Powell Industries Inc (POWL) 2008 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Thank you so much for standing by, and welcome to the Powell Industries second quarter 2008 conference call. (OPERATOR INSTRUCTIONS.) As a reminder, this conference is being recorded today, on Wednesday, the 7th of May, 2008.

We'll now turn the conference over to Ms. Karen Roan with DRG&E. Please go ahead.

Thank you, Michael, and good morning, everyone. We appreciate your joining us for Powell Industries' conference call today to review fiscal 2008 second quarter results. We would also like to welcome our internet participants listening to the call, simulcast live, over the internet.

Before I turn the call over to Management, I have the normal details to cover. You could have received a fax or e-mail of the news release this morning. Occasionally, there are difficulties experienced during these broadcasts, so if you did not get your release, please call our offices at DRG&E at 713-529-6600, and we will get one to you. Also, if you want to be on the permanent e-mail distribution list, please relay that information to us.

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, or a recorded replay will be available until May 14th and information on how to access the replay was provided in today's news release.

Please note that information reported on this call speaks only as of today, May 7th, 2008, and, therefore, you are advised that time sensitive information may no longer be accurate as of the time of any replay.

As you know, this conference call includes certain statements, including statements relating 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. Investors are cautioned that such forward-looking statements involve risks and uncertainties, and 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 strategies. For further information, please refer to the Company's filings with the Securities & Exchange Commission.

Now, with me this morning are Tom Powell, the Company's Chief Executive Officer, Pat McDonald, President and Chief Operating Officer, and Don Madison, Executive Vice President and Chief Financial and Administrative Officer.

I will now turn the call over to Tom.

Thank you, Karen. Good morning. Thank you for joining us today to review our fiscal '08 second quarter results. I'll make a few comments about the quarter and our markets, and then I'll turn it over to Pat and Don for a more detailed discussion.

I feel like I'm repeating myself because, again, not a lot has changed in the three months since our last conference call, except our results and our outlook are much better. Our markets remain strong, and we continue to see high levels of project activity. And as our results indicate, we're well positioned in our key markets and continue to close business very successfully.

We had a strong second quarter with solid bookings of $196 million. We have another record backlog of $537 million, and earnings are up 65% over the first quarter of this year. Inquiry levels from our customer base remain high and, more importantly, we still have not seen the affect of recession worries in our markets.

The long-term requirements of both the oil and gas and the electrical power industries continue to drive our positive outlook. We continue to see numerous opportunities in the key sectors of the utility, energy, transit, and mining. And we expect to continue to benefit from those prospects.

I'll now turn the call over to our President and Chief Operating Officer, Pat McDonald.

Thank you, Tom.

Operationally, the Power/Vac transition is complete, with all manufacturing and assembly now in Houston. We continue to strengthen the workforce in the new facility, and expect, as we have discussed previously, that it will take two to four quarters before we are up to desired output levels. So we still have these benefits ahead of us.

A recent focus has been on improving our customer service levels, and we are very close to achieving our objectives. Through our strategic alliance with GE, we are working to develop opportunities for both companies, especially in Canada and Latin America.

Regarding the balance of the organization, our focus and efforts are still on training our people and perfecting our processes. We continue to bring in new talent to the organization, and we are seeing the workforce maturing as a result of the training and the time on the job.

The entire oil and gas industry is currently operating at record levels. This has put tremendous pressure on the infrastructure to support all of the capital projects on the board. We are experiencing some supply chain constraints, particularly with components. We are also seeing these pressures on the -- as the EPC firms are staffing up to handle the volume, the same as Powell.

There's no doubt that the world economy and demand for oil have resulted in an upward pricing pressure that is now manifesting itself in commodity price inflation. We try to stay in front of these rising commodity costs by anticipating and raising prices accordingly, but the element of risk is increasing, again. We continue our practice of buy forward on commodities to maintain margins as much as possible. With the expectation that our utility customers will be developing plans and options for nuclear power, we are investigating and making plans to support their product and project requirements.

Strategically, we consistently rely on our customers and their requirements to assist us as we look at new and advanced product needs, which will prioritize our R&D efforts. Our operational tactics are very simple, listen to and work with our customers and their engineering firms, manage the timing of the business in accordance with our backlog and our customers' needs, and execute the timely production and delivery of their projects.

Now, I will turn the call over to our Chief Financial Officer, Don Madison, to review the financial results.

