Robert Weber - Vice Chairman, Chief Financial Officer, and Treasurer Thomas Gendron - Chairman, President, and Chief Executive Officer.

Sheila Kahyaoglu – Jefferies William Bremer - Maxim Group J B Groh - D A Davidson Tyler Hojo - Sidoti & Company Stephen Levenson - Stifel Nicolaus Michael Ciarmoli - KeyBanc Capital Markets Robert Spingarn - Credit Suisse Securities Peter Skibitski - Drexel Hamilton Gary Farber - CL King.

Thank you for standing by. Welcome to the Woodward Incorporated First Quarter Fiscal 2015 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; and Mr. Bob Weber, Vice Chairman, Chief Financial Officer and Treasurer. I would like to turn the call over to Mr. Bob Weber..

Thank you, operator. We’d like to welcome all of you to Woodward’s first quarter fiscal year 2015 earnings call. In today’s call, Tom will comment on our markets and related strategies, and I 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 February 3, 2014.

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 three.

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. These 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 our 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.

Turning to our results, net sales for the first quarter of fiscal 2015 were $488 million, compared to $429 million in the first quarter of last year, an increase of 14%. Earnings per share were $0.66 for the first quarter of 2015, compared to $0.34 for the first quarter of last year.

EBIT for the quarter was $63 million, compared to $39 million for the same quarter of the prior year, an increase of 61%. Free cash flow was an outflow of $9 million for the quarter, compared to an inflow of $7 million for the first quarter of 2014, including $9 million of increased capital expenditures.

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

Thank you, Bob. Welcome to those who joined us today. Our financial results for the quarter was strong compared to the prior year driven largely by higher sales across the company. Sales related to aerospace, industrial gas turbine systems, and natural gas systems for buses and trucks in China were particularly strong.

Before I get into our markets in more detail, let me first address the very prominent topic of oil price impacts on our business. Overall, we do not believe Woodward will experience significant impact in 2015 related to oil prices.

We believe low oil prices will have a neutral to positive effect on our aerospace business related to increased aftermarket sales. Since our exposure to oil production is relatively small, we believe low oil prices will have only a slightly negative or neutral impact on our energy business.

Overall, we think the impact on fiscal year 2015 is well within our guidance. We will continue to monitor the situation, but believe the broader economic impacts of lower oil prices should provide additional GDP growth.

Turning to aerospace, commercial aerospace continues to be a very robust market as production rates, air traffic, aircraft, order backlogs are all at healthy levels. Major new programs such as Airbus A320neo and Boeing 737 MAX are nearing launch and will produce significant revenue and earnings growth for Woodward as they enter into service.

Defense aftermarket sales were strong in the quarter due to the pent-up repair demand resulting from the timing of contract awards. We believe the complex around the world support a stable overall defense business this year.

Commercial aftermarket remains solid in our results for the quarter as compared to the prior year reflected positive variability across various aircrafts. Regional jet market continues on a positive trend and the business jet market continues to strengthen.

Large cabin jets continue to lead the recovery, but small cabin jets are now showing improvement. We continue to expect growth in this market as a result of new aircraft launches. As anticipated, the commercial rotorcraft market is softening, mainly as a result of the oil and gas industry, moderating capital expenditures.

Our new aerospace facilities in Niles, Illinois has completed on schedule on December. The Rockford, Illinois facility is to be completed in the coming months and the Fort Collins, Colorado facility in early 2015, both has planned.

Turning to energy, in the quarter many of our markets continue to strengthen as a result of availability in globalization of natural gas and domestic oil production. The robust demand for aftermarket services related to industrial gas turbines continues to drive increased sales for Woodward.

The market for new heavy frame gas turbines, however, remains soft. The oil and gas industry continues to drive the aero-derivative gas turbine and gas engine markets. We could see the future softness in this market if oil prices remain at low level. The natural gas truck and bus market in China remains solid, the strong sales in the quarter.

We anticipate continued volatility in this market as a result of government incentives and the relative price of natural gas to do so. In summary, we had a quarter as a result of strong sales, ongoing cost control, and positive leverage on earnings.

Despite ongoing global uncertainty and challenges, most of our markets are showing strength of improvement. New aerospace programs are getting close to launch. The natural gas usage continues to expand globally. Both are expected to drive significant future growth for Woodward. Now let me turn it back to Bob for our financials..

