SECURITIES AND EXCHANGE
COMMISSION


Washington, D.C. 20549

Form 10-K

(Mark One)[X]    
         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For
the fiscal year ended October 31, 2004.

OR

[  ]    
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________ .

Commission File Number
001-12488

Powell Industries, Inc.


(Exact name of
registrant as specified in its charter)

|Delaware (State or other jurisdiction of       
incorporation or organization)       8550 Mosley Drive, Houston, Texas      (Address of principal executive offices) | 88-0106100(I.R.S. Employer
Identification No.)77075-1180(Zip Code)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------

Registrants
telephone number, including area code: (713) 944-6900

Securities registered pursuant to section 12(b) of the Act: None

Securities
registered pursuant to Section 12(g) of Act:

Common
Stock, par value $.01 per share

Indicate
by X whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.   X    Yes
      No

Indicate
by X if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained herein and will not be contained, to the best of the registrants
knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.   [    ]

Indicate
 by "X" whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    X    Yes
      No

The
aggregate market value of the voting stock held by non-affiliates of the registrant as of
the last business day of the most recently completed second fiscal quarter, April 30,
2004, was approximately $169,934,000.

Indicate
the number of shares outstanding of each of the registrants classes of common stock,
as of the latest practicable date.

Common
Stock, par value $0.01 per share; 10,740,204 shares outstanding as of January 26, 2005.

# Documents Incorporated
By Reference

Portions
of the Proxy Statement for the 2005 annual meeting of stockholders to be filed not later
than 120 days after October 31, 2004 are incorporated by reference into Part III.

---

# POWELL INDUSTRIES, INC. TABLE OF CONTENTS

|           |  | Page                                                                   
|---------- |  | -----------------------------------------------------------------------
|           |  |                                                                        
|           |  | Cautionary Statement Regarding Forward-Looking Statements; Risk Factors
|PART I    
|Item 1     |  | Business                                                               
|Item 2     |  | Properties                                                             
|Item 3     |  | Legal Proceedings                                                      
|Item 4     |  | Submission of Matters to a Vote of Security Holders                    
|PART II   
|Item 5     |  | Market for Registrant's Common Equity and Related Stockholder Matters  
|Item 6     |  | Selected Financial Data                                                
|Item 7     |  | Management's Discussion and Analysis of Financial Condition            
|           |  | and Results of Operations                                              
|Item 7A    |  | Quantitative and Qualitative Disclosures About Market Risk             
|Item 8     |  | Financial Statements and Supplementary Data                            
|Item 9     |  | Changes in and Disagreements with Accountants on Accounting            
|           |  | and Financial Disclosure                                               
|Item 9A    |  | Controls and Procedures                                                
|Item 9B    |  | Other Information                                                      
|PART III  
|Item 10    |  | Directors and Executive Officers of the Registrant                     
|Item 11    |  | Executive Compensation                                                 
|Item 12    |  | Security Ownership of Certain Beneficial Owners and Management and     
|           |  | Related Stockholder Matters                                            
|Item 13    |  | Certain Relationships and Related Transactions                         
|Item 14    |  | Principal Accountant Fees and Services                                 
|PART IV   
|Item 15    |  | Exhibits and Financial Statement Schedules                             
|Signatures |  |                                                                        

1

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CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS; 
RISK FACTORS

This Annual Report on Form 10-K includes  forward-looking  statements based on the Company's  current  expectations,
which are subject to risks and uncertainties.  Forward-looking  statements include  information  concerning future results of
operations  and  financial  conditions.   Statements  that  contain  words  such  as  "believes,"  "expects,"  "anticipates,"
"intends,"  "estimates,"  "continue,"  "should," "could," "may," "plan," "project,"  "predict," "will" or similar expressions
may be  forward-looking  statements.  These  forward-looking  statements  are  subject to risks and  uncertainties,  and many
factors could affect the future  financial  results of the Company.  Factors that may have a material effect on our revenues,
expenses and operating  results include adverse business or market  conditions,  the Company's  ability to secure and satisfy
customers,  the availability and cost of materials from suppliers,  adverse competitive  developments and changes in customer
requirements.  Accordingly,  actual  results may differ  materially  from those  expressed or implied by the  forward-looking
statements  contained in this Report. Any  forward-looking  statements made by or on our behalf are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.

The  forward-looking  statements  contained in this Annual Report are based on current  assumptions that the Company
will  continue to develop,  market,  manufacture  and ship products and provide  services on a competitive  and timely basis,
that  competitive  conditions  in the  Company's  markets will not change in a materially  adverse way, that the Company will
accurately  identify and meet customer needs for products and services,  that the Company will be able to retain and hire key
employees,  that the Company's  capabilities  will remain  competitive,  that risks related to shifts in customer  demand are
minimized  and that there will be no material  adverse  change in the  operations  or business  of the  Company.  Assumptions
relating to these factors  involve  judgments  that are based on available  information,  which may not be complete,  and are
subject to changes in many factors beyond the control of the Company that can materially affect results.

Because of these and other factors that affect our  operating  results,  past  financial  performance  should not be
considered  an indicator of future  performance,  and investors  should not use  historical  trends to anticipate  results or
trends in future periods. Our business faces  significant  risks.  These risks include those described below and may include  additional risks and  uncertainties not
presently  known to us or that we currently  believe  immaterial.  If any of the events or  circumstances  described in the following risks
occurs, our business,  operating results or financial condition could be materially and adversely  affected.  These risks should be read in
conjunction with the other information set forth in this Annual Report on Form 10-K.  :

| | The Company operates in an intensely  competitive  environment. Many of our competitors are  significantly
         larger and have  substantially  greater  resources than we do. Some of our  competitors  seek to employ  competitive
         and management  strategies  similar to those of Powell.  As a result,  our  competitive  standing may be expected to
         vary from time to time and among different markets.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company's  business is affected by general economic and industry  conditions.  Our markets are cyclical
         in nature and subject to general  trends in the  economy.  Our  profitability  and cash flow  availability  could be
         adversely affected by any prolonged economic downturn.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company's  international  sales may fluctuate  significantly as  international  political and economic
         conditions  change.   International  sales  accounted  for  approximately  14% of our revenues in fiscal  2004.  As a
         result of our  international  sales and operations,  we are subject to the risk of fluctuation in currency  exchange
         rates.  International  instability  from  war or  terrorism,  and  unforeseen  political  or  economic  problems  in
         countries that we export products to could adversely affect our business.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2

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| | Fluctuations in the price and supply of the raw materials used to manufacture  the Company's  products may
         reduce the  Company's  profits.  Our raw  material  costs  represented  approximately  49% of our revenues in fiscal
         2004. We purchase a wide variety of raw materials to manufacture our products  including  steel,  aluminum,  copper,
         and various electrical  components.  Unanticipated  increases in raw material  requirements or price increases could
         increase production costs and adversely affect profitability.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company may pursue future  acquisitions that may adversely affect our financial  position or cause our
         earnings per share to decline.  Our business  strategy calls for growth and  diversification.  Pursuing  acquisition
         opportunities  and  attempting to integrate and manage  acquired  businesses  could require  significant  resources,
         including  management  time and skill,  and these  efforts may detract  from the  management  or  operation of other
         businesses.  Acquired  businesses  may not perform as  expected,  thereby  causing our actual  operating  results to
         suffer.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3

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PART I

Item 1.       Business

Overview

We develop,  design,  manufacture,  and service  equipment and systems for the  management and control of electrical
energy and other critical processes.  Headquartered in Houston, TX, we serve the transportation,  environmental,  industrial,
and utility industries.

