Woodward Inc (WWD) 2016 Q1 法說會逐字稿

Thank you for standing by, and welcome to the Woodward Inc. first-quarter fiscal year 2016 earnings call. At this time, I would like to inform you that this call is being recorded for rebroadcast and that all participants are in a listen-only mode. Following the presentation, you will be invited to participate in a question-and-answer session.

Joining us today from the Company are Mr. Tom Gendron, Chairman and Chief Executive Officer; Mr. Bob Weber, Vice Chairman, Chief Financial Officer and Treasurer; and Mr. Don Guzzardo, Director of Investor Relations and Treasury.

I would now like to turn the call over to Mr. Guzzardo.

Thank you, operator. We would like to welcome all of you to Woodward's first-quarter fiscal year 2016 earnings call. In today's call, Tom will comment on our markets and related strategies; and then Bob will discuss our financial results, as outlined in our earnings release. At the end of our presentation, we will take questions.

For those who have not seen today's earnings release, you can find it on our website at woodward.com. We have again included some presentation materials to go along with today's call that are also accessible on our website. An audio replay of this call will be available by phone or on our website through February 2, 2016. The phone number for the audio replays on the press release announcing this call, and will be repeated by the operator at the end of the call.

Before we begin, I would like to refer to and highlight our cautionary statement as shown on slide 3. As always, elements of this presentation are forward-looking or based on our outlook and assumptions for the global economy, and our businesses, more specifically. Those elements can and do frequently change. Please consider our comments in light of the risks and uncertainties surrounding those elements.

We also direct your attention to the reconciliations of certain non-US GAAP measures included in today's slide presentation, and our earnings release and related schedules. Management uses these non-US GAAP measures in monitoring and evaluating the ongoing performance of Woodward in each business segment. I would like to remind everyone, as announced during our Analyst Day in December, that we changed our Energy segment name to Industrial, which more accurately reflects the markets served by the segment.

Turning to our results, net sales for the first quarter of fiscal year 2016 were $445 million, a decrease of 9% compared to $488 million in the first quarter of 2015. Earnings-per-share were $0.40 for the first quarter of 2016 compared to $0.66 in the first quarter of 2015. Excluding special charges of $16 million related to our efforts to consolidate facilities, reduce costs, and address current market conditions, earnings-per-share would have been $0.56 per share this quarter.

EBIT for the first quarter of 2016 was $34 million. Excluding the special charges of $16 million, EBIT would have been $51 million compared to $63 million in the prior-year first-quarter. Free cash flow for the first quarter of 2016 was $4 million compared to an outflow of $9 million in the prior-year period. Capital expenditures in the first quarter of 2016 were $33 million compared to $47 million in the first quarter of 2015.

Now I will turn the call over to Tom to comment further on our results, strategies, and markets.

Thank you, Don. And welcome to those joining us today. Our first quarter of fiscal 2016 started off in line with our expectations of a challenging market environment. We delivered solid operational performance in both segments. However, we expect headwinds to continue in our Industrial segment, and are taking appropriate strategic actions to address these issues.

We continue to balance our operations to rationalize our global footprint, reduce costs, and address global economic conditions while preparing for our new program launches. As a result of recent actions, we recorded special charges of [$60 million] this quarter, which will enhance profitability both in the near-term and future years.

Within aerospace, commercial sales were solid and order backlogs remain at very healthy levels. We are looking forward to the much-anticipated launch of the next-generation aircraft later this year when our many years of development and investment will begin to pay dividends. Additionally, defense sales have stabilized at a stronger level than we have seen in the recent past.

Our industrial markets are being adversely impacted by the same lingering issues, namely a volatile Chinese market, including natural gas trucks, unfavorable global currency swings, a general tightening in demand as a result of global macroeconomic uncertainty, and depressed oil and gas prices.

Moving to our segments in more detail, starting with aerospace, commercial transport backlogs remain strong with solid passenger mile growth and record high load factors. Major new programs, such as the Airbus A320neo and Boeing 737 Max, will be entering service soon. The regional business jet markets are showing some weakness.