Thank you, Tom. We did deliver a solid first quarter in both sales and earnings. Increased sales volume and operating leverage were partially offset by higher company-wide variable compensation.

In aerospace, higher commercial aftermarket sales, steady growth in commercial OEM compared to the prior year, and strong defense aftermarket sales contributed to a strong quarter. Commercial aftermarket increased 16%, a significant increase compared to the prior year quarter.

Aerospace segment earnings for the first quarter of 2015 were 14% of sales compared to 9.8% in the same quarter year ago. Segment earnings in the quarter were favorably impacted by the higher sales volume and improved manufacturing margins.

In our Energy segment this quarter, increased sales resulted from higher service related sales for industrial gas turbine systems, fuel systems for natural gas truck and buses in China, and wind turbine power converters.

Foreign currency exchange rates had an unfavorable impact on sales of approximately $12 million compared to the last year’s first quarter. Earnings as a percent of sales were 16.9% this quarter compared to 13.6% in the same quarter of the prior year.

Segment earnings for the quarter were primarily impacted by the higher sales volume, partially offset by an unfavorable impact due to foreign currency exchange rates.

At the Woodward level, research and development costs were $34 million for the first quarter of 2015, compared to $29 million for the first quarter of 2014, reflecting quarterly variability primarily due to the timing of achieving development milestones and related testing.

As a percentage of net sales, research and development was approximately 7% in the first quarter of both 2015 and 2014. Selling, general and administrative expenses were $40 million or 8.2% of net sales for the first quarter of 2015, compared to $37 million or 8.7% of net sales in the first quarter of 2014.

The effective tax rate for the first quarter of 2015 was 23%, compared to 29% for the first quarter of 2014. The decrease in the income tax rate was primarily due to the $5.1 million, or $0.08 per share, retroactive impact of the research and experimentation tax credit extension through December 31, 2014.

We still anticipate a full year effective tax rate of approximately 27%. Looking at cash flows, we generated $38 million of cash flow from operations for the first quarter of fiscal 2015, compared to $44 million for the same period of prior year, primarily related to higher sales in the first quarter of 2015.

Free cash flow for the first quarter of fiscal 2015 was an outflow of $9 million, compared to an inflow of $7 million for the same period of the prior year.

Capital expenditures were $47 million for the first quarter of fiscal 2015, compared to $37 million for the same period of the prior year, reflecting growth in spending related to our capacity expansion projects.

Also in the first quarter of fiscal 2015, we repurchased $32 million of Woodward stock under our $200 million share repurchase authorization. Lastly, turning to our fiscal 2015 outlook.

We are maintaining our full year outlook for fiscal 2015, with sales anticipated to be between $2.05 and $2.15 billion, and earnings per share expected to be between $2.65 and $2.90 per share. We believe our cost control initiatives and improved operating leverage will offset any potential negative sales impact of global economic uncertainty.

This concludes our comments on the business and results for the first quarter of fiscal year 2015. And operator, we are now ready to open the call for questions..

Thank you. The question-and-answer session will begin at this time. [Operator Instruction] Our first question comes from Sheila Kahyaoglu with Jefferies. Please state your question..

Hi, good afternoon guys, and thanks for taking my question..

Hi, Sheila..

Tom, maybe can you talk about current order trends; you stated that the oil and gas impact is expected to be neutral for the year.

Can you tell us what you’re seeing in the current business? And just within energy, what your expectations are for revenue growth for the remainder of the year in the different subcomponents?.

Yes, on the order book, actually our order book is continuing strong at this point relative through one quarter. Orders are still coming in. As we said, we’re monitoring to see if we see some impacts from the oil industry.

We have seen - I would say there’s a little bit that we’ve seen, but nothing material and that we’re still holding to the sales growth that we highlighted earlier when we launched the fiscal year. So we’re on track for that and we haven’t changed that outlook. So….

And I guess in terms of expectations for the year within the subcomponents of the business, would you say you’re at the high-end of the aftermarket services for IGT.

How would you kind of rank where expectations are? Could you provide some glimpse into that?.

Sure. I think we’re doing quite well on aftermarket services across the energy market, I think, that’s what you’re asking. Also on the aerospace market, they’re doing quite well at the moment.

I don’t know that we’d see a huge shift in that, but one of the positive things is that the installed base keeps getting larger, so we’re working to capture more of the aftermarket, so some of our aftermarket strategies are working and that’s growing.