Thank you, Pat.

Revenues were $160.3 million in the second quarter of fiscal 2008, compared to $141.9 million in the second quarter of fiscal 2007. We continue to experience strong demand for our products and services.

Gross margin for the second quarter was 19.1%, compared to 16% in last year's second quarter. Looking at our historical operation, which excludes the direct impact of the acquired Power/Vac product lines, gross margin for the quarter was 22.3%, compared to 19% a year ago. Gross profits have improved as a result of improved pricing and productivity, as well as the favorable impact from the successful completion of certain jobs with margins that exceeded expectations.

Selling, general, and administrative expenses were 13.1% of revenues in the second quarter, compared to 13% of revenues in the second quarter of 2007. SG&A expenses were $21 million for the second quarter, compared to $18.5 million for the second quarter a year ago. Expenses increased primarily due to increased costs related to the Power/Vac product line, and increased compensation expenses, including cash and noncash equity incentives, which are consistent with the increase in volume and earnings.

Interest expense in the second quarter was $771,000, a decrease of approximately $148,000 from a year ago. Interest income was $86,000 compared to $120,000 in the second quarter of 2007.

Our provision for income taxes reflects an effective tax rate on earnings before income taxes of 35.8%.

Net income in the second quarter of fiscal 2008 was $6 million or $0.53 per diluted share, compared to $2.3 million or $0.20 per diluted share in the second quarter of 2007.

For the six months ended March 31st, 2008, revenues were $307.5 million compared to $264.7 million in the same period a year ago. Revenues increased due to the continued strength in our primary markets, and a strong backlog.

Gross margin was 18.7% for the six-month period, compared to 16.2% a year ago. Gross margin in our historical operations, which excludes the direct impact of the acquired Power/Vac product line for the six-month period was 21.9% compared to 18.8% last year.

YTD selling, general, and administrative expenses were 13.4% of revenue, compared to 13.1% of revenue for the first six months of 2007. SG&A expenses were $41.1 million compared to $34.7 million a year ago.

Interest expense for the six months ended March 31st, 2008 was $1.6 million, unchanged from a year ago. For the six-month period interest income decreased by $99,000 to $201,000 compared to the same period in 2007. YTD our provision for income taxes reflects an effective tax rate on earnings before income taxes of 36.1%.

For the six months ended March 31st, 2008, net income was $9.6 million or $0.84 per diluted share, compared to $4.3 million or $0.39 per diluted share a year ago.

As of March 31st, 2008 our order backlog was $536.5 million, compared to $501.7 million at December 31st, 2007 and $407.6 million at the end of the second quarter a year ago. New orders remained strong, totaling $196.2 million in the second quarter, compared to $167.7 million in the second quarter of fiscal 2007.

YTD cash used by operating activities was $9.6 million. Cash flow from operations is primarily influenced by demand for our products and services and is negatively impacted as our progress payment terms on projects with our customers typically extend beyond the payment terms with suppliers.

The payment of annual incentive compensation earned in 2007 and the first six months of fiscal 2008, along with higher levels of inventory needed to support our existing backlog has negatively impacted cash flow from operations.

Investments in property, plant, and equipment during the first six months totaled approximately $1.5 million, compared to $9.7 million in the first six months of fiscal 2007. At March 31st, 2008 we had cash and cash equivalents of $7.8 million, compared to $5.3 million at September 30th, 2007.

Long-term debt and capital lease obligations, including current maturities, totaled $45.9 million at March 31st, 2008 compared to $35.8 million at September 30th, 2007.

Looking ahead, we now expect full year fiscal 2008 revenues to range between $650 million and $660 million, and full year earnings to range between $1.85 and $2.10 per diluted share.

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

Thank you, Don. Let me make a few more remarks, and then we'll be happy to take your questions.

Over the past several quarters we've seen a great deal of capital investment in the oil and gas sector. Recently, there've been a number of very large scale domestic refining projects in which we've been highly successful. While the refining market remains very strong going forward, we expect growth in this sector to primarily consist of more traditional sized projects, both in upgrades and environmental improvements. I don't want to imply a slow-down, as there will be a large number of smaller projects.

Regarding our offshore business, we're seeing a great deal of activity with more deepwater exploration occurring, which bodes well for us and the future, but with our power control modules for offshore production platforms.

