Powell Industries Inc (POWL) 2006 Q4 法說會逐字稿

Good morning, ladies and gentlemen and welcome to the Powell Industries fourth quarter conference call.

[OPERATOR INSTRUCTIONS]

I would now like to turn the conference over to Lisa Elliot, Senior Vice President of DRG&E. Please go ahead, ma'am.

Thank you, operator, and good morning, everyone.

We appreciate you joining us for Powell Industries conference call today to review fiscal 2006 fourth quarter results. We would also like to welcome our Internet participants listening to the call being simulcast live over the Internet.

You could have received a fax or e-mail of the news release this morning. Occasionally, there are technical difficulties, so if you didn't receive yours, please call our offices at DRG&E at 713-529-6600 and we'll get one right out to you. Also, if you would like to be on the permanent e-mail distribution list or fax list, please relay that information as well.

There will be a replay of today's call and it will be available by Webcast by going to the Company's website at www.powellind.com. On a recorded replay will also be available until December 13, and those instructions are in today's press release. Please note that information reported on this call speaks only as of today December 6, 2006, and therefore you're advised that time sensitive information may no longer be accurate as of the time of the replay.

As you know, this conference call includes certain statements including those related to the Company's expectations of its future operating results that may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investor are cautioned that such statements -- such forward-looking statements involve risks and uncertainties that actual results may differ materially from those projected in the forward-looking statements.

These risks and uncertainties include but are not limited to competition and competitive pressures, sensitivity to general economic and industry conditions, international, political, and economic risks, availability, and price of raw materials and execution of business strategy. For further information, please refer to the Company's filings with the Securities and Exchange Commission.

Now with me this morning are Tom Powell, the Company's President and Chief Executive Officer; Don Madison, Vice President and Chief Financial Officer; and Mark Reid, Executive Vice President.

I will now turn the call over to Tom.

Nice job, Lisa. Would you like my part?

Good morning, ladies and gentlemen. Thank you for joining us this morning to review our '06 fourth quarter and year-end results. By now, in all likelihood, you've seen the press release and the results for our two-month fourth quarter and 11-month year end. A significant improvement over our '05 results. Don Madison, our Chief Financial Officer will give you more details on those numbers in a moment.

While we're pleased with these positive accomplishments, we're even more excited with our prospects for '07, '08, and beyond. We've often talked about the cyclical nature of our markets and our business where sales opportunities depend on the number of major construction projects in our market segments. From the bottom of the cycle in 2004, our markets have moved to what I consider the most active level of project activity that I have ever seen, ever witnessed in my 45 years in this business.

Oil and vast exploration, production and processing, both onshore and offshore, domestically and internationally continues to gain momentum. Activity in the gas transmission and pipeline segment is also growing. For the first time in 20 years, we see major refinery expansions as well as new grassroots domestic and international refinery construction projects.

Similarly, the utility industry for the first time in recent memory is moving forward with new coal fired generation plants. At last week's Power Generation Trade Show in Florida, there were projections of some 300 new coal fire generators being added to the system over the next several years. With wind farm construction at historical levels, Texas recently became the state with the largest installed base of wind farm generation in the United States, with the nation's largest single wind farm connected in the grid with Powell 38-KV Switchgear.

The transit industry for electrified rail is more active than any time I can recall and now Powell has become the market leader. With our acquisition of S&I in the U.K., our participation in the international marketplace has been greatly expanded. All in all, we're seeing exceptionally strong conditions, market conditions at -- with significant momentum. All of these positive market developments have contributed to our optimistic outlook.

Our new business bookings were outstanding. We continue to secure major projects at improved price levels for profitability. Materials have become less volatile, and our execution has improved with added factory capacity, personnel, and training. And the acquisition of the PowerVac(R) Switchgear line and our commercial alliance agreement with General Electric will add complete new market segment opportunities and channels to the marketplace that will further enhance our position in years to come.

As you can see, we're excited about the future and the opportunities it will bring.

At this point turn it over to Don and talk about numbers.

Thank you, Tom.

Again, I would like to remind everyone that the Company changed its fiscal year end to September 30th from October 31st. Accordingly, the fourth quarter of fiscal 2006 consists of only two months and the full year consists of 11 months.

Now, looking at our fourth quarter results. Revenues for the two months fourth quarter of fiscal 2006 were $88.3 million compared to last year's three month fourth quarter results of $83.1 million. The success of our recent acquisitions combined with the strength of our backlog has provided additional revenues in this year's fourth quarter.

