Powell Industries Inc (POWL) 2009 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Powell Industries Third Quarter Earnings Conference Call. (Operator Instructions) As a reminder, today's conference is being recorded August 4, 2009. At this time I would like to turn the presentation over to Karen Roan with DRG&E. Please go ahead, ma'am.

Thank you, Andrew, and good morning, everyone. We appreciate your joining us for the Powell Industries conference call today to review fiscal 2009 third quarter results. We would also like to welcome our Internet participants listening to the call 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 technical difficulties experienced during these broadcasts, so if you did not get your release please call our offices at DRG&E at 715-529-6600, 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 August 11, 2009, 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, August 4, 2009, and therefore you are 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 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 and Exchange Commission.

Now, with me this morning are Pat McDonald, President and Chief Executive Officer, and Don Madison, Executive Vice President and Chief Financial and Administrative Officer. I will now turn over the call to Pat.

Thank you, Karen, and good morning, everyone. Thank you for joining us today to review our fiscal 2009 third quarter results. Following my initial comments on the quarter and current market environment, Don will cover the financial details of the quarter. Then I will return for some final remarks.

We are pleased with our third quarter revenue earnings and cash flow results, but disappointed in our orders and backlog of future business. Conditions remain difficult in our primary (inaudible), and the utility markets due to the economy and hesitation by business to commit to new capital projects until US Government policy is finalized.

The US oil and gas industry has available projects and capital as well as a reasonably stable price for oil over the intermediate term. The key unknown for the industry is the future impact of regulation and tax policy on any near-term decisions.

One year ago, when we looked at our funnel potential business, it was possible to predict orders and timing based on direct information. But now a great deal of uncertainty exists. Now we find ourselves in the position of having some customers frozen in the decision process, unsure as to the additional cost that may occur due to such items as cap and trade, repeal of intangible drilling and development costs, or the repeal of the percentage depletion deduction.

So, predictability even over the near term is almost nonexistent. While potential new regulations make decisions difficult for the major oil and gas companies, these customers do have options, which include investments in international projects. Smaller domestic oil and gas companies do not have that same luxury. We would have a much better understanding of our future business levels if some of these matters would be resolved, which would enable our customers to make their investment decisions.

Electrical power generation is suffering the same fate. I think everyone agrees that the development of sustainable, renewable energy sources is a good thing. Wind, solar and biomass projects should receive attention and investment. But these are not the equivalent of the base load generation technologies provided by nuclear, clean coal, and gas-fired facilities. The US will need both renewable and fossil-based technologies for many decades in order to provide the electrical needs of our country.

The energy and utility markets are not entirely negative, though. While customers seem hesitant to release green field projects, the maintenance and service-related side of our business is seeing renewed levels of activity as customers focus on upgrading and extending the life of existing equipment. These are areas in which Powell excels and where we demonstrate our contributory value to those customers and plants where we have solid relationships.

We continue to see activity and interest in the transit business as spending on infrastructure leads the current economy, and we expect it to continue for the foreseeable future. Included in many of these infrastructure projects is spending for information systems to manage the power and control substations from remote locations. And Powell is also well positioned for this type of business.

Now, I will turn the call over to our Chief Financial Officer, Don Madison, to review our financial performance for the third quarter, and then I will make some final remarks.

Thank you, Pat. Revenues increased by $1.8 million to $165.9 million in the third quarter of fiscal 2009, compared to $164.1 million in the third quarter of fiscal 2008. Gross profit increased by approximately $6.1 million to $41.1 million. Revenues and gross profit increased by $3.5 million and $2.8 million, respectively, due to a mediated settlement related to a previously completed contract that had been in dispute for several years.

Gross margin increased to 24.8% compared to 21.3% in last year's third quarter. Excluding the contract settlement, gross margin was approximately 24%.

Selling, general and administrative expenses decreased to 12.3% of revenue compared to 13.3% of revenues in the third quarter of 2008. SG&A expenses decreased by $1.4 million compared to last year's third quarter.

Interest expense net of interest income was $163,000 in the third quarter, a decrease of $475,000 from a year ago. Our provision for income taxes reflects an effective tax rate on earnings before income taxes of 35.1%.

In the third quarter of fiscal 2009, we generated net income of $13.1 million, or $1.14 per diluted share compared to $7.9 million, or $0.69 per diluted share in the third quarter of fiscal 2008.

