Powell Industries (POWL) Q4 2010 earnings summary

Executive summary

• FY2010 revenue fell to $550.7M from $665.9M as customers delayed or cancelled capital projects; gross margin improved to 25.8% from 21.8% on project execution and cost efficiencies.

• Net income attributable to shareholders declined to $25.0M and diluted EPS to $2.14; lower backlog and one-time goodwill and tax charges weighed on results.

• Management expected modest activity improvement over the next 12 months, led primarily by projects outside the U.S., while warning that FY2011 revenue would be pressured by lower backlog.

Financial highlights

• FY2010 revenue was $550.7M, down $115.2M YoY; gross profit was $142.1M versus $145.0M, and operating income was $45.7M versus $61.6M.

• Net income attributable to shareholders was $25.0M versus $39.7M; diluted EPS was $2.14 versus $3.43.

• Cash from operations was $64.1M; cash and equivalents ended FY2010 at $115.4M versus $97.4M a year earlier.

• U.S. revenue declined to $393.1M from $516.0M; international revenue increased to $157.6M from $149.9M, including $51.1M contributed by Powell Canada.

• Fourth-quarter revenue was $133.8M and net loss attributable to shareholders was $4.8M, or diluted loss per share of $0.41.

Outlook and guidance

• Backlog entering FY2011 was $282.3M, down $83.5M from the prior-year opening backlog; management expected the decline to reduce FY2011 revenue and gross profit versus FY2009 and FY2010.

• Management expected modest improvement in business activity over the coming year, primarily from capital projects outside the U.S., as customer investment funding recovers.

• Existing cash and borrowing capacity were expected to cover operating needs, capital improvements and debt repayments for the foreseeable future.