Thank you, Camille and good morning everyone. We appreciate your joining us today for Powell Industries' conference call to review fiscal 2012 first quarter results.

We would also like to welcome our internet participants listening to the call simulcast live over the web.

Before I turn over the call to management, I have the normal details to cover. If you did not receive an email of the news release issued yesterday afternoon, please call our offices at DRG&L and we will get one to you.

That number is (713) 529-6600 or you may email us, and that contact information is in the news release. Also, if you want to be on the permanent email distribution list for Powell news releases, 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 February 15, 2012, and information on how to access the replay was provided in yesterday's earnings release.

Please note that information reported on this call speaks only as of today, February 8, 2012, and therefore you are advised that time sensitive information may no longer be accurate as of the time of any replay listening. 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 strategy.

For further information, please refer to the company's filings with the Securities and Exchange Commission.

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

Thank you, Karen and good morning everyone. Thank you for joining us today to review our fiscal 2012 first quarter results.

I will be handling today's call. Tom recently had knee replacement surgery and will be out of the office for a few weeks.

He is at home recovering and undergoing normal physical therapy. He is doing well and is expected to be back in the office in a couple of weeks.

I will begin by making some initial comments on the quarter and current market activity and then I will cover the financial details and open the call up to your questions. There has been little change in our key markets since our fourth quarter call 2 months ago.

As we indicated then, we continue to anticipate a fairly competitive market environment throughout 2012. Despite these difficult market conditions, we generated strong first quarter orders of $189 million and our backlog increased to $474 million.

Our first quarter earnings results were disappointing. The loss was primarily due to project execution challenges in Canada, which we discussed on our last 2 conference calls.

What was unexpected this quarter was the difficulty in negotiating change orders on a large project to cover the cost of customer-triggered schedule delays. Regarding our key markets, activity in the oil and gas sector continues to be solid.

There are indications of opportunities and signs of activity in other sectors, but not enough to call a trend.

We have had some recent successes in the transit market and we are seeing some spotty activity in the utility sector. While most quotation activity continues to be in support of oil and gas projects, we believe there is pent-up demand in other markets.

While substantial improvement in these markets will not likely occur until overall economic activity strengthens, we are encouraged by recent requests for proposals.

Now let me review our financial performance for the quarter. Revenues were $157.5 million in the first quarter of fiscal 2012, an increase of $33 million or 26% compared to the first quarter of 2011.

This increase in revenues is a result of a strong backlog of orders of which we had coming into the year.

Gross profit as a percentage of revenues was 12.9% in the first quarter of fiscal 2012, compared to 20.7% in the first quarter of 2011. This decrease in gross profit resulted primarily from the project execution challenges in Canada as we previously discussed.

In addition, we continue to experience low margins due to competitive price pressures that existed during the period in which the orders were awarded.

Selling, general and administrative expenses decreased by approximately $1.2 million to $19.8 million in the first quarter, compared to the first quarter last year. This decrease is primarily due to the mix of sales during the quarter, which resulted in lower sales commission expenses.

Consolidated SG&A expenses decreased to 12.6% of revenues in the first quarter compared to 16.8% of revenues in the first quarter of fiscal 2011, primarily as a result of the increase in revenues.

Amortization expense was $703,000 a decrease of $464,000 compared to the first quarter of fiscal 2011. This decrease is primarily the result of the decrease in tangible assets following the impairment charge recorded last year.

For the first quarter of fiscal 2012, we recorded a provision for income taxes of $1.6 million, which reflects the estimated tax liability on our non-Canadian earnings. First quarter losses incurred at our Canadian operations have not been tax effective.

We reported a net loss of $1.7 million or $0.15 per share in the first quarter of fiscal 2012, compared to net income of $2.4 million or $0.21 per diluted share in the first quarter of fiscal 2011.

As of December 31, 2011, our order backlog was $474 million, an increase of $31 million over the previous quarter, and $130 million compared to a year ago. New orders were $189 million in the first quarter, compared to $125 million in the prior quarter, but roughly equivalent to the first quarter of last year.

