Woodward Inc (WWD) 2018 Q1 法說會逐字稿

Welcome to the Woodward, Inc. First Fiscal Year 2018 Earnings Call. At this time, I would like to inform you this call is being recorded for rebroadcast. (Operator Instructions) 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 2018 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 would be available by phone or on our website through February 5, 2018. The phone number for the audio replay is on the press release announcing this call as well as on our website 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, including the risks we identify in our filings.

We also direct your attention to the reconciliations of non-U.S. GAAP measures, which are included in today's slide presentation and the earnings release and related schedules. Management uses these non-U.S. GAAP measures in monitoring and evaluating the ongoing performance of Woodward and each business segment.

Now turning to our results. Net sales for the first quarter of fiscal year 2018 were $470 million compared to $443 million in the first quarter of 2017, an increase of 6%. Net earnings for the first quarter 2018 were $18 million or $0.29 per share, compared to $47 million or $0.73 per share in the first quarter 2017. The effective tax rate for the first quarter of 2018 was 51.3% compared to 1.1% in the first quarter of the prior year. The first quarter of the current year reflects a onetime expense of approximately $15 million or $0.24 per share as a result of the new U.S. tax legislation.

EBIT for the first quarter of 2018 was $44 million compared to $53 million in the first quarter of 2017. Net cash used in operating activities for the first quarter of 2018 was $3 million compared to cash generated of $52 million for the prior year. Free cash flow for the first quarter of 2018 was an outflow of $31 million compared to an inflow of $31 million in the prior year period. Capital expenditures in the first quarter 2018 were $28 million compared to $21 million in the first quarter of 2017.

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. For the quarter, Aerospace sales were up sharply and Industrial segment sales in total remained challenged, although we continue to see improvement in certain end markets.

While our first quarter operating results appeared mixed on the surface, I want to highlight 2 elements that should be key takeaways. The new U.S. tax legislation will significantly benefit both earnings and cash flow for Woodward. Our predominantly U.S.-based footprint should optimize the benefit, and our future U.S. tax liabilities will be significantly reduced. We believe this legislation will also be very positive for our customers and the economy as a whole and allow us to increase investment to drive growth and shareholder return.

Additionally, we saw a sizable increase in R&D this quarter, putting pressure on our Aerospace segment earnings. This is related to new program wins and opportunities and represents further additions to our share gains.

Focusing on our market segments in more detail. The aerospace industry overall continues to fire on all cylinders. Commercial OEM activity is strong on the back of the narrowbody ramp ups. Both Boeing and Airbus announced record deliveries in 2017, and backlogs remained extremely strong. Regional aircraft market remains soft. The business jet and rotorcraft markets are showing signs of recovery. Global passenger and cargo traffic growth continue to track at record levels, and low tractors remain high which are fueling aftermarket demand.

Defense activity continues to be robust with rising global defense budgets and continued global instability providing tailwinds. Smart weapons continue to provide lift.

Turning to Industrial. Long-term trends underlying our Industrial business remain solid, and we are well positioned to benefit as end markets continue to improve. Natural gas and renewables continue to gain share of global energy consumption, and these trends are expected to accelerate over the next decade. In the near term, while we are seeing significant weakness related to gas turbines, many of our end markets are showing strengths.

Focusing on our 3 main Industrial market segments. Power generation is a significant complement to global industrial activity. Currently, the market is undergoing significant disruption related to the shift to natural gas, the continuing impact on renewables and softer demand related to more efficient electrical consumption. Renewables and efficiency are contributing to significant current weakness in the industrial gas turbine market, which is being magnified by excess inventory in the channel. While we believe the inventory issue may be resolved over the next 12 to 18 months, it's unclear when utilities scale natural gas turbine power demand will recover.

Distributed power, which is shorter cycle and tied more closely to economic activity, is showing an improvement especially with respect to large dual fuel engines. The global changes required to support the natural gas market have been and continue to be underway, supporting our view of the long-term dynamics. In transportation, the positive trends we've seen in recent quarters continued. The natural gas truck market in Asia remains strong although volatile due to rapidly changing market conditions. We're also starting to see some recovery in the marine and locomotive markets.