For the nine months ended June 30, 2009, revenues increased $28.9 million to $500.5 million compared to $471.6 million for the nine months ended June 30, 2008. Gross profit increased by approximately $17.1 million to $109.5 million compared to the nine months ended June 30, 2008. Gross margin increased to 21.9% for the nine months of 2009 compared to 19.6% a year ago.

For the nine months ended June 30, 2009, selling, general and administrative expenses decreased to 12.4% of revenue compared to 13.3% of revenue for the first nine months of 2008. Year-to-date, SG&A expenses were $62.3 million compared to $62.8 million a year ago. Interest expense net of interest income for the nine months ended June 30, 2009 decreased by $1.2 million to $837,000 compared to the same period in 2008.

For the first nine months of fiscal 2009, our effective tax rate was 35.1%, compared to 36.8% for the first nine months of 2008. For the nine months ended June 30, 2009, we recorded net income of $29.8 million, or $2.59 per diluted share compared to $17.5 million, or $1.53 per diluted share a year ago.

As of June 30, 2009, our order backlog was $425.7 million compared to $486.5 million at March 31, 2008, and to $553.1 million at the end of the third quarter a year ago. New orders were $103 million in the third quarter compared to $154 million in the previous quarter, and to $188 million in the third quarter of 2008.

Year-to-date cash provided by operating activities totals $112.2 million. Working capital excluding cash has decreased by $71.5 million over the past nine months, in a period where we have continued to experience growth in business volume. Investments in property plant equipment during the first nine months totaled approximately $6.4 million compared to $2 million in the first nine months of fiscal 2008.

At June 30, 2009, we had cash and cash equivalents of $89.4 million, an increase of $79.3 million compared to the balance at September 30, 2008. Long-term debt and capital lease obligations including current maturities total $14.9 million, a decrease of $26.8 million compared to the balance nine months ago.

Looking ahead. We now expect full year fiscal 2009 revenues to range between $650 million and $665 million, and full year earnings to range between $3.15 and $3.30 per diluted share.

At this point, I will turn it back to Pat.

Thanks, Don. Let me make a few more comments and then we'll be happy to take your questions. The difficult economic climate and changing marketplace have impacted our orders and resulting backlog. There is little doubt that there is no short-term fix to the economy, and that everyone will see slower paced activity before the markets return to full help. However, we are beginning to hear that some projects that had been delayed may be coming back, and there is activity in quotations and planning. All of this is encouraging, yet we reiterate that uncertainty and indecision remain high.

We are well positioned for a return to more normal activity levels. We have the right solutions for our client base. Our people are well trained and dedicated, and we continue to focus on those things which are in our control. We are proactive and working to develop deeper relationships with existing customers while pursuing and forging new relationships in order to expand our base.

Building relationships takes time, yet we are confident that our efforts will be rewarded. In addition, we continue to focus on our execution including our margin performance and cash management on all projects. At this time, we will be happy to answer your questions.

Thank you, management. (Operator Instructions) Our first question will come from Craig Bell with SMH Capital. Please go ahead.

Good morning. Just pretty impressive performance in the quarter with respect to your gross margins. Just wondering, was there something really special there in the quarter for you? I mean, were you able to take advantage of older contracts and lower commodity costs?

Craig, when we look at the quarter, of course, the first thing in the gross margin, as we explained, is the mediated settlement, which brings it down. The quarter was a great quarter for us, and the close-out of contracts that we have had very favorably, and also was a very strong service-related quarter for us. And that service business is not as long of a backlog view that we see, so it closes in a quicker time cycle than what we would see most of our other business. So, it's a combination of just good execution on the projects that we had in place, close-out of those projects, and better service revenue.

Okay. And then in terms of what you are seeing in terms of, sort of call it project delays. You talked about all the uncertainty regarding government policies. I am assuming that that is feedback that you are getting from your customers. Is there any way for you to sort of get a feel for how much is being pushed off from the uncertainty versus just economics at companies?

Craig, I wish I could tell you. You're right, it is direct feedback from our customers. Our customers, we deal in various levels with our customers, and these people are ones that are coming in here that are talking to us in the planning stages of projects that are coming up, looking at what they are wanting to do. They come in here knowing that they're in competition for the capital in their own companies, but they are very uncertain as to when these are going to be released to go into order. So, most of them are just sitting there waiting until they can figure out whether or not their investment is going to return to them in a domestic environment today.

