Powell Industries (POWL) Q4 2008 earnings summary

Executive summary

• FY08 set records in revenue, orders and backlog amid strong demand across energy, utility and transportation markets.

• Revenue and earnings improved substantially YoY; higher volume, better pricing and productivity supported results, while the financial crisis raised uncertainty around future project timing.

• CEO transition took effect September 30, 2008, with Patrick McDonald succeeding Thomas Powell.

Financial highlights

• FY08 revenue was $638.7M vs. $564.3M in FY07; gross profit was $126.4M vs. $95.6M.

• FY08 operating income was $42.4M vs. $18.3M; net income was $25.8M vs. $9.9M.

• FY08 diluted EPS was $2.26 vs. $0.88; Q4 revenue was $167.1M and net income $8.3M, vs. $150.5M and $2.5M in Q4 FY07.

• FY08 domestic revenue rose to $469.1M from $372.7M; international revenue declined to $169.6M from $191.6M after a large project was substantially completed in FY07.

Outlook and guidance

• Backlog entering FY09 was $518.6M, up $54.1M from the beginning of FY08; FY08 orders totaled $705.4M vs. $667.1M in FY07.

• Long-term energy and infrastructure investment is expected to support demand, but project starts may be delayed as customers assess market conditions and credit availability.

• FY09 priorities include improving efficiency and throughput, expanding R&D, and developing employee training and capabilities.

• Working capital and borrowing capacity were expected to fund anticipated operations, capital improvements and debt repayments; receivables and inventories would be actively monitored.