Woodward, Inc. · NASDAQ:WWD
Woodward — Investor Day (December 2011)
112 slides from Woodward's investor day presentation, Dec 7, 2011
Slide 1: Why Woodward Wins
WHY WOODWARD WINS..
Slide 2: Agenda
Agenda 2 Time Topic Presenter(s) 8:30 Breakfast 9:00 Introductions & Woodward Overview Tom Gendron 9:15 Aerospace Segment Tom GendronMarty GlassSagar Patel 10:15 Break 10:30 Energy Segment Tom GendronChad PreissJim Rudolph 11:30 Financials Bob Weber 11:45 Summary & Wrap-up Tom Gendron
Slide 3: Participants
Participants Tom Gendron Chairman and CEO Bob Weber Vice-Chairman, CFO and Treasurer Marty Glass President, Airframe Systems Sagar Patel President, Aircraft Turbine Systems Chad Preiss President, Engine Systems Jim Rudolph President, Industrial Turbomachinery Systems Chris Fawzy Corporate Vice Presi
Slide 4: Cautionary Statement
Cautionary Statement Information in this slide presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, including, but not limited to, statements regarding future sales, earnings, liquidity, rela
Slide 5: Vision 2015
Ms.woopwarn wry WOODWARD wins... 5 Tom Gendron Vision 2015
Slide 6: Why We Are Here
W.wooowaro wy WOODWARD wins... WHY WE ARE HERE Woodward enhances global quality of life and sustainability by optimizing energy use through improved efficiency and lower emissions. 6
Slide 7: Vision 2015
M.wooowaro wry WOODWARD wins... global i! VISION 2015 Woodward sets the global standard in energy control and optimization solutions. Our ‘success is enabled by our members and is measured by excellence in customer satisfaction and shareholder returns. ity SONG successfulariven reliable i i VISION 2
Slide 8: Key Focus Areas
Ms.woopwarn wry WOODWARD wins... Key Focus Areas : Customer Solutions Organizational Capability Strategic Growth Leading Performance
Slide 9: Aerospace
Ms.woopwarn wry WOODWARD wins... 9 Tom Gendron Aerospace
Slide 10: Aerospace Market Trends
Aerospace Market Trends Fundamental requirements Technical Safety, critical system redundancy Smaller size, lower weight Performance, reliability Commercial Aggressive price expectations Lower Life Cycle Costs Special focus on operating cost Source: FAA, Bernstein 10
Slide 11: Aerospace Market Trends
Aerospace Market Trends Recent trends/requirements Technical Fuel efficiency Emissions regulations Affordable precision Commercial Lessors/Low Fare Carriers Lower acquisition cost expectations Shorter term cost of ownership 11
Slide 12: Aftermarket Trends
Aftermarket Trends Aircraft and Engine OEMs Seek 'one-stop shop' Predictable, long-term pricing Older aircraft platforms replaced by new models Higher reliability engines offset cutting edge technologies Fleet expansion drives regional MRO requirements Asia, Middle East 12
Slide 13: Growth Driver - Global Traffic Demand
Growth Driver - Global Traffic Demand Continued Emerging Market strength - Asia in particular Significant portion is replacement 13 Growth Replace Source: Airbus and Boeing projections
Slide 14: Growth Driver - Fleet Development
14 Growth Driver - Fleet Development Source: Boeing projection
Slide 15: Aerospace Growth Drivers
Aerospace Growth Drivers Marty Glass 15
Slide 16: Aerospace Sales FY11
Aerospace Sales FY11 1 11 OEM 62% Aftermarket 38%
Slide 17: Aerospace Sales FY11