As you break into some of the other segments, as we said in the prepared remarks, the large turbines is a little soft still. That hasn’t changed. Aero-derivatives has been strong and that’s probably one of our watch items. You move into natural gas, CNG vehicle that’s been strong, order book is still okay, but that’s a watch item for us.

Large natural gas, winds are all doing well. Order books are good. So, overall, there is some puts and takes, but we still think the outlook is in the range of our growth projections..

Got it and then just one last one for me and I’ll hop back in. You mentioned the rotorcraft market is flowing down.

Is that more rhetoric from the OEMs you’re hearing or did you experience a decline in the quarter?.

Yes, there is a little bit of a decline, very, very marginal, but we’re watching that one and that’s one of those commercial - commercial rotorcrafts besides serving that market was down slightly..

Sounds good, thanks..

Yes..

Our next question comes from Pete Skibitski with Drexel Hamilton. Please state your question..

Yes, nice quarter guys..

Thank you, Peter..

Thank you, Peter..

Guys, on energy, pretty solid margin rate.

I think typically you think you could ramp the margin rate there with higher volumes for the rest of the year, but is there any reason you’re thinking maybe you can’t do that? Was there any special mix this quarter or something or something that will give us headwind the balance of the year in energy in terms of the margin?.

I don’t think there is any headwind that we’re particularly seeing. I think it’s really the uncertainty. Clearly, we had a great quarter. Yes, there are mixed elements and so on that that can go into that. I think we’ve said that, the 16, we still were holding as our long-term target.

We do believe as we have shown lately that we can overachieve that from time to time, but as we saw last year, we’re also still knocking on the door but not quite there.

So I think a lot of the work we’ve done whether its lean manufacturing capabilities et cetera, et cetera has allowed us to increase the base layer to a much higher level, but holding that above 16 is not always easy to do..

Okay, okay. And then on the softness in the heavy frame gas turbines, is that just kind of a big power plant type stuff and I guess that’s my question..

Yes, definitely it’s the large power plant and it’s unchanged. It’s still soft. So there wasn’t a really a shift there and we just haven’t seen the anticipated pickup that we believe will come, most likely moving into 2016..

Okay, and then just lastly, guys, the growth in energy revenue, was that all unit growth or did you get some pricing in there also?.

Primarily unit growth..

Okay, thanks guys..

Our next question comes from William Bremer with Maxim Group. Please state your question..

Good afternoon, gentlemen..

Hi, Will..

Hi..

A very nice quarter..

Thanks..

Yes, my question is definitely on the specifically on energy, on the pricing, whether or not the bookings coming in, are you able to hold pricing or is it more in essence volume related?.

Well, pricing is - overall, we’re holding pricing and through our - through volume, our cost initiatives, and lean manufacturing is what’s really expanding our margin..

All right..

Margins aren’t being expanded with price. I mean, you know, its tough market out there, but we’re doing our best to hold pricing and build margins through those other activities..

As we look throughout 2015, do you sort of expect the margins, I guess, hey, this is an outstanding quarter for energy on margins. Do you expect it to be tempered as you go into the back half or how should we look at that? Because at the analyst day, you sort of always say 100 bps on both segments year-over-year.

Are you still seeing that play out or do you think it’s going to be more heavily weighted in terms of aerospace versus energy?.

Right now, we think that’s still good guidance, that’s still our outlook and we think that’s about right on both segments..

Okay. Then my final question is definitely is on the inverters.

Can you give us a little bit what you are seeing? I mean they had a nice quarter, but what’s the visibility in that market, and also we could throw in the compressed natural gas engines for the Chinese market?.

Sure. On the wind converters, that’s a - wind is a volatile market and we’re in a good phase of the market right now, but we are seeing sales growth. We’re also seeing earnings improvement in that business and we feel real good in that we got the earnings back where we want them.

And then a lot of that’s come from both new platforms which have leveraged Woodward technology as well as we do run those converters down our lean manufacturing line and so we’ve got productivity coming out of that. So that’s almost looking good. Just remember it’s a volatile market, but we’re in a good phase of the market right now..

Okay..

China, CNG has - was a very good quarter. That one is - I remind everybody that that can be a volatile market. We’re going to keep a close eye on that one because the price delta between diesel and natural gas equivalent does have an impact on that market and that price delta has been reduced as everybody knows.

So that’s one area of potential variability we have going forward. We believe that’s well factored into our guidance and into our growth projection. But that that has - those two - Bill, you picked up on, those are two of our higher variability markets and we think this year that pattern will continue being our highest variability..