In oil and gas, we are seeing ongoing strength driven by rising oil prices, rig count growth and increased global mining activity. As you may recall, we realigned the Industrial segment last year to become more efficient and effective in response to these challenging markets. While we continue to gain traction in our efforts, we are not being complacent. We constantly and aggressively look for additional opportunities to improve our cost structure without sacrificing our commitment to innovation and our investments to drive long-term growth.

One of our key strengths is our ability to leverage innovation, technology and control solutions across both of our business segments. This allows us to optimize our R&D investment, reallocate resources as needed and thereby better managing business cycles.

Returning to Woodward level focus. Woodward continues to win in the marketplace. And as you could see at this quarter's financial results, and as mentioned at our Analyst Day, we are increasing our investment in R&D. Research and development can be variable from quarter-to-quarter of program deliverables.

This quarter's increase in R&D relates to a number of newly awarded programs and future opportunities such as the Airbus A320neo TRAS for the new nacelle, the new Pratt & Whitney PT6 turboprop engine control, the GE advanced turboprop, the new defense rotorcraft engine referred to as ITEP, the TRAS on the Boeing 777X and Airbus A330neo, new power converters for next-generation wind turbines, Euro 6-compliant natural gas engine systems in Asia in addition to a number of other programs that are in the bid and proposal cycle.

While winning these programs require incremental investment in research and development, these opportunities present significant market share gains that we believe will be a key driver of future shareholder value.

Now let me turn it over to Bob to discuss the financials in more detail.

Thank you, Tom. Let me first give a little more color on the effects of the new U.S. tax legislation. The effective tax rate for the first quarter of 2018 was 51.3% compared to 1.1% for the first quarter of 2017. The first quarter of 2018 reflects a onetime net tax expense of approximately $15 million or $0.24 per share as a result of the new tax legislation. This onetime expense primarily resulted from the offshore transition tax component of the recent tax changes, partially offset by the positive impacts of the lower tax rate on our future deferred tax liabilities. The first year -- the prior year first quarter tax rate was extremely low due to the favorable tax impact of the repatriation of certain foreign earnings.

Another factor is that Woodward has a September 30 fiscal year-end. As a result, our statutory tax rate for full fiscal year 2018 is a blended rate of 24.5%, reflecting 1 quarter at the old 35% statutory rate and 3 quarters at the new 21% rate. Considering this, we now expect our full year fiscal 2018 effective tax rate to be approximately 24%. More importantly, beyond 2018, we anticipate our long-term effective tax rate to be approximately 22%, a significant reduction from the 26% to 28% long-term rate we have called out in the past.

Lastly, I'd like to point out that the reduction of the U.S. federal statutory tax rate from 35% to 21% also has a significant positive impact on future cash flows. For 2018, we anticipate the lower tax rate to generate approximately $25 million of additional free cash flow. We would expect the free cash flow impact in future years to be significantly higher.

Turning more broadly to our first quarter results. Aerospace sales grew by an exceptional 15% this quarter compared to the prior year, fueled by strength in commercial and defense OEM as well as commercial aftermarket. Commercial aftermarket sales for the quarter were up 23% due to record levels of passenger traffic, favorable fleet dynamics and quarterly variability.

Aerospace segment earnings for the quarter were 14.2% of sales compared to 17.6% in the same period of last year. Although segment earnings were favorably impacted by the higher sales volume in the quarter, this was partially offset by higher manufacturing costs related to increased production capacity. Segment earnings were also negatively impacted by the unfavorable mix within our OEM sales and increased R&D spend to support the new programs that Tom mentioned earlier.

R&D spending at the Woodward level was approximately $8 million higher in the first quarter of 2018 compared to the prior year quarter, with the majority of that difference incurred in our Aerospace segment. Although this investment puts some pressure on earnings this quarter, we expect the spending level to taper through the remainder of the year due to quarterly variability and the timing of program deliverables. We also expect increased productivity and leverage as the narrowbody programs ramp through this year, finishing 2018 with anticipated Aerospace segment margins flat to slightly up compared to the prior year as originally projected.

Turning to Industrial. First quarter Industrial segment sales were down 7% compared to the first quarter of fiscal 2017. Power generation was weak this quarter due to both industrial gas turbines and renewables. We did see improvements in transportation and oil and gas, primarily in gas engine fuel systems.