N.wooowaro wHy WOODWARD wins. Aerospace Sales FY11 Mil Rotor Wing 14% Precision Guidance 13% Civil OEM 33% Commercial Transport 37% Mil Fixed Wing 17% Military OEM. 29%
Slide 18: Growth Driver - New Platforms
Growth Driver - New Platforms 18 737 MAX EJet EV Lower fuel burn and emissions
Slide 19: Growth Driver - New Entrants
Growth Driver - New Entrants 19 Superjet 100 C919 ARJ21 MRJ
Slide 20: Growth Driver - Military
Growth Driver - Military DoD budget pressure, but key programs will move forward Continuing conflicts drive warfighter support needs 20 F-35 KC-46A JDAM RWS F/A-18 KC-390
Slide 21: Growth Driver - Aftermarket
Growth Driver - Aftermarket Growing fleet and utilization (hours flown) drives MRO requirements Single aisle is largest segment Woodward share of installed base is growing rapidly with A320, 777, and Regional Jets fleet growth 21
Slide 22: Woodward Aerospace Overall Strategy
22 Woodward Aerospace Overall Strategy Propulsion system control solutions for every type of turbine-powered aircraft Actuation system solutions for critical aerospace and defense applications Turbine Engine Control & Combustion Solutions Aerospace & Defense Motion Control Solutions Aerospace Propul
Slide 23: Aerospace Growth Strategies
Aerospace Growth Strategies 23 System/Product Strategies Systems framework and transparent trade studies Across Woodward, develop/leverage platforms for share growth Long-term technology focus Customer Strategies 'Business partner' relationships Early technology alignment Target key platforms, maxim
Slide 24: Aerospace Motion Control
Aerospace Motion Control Marty Glass 24
Slide 25: Motion Control Overview
25 Motion Control Overview Aircraft Control Systems Cockpit to Surface Hydraulic and Electric Motion Control Solutions for Fixed and Rotary Wing Aircraft Secondary Flight Control Systems Primary Flight Control Systems Cockpit Control Systems
Slide 26: Smart Weapons - Precision Guidance and Stabilization Solutions
Smart Weapons - Precision Guidance and Stabilization Solutions 26 Motion Control Overview Motion Control and Sensor Solutions for Critical Tier1 Applications
Slide 27: Technology - New Product Introductions
Aircraft Controls Systems Platform Cockpit Controls New Hydraulic Actuators Integrated Electro-Mechanical Actuators Smart Weapons Guided Weapons Platforms Remote Weapons Stations Motion Control & Sensor Solutions New Position Sensing Products High Volume Motors & Servo Valves 27 Technology - New Pro
Slide 28: Continued Growth Vision - Motion Control
Target additional content, especially 737 MAX & A320neo Aircraft Control Systems Motion Control & Sensing Solutions Expand Aftermarket Sales Sales Channel Development Price Realization Improve Repair Practices Win new Military content Affordable Guided Weapons Remote Weapons Stations Unmanned Air Sy
Slide 29: Aerospace Propulsion Control
Aerospace Propulsion Control Sagar Patel 29
Slide 30: Propulsion Control Overview
Propulsion Control Overview Evolution from components to systems supplier Organic development and acquisitions grew product breadth Key program wins set table for future growth 30 Combustion Systems Actuation Systems Fuel Systems Electronic Systems Electronics
Slide 31: Propulsion Control Evolution
31 Propulsion Control Evolution Successful transition from Components... GEnx LEAP-X GE90 HMU V2500 FMU, Fuel Nozzle CFM56-5 HMU to systems...