For the quarter, cash used by operating activities totaled $9.9 million and investments in property, plant and equipment totaled $9.4 million. At December 31, 2011, we had cash and cash equivalents of $104 million, compared to $124 million at September 30, 2011.

Long-term debt and capital lease obligations, including current maturities, totaled $4.8 million.

Looking ahead, based on our backlog, current business conditions, as well as additional cost incurred on a certain large project in the first quarter, we expect full year fiscal 2012 revenues to range between $625 million and $675 million, and full year earnings to range between $1 and $1.25 per diluted share. Our earnings outlook does not include an estimate of recoverable costs that the company will pursue.

Before I take your questions, I would like to make a few closing comments. First, regarding our Canadian operations.

Most of our oil and gas customers have operations all over the world, and Western Canada, with its large reserves, is strategic to our ability to serve these customers. Many of our existing customers have projects in Canada, and more are planned.

We are committed to this strategic market. Changes have been made and we continue to strengthen the organization and improve business processes.

The size and the quality of our Canadian backlog continues to improve. At this point, there is one sizeable project in process that is creating extraordinary challenges.

We are currently scheduled to complete this job in March. However, we have experienced delays in receiving customer supply materials and documentation, so additional delays could be incurred.

While we have received change orders in this project, as this project nears completion, change order negotiations have become increasingly difficult. Yet, we continue to incur additional cost.

We will pursue recovery of these additional costs through change orders, or if necessary, through the claims process included in the contract.

In conclusion, Powell's overall business is subject to the market, normal market capital investment cycles. We have the flexibility to adapt quickly to market forces and we are committed to providing the products and solutions our customers demand.

We will continue to provide the technical insight and superior service that our customers rely upon and expect.

In closing, our orders have grown during the quarter and our backlog is increasing. Revenues are up and we expect improved earnings in the coming quarters.

At this point, I will be happy to take your questions.

Clearly the market doesn't believe that the quality of your backlog would support some of your earnings outlook in the year ahead. What kind of assurances can you give us that, that the margin profile of that backlog will get you to that kind of earnings that you are looking for certainly in, especially in the back half of the year?

At this point in time, John, our outlook on the business, and is very much in line of what we talked about just a couple of months ago. The big change that occurred in the last 60 days is the wrapping up of this large project in Canada that is coming to a conclusion and the negotiating of final change orders is becoming to drag out.

When you're looking at our backlog, we talked about last couple of calls that the first couple of quarters could be impacted by the backlog that we have walked into the year with, at this point in time, all projects have been substantially completed as of today in the Canadian area of concern, with the exception of the one project that I just spoke to.

We have strong documentation on what our costs are and we feel confident that we will recover the cost that we have on that particular project. When you are looking at the balance of our business, and I think you can see that by the fact that we are recording tax liabilities, we are making profits in the balance of the company and that we're recording our tax liabilities, and that the balance of the company is performing well.

And with the exception of this one project, there were no big surprises, even from the Canadian operations. So I guess at this point in time, yes, the proof will be in the results, but we remain confident that this year is going to turn out much like what we talked about over the last couple of quarters.

Now, change orders aren't something new for your business. You've had them on the positive and negative side over the years.

Yes, that's correct.

Why are you having a tough time with this one so much so that you won't even guesstimate any kind of a recoverable factor to it?

Well, whenever you are -- I mean the issue is, is this going to a -- the issue we have here is that you have an owner, operator, we have a middle man in between and then we have -- there have been projects in the past where we have not recovered the cost that we thought we were due. But they were not of this material size.

This project is a very large project, it is in excess of $10 million, and therefore the materiality of it on a particular quarter is more substantial than what many of our projects would have been in the past.

The other issue is that this is not with a client that we've had a long-term relationship with and can expect how the process will go. So when you have a new client, new customer that is one that that you have not dealt with in the past, it is a sizeable project.

We are being cautious, but that's not out of line with the way that Powell has reported our financial results or handled our outlook in the past, is that when there is question marks, we tend to take a conservative position.

So can, just kind of following onto John's discussion and just picking on Canada a little bit more. So this large project that's problematic, is that the largest project that they're working on in that business right now, or is it one of the -- is it the second largest?