Our acquisition of S&I in July of 2005 and the PowerVac(R) product line in August 2006 added revenues of $30 million in the fourth quarter of 2006 compared to $16.8 million added by S&I in the fourth quarter of 2005. Gross margin for the quarter was 18.8% compared to 19.1% in last year's fourth quarter.

In the fourth quarter, material costs increased approximately $1.3 million compared to the fourth quarter a year ago, principally due to higher copper costs. Higher margins on new business due to improved pricing and better operating efficiencies benefited the quarter partially offsetting higher material costs.

Selling, general and administrative expenses decreased to 14.5% of revenues in the fourth quarter compared to 15.7% of revenues in last year's fourth quarter. SG&A expenses totalled $12.8 million in this year's two-month fourth quarter compared to $13.1 million a year ago. SG&A associated with the operating activities of our recent acquisitions totalled $3.1 million compared to $1.9 million a year ago.

Interest expense for a two-month fourth quarter of 2006 was $488,000 compared to $375,000 in last year's three-month fourth quarter. The increase in interest expense is primarily due to additional debt incurred to partially finance acquisitions. Interest -- income for the two-month fourth quarter was $191,000 compared to $224,000 in last year's three-month fourth quarter.

Our provision for income taxes reflect an effective tax rate on earnings before income taxes of 20.6% in the fourth quarter of this year compared to 48.9% in the fourth quarter of fiscal 2005. Net income in the two-month fourth quarter was $2.8 million or $0.25 per diluted share compared to $1.8 million or $0.17 per diluted share in the three-month fourth quarter of 2005.

As of September 30th, 2006, our order backlog was $355 million compared to $259 million as of October 31st, 2005, and to $287 million at the end of our third quarter. New orders placed during the two-month fourth quarter totalled $156 million, which includes approximately $49 million in initial orders from General Electric. This compares to $91 million in the three-month fourth quarter of 2005 and $122 million in the three-month third quarter of 2006.

Turning to our business segments: the Electrical Power Products segment reported revenues of $82.5 million in the two-month fourth quarter which includes revenues from the Company's S&I and PowerVac(R) product line acquisitions compared to $73.8 million for the three-month fourth quarter of fiscal 2005. Income before income taxes for Electrical Power Products was $2.7 million compared to $2.7 million a year ago.

The Process Control Systems segment reported revenues for the two-month fourth quarter of $5.8 million compared to $9.4 million for the three-month fourth quarter of fiscal 2005. Income before income taxes for Process Control Systems was $849,000 compared to $1 million in last year's fourth quarter.

Now looking at our full-year results. Revenue for fiscal 2006 were $374.5 million compared to $256.6 million in 2005. Our acquisitions of S&I in July of 2005 and the PowerVac(R) product line in August 2006 added revenues of $70.7 million in 2006 and $19.9 million in 2005.

Gross margin for fiscal year 2006 was 19% compared to 17.1% a year ago. Higher margins on new business due to improved prices and better operating efficiencies were partially offset by higher material costs. Material costs increased by approximately 2.1% or $3.7 million in 2006 as compared to 2005.

Selling, general and administrative expenses decreased to 14.8% of revenues in 2006. This compares to 16.3% in 2005. SG&A expenses were $55.3 million in 2006, an increase of $13.5 million over 2005, of which operating activities of new acquisitions accounted for $7.6 million of the increase.

Research and development expenditures were $4.2 million in 2006 compared to $2.8 million in fiscal 2005, an increase of $1.4 million. The adoption of SFAS 123R, investing modifications increased SG&A expenses by approximately $2 million in fiscal 2006.

In addition, we reported additional sales tax expenses in 2006 of approximately $300,000 due to an unfavorable outcome on a state tax audit. The remaining increase of approximately $2.1 million was due to higher wages, legal and accounting fees, as well as other general increases related to higher business volumes, which were partially offset by an 11-month fiscal year.

Interest expense was approximately $1.6 million in fiscal 2006, an increase of approximately $900,000 compared to 2005. The increase in interest expense is primarily due to added debt incurred to partially finance acquisitions and interest payments to state taxing authorities.

Interest income was $900,000 in fiscal 2006 compared to $1.1 million in fiscal 2005. This decrease in interest income was a result of lower levels of marketable securities. Our provision for income taxes reflect an effective tax rate on earnings before income taxes of 35% in fiscal 2006 compared to 33% in fiscal 2005.