Nice start for the year gentlemen..

All right, thanks..

Our next question comes from J. B. Groh with D. A. Davidson. Please state your question..

Yes, thanks for taking my call guys. On the incrementals in aerospace, that was a very, very strong.

How much of that’s strength in aftermarket? I am guessing that’s a fair contributor?.

It was, yes. We have 68% growth in commercial aftermarket and we called out both sides, both defense and commercial as being a cause of the increase, so you’re right. Incremental had a lot of aftermarket carry with..

And then on neo and MAX, I guess neo first, when do you start to see meaningful ramp on that?.

Well, we’re really start seeing it in 2016. There will be some more sales in 2015, but meaningful ramp is really 2016..

Okay, okay, and then a couple for Bob.

Bob, what do you have implied in the guidance on the interest cost and the tax rate for the year?.

Tax rate, we’re still holding to the same 27% that we called out early on in the year, so that we’re holding on. You’ve heard a lot of the press with respect to raising interest rates and so on, but we don’t at this time see any overall change in our interest expense for the year, so no variation at this point in time.

We’ve probably heard, I don’t know how many times now that they’re going to raise them and then they never do. So with everything going on globally we’ll see what happens, so no change in overall guidance on interest and it will probably hold almost even with the quarter….

Okay, thanks a lot..

Sure..

Our next question comes from Tyler Hojo with Sidoti & Company. Please state your question..

Yes, hi everyone, so just the first question is just on seasonality. During the last earnings call, I think you told us all to expect kind of a seasonally weak Q1 and certainly not complaining by the strong result in Q1.

I’m just kind of curious though what came in stronger than expected this quarter, I’m guessing aftermarket, but what else?.

Yes, we’ve called out a little bit of pent-up demand that we had from the fourth and we kind of call that out as well. When you look at kind of from an eight quarter standpoint, you’ll notice that even though this was a very strong quarter historically based on first quarters.

We still have improvements as we go through the year, so last year’s first quarter was a tough one and that’s for sure, but we did see some nice increase predominantly as you point out, related to aftermarket in this quarter. So I think as those that we’re off to a good start and we hope we can maintain that..

Okay, great. Just a question on aero-derivatives, and I guess that’s where the bulk of your oil and gas production exposure lies. Have you seen any softening in that market yet? And I guess, maybe, it might be helpful to provide a little bit of context.

How important is aero-derivatives to the energy segment overall, and at what level was aero-derivative sales at, say, at the last trough of the cycle?.

So aero-derivative is A - it’s a nice chunk of business for us. So, yes, it does have a significant - can have a significant impact. I don’t think as yet, we’ve seen significant drop in aero-derivative orders for the full year. It was down a little bit sequentially.

It was up over the prior year, so we have kind of a difficult seasonality that we saw in the quarter. They are used in extraction, pipelines, processing, and so on. So there is a lot of utilization of those that you may not see any impact for some period of time..

Yes, and also, and this is maybe a broader comment on the oil and gas market, we also believe there is a really an opportunity as some - you say the price come down and maybe there is the opportunity and we see that there is going to be more maintenance being done in the short-term while prices are down.

So with that, we could see some offsets to any production on the OE side..

Okay, got it. I guess just as it relates to aero-derivatives, I am assuming the low end of your guidance takes into account some softening there, but I just want to make sure that’s the case..

Yes. The guidance takes into consideration. The market areas that we said have potential for softness and that was definitely on - the aero-derivatives is definitely potentially on the China CNG applications. Those are ones that we could see some in. We could see minor in some of the other markets, but that has been factored into our outlook..

Okay, great. Lastly, I just wanted to ask you about a line that was in the press release, just in regards to the fact that cost-control initiatives are an offset to global economic uncertainty.

So I guess the question is does the guidance bake in some sort of quick hit or sort of actions that you can take if things kind of materially devolve in some of these markets?.

If that was the case, we can’t adjust on fairly quickly, but it depends how severe of a change, Tyler. I would say that any manufacturing company can handle a certain band of sales reduction quickly and if it goes way beyond that, you have a little more trouble.

We’re not seeing and do not forecast any collapse, so we do believe our ongoing cost initiatives and our ability to flex will handle the variability that we’re currently forecasting in all our segments..

Okay, great. Well thanks so much for the color. I appreciate it..

Yes, thanks, Tyler..

