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Woodward's (WWD) CEO Tom Gendron on Q2 2016 Results - Earnings Call Transcript

Q2 2016 Earnings Conference Call

April 19, 2016 16:30 ET

Executives

Don Guzzardo - Director, Investor Relations and Treasury

Tom Gendron - Chairman and Chief Executive Officer

Bob Weber - Vice Chairman, Chief Financial Officer and Treasurer

Analysts

Sheila Kahyaoglu - Jefferies

Gautam Khanna - Cowen & Company

Robert Spingarn - Credit Suisse

Pete Skibitski - Drexel Hamilton

Michael Ciarmoli - KeyBanc

William Bremer - Maxim Group

Jim Foung - Gabelli & Company

Operator

Thank you for standing by. Welcome to the Woodward Inc. Second 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.

Don Guzzardo

Thank you, operator. We would like to welcome all of you to Woodward’s second 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 May 3, 2016. The phone number for the audio replay is 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-U.S. GAAP measures included in today’s slide presentation and the earnings release and related schedules. Management uses these non-GAAP measures in monitoring and evaluating the ongoing performance of Woodward and each business segment.

Turning to our results. Net sales for the second quarter of 2016 were $479 million, a decrease of 3% compared to $493 million in the second quarter of 2015. Earnings per share were $0.65 for the second quarter of 2016 compared to $0.66 in the second quarter of 2015. EBIT for the second quarter of 2016 was $60 million compared to $63 million in the prior year second quarter. Strong performance in our Aerospace segment was offset by continued weakness in our industrial segment. Free cash flow for the first half of 2016 including the $250 million of proceeds from the formation of the joint venture with GE was $262 million compared to $14 million in the prior year period. Capital expenditures for the first half of 2016 were $99 million compared to $109 million in the prior year period.

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

Tom Gendron

Thank you, Don and welcome to those joining us today. The fiscal year is progressing largely in line with our overall expectations despite ongoing market challenges. For the second quarter, our aerospace markets continued to be very healthy with particular strength in commercial aftermarket and defense. In our industrial segment, while we have seen some additional sales deterioration as a result of economic headwinds and slower growth in China, we believe many of our markets are at or near the bottom of the cycle. Our second half is historically stronger for us and we expect this year to follow the same pattern. Significant challenges remain, but we are still on track to deliver our full year guidance.