The commercial rotorcraft market continues to be soft, stemming from prolonged pressure in oil and gas industry. Defense sales, both OEM and aftermarket, were a strong contributor this quarter. With the recent defense budget increase and continuing global instability, we expect defense to remain strong.

Lastly, we announced the formation -- the formal creation of our joint venture with GE Aviation earlier this month. Joint venture will provide large engine fuel systems, including the new GE9X, which will power the Boeing 777X.

Turning now to Industrial. The long-term trends driving our Industrial business remain strong. The globalization and expanded use of natural gas will drive long-term growth for our company. However, near-term, many of our markets will remain challenged.

Now I would like to focus on our three main market segments of Power Generation, Transportation and Machinery, and Oil and Gas.

In Power Generation, existing equipment is being used and kept in service longer. And, as a result, we are seeing robust demand for aftermarket services, particularly related to industrial turbines. We expect this trend to continue as capital expenditure budgets remain tight.

In Transportation, the Asian national gas truck market remains weak. In China, regulated price spread between diesel and natural gas was returned to a level that should create an incentive to purchase natural gas trucks versus diesel. Considering the overall Chinese economic situation, it is too early to estimate the impact on this market.

Oil and Gas remains challenging, with continued price declines and increasing supplies limiting capital investment. In addition, weak economies and foreign currency headwinds continue to negatively impact our overall markets in Europe, South America, and Asia.

As we look ahead to the balance of fiscal 2016, we expect the positive momentum in aerospace to accelerate, and the Industrial segment to perform in line with our outlook despite ongoing economic uncertainty, which we expect to persist. The strategic actions we have taken this quarter will enhance long-term profitability and help position us for continued operational performance.

Now let me turn over to Bob to discuss our financials.

Thank you, Tom. As previously mentioned, our quarterly results were consistent with our expectations for the first quarter of the fiscal year, despite being a decrease from an unusually strong first quarter last year. As Tom said, we recorded special charges of approximately $16 million in the quarter in our non-segment results, related largely to facility rationalizations and workforce management.

We expect to generate savings during the remainder of this fiscal year to largely offset the special charges. Excluding the impacts of the special charges, earnings-per-share would have been $0.56 per share this quarter compared to $0.66 in the prior-year quarter.

In Aerospace, sales increased 5% this quarter against a strong comparison to the prior-year quarter. The sales increase was driven by strong defense sales and commercial aftermarket. Aerospace segment earnings for the quarter were 16.2% of sales compared to 14% in the same period last year. The improvement was driven largely by the increased sales volume and strong aftermarket.

Turning to Industrial, while we did see pockets of strength within the Industrial segment, particularly in aftermarket sales, that strength was more than offset by well-known headwinds, including the Asian natural gas truck market, currency volatility, and global economic weakness. As a result, first-quarter Industrial segment sales were down $55 million or 24% compared to an unusually strong first-quarter of fiscal 2015.

As a reminder, in the first quarter of last year, China CNG sales were at a very high level before dropping significantly thereafter. Industrial sales for the quarter were negatively impacted by foreign currency exchange rate movements of approximately $13 million compared to the first quarter of fiscal 2015. These two items alone accounted for approximately $45 million of the $55 million in sales decline for the segment.

First-quarter Industrial segment earnings were 12.2% of sales compared to 16.9% in the prior-year period. On a constant currency basis, Industrial segment earnings would have been 13.1% of sales for the current quarter. Segment earnings were unfavorably impacted by lower sales volume and the negative effects of foreign currency.

At the Woodward level, gross margin percentage for the first quarter of 2016 was (technical difficulty) [25%] compared to 30% in the prior-year period. Excluding the special charges, gross margin would have been 28% this quarter. Both research and development costs and selling, general, and administrative expenses were consistent with the prior year.