Powell  Industries,  Inc. ("we," "us," "our,"  "Powell," or the "Company") was incorporated in the state of Delaware
in 2004 as a successor to a Nevada  company  incorporated  in 1968.  The Nevada  corporation  was the  successor to a company
founded by William E.  Powell in 1947,  which  merged  into the  Company in 1977.  Our major  subsidiaries,  all of which are
wholly-owned, include: Powell Electrical Systems, Inc., Transdyn Controls, Inc. and Powell Industries International, Inc.

Our website  address is  www.powellind.com.  We make  available  free of charge on or through our website  copies of
our annual report on Form 10-K,  quarterly reports on Form 10-Q,  current reports on Form 8-K and amendments to those reports
filed  or  furnished  pursuant  to  Section  13(a)  or 15(d) of the  Securities  Exchange  Act of 1934 as soon as  reasonably
practical after we electronically  file such material with, or furnish it to, the Securities and Exchange  Commission.  Paper
or electronic copies of such material may also be requested by contacting the Company at our corporate offices.

Our  business  operations  are  consolidated  into two  business  segments:  Electrical  Power  Products and Process
Control  Systems.  Financial  information  related  to  these  business  segments  is  included  in  Note L of the  Notes  to
Consolidated Financial Statements.

Electrical Power Products

Our Electrical  Power Products  segment  designs,  manufactures  and markets  electrical  power  management  systems
designed to monitor and control the flow of electrical  energy and to provide  protection to motors,  transformers  and other
electrically  powered  equipment.  Our principal  products  include power control modules,  power control rooms,  switchgear,
motor  control  centers  and bus duct  systems.  We design and  manufacture  systems  ranging  from 480 volts to in excess of
36,000 volts to serve the transportation, industrial, and utility industries.

Customers and Markets

This segment's  principal  products are designed for use by and marketed to sophisticated  users of large amounts of
electrical  energy.  Our markets  include oil and gas producers,  oil and gas pipelines,  refineries,  petrochemical  plants,
electrical  power  generators,  public  and  private  utilities,  mining,  pulp  and  paper  mills,  transportation  systems,
governmental agencies, and other large industrial customers.

Products and services are  principally  sold  directly to the end-user or to an EPC  (engineering,  procurement  and
construction)  firm on behalf of the  end-user.  We market and sell our products and services to a wide variety of customers,
markets  and  geographic  regions.  During  each of the past  three  fiscal  years,  we did not have  any one  customer  that
accounted  for more than 10% of  annual  segment  revenues.  Accordingly,  we do not  believe  that the loss of any  specific
customer would have a material  adverse  effect on our business.  While we are not dependent upon any one customer for sales,
we could be adversely impacted by a significant reduction in business volume from a key customer industry.

Export  revenues  were $28.2  million,  $39.1  million,  and $26.2  million  in fiscal  years  2004,  2003 and 2002,
respectively.  During each of the past three  fiscal  years,  no one export  country  accounted  for more than 10% of segment
revenues.  For  information  on the  geographic  areas in which our  consolidated  revenues were recorded in each of the past
three years, see Note J of the Notes to Consolidated Financial Statements.

4

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Competition

This  segment's  products and systems are  engineered to meet the  specifications  of our  customers.  Each order is
designed and  manufactured to the unique  requirements  of the  installation.  We consider our engineering and  manufacturing
capabilities  vital to the success of our  business,  and believe our technical and project  management  strengths,  together
with our  responsiveness  and  flexibility  to the needs of our  customers,  give us a competitive  advantage in our markets.
Ultimately,  our  competitive  position is dependent  on the ability to provide  quality  products  and systems,  on a timely
basis, at a competitive price.

Backlog

Orders in the  Electrical  Power  Products  segment  backlog at October 31, 2004 totaled $89.5  million  compared to
$97.0  million at the end of the previous  fiscal year.  We anticipate  that  approximately  $86.5 million of our ending 2004
backlog will be fulfilled  during our fiscal year 2005.  Orders included in our backlog are represented by customer  purchase
orders and contracts,  which we believe to be firm.  Under certain  circumstances,  penalties are included as a term of order
acceptance to minimize our risk of customer  cancellation.  However,  weak economic  conditions  caused us to experience some
customer  delays  and  cancellations  during  2004 and 2003,  which is unusual  for our  business.  Cancellations during 2004 and 2003
  totaled  approximately  $1.2  million and $6 million,  respectively.  We did not  experience  a material
amount of cancelled orders during 2002.

Raw Materials and Suppliers

The principal raw materials used in Electrical  Power Products'  operations  include steel,  copper,  aluminum,  and
various  electrical  components.  These raw  material  costs  represented  approximately  49% of our revenues in fiscal 2004.
Unanticipated  increases in raw material  requirements  or price  increases  could  increase  production  costs and adversely
affect profitability.

We purchase certain key electrical  components on a sole-source  basis and maintain a qualification  and performance
surveillance  process to control risk  associated  with  sole-sourced  items.  Changes in our design to  accommodate  similar
components  from other suppliers  could be implemented to resolve a supply problem  related to a sole-sourced  component.  In
this  circumstance,  supply problems could result in short-term  delays in our ability to meet  commitments to our customers.
We believe that sources of supply for raw materials and components  are generally  sufficient and have no reason to believe a
shortage of raw materials  will cause any material  adverse  impact  during  fiscal year 2005.  While we are not dependent on
any one supplier  for a material  amount of our raw  materials,  we are highly  dependent  on our  suppliers in order to meet
commitments to our  customers.  We did not  experience  significant or unusual  problems in the purchase of key raw materials
and commodities in the past three years.

