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Powell Industries Inc. Reports Operating Results (10-K)

December 11, 2009 | About:
10qk

10qk

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Powell Industries Inc. (POWL) filed Annual Report for the period ended 2009-09-30.

Powell Industries, Inc. sells, designs, develops, manufactures, packages and services systems and equipment for the distribution, control and management of electrical energy and other dynamic processes. The principal products are switchgear and related equipment, bus duct and process control systems. These products and systems are utilized primarily byrefineries, petrochemical plants, utilities, paper mills, offshore platforms, commuter railways, vehicular transportation and numerous other industrial, commercial and governmental facilities. Powell Industries Inc. has a market cap of $377.1 million; its shares were traded at around $32.88 with a P/E ratio of 10.5 and P/S ratio of 0.7.

Highlight of Business Operations:

Products and services are principally sold directly to the end-user or to an engineering, procurement and construction (“EPC”) firm on behalf of the end-user. Each project is specifically tailored to meet the exact specifications and requirements of the individual customer. Powell’s expertise is in the engineering and packaging of the various systems into a single deliverable. We market and sell our products and services to a wide variety of customers, markets and geographic regions. As a result of the supply agreement that we entered into on August 7, 2006, with GE, our revenues from GE were approximately $86 million, $82 million and $100 million in fiscal 2009, fiscal 2008 and fiscal 2007, respectively, or approximately 14%, 13% and 18% of our consolidated revenues for these periods. Aside from GE, with whom we have a long-term supply agreement, we do not believe that the loss of any specific customer would have a material adverse effect on our business. We could be adversely impacted by a significant reduction in business volume from a particular industry which we currently serve. GE has become a significant customer and has accounted for, and could continue to account for, more than 10% of the annual revenues of this business segment as a result of the supply agreement that we entered into on August 7, 2006.

Backlog represents the dollar amount of revenue that we expect to realize from work to be performed on uncompleted contracts, including new contractual agreements on which work has not begun. Our methodology for determining backlog may not be comparable to the methodology used by other companies. Orders included in our backlog are represented by customer purchase orders and contracts, which we believe to be firm. Orders in the Electrical Power Products business segment backlog at September 30, 2009, totaled $329.6 million compared to $493.0 million at September 30, 2008. Our backlog has declined as an increasing number of our customers have delayed the start of new capital projects during the second half of fiscal year 2009. We anticipate that approximately $282.6 million of our ending 2009 backlog will be fulfilled during our fiscal year 2010. Conditions outside of our control have caused us to experience some customer delays and cancellations of certain projects in the past, accordingly, backlog may not be indicative of future operating results as orders in our backlog may be cancelled or modified by our customers.

This business segment’s research and development activities are directed toward the development of new products and processes as well as improvements in existing products and processes. Research and development expenditures were $5.8 million, $6.3 million and $5.4 million in fiscal years 2009, 2008 and 2007, respectively.

This business segment’s products and services are principally sold directly to end-users in the transportation, environmental and energy sectors. From time to time, a significant percentage of revenues may result from one specific contract or customer due to the nature of large projects common to this business segment. In each of the past three fiscal years, revenues with one or more customers individually accounted for more than 10% of our segment revenues. Revenues from these customers totaled $7.4 million, $5.4 million and $5.9 million in fiscal 2009, 2008 and 2007, respectively. Contracts often represent large-scale, single-need projects with an individual customer. By their nature, these projects are typically nonrecurring for a given customer. Thus, multiple and/or continuous projects of similar magnitude with the same customer are rare. As such, gaps in large project awards may cause material fluctuations in segment revenues.

Backlog represents the dollar amount of revenue that we expect to realize from work to be performed on uncompleted contracts, including new contractual agreements on which work has not begun. Our methodology for determining backlog may not be comparable to the methodology used by other companies. Orders included in our backlog are represented by customer purchase orders and contracts, which we believe to be firm. Orders in the Process Control Systems business segment backlog at September 30, 2009, totaled $36.2 million compared to $25.5 million at September 30, 2008. We anticipate that approximately $24.7 million of our year-end 2009 backlog will be fulfilled during our 2010 fiscal year. Conditions outside of our control have caused us to experience some customer delays and cancellations of certain projects in the past, accordingly, backlog may not be indicative of future operating results as orders in our backlog may be cancelled or modified by our customers.

The majority of research and development activities of this business segment are directed toward the development of our software suites for the management and control of the critical processes and facilities of our customers. Non-project research and development expenditures were $0.3 million, $0.3 million and $0.3 million in fiscal years 2009, 2008 and 2007, respectively.

Read the The complete ReportPOWL is in the portfolios of Chuck Royce of ROYCE & ASSOCIATES.

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