The effective tax rate for the first quarter of 2016 was 8.4% compared to 23.3% for the first quarter of 2015. The decrease in the income tax rate was primarily due to the retroactive impact of the permanently reinstated research and experimentation tax credit on lower earnings before income taxes compared to the prior-year quarter. Both the current and prior-year quarters included a $5 million credit for the retroactive portion related to the R&E tax credit reinstatement. Our expected full-year tax rate of 28% anticipated this reinstatement and is therefore unchanged.

Looking at cash flows, we generated $37 million of cash flow from operations for the first quarter of fiscal 2016 compared to $38 million in the prior year. Free cash flow for the first quarter of 2016 was $4 million compared to an outflow of $9 million in the similar period in the prior year. The increase was driven by lower capital expenditures of $33 million for the first quarter of 2016 compared to $47 million for the same period of the prior year.

In the first quarter of fiscal 2016, we repurchased shares of our common stock for an aggregate purchase price of $31 million. In January, we received $250 million as a result of the formal creation of the large engine fuel systems joint venture with GE Aviation. These funds will be used for debt reduction and to fund the remaining $94 million of share repurchases out of the $250 million plan announced in May of 2015. This will complete our return to shareholders of the proceeds from the formation of the joint venture.

Lastly, turning to our fiscal 2016 outlook. For 2016, our guidance is unchanged, and we expect net sales to increase 1% to 2% over 2015; earnings before interest and taxes to be up approximately 5%; and earnings-per-share to be between $2.75 and $2.95 per share. The special charges are anticipated to be largely offset by the related savings, and therefore, there is no impact on our outlook.

In summary, we delivered a solid first quarter from an operational perspective in the face of very different macroeconomic challenges. We are well-positioned to deliver strong long-term earnings growth and drive shareholder value, particularly as our end markets improve.

This concludes our comments on the business and results for the first quarter of fiscal 2016. Operator, we are now ready to open the call to questions.

(Operator Instructions) Sheila Kahyaoglu.

Thanks for taking my question. Bob, just a follow-up on your outlook comments for fiscal 2016. As we look at the quarter, excluding the charge, earnings were down 15%, but EPS is taking in earnings up about 5%, so can you talk about the moving pieces and what you expect to improve over the next three quarters?

So, probably the most significant, when you take the special charges, will be the cost savings associated with the special charges. So, as we said, we anticipate the majority of those to be returning cost savings as we go forward. So a neutral impact on our overall guidance.

The other moving pieces are that the R&E credit, which we did anticipate, and is consistent with the prior-year, obviously will not occur in the remainder of the year. And since we anticipated it, our tax rate will still be the 28% overall for the year.

Outside of that, last year -- and we called out, I think, the -- I think we called out the fact that last year was extremely strong for CNG in the first quarter. Beyond that, we believe that this year so far we will probably be very consistent with the second, third, and fourth year -- quarter. And so we don't see that as a differential as we go forward. I think those are kind of the major moving pieces.

So do you think you could -- I mean, it seems like you will grow earnings within Aerospace, but do you still think you can grow earnings within the Industrial segment?

We do, through the remainder of the year, yes.

Okay. And then just in terms of the charge, do you mind breaking down maybe what the facility consolidation is? What that includes, and what sort of headcount?

The facility consolidation is largely related -- we described our -- Niles, our new facility in Niles and some of the actions we were taking there, we had very high costs through a result of the acquisition. And we've now -- the last piece of that was to cancel the lease with respect to one building we had remaining. That was also anticipated at the time that we made all these strategic changes, and does result in continuing net cost savings as we go forward.

That was by far the largest piece. And then beyond that was kind of a combination of workforce management actions, largely, as Tom said, related to strategic activity in our Industrial segment.

Okay, thanks.

Sure.

Gautam Khanna.

I was wondering if you could elaborate on the strength in the commercial aftermarket? Was it lumpy by geography or product area? If you could just provide some color on that. Then I have a follow-up.

Sure. I think -- actually the commercial aftermarket is -- our two main areas of initial provisioning sales and part sales, as well as repair and overhaul, were both up. And as we move forward here, we see strong initial provisioning carrying forward as new programs are launching.