Inflation

This segment is subject to the effects of changing  prices.  During fiscal 2004, we realized  moderate  increases in
pricing for  purchases of certain  commodities,  in particular  steel,  copper and aluminum  products,  which are used in the
production  of our products.  While the cost outlook for  commodities  used in production of our products is not certain,  we
believe we can manage these  inflationary  pressures  through contract pricing  adjustments and by actively pursuing internal
cost reduction  efforts.  We have not entered into any derivative  contracts to hedge our exposure to commodity price changes
in fiscal years 2004, 2003, or 2002.

Employees

At October,  31, 2004,  the Electrical  Power  Products segment had 968  full-time  employees  located in the United  States and
Singapore.  Our employees are not represented by unions and we believe that our relationship with employees is good.

5

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Research and Development

This  segment's  research  and  development  activities  are  directed  toward the  development  of new products and
processes as well as  improvements  in existing  products and  processes.  Research and  development  expenditures  were $2.7
million, $2.9 million and $2.9 million in our fiscal years 2004, 2003 and 2002, respectively.

Patents

While we are the holder of various patents, trademarks, and licenses, we do not consider any individual
intellectual property to be material to our consolidated business operations.

Process Control Systems

Our Process Control Systems  segment  designs and delivers  technology  solutions that help our clients manage their
critical transportation,  environmental,  energy,  industrial and utility facilities.  We offer a diverse set of professional
services that specialize in the design,  integration,  and support of high-availability control,  security/surveillance,  and
communications  systems.  The  systems  allow our  clients  to safely  and  effectively  manage  their  vital  processes  and
facilities.

Customers and Markets

This  segment's  products  and  services  are  principally  sold  directly  to  end-users  in  the   transportation,
environmental,  energy,  and  industrial  sectors.  We may be dependent on one specific  contract or client for a significant
percentage  of our  revenues  due to the  nature of large,  long-term  construction  projects  common  to this  segment.  For
example,  during  2003,  we received a contract to design and build  Intelligent  Transportation  Systems  (ITS) for the Port
Authority of New York and New Jersey which  accounted  for 16% of segment  revenues in fiscal 2003 and 44% in fiscal 2004. In
each of the past three fiscal years, we had revenues with one or more clients that  individually  accounted for more than 10%
of our segment revenues.  Revenues from these clients totaled $14.8 million,  $4.8 million,  and $2.9 million in fiscal 2004,
2003 and 2002,  respectively.  Our contracts often represent  large-scale,  single-need  projects with an individual  client.
By their nature,  these projects are typically  non-recurring for those clients and multiple and/or  continuous  requirements
of similar  magnitude with the same client are rare.  Thus, the inability to successfully  replace a completed large contract
with one or more of combined similar magnitude could have a material adverse effect on segment revenues.

Export  revenues  were  $0.8  million,  $0.7  million,  and $1.8  million  in  fiscal  years  2004,  2003 and  2002,
respectively.  During each of the past three  fiscal  years,  no one export  country  accounted  for more than 10% of segment
revenues.  For  information  on the  geographic  areas in which our  consolidated  revenues were recorded in each of the past
three years, see Note J of the Notes to Consolidated Financial Statements.

Competition

This segment  operates in a competitive  market where  competition  for each contract  varies.  The  competition may
include large  multinational  firms as well as small regional low-cost providers depending upon the type of system and client
requirements.

Our customized  systems are designed to meet the specifications of our clients.  Each order is designed,  delivered,
and installed to the unique requirements of the particular  application.  We consider our engineering,  systems  integration,
installation,  and support  capabilities vital to the success of our business.  We believe our technical,  software products,
and project  management  strengths,  together with our  responsiveness,  flexibility,  financial  strength,  and  thirty-year
history of supporting mission critical systems give us a competitive advantage in our markets.

6

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Backlog

Orders in the Process Control  Systems  segment backlog at October 31, 2004 totaled $44.8 million  compared to $60.5
million at the end of the previous  fiscal year. We anticipate  that  approximately  $25.9 million of our ending 2004 backlog
will be fulfilled  during our fiscal year 2005.  As of October 31, 2004,  $19.5  million of our ending  backlog  relates to a
contract  received in 2003 to design and build  Intelligent  Transportation  Systems (ITS) for the Port Authority of New York
and New Jersey.  We have not experienced a material amount of cancelled orders during the past three fiscal years.

Employees

The Process  Control  Systems segment had 119 full-time  employees at October 31, 2004,  all located in the United  States.  Our
employees are not represented by unions and we believe that our relationship with employees is good.

Research and Development

The majority of research and  development  activities  of this segment are directed  toward the  development  of our
software  suites for the management and control of the critical processes and facilities of our clients.  Research  and  development  expenditures  were $0.8  million,  $0.7 million and $0.5 million in our fiscal
years 2004, 2003 and 2002, respectively.

Item 2.       Properties

We have  manufacturing  facilities,  sales  offices,  and repair  centers  located  throughout the United States and
Singapore.  Our  facilities are generally  located in areas that are readily  accessible to raw materials and labor pools and
are maintained in good  condition.  These  facilities,  together with recent  expansions,  are expected to meet our needs for
the foreseeable future.

Our principal
manufacturing locations by segment as of October 31, 2004, are as follows:

|                           |               |       |                           
|-------------------------- | ------------- | ----- | --------------------------
|                           | Number        |       | Approximate Square Footage
|Location                   | of Facilities | Acres | Owned                     
|Electrical Power Products: |               |       |                           
|Houston, TX                | 2             | 68.2  | 430,600                   
|North Canton, OH           | 1             | 8.0   | 72,000                    
|Northlake, IL              | 1             | 10.0  | 103,500                   
|Process Control Systems:   |               |       |                           
|Pleasanton, CA             | 1             |       | ---                       
|Duluth, GA                 | 1             |       | ---                       

We
also own two idle facilities, located in Elyria, Ohio and Greenville, Texas, each
consisting of manufacturing and office space. We anticipate that we will sell these
properties during the coming year. As these properties are held for sale, the $1.4 million
of related net book value is included in other current assets at October 31, 2004. These
facilities were previously used to manufacture our non-segregated bus duct and
distribution switch product lines, for which the manufacturing has been consolidated into
other existing Company facilities.

We
are currently in the process of closing our leased facility in Watsonville, California,
whose operations will be consolidated into an existing Houston location. The Watsonville,
California facility lease expires in February, 2005. All other leased properties are
subject to long-term leases with remaining lease terms ranging from 3 to 5 years as of
October 31, 2004. We do not anticipate experiencing significant difficulty in retaining
occupancy of any of our leased facilities through lease renewals prior to expiration or
through month-to-month occupancy, or in replacing them with equivalent facilities.

