Welcome to the Woodward, Inc's. Third Quarter Fiscal Year 2020 Earnings Call. At this time, I would like to inform you that this call is being recorded for rebroadcast, and all participants are in a listen-only mode. [Operator Instructions] Joining us today from the company are Mr. Tom Gendron, Chairman and Chief Executive Officer; Mr. Bob Weber, Vice Chairman and Chief Financial Officer; and Mr. Don Guzzardo, Vice President of Investor Relations and Treasurer. I would now like to turn the call over to Mr. Guzzardo.

Thank you, operator. We'd like to welcome all of you to Woodward's Third Quarter Fiscal Year 2020 Earnings Call. In today's call, Tom will comment on our markets and related strategies, and Bob will then 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 the presentation to go along with today's call that are also accessible on our website. Audio replay of this call will be available by phone or on our website through August 20, 2020. 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. I would like to refer to and highlight our cautionary statement as shown on slide three. As always, elements of this presentation are forward-looking or based on our current outlook and assumptions for the global economy and our businesses more specifically, including the ongoing COVID-19 pandemic and related measures taken by individuals, governments and private industry. 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. In addition, Woodward is providing certain non-U.S. GAAP financial measures. We direct your attention to the reconciliations of non-U.S. GAAP financial measures, which are included in today's slide presentation and our earnings release and related schedules. We believe this additional information will help in understanding our results. Now turning to our results for the third quarter. Net sales for the third quarter of fiscal 2020 were $524 million compared to $752 million for the prior year quarter, a decrease of 30%. Net earnings were $38 million or $0.61 per share compared to $66 million or $1.02 per share for the prior year quarter. Adjusted net earnings were $31 million or $0.48 per share compared to adjusted net earnings of $84 million or $1.30 per share for the prior year quarter. Net cash generated from operating activities for the first nine months of fiscal 2020 was $212 million compared to $219 million for the prior year period. Free cash flow was $173 million and adjusted free cash flow was $169 million for the first nine months of 2020 compared to free cash flow of $141 million for the prior year period. I will now turn the call over to Tom to comment further on our results, strategies and markets.

Thank you, Don, and good afternoon, everyone. Our performance in this quarter was severely impacted by the global pandemic. However, as we discussed last quarter, when the pandemic was first taken hold on the world, we took immediate actions to mitigate adverse effects on our business. These actions include heightened communications with suppliers and customers, proactively revising demand and supply plans, numerous cost-cutting and cash preservation steps. I'm proud of the strength and resiliency of our Woodward team as we continue to navigate through this challenging period. As we progress through rapidly evolving economic environment, we have been focused on the safety of our members and communities, while maintaining our financial strength. So far, what we are seeing in our markets is within the range of the scenarios and assumptions we developed early in our third fiscal quarter. We continue to closely monitor the situation, strategically adjust our business aligned with customer expectations, while rightsizing our cost structure for today and continuing to invest for the future. Moving to our markets in more detail. Our Aerospace segment took the brunt of the impact from the pandemic. Global flight hours declined as much as 80% on some platforms and OEM build rates plummeted due to the global manufacturing constraints, plant closings and furloughs. Flight traffic has begun a slow increase off the bottom and is starting to show some improvement, and OEM production rates are slowly stabilizing. However, we anticipate a slow recovery in commercial Aerospace over the next couple of years with commercial aftermarket recovering first. When it does recover, the fleet that will be in service will have greater Woodward content than the permanently retired aircraft resulting in a positive fleet dynamic for Woodward, favorably impacting both our earnings and cash flow. In Defense, our aftermarket business delivered solid…

Thank you, Tom. Aerospace segment sales for the third quarter of fiscal 2020 were $306 million, a 39% decrease from the prior quarter. The decline in segment sales was predominantly driven by lower commercial sales due to the secular decline in passenger traffic and lower OEM production rates, plant closings and furloughs, all as a result of the global pandemic. Commercial aftermarket sales were down 47% in the third quarter of 2020 as compared to the prior year quarter as a result of the severe decline in global flight hours. Defense OEM sales were down in the quarter, driven by lower sales of guided weapons and fixed-wing aircraft tied to supply chain issues from COVID-19 as well as a very strong quarter in the prior year. Defense aftermarket activity benefited from continued military spending in support of the U.S. Defense initiative to improve the combat readiness of the U.S. fleet and global upgrade programs. Overall Defense sales for the first nine months of 2020 were up 8% compared to the same period last year, and our backlog remains strong. Aerospace segment earnings for the third quarter of 2020 were $41 million or 13.4% of segment sales compared to $103 million or 20.7% of segment sales for the third quarter of 2019. Segment earnings were negatively impacted by the severe commercial aftermarket decline and lower OEM sales, partially offset by the cost reductions we took early in the quarter. Turning to Industrial. Industrial segment sales for the third quarter of fiscal 2020 were $217 million compared to $253 million in the prior year period, a decrease of 14%. Excluding the renewable power systems and related businesses, which I will refer to as RPS, Industrial segment sales for the third quarter would have been $210 million compared to $230 million for the…