Yes, thanks, Tyler..

Our next question comes from Steve Levenson with Stifel. Please state your question..

Thanks good afternoon everybody..

Good afternoon..

Thanks for giving us a good end to the day. On the aftermarket step on I’m started up to hope on it.

But I’d never had been some pent-up demand on defense related aftermarket is this a level that’s sustainable growing, or was there a chunk of that business that you got during the quarter that won’t continue?.

We definitely had some contracts that, I think, we were talking little bit about last year that kind of migrated towards the end of fiscal year 2014 and end of 2015 for the - there was little, there was little benefit from that.

We do see defense being stable to slightly up this year and we’re kinds of seeing signs in that, we’ll have to wait to make sure all the order books and the contract could let. But right now that’s kind of our outlook for it. So it was a good quarter on defense, but we do see year-over-year defense being solid and slightly up..

Got it. Thank you. And I know MRO prospectors suggesting there’s nearly $10 billion of MRO work on the CFM56s to B2500s, GE90s and CF6s out there.

I know you’ve got little less exposure on the CFM56 than you do on the lead, but do find this generally something you agree with or do you think that’s a pretty big number?.

No, I think there is pretty accurate. If you look, we - this is a remainder on the current generation of CFM were on you can call the dash five, which is on the A320, whereas also on the V2500.

So that A320, if you look at the enormous installed base the hours and where they are in the cycle, yes there is a large forecast for MRO I think on the 777 for the GE90. So those ones we think are accurate and we have seen in our planning for aftermarket flow through on those to our business..

Yes great thanks and just one last one for Bob.

You mentioned the amount of money you would spent on buyback, do you have the number of shares you repurchased?.

About 600,000 shares..

Got it?.

Thank you very much..

Sure, thanks Steve..

Our next question comes from Michael Ciarmoli with KeyBanc Capital Markets. Please state your question..

Hi, good afternoon guys. Thanks for taking the question, nice quarter..

Thank you..

Guys may be just a little bit, I mean, we’re talking about lot of the different end markets. What are you guys expecting or seeing in terms of Caterpillar sales. And I know the mining markets in particular have been weak.

Can you kind of track how much of your sales into Caterpillar feed into oil and gas that you might not have kind of direct line of sight into that market?.

And a lot of times with the oil and gas market some of the engines are used in lot of different where we sell are used in a variety end markets. So it’s a little challenging for us to tell exactly where we’re going so I don’t know that I can really comment on their engine production in those areas..

Okay and even on Caterpillar sales in general, I mean, can you comment on the booking trends there I mean it looks like their business will probably start to weaken.

I mean have you - it seem like at one point some of those Cat sales were at trough pipe conditions, I mean, its specific low end of the guidance adequately taking to account further weakening of Caterpillar sales..

Well, I think I would turn around and say, I don’t want to say Caterpillar sales are weakening. In fact there has been what we believe our - the right sales to Caterpillar. So I think we will talk about kind of weakening. They definitely have different exposure than what we’re doing because we’re not on all their equipment.

But we have factored in, Caterpillar is a great company and they run their supply chain very well and they’re very good about their order forecasting and slow down. So we do believe we have the right numbers in for CAT for the full year..

Got it..

We do usually have the luxury of listening to their call before our call and they’ll be out net week I guess. So we’ll be watching that as well..

Got it. And I Bob. I mean there is clearly not an apples-to-apples if I look at the oil price decline and how it is you guys from 2008 to 2009 we obviously had a much deeper recession in there. But I struggle with 85% of the segment being exposed to oil and gas I mean I guess the engine systems back in a way 2009 had a big collapse.

It just doesn’t seem like the offset, I mean, you’ve got some China projects that are going well.

Although China appears to be slowing, how do we get comfortable with just 85% of the segment being exposed to oil and gas and we’re already hearing from a lot of the oil services companies they are scaling back on CapEx, I think, with a couple of companies today trying to push through price concessions. I mean - I guess that’s the struggle.

Do you guys think there’s enough offset on some of your natural gas, and compressed natural gas and other opportunities to really keep this at neutral?.

Yes, I think you’re referring we use that 85%. We refer to our energy value stream and within that energy value stream 85% of our equipment ends up in oil and gas. Now the way we say that is oil and gas and I think the terminology what you’re seeing some of those statistics you’re talking about R&D extraction part of it.