7

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Item 3.       Legal Proceedings

We
are involved in various legal proceedings, claims, and other disputes arising in the
ordinary course of business which, in general, are subject to uncertainties and the
outcomes are not predictable. However, we do not believe that the ultimate conclusion of
these disputes will materially affect our financial position or results of operations.

Item 4.       Submission of
Matters to a Vote of Security Holders

We
did not submit any matter to a vote of our stockholders during the fourth quarter of
fiscal year 2004.

8

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PART II

Item 5.       Market for
Registrants Common Equity and Related Stockholder Matters

Price Range of Common
Stock

Our
common stock trades on the NASDAQ National Market under the symbol POWL. The
following table sets forth, for the periods indicated, the high and low sales prices per
share as reported on the NASDAQ National Market for our common stock.

| |                   |                | High   | Low   
| | ----------------- | -------------- | ------ | ------
| | Fiscal Year 2003: |                |       
| |                   | First Quarter  | $20.72 | $13.65
| |                   | Second Quarter | 15.23  | 13.13 
| |                   | Third Quarter  | 16.71  | 12.17 
| |                   | Fourth Quarter | 20.61  | 14.62 
| | Fiscal Year 2004: |                |       
| |                   | First Quarter  | $20.50 | $14.50
| |                   | Second Quarter | 19.50  | 14.85 
| |                   | Third Quarter  | 18.73  | 15.25 
| |                   | Fourth Quarter | 18.21  | 15.87 

As
of October 31, 2004, the last reported sales price of our common stock on the NASDAQ
National Market was $16.12 per share. As of January 24, 2005, there were 644 stockholders
of record of our common stock. All common stock held in broker accounts are included as
one stockholder of record.

See
Part III, Item 12 for information regarding securities authorized for issuance under our
equity compensation plan.

# Dividend Policy

To
date, we have not paid cash dividends on our common stock, and for the foreseeable future
we intend to retain earnings for the development of our business. Future decisions to pay
cash dividends will be at the discretion of the Board of Directors and will depend upon
our results of operations, financial condition and capital expenditure plans, along with
other relevant factors.

9

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Item 6.       Selected
Financial Data

The
selected financial data shown below for the past five years was derived from our audited
financial statements. The historical results are not necessarily indicative of the
operating results to be expected in the future. The selected financial data should be read
in conjunction with Managements Discussion and Analysis of Financial Condition
and Results of Operations and the consolidated financial statements and related
notes included elsewhere in this Annual Report on Form 10-K.

|                                                                                                                |                                      
|--------------------------------------------------------------------------------------------------------------- | -------------------------------------
|                                                                                                                | Years Ended October 31,              
|                                                                                                                |                                      
|                                                                                                                |                                      
|                                                                                                                | (in thousands, except per share data)
|Statements of Operations:                                                                                       |                                      
|Revenues                                                                                                        |                                      
|Cost of goods sold                                                                                              |                                      
|                                                                                                                |                                      
|Gross profit                                                                                                    |                                      
|Selling, general and administrative expenses                                                                    |                                      
|                                                                                                                |                                      
|Income before interest, and income taxes, and
       cumulative effect of change in        accounting principle |                                      
|Interest expense (income), net                                                                                  |                                      
|Income tax provision (benefit)                                                                                  |                                      
|Minority interest                                                                                               |                                      
|Income from continuing operations before                                                                        |                                      
|cumulative effect of change in accounting                                                                       |                                      
|principle                                                                                                       |                                      
|Cumulative effect of change in accounting                                                                       |                                      
|principle, net of income taxes                                                                                  |                                      
|                                                                                                                |                                      
|Net income                                                                                                      |                                      
|                                                                                                                |                                      
|Basic earnings per share                                                                                        |                                      
|Diluted earnings per share                                                                                      |                                      

|                                              |                  
|--------------------------------------------- | -----------------
|                                              | As of October 31,
|                                              |                  
|                                              |                  
|                                              | (in thousands)   
|Balance Sheet Data:                           |                  
|Cash and cash equivalents                     |                  
|Property, plant and equipment, net            |                  
|Total assets                                  |                  
|Long-term debt and capital lease obligations, |                  
|including current maturities                  |                  
|Total stockholders' equity                    |                  
|Total liabilities and stockholders' equity    |                  

10

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During
fiscal year 2004, we initiated a consolidation plan to reduce overhead costs and improve
efficiency. As a result of this plan, we incurred significant expenses during 2004. For
additional information related to the consolidation plan and expenses incurred, see Note M
of the Notes to Consolidated Financial Statements.

Item 7.       Managements
Discussion and Analysis of Financial Condition and Results of Operations

The
following discussion should be read in conjunction with the accompanying consolidated
financial statements and related notes. In the course of operations, we are subject to
certain risk factors, including but 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. Any forward-looking statements made by or on our behalf are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers
are cautioned that such forward-looking statements involve risks and uncertainties in that
the actual results may differ materially from those projected in the forward-looking
statements.

The  effects  of the  restatement
discussed  in Note O of the  Notes to  Consolidated  Financial  Statements  have been  reflected  in the
accompanying Managements Discussion and Analysis of Financial Condition and Results of Operations.

# Overview

We
have continued to experience a significant reduction in market demand for our products.
The difficult market conditions that existed in fiscal 2003 have continued through fiscal
2004. Additionally, market price levels have deteriorated as competition for available
business volume intensified. However, we have been able to expand revenues related to
system modification and equipment replacement as customers look for ways to extend the
lives of their existing systems.

Although
we currently face reduced demand and prices, there are indications of improvement in our
principal markets. Historically, business expansion within our principal markets 
public and private utilities, heavy industry and public agencies  have lagged
general economic trends by six to twelve months as our revenues are principally driven by
new capital investments. One of the positive trends we have experienced is an increase in
new order activity. Orders received during the third and fourth quarters of fiscal 2004
totaled $42.1 million and $62.5 million, respectively, versus $35.8 million and $36.3
million in the same periods a year ago. We are optimistic that we will see further
improvement in fiscal 2005.

In
anticipation of improving business opportunities, we are taking advantage of lower
production volumes to make necessary capital improvements to our manufacturing facility in
Houston, Texas. We have committed to capital improvement projects totaling $6.1 million.
These projects include a new metal finishing and paint system and replacement of some
older metal fabricating equipment with a laser cut fabricating center and material
handling system. Consistent with other lean initiatives, these investments will improve
our quality and efficiency as well as lead to lower working capital requirements. These
projects are scheduled to be completed in March 2005.