How does it kind of rank in terms of size and what they're working on now?

Clearly, this is the largest project that we have currently in our backlog within the Canadian operations by a significant scale.

Okay, so how do you feel about the way that business is executing on other, I guess smaller to mid-size projects now. I mean do you think it's kind of more in line with the Powell core business?

Clearly, when you are looking at by sector by sector, the equipment side of the business, the other services side of the business, basically even within this subset, we see progress, we see improvements. And that, this is the frustrating part, is that you have one specific project that predominantly overshadows by such a magnitude you cannot see the results of improvements in the balance of the business.

And so when you are looking at all facets of the business, we are pleased with where we are headed to and we think we are making progress, that we've strengthened the organization, we've strengthened our business processes, we've gone from the quotations all the way to the executions. Are there changes, further changes that need to be made and improvements yet to be realized?

Absolutely, but the weight of this one project is predominantly the reason that we are still talking about the Canadian operations.

Got you. And then secondly, it's encouraging to hear that maybe you are seeing little bits of signs of improvement in the market outside of oil and gas.

Can you just give us a little bit more color as to -- I mean, I guess you are getting -- Go ahead.

There is nothing specific as far as trends orientation that we've seen and again, these are opportunities that have been presented to us that are currently in the quotation phase. But there are opportunities in some of the industrial sectors, there is some smaller projects in which you would actually lean towards light industrial or commercial type activity.

There has been a couple of projects that have come along in the utility sector that we are currently working on. The unknown area is that how quickly will these projects actually convert to orders, and what would the competitive pressures be as we go to try to close some of this business.

True, but still, these are the types of things that maybe you haven't even had discussions about for several quarters.

That is correct, some of these areas are coming to us that are, are new to us relative to what we've seen over the last couple or 3 quarters, last year for sure.

Don, does your guidance assume any additional charges for this project? I guess it would be in the current quarter.

Basically our guidance and outlook is that we will complete the project as currently scheduled based on the man power that we have tied to this project in the March time period. If additional delays are incurred beyond what we currently expect, that would impact our outlook.

But at this point in time we have included in our outlook all costs that we anticipate incurring through March.

Got you. And Don, could you give a sense what percentage of the backlog in Canada is remaining, I guess wasn't under your supervision or discretion when the work was booked.

There are a couple of small projects that are lining up here in February, early March, but there is, the only one of real concern that we talk about, almost on a daily basis is the one that we're, that I'm alluding to and is creating the challenges. At this point in time, I would say the backlog we've been talking about for the last couple of quarters is behind us with the exception of this one project.

I see. One more if I could, do you have any specifics on what kind of project this is.

It's basically -- when we talked about that the acquired company were in lines of business that Powell has not had dealt with in the past. This specific business, and you're familiar with Powell and how we've talked about that we build a substation, a power control room, and deliver it fully integrated and tested to the customer site and then the only thing remaining for the customer then is to interconnect it with all the devices within the particular facility.

What this contract is, is that we are bringing in the electrical talent necessary to install and do the interconnects on a plant or in an expansion.

So where Powell's historical business is to bring the power control room on site, now what we are dealing with are people that are providing material to the client, and the client and the material is not showing up on schedule. And our responsibility is to get it connected to all of the devices on the facility.

So it's not something that's totally foreign to us, but it is a different phase of a project than what we've dealt with in the past. And the issue that we are having with this is the information, the schedule delays, the late equipment from other suppliers, has impacted our ability to complete the work.

So you had pretty nice orders in the quarter. Can you give us a sense if there were any orders of notable size, larger projects.

And then can you comment on the profitability of the new orders coming in, are you seeing any improvement in pricing in the market?

The orders in the current quarter were what I would call mid to smaller, similar to what we talked about in the past. There is not a large, there are not large projects in the near term outlook, there is clearly some that are in the mid to longer term outlook that we are working on.

But when you are talking about what we booked in the previous quarter or what we would anticipate booking in the next month or so, they are more of the small to mid-size projects. I don't think there was any projects that was included in our first quarter orders bookings that was significantly north of $20 million.