The hours and utilization on the aircraft are high, and it is driving repair and overhaul demand. And -- so both those key areas are strong and did well in the quarter, and we anticipate will do well for the full fiscal year.

Okay. And order trends since the quarter have continued strong? Is that a fair statement?

Could you repeat? I'm sorry.

Have order trends in the aftermarket since the quarter remained pretty strong?

Yes. Right now we're looking very good for the remainder of the year on commercial aftermarket. So it's still strong.

Okay. Also, just on your CapEx, it seemed a little light in the quarter. I was wondering if you could update us on what your capital expenditure plans are? And how they are weighted first-half versus the second-half?

Yes, they are -- definitely to answer your second question, they are definitely weighted in the first-half vis-a-vis the second-half. I don't know that they were light maybe compared to what we saw at the latter half of next year. We had a lot going on.

As you know, the Niles facility has now been complete; the Rock Cut facility is nearing completion. And so we're kind of cutting down to one of our three main projects, is all that largely remains. We will still have some equipment for Rock Cut.

So I would envision maybe some slight decline this quarter versus next quarter. Hard to say, but definitely first-half to second-half, you should see some further decline in CapEx.

And could you quantify an all-in number for the year?

We could -- yes, we --

Yes. We called out $100 million.

$180 million

$180 million --

$100 million, okay.

-- for the full year. But we said at the Analyst Day, if you recall, that we were going to be dropping down more to a run rate approaching the $100 million in the second-half.

Okay, thanks a lot, guys. I will turn it over.

Pete Skibitski.

Hey, just wondering what market areas in Industrial were you guys most surprised by in the first quarter that led to the restructuring? Just because -- I'm guessing -- I'm sure you had low expectations for China CNG and oil/gas, so was just power gen kind of incrementally weaker, maybe on the power gen OE side?

What I would say is none of it was unanticipated. As you go through looking at both facilities and restructuring, it takes time to work your way through everything. So, we anticipated doing this. We just had to finalize and get through all the analysis, all our costs, all the activities associated with it.

So we had anticipated the softness that we're seeing. As you recall, we built that into our outlook, which was approximate flat to up 2% on the Industrial business. But -- so that was in the plan. And we knew we were going to come off -- last year's first-quarter in Industrial was high, and particularly in the CNG market in China. And, as everybody knows, that collapsed in the latter three quarters.

So we were anticipating, as we go through this year, to be consistent with the last three quarters as a run rate. So all that was built into our plan. It just takes a little time to work your way through everything and execute on your plans. And that's what occurred.

Okay, okay. And if we could -- everyone is worried about the macro right now. Could we go maybe deeper on power gen? Was power gen down in the first quarter, since it's such a big part of Industrial? And if it was, is it across the globe? Is it mostly China? Just wondering -- China, Europe, US, how things are going in power gen since it's such a big part of your business.

Sure. If you look on the OEM side of power gen shipments, they were flat to down across all our markets. China in some specific areas, particularly around steam, turbine controls were down. But what was -- worked favorable in power gen is we had very strong aftermarket in that, especially around the industrial turbines. So, our aftermarket did offset some of the weakness in the OE sales.

Okay, okay. And then last question, just in terms of off to a low start in Industrials, and you are going to recover to be flat for the year, is it just a situation where the comps get a lot easier in the back-half? Or are you anticipating certain markets to get better? Can you just add some color there?

Sure. The -- well, the comps will definitely be easier, there's no doubt about that, as we go forward. But we actually do anticipate -- and this is, I think, something we also talked about at the Investor Day -- we do anticipate the launch of some of our new products that will add to revenue while we're still in a flat-to-down market. So that will help on the topline.

We're also seeing growth in our wind business. So that will continue, I think, through the remaining part of the year. So we have some -- those are the offsets to a tough macro environment. But -- so we do see sales improving in the next three quarters, in particular, relative to last year.

Okay, thanks very much, guys.

Thanks.

Michael Ciarmoli.