We
also expect international business opportunities to strengthen. To enhance our ability to
serve the oil and gas and petrochemical industries, we increased our interest in Powell
Industries Asia Private Limited (PIA) from 50% to 60% on August 1, 2004. Since that time,
these operations have been fully consolidated in our financial statements. PIA was formed
in 2000 as a joint venture between Powell and Rotary Engineering Limited, Singapore
(Rotary). We anticipate the business opportunities to increase and, with increased support
from our domestic operations, we should be able to improve our ability to support the
development of oil and gas production in Southeast Asia.

To
reduce overhead costs and improve efficiency, we initiated a consolidation plan that will
reduce the number of facilities within our Electrical Power Products segment. During 2004,
we consolidated our Greenville, Texas and North Canton, Ohio operations, closing the
Greenville facility as of June 30; we consolidated our Elyria, Ohio and Northlake,
Illinois operations, closing the Elyria facility as of October 31; and in September, we
announced plans to consolidate our Watsonville, California and Houston, Texas operations,
exiting the leased Watsonville facility by December 31, 2004. Total pre-tax expenses
associated with these plant closings are estimated to be approximately $2.6 million. In
fiscal 2004, we incurred pre-tax expenses associated with the plant closings of $2.2
million. For additional information related to consolidation costs, see Note M of the
Notes to Consolidated Financial Statements.

11

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# Results of Operations

Year ended October 31,
2004 compared with year ended October 31, 2003

Revenue and Gross Profit

Consolidated
revenues decreased 19% to $206.1 million in fiscal 2004 compared to fiscal year 2003
revenues of $253.4 million. Domestic revenues decreased $36.9 million to $176.7 million in
2004 compared to 2003. Revenues outside of the United States accounted for 14% of
consolidated revenues in fiscal 2004 compared to 16% in 2003.

Electrical Power
Products

Our
Electrical Power Products segment recorded revenues of $173.5 million in fiscal 2004
compared to $227.0 million in fiscal 2003. Customers have been reluctant to commit to new
capital construction projects throughout fiscal 2004 due to economic uncertainty. However,
we have been able to expand revenues related to system modification and equipment replacement
 as customers look for ways to extend the lives of their existing systems.
Overall, we have experienced a decline in revenues in each of our major markets. Revenues
from industrial customers were $98 million in 2004 compared to $125 million in 2003.
Utility revenues were $59 million in 2004 compared to $79 million in 2003. Municipal and
transit projects generated revenues of $17 million compared to $23 million a year ago.

Gross
profit, as a percentage of revenues, decreased to 16.8% in fiscal 2004 from 18.8% in
fiscal 2003. Fiscal 2004 costs of goods sold included one-time expenses of $1.8 million to
consolidate our operations. Consolidation expenses include employee severance, training
and equipment relocation costs. Inflationary pressures, primarily due to higher commodity
prices in copper, aluminum and steel increased direct material expenses by approximately
4%, or $3.3 million, compared to fiscal 2003.

Both
revenue and gross profit have been adversely impacted by competitive pricing in a
depressed marketplace. Partially offsetting adverse market conditions have been the
results of our efforts to reduce our production overhead costs by improving operating
efficiencies through the implementation of lean initiatives.

Process Control
Systems

Revenues
in our Process Control Systems segment increased 24% to $32.7 million compared to $26.4
million in fiscal 2003. The increase in revenue is primarily attributed to our contract to
design and build Intelligent Transportation Systems (ITS) for the Holland and Lincoln
tunnels for the Port Authority of New York and New Jersey. This contract accounted for
$14.3 million of segment revenues in fiscal 2004 and $4.2 million in fiscal 2003. As of
October 31, 2004, the remaining value associated with this project in our backlog was
$19.5 million, or 44% of segment backlog, which is expected to be recognized as revenue in
2005. Export revenue increased to $0.8 million in fiscal 2004 from $0.7 million in fiscal
2003.

Segment
gross profit, as a percentage of revenues, was 21.0% in fiscal 2004, compared to 23.5% in
fiscal year 2003. Gross profits as a percentage of revenues were reduced in 2004 due to
the large amount of subcontract work and material pass-through purchases on the Holland
and Lincoln tunnels contract which typically will generate significantly lower profits
compared to our other professional services.

For
additional information related to our business segments, see Note L of the Notes to
Consolidated Financial Statements.

12

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Consolidated Operating
Expenses

Selling,
general and administrative expenses were $35.4 million, or 17.2% of revenues, in fiscal
2004 compared to $35.3 million, or 13.9% of revenues, in fiscal 2003. In fiscal 2004,
accounting and auditing fees increased $0.8 million compared to 2003, primarily attributable
to Sarbanes-Oxley compliance efforts. One-time consolidation expenses of $0.4 million were
incurred in fiscal 2004. These expenses were costs associated with actions to consolidate
our operations and close certain facilities which represented excess capacity. The benefit
of lower operating overheads should be realized beginning in 2005. Excluding the impact of
these increases, selling, general and administrative expenses would have decreased
consistent with revenues.

Research
and development expenditures were $3.5 million in 2004 compared to $3.6 million in fiscal
2003. Our research efforts are directed toward the discovery and development of new
products and processes as well as improvements in existing products and processes.
Research and development costs are included in selling, general and administrative
expenses.

Interest Income and
Expense

We
incurred $0.1 million in interest expense in fiscal 2004 compared to $0.4 million in fiscal 2003.
Interest expense has been reduced by favorable interest rates and decreasing balances on
our industrial revenue bond debt. Our industrial revenue bonds have scheduled payments of
$0.4 million that become due each year in October. Additionally, in fiscal 2003, we incurred
$0.2 million in interest expense on our term loan and the associated interest rate swap. In
September 2003, we paid the remaining principal balance on our term loan, which has
reduced our interest expense.

We
earned $0.9 million in interest income in fiscal 2004 compared to $0.6 million in the previous
year. Interest income increased primarily due to higher levels of invested funds.

Provision for Income Taxes

Our income tax  provision/(benefit)
 for fiscal 2004 and 2003 was  ($0.3 million) and $6.1  million,  and our  effective tax rate was (21%)
and 45%, respectively. During 2004, we recorded several non-recurring tax
               adjustments related to the following items:

|a) |  | A $0.4 million benefit was recorded primarily for the benefit of revised
               extraterritorial income exclusion amounts for the years ended 2002 and 2003.
               This benefit was derived by calculating the extraterritorial income exclusion
               amount on a transaction by transaction basis in 2004, as opposed to an aggregate
               basis as originally estimated,
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) |  | A $0.3 million valuation allowance related to capital losses was released in 2004.
               We entered into an agreement in 2004 to sell a capital asset that will trigger
               enough capital gain to utilize the capital loss carryforward, and
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c) |  | We released $0.2 million of state income tax reserve in 2004 due to acceptance by
               certain state taxing authorities of voluntary disclosure agreements in 2004.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Without these adjustments,
our 2004 effective tax rate would have been 40%.

