Powell Industries (POWL) Q4 2007 earnings summary

Executive summary

• FY07 marked a strong recovery, with revenue of $564.3M, net income of $9.9M and a record $464.5M backlog entering FY08. Results include 12 months versus 11 months in FY06.

• Growth reflected stronger energy-related demand, improved pricing and productivity, and Power/Vac acquisition revenue; integration and relocation costs and weaker project execution at a smaller unit weighed on earnings.

Financial highlights

• FY07 revenue was $564.3M versus $374.5M for the 11 months of FY06; gross profit was $95.6M versus $69.1M.

• Net income was $9.9M, or $0.88 diluted EPS, versus $8.4M, or $0.76, in FY06.

• Q4 FY07 revenue was $150.5M, gross profit $25.3M, net income $2.5M and diluted EPS $0.22.

Outlook and guidance

• Backlog entering FY08 was $464.5M, the highest recorded; management expected strong activity in principal markets to continue into early 2008.

• Power/Vac integration and relocation costs were expected to pressure earnings into early FY08; working capital needs were expected to rise with business activity.

• Cash and borrowing capacity were expected to fund operations, capital improvements and debt repayments; working-capital needs or strategic acquisitions could require additional borrowing.

• Management cited a 3–5 year growth horizon based on backlog and research.