First quarter Industrial segment earnings were 11.8% of sales compared to 10.2% in the prior year period. Segment earnings were positively impacted by cost savings initiatives taken in prior quarters, partially offset by the effect of lower sales volume.

At the Woodward level, research and development costs were 7.4% of sales compared to 6% of sales in the prior year first quarter. Tom mentioned the awards and opportunities driving this increase in the quarter. We do anticipate that R&D will taper somewhat during the year, and as such, for the full year, we expect our R&D spend to come down to approximately 6.5% of sales.

Selling, general and administrative expenses were $46 million this quarter compared to $38 million for the first quarter of last year largely due to the timing of stock compensation expense, the majority of which was recorded in our non-segment. In fiscal 2017, this expense was recorded in the second quarter, whereas this year, they were recorded in the first quarter.

Looking at cash flows. Net cash flow used in operating activities for the first quarter of fiscal 2018 was $3 million compared to cash generated of $52 million in the prior year. The difference was largely attributable to quarterly variability related to working capital.

Free cash flow for the first quarter of 2018 was an outflow of $31 million compared to an inflow of $31 million in the same period of the prior year. Capital expenditures were $28 million for the first quarter of 2018 compared to $21 million from the prior year quarter. For the full year, we now anticipate free cash flow to be approximately $230 million. This reflects the positive impact of the tax rate changes partially offset by higher working capital.

Lastly turning to our fiscal 2018 outlook. For 2018, our top line guidance is unchanged. We expect net sales to be between $2.2 billion and $2.3 billion, with Aerospace sales slightly stronger than expected and Industrial sales slightly weaker than expected. We still anticipate segment earnings as a percent of sales for both segments to be flat to slightly up compared to the prior year. Earnings per share are now expected to be between $3.35 and $3.60, which reflects the anticipated full year favorable effects of the change in U.S. tax legislation.

This concludes our comments on the business and results for the first quarter of fiscal year 2018. Operator, we are now ready to open the call to questions.

(Operator Instructions) And our first question will come from the line of Gautam Khanna with Cowen and Company.

This is actually Bill on for Gautam tonight. Wanted to dig into the Aerospace margin guidance. Obviously, margins were down a lot year-over-year. I know there's a lot of moving pieces. But just from a mix perspective, aftermarket comps get tougher, OE ramps more given engine ramps. So do you still have a lot of confidence in your margin guide? Should we expect R&D to fall off very quickly? Or was there an opportunity to pull R&D forward, given the tax legislation changes? Just any more color you can give on kind of the cadence of margins going through the year.

Sure. Yes, we remain very confident in terms of how the year will end up in total and that's why we reaffirmed our guidance. In terms of pulling things forward related to the Tax Act, no, I wouldn't say it was that, but it is clearly the timing of all the award wins that Tom mentioned that we have increased our R&D predominantly in this first and probably second quarter and then it should taper off fairly substantially in the third and fourth quarter during the year. And then, as you know, with the narrowbody ramp, we do have a significant amount of manufacturing costs that will be absorbed more in those margins as we ramp throughout the course of the year. You will see that as we -- you see the 10-Q coming out. You'll see a bridge in the Aerospace section that will call that out as production capacity cost, approximately $6 million on that neighborhood. And so we tried to be fairly clear on kind of the components of why this quarter is down from the prior year quarter, and we are confident that it will turn around.

All right, that's helpful. And then just on the manufacturing cost, is this just simply a mismatch between cost and actually delivering the product or the ramp? Or are these slight learning curve issues where you're just early on in the production ramp and you get more productive and you recognize those learning curve benefits down the road?

Yes. It's predominantly the former. We have, obviously, as you can imagine, a lot of equipment, a lot of fixed cost that is anticipation of the higher volumes later in the year and in 2019 that is currently not productive. So there's a lot of that, that is hitting our depreciation and fixed cost lines and we're not yet getting the full volume, the full capacity impact of the return.

Okay. And then just in Industrial, the IGT seems like it was pretty weak. Is that just severe destocking going on in the channel?