Net income

Net
income was $1.7 million, or $0.15 per diluted share, in fiscal year 2004 compared to $7.0
million, or $0.65 per diluted share, in fiscal year 2003. The decrease in net income
primarily relates to lower business volume and decreased gross profits in fiscal 2004.
Gross profits declined as a result of one-time consolidation costs, inflationary pressures
on materials costs, and depressed market price levels. Partially offsetting lower gross
profits were higher interest income and a net income tax benefit.

13

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In
fiscal 2003, net income was negatively impacted as a result of our adoption of Statement
of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other
Intangible Assets. During the first quarter of fiscal 2003, we recorded a goodwill
impairment loss of $0.5 million as a cumulative effect of a change in accounting
principle. The goodwill impairment charge accounted for a loss of $0.05 per diluted share
a year ago.

Year ended October 31,
2003 compared with year ended October 31, 2002

Revenue and Gross Profit

Consolidated
revenues decreased 17% to $253.4 million in fiscal 2003 as compared to fiscal year 2002
revenues of $306.4 million. Domestic revenues decreased $64.8 million to $213.6 million in
2003 compared to 2002. Despite weaknesses in domestic markets, new investments in oil and
gas production facilities contributed to increased international revenues in fiscal 2003.
Revenues outside of the United States accounted for 16% of consolidated revenues in 2003
compared to 9% in 2002.

Electrical
Power Products

Our
Electrical Power Products segment recorded revenues in fiscal 2003 of $227.0 million
compared to $283.6 million in fiscal 2002. Revenues from public and private utilities fell
by 55% in fiscal 2003. In particular, there was a significant decline in new investments
in electrical power generation facilities. Utility revenues were $79 million in 2003
compared to a record $173 million in 2002. Our municipal customers faced a reduced tax
base with which to fund infrastructure projects in 2003. Municipal and transit projects
generated revenues of $23 million compared to $29 million in 2002. However, revenues from
industrial customers totaled $125 million in fiscal 2003, an increase of $44 million, or
54%, over 2002. This increase in revenue from industrial customers resulted primarily from
revenues related to the manufacture and delivery of power control modules for new oil and
gas production facilities. These long-term projects to construct new oil and gas
production facilities were initiated by our customers during 2001 and 2002.

Gross
profit, as a percentage of revenues, was 18.8% in fiscal 2003, compared to 22.0% in fiscal
year 2002. Gross profit has been adversely impacted by lower production volumes and
competitive pricing pressures. Partially offsetting adverse market conditions were the
results of our efforts to reduce our costs of production by improving operating
efficiencies through the implementation of lean initiatives. In addition, we incurred an
impairment loss of $0.4 million to decrease the carrying value of machinery and equipment
to their estimated market value. This impairment loss resulted from our decision to
discontinue certain product lines. These product lines generated aggregate revenues of
less than $1.0 million in fiscal 2003.

Process
Control Systems

Revenues
in our Process Control Systems segment increased 16% to $26.4 million compared to $22.8
million in fiscal 2002. Our most significant award during 2003 was a contract to design
and build Intelligent Transportation Systems (ITS) for the Holland and Lincoln tunnels
from the Port Authority of New York and New Jersey valued at $37.4 million as of October
31, 2003. Revenue attributable to this project totaled $4.2 million during fiscal 2003.
Gross profit, as a percentage of revenues, was 23.5% in fiscal 2003, compared to 23.0% in
fiscal year 2002.

For
additional information related to our business segments, see Note L of the Notes to
Consolidated Financial Statements.

14

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Consolidated Operating
Expenses

Selling,
general and administrative expenses increased to 13.9% of revenues in fiscal 2003 compared
to 12.7% of revenues in fiscal year 2002. Our commitment to continue to develop our
customer markets and products resulted in an increase in operating expenses relative to
our revenues. Research and development expenditures were $3.6 million in fiscal 2003
compared to $3.4 million in fiscal year 2002. Our research efforts are directed toward the
discovery and development of new products and processes as well as improvements in
existing products and processes.

Interest
Income and Expense

We
incurred $0.4 million in interest expense on our term debt and outstanding industrial
development revenue bonds during fiscal 2003 compared to $0.5 million in 2002. As a result of
lower levels of debt and decreased interest rates, our interest expense has declined.

Interest
income increased by $0.3 million to $0.6 million in 2003 compared to the same period of the
previous year. An increase in invested funds during 2003 has been partially offset by the
lower interest rate environment.

Provision
for Income Taxes

Our
provision for income taxes reflects an effective tax rate on earnings before income taxes
of 45.0% in fiscal 2003 compared to 37.1% in fiscal 2002. Included in our provision is
$1.3 million for state taxes (net of federal tax benefit) of which $0.9 million reflects
revised estimates in state tax exposures related to prior years. Over the past several
years, our business has expanded and we are now conducting activities in more states. We
have accordingly increased our estimates for such state tax exposures.

Cumulative
Effect of Change in Accounting Principle

As
a result of the adoption of Statement of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Other Intangible Assets, we recorded a goodwill
impairment loss of $0.5 million , net of $0.3 million taxes, as a cumulative effect of a change in
accounting principle during the first quarter of 2003. We recorded an impairment charge of
$0.4 million , net of $0.2 million taxes, to write off the full value of goodwill in our Process
Control Systems segment. In our Electrical Power Products segment, we recorded an
impairment charge of $0.1 million, net of approximately $71,000 taxes. The goodwill impairment charge
accounted for a loss of $0.05 per diluted share.

Net
Income

Net income
was $7.0 million, or $0.65 per diluted share, in fiscal year 2003 compared to $17.8
million, or $1.66 per diluted share, in fiscal year 2002. The decrease in net income
primarily relates to lower business volume and decreased gross profits in fiscal 2003.
Additionally, net income was negatively impacted as a result of an impairment loss of $0.2
million, net of taxes, recorded to decrease the carrying value of machinery and equipment;
an increase in estimates for state tax exposures related to prior years of $0.9 million,
net of federal tax benefits; and the net effect of a change in accounting principle
related to goodwill accounted for $0.5 million. Each of these adjustments to net income is
discussed in the Notes to Consolidated Financial Statements.

# Liquidity and Capital
Resources

Year ended October 31,
2004 compared with year ended October 31, 2003

We
have continued to improve our liquidity position. Working capital was $99.3 million at
October 31, 2004 compared to $97.0 million at October 31, 2003. As of October 31, 2004,
current assets exceeded current liabilities by 3.1 times and our debt to capitalization
ratio was less than 0.1 to 1.