So the activity is fairly strong, but what it requires us to do is to be handling stronger number of projects to maintain the order flow. When you are looking at the near term outlook, meaning just the coming quarter, that it's like every quarter, timing is everything, but it will be dependent upon the closing of a number of small to mid-size orders again.

When you are looking at the full year, at this point in time we continue to be optimistic and I believe that we will exit the year with a backlog as strong or stronger than we entered the year.

Okay, and then in terms of ? you know, you talked about the oil and gas market strengthening a little bit, so are you seeing any associated improvement in pricing and some improvement in profitability or are you seeing kind of a stable trend over the past few months?

At this point in time, I think it's better to characterize the market conditions as stable. And again, they vary depending on where you are, which region of the world, what the market sector is.

Some of the new business that we're seeing on a spotty type basis, we're anxious to see at what levels they are closed at, and what the competitive pressures are, because that's new to us relative to the past couple of quarters. But at this point in time I would describe our perspective of the market as stable from a pricing perspective.

Okay, so you've been working to strengthen your management team in Canada, can you give us an update on that process. Are you now comfortable with the team that you have in place or are you still looking to make some additions there.

We're clearly still looking to grow the business in Canada as we are everywhere else. We've brought some new people on even as recently as this past month.

We have some offers for strengthening outstanding right now. It's, it will be an ongoing and continuous process of building the organization, in particularly in light of what we anticipate -- I mean from our backlog, I mean we are, the backlog opportunities there are continuing to grow and we've got to grow that business to make sure that we meet our customers' expectations.

Okay, and then a quick housekeeping question. Can you give us the tax rate on your U.S.

income?

When you are looking at our business historically, and of course it varies depending on the period of time you are looking at, but I think that if you go back and look into history, we've ranged pretty much plus or minus 35%.

And then finally can you give us any update on your search for a CEO?

The last conversation I had with the committee was that it's proceeding as schedule, there has not been any big bumps in the road, whenever you are dealing with individuals at that level, timing of arranging interviews can complicate the process. But I believe that they feel that the process is on track and they are pleased with where they are.

So does that imply that, that the U.S. operations made about $4.5 million in the quarter, is that about right?

That would, if you back into the effective tax rate, and you are looking at our tax liability that would be the order of magnitude of the non-Canadian profits, then it would be correct.

Okay, so it looks like the -- and what percent of your revenues are Canada right now roughly?

The Canadian revenues, they are in the order of magnitude -- let me come back to that question. Let me look it up, because I don't want to just throw a number out arbitrarily.

Okay, who is running Canada for you now?

The individual that is in charge is the same individual that's been in charge now for the last year and a half.

Okay, so you think you've got some stability up there now from a management perspective. I know that you continue to look for talent, but is the leadership in place now?

The key leadership is clearly in place. Again, coming back to the comment I made a minute ago.

We clearly have holds that we need to continue to grow because of anticipated growth in the business. There have been changes and we shored up what I would consider our baseline strengths that we needed to do and we are comfortable that we have put in place business processes that's going to prevent us from entering back into the challenges that we're having with the current project.

But to say that we're not still interviewing and trying to grow the business and strengthen the organization with each additional hire, I mean that's exactly what we're going to do. Over the next year, I would say that there will be several individuals that we are bringing on board in the mid-management level to manage projects, do engineering and strengthen the overall organization.

Okay, Don, I realize -- do you have an update for CapEx for the full year? It looks like you front end loaded a fair amount of it in the first quarter.

We're in line with what we talked about last quarter. I still say that our maintenance CapEx is going to be in the $7 million to $8 million.

But we did acquire a piece of property to expand our capacity and ability to serve the offshore market. We acquired a strategic piece of property that over time, will allow us to nearly double our capacity in that from a strategic standpoint of what we see the market going in the next 5 to 10 years.

So $6.5 million of the first quarter CapEx was related to this specific land acquisition. Back to your previous question, fumbling through here, trying to answer the others, the order of magnitude in the first quarter, the Canadian revenues were approximately 15% of our total revenues.

Okay, and I just have one other question, just a quick comment. So I realize you've got the CapEx in the quarter and then some working capital build.

