Greetings and welcome to the Powell Industries Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now pleasure to introduce your host, Mr. Ken Dennard. Thank you, Mr. Dennard. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for Powell Industries' conference call today to review fiscal year 2017 second quarter results. With me on the call are Brett Cope, Powell's Chief Executive Officer; and Don Madison, Chief Financial Officer. Before I turn the call over to management, I have the usual details to run through. If you didn't receive an email of the news release issued yesterday would like one, please call our offices at Dennard-Lascar and we will get that right up to you. Our number is 713-529-6600. Also, if you like to on the email distribution list for Powell, please let us know. There will be a replay of today's call, it will be available via webcast by going to the Company's website, powellind.com or a recorded replay will be available till May 10th. And the information on how to access the replay feature was provided in yesterday's earnings release. Please note that information reported on this call speaks only as of today, May 3rd, 2017 and therefore, you are advised that any time-sensitive information may no longer be accurate by the time of any replay listening or transcript reading. As you know, this conference call includes certain statements, including statements related to the Company's expectations of its future operating results that may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 economic, general economic and industry conditions, international political and economic risks, availability and price of raw materials and execution of business strategies. For more information, please refer to the Company's filings with the Securities and Exchange Commission. And now with that I'd like to turn the call over to Brett.

Thank you Ken, and good morning everyone. Thank you for joining us today to review our 2017 second quarter results. I will make a few comments and then I will turn the call over to Don for more financial commentary and our outlook before we take your questions. Our second quarter revenue was $105 million, slightly down from our first quarter of $110 million. However, our second quarter gross margin was 15%, an improvement of 1.4 points over the first quarter. The improvement in gross margin was largely driven by operational efficiencies where we have had an increased focus over the last 18 months. A significant portion of our second quarter performance was contributed by our Houston operations. Our operational teams across Powell executed very well in the second quarter. Our on-time performance and meeting or beating project milestone has improved across the company. Strong execution in our fabrication and assembly operations over the last several quarters has further improved our speed of execution without sacrificing quality or safety performance. One of the strengths of our brand is the trust our customers have in our ability to meet critical dates. We have worked very hard to return predictability and meeting schedule over the last 18 months. Our efforts are producing positive results. Our second quarter experienced the continued deterioration of our backlog and mid soft market conditions. Reported backlog was $228 million compared to $271 million in the first quarter resulting from reduced customer activity has been severely impacted by uncertainties in the oil, gas and petrochemicals markets. New orders in the quarter were disappointing $62 million compared to $91 million in our first quarter of 2017. We attribute our lower bookings rate to a combination of timing of awards and continued competitive market pressures that we have been experiencing…

Thank you, Brett. Revenues decreased 31% or $48 million to $105 million in the second quarter of fiscal 2017 compared to the second quarter of fiscal 2016. Here are some comparisons to last year second quarter. Domestic revenues decreased by $31 million to $76 million and international revenues also decreased by $16 million to $29 million. The decrease is as the result declined in our project backlog as we completed existing projects, and continue to see lower demand from our customers in our core, oil, gas and petrochemical markets. Gross profit as a percentage of revenues decreased to 15% in the second quarter of fiscal 2017 compared to 20% in the second quarter of 2016. Gross profit decreased by $14 million to $16 million. Our Canadian operations continue to see positive improvement in gross profit that was offset by declining gross profit in our domestic operations. Selling, general and administrative expenses decreased by 16% or $3 million to $16 million in the second quarter of fiscal 2017. However SG&A as a percentage of revenues increased slightly to 15% due to lower revenues. And the second quarter of fiscal 2017, we incurred $840,000 and separation cost as we took actions to further adjust our cost structure. And the second quarter of fiscal 2016, we incurred approximately $3.3 million of separation cost, due to the restructuring of our senior management team and reductions and our workforce. We recorded a benefit for income taxes of $1.3 million in the second quarter. In the second quarter of fiscal 2017 recorded a loss of $829,000 or $0.07 per share compared to income of $5.6 million or $49 per share in the second quarter of fiscal 2016. Excluding restructuring and separation cost we recorded a net loss for the second quarter of fiscal 2017 of $283,000…

Thank you. We will now be conducting a question-answer-session. [Operator Instructions] Our first question comes from John Tanwanteng with CJS Securities. Please proceed with your question.

Good morning, Brett, Don, thank you taking my questions.

Good morning.

Good morning John.

Can you talk about project margins in the backlog, are they lower than what you executed in Q2?

When you're looking at over the balance of our backlog which is little $200 million, there is a downward pressure on margins based on prices. We are going to start seeing that more as a greater percentage of our mix beginning in the later part of the third quarter and continue on to the fourth and first quarter of next year.

Got it, thanks. And then the SG&A run rate you put up in the quarter was pretty nice, is that sustainable, how does that growth orders to come and could there be more reductions if necessary?

We're constantly looking at where we can trim costs and maintain our cost structure relative to our production volume, so there's always another way that we can try to trim and we will continue to manage that as we go forward. Relative to increases the biggest challenge will be the biggest increase would be the variable costs related to the sales transaction manufacturers reps would be the biggest variable in the near term relative to increases.

Okay, got it. And then just on the orders, which obviously weren't that great. What gives you confidence that it isn't further weakening in the end markets and it's just the timing issue in that there will be a rebound in Q3?