Thanks for taking my question. Maybe just to stay on that Industrial theme, can you sort of characterize -- it obviously sounds like you guys are expecting some improvement there based on the product introductions in some of those end markets. But maybe characterize what you are seeing from some of your big customers. I mean, anything notable changes from Caterpillar? I mean, it sounds like the nat gas engines are a little bit weaker at Wichay. But anything sort of in real-time since oil has weakened, or we've seen more global pressures that it's kind of changed your thinking at all?

No, in a lot of ways, as we look at some of our customers, we see their line rates holding, or if you want to say firming up, but not firming up at new levels. They are firming up so we think, when you go across the markets, as you well know, we have a lot of markets that are depressed. And so they are kind of -- if you want to say firm/stable at that depressed level. And we do anticipate, as time goes by, that they'll pick up.

In the meantime, we do have -- even on this, if you want to say, depressed level, we have the new products coming on that allow some sales growth. And we put a strong emphasis on going after aftermarket and working with our customers to capture and expand the aftermarket. And that's working. And so the aftermarket is helping to offset some of that weakness.

So, we do see the second -- you know, I'm just saying the next few quarters, improvements in sales for Industrial, but a very tough market. But we do see an improvement for us.

Got it. And then maybe just on Aerospace, you guys mentioned quickly that maybe some risks, some weakening in the biz jet market. Can you just elaborate there? I mean, obviously, this has just been dragging along bottom. Now we are seeing maybe some weakness in that high-end. How are you guys -- are you guys thinking about the trajectory of biz jet revenues throughout the remainder of the year?

Yes, we see it just kind of bouncing around at a lower level than it already has kind of gone down to. Don't see it really impacting us any further. So -- and we are not predicting a recovery in biz jets either this fiscal year. So, it's kind of baked into our plans. It was really in our outlook that it was going to be tough, a little bit weak, based on some large business jets are tied in other countries, and corporations that are tied to oil and gas.

So we saw that coming down. But the -- it's definitely being offset by strength in Defense and Commercial, and in the overall aftermarket. So, it is one segment that's not doing that great but it was in our plan at those levels.

Got it. And then that's a good segue to the last one. Any specific programs or platforms that you would point to as the areas of strength in Defense?

Well, just as a reminder to everybody, we are on most all defense platforms for the aircraft helo's. And then, in particular, smart weapon. So I'd have to say one of the stronger areas is smart weapons, but we are seeing pretty well, across the board, good numbers, and anticipate that that will hold for the year.

Okay. Perfect. Thanks a lot, guys.

Robert Spingarn.

Could we clarify then, given the way CapEx is trending, what you expect for free cash flow for the year?

Yes. Free cash flow for the full year, we expect to be around $100 million, largely driven by that second-half, as I mentioned.

Okay. Okay, makes sense. And not to go back to what everybody else is asking, but I think it is the focus point -- have you -- you've said -- Tom, you opened by saying that, so far, what you are seeing in Industrials is according to a plan with fairly realistic cautious expectations. Nothing that we've seen here in January changes that? You haven't seen a change in behavior relative to what you were expecting?

No, really we haven't. We put in a very -- we planned very conservatively this year, recognizing that a lot of our end markets were depressed and we weren't anticipating improvements in them. And, as such, we planned for that. If we get improvements, that will be an upside.

But still today, we're not planning on improvements. So that's why I said the focus is get the new products in and then a heightened focus on pulling in aftermarket, which is working. And so that will be the Industrial picture this year. And when we put out the forecast, that we weren't anticipating much different.

And then you've emphasized in the past that the extraction side of your energy business is relatively -- I don't know if modest is the right word, but that you see upside on the distribution side. But on the extraction side, how do we think about just the current environment?

It's very low. (laughter)

Are we so low that there's not much downside? Is that really where we are?

You know, if we look across it, I would say this -- I mean, you could always get worse, but we really do believe we are down at the bottom in mining and marine and in extraction. But these markets are bottomed. I mean, it's hard to see them going any lower. And our plan is at that bottom level.