Slide 32: Technology - New Product Introductions
32 Technology - New Product Introductions Systems capabilities investments Customer technology alignment Near Term - refinement Mid Term - new product maturation Long Term - enabling technologies World Class cycle times Recent Introductions: Main Fuel Pump, Air Valve - Future: More Electronic Air Va
Slide 33: Continued Growth Vision - Propulsion Control
33 Continued Growth Vision - Propulsion Control Continue strategic evolution More organic solutions Greater optimization within systems Target GE9X for 777-8X Evaluate adjacencies Support "podded engine" Leverage Motion Control 777-8X Integrated Propulsion System
Slide 34: Aerospace Growth Profile
Aerospace Growth Profile Sagar Patel 34
Slide 35: Aerospace Content per Aircraft - Commercial
Aerospace Content per Aircraft - Commercial 35 A380 ~$400,000 B787 ~$180,000 A320 ~$80,000 B747-8 ~$350,000 B777 ~$125,000
Slide 36: Aerospace Content per Aircraft - Regional
36 Aerospace Content per Aircraft - Regional Bombardier CRJ 700/900 ~$150,000 Embraer E170/190 ~$160,000 Superjet-100 ~$210,000
Slide 37: Single Aisle Growth
Single Aisle Growth Adding content within market 3X content, 2X share gains in Propulsion Pursuing multiple additional opportunities 737 MAX 25% CAGR* Woodward internal projections *
Slide 38: Twin Aisle Growth
777 Twin Aisle Growth Significant content on new platforms Beyond 2015, 777X gains 2X content, 2X share gains in Propulsion A380 787 747-8 18% CAGR* Woodward internal projections *
Slide 39: Aerospace Content per Aircraft - Business Jets
39 Aerospace Content per Aircraft - Business Jets Bombardier Global Express ~$180,000 Cessna Sovereign ~$150,000 Gulfstream 550 ~$100,000 Dassault 7X ~$110,000
Slide 40: Business Jet Growth
Business Jet Growth Post financial crisis Continued large jet strength with good representation Recovering light-medium jets New models drive long- term sales growth Gulfstream G650 Bombardier Global 7000/8000 G650 13% CAGR* (c) Gulfstream Corporation 40 Woodward internal projections *
Slide 41: Rotorcraft Market Growth
Rotorcraft Market Growth Good positions across both military and civil platforms DoD budget pressures uncertain 1 4% CAGR* Bell 429 Black Hawk 41 Woodward internal projections *
Slide 42: Aerospace Content per Aircraft - Military
42 Aerospace Content per Aircraft - Military Boeing KC-46 Tanker ~$500,000 Boeing F-18 ~$250,000 Lockheed Martin F-35 ~$330,000 Sikorsky UH-60 Black Hawk ~$60,000
Slide 43: Military Market Growth
3 Military Market Growth Strong content F-35, KC-46A Strong presence in weapons, UAVs, warfighter safety 43 F-35 KC-46A 9% CAGR* *
Slide 44: Total Aerospace - OEM
Total Aerospace - OEM 44 12% CAGR* Aircraft, excludes Weapons Woodward internal projections *
Slide 45: Aftermarket Growth
Aftermarket Growth Woodward growth rate ahead of market Positive Fleet Dynamics Commercial rate higher Business/GA, Military somewhat lower rate than Commercial 45 10% CAGR Aftermarket Sales Woodward internal projections
Slide 46: Outlook
Ms.woopwarn wry WOODWARD wins... 46 Outlook
Slide 47: Aerospace - Sales Outlook
47 Aerospace - Sales Outlook (CHART) ~10% CAGR
Slide 48: Energy
Mb.woonwaro wry WOODWARD wins... Tom Gendron Energy
Slide 49: Energy Overall Strategy
49 Energy Control solutions for power equipment used in the extraction, distribution and conversion of renewable and fossil fuels in the marine, locomotive and industrial equipment market Control solutions for any machine that produces electricity utilizing conventional or renewable energy sources S
Slide 50: Global Energy Outlook - Demand
Global Energy Outlook - Demand 50 Population and income growth are driving production & consumption of energy 2010 ? 2035* 37% overall increase in energy demand Driving energy infrastructure investment of over $34 Trillion! Source: BP Energy Outlook *Source: International Energy Agency Special Repor
Slide 51: Global Energy Outlook - Emissions
51 Global Energy Outlook - Emissions Expanding emissions regulations will impact both Energy mix, and Energy efficiency Renewable energy Conservation More efficient use of waste fuels
Slide 52: Global Energy Outlook - Gas
Global Energy Outlook - Gas Gas displaces coal and nuclear, motivated by environmental policy and safety concerns 52 Source: International Energy Agency Special Report
Slide 53: A Golden Age of Gas?
