Powell Industries (POWL) Q4 2002 earnings summary

Executive summary

• FY2002 delivered record revenue of $306.4M, up 13% YoY, and net earnings of $17.9M, up 32%, despite a third consecutive year of declining industry revenues.

• Backlog was $190M; operating efficiency improved 6%, and inventory-to-sales ratio improved 19% after lean initiatives and facility expansions.

Financial highlights

• FY2002 revenue was $306.403M vs. $271.243M in FY2001; gross profit was $67.658M vs. $56.797M.

• Net earnings were $17.905M vs. $13.542M; diluted EPS was $1.67 vs. $1.28.

• Q4 FY2002 revenue was $75.343M, gross profit $18.370M, net earnings $5.134M, and diluted EPS $0.48.

• Operating cash flow was $31.7M; free cash flow was $18M, as defined as operating cash flow less capital expenditures.

Outlook and guidance

• FY2003 revenue was forecast to decline 5%–10%; diluted EPS from continuing operations was guided to $1.50–$1.60.

• Expected FY2003 capital expenditures were $8M–$12M, including ~$4M to expand offshore oil-platform control-module capacity; project completion targeted by mid-2003.

• Expected FY2003 pre-tax goodwill impairment charge of ~$800K, recorded as a cumulative effect of an accounting change as of Nov. 1, 2002.

• Cash was expected to grow in 2003; working capital, borrowing capacity, and operating cash generation were expected to fund operations, capital improvements, debt repayment, and potential acquisitions.