[Operator Instructions] Our first question comes from Sheila from Jefferies. Your line is open.

Hi. Good afternoon, guys and thanks for the time. My first question, I guess, would be on the Aerospace side. If you could obviously, we're seeing a massive decline. If you could maybe comment on where you are on production on the MAX and other platforms and what you're seeing in terms of your own inventory?

Yes. Sheila, I think the first thing I'd comment on the MAX is, I think, all production rates for us right now are a little bit uncertain. I think what really will play out is when it's certified. Things have been moving. And so I guess we don't have today, a stabilized production rate to quote. So I think we'll not state anything on that one. The rest of the production rates are tracking with what Boeing and Airbus on the commercial side have communicated to the market, and those have been reflected in updated POS that have come through either directly or through our Tier one customers. So we're tracking really with what they're saying.

Sorry, Tom. Just on the MAX, are you producing any right now?

We have some hardware that we're producing. So it varies by the end product that we have. So yes, we are producing, but it depends on how much inventory was already in the system, what they're pulling, and it's not consistent across all our MAX products.

Okay. And then I wanted to ask about Industrial. I think the decrementals were pretty good, actually. And I don't know how much of that was the RPS divestiture that was dilutive to the business, but maybe can you talk about what helped margins? Is this a sustainable level?

Yes. We are encouraged by the industrial segment earnings this quarter, and I think it does represent some of the work that we've been doing and there is an impact to RPS for the quarter and the year-to-date. It's obviously favorable. I'd say it's one of probably three major things, the cost reduction actions and RPS. And then having some mix going on a little bit. We were seeing turbine business improving in the kind of first six months and stayed fairly flat in the last quarter, offset by a decline in the L'Orange aftermarket.

Great, thank you.

Thank you. Our next question comes from Robert Spingarn of Credit Suisse. Please state your question.

Good afternoon. Tom, your Aero margins held in pretty well this quarter despite the sharp drop in sales. So I'm wondering if you'd be comfortable calling the June quarter, the floor for margins unless the pandemic gets much worse. Or maybe said differently, should we expect further cost out in Q4 to have favorable drop-through to margins, assuming that sales don't get worse?

There's a rally. And there's a definite strong tie to the volume. The third quarter was a very tough quarter. I think everybody on the call knows. Our customers had facilities closed, people were furloughed, weren't taking products, the airlines were parked, a very challenging time. You could say, subject to further pandemic issues that our fiscal third and fourth quarter should represent the bottom, okay. Now we can't say that for certain, but that's what it would look like. And as Bob highlighted, and I mentioned as well, the first thing that's going to come back is aftermarket. The production rates have been changed, as everybody knows. The really the most uncertain one is Sheila asked was the MAX, and that's still uncertain going forward, exactly what the ramp rate on the MAX will be. The other ones are understood, obviously down significantly from where they were even six months ago. So what we see is those OEM, the first thing they'll start growing is aftermarket. And the reason I'm highlighting that is, obviously, that's a high-margin business. So it should bode well for increasing margins as we move into 2021 on lower sales, which are anticipated year-over-year.

And then just on the industrial side, from I guess, a top line perspective, but how are things trending as we move past June into the summer here, I guess, both from a top line perspective? And then how you think about margins?

Yes. Well, top line, there's going to be continued pressure. We have seen our customers reduce some production rates. I'm sure we've seen some of those announcements come out over the last week, 1.5 weeks. We do believe, though, that our margins will continue to hold and improve both from cost out actions, but also what we would call portfolio adjustments that we've done with pruning some businesses. And in fact, removing low-margin businesses and our core businesses have good margins. So this is one step toward a goal we've had that we're not changing, which is industrial should be a 16% plus margin business. And as the volume picks up with the cost structure initiatives we've taken, we'll lever the sales growth into higher margins as we move forward. But we are going to still have there is still a tough outlook for some months to come until we really see how things stabilize.