The overall fall John that we've been tracking pretty closely quarter-over-quarter setting challenger mid-2014 it's pretty constant, we track that pretty granular as to the status of the order once going to close, we have kind of alluded during the past calls about the shifting in the timing has become more difficult, we definitely experience that in the second quarter. And then just general competitive pressures there certainly some jobs that we're tracking the margins very closely those that we were disappointed to lose in the quarter, and some that we're continuing to exercise prudent disciplines as to when to say no. But when you look at the overall funnel no real big change, just definitely some timing effects in Q2 and a couple of competitive ones that just in materialized for us.

Those pricing continue to deteriorate would the competitors in the market or that has self-study?

I feel I guess self-study, it hasn't improved, but the grind on pricing is sort of maintained the last two quarters, and I don't see any changes past quarter as we didn't see any change from last call.

Got it. And then Brett, you did mentioned some pickup in offshore and not to get too excited about it, but it is there any timeframe for one there could be a recovery in that market, whether it's in two years or three years, what is the long term outlook for offshore in general?

We're monitoring it very closely there. There has been some - the offshore yard is one of the areas that we've been exploring some new markets try to leverage some of the assets out there. We talked about some of last buildings that we worked on. Some of the more traditional module the thicker welder plate construction that we find in the offshore market has returned again not a lot, but a couple of projects, looking out we are tracking all of the work that we traditionally work in the Gulf of Mexico offshore, Africa parts of the med, there is some percolating activity, but it's still very cautious, there's just a lot of comments out there by the Tier 1, Tier 2 companies about their reserves and are they going to start bidding projects in engineering houses and we're trying to track all of those developments very closely. So it's - I don't think we'll see this fiscal year safe to say, but still a little murky for 2018 it may dripped in the latter half 2018 best guess right now, but is still not clear.

Got it, thanks. And then Don just can you give us an update on what the backlog conflict in terms of mix between Canada and the U.S. is there stuff in the pipe in Canada to continue to performance you had there?

At this point in time the backlog in the Canadian facility is actually beginning to be very weak. Our overall backlog of $200 million is still more domestic U.S. based than it is in Canada or in the UK and the reductions in volume will definitely be impacting our Canadian operations the second half of the year.

Okay, great, thank you.

Thank you. Our next question comes from John Franzreb with Sidoti & Company. Please proceed with your question.

Good morning guys. Most of the topics have been addressed, but could just talk a little bit about the balance sheet, and how the free cash flow was in the playoff this year, is there any concern about the dividend we have to support it.

John at this point in time, we close the quarter with $108 million in cash. We anticipate, we will continue to maintaining or grow our cash position between now and the end of the fiscal year that we'll see some pressure from earnings but we will basically see the benefits of reduced working capital, I do not see any risk in our dividend program at this point in time.

Okay. Thank you. It's all done.

[Operator Instructions] Our next question comes from Tom Spiro with Spiro Capital. Please proceed with your question.

It's Tom Spiro, Spiro Capital. Good morning.

Good morning, Tom.

Good morning, Tom.

Brett, could you update us on the outlook for petrochemical opportunities in the Gulf of Mexico?

It's one of the markets, John - Tom, sorry. When we hit the downturn it was one of the markets it just tried out completely. All of the work by the major Anadarko, Exxon, Chevron, Shell it just stopped. There are a couple of projects that have come back they're not Gulf of Mexico oriented and the ones that we referred to in Q2 there are more further parts away from Gulf. There is some conversation coming back in the Gulf. Couple of projects from you can follow in the press BP as couple some conversation out there will Anadarko continue how long to another one, but there not as far along with some of the other ones that we've competed in up Brazil and in up Israel there's a couple jobs going on. So it's I don't think it's going to be anytime soon, as I kind of mentioned earlier in the question from John was at a guess later half 2018, but it doesn't look it's not gangbusters any time soon.

Oh, that's helpful. Thanks and how about LNG opportunities for you in the Gulf of Mexico?

We've won a fair share of LNG facilities, which were still executing on, there's number of projects that are ongoing in construction phase, and now entering commissioning. We are tracking and involved in pre-fee pre-engineering discussions on the others that are progressing there permitting. I think we have a good handle on a lot of those projects, they're competitive, a lot of them are also being led by - what I'll call non-traditional money there are some majors out entering in the market, funding some of the jobs, but if you even look at the current LNG jobs there's a lot of new participants that are driving those projects. So I feel good that we're tracking them, we're engaged with engineering companies are competing for those business, and making sure they understand right proposition, and what we can do here especially with our Gulf with our offshore facility being able to build a large modules that those facilities require kind of reduces the amount of splits that some of our competitors offer, because we can build a larger module ship the rest of their site.

Thanks much, and good luck.

I appreciate.

That does conclude our question-answer-session. I would like to turn the floor back over to management for any closing remarks.

Thank you, operator and thank you Ken. We continue to current market challenges by optimizing our costs, securing what new business is available and strengthening our balance sheet. In the meantime we will carefully watch the timing of new order words and their impact on policy future performance. I want to thank Powell's employees who have responded admirably in response to the historically difficult business environment. Our teams across the company have worked hard to align our operating costs with market conditions. And at the same time, how prepare Powell for future opportunities. In conclusion, I continue to see positive overall market sentiment and with Powell has positioned itself well for an eventual market recovery, and although it's not imminent our customers capital expenditure budgets going into 2018 will offer better visibility in the future project activity. In the meantime, we remain focused on leveraging our successful internal initiatives including the delivery of superior customer service and the expansion of our product lines to meet customer demand. Thank you again for your interest in Powell, and we look forward speak with everyone next quarter.

Thank you. This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time. And have a wonderful day.