Net income for fiscal 2006 was $9.8 million or $0.89 per diluted share compared to $2.3 million or $0.21 per diluted share last year. Net income for 2005 included a gain of $1.1 million on the sale of land and buildings.

For the full year, our Electrical Power Products business segment recorded revenues of $347.9 million, which includes revenues from business operations of the Company's S&I and PowerVac line acquisitions compared to $220.1 million in fiscal 2005. Income before income taxes for this segment totalled $13.5 million compared to a loss before income taxes of $438,000 last year.

Process Control Systems segment reported revenues of $26.6 million compared to $36.5 million in 2005. Net income before income taxes for Process Control Systems was $1.7 million compared to $3.9 million in 2005.

In fiscal 2005, revenue and income taxes -- excuse me. Income before income taxes were favorably impacted by $1.7 million from the settlement of our claim related to the Central Artery/Tunnel project.

We ended the year with $10.5 million in cash and marketable securities compared to $33 million at the end of 2005. Net cash used in operating activities was $4.7 million. This reduction in cash was principally used to fund growth in accounts receivable, inventories, and costs related to uncompleted projects. This investment was needed to support our growth and business volume.

We invested -- excuse me, we invested $8.4 million in capital improvements during 2006 and we used $8.5 million for the initial payment for the acquisition of the PowerVac(R) product line from GE.

Looking ahead at our guidance for fiscal 2007. Our acquisition of the PowerVac(R) product line from General Electric and the costs associated with a relocation and integration of the product line in our Houston operations will make quarter-to-quarter guidance difficult to forecast. The timing of the integration costs will be dependent upon our ability to hire and train new personnel which could vary considerably by quarter.

Based on the strength of our backlog together with the benefits from recent acquisitions, we expect full-year fiscal 2007 revenues to range between $475 million and $500 million. Full-year fiscal 2007 earnings are expected to be between $1.20 and $1.45 per diluted share, which includes integration cost.

At this point, I'll turn it back to Tom.

Thank you, Don.

Let me make just a few more comments and then we'll be happy to take your questions.

First, the acquisition of GE's PowerVac(R) product line and the commercial alliance with GE sales forces is progressing well. As mentioned before, we've leased 140,000 square foot facility near our Moseley facility here in Houston. We've relocated our service business to that facility and we have moved some of the assembly of our Powell medium voltage circuit breaker lines to that facility.

And during the past month, we've begun the production and assembling of the PowerVac(R) circuit breaker line here in Houston. We've made a good initial start, but as you can imagine, there's a lot of work to do since we're in the process of physically moving the product from Iowa to here in Houston.

We're pleased with the addition of our S&I acquisition in the U.K. They have met our expectations throughout this first year, full year of ownership, and we continue to be optimistic about the future for that group.

At our Chip Channel location, we're in the process of doubling the bulkhead, which essentially doubles the square footage areas where we can build these large, large models. We're on track for completion of that in January.

We're also in the process of expanding our North Canton, Ohio facility by some 26,000 square foot, plus parking area. That's due to the success and growth of our Traction Power business for the transit market. This is more or less a 35% increase in manufacturing and office space.

Again, we're pleased with the progress we've made this year and look forward to continued improvement in the next year. I'm proud of the efforts of our marketing and sales professionals and the success with our new products that we've introduced over the past several years. Certainly we're happy to be working with the General Electric group as well.

Okay. At this point, we'll be happy to take your questions.

Thank you.

Thank you, sir.

[OPERATOR INSTRUCTIONS]

Your next question comes from John Franzreb with Sidoti and Company. Please go ahead, sir.

Good morning, guys, great quarter.

Good morning, John.

Good morning, John.

First question is the -- where's the demand in the backlog coming from? Is it more tilted toward the utility end market or the industrial end market? Can you give us some color as to the demand in the backlog?

Surprisingly, it's quite balanced between utility, oil gas production and our traction group. It's quite well balanced at this point.

Okay.

How about as a follow-up question the -- if I pull out the backlog from the PowerVac(R) acquisition, what was the backlog from PowerVac(R) in the fourth quarter?

When you're looking at -- John, let me answer that. We did not acquire any backlog. We acquired the product line and then we entered into a commercial agreement with GE to supply them with product.

The initial purchase order that we received from General Electric for supplying equipment into their channel was approximately $49 million. The visibility that we have into this, it was -- I don't have the percentage on it, but it was again fairly broad-based between utility and industrial clients.