Okay. Thank you, Tom.

Thank you. Our next question comes from Christopher Glynn of Oppenheimer. Please state your question.

Thanks, good afternoon. I just want to kind of build on the discussion of the margin pathway for Industrial there, you had brought up pruning. Just want to get a sense of what degree of pruning is taking place? Other than RPS, should we think about that as kind of like a couple point impact on the top line?

Yes. I think when we say that, as Bob highlighted, what we refer to as the RPS businesses. So there is a number of product lines with the wind turbine converters being the largest of those. Those product lines net had lower actually significantly lower margins than the core industrial margins. And so we talked previously, when we announced the divestiture of the businesses that we would be like 2, 2.5 points margin improvement based on steady sales based on that divestiture. And in addition, those businesses were not core or strategic to our future.

Okay. Yes, I just wanted to clarify. There are not other pruning actions contemplated at the moment?

Nothing material. We constantly look at our portfolio, but we do not see anything on the order of an RPS in the near future.

Okay. I want to jump over to Marine for a minute. How should we think about that tracking in terms of drivers? Is it really global trade? Any weight to oil and gas production levels? And also wondering if the environment creates a window, maybe if there's any pent-up aftermarket demand that built up in the system?

Yes. I think it's really tied to global economic activity, global GDP, which leads to trade, as you're highlighting. Where we see -- Your point is correct. We do see that there will be some pent-up aftermarket demand coming as the ships are brought back online, and in fact in utilization increases. So we are looking at that, and we're anticipating our forecast as the economy picks up, global economy picks up that we will see that. Second thing that we're seeing some favorability on is orders for LNG carriers. So LNG is a trend out there. We have substantial content on LNG carriers. And so we see that coming in the next couple of years as those ships are built and put into service. And those also will have a nice aftermarket tied to them.

Okay, thanks. Sounds good.

Okay. Thank you.

And next we have Pete from Alembic Global. Please state your question.

Hey, good afternoon guys. Hey, Tom, the comments in the slide on the commercial aftermarket and just your comments about the better mix on the newer aircraft. Are you implying or should we think that maybe the recovery in commercial aftermarket sales for you guys is kind of more of a v-shaped recovery versus, obviously, kind of a slower or a more modest slope on the OEM sales?

I would not claim a v-shaped recovery. I think what we're really trying to say there, Pete, is so we really monitor all the aircraft in the fleet. We actually track every airline. What they're flying? What their route structures are? And what aircraft they're utilizing? So as we look at the retirements that have been announced or planned and ones we see coming, they're taking out aircraft that has little-to-no Woodward content for the most part. There will be some that have that's a spectrum. But for the most, it's smaller. The fleet that we see coming out of the recovery of the pandemic will have higher content per aircraft than the fleet that has been flown before. So what that means is, as we move forward and the market recovers, we will recover probably better than the market because we have more content per plane, which will lead to higher sales with good margins. So it's more about really a very detailed analysis of what we call the demographics of the fleet. And we think the Woodward portfolio a year from now, two years from now, as things settle out, start flying again, will be an excellent portfolio, and we'll have better position in the market.

Okay. That's great. Just one more follow-up on the Industrial side. I feel like you got I feel like oil and gas has been soft for you guys for a few quarters now. I lose track exactly, but and I think you guys have been talking about 70% to 80% down, something like that. At what point do we get to easy comps in oil and gas? Are we getting closer to kind of the trough in that area?

Yes. I think as you roll past the first quarter of 2021 or the start of calendar 2021, there's no doubt. At one point, we saw just it was on the order, 80% drop in our oil and gas sales, applications in oil and gas. And just a reminder for everybody on the call, too. A lot of the product that Woodward product that goes into that oil and gas market is on drilling or compression, pumping and those are applications that have a lot of hours. So when they're running, they generate good aftermarket, a lot of that's been shut down. And so with no operation, there's no additional aftermarket additions and no OEM sales. So yes, it's kind of for Industrial, we're pretty pleased with how we've made it through all this, but if you think about, we had an oil and gas crisis compounded by a pandemic, and we're still holding together. So when that recovers, which it will, we'll be in good shape. And somebody asked a question earlier, maybe it was related to Marine, but you could apply that to oil and gas. When they bring these rigs back up online and start operating, there will be an aftermarket demand to get all that back in place. And we saw that before, during our previous oil cycles or oil market cycles.