— \wHy WOODWARD wins... 3 NG JE WE ENTER! A GOLDEN ‘AGE OF GAS? global @ innovative pz
Slide 54: Global Energy Outlook - Gas
Global Energy Outlook - Gas Gas production & consumption grow significantly through 2035 $8 Trillion in gas infrastructure investment >50% increase in total gas consumed Gas share of total energy consumption - 21% ? 25% Unconventional sources of gas rise 54 Source: International Energy Agency Specia
Slide 55: Global Energy Outlook - Gas
Global Energy Outlook - Gas LNG trade grows twice as fast as global gas production $720 Billion in LNG infrastructure investment* $86 Billion investment in new LNG carriers* 55 Source: BP Energy Outlook *Source: International Energy Agency Special Report
Slide 56: Global Energy Outlook - Other Trends
56 Global Energy Outlook - Other Trends Aging infrastructure Gas pipelines Electrical grid New technology changing the landscape Hydraulic fracturing Smart grids Energy Storage Biofuels Energy independence influences energy policy Exploration Fuel Flexibility
Slide 57: Energy Value Streams
Ms.woopwarn wry WOODWARD wins... 57 Energy Value Streams
Slide 58: Value Stream
My.wooowaro wy WOODWARD wins... Value Stream Power Generation Utilization / Eten) conto
Slide 59: Energy Value Stream
Mb.woonwaro wry WOODWARD wins... Energy Value Stream : J i Power Generation Utilization / 5) distribution) Processing) & Distribution Conversion to Work Natural Gas
Slide 60: Woodward's Energy Business
Woodward's Energy Business Chad Preiss President Engine Systems Jim Rudolph President Industrial Turbomachinery Systems 60
Slide 61: Oil & Gas
M.woopward wHy WOODWARD wits... Oil & Gas Power Generation Utilization / E cae in ll m if
Slide 62: Oil and Gas Landscape
G G G G G G G C C C C C C C C C C C E E E E E E E E E E P P P P P P P P P P S 62 Oil and Gas Landscape
Slide 63: Oil and Gas Landscape
M.woopward wy WOODWARD wins. Oil and Gas Landscape Gas to r Distribetion ‘Consumer an LP
Slide 64: Dynamic Positioning, Extraction and Gas Compression
64 Dynamic Positioning Energy Extraction Gas Compression Diesel Gen-Sets Power Management Power Distribution Support Ships
Slide 65: Energy Transportation - LNG
65 Energy Transportation - LNG Process Safety & Control Natural Gas Engines Compression
Slide 66: Coal and Uranium
Mb.woonwaro wry WOODWARD wins... Coal and Uranium aN it Power Generation Utilization / & Distribution Conversion to Work m he lie J Uranium a i ii
Slide 67: Gas Turbines, Steam Turbines and Diesel Engines for Power Generation
67 Gas Turbine(s) For Peak Power Coal Fired or Nuclear Power Generation Diesel Engine(s) For Site Back-Up Power Steam Turbine(s) for Prime Power Coal-Fired or Nuclear Power Plant
Slide 68: Utilization
M.woopward wHy WOODWARD wits... Utilization ; Extraction it Power Generation Utilization / PGE) conte er
Slide 69: Energy Value Stream - Utilization - Diesel & Gas
69 Energy Value Stream - Utilization - Diesel & Gas E G S E E E P E s
Slide 70: Waste Gases and Bio-Fuels
M,.woopward wHy WOODWARD wits... Waste Gases and Bio-Fuels is », it Power Generation Utilization / I Bp) Darbutons) > Procesing > "USS coment or m he lie J
Slide 71: Combined Heat & Power Application
71 Combined Heat & Power Application
Slide 72: Power Generation & Distribution
Power Generation & Distribution 72
Slide 73: Power Generation & Distribution Landscape
73 Power Generation & Distribution Landscape G S R R R R R R R R R R P P P P P P P P P P P P E
Slide 74: Power Generation & Distribution Landscape
74 Power Generation & Distribution Landscape
Slide 75: Renewable & Power Conversion Systems
75 Renewable & Power Conversion Systems Wind turbine inverters Energy storage converters Solar inverters Shore power & dynamic positioning inverters
Slide 76: Energy Products & Systems
Ms.woopwarn wry WOODWARD wins... 76 Energy Products & Systems