We've also been highly successful in the utility sector, and we expect this market to continue on this pace, if not improve in the coming months and years. Our transit market continues to be strong but, as you know, is subject to continued government financing.

By my nature, I'm generally conservative, and I don't like to promise what we can't deliver but, frankly, it's rather difficult to hold back our enthusiasm, given the opportunities that we're seeing. Activity and opportunities, all of our primary markets remain healthy, and we're confident that we will continue to participate in the growth of these markets into the foreseeable future.

At this point, we'll be happy to answer any questions that you might have. Thank you.

(OPERATOR INSTRUCTIONS.)

Our first question is from the line of John Franzreb with Sidoti. Please go ahead.

Good morning, guys. Great job today.

Good morning, John.

Thank you.

Listen, could you just talk a little bit about what's going on with the Power/Vac, the new labor force? Pat, you implied that there's certainly opportunity to improve the margin and productivity over there. Can you just give a little bit more background color on what steps you're taking, and why is that timeline so long?

Well, John, we've always talked about how long it would take. Again, remember, we brought in a whole new workforce to take on this product line, as we transitioned it from Burlington, Iowa, with a workforce there that averaged more than 25 years with seniority.

So it's a new workforce to us here. One, it's a new product, you know, for this workforce to be working on, so as we have transitioned it, we are now working on the productivity of being able to be very consistent in what we do, how it flows down the product line, making sure that all the parts and pieces are there and available for the organization to be able to produce the equipment on an ongoing basis. And we continue to look at how we can figure the facility to make sure that we make the productivities that we're looking for.

Are you through with the recruiting expenses, kind of associated with staffing up that line?

Well, again, remember, there are two areas of staffing and growth in our employment levels. One is for that business, the other is for the tremendous volume that we have across all of Powell. So we are still hiring, not at the pace we were for our [Curlin] facility, but we continue to hire throughout the entire organization, and we'll continue to have hiring expenses and training expenses for those people continuing out for quite some time.

Okay. One follow-up question then, the Port Arthur Project, that $50 million, is that all part of backlog, or--?

Yes, it is all part of backlog.

Okay. It's already in there. So would it be fair to assume that we'd see, I mean that was a big number for the quarter, that backlog would drift down next quarter, that'd be a fair assumption or no?

John, I want to make sure, we announced that and the $50 million order. However, that is actually over two quarters. We had part of that order back in the first quarter, booked in, and then part of the order, almost half and half booked in the second quarter.

Okay. That's helpful. So are you implying that the backlog is sustainable at this level, or should we be bracing for maybe a drift down next quarter?

Well, again, it's too hard to predict exactly where it's going to be. As Tom pointed out, we still see our activity to be strong.

Right.

However, we see that to be more in the smaller projects of the refining and petroleum business, as opposed to what we have seen in these large major projects that have been coming in.

Okay. Great. Thanks a lot, guys.

Thank you. Our next question is from the line of [Fred Fanacor] with CJS Securities. Please go ahead.

Hi. You actually have Arnie Ursaner from CJS Securities. Good morning.

Good morning, Arnie.

A couple of quick questions. Obviously, your 22% gross margin in the quarter was, if not at record, certainly approaching record levels, and you achieved it despite dramatically higher raw material costs and also continuing inefficiencies. How should we think about this over the next six quarters or so?

Arnie, I mean it's going to go up and down, as we're talking about right now. You're right, we are seeing commodity increases going up, and we do try to anticipate those, again, as we said in our pricing configurations, there is always some timing element to those that we may be in a detriment or into a positive situation.

I think the -- as you have seen over the last successive quarters, the rate of improvement, you know, has been slowing somewhat, and it's going to be up and down, quarter by quarter. We also, as Don pointed out, had some very favorable projects that closed out in our second quarter, which had a nice impact on our margin levels, and that also will be subject to fluctuation quarter to quarter as we go out.

Keep in mind, that we are a project business and that, you know, sequential changes quarter to quarter are hard to interpret trends, and this quarter we had a very favorable set of order closeouts, near completion, and we got benefit from that. You can't anticipate that we'll get that same level of benefit necessarily each and every quarter. Over a period of a year they average out.

Yes, but I think where I'm going with this, Don, is to the extent next year is the driver of valuation for your stock and you can improve margins by 100 to 200 basis points, that has an enormous impact on the profitability you might achieve. It's not a rounding error, it's a very sizable difference.