Much appreciate it. Thank you.

Thank you. And next we have David Strauss of Barclays. You please state your question.

Hey, thanks. When it. So I don't know if I might have missed it. Did you actually say how much your commercial aero OE sales were down in the quarter? And could you comment on the potential for destocking to see a pickup in the revenue decline that you're seeing on the commercial aero side from here?

Yes. So commercial aero was down approximately six aero OEM was down 62% in the quarter. So quite significant. We have studied and this is why it's a little hard to say, production rates, and there was a question regarding the MAX. But even on some of them, as we've been monitoring and calculating all the inventory in the system. And so there will be some rightsizing of inventory through the whole supply chain. We've got that planned into our numbers. I would say we've seen some of that. So I think you call it destocking. I'm just saying that the inventory and the supply chain needs to come to a new balance given the production rates. And that's occurring. But all the lines that Boeing, Airbus, Embraer, we are producing product. It's just at which rate are we producing and it will then turn over the next months to stabilize to their stated rates.

Okay. And on the aftermarket, Tom, what do you think about the potential going forward that we could actually see a decoupling in the aftermarket relative to underlying kind of flight activity? I mean, right now, we're seeing for you guys and pretty much everyone else, the aftermarket down in line with kind of what calendar Q2 flight activity was down. But do you have any concern that we might actually see the aftermarket coming below flight activity going forward as the airlines kind of get their arms around this and start using start cannibalizing parts and use material and all of that? Thanks.

Yes. I think the I would state the airlines are doing a proper job. If I was in their shoes, I'd be doing the same, trying to minimize expenditures as much as they can today. The interesting thing is we're still seeing activity of engines going into shops, obviously, at much, much reduced rates. We will see and we're planning that in our outlook that the airlines will do their best to delay by swapping out equipment, delay expenditures that they can. We in some ways, in the quarter, our aftermarket sales were not down as far as flight hours even in this bad quarter. So it's there's a lot of uncertainty wrapped around that. There's certain amount of maintenance that has to occur and I don't know that we're right today, I would not believe we will fall below flight hours as a drop. The one challenging part also to watch is the impact of all the fleet being retired or parked, what happens with some of that equipment. Again, we're tracking that. But all that we shouldn't be too far off of flight hours. And then as they start putting more aircraft back into service, which means they have to make sure they're quite worthy and safe and so forth, we will start seeing that aftermarket pick up and so may pick up more rapidly than flight hours. There will be an inflection point on that. So challenging to forecast, given that I've been in the industry a long time, so as my team. We've got a really good experienced team from 35 to 40 plus years in the industry, nobody has seen anything like this. So we're doing our best to estimate, talk to customers, talk to airlines, work with everybody. But I do see, once we hit that inflection point, that was the fleet dynamic discussion we had earlier, we will see Woodward accelerate out of this downturn due to the fleet demographics.

All Right. Cushing all the color. Thanks.

Thank you. And up next, we have Michael from Truist Securities. If you please state your question.

Hey good evening guys. Thanks for taking the question here. Tom, maybe just a little bit more on the aftermarket. I mean, the down 47% in the quarter. I know you kind of gave the expectations for the second half kind of being a bottom here. But do you think the aftermarket growth could get worse? I guess could you enter this quarter with a backlog? I mean, clearly, there were engines in the shops. And I think if we look at what some of your big customers, GE saw, I think, 60% declines in some of their CSA billings and the engine shop visits down. So do you think the aftermarket actually gets worse here in the short-term before it picks up? Or do you think you've bottomed here?

I do believe we're near bottom with the plus or minus I'm not sure what percent to put on it. It's pretty close to bottom. What we're seeing just share with everybody, we did have a number of airline customers where we had hardware back for repair and overhaul, who said stop working and ship it back as is, don't do any more work, stop. So we did see a fair amount of that. But at the same time, we had a number of customers, which we were unsure of at the time, say, please complete it, get it back to us. And then we've seen some outlook for shop visits to come off of this bottom as we move over the next few months. So we've seen the whole gamut here. And we've also been frankly, we've been very careful. And if you look at how well we did on our receivables, we've been very careful to ensure airlines and operators are able to pay. And so we have a lot of dialogue, and we did really well with that. So I can't say it won't get worse, but I'm more in line that we're pretty well bottomed or near the bottom and over the next and I'm going to say, over the next year based on the uncertainty, but we're starting to see an inflection point in that time period, and then they'll start picking up again.