Well, there definitely is the destocking issue that we've discussed the last couple of quarters that's still taking place, but there is also lower OE and aftermarket demand as well. So it's a combination of all 3.

And our next question will come from the line of Drew Lipke of Stephens.

Just on the free cash flow outlook, the $230 million, with the tax benefit being offset somewhat by that $15 million higher working capital, what is that tied to? And maybe associated with that, how do we think about the cumulative $1.3 billion to $1.5 billion guidance that you guys have kind of put out there for 2020 in light of both the lower tax rate and then the higher needed working capital?

Yes. So moving up approximately $10 million and $25 million of the upside is the tax rate impact. And the bridging item, if you will, is approximately $15 million in net working capital as we approach the end of the year. We do believe, especially in our Industrial business, that the second half will be stronger, which means we'll have higher inventories and higher receivables as we close out the year. And that will absorb some of that delta in the free cash flow. So it really is just the timing of those 2 items. I'm sorry, the second part of the question?

The kind of 2020 $1.3 billion to $1.5 billion cumulative...

Oh, yes, yes. As we called out at the Analyst Day, we're still targeting the $1.5 billion through 2020. And clearly, we believe this helps us. We get a $1.3 billion to $1.5 billion range. This clearly helps us in terms of achieving the $1.5 billion because it will be a significant positive free cash flow impact in the remaining years leading up to 2020.

Just as a reminder, we did highlight that we do need recovery in our industrial markets to hit the high end of that range. So there's still that open item out there. But as Bob said, it all combines to helping us be in that range.

Okay. And then maybe sticking on that Industrial outlook. It seems like you maybe revised expectations there a little bit lower from flat to slightly up to flat to slightly down. I'm curious what changed over the last month or so to kind of revise your outlook slightly there. And then how comfortable are you with your visibility there just given the China truck market and the visibility that you have?

Well, we still saw some movement in sales in particular around the gas turbine market. We have some just a little bit of caution and a couple of the others with -- as you highlighted, with some of the volatility in China. Overall, we still feel pretty good with the outlook. That's why we kind of kept it to flat to slightly down just through to the start of the first quarter. But overall, not much has really changed from the beginning of the year.

And our next questions will come from the line of Christopher Glynn with Oppenheimer.

So just that Industrial, the last couple of quarters really starts to show some strong pivot and improved profitability there. Just wondering if you could give a little understanding on the timing of the cost-out programs and what really kind of hit the last couple of quarters versus the work pace to get there previously.

Yes. Well, some of the initiatives on cost-out, we have been going through a little bit and we're starting to see the full benefit. The other one I did mention in the prepared remarks and we talked a little bit about at our Investor Day is we have been shifting resources from our industrial market to help support the new activity in Aerospace. And that's one of the unique things about Woodward is that when you get to the fundamentals of what we do between Aerospace and Industrial, it's the same type of technology. So we're able to leverage resource and move them around. So with the increase in Aerospace demand, we've been able to shift more resources. So it's a combination of those that are taking hold along with ongoing productivity improvements that we're driving, supply chain improvements. So it's a lot of things all coming together. But we're confident and I think, as Bob mentioned as well, we are confident as well of getting into our targeted earnings range for Industrial as well as we are for Aerospace.

On the first part of your question, Tom referred to our kind of realignment of the segment. That was back in 2016. And since then, that was the larger realignment. Since then, we've had smaller items kind of just not each quarter but throughout the year. So nothing significant beyond the first time.

Great, that's a lot of good color. And just wondering on the tax rate. What was the operating tax rate in the quarter? Does the guide essentially include the full 51% from the first quarter? And is it kind of linear in the back 9 months?

Fairly linear in the back 9. I think it worked that out to be approximately 18%, 19%, something like that, to get us to the full year 24%.

And our next questions will come from the line of Michael Ciarmoli with SunTrust.

Tom, just on the comments on Industrial that you had. I think you just talked about 12 to 18 months until things kind of get better. And obviously, we've got inventory destocking to deal with. But it sounds like you're maybe a little bit less constructive on this market improving in that time frame. I mean, is that kind of the view we should take here? You're kind of thinking that this IGT and renewables weakness might just last a little bit longer.