Okay, great. Thanks, I'll get back in queue.

Thank you. We'll move to our next question from the line of Ned Borland with Next Generation Equity Research. Please go ahead.

Good morning, guys. On the guidance, does that include the settlement in the range on revenue and on EPS?

Ned, yes. Both our revenue and EPS guidance includes our year-to-date performance, our fourth quarter estimate, which obviously does include the mediated settlement.

Okay. All right. And then on some of the transit projects, some of those have been linked to some stimulus funding, have they not? I mean, when do you expect the timing of the release of those funds?

Ned, the transit business, when we look at the funnel backlog of all the projects that municipalities have been looking at it, it's a fairly sizable list and things like that. To date, we can't say that any project has been enacted as a result of stimulus money. There are discussions of projects that might come into the order phase a little bit quicker because they are anticipating some stimulus money, but to date none of them that we can directly see where stimulus money has been handed to a municipality and they say we are going to go ahead with this project.

Okay. So, your outlook on transit isn't really that much better than anything in the energy side of the business?

No, I disagree. The outlook on transit is still a very strong outlook. There is a lot of projects that are going to be done, and the trend is towards getting municipal moneys approved for that, whether that be local municipal money or whether that also be a combination of local and stimulus money. But what has been transpiring so far has not been directly attributable to the stimulus money. Most from what we can see of the stimulus money has gone into what they want to call shovel-ready projects, which are repaving roads, redoing bridges, and things like that. It hasn't filtered its way down into the transit side yet.

Okay, all right. But from a timing perspective, you would think near-term there would be some action on the transit side of the business?

We agree.

Okay. All right. And then internationally, where are the opportunities lying internationally for S&I?

Well, a lot of our opportunities internationally, remember, there are two facets to our international business. One, which is IEC-based, which comes out of our UK S&I business. The other is our domestic ANSI business. So, as we talked about, as our base of customers looks to see where they can get a reasonable return on their investment, some of them are looking more outside. Whether that is going to end up being an ANSI-based product or an IEC-based product, we don't know yet. A lot of those are still in the Middle East. Some of the refining projects were in the Middle East that had been put on hold are now being activated again. So, I think there is still going to be a lot of investment in the Middle East area, where there is no cap and trade.

Right. Okay. And then on service revenue, I guess that does go into backlog and it does carry a higher margin. But what is sort of the backlog cycle for some of the service related revenue opportunity?

Backlog can be anywhere from 30 to 60, 90 days. A lot of it is within that 30-day cycle to 60-day cycle.

Okay. And could you characterize what the split was? I mean, how much of your revenue was service-related in the quarter?

No, we don't split that out into those numbers.

Okay. All right. Thanks.

Thanks, Ned.

Thank you. We'll move to the next question from the line of Fred Buonocore with CJS Securities. Please go ahead.

Hi. It's actually Arnie Ursaner backing up Fred.

Hey, Arnie.

Pat, how are you?

I'm fine.

Question I have is your gross margin performance was extraordinarily good in the quarter, and maybe you could expand a little bit on giving us some sense of the factors. Obviously, copper seems to have been going the right way. You talked a lot about integration of labor and how you can improve efficiency there. I'm assuming fixed cost absorption was better.

Weighing all the factors, and you also mentioned you had some contracts that came to an end, and I assume you keep some reserve for these contracts. When you weigh all of these factors, could you perhaps give us a feel for what drove this tremendous gross margin performance and perhaps how sustainable it is?

Well, I think, again, when I look at that, Arnie, let's go back to kid of that 21%, 22% that we've been looking at as where we were at. So, you're talking about the three points additional and I think about eight-tenths of that point was relational to the mediated settlement. So, we're talking about two points in here.

Right.

Again, I can't attribute it to any one -- and you hit a lot of them there -- but any one really stood out. There is no doubt the mix of the service business had one fairly substantial impact on it. Our projects, just the execution, because we have been focusing so much on our throughput and how well we execute and how well we manage those projects, we have seen that come back in the margin level. How much higher it can go, that 21%, 22% level seems to be kind of stabilizing out as an overall long-term run that seems to be market level that we can sustain.