Got it. Okay. And then just what about your opportunities and content on the 777 times, the nine times engine that being pushed out. Does that have, I mean, obviously, there's a whole host of other things going on, but does that have any major near-term impact on you guys?

Well, yes, of course. This now, all of our previous five year forecasts are now changed. So but if you had gone back six months ago, those sales were in our forecast. Obviously, going forward, as we're recasting everything, we've adjusted. And so we were 777 times would have had sales. It was planned to come online. And once it came online, there would have been initial provisioning sales. So yes, there's an impact to that. It's not huge. And but at the same time, it's not lost. I truly believe that will be a very successful aircraft. People will fly again. People do want to fly internationally. We all sit around here and talk about. In my entire working career, I've never been home this much in a row in my life. So we all are like going a little stir crazy, not traveling. So we're all ready to get going as soon as we can. And I think the whole world is that way. So you're going to see these the demand for the aircraft come back. It's just it's one year, two years, three years, but I'm very confident we'll see people flying again and that international flight will go and 777 times, 787, A350 are going to be great planes.

Got you. Right. And last one, just the margins in the quarter. I know last quarter, I think there was the reversal of the variable comp and bonus. Was there anything else? Did that flow through at all in this quarter? Or was that all done last quarter?

That was all done last quarter in terms of reverse. There was nothing recorded in the quarter because we forego the annual bonus for the year. But no big credit like it was last year.

Okay, got it, thanks.

Thank you. [Operator Instructions] Our next question comes from Gautam Khanna of Cowen. Please state your question.

Yes, thanks, good afternoon guys.

Hi, good afternoon.

I wanted to pick up on one of the earlier questions on and Tom's response to it, which was that you might see part outs and I guess, some cannibalization, but I was curious, like, have you guys what is your exposure to use serviceable material? Maybe how does that affect the last downturn? And how is the aftermarket mix different or similar to what was experienced, what the mix was back in the '08, '09 downturn? Or maybe before that, 9/11, what have you?

Yes. If you go back to those time periods, I mean, it's a good question. To date, we haven't seen that used service material market in that we would anticipate that with retirement, permanent retirements to where you would see some of that equipment coming online. What we did see in the last time, we had a real downturn. There was a small impact from that. But the interesting thing was some of that though they say use serviceable material, we would see a number of those type controls come back to us to be, if you want to say, brought up to standard latest service to be repaired, so they have a little more value. So we actually would see some aftermarket tied to that not saying universally, we saw it, but we did see on some of the more complex units that they would actually come back through us. We're actually looking at that and saying, okay, if that's coming available, let's work to make sure we participate in that market. And so we're looking at ways to do that. But I don't expect it to be a material negative on our aftermarket sales.

Okay. And just a follow-up from earlier. Do you feel like you have good customer visibility right now on what you're supposed to deliver over the next two or three quarters? Or just getting to the point on destocking. How much visibility do you have? Or do you keep getting change orders or what have you, schedule changes and the like?

Yes. What I shared with you. We talked about this last quarter, but I'm going to say this across all our customers in all our markets, okay? So no not going to highlight one over another. So this is Industrial and Aerospace. Customers can be slow to change their orders. And what we did is understanding this and having lived through downturns, we proactively changed our production plans based on what we saw and anticipate was going to happen. And in our prepared remarks, we made reference to that. And we were pretty darn accurate with what happened. We are talking to our customers every week. All customers to align what they're looking for in deliveries, what the inventory levels are and the like. So a little long to answer your question, we're very confident and on top of what inventory is in the system, what our customers are doing and how we will produce to the current requirements. Now, will there be volatility in those requirements? And I'd have to say yes, because we could see changes in production rates. We could see changes in the market. But customers are working really well with us. And we're like I said, it's a weekly discussion. And I would say we've got a really Yeah. Inventory somewhat I'd like we're on top of it.

Great. And just one last one on, your appetite in this downturn to entertain acquisitions, or mergers or what have you, just cash redeployment. Is it one of the situations where we just kind of preserve liquidity? Or are you looking at things in the M&A pipeline?