There is still opportunity in front of us, offset by increased risk of commodity cost as we go into the future.

Two more very quick questions, if I can? You've always disclosed a stepped function, once you got Texas up and running, you'd be able to reduce or eliminate the expenses related to Iowa. Now that you've essentially achieved that stepped function, what sort of headcount reduction are we likely to see, and I assume we will see it in this quarter?

You will not see any headcount reduction from the Powell perspective. What you -- what we'll see is the elimination of costs that we've incurred from a contract basis from GE. Those costs have now been eliminated, and they were substantially eliminated about mid quarter. That also benefitted this particular period of time. We finalized the transition of all product to Powell at the end of February. March was substantially on our own.

Okay. And when you have a large number of smaller projects are the margins similar on that?

They can be very similar. Hopefully, they turn a little bit quicker, and you don't have the mega coordination that goes on with these big projects.

The complexity is more of an issue as far as profitability as opposed to size.

Thank you very much.

All right. Thank you. Our next question is from the line of Craig Bell with SMH Capital. Please go ahead.

Yes, good morning. Just sort of following up on the margins for the Power/Vac line, as we move through the next several quarters here, how do you see those margins progressing? Is it going to be more incremental improvements or do you expect since you had the transition completed sort of mid quarter that we saw the noticeable step-up there? Is it going to be more incremental or do you expect to see another significant jump forward on that?

I think it's going to be more of an incremental. Again, as Don pointed out, we were significantly clear by mid quarter, and finished by the end of February, and from here on out our growth in that area is going to be on our own performance, and how well our own workforce rises to the task and gets used to what they're doing and becomes very predictable in what they do.

Okay. And then, Pat, in your prepared remarks, you were talking about the two to four months to ramp-up the productivity on that. Once you get through that time period, I mean do the margins on the Power/Vac start to look a lot like the legacy Powell products?

Again, remember, it was two to four quarters we talked about, not two to four months.

Right. I'm sorry, that's what I meant.

Don't compress me down in time too much there. Again, we are serving, you know, serving similar markets and some markets that aren't similar, but switch gear products and the way we price, we see that they should be somewhat comparable in the marketplace.

Okay. And then just quickly on your CapEx spending. I believe on the last call you talked about targeting a sort of $8 million to $10 million range for fiscal '08. You've only done about $1.5 million of that so far. Are you -- is that still the kind of range that you're looking at?

Probably not. We had some, as we talked about, the last one, we drew some of the CapEx in, into the tail end of last year. I think we won't hit that $8 million to $10 million range.

Okay. And the spending that you're still doing, is that still just focused on driving throughput?

Throughput and material throughput.

Okay, great. Thanks, guys.

All right. Thank you. (OPERATOR INSTRUCTIONS.)

Shawn Boyd with Westcliff Capital Management, please go ahead with your question.

Good morning, gentlemen. Congrats on the quarter.

Thanks, Shawn.

Just a couple of follow-ups, if I may. On the material costs, with what we see in copper so far, can you just remind us as to how your pricing those contracts, and what you're doing on the forward pricing, and how you're looking at the forward pricing in the commodity?

Well, again, great question. We continue to look out to the time of our backlog and the time of quotation, and we try to anticipate where our commodity prices are going to be. We try to use that as part of the basis of our quotation of what that commodity will be at the time that we have to procure it and deliver it to our customer, so part of it comes into the pricing side of it.

At the point in time that the contract is awarded to Powell, and we actually engineer it and have a fairly clear picture of the amount and type of commodity that is going to be required for that project, if we see an advantage, or if we see a disadvantage that might be coming towards us, then we will look at that quantity and go out and buy forward a contract on those commodities for that time of delivery.

Okay. And given the performance in the quarter and the change in the guidance for the full year, that is clearly working so far.

We are proud of what we're doing at this moment in time, yes.

Very good. On the order growth, for the first half of the year, it looks like we're up about 21% YOY. I know on the last call we talked about turning down some short cycle jobs here and there. It sounded as though from the comments given so far today not much has changed on the demand side. It's fairly robust all the way around. Is there, are we still turning down the short type of jobs, or is there the ability to goose that order [girth] further?

Well, again, we always have to look at exactly what a customer is asking us to do. We don't just flat out turn down anything if we reasonably expect that we can do it and not disadvantage another customer.

When it comes to projects with PCRs, again, we have to be very careful because of the schedule, the backlog, and how much room and space a power control room takes up out on the factory floor.