You also have to recognize that they have a fairly large market share that goes to OEM manufacturers and a portion of it went to that as well, which, again, ultimately will end up in the hands of a utility or industrial client.

So that $355 million backlog, that's just S&I's and Powell's own order backlog as it stood?

No, sir. The $355 at the end of the quarter included an initial purchase order of $49 million from GE.

So I'm looking at 304 versus that 287 in the previous quarter?

There was a one-time step adjustment that would not expect it to be repeated in future quarters from GE of the $49 million. Make sense?

Thanks very much, Don.

I'll requeue.

Okay.

Thank you, sir. The next question comes from Craig Bell with Sanders, Morris, and Harris. Please go ahead, sir.

Good morning.

First question, I'm wondering, did you sell any of the existing Powell products into the GE sales channel?

Yes, absolutely. General Electric did not have an offering for Arc Resistant Products, nor did they have an offering for 38-KV Switchgear. There are some other products we're selling through that channel.

Okay.

Did that -- did those sales start pretty much right away after the announcement back in August, or was that -- did it take a while to get ramped up on that.

We had actually been working on it prior to the completion of the acquisition. There was a couple of orders closed in the fourth quarter.

As you can imagine now, we're getting certainly much more active in the quotation process usually takes 60 to 90 days to close some of those orders.

Okay.

And then one question on S&I.

Can you just comment on what you're seeing in terms of inquiry rate for that? And is there any significant change from what you saw last quarter?

Let me let Mark answer that. He just came back from that area.

Hi, Craig, this is Mark Reid.

The inquiry rate from our international group at S&I in England is extremely high. As you remember in past conference calls, we've talked about their concentration in the oil and gas business and certainly globally that business is doing very well.

So, they're at a very high rate of production right now and they're future looks very bright, just like the Houston operations.

Okay, great.

Thank you.

I'll requeue.

Thank you, sir. Our next question comes from Tom Spiro with Spiro Capital Management. Please go ahead, please.

Tom Spiro, Spiro Capital. Good morning.

Hello Mr. Spiro, how are you, sir?

A whole lot better after reading your press release. Congratulations.

Thank you.

Say, Tom, we're enjoying good fortune, can see in our numbers and backlog and such.

I was kind of curious if you think the whole industry is performing as robustly as we are and kind of running out of capacity?

From everything I can gather, yes, we're seeing deliveries move out to some extent because people are filling their backlog. So it's pretty robust throughout the industry.

I think a quarter or two ago, Tom, you had suggested a little bit of concern that some of our customers might not be able to take delivery, so we'd be force to slow down a little bit. Are you seeing much of that?

Not much. A few projects that have been delayed due to weather, but there's also a shortage of talent in the industry to be able to complete all of these construction projects on a timely basis.

There certainly is some concern there, but I don't think it's that great. I'm pretty pleased with what we're seeing and haven't seen too many slippages.

I know it's the smaller side of the house, but over on the Process Control, the outlook for business, is it pretty good or not so good, or what do you think?

It's improving. It did hit a slow spot, as I've said before. A lot of expenditures have gone to brick, mortar, cement and other types of security systems as opposed to electronic processing and so forth.

So, we've bid a number of projects, we've missed some, and we have several others that are pending. But we have not really seen any real large projects in the last six months.

Okay.

Don, I just had a couple of financial once for you if you have a second.

What's the expected tax rate for the new fiscal year?

Looking forward in 2007, I would expect a effective tax rate of around 36%. That would be a good number for forecasting purposes.

And the EPS guidance reflects and incorporates the GE acquisition --

That is correct.

My recollection, tell me if I'm right, that we were expecting GE, the impact of that acquisition on a full-year basis to be around break even?

Basically, we're expecting it to be nominal accretive to the earnings in 2007 because of the integration costs associated with relocating the product line, that is correct.

And I guess it will bounce around quarter to quarter?

Clearly it will bounce around quarter to quarter.

The other thing we need to take into consideration which we've talked about some at the announcement, but we're also going to be absorbing in addition to the integration costs the amortization expense associated with the acquisition. The intangible amortization associated will grow next year to approximately $4 million in total.

So when you say that it's nominally positive, are you reflecting the amortization in that conclusion or not?

That is correct. I'm looking at the total cost of the acquisition incoming integration and the amortization expense.

That's very helpful.

Thanks much and good luck in the new fiscal year.

Thank you, Tom.

Thank you, sir. The next question comes from Ned Borland with Next Generation Equity Research. Please go ahead, sir.