Yes. What I would say first is liquidity was priority number 1. And then with that liquidity, not knowing initially where this could go, we wanted to ensure we had ample liquidity, no issues with debt covenants and the like. And you can see by the results that we're in quite good shape there. As we go over the next year, we will start accumulating cash. And as we watch the market conditions to ensure we don't need to preserve liquidity, we are actively working on our growth initiatives. And we did this in past downturns. We did it after 9/11. We did it after the financial crisis. And a lot of you guys might remember, on the financial crisis, Bob and I, months before the crisis hit, we told the world, prices were too high. We went into that financial crisis net debt free until everybody in advance, we were going to buy, and we did. We made two significant acquisitions that have really position us in the Aerospace market. So we'll be looking at opportunities, but we're going to be conservative and very prudent about deployment of cash and the like. At the same time, though, I know we like to talk a lot on M&A. I just want to highlight this is we're still investing very well into R&D, organic development, I see opportunities with customers where weak suppliers may not make it or they're not able to properly support the customer of the market. There's opportunities in that. We're positioning our technology so that we can have more share on the next application. So we're not backing down on that. And I absolutely believe we're going to come out stronger with very good growth rate as the market recovers. So we're going to be doing both.

Thank you very much guys.

Thank you.

Thank you. And we now have a follow-up from Robert from Credit Suisse. Please state your question.

I wanted to just follow-on that last question and then some earlier comments on destocking and asking your customers or trying to frame what your customers really need. I wanted to ask you, Tom, if you ever get into a situation where you have mixed signals between on the OE side between what the airframe guys are saying and the engine guys?

Not really, Rob. There's always a difference to lead times and you want to say, material management strategies. But they are in sync, and we're confident. As a matter of fact, we constantly look at both to ensure we're confident in the data that we get from both of them. So I would say today, again, we're tracking this and monitoring weekly discussions, they are in sync.

The reason I ask that is because you'll remember back with Precision Castparts, who sold a lot of components through the engine guys, they were in this lengthy period of destocking. And we couldn't quite track it. And it turns out that at least one particular engine OEM was overstocking or at least had been. And I just wondered if there's any risk of that not necessarily going forward, but maybe it's already happened and just wanted to be aware of it.

Yes. What I would say occurs in the industry, and we would at Woodward, would do the same thing. If you have long lead time parts with a supplier that's not consistently delivering on time, you're going to build up a buffer of inventory. And then if things change, you got to burn that off. What I would say with our customers is we're kind of delivering to them in a more just-in-time fashion. And then what we when we talk about inventory in the supply chain, what we're talking about is some of our hardware will go to a nacelle manufacturer that then gets podded with an engine then gets on to the airplane. So you got to track that inventory in the system. But when we're selling to a customer, they do not have big buildups of Woodward inventory at their sites. So it's mainly just what's flowing through the system. So that's why I have a little more confidence in an understanding of what's in the supply chain that there's not going to be a big destocking effect on Woodward. I can't say you on every supplier because we have I can tell you, we buffer some of our suppliers just due to poor performance ensuring that we can deliver. So I understand how that occurs, but that's not what we're experiencing.

Okay. And then just while I have you and I don't think this came up before but, CapEx is down by something like half from last year, and that was discussed in the context of free cash flow. But I'm just wondering, when we come out of the pandemic, whenever this is, a year, two years, three years from now, will we have a big catch-up spend?

Yes. No. This is good for our investors or future investors. Look, we facilities' and were prepared for all the growth that was happening, and we were ahead of it. So just think of that and the line rates that we're going, we have years of not needing additional capacity. There'll be maintenance capital, capital for productivity and things. So it's not like going to be 0, but it's going to be significantly below past CapEx levels because we have brilliant capacity.

Okay. Excellent. Thank you.

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

Well, thanks, everybody, for joining us today. And I think we're going through challenging times, but I can only imagine for all our investors, how challenging it is to understand what's going on in the market and what's going on with the company. Hopefully, we've provided you with some information and color. Please reach out to us if you have questions, and we look forward to talking to you through this quarter and at our next quarterly report. So 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 starting at 7:30 p.m. Eastern Daylight time by dialing one (855) 859-2056 for U.S. call or you may dial one (404) 537-34-0649 U.S. calls. You can also enter the access code for U.S. call. The access code is 3888854. The broadcast will also be available at the company's website, which is www.woodward.com for 14 days. We thank you for your participation in today's conference call and ask that you please disconnect your lines.