Well, let me take them separately. On the IGT, it's everybody's been seeing, this market's down, the key players in the market are down. We're burning off -- the inventory is starting to burn off, but there is a fair amount in the system. I guess, what we would be saying is we're taking a more cautious approach as we're looking forward. And it's just going to take a little longer to recover. We'll see if it speeds up or not, but -- so we're just being a little more cautious on that. On the renewables side, I want to kind of be clear for everybody. We have a little bit of a different dynamic. Overall, the wind market is doing well. Our customer base and our mix of programs with our customer base has been unfavorable. And what that really means is they're selling machines that were not on and we've won some new programs and that's why we highlighted that we are investing in some new power converters. Those new programs that we have the new platforms on will start hitting next year. So we actually will see and believe that wind will turn for Woodward and get more in line with that wind overall market that we've had the softness due to, like I said, customer sales and our product mix with them. So they're a little too different dynamics between the gas turbine and the wind market.

Got it. And then just sticking with the Industrial, the margins, I knew you've got the longer-term target out there of 16%. But you put up nice year-over-year and even sequential margin expansion presumably on the cost-saving initiatives. You mentioned the shifting of resources. Can we expect you guys to continue to show -- obviously, you need the market to come back in the volumes. But can you put up some gradually improving margins if this kind of sluggish environment persists?

We will improve margins even on flat to slightly lower sales this year. So there may be quarter-to-quarter variability, but we see that we can do that. And then as volume and activity picks up, we get on track to our goal of 16%.

Okay. And then just the last one for me on the Aerospace side. You did mention the biz jet, the rotorcraft market, and certainly everything in aero on the top line revenue-wise really humming along. What's the percent of the Aerospace segment now that's coming from biz jet, rotorcraft? I mean, can that be a material -- maybe not material, but can that be a nice driver maybe offsetting some tougher comps on aftermarket later in the year? If you can just remind us what the exposure there is from a percent level?

Yes. Overall, we're in that 10%, 12% on the business aviation. As it picks up, because we have, and I think if you look at our Investor Day package, you see we're on really the premier biz jets. And as that picks up, there is an opportunity for growth in that area. It's been depressed since the -- if you remember the automotive CEO fiasco, that was at 2009, and it's been depressed since then. So -- but in the meantime, we've won on all the premier programs, increased content and better position. So when it recovers, yes, it will be a tailwind for us. It will be a positive.

And our next questions will come from the line of Sheila Kahyaoglu with Jefferies.

Tom, maybe just to follow-up on the inventory question with regards to Industrial. It seems like your inventories are leaned out. How do you feel about your customer inventories? What's the lead time change there, maybe over the last year? And when are you conservative enough?

Yes. Well, the one thing that -- Sheila, if we looked, we have been leaning out our inventory and we are monitoring closely with our customers their inventory. They're slowly burning through some of it. As we move forward, the lead times there, we are happy to start seeing some visibility approximately 6 months out, start making sure any significant or material change in volumes would have to have something like an outlook like that. So we would have pretty good visibility when we start seeing a shift or a curve and a change in there. At the moment, we're not seeing it. So we're still a ways out as we said.

Okay, understood. And then, Bob, back to you in terms of just Aerospace margins. It seems based on the first question, R&D is about $6 million as is the OEM headwind. So together, they each account for about 200 basis points of margin headwind this quarter. So -- and it seems like that reverses in the second half. But it would imply that to keep margins flat at a 19% rate, you would have to put up 24%, 25% margins in the second half. Is that a fair statement, one, I guess? And then two, is that primarily driven by higher volumes and productivity?

More the latter, more the productivity aspect of it and then getting back to a more normal mix within the OEM. So our OEM business does have its own mix inside. And so we have some quarterly variability there that we also anticipate, and you'll see the 3 of those things all around that $5 million to $6 million level kind of called out in the bridge in the Q.

And I would just also say, Sheila, as you go into the latter half in the year, the top line gets a lot larger as well. So it's part of our plan. So you're going to have a lot more earnings and average out those margins.

Okay. And then just the last question. Accounts receivables picked up the quarter. What was that in regards to?

More timing than anything. We don't really have anything significant going on other than the timing during a particular quarter can give us some variability from front end.