Again, Arnie, as we've talked in the past, be careful of doing sequential quarter-to-quarter trends because of the project nature of our business. You've got to keep that in mind when you are doing your analytics.

Well, that is exactly what I was getting at. Thank you, Don. And then another question related to your backlog, if I can, in margins. Backlog is obviously under a lot of pressure for you and other companies in your space. What sort of margin are you willing or have to take on to win this business in a much more competitive environment?

I think right now we've been as competitive as we need to be and we continue to, as we take every project, we look at what we think our anticipated margin that quotation is and we try to come up with our profit improvement projections on that.

There is no doubt there is some pressure from competition right now, but at this moment in time I can say I don't believe that -- nobody has made any moves out in the marketplace that we would characterize as being foolish. So, I think it's just basic normal competitive pressures that we see, but there isn't anything that would say we're going to see a huge slide in margins as a result of that competition.

Pat, let me ask the question in a different way, if I can. You in the past have been willing to walk away business that weren't at an attractive enough margins. You had more selectivity in the bids you were willing to take on because you had so much work. Has that dynamic changed and are you willing to take on work at lower margins to keep your facilities in better use?

You know, Arnie, in the project business, one of the key things is always when are you ready to walk? And you can't necessarily look at just loading capacity in, because as you have seen in our past performance, if you do that, you're going to see that in your performance over nine months, 12 months, 18 months.

So, I think our key is, first off, understand where we feel comfortable in taking projects and that the right projects to go take, walk from those that aren't good, and manage our overheads and our people to the proper levels of volume that we have.

Look forward to seeing you in two weeks at our conference. Thank you.

Hey, looking forward to seeing you, Arnie.

We'll move to the next question from the line of John Franzreb with Sidoti & Company. Please go ahead.

Good morning, Pat and Don. Could you just help me with the mediated settlement? Did that run through process controls or was that on the electrical side of the business?

That was part of our process control systems business.

Okay. So, the outstanding results in process controls isn't sustainable, we should be looking forward to more of a $6 million run rate next quarter or so?

You should back out the mediated settlement from the current quarter, yes.

Okay, beautiful. All right. And when we are talking about the composition of the new order book, what does it look like today versus what we are booking in revenues today? Is there a change in a percent of oil and gas business? Can you kind of walk us through how those new orders look?

Well, John, from an abstract standpoint, we can tell you that we don't see any radical change in mix in business. But to say that we can quantify that with our current system from a backlog perspective, we really can't today. But from a major quotation standpoint in review of those type projects, I don't think we have seen any material change that would radically change what we have seen in the recent months.

Okay, good. And, Pat, in your opening comments you sound a little frustrated by the pace of bookings. Is that a right characterization, and when do you expect to see any kind of change in that order flow?

I'm only frustrated because it is kind of one of those things that you can't control your own destiny, and that is where I get my frustration. I am frustrated because we all believe that there is good business to be had if certain things would happen that would create certainly for our customers that would allow them to invest. This is not artificial demand like is being put out with the automobile side of things right now. There is a real demand for electrical generation that need to be put in place, and there is real need for energy. And artificial things that are going on is preventing that from happening. I'd like the free market to take its course and let it run.

Okay. Thank you very much, guys.

Thank you. Our next question comes from the line of Richard Leader with First Houston Capital. Please go ahead.

Good morning, everyone. Hey, Don, can you embellish a little bit on the balance sheet? This is pretty impressive that you were able to end the quarter with $90 million cash on hand and pay down debt and, of course, decrease interest expense. And that also leads me to the possibility that your balance sheet is in such good shape that you might be looking at some acquisitions now. Can you comment on that?

Well, I will comment to the fact that we are always looking for opportunities to grow the business. Any other?

Well, can you tell me how the cash zoomed as it did and --

Well, if you are looking at it from the cash perspective, there is probably two major issues. The first one is what we have been talking about, and that is project management. We have been working, we have been talking about that now for the last two to three years of improving the way we quote, the way that we execute projects. And because of the nature of our backlog, we are -- it takes time to turn that backlog and to turn it into results. And I think that is what we are seeing in the last couple of quarters. And we have turned the point and the work that we have been seeding into the organization over the last 18 months is coming to the results and the cash flow standpoint, from a balance sheet.