We have had some very good success where we have had switch gear only orders, and with some of the process improvements that we're doing out on the factory floor, we have been able to improve some delivery times and take some shorter cycle times with that, and we've been able to actually deliver those in a very compressed time schedule with complexity.

And we are also doing that very well with our Power/Vac product line, especially as it relates to our box frames, L frames, compartment kits, you know, the shorter cycle things like that, we've been reducing our lead-times there and have been able to cycle those products fairly quickly. So it depends on the complexity and what we have.

Okay. So in the backlog right now, Pat, how far out do those jobs go, what's the range?

We're out nine months plus on a lot of jobs, and the big project jobs range out well over a year.

At this point in time the -- I don't think we have anything substantial that goes out beyond 24 months.

Okay. That's helpful. Last question for me, and then I'll jump back into queue. The CapEx, just that comment earlier, made me think that at this point we're in pretty good shape in terms of capacity from our existing facilities, as opposed to thinking about any kind of expansion right now?

We're continuing to monitor it. We continue to work on our throughput, and we'll look forward as this market continues and tells us where we need to be in our capacity.

Okay. I'll jump back into queue. Thanks.

All right. Thank you. Our next question is from the line of Tom Spiro of Spiro Capital Management. Please go ahead.

Good morning.

Hey, Tom.

Hello, Tom.

Congratulations on such a fine quarter. I wondered if we might get a little clearer picture of S&I? How is S&I faring these days?

S&I continues to do well. I will tell you that, again, the competition that S&I goes through on the IEC product line is a very different type of competition than what we have here domestically, especially with our oil and gas business, because they are competing with a lot of local assembly of major companies and suppliers. But they continue to do well, they continue to focus strong with the team here on the EPC companies and the oil companies that we have in common. So it's doing very well.

Any plans to expand, either personnel or a physical plant?

Yes, we continue to -- the plant I don't see us doing that, but we continue to, as we do here, we'll work on the throughput in the plant. That is a nice plant, nice facility, we just need to continue to work on our throughput to be able to handle more volume.

Speaking of throughput, if I focus here domestically and on what I call core Powell, not -- that is ex Power/Vac, you've mentioned in the last couple of three quarters that there've been some productivity challenges raised by many new employees. Can you give us a sense of how those -- that's progressing? Are we sort of narrowing the negative variance, so to speak? Is it widening? How do you measure it? And what's it look like?

Well, I think when you look at the margins, you'd have to say that we are narrowing it, because our margins continue to improve, and not all of it is in price area. I feel very good that our people have come up to speed fairly quickly in the time scales that we look at, six to nine months with this, and that's not only here, it's also our North Canton Division, all of our Division have been adding people, and so that is spread amongst all of our Divisions, and they are doing very well at getting them up to speed and seeing the productivity improvements out of it.

And, lastly, could you give us an update on the process side of the Company, please? I think at last conference call there was a mention of possibly a couple of jobs out there we might win, where does all that stand?

Tom, this is Tom Powell. We have booked several smaller to medium sized projects. The two or three very large projects that are out there, we're still short listed. We've -- we're probably just one of two bidders on those projects. I believe those projects will probably be let later this month or June --

One.

Yes, one of them.

Tom is saying that one of the three is currently now scheduled to be let in the next four weeks or so.

So we're still short listed, they're still asking an awful lot of questions, which is encouraging, but I don't have anything to report at this time.

Thanks much.

Yes, sir.

All right. Thank you. Our next question is coming from the line of George Gaspar with Robert W. Baird. Please go ahead.

Yes, good morning to everyone.

George, you're still alive and on the call. Good to hear from you, buddy. I was asking about you.

Yes, sir. Yes, sir. Well, you know, 1989 you were [four], when I started following you, and [eleven times it], now you've got to accelerate that, okay?

Yes, sir.

My first question is on Power/Vac, the capacity that you have in your new plant versus the capacity that was able to come out of Iowa, can you give us a comparison on that? Annual capacity potential?

Okay. You're talking Power/Vac, not Powell Back?

Yes.

Power/VAC, yes, excuse me.

The capacity, we have set the capacity lineup to do what Burlington was capable of doing and what they had seen in their last so many years. Again, as we mature this workforce, I'm sure we'll be able to bump that capacity up as the market dictates. We've got a nice facility, we've got good lines, so I'm pleased with what we're capable of doing in the future.