Slide 77: Woodward Differentiators in the Energy Business
77 Woodward Differentiators in the Energy Business Technology/Application knowledge Emissions, efficiency, fuel flexibility, total cost Technology and development partnering Strategic customer relationship Develop/maintain strategic relationships with top customers Globally local Strong aftermarket
Slide 78: Solutions for Gas Turbines
78 Solutions for Gas Turbines MicroNet Plus Atlas II Services G Electronic Control
Slide 79: Solutions for Steam Turbines
79 S Solutions for Steam Turbines Turbine Actuation Speed Sensing Auxiliary Devices Standard Configurable Controls Customized Turbine Controls Services
Slide 80: Solutions for Compressors
40 C Solutions for Compressors Standard Configurable Controls Customized Compressor Control and Protection Comprehensive Front-End Engineering and Design Services
Slide 81: Compressor Control
Compressor Control 81 New target market - +$500M with 10+% CAGR Developing market channels Focused investment in Asia and Middle East Integration of compressor control with turbine and motor control
Slide 82: Power Generation & Distribution
82 Power Generation & Distribution Bio Fuel generator sets Prime Power Generator sets Emergency stand by Generation Sub station Protection & Automation Commercial and Industrial Protection & Automation Low/Medium Voltage Distribution Protection & Automation P
Slide 83: Renewable and Power Conversion Systems
43 Renewable and Power Conversion Systems Electrical Storage Wind Solar Dynamic Positioning (Marine) R
Slide 84: Solutions for Engines
MW wry WOODWARD wins... Ss olutions for Engines ‘Combustion ‘Control UQUID (DIESEL) 2 HP GAS =
Slide 85: Gas Engine Initiatives
45 Gas Engine Initiatives Gas Engine Initiatives E Small gas engines: Next-generation on & off highway CNG systems Large gas engines: Complete gas & bio-gas engine control systems Actuation & valve platform Large engine control platform
Slide 86: Diesel Engine Initiatives
Diesel Engine Initiatives 46 Large diesel engines: Common-rail fuel systems Actuation & valve platforms Large engine control module platform Small diesel engines: Aftertreatment control systems Licensed to Tenneco E
Slide 87: Enabling System Integration
Enabling System Integration Smart and Micro Grid solutions Distributed Energy Resources (DERs) Integration Utility scale Energy Storage 87
Slide 88: Energy Segment Revenues
Energy Segment Revenues Power/Industrial Equipment - Extraction, Distribution, Processing, Utilization 88
Slide 89: Outlook
Ms.woopwarn wry WOODWARD wins... 89 Outlook
Slide 90: Energy - Sales Outlook
Energy - Sales Outlook 90 (CHART) ~13% CAGR
Slide 91: Financial Highlights
Financial Highlights Bob Weber 91
Slide 92: Woodward Growth Vision 2010
Woodward Growth Vision 2010 Sales growth doubled - 2005 ?2010 Significant share gains Aero Propulsion Wind converters New Platform launches 92 Note: Includes inorganic sales $ in millions (CHART)
Slide 93: Segment Sales
Segment Sales Strategically designed segment balance Late cycle Energy recession impacts still in early 2010 Strong return to growth in 2011 Aerospace - +9.6% Energy - +26% 93 (CHART) (CHART)
Slide 94: Earnings per Diluted Share
Earnings per Diluted Share Volume impacts of recession sales declines Mining Transportation Power Generation Business jets 2009 impacts of restructuring and purchase accounting Absorption of MPC and HRT acquisitions in 2009 Significant non-cash amortization Strong earnings growth 94 (CHART)
Slide 95: EBITDA
EBITDA "Great Recession" pause in growth Reflects removal of impact of non-cash amortization Continued growth in 2012 95 (CHART) Note: EBITDA reconciliation to Net Earnings calculation for the periods shown is included in attached appendix slide $ in millions
Slide 96: Gross Margin