Hello.

Good morning.

Good morning.

A quick question again on the guidance. Assuming GE is nominally accretive for '07, what are the other swing factors from the low end to the high end that are baked into the guidance?

The swing factors, looking at it is the overall guidance is clearly based on a no impact from the GE. From a quarter-to-quarter standpoint, it will have impacts on the business. When you're looking at the larger picture, you're also looking at our ability to absorb another $75 to $85 million into our Houston operations.

The impact of the integration of the product line into our existing businesses could have some impact on our other product lines as well because of competing resources and the shortages overall. We're also looking at the variability of the business yet to be booked and what we anticipate price levels and efficiencies would be on those businesses.

Where there are several orders out there that we're looking at that will probably fall in the near term that could have an impact on our fiscal 2007.

We still need to be adding some 200 or so, 300 people to get them trained to take on this product line and I would imagine at this point we're going to see more overtime to meet our commitments to our customers. It varies from quarter to quarter.

Clearly what we're going to be doing is pulling some of our experienced people out of our other operations and moving them into the new business.

And so when you're looking at how much of it is directly related to one product line or the other, it becomes fuzzy as we go forward.

Okay.

So if I understand that correctly, it's the integration of GE, but as it may impact your existing businesses. Is that fair?

That is correct --

-- a fair characterization.

Okay. And just as a follow-up, if you could comment on the pricing environment with your utility customers as you see it going forward?

We do all we can.

Price levels overall are improving, both in the industrial as well as the utility markets.

As the capacity constraints across the industry are becoming tighter and tighter and the realizations that we need to pass on cost increases from not only the raw materials but the ripple effect and the labor markets and the ripple affect into the transportation costs on through other components, there is -- market levels are improving across the board.

Okay. Thanks.

Thank you, sir.

[OPERATOR INSTRUCTIONS]

At this time we have a follow-up from John Franzreb. Please go ahead, sir.

Just back to the integration costs.

Could you provide us a range of what your expectations are or what you've baked in as an estimated cost to integrate the GE business this year?

John, our estimates have not materially changed from when we talked in our earlier call. What we're looking at is a $7 to $8 million EBITDA, which would include the amortization impact post integration. So therefore, you're looking at an integration cost that's going to range in that same neighborhood given the fact that we're putting zero into the current year.

The question is -- and that's the challenge and part of the issue, maybe I should have clarified earlier on the other question is that we're estimating this is going to take anywhere from 12 to 18 months. The timing of this is part of the issue that we're really struggling with right now is because I don't think the costs will materially change. Clearly if we come in at 12 months, there will be some savings, but it will not be proportional to the time difference.

So the more successful that we are at moving the product line rapidly to Houston and end up on the shorter end of that 12 to 18 month range we'll pull more cost into the current fiscal year that might otherwise slide into 2008.

So it's very difficult for me to sit here and really say how much it's going to affect the fiscal year other than at this point in time I would say that we've prorated the $7 to $8 million impact over about 15 months.

Okay, Don. That helps a lot.

Thanks very much.

Thank you, sir. We have a follow-up question from Craig Bell. Please go ahead, sir.

Yes.

In the press release you said that the combination of GE and S&I contributed, I think, it was $30 million in the quarter. Can you break that out any further so we can get an idea of what GE contributed by itself?

Basically I would prefer just to say at this point in time that we have estimated a range of $75 to $85 million in the first 12 months.

Nothing occurred in the first 60 days that would give us any reason to believe that those numbers on a 12-month basis are not very representative to what we expect to yield from this product line.

Okay.

And then, on your tax rate for the quarter, wondering if you can talk about why that was so low?

The effective tax rate in the current quarter was a -- if you're looking at where we were earlier in the year, we were fairly conservative in our assumptions because of recently enacted legislation that we were going through our analysis and that specifically there was issues related to Section 199 and the manufacturing deductions that we had to go through.

When we went back and did our trueup in the fourth quarter, completing these analysis, we determined that we had been overly conservative in our estimates. The other thing you need to consider, is the impact is greater when you're looking at an adjustment in a two-month quarter, than what it would have been had we had a three-quarter.

Okay. Great. Thank you.

Thank you, sir. At this time, we have a question from Bill Weiss with Delta Management. Please go ahead, sir.

Hi.

Just relative to the $49 million in initial orders from GE, given that you haven't yet transitioned the product line physically, how confident are you that you can meet those orders in a timely way, and when are you expecting to begin shipping those orders?