Okay. All right. And then in terms of the backlog, on the -- can you define, at all, what is involving LNG related electrical equipment versus the refinery petrochemical area, or can't you break that off?

We have not recently seen a lot of the LNG. Most of our business that we're seeing right now is our basic refining and chemical processing, where everybody is adding to or improving the refining, lack of capacity that was in North America.

Oh, okay, all right. And then I don't know, you may have mentioned this but when you define this backlog, what's international versus domestic?

If you're looking at this year, we have seen a shift, a little bit back toward the strength of the domestic market due to where the projects are being implemented at the current time. And if you're looking at where we are through the first six months, we're a little below 30%, around 28%, 29% thus far this year.

That 28%, 29% is--?

Of total revenue.

Is--?

Is international.

Is international.

Compared to about 35% last year.

I got you, okay, all right. And then a question on the outlook for any possible acquisitions that you still might be seeking, is there any specific area that you now see an opportunity to add onto that you would like to accomplish?

There's always opportunities, George, and we're certainly exploring and looking, but frankly I think it would behoove us to digest some of the backlog and some of the issues that are currently facing us, but we're not going to pass up any opportunities.

Okay. And then, lastly, on process control. What's your strategy at this point? I know from time to time, there's been a thought process of potentially making that available for sale, divestiture, or something, but it looks like there's a little improvement taking place, though the revenue stream is a little lower. How do you feel about the--?

George, you've always pushed me on that subject, and we've never really discussed it, any plans there.

Oh, okay.

But we -- we're very pleased with the results of [Trans 9], and we'll keep our eye on that city area, and do what's best for the shareholders and for the employees of that group.

Okay. All right. Well, keep up the good work, guys, you've really got a great opportunity out there right now. Take care.

Thank you, George. Nice to talk to you.

Yes, sir.

Hope you do it again.

Thank you.

Thank you. Our next question is from the line of J.D. Padgett with the Boston Company. Please go ahead.

Yes, hi, guys, a couple quick ones. One on the larger potential opportunities you were discussing, are those mostly international?

No, those have been domestic.

Okay. So those couple where we could see something let in the next month or two are domestic?

No, the big projects that we were talking -- are you talking about the process control?

It was just a question, one or two back, about some of these bigger ones that we're tracking?

When you're looking at our order intake, most of the large contracts have come domestically. When you're looking at the prospect that Tom was referring to, that we have about three large prospects in the process control group, that is a mix of both domestic and international opportunities.

Correct.

Okay. And is any of that on the power of generation transmission side, or is that mostly Petrochem and--?

Well, the process control, most of that is going to be municipal control type from a transportation or from a process facility.

Okay. Do you have any reach into any of the larger projects that are looming out there for power in the -- on the international front?

Yes, we do have inquiries in-house, and we continue to look at those, and we are working some of those with the IEC side with S&I.

Okay. And the other question was I think I missed the metric that you gave, the gross margin for this last quarter, excluding Power/Vac was what?

Gross margin this last quarter excluding -- I should have it memorized, give me a second. Excluding, there was 22.3 for the quarter, 21.9 for the six-month period.

Okay. And is there an expectation over time that the Power/Vac business can be brought up in line with that, or is there something different structurally with that business versus your core business?

When you're looking at the markets it serves, we do not see a material difference in the business long-term, once we reach our effectiveness and efficiency that we've targeted, that will not hinder us in reaching our overall objectives for the Corporation.

Okay. So over time you look to continue to push up on the Power/Vac side and get it up into the low 20s, as well?

That is correct.

Okay. Great. Nice job. Thank you.

Thank you.

(OPERATOR INSTRUCTIONS.)

We have a follow-up from the line of Shawn Boyd. Please go ahead.

Hi, guys. Have I still got you?

Yes.

Yes.

Great. Real quick, Don, when I back into -- well, when I just looked back in my notes I see that the March quarter a year ago, we had kind of a nice bump on the Power/Vac sales. And so I'm wondering, and I know that we're still working out the kinks and it's fairly flat this year YOY, if you back out the Power/Vac and just look at pure electrical power products without that, are we still looking at 20%, I'm looking at like 21% YOY revenue growth versus the reported was 13%.

YOY -- I'm sorry, 13 for--?

Well, electrical power products did 13% growth YOY.

Oh, growth YOY?