But when you get to the utilization side, and that could be power-gen, petrochemicals transportation, whether its rail, by sea or on highway, low energy prices are really good for those markets. And so we are trying to highlight where things could go down.

The people that utilize energy, the low prices of the big part and there is an upward opportunity there with GDP growth not only in our country, but around the world.

Now the people that are in the companies that are tied to the extraction is correct, there is slowing there, and so we’ve actually when you look at our value stream, have a higher exposure to the utilization side than we do to the extraction side.

And so we see slight drop, drop occurring in the extraction stabled up over time here on the utilization side, benefiting from the low prices. And when you sum it all together that’s were we get the slightly negative to neutral. And so we feel very comfortable with that.

And so I think if you look at Woodward’s, yes we play in the market but we play across the whole value stream and that’s why I always used to say value stream chart. So remember the utilization side is good for us, and low prices will benefit utilization side..

Got it.

And then just last one on more in the Aerospace any sort of update on 777X kind of additional work or R&D spend or kind of thoughts on your work package as we move forward?.

Yes. Well right now - it’s in R&D numbers because the way it works - we are working in lot programs doing the better proposal work. The words we think will let start coming out over the next six month to nine months, someone will be earlier some later.

So we feel positive about it that today we only release to one win and here we expect, we expect more, but we’re not in a position yet to highlight that that’ll be, we’re pretty confident we’ll increase our content over the current generation 777..

Got it, very good. Thanks lot guys..

Right, thanks..

Thank you..

Our next question comes from Rob Spingarn with Credit Suisse. Please take your question..

Hi good afternoon..

Hi there..

I just wanted to ask a couple of follow-up questions on most of what’s already been discussed.

But just going back to energy and understanding what you just said about the upstream and the downstream, at what point do you think what you are seeing will reflect the price of oil that we see now, the $50 Brent? In other words, it sounds like you are just starting to see the impact.

When should we have a better idea of what the real impact is?.

Well. I think over - based on what we are seeing, if you are looking at the, this is my view that on the extraction side or if you are looking at, to be more clear, on the drilling side. I think we are start to feeling that in the second quarter here.

The utilization side, I think from a fixed little time to work below prices to work through higher use. And as such I think it will be late third, fourth quarter and going into 2016. So that balancing there will determine exactly or for slightly down or neutral, but that’s kind of where we have that little bit of a range, but....

So that tail - yes, so the tailwind lags to headwind a little bit..

Yes, you can cut faster than you can increase. I mean that….

Yes, okay..

I think, that happens in any market, any business, I mean, you can cut quick. It takes a little more time to increase. So that’s why I think there will be a little bit of phase lag here as we go through the fiscal year, but we think its enough that we are captured towards the end of the year on the use side..

And your usings are current in what you said today, we are looking at $48 type Brent in your guidance?.

Yes, that still we are using current prices both for oil and for natural gas..

Got it, got it. And then just quickly on the aerospace aftermarket you talked about the 16%. It really is a very good number for you. I understand there some pent up demands in there. But the last time you had an aftermarket number this strong is really going back a couple of years ago. I think it’s a second quarter of 2012.

So what type of - how do we think about the aftermarket going forward for the rest of the year? What type of growth expectation is embedded in the guidance?.

Yes, I think generally, we’ll say aftermarket will follow aftermarket growth in total will follow past some of your miles. And I think right now, your projection at 5%, 6% there.

Then that goes up and down based on the aircraft types you’re on and new aircraft launches which help drive initial provision in sales and aircraft coming out of production take that down. So we think we’d do more tracking for the full year, I’d say more closer to traffic growth..

Okay. And then just, yes..

Yes, I think that’s far right..

Okay, okay.

And then just lastly on the cash flow, I mean I don’t think the trend is a whole lot different than it’s been, but you expect it to ramp through the year and then in that way how do we think about working capital as the year progresses?.

So, yes, we do expect it, so first quarter as historical I always say a heavy cash quarter for us as usually tax payments, et cetera. We have the CapEx spend on the major projects, which will kind of probably peak here in the middle of the year. And then start to take there off. But there is still, if they’re going to be strong for the year.

We have called out kind of a target to remain neutral with the free cash flow standpoint on the capital expenditures.

So our target so intent, but as you guys know, with any major projects and we have three of them of going whether or not everything can cause some very significant fluctuations with respect to the end of the year and what we end up seeing but that’s our intent for the year..

Did you say neutral on free cash flow?.

Neutral on free cash flow..