So -- now, never say never, of course, but we don't see it going much lower. So we have quite a bit of stuff that's way down. On the positive side, though, the renewable business is improving on sales year-over-year, but most of the largest markets we are in are down, and we think they are pretty much bottomed.

Okay. And then just a final one, on the Aerospace side on your newest platforms, the ones that are coming -- that are pending, any surprises there? Everything going according to plan? Any delays or issues with any of the new product?

No, we're not seeing anything from our customers. And within Woodward, we are on track on all our programs and actually ahead on some. So, we feel very good about our preparation for the launch and it looks like the launches are going well, so.

And have you seen -- have you gotten any sense that there's any volatility in rates? Or they're sticking to their plans?

Right now we see them sticking to their plans, you know.

All right. Thank you.

Yes.

Steve Levenson.

Just sticking on the new platforms a little bit, I know the first powered A320neo was a little bit delayed, but I take it that's not having any impact on your deliveries?

Not at the moment. You know, we anticipate as being publicized that they would be back on track and we expect that to go forward. So we don't see any delay that will cause any impact on sales.

Okay, thanks. And in relation to both programs, do you foresee any inventory issues? Are you building things up? Is there the typical rate readiness thing that the manufacturers are asking you to get prepared for? Or do you have a pretty much set schedule?

Well, you're definitely on that, Steve. As we go to ramp up, we will be ramping ahead of their schedule to make sure we have inventory in place. We are working with our customers to have -- pull systems in so that they can pull from inventory. So all that is being created right now. We are on track to do that. So, we do anticipate there will be, for these new programs, some inventory build-up. That is anticipated.

I think the one good thing is -- I think we've talked with you guys a lot on the efficiencies of our new facilities, and one piece, flow, and lean, and everything else. So while there will be a buildup, it probably will not be similar to old program buildups.

That's correct. Yes.

Got it. So that's going to help cash flow a little bit, I take it, on the working capital side?

We believe so, yes.

Okay. Thanks very much.

William Bremer.

Are you seeing any deferrals on the Industrial side? I guess that's my first question -- in terms of -- I know you guys supply the components, but are things being held just a little bit longer in this environment, and you are ready to ship? And I heard you mention extraction, power gen -- could we go into a little bit on the processing side of the energy platform, and give us an update there?

Sure. We really aren't seeing anybody hold anything -- I'll call it. But I also have to tell you on the Industrial side, we definitely have, again, working lean manufacturing systems between Woodward and our customers. A lot of things are on pulled systems.

So from that standpoint, they don't hold; it's just when they change and when they pull from that. So, nothing sitting on the docks or anything like that. So, we are getting schedules, we know line rates, we are in sync with them. And that's all built into the plan. So that's not an issue. So -- the question on processing?

Yes.

Yes. It's still -- it's okay. We're seeing -- that is an area where we are concentrating some of our aftermarket initiatives to upgrade, improve efficiency; help with uptime, maintainability and the like. So that's been a good area for aftermarket focus. So it's -- the market is holding okay at a -- at, once again, a down level, but aftermarket side in that area has been doing well.

Okay. And Bob, did I hear you correctly? Top line for Industrials, we expect to have a year-over-year improvement throughout the rest of the year? And can you just touch base a little bit on the operating margins? Will you be able to hold at least a 12% there?

Yes, we would -- yes, you did hear correctly. We originally called out [0% to 2%] on the topline. Obviously, zero is zero, but I think we do believe that, through the course of the year, we will see increases. As Tom mentioned, a number of our different product lines and new product initiatives and things like that; wind is doing okay.

So, yes, we do see some increase as the year progresses, And we do believe that, as we get some of those increases, we will be able to improve our earnings overall as well. And we have kind of called that out early in the guidance, and we don't see any change in that at this point either.

Okay, great, gentlemen. Thank you.

Sheila Kahyaoglu.

On the full-year EPS of $2.75 to $2.95, I just wanted to make sure that includes the restructuring charge of [$16 million]? I guess -- did it always include it when you initiated guidance in November? And also, does that incorporate $16 million to $20 million of cost savings all within fiscal 2016? Is that -- is it -- essentially is it a guide up on underlying earnings?

