Powell Industries (POWL) Q4 2011 earnings summary

Executive summary

• FY2011 revenue rose to $562.4M from $550.7M, but gross profit fell to $99.9M and the year ended with a $2.7M net loss, versus $25.0M net income in FY2010.

• Orders rebounded to $725.2M and backlog reached $443.0M at September 30, 2011, driven mainly by petrochemical and offshore oil and gas projects.

• Thomas W. Powell returned as CEO and president; no change in strategic direction was planned, and a search for a new CEO was underway.

Financial highlights

• FY2011 revenue was $562.4M, up from $550.7M; gross profit was $99.9M, down $42.1M, and gross margin was 17.8% versus 25.8%.

• FY2011 net loss attributable to shareholders was $2.7M, or $0.23 diluted loss per share, versus $25.0M net income and $2.14 diluted EPS in FY2010.

• Q4 FY2011 revenue was $171.2M, gross profit $27.3M, net loss $7.0M, and diluted loss per share $0.59.

• Operating cash flow was $15.5M in FY2011, compared with $64.1M in FY2010.

Outlook and guidance

• Backlog of $443.0M entering FY2012 included large petrochemical and offshore oil and gas projects, many awarded through competitive bids and requiring months to produce.

• Competitive bidding and higher commodity prices were expected to pressure gross profit as orders were completed in FY2012 and FY2013; project execution and Powell Canada integration also posed risks to FY2012 net income.

• Cash, expected operating cash flows, and existing borrowing capacity were considered sufficient for operating needs, capital improvements, and debt repayment for the foreseeable future.