Do you have a sense as to where cash kind of -- do you expect to build cash as you move throughout the remainder of the year, or you kind of hold it flat as I realize business is going to grow here. So I would suppose there might be even more working capital requirements as we move forward.

When you are looking at the quarter to quarter impacts there will be ups and downs regarding the working capital needs. We did have a slight build of working capital in the first quarter, but when you are looking at our full year outlook, we still expect that we will see overall, a positive cash flow from operations, probably in excess of what our CapEx is.

So, to interpret that comment, you'd expect to generate some free cash flow this year.

I clearly expect that free cash flow will be modestly positive.

Okay, just as a point here, I mean with the stock under pressure again it's kind of like a Yo-Yo, we're up and down here between like 32 and 37 or 38 and we're, and the stock is getting beaten up pretty good again today. I know it's not a direct comparable, but ABB paid almost 10x EBITDA for Thomas & Betts, Don, and I mean if you've come close to your numbers, Powell is being valued today on a fairly depressed level of EBITDA, at about 5.5x.

So, I just really urge the board to consider a share buyback of some consequence because the company is extremely undervalued, the news obviously has been disappointing regarding Canada, but it sounds like we are getting hopefully closer to resolution there, and hopefully Canada contributing positively. So again, the board, I urge the board to consider a buyback.

The company is meaningfully undervalued.

Going back to Canada, can you talk a little bit about the order rates, M&A in Canada. And are the issues up in Canada at all affecting your ability to bid on new business up there at the moment?

No, I mean that, from a customer perspective, I think that even on the project in question, we have delivered quality product and we are delivering it timely based on the information and materials available to us and that's what we will continue to do. When you are looking at the overall market, I think that we -- it has been very receptive to Powell's presence in Canada and the expectations of what we will bring to the Canadian market from our capability standpoint.

And that's the reason that I think we are seeing the Canadian backlog continue to grow. Most of the growth has been from a Powell control stand point, more focused on the businesses that we're stronger at from a historical standpoint, although from a strategic standpoint, we are also continuing to work on other areas to support strategic clients.

Okay, at this point, is every Canadian bid reviewed back in Houston regardless of size?

I would not say every Canadian bid is reviewed back in Houston. Clearly, a significant number of them are.

But when you are dealing with, under a nominal size, with the processes that we've put in place, and the people that we currently have in place reviewing, and those are still being reviewed locally, although we are continually looking at our quote backlog on a regular basis as to what's in there and what the prices, terms and customer content is.

Okay and you mentioned that there could be some additional delays in that project of question. If there was, let's say it was delayed and completed in the following quarter, one additional quarter.

Any magnitude of a financial impact you can provide for us as to what the impact might be?

Well, first off we clearly made our best estimate of what the cost will be to complete the project based on the schedules and the information that we have today. And that's included in our results as well as the outlook.

When you are looking at the caveat of additional delays could occur and that is because we still do not have all the materials necessary to complete the project.

There are still late deliveries coming from other suppliers, as well as some information that we need to get clarifications on to complete our order. Clearly at this point in time we fully expect all of that to be as currently scheduled and we will be able to complete our work as planned.

When you are looking at what could happen beyond the current quarter, it would all depend on what's the nature of the change. Is it a matter of something that is relatively nominal and then we end up having to continue to dedicate 10 people to the project, or is it something that is material and it ends up being in excess of 50.

Today we have a little over 75 employees working on this particular project. But in any regard, if it is for delays beyond our control, we fully expect to receive change orders for that, or that we will pursue recovering of those costs in a claim.

The issue is that we do not record or forecast claims because it's difficult to predict the exact outcome and the timing of that. So even in the current quarter, our objective will be to recover the cost that we incurred in the first quarters.

You just touched on it. But as we think about recovering those costs either through negotiations or "arbitration" or whatever.

You think that's a fiscal 2012 event or could that extend into 2013.

I would hope that it would be something we could resolve in the current quarter. If it is something that we can sit down and negotiate with our customer, it will be.

If it rolled into a more challenging claim process, it's questionable as to whether it would be in the current fiscal year or in our fiscal 2013.

It's Tom Spiro, Spiro Capital. The process control business, I wondered if you could spend a moment or 2 giving us your thoughts about your outlook there.