Gross Margin Margins remained strong through recession Productivity offsetting material cost increases and pricing pressures Strategy of driving strong aftermarket business in many areas 2009 impacted by non-cash purchase accounting impacts 2012 - Continue to expect improvement from volume and effic
Slide 97: Research and Development
Research and Development Consistent investment through all cycles Well balanced across both segments Aligned technology efforts with customers Proven returns Program wins driving 2011+ growth 2012 - 7% - 7.5% of sales 97 (CHART) $ in millions
Slide 98: Selling, General & Administrative Expenses
Selling, General & Administrative Expenses Continuing leverage of SG&A Absorption of acquisitions and synergy realization 98 * in millions (CHART)
Slide 99: Free Cash Flow
Free Cash Flow Historically strong cash flow generation 2011 investments in growth through working capital Working capital leverage improves in 2012 99 Note: See reconciliation on appendix slide $ in millions (CHART)
Slide 100: Capital Expenditures
Capital Expenditures Organic growth driving increasing needs for investment Consistent investment through the cycle on strong cash flow 100 $ in millions (CHART)
Slide 101: Debt-to-EBITDA Leverage
Debt-to-EBITDA Leverage Current leverage supports growth Organic - program wins and share gains Inorganic opportunities $349 million of debt repaid since HRT acquisition In line with internal commitments 101 Note: Leverage as used above is calculated as the ratio of Total Debt to EBITDA. See appendi
Slide 102: Return on Total Capital
Return on Total Capital Solid improvement in ROTC since acquisitions Solid earnings returns post recession Significant debt repayments 102 (CHART)
Slide 103: Aerospace - Sales Outlook
(CHART) Aerospace - Sales Outlook Growth Drivers Share gains on new platforms New entrants Increased aftermarket penetration Expanded motion control offerings Increased synergies 103 ~10% CAGR
Slide 104: Energy - Sales Outlook
(CHART) Energy - Sales Outlook Growth Drivers Return to economic and infrastructure growth "Golden Age of Gas" Common Rail technology Renewable power Grid complexity Increased synergies 104 ~13% CAGR
Slide 105: Organic Woodward Sales Outlook
105 (CHART) Organic Woodward Sales Outlook Key Assumptions Financial markets avoid significant disruption Mild downturn in 2014/15 DoD budgets decline moderately No detrimental energy regulation/legislation ~12% CAGR $3B
Slide 106: Earnings Expectations FY 2012
106 Earnings Expectations FY 2012 Woodward Total Sales - $1.85 - 1.95 billion Earnings Per Share - $2.20 - $2.35 Outlook Period Aerospace - 20% Energy - 16% Research and Development Remain in mid-7% range through Outlook period Capital Expenditures 2-3+ years ? above average Non-segment expenses Con
Slide 107: Woodward Stock Performance
WOODWARD wry WOODWARD wins. ‘Woodward Stock Performance 150 100 : J 2006 2007 2008 2009 2010 2011 WWD S&P Mid-cap 400m S&P Industrial Machinery
Slide 108: Wrap-up
Ms.woopwarn wry WOODWARD wins... 108 Tom Gendron Wrap-up
Slide 109: Summary
Summary We have strategically positioned Woodward to capitalize on growth opportunities in the Aerospace and Energy markets Customer alignment Consistent long-term investments Significant growth over the next decade Program wins Share gains Winning business model 109
Slide 110: Why Woodward Wins
WHY WOODWARD WINS..
Slide 111: Appendix
Ms.woopwarn wry WOODWARD wins... m1 Appendix
Slide 112: Q4 EBITDA, Free Cash Flow & Leverage Ratio
112 Q4 EBITDA, Free Cash Flow & Leverage Ratio * Non-US GAAP Measures: EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), free cash flow and Debt-to-EBITDA Leverage Ratio are non-US GAAP financial measures. The use of these measures is not intended to be considered in isolation