15

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At
October 31, 2004, we had cash, cash equivalents and marketable securities of $63.2
million, compared to $42.3 million at October 31, 2003. Long-term debt, including current
maturities, totaled $7.1 million at October 31, 2004 compared to $7.4 million at October
31, 2003. In addition to our long-term debt, we maintain a revolving credit agreement
which at year end provided for a borrowing capacity of $15 million through February 2007.
As of October 31, 2004 and 2003, there were no outstanding borrowings under this line of
credit. For further information regarding our debt, see Note G of the Notes to
Consolidated Financial Statements.

Operating
Activities

Net
cash provided by operating activities was $24.9 million for fiscal 2004. A net reduction
in operating assets and liabilities provided $20.1 million with the remainder of the
increase related to net earnings adjusted for depreciation, amortization and other
non-cash expenses. Of the $20.1 million provided by the net reduction in operating assets and liabilities, $14.5 million was
provided due to a reduction of investments in contract costs and inventories as projects
in our backlog reached contractual billing milestones. In addition, lower sales volumes have resulted
in less cash being reinvested in operating assets. During fiscal 2003, operating
activities provided net cash of $36.5 million of which $22.5 million resulted from a
reduction in operating assets and liabilities with the remainder of the increase related
to net earnings adjusted for depreciation, amortization and other non-cash expenses.

Investing
Activities

Investments
in property, plant and equipment during fiscal 2004 totaled $6.5 million compared to $4.5
million in fiscal 2003. The majority of our 2004 capital investments will be used to
improve our capabilities to manufacture switchgear and electrical power control rooms. We
have committed to capital projects totaling $6.1 million to acquire a new metal finishing
and paint system, a laser cut fabricating center, and material handling system. As of the
end of fiscal 2004, we have incurred costs of $4.2 million for these projects. We expect
to incur the balance during the first half of 2005. Consistent with other lean
initiatives, these investments will improve our quality and efficiency as well as lead to
lower working capital requirements.

Proceeds
from the sale of fixed assets provided cash of $1.8 million in fiscal 2004, primarily from the sale of
our Franklin Park, Illinois manufacturing facility which was idled in 2002. Net trades in
marketable securities provided cash of $1.8 million in fiscal 2004. During 2003, we purchased
$5.8 million of these investment-grade corporate bonds and classified them as available
for sale. The maturity dates of these bonds vary from one to nine years.

Financing
Activities

Net
cash provided by financing activities was $0.6 million in fiscal 2004 primarily from the
exercise of stock options. Net cash used in financing activities in fiscal 2003 was $3.7
million. In September 2003, we paid the remaining principal balance on our term loan. The
repayment of this loan was the primary use of cash for financing activities in fiscal year
2003.

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Contractual
Obligations

At
October 31, 2004, our long-term contractual obligations were limited to debt and leases.
The table below details our commitments by type of obligation and the period that the
payment will become due (in thousands).

|As of October 31, 2004   
  payments due by period: | Long-term DebtObligations | Capital LeaseObligations | Operating LeaseObligations | Total    
|--------------------------------------------------- | ------------------------- | ------------------------ | -------------------------- | ---------
|                                                    |                           |                          |                            |          
|Less than 1 year                                    | $   419                   | $   55                   | $   1,694                  | $   2,168
|1 to 3 years                                        | 858                       | 98                       | 2,731                      | 3,687    
|3 to 5 years                                        | 800                       | 70                       | 1,438                      | 2,308    
|More than 5 years                                   | 4,800                     | ---                      | ---                        | 4,800    
|Total long-term contractual obligations             | $ 6,877                   | $  223                   | $   5,863                  | $  12,963

We
are contingently liable for secured and unsecured letters of credit of $10.3 million as of
October 31, 2004. We also had performance bonds totaling approximately $167.9 million that
were outstanding at October 31, 2004. Performance bonds are used to guarantee contract
performance to our customers.

Year ended October 31,
2003 compared with year ended October 31, 2002

Working
capital was $97.0 million at October 31, 2003 compared to $86.5 million at October 31,
2002. As of October 31, 2003, current assets exceeded current liabilities by 3.2 times and
our debt to capitalization ratio was less than 0.1 to 1.

At
October 31, 2003, we had cash, cash equivalents and marketable securities of $42.3
million, compared to $14.4 million at October 31, 2002. Long-term debt, including current
maturities, totaled $7.4 million at October 31, 2003 compared to $12.0 million at October
31, 2002. In addition to our long-term debt, we maintain a revolving credit agreement
which at year end 2003 provided for a credit facility of $15 million through February
2006. As of October 31, 2003, there were no borrowings under this line of credit. For
further information regarding our debt, see Note G of the Notes to Consolidated Financial
Statements.

Operating
Activities

Net
cash provided by operating activities was $36.5 million for fiscal 2003. A net reduction
in operating assets and liabilities provided $22.5 million with the remainder of the
increase related to net earnings adjusted for depreciation, amortization and other
non-cash expenses. During fiscal 2002, operating activities provided net cash of $31.7
million of which $8.8 million resulted from a reduction in operating assets and
liabilities.

Investing
Activities

Investments
in property, plant and equipment during fiscal 2003 totaled $4.5 million compared to $13.9
million in fiscal 2002. The majority of these expenditures were used to complete a project
initiated during 2002 to increase our manufacturing capacity available for the manufacture
of electrical power control modules. These modules are provided to the oil and gas
industry for use on offshore platforms.

During
2003, we purchased $5.8 million of investment-grade corporate bonds. As of October 31,
2003, the maturity dates of these bonds vary from five to nine years.

Financing
Activities

Financing activities
used $3.7 million in fiscal 2003. Approximately $4.8 million was used for repayments on
our long-term debt. Other financing activities were limited primarily to the exercise of
stock options. During fiscal 2002, net cash used by financing activities was $10.0
million, primarily from payments on long-term debt.

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# Outlook for Fiscal 2005

We
expect our principal markets to strengthen throughout 2005. Customer inquiries, or
requests for proposals, have steadily strengthened during the second half of fiscal 2004.
One of the positive trends we have experienced is an increase in new order activity.
Orders received during the third and fourth quarters of fiscal 2004 totaled $42.1 million
and $61.5 million, respectively, versus $35.8 million and $36.3 million in the same
periods a year ago. We are optimistic that we will see further improvement in fiscal 2005.

In
our Electrical Power Products segment, third and fourth quarter orders increased both
sequentially and year over year. In addition, we expect to realize lower overhead expenses
and increased efficiencies as a result of our consolidation efforts and capital
improvements, both of which should improve our competitive position. Although our Process
Controls Systems segment continues to experience soft market conditions, we anticipate
increased funding for municipal projects will be available as general economic conditions
strengthen. We believe we will be well-positioned to take advantage of improving economic
conditions.