And our next question will come from the line of George Godfrey with CL King.

Just 2 quick ones. Bob, can you -- what is the CapEx assumption embedded for the $230 million free cash flow this year?

$28 million -- $110 million, I'm sorry. I was giving you the quarter. $110 million.

$110 million. Okay. And then a lot of commentary on the Industrial side. So if I look at full year guidance of flat to down when we started Q1 at down 7%, then the interpretation would be that it improves throughout the year for seasonal reasons but really no structural change in the market. Is that the way I should look at that?

A little bit of combination. Tom mentioned the volatility in the Asian natural gas engines. We do anticipate that as we come out of winter that, that will improve a bit. So there's mostly seasonal. Our first quarter is always our lowest. This year was no different. And then on top of that, a little bit of a seasonal aspect -- or structural aspect going into the second half. That's also what we believe is driving that increased need in working capital.

(Operator Instructions) And our next question will come from the line of Pete Skibitski with Drexel Hamilton.

So Tom, $25 million tailwind this year from the tax reform. Bob is saying significantly higher in the out years. With that different trajectory, do you change your cash deployment strategy at all? Do you think about different R&D levels, different share repurchase levels? How does your thinking change with this new landscape?

Yes. I think it would be basically consistent with what we were highlighting here. We put, obviously, a focus on growth, organic growth first. We continue to look for the right type of strategic acquisitions. And then we're going to continue like we committed to increase our dividend, so that policy is still in place. And then depending on the growth opportunities, additional share buybacks would be taken with the cash.

Got it. Okay. And then one for Bob. Bob, corporate expense this quarter was a bit high, $19 million. I don't know if you can give us a sense what your full year expectation is and kind of what drove the quarter. Did you pay a lot of tax accountants and tax lawyers this quarter maybe?

Yes, they always (inaudible). It was predominantly the stock compensation was the quarterly impact that the piece -- largely the $8 million is delta between this year and last year and the quarter. And then we do expect it for the rest of the year to end up being above flat. So second quarter will be a shift around and then third and fourth will flatten out.

Okay, got you. Helpful. Helpful. And Tom, can you quantify for us how much power gen was down in the first quarter? Give me a ballpark.

Elements of power gen, we're looking at it. The reciprocating engine side was up nicely. Gas turbine was again down, and wind was down. So the whole mix -- apologies, Pete, I don't have it off the top of my head, the total mix and power, total down.

That's okay. Understood. Let me slide one more in that. Continuing resolution, we're getting into it looks like February there with the CR. Are you guys seeing any impacts, any headwinds to defense either in this past first quarter or feeling anything in the early stage of the second quarter here from the CR?

No, not at all. At the moment, no. We're -- prior to this being out there as maybe a risk item, we've seen continued increases in defense sales that's coming from both domestic as well as foreign military sales. I think as everybody knows, there's a strong demand for smart weapons, but we also have real strong demand for repair and maintenance of the defense assets in particular where we have so many that need upgrading or to get operationally ready. So right now, we're looking at a pretty promising remainder of the year on defense unless this is protracted and throw some sort of curveball at us. But at the moment, we're not anticipating or seeing anything.

And we have follow-up questions coming from the line of Gautam Khanna (sic) [Bill Ledley] with Cowen and Company.

Just wanted to -- just one quick clarification. Is the $0.24 hit from the tax bill in Q1 included in the $3.35 to $3.60? Or is that not included?

It is included.

Mr. Gendron, there are no further questions at this time. I will now hand the conference back to you.

Okay. Well, I appreciate everybody joining us today, and thank you for your questions. During the quarter, I know we'll see some of you so we look forward to that. And any additional questions, Don Guzzardo is always ready to answer them for you. So I appreciate it and looking forward to talking to you next quarter. Bye.

Ladies and gentlemen, that concludes our conference call today. If you would like to listen to a rebroadcast of this conference call, we will be available today at 7:30 p.m. Eastern standard time by dialing 1 (855) 859-2059, for a U.S. call, or 1 (404) 537-3406 for a non-U.S. call and by entering the access code 84309908. A rebroadcast will also be available at the company's website at www.woodward.com for 14 days. We thank you for your participation on today's conference call and ask you that you please disconnect your line.