Clearly, we have a transition agreement with General Electric where they are supporting it through the 12 to 18-month period transitioning their product from their existing facility in Iowa. We have not ceased production.

What is happening at this point in time is that we have a contract in place where we have subcontracted work back to them. Clearly a significant amount of the work during the first 30 days was predominantly coming off the existing facility.

We started doing some production in the last 30 to 45 days here and as we transition forward, we will control will whether the work is performed here in Houston or whether we continue to subcontract portions of the work back to the Iowa facility over the transition period.

So therefore, it's important to both GE and Powell that we maintain our quality of service and the deliveries to the customers. So that's why we've put together this plan where we both are working towards transitioning it effectively and ensuring that the customers are not impacted in the process.

Okay.

And is the phase-in gradual over the next 12 months, or is there a period where you expect to be able to shift a majority of the production?

It will be phased in. Clearly there are some milestones. We've got some milestones that we've done a lot of planning in work in the last 90 days looking at where we need to do, particularly in the January/February time period.

We're going to be hitting some fairly substantial milestones and by the end of the first calendar quarter, we'll see a substantial amount of production here in Houston. But when you're looking at it from a macro standpoint, the best assumption is that it's relatively straight-lined.

Okay.

And how are you doing on hiring the people that you need to staff the new facility given the state of the labor markets in Texas?

Professionals is a little bit more difficult than the mechanics and the electricians we need in the plant, but we're working hard at it. We're certainly having some success. It is a difficult marketplace currently.

Thank you.

Thank you, sir.

[OPERATOR INSTRUCTIONS]

At this time we have a follow-up question from Tom Spiro. Please go ahead, sir.

I had a couple for Mark. Number one, Mark, could you give us an update on the rollout of the MIS system?

Sure.

The MIS system is progressing. We are mostly done at our first rollout facility, which is in CD. It's been closing the books regularly. There are always a few things that we need to fix. We are actively pursuing the rollout here in Houston.

As you can imagine with the volume of orders that we have, we're being very careful about what we bring on and what we double double check, but it is progressing fine and once we're done with Houston, which will be sometime in the early part of next year, early to mid-part of next year, we'll be moving out to the other facilities outside of Houston.

And on S&I, Mark, does S&I now have some significant orders in backlog that you think would not have gotten without the Powell alliance?

That's an excellent question.

I would say there have been one or two significant orders because of our association with them, yes. But it takes time to generate the activity levels, generate the interest and the like and a lot of what we expect in additional market coverage will actually come out of our backyard here in Houston at the EPC houses. That is starting to happen now.

We have several very promising inquiries that we're pursuing at this time. Certainly the steam has been built up and we expect it to start producing some real results for us now and in the near future.

Are there any plans to expand S&I either personnel or square footage?

There are no plans like what we've done in offshore or in CD. We have added a temporary building on the job site, on the factory site, because of the amount of work that we have presently going through the shop and we are hiring people.

There are additional shifts being put on. So there is capacity left in the facility that we have, but if we keep growing at the rate we are, we'll have to address that sometime soon.

Thanks a lot.

Thank you, sir. Next question comes from Michael Christodolou with Inwood Capital. Please go ahead, sir.

Good morning, gentleman.

Tom, in your opening comments you mentioned that interest from the transit industry in power generation and transmission is quite high.

I was wondering if you could be a little more specific and I understand there's a $1 billion light rail project that's going in in Houston and the contracts will be let soon. Any sense of where Powell may participate in that?

We will -- I'm sure we'll bid that project, but Houston seems to have locked in with another group early on and there's a tendency to stick with the initial group.

We will bid that, but there are five or six major projects that have bid across the country in the last several months that would probably total about $100 million and we feel quite confident on a couple of those units and hope to see those things booked here within the next several months.

Of course, there's the Dallas area transit job, but that quotation date seems to keep moving out at this point.

Good luck with that.

Thank you.

Thank you.

Thank you, sir.

Mr. Powell, at this time, there are no further questions. Please go ahead.

All right.

Thank you for joining us today. Certainly we're pleased with the improvement in our results for fiscal '06 and the GE acquisition provides us a commercial alliance which will allow us to diversify our existing markets and we're proud of that association with that group.

That's it for us. We thank you for being here and we look forward to talking to you next quarter.

Thank you.

Ladies and gentlemen, this concludes the Powell Industries fourth quarter conference call. You may now disconnect and thank you for using ACT teleconferencing.