Okay.

So in other words, if there is a hick-up in the any of the plant work, it could be slightly negative?.

It could be, yes..

Okay. Thank you..

Sure..

[Operator Instruction] Our next question comes from Peter Skibitski with Drexel Hamilton. Please state your question..

Yes, Tom, I want to ask just a slightly different question about energy.

If the decline in oil, if it ends up to be more demand driven - demand destruction driven than supply driven, in other words, if global GDP is slowing, should that impact energy, do you think, this year or do you think maybe we’re going through a pent-up replacement cycle that maybe offsets that to some degree?.

So it is an interesting one. We are more into cap that its supply versus demand at the moment. Historically, I do believe that lower energy prices will help stimulate worldwide economic growth. I think your question is this, if economic growth goes down, will that impact, and the answer will be yes. We would feel that across our business.

Because we run, forecast and correlate against the industrial production well in the U.S., China, Europe, South East Asia, so we track all that and we correlate with industrial production fairly well. So low energy usually drive increased industrial production I don’t think this oil has been driven by a recession.

If we go back into last time oil drop, I think somebody mentioned that earlier was tied to a recession. That’s not - I don’t see that’s what’s driving us today. So I think it’s going to be more simulative than not over time here. So I guess that’s our view in the way we modeled it..

Okay. Fair enough. And then just can you give some color - you touched on energy aftermarket earlier.

How much was the aftermarket for energy up in the first quarter and what are your expectations for the full year?.

Energy aftermarket is extremely difficult for us to really track. It’s not the same as the aerospace side of the house.

So we historically other than dialog with the customers, and so on, we do know as you saw in some of these areas, that there is increased utilization and we have seen on the aero-derivative and heavy frame side where we are getting a little better information.

On the engine side of the house, it’s much more difficult, so at an energy level, it’s very difficult to say but we knew - we do know that with lower oil prices you get some of the increased utilization and that usually drives aftermarket..

Okay, fair enough..

There you can see….

Our next question comes from Gary Farber with C.L. King. Please state your question..

Yes, I just had two questions.

Can you also talk about, just bigger picture away from your end markets, how you see your three major geographies, North America, China, and Europe, as far as relative strength and if there anything during the quarter that they - did one or two markets strengthen or slow during the quarter? And then also talk about market-share gains, how that might have played into the first-quarter results.

Are there any particular end markets where you think you’re gaining market share?.

Yes, I’ll just give you kind of a lot of the function, I don’t think what we see is any different from what all kind of read in the papers. But North America has been strong, and I think the outlook is for strong relative, may not be historically strong compared to what was in the past but, stronger than it has been.

Europe, I think we’ve seen some softness there, from an overall economic standpoint, currency issues, and so forth. I think we believe in the comments that have come out that North America is a net importer, and so on, will help the European economy, whether or not that’s enough to allow it to stay flat to grow, that remains to be same.

So that’s been softer, and then I think China, we agree with the position on, it’s down a little from what it was in the past but it’s still higher than was expected. And so overall for us it’s more of that concern regarding volatility.

That they still have some very nice growth figures, 7.3%, 7.4% still, nice growth figures, whether or not we’ll continue to see that in the CNG area is kind of remains to be seen..

And just on market-share gains, is there anything that - any particular end market or product line where you are seeing much deeper market penetration than other markets?.

Not from a geographic, and I think clearly we’ve talked a lot about share gain on aerospace side of the equation and that’s predominantly North America and European with airbus driven phenomenon. But that’s driven by global demand for the aircraft. So it is kind of global overall phenomenon that we are gaining share aerospace-wise.

We’ve talked a lot about things like common rail diesel, goods [ph], fuel, et cetera, that we believe rarely to market-share gains as we go forward in our energy areas, as well. We are with all three of the big three when it comes to industrial gas turbines and hopefully increasing our share with all of them.

So we do believe market share is probably the longer term phenomenon in the energy side. And as Tom said, we’re going to start launching in 2015, searching meaningful lines in 2016 on the narrow-bodies and that will contribute to our market share growth then for aerospace..

And then just one last one back on Europe.

Even though the quarter is a short time period, as you move through the quarter was there any discernible change in the order pattern in Europe or was it just generally soft?.

No there was not any change there..

Okay. All right thank you..

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

Okay, well I appreciate all the questions and discussion and look forward to all talking to all of you in the upcoming quarter. So thanks for joining us today, right..

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