On a -- correct. And what I'm looking at is if I exclude the decline in the Power/Vac.

Exclude the Power/Vac -- the Power/Vac product line YOY was roughly flat. We are still running at plus or minus $80 million, so that a rule of thumb is that we're just over $20 million. Last year we did $86 million, this year we'll probably end up somewhere about the same place, somewhere between $80 million and $85 million, so that gives you an order of magnitude to try to factor into the overall business.

Okay. That Power/Vac line was only $26 million, the March quarter a year ago?

March quarter a year ago it was --

26.

It was $26 million, yes.

Okay. So if I'm looking at $26 million, dropping to let's call it $20 million, $21 million, if you pull out that decline your electrical power products business is growing 20 plus percent?

That would be the math, that's correct.

Okay. A second question, Pat, in your comments you mentioned the components, supply chain constraints, especially in components, and then something else on the EPC firms, can you just give us a little more color on both of these?

Sure. On the component side, again, we do buy a lot of components from people, transformers, motor control center, a lot of different products, and all of our suppliers are seeing the same volume hit them, and so there are issues with supply and timeliness of that supply, that at times holds up some of our projects. So those are the issues that we're having on the component side.

As it relates to the EPC companies, they are having to hire just the same as we are, and they have great numbers of requests for people to come onboard, and when they do that they have the same learning curve issues, time to be of a quality organization, and you have to work through those issues within at the same time that we're growing.

Okay. So this sounds like the normal blocking and tackling we've been doing in a tight environment for awhile now?

I don't think I've ever seen one quite like this. I mean when I look at the numbers of people that the EPC companies are trying to hire at this point in time, I can't recall in my professional career I've ever seen that size.

The last 18 months or so.

Yes.

Got it. Okay. That's helpful. The other question for you, when I was thinking about that last call, or that last question on the margins, and specifically that pretax margin on process control jumping up significantly this quarter, were there maybe some completions of particular contracts that popped that up, and if so do we think that we see that drop back down in the coming quarter?

I mean the process control business is a project business, just like the rest of Powell, and they can experience short-term changes due when the order closes out toward the end of a project, and they did have some order closeouts that occurred in the current quarter, that benefitted them.

Okay. So that business has been running a 3% to 4% pretax margin before this quarter, think about that going back to that, or some level higher?

I would be more like looking at the weighted average, because again you're going to have good quarters, and you're going to have quarters that don't have the same benefit, but over time they'll average out.

Weighted average of the first half, Don?

Yes.

Okay, that's helpful. Thank you. And just a last question, if I may, Tom, in your very early comment, you mentioned the strength from utility energy trends and mining, can you just remind us what we're doing in mining? Is that in putting mills on the grid and power sourcing mills? Or what in particular are we doing there?

Not so much mills, it is international opportunities and new mines opening up, open in Latin America, the Indonesian area.

Okay. So it's just all the, everything you need basically to source the power for these new mines?

That's correct.

Okay. It's very helpful. Hey, great quarter. Thanks a lot, guys.

Thank you.

Thank you. And our next question is also a follow-up from the line of Tom Spiro. Please go ahead.

Pat, I was curious about that reference in your comments to the potential nuclear opportunities with some utilities. What's going on there?

Well, as we've been tracking and following, and anybody reads in the paper, you know, nuclear is now green, it's a renewable deal. I think this country is definitely going to be starting to move more towards nuclear to supply the power capacity that we need.

There are over 50 out for permitting right now. It looks like a lot of these are going to start to come out of permitting, and we're really hard, investigating what all we have to do to be prepared for to supply them with their electrical needs as they get ready to start building these nuclear power plants.

And now, lastly, is the Company going to increase its workforce in this current quarter as it's done in the last couple of quarters?

Yes.

Well, thanks much, and good luck.

Thank you.

All right. Thank you. There are no further questions. Please continue with any closing comments.

If there are no further questions, we appreciate you joining us today, and look forward to talking to you again in the next quarter. Thank you, again.

All right. Thank you, ladies and gentlemen. This concludes the Powell Industries second quarter earnings conference call. The conference will be available for replay after 12:00 noon today through May 14th at midnight Eastern Daylight Time, and you can access the replay system at any time by dialing 303-590-3000, and enter the access code 11113198. The numbers, again, 303-590-3000, enter the access code 11113198. We thank you very much for your participation, you may now disconnect. Have a very pleasant rest of your day.