Woodward, Inc.

Thank you for standing by. Welcome to the Woodwork Incorporated Fourth Quarter Fiscal Year 2021 Earnings Call. At this time, I would like to inform that this call is being recorded for a broadcast 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. Mark Hartman, Chief Financial Officer, Mr. Don Guzzardo, Vice President of Investor Relations and Treasurer, and Mr. Dan Provasnik, Director of Investor Relations. 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 fourth quarter fiscal year 2021 earnings call. In today's call, Tom will comment on our markets and related strategies, and Mark 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 December 2, 2021. 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 expected and potential effects of the ongoing COVID-19 pandemic. 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-US GAAP financial measures. We direct your attention to the reconciliations of non-US GAAP financial measures, which are included in today's slide presentation and our earnings release and related schedules. We believe this additional financial information will help in understanding our results. Now turning to our results for the fourth quarter, net sales for the fourth quarter of fiscal 2021 were $570 million compared to $531 million for the prior year quarter. Net earnings for the fourth quarter of 2021 were $50 million or 76 cents per share compared to $57 million or 89 cents per share for the prior year quarter. Adjusted net earnings for the fourth quarter of 2021 were $54 million or 82 cents per share compared to $48 million or 75 cents per share for the prior year quarter. And for the full year, Net sales were $2.25 billion compared to $2.5 billion for the prior year. Net earnings were $209 million or $3.18 per share for fiscal 2021 compared to $240 million or $3.70 per share for the prior year. Adjusted net earnings were $212 million or $3.24 per share compared to $254 million or $3.96 per share for the prior year. Net cash generated from operating activities for 2021 was $465 million compared to $349 million for the prior year. Free cash flow and adjusted free cash flow for 2021 were both $427 million. For 2020, Free cash flow was $302 million, and adjusted free cash flow was $315 million. Now I will turn the call over to Tom to comment further on our results, strategies, and markets. Thank you, Don. Good afternoon, everyone.

As some of you know, Don has decided to retire at the end of the year after a 31-year career at Woodward. Don has been an important champion of Woodward's growth and transformation story over the past three decades. and has been a trusted advisor to management. On behalf of the company, I want to express our sincere gratitude for his dedication to Woodward, outstanding leadership, and counsel. We wish you all the best in retirement. Going forward, Dan Provaznik, a 15-year Woodward veteran, will lead our investor relations function. We delivered solid results for fiscal 21 against the headwinds of COVID and global supply chain disruptions. We do expect continued recovery throughout 2022, although uncertainty and volatility around the pace of recovery is anticipated to remain. We believe our proven resiliency and strong financial position will allow us to capitalize on future market opportunities. Moving to our markets in more detail, commercial aerospace continues to recover. Build rates are expected to improve further in 2022 based on announced increases and the anticipated certification of the 737 MAX in China. Commercial aftermarket is being driven by increased passenger traffic and the utilization of a commercial fleet that includes significantly higher woodward content. Domestic travel is nearing pre-COVID levels, while international travel, although steadily improving, is still significantly lagging. Defense markets remain stable, with the exception of guided weapons which we anticipate will continue to soften in fiscal 22. Turning to our industrial markets, in power generation, demand for gas turbines continues to increase, driven primarily by growth in Asia and the continued replacement of coal-powered plants. Additionally, we see strong demand for backup power for data centers. Aftermarket activity has been stable but is expected to increase in 22. In transportation, the global marine market is seeing improvement in orders for new ships, as well as increased utilization, which will drive aftermarket activity. Demand for China natural gas trucks continue to be soft, as expected, due to the absorption of China 5 diesel pre-buy activity related to the implementation of new China 6 diesel emissions regulations, which took effect July 1st. In addition, Global natural gas prices have spiked due to increased demand for power generation and limited supply and weather-related usage. This increase in price is expected to dampen demand for natural gas trucks in the near term. Despite this volatility, China's commitment to reducing emissions is expected to drive long-term demand for natural gas trucks. In oil and gas, prices have returned to pre-2020 levels, from pandemic lows due in part to energy demand increases. Capital expenditures have increased steadily since early 21, and this level of investment is expected to continue. In summary, we've delivered solid performance in a challenging macroeconomic environment. We are seeing improvements in most of our markets. However, COVID-related impacts, including ongoing labor and supply chain challenges and regional market fluctuations, continue to pressure global economic recovery. Looking ahead to 2022, we expect ongoing recovery and improved profitability in our aerospace business as OEM production rates and passenger traffic continue to grow. In industrial, we expect a modest improvement in profitability as our markets continue to recover. Marine cargo rates and volumes are improving. Demand for industrial gas turbines is increasing. and rising oil and gas prices are driving investment. We are optimistic about the continued recovery across our markets and look forward to continued progress in 2022. And I'll turn the call over to Mark Hartman.