No, not a guide up. We said that, largely, all of the [$16 million] would be recovered through cost savings. Obviously, given the first quarter, you can kind of run rate these things -- full-year savings is probably closer to the number -- you know, the full [$16 million]. But -- so it is a slight downward -- extremely slight, to the guidance to the point where it isn't having a significant impact. But it's not -- I would not characterize it as upside.

Right.

And so I think -- off of this, I think, Sheila, you're saying the question is -- was it in our plan? And would have been incremental, I think is a little bit -- and we were looking at that going in. And so, as Bob highlighted, the guidance holds, and we will recover as we go through the year. So it's --

It was anticipated along with the savings at the time when we gave the original guidance.

Right.

Okay, thanks.

Pete Skibitski.

Yes, Tom, on power gen aftermarket -- you talked about OE, but power gen aftermarket, I know you guys have been real successful on the upgrades. Was that strong across all regions in the first quarter? Or are you starting to see some differentiation across regions on the aftermarket as well for power gen?

I think for the most part it was across all regions. As I'm going through on the aftermarket upgrades and services, I'd look at we were doing well in Asia and the Middle East, and North America. So it was pretty much -- the upgrade market and service is doing well everywhere.

Okay. And your power gen OE customers, they just haven't really given you any reason to kind of worry incrementally about age at this point? Is that a fair statement, would you say? Or --?

That's a fair statement. We look at where we are and we're not seeing or anticipating any downward pressure from already --

Any further.

-- any further -- that is a good way to say it, Bob -- any further downward pressure from where we are.

Got it, got it, okay. And then, Bob, FX from here on out, is it kind of annualized into the numbers at this point? Or is there more headwind there?

Got it. Well, depending upon what currency rates do, but we do not anticipate, and guidance doesn't really anticipate, any further heavy impacts to foreign exchange.

Okay, thanks so much, guys.

Thank you.

Gautam Khanna.

Yes, so I was wondering if you could parse out for us the aftermarket growth you anticipate this year from provisioning versus kind of regular-way aftermarket sales? And if you could also just tell me again -- did you say the CapEx this year is $100 million all-in? Or did I mishear that? Thanks.

I will answer the second one first. CapEx of approximately $180 million for the full year. And what I mentioned was that in the second-half, we anticipate that the run rate will begin approaching that $100 million level. Is that -- okay?

Okay.

And I will turn it back to Tom.

Yes, so on initial provisioning spares in the aerospace market, we are seeing good provisioning coming from programs already launched, programs such as 787 and the like. We also are anticipating just the beginning of some of the new narrowbodies as the fiscal year goes forward, but more of that will be in 2017. But year-over-year, we're going to be up on provisioning sales.

Could you quantify how much you think all-in aftermarket will be up? And how much of that growth leads to provisioning?

Yes. Usually we don't break it out -- all in all, I think we're looking at about -- I think it was about a 5% overall aftermarket increase. And that's broken up between provisioning, spare parts, and repair and overhaul services. And each are up year-over-year.

Okay, thank you.

(Operator Instructions) All right, Mr. Gendron, I am showing there are no further questions at this time. So I would now like to turn the conference back over to you.

Okay. Well, I'd like to thank all of you for joining us today, and thank you for your questions. And hopefully, we were able to give you some clarity on our first-quarter results. And Bob and I will look forward to talking with all of you in the next quarter. Thank you.

Ladies and gentlemen, that concludes our conference call today. If you would like to listen to a rebroadcast of this conference call, it will be available today at 7:30 p.m. Eastern Standard Time by dialing 1-888-266-2081 for a US call, or 1-703-925-2533 for a non-US call, and by answering the access code 1667357. A rebroadcast will also be available at the Company's website, www.woodward.com, for 14 days.

We thank you for your participation on today's conference call and ask that you please disconnect your lines. Thank you and have a wonderful day.