It's got a pretty nice backlog. You think it will start making some money?

Clearly it's made money, and it's made money for years, so that's not the question. Right now the question is the size of the backlog and the turning of it.

That they are, they deal predominantly in outside of the oil and gas sector, so therefore they are probably one of the more challenged segments of our business as far as the current market environment. There is some outlook that we are currently quoting that would help them in the near term.

But they are faced with the physical challenges of the municipal market, public sector, and my personal outlook is very positive, but the current short-term outcome is probably going to be relatively flat.

I see. Raw materials, are you experiencing any particular pressures in the raw materials area?

There are clearly concerns that we've seen some announced price increases for the first of the year. We've been able to push some back and then we've had to accept others.

But at this point in time, there is nothing that is going off the map as far as issues that we will not be able to manage our way through based on our current situation.

Thanks, and lastly, if memory serves, in the last conference call, Don, you and Tom expressed an expectation that the Canadian business would reach profitability by the end of the fiscal year. I wonder if you still have that point of view.

Clearly. I think that what I've tried to express is that even in the first quarter, except for this one project, the overall results were not out of line with where we thought we would be and that we are seeing progress.

For the full year, the only issue in question is the ultimate outcome of this one project. If the change orders/claims do not occur in the current year, that will have a negative impact on the overall results and could keep it in a loss position.

But barring that, I fully expect that the Canadian operations will be in the breakeven to positive position in the current year.

Don, I'm sorry for my confusion. So you have booked the anticipated loss on this large contract in Canada with the assumption that it is shipped by the end of March, correct?

And you have not booked change fees associated with that, correct?

That is correct. This is, at this point in time, based on our current contract value, is viewed as a loss contract.

All costs anticipated on this project have been recorded in the current quarter with the assumption that those, that estimate is accurate, all future change orders will be profit.

Okay, Don can you just talk -- I read Jacobs' recent quarterly column, they are talking about a renaissance in the chemical industry in the North American market and they said they're tracking $10 billion of ethylene projects alone just in the Gulf Coast. Are you starting to see anything on the chemical side of the business in terms of demand percolating for you?

Clearly, there is conversation in that area. We are seeing activity within some of our client base in engineering firms.

To say that it's had a material impact on our orders at this point in time, that's not the case, but it is clearly an opportunity for us in the coming quarters.

So that will be a nice tailwind for you as those, as that construction ramps up?

That would be correct.

And then what do you see on the refining side? They had a fairly positive view of refining upgrades and some of elevated CapEx on the refining side.

Are you seeing that as well?

Yes, most of it is outside the United States as of to-date. But clearly there is activity both in the production side as well as the downstream processing.

So bottom line is that oil and gas, which has kind of being carrying the water here to-date, is you are starting to see utilities, refining the chemicals and the general industrial markets starting to perhaps participate as well.

At this point in time, I would rather characterize it that the oil and gas sector is where we continue to see the majority of the activity. However, there are glimmers of opportunity that may turn into additional work for us in other sectors.

Don, just a couple of questions.

Sure.

First, excluding all of the issues in Canada, can you maybe comment on the gross margin trend in the core business. Just looking at our back of the envelope calculations, it looks like it may have slipped a bit.

Except for the, this large project, we are pretty much in line with where we expect to be and what we talked about in the previous calls. I would expect this year when we get through the year, to still be in the, again, I'm excluding the impact of this one project, to be in the plus or minus 18% range.

That when you are looking at any one quarter, as in the past, I always caution because the mix of business when you are dealing with large projects, it does impact a quarterly number. And that I'd really prefer talking about it in a longer period of time.

The trend is solid with where we've anticipated it to be, it's in line with our overall guidance.

Got it. And then second question, it looks like dollar SG&A declined about $2 million.

Is most of that in line with the mix and sales commission that you mentioned in your prepared remarks?

The majority, the single largest change was in the variable selling cost. That is correct.

Well, I would like to thank you for joining us today. I talked with Tom yesterday afternoon and he is looking forward to getting back into the office and being here to talk with us next quarter.

I appreciate your interest in Powell. Thank you.