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Peerless Manufacturing Co. (PMFG)

F1Q09 Earnings Call

November 10, 2008 10:00 am ET


Peter Burlage - President and Chief Executive Officer

Hank Schopfer - Chief Financial Officer

Kevin McGrath - Investor Relations


Rick Hoss - Roth Capital Partners

Fanyl Fable - Detexis

Theod Kundtz - Needham & Company

Dick Ryan - Dougherty & Company

Bill McCann - Brown Advisory


Kevin McGrath

Good morning every one and thank you for joining the PMFG conference call and webcast to discuss the company’s financial results for the first quarter of fiscal year 2009 ended September 30, 2008. During this call non-GAAP financial measures will be discussed. Reconciliation’s to the most directly comparable GAAP financial measures are included in the company’s earnings release for the first quarter, which is available on the Investor Relation’s page at the company’s website at

Before I turn the call over to Peter Burlage, President and CEO of PMFG, I need to inform you that certain statements made in this conference call are forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

All statements other than statements of historical facts, made during this call are forward-looking statements. These forward-looking statements include statements that reflect the current views of PMFG’s senior management with respect to our financial performance, and future events with respect to our business and our industry in general.

Statements that include the words anticipate, preliminary, expect, believe, intend and similar statements of a future or forward-looking nature, identify forward-looking statements. You should not place undue reliance on these statements. Forward-looking statements address matters that involve risks and uncertainties. Accordingly there are or will be important factors that could cause the company’s actual results to differ materially from those indicated in the statements.

Important information regarding factors that may affect the company’s future performance are included in the public reports that the company files with the Securities and Exchange Commission, including the information in items 1.A, Risk Factors of part one to our annual report on Form 10-K for the fiscal year ended June 30, 2008 and for our 10-Q for the period ended September 30, 2008, which we intend to file later today.

The company undertakes no obligation to publicly update or revise any forward -looking statement. Inclusion of any statement in this conference call does not constitute an admission by the company or any person of the events or circumstances describe and such statements are material.

With that said, I will now turn the call over to Peter Burlage, President and CEO of PMFG.

Peter Burlage

Thanks, Kevin. It is my pleasure to welcome all of you to our conference call. Joining me today is Hank Schopfer, our Chief Financial Officer. I will make a few introductory comments regarding our business activities and then Hank will provide you with our financial results for the first quarter.

PMFG had a solid performance for the first quarter with revenue up 45.4%, this was our first full quarter of operating results that included Nitram Energy and we are very pleased with their contribution. Our net earnings for diluted share on a non-GAAP basis were $0.17; Hank will provide more details on our financial results later in the call.

Environmental System segment revenues for the first quarter decrease at 60.3%. As I have stated in the previous calls both the timing of orders and the size of the orders can significantly impact quarterly comparisons. This was the case in Q1 ‘09 comparisons as the first quarter of fiscal year 2008 included approximately $13.3 million from a large environmental order.

While we are mindful of the worldwide business climate, we continue to see healthy business pipeline activity in the areas of combined cycle power plants that are seeking multiple unit auctions, growing demand for biofuel and renewable fuel power generation and continued activity with peaker power generations.

Separation and Filtration System segments revenues for the first quarter increased 171% and benefited from the inclusion of the full quarter of Nitram operating results. Our Separation/Filtration segment continues to benefit from the growth of gas transmissions and pipeline expansion, new gas processing plants and from nuclear power plants that continue to invest in life extension, as well as new generation of nuclear power.

PMFG has been a leader in the nuclear power plant steam separator business for some 40 years and we plan to continue to build on that reputation. We recently announced the opening of our manufacturing plant in China that will manufacture and supply separations/filtrations and sound and equipment for the China and for the Asian markets and will also fabricate Nuclear Steam Dryer equipment for customers throughout China.

We expect our existing sales offices in Singapore to provide additional opportunities for this new manufacturing capability in Asia. We are pleased that both segments of our business have been performing well, and at the integration of Nitram Energy are on track. Backlog at the end of September was approximately $102 million and should position us well for continued growth in fiscal 2009.

With that said, it is important for investors to understand that timing and size of our orders has always been a big factor in our business and we do not see that changing. Additionally, we are closely monitoring the markets we serve in view of the current global business environment.

While we are understandably cautious, we continued to experienced near term solid demand for our systems and products and believe the long-term fundamentals driving demand have not changed and we remain positive about our growth opportunities over the next several fiscal years.

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