The other is that we worked hard from an operations perspective as well, and our inventories are coming down. Just the execution of our operations and the processes within our factories are also showing improvement. And both of those have come together at roughly the same point in time that is generating significant improvements in our working capital and throwing off cash flow.

And your earlier comments indicate that there are opportunities that you are reviewing on a regular basis to perhaps add to your business on an acquisition --

Oh, we are constantly looking at how we can improve the business, how we can add products or add market access and strengthen Powell in our marketplace. That has continued and will continue.

Okay, thanks a lot.

Thank you. We will move to the next question from the line of [Brendan Watkins] with D.A. Davidson. Please go ahead.

Hello, gentlemen, congrats on the quarter. I just have a few housekeeping questions for you. I was wondering if you could break out the utilities, industrial and traction power contributions to the electrical power products revenues?

In this past quarter the utilities ended up at approximately $39 million of total revenue. The industrial commercial market totaled $106 million, and our municipal and transit projects totaled around $11 million.

Okay, excellent. And then one more question on the transit topic. You mentioned more quotations earlier. I don't know if you were talking specifically about more quotation activity in transit projects, but I was wondering if you could maybe elaborate on that a little bit?

Our overall quotation activity, let me split it up into our industrial and then the transit business. We still have a good amount of quotations going on in the industrial area, like I said. We see a lot of that business, quoting is just a question of are they going to turn to orders and when? On the transit business, we still have a fairly sizable amount of funnel in the transit area that we constantly monitor and evaluate and work with those municipalities to understand when are they going to be in a position to actually go execute to drive that.

And even when you look at the transit, you have to split that down between what I would say refurbishment, enhancement or upgrades to the system, where they already have right-of-ways, versus, which is kind of like the WMATA project that we have had over the last three years or four years that we have been doing, versus a new line such as the Dulles line that WMATA is going to be put in, where they have to acquire right-of-ways. Those projects take longer to happen and we are seeing all of those starting to play out now in our quotation activity, and actually people now starting about, okay, thinking about placing an order for product.

All right, excellent. Thanks a lot. That is all the questions I have.

Thank you. We'll move to our next question. Our next question will come from the line of Brian Rafn with Morgan Dempsey Capital Management. Please go ahead.

Good morning, guys. Question for you. How much -- and you don't hear it as much on the electric power side, but from the standpoint of smart power grids, and I think the figure has been $1 trillion, or $1.2 trillion. From a 50,000-foot view, give us a sense of the infrastructure side to the electric power grid, how you guys see that going -- I think you talked a little about it with cap and trade and that. But give us your kind of three- to five-year view.

Boy, I would say when people talk about the smart grid, they are probably at about the 100,000-foot level, they're not at 50,000. You know, again, this is a real long conversation, I'll try to make it as short as possible. There is base generation, which is probably about, today, somewhere between 70% and 80% that adds to our electrical power. The rest of it is in renewable and things like that, that are more offline. And when you get down to really wind and solar, you are -- less than 5% is in that area. So, if we go about doubling or tripling that, you are going to be at 10% to 15%.

We have the tendency in this country to ignore the base generation side of this, which has been fossil-based predominantly for years and years and years, and the cost to convert that to something else is going to be exorbitant. I don't think it's a price tag that any of us want to go look at. So, the question is going to be, what is the structure going to do to enhance, augment and replace the aging infrastructure of that base generation? And I think the future is going to be in the clean coal and things like that.

For the renewable, a lot of those are going to require transmission investment, because those are going to be in areas where people are not necessarily accessible to the grid. We don't participate as much in the transmission side of it, but on the generation side of that, we can participate. So, I think a lot of that is going to happen.

As it comes to the smart grid, the smart grid, we have systems that allow our people to understand how energy is being managed, how it flows, what that means to them in smart systems, and we are going to be prepared to tie that to whatever somebody wants the smart grid to become.

Okay, okay, fair enough. How much from the standpoint of some of the rhetoric on the new six-year build, the highway build, the safety (inaudible), which was about $286 billion, now the new one is looking to be somewhere between $450 billion, $500 billion. How much leverage does Powell have off of that from an electrical product standpoint?

On a highway build, on the electrical standpoint, we have very little. When you look at highway build, if you are building out in rural areas, again, we are not going to be doing anything, especially as it relates to our process and control side. Where you are having the build in the major municipal corridors, where they are trying to move traffic flow in and out, signage for that, get people into the arteries and tunnels and bridges, we can play a significant role in that area. Both in power, as it is required to move those things, and in the information technology, the signage and road access.

Okay. You guys also talked about, back about your bid quote activity. Would you say that -- you said that there was a bit of a delta change. Has it been a robust change or a minor, slight change? Give us kind of a flavor.

Explain to me exactly which backlog or (inaudible) --

Well, you're talking on both the industrial and the transit. It sounds like you talked about the industrial, the pace was there, and you had a sizable pipeline on the transit side. You made an opening comment that said we take some confidence that bid quote activity is up. Is it slightly up off the trough? Is it a dramatic shift? Is it erratic month-to-month? Give us a sense of what you're seeing

What we are seeing is the activity, the numbers of bids that we have is probably flat, maybe slightly down. Where we do see a big difference, if you've been following the calls over the last year or so, we saw a big trend in much larger projects than we had ever seen before. Those are now trending back down the other way. The size of the projects the people are looking at doing now are much smaller than what they were a year to 18 months ago.

Okay, good. Thanks, guys. Excellent job.

Thank you, sir. (Operator Instructions) Our next question will come from the line of Beth Lilly with Gabelli. Please go ahead.

Good morning, Pat and Don.

Hi, Beth.

I had a couple of questions. Can you talk a little bit more about the competitive environment? Over the last couple of calls you have spoken about you are starting to see a little more competitive activity in terms of quoting and things like that, and the bigger players, as their markets kind of dry up, they start to move down in terms of megawatts. What have you seen? Is there any significant change over the last several months?

Beth, I have not seen any change over the last several months on it. I think the issue still remains that everybody will try to quote nowadays as opposed to maybe they wouldn't have in the past. The thing that we have to continue to do with Powell is how do we continue to talk to our customers about the value add that we drive, that we feel our other competitors don't? When we put a project together and we project manage it, as Don talked about a little bit ago, our execution and our project management is as much a good thing for Powell as it is for the customers.

So, I think as long as we continue to drive our value add, we will see ourselves be very competitive but yet able to solicit business, because our customers will value that. If we get down into where customers don't value that, then that is where I talked about a little bit ago. You have to be prepared to walk away.

Okay. So, you're not seeing any change in your competitors' behavior?

We still see the same guys at the same time with the same story. So, we just have to out-execute it.

And there is nothing irrational going on?

Not that I can see at this moment in time.

Okay.

Let's hope we all keep it that way.

Yes, okay. And my next question is for Don. Just -- I want to reiterate, perfect job in terms of the cash management. I know this has been a focus of the organization for the last several years, and you had a goal to drive working capital of the percentage of sales down. I think last quarter or the last several quarters it has been 20% of revenue; is that correct?

I don't have the number here in front of me, but that sound reasonable.

Okay. So, what was it in this past quarter, do you have the number in front of you?

No.

Okay. My guess is, it is below 20%.

Okay.

Does that sound reasonable?

I believe you're correct. I haven't calculated the number, but I can look at it and we can discuss it later. But, yes, we have set goals, and I think we are heading up -- our short-terms goals that we had set for the organization we have reached. But that doesn't mean that we have reached where we think our potential is.

Okay. So, you have reached your short-term goal?

I think that is a fair statement.

Okay, great. All right, wonderful. Well, congratulations and talk to you soon.

Thanks, Beth.

Thank you. At this time we have no additional questions in the queue, and I will turn the conference back to management for any further remarks.

Thank you very much for joining us today. We would like to reiterate, this is a very unpredictable market. Results are very unpredictable as you look quarter-to-quarter, as we've always talked about it. But the business still is going to be a very viable and strong business. We do appreciate your interest in Powell and we look forward to talking with you again next quarter.

Thank you, management. Ladies and gentlemen, at this time we will conclude today's teleconference. If you would like to listen to a replay of today's program, please dial 1-800-406-7325, or 303-590-3030, with access code 4112147. Once again, if you would like to listen to a replay of the conference, please dial 1-800-406-7325, or 303-590-3030, with access code 4112147. We do thank you for your participation on today's conference call. At this time you may now disconnect and please have a wonderful day.