We
anticipate that we will begin reinvesting a portion of our cash in operating working
capital in fiscal 2005. Working capital needs are anticipated to increase with growing
levels of business activity. We believe that working capital, borrowing capabilities, and
funds generated from operations will be sufficient to finance anticipated operational
activities, capital improvements, debt repayment and possible future acquisitions for the
foreseeable future.

# Effects of Inflation and
Recession

In
2003, we experienced a significant deterioration in business volume due to the effects of
the U.S. economy on our markets and customers. New investments in infrastructure projects
were curtailed in both our utility and industrial market segments. Our municipal clients
faced a reduced tax base with which to fund infrastructure projects. Along with
indications of an improving U.S economy, new business inquiry levels strengthened
throughout 2004. The pace of orders grew stronger as 2004 progressed and we ended the year
with an order rate that we have not experienced since 2002. We anticipate these conditions
will continue into 2005.

As
the U.S. economy began to show signs of improvement, we experienced significant price
pressures with our key raw materials, primarily copper, aluminum and steel. Competitive
market pressures limited our ability to pass these cost increases to our customers. These
competing pressures eroded our earnings in 2004. We anticipate these inflationary
pressures will continue to adversely impact our operations in 2005.

# Critical Accounting
Policies and Estimates

The
preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires us to make estimates and
judgments with respect to the selection and application of accounting policies that affect
the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of
contingent assets and liabilities. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates. We believe the following accounting policies and
estimates to be critical in the preparation and reporting of our consolidated financial
statements.

Revenue
Recognition

Our
revenues are generated from the engineering and manufacturing of custom products. We
recognize revenues under both the completed contract method and the
percentage-of-completion method, depending upon the duration and the scope of the project.
At the onset of each project, the size, scope and duration of the contract is reviewed to
determine the appropriate revenue recognition method based upon company policy and
applicable accounting standards. Due to the long-term and fixed-price nature of the
projects in the Process Control Systems segment, all revenues are recorded using
percentage-of-completion. However, projects in the Electrical Power Products segment vary
widely; thus, both the completed contract and percentage-of-completion methods are used.
During the last three years, approximately 61% to 71% of revenues in our Electrical Power
Products segment were recognized using the percentage of completion method.

18

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Under
the completed contract method, revenues are recognized upon the transfer of title, which
is generally at the time of shipment or delivery (depending upon the terms of the
contract), when all significant contractual obligations have been satisfied, the price is
fixed or determinable, and collectibility is reasonably assured. We use shipping documents
and customer acceptance, when applicable, to verify the transfer of title to the customer.
We assess whether the price is fixed or determinable based on the payment terms associated
with the transaction and whether the sales price is subject to refund or adjustment.
Collectibility is assessed based on the creditworthiness of the customer assessed through
credit verification, the customers payment history and other relevant factors.

Under
the percentage-of-completion method, revenues are recognized as work is performed based on
the estimated completion to date calculated by multiplying the total contract price by
percentage of performance to date, based on total labor dollars or hours incurred to date
to the total estimated labor dollars or hours estimated at completion. Application of the
percentage of completion method of accounting requires the use of estimates of costs to be
incurred for the performance of the contract. Contract costs include all direct material
and labor costs and those indirect costs related to contract performance, such as indirect
labor, supplies, tools, repairs and all costs associated with operation of equipment
(excluding depreciation). The cost estimation process is based upon the professional
knowledge and experience of the companys engineers, project managers, and financial
professionals. Factors that are considered in estimating the work to be completed and
ultimate contract recovery include the availability and productivity of labor, the nature
and complexity of the work to be performed, the effect of change orders, the availability
of materials, the effect of any delays in performance and the recoverability of any
claims. Changes in job performance, job conditions, estimated profitability and final
contract settlements may result in revisions to costs and income and their effects are
recognized in the period in which the revisions are determined. Whenever revisions of
estimated contract costs and contract values indicate that the contract costs will exceed
estimated revenues, thus creating a loss, a provision for the total estimated loss is
recorded in that period.

Allowance
for Doubtful Accounts

We
maintain and continually assess the adequacy of an allowance for doubtful accounts
representing our estimate for losses resulting from the inability of our customers to pay
amounts due to us. This estimated allowance is based on historical experience of
uncollected accounts, the level of past due accounts, the overall level of outstanding
accounts receivable, information about specific customers with respect to their inability
to make payments and expectations of future conditions that could impact the
collectibility of accounts receivable. However, future changes in our customers
operating performance and cash flows or in general economic conditions could have an
impact on their ability to fully pay these amounts which could have a material impact on
our operating results.

Impairment
of Long-Lived Assets

We
have significant investments in long-lived assets, including property and equipment and
goodwill. We evaluate the recoverability of the carrying amount of long-lived assets
whenever events or changes in circumstances indicate that the carrying value of an asset
may not be fully recoverable. The review for impairment of long-lived assets and goodwill
takes into account estimates of future cash flows. Our estimates of future cash flows are
based upon budgets and longer-range plans. These budgets and plans are used for internal
purposes and are also the basis for communication with outside parties about future
business trends. While we believe the assumptions we use to estimate future cash flows are
reasonable, there can be no assurance that the expected future cash flows will be
realized. As a result, impairment charges that possibly should have been recognized in
earlier periods may not be recognized until later periods if actual cash flows deviate
unfavorably from earlier estimates. For assets held for sale or disposal, the fair value
of the asset is measured using quoted market prices or an estimation of net realizable
value. Based on general economic conditions and conditions specific to our industry, the
ultimate amounts realized on assets held for sale may differ materially from their
currently estimated realizable values.

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Accruals
for Contingent Liabilities

From
time to time, contingencies, such as insurance and legal claims, arise in the normal
course of business. Pursuant to current accounting standards, we must evaluate such
contingencies to subjectively determine the likelihood that an asset has been impaired or
a liability has been incurred at the date of the financial statements as well as
evaluating whether the amount of the loss can be reasonably estimated. If the likelihood
is determined to be probable and it can be reasonably estimated, the estimated loss is
recorded. The amounts we record for insurance claims, warranties, legal and other
contingent liabilities require judgments regarding the amount of expenses that will
ultimately be incurred. We use past experience and history, as well as the specific
circumstances surrounding each contingent liability in evaluating the amount of liability
that should be recorded. Actual results could differ from our estimates.

Accounting
for Income Taxes

We
account for income taxes under the asset and liability method. This approach requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax basis of
assets and liabilities. Developing our provision for income taxes requires significant
judgment and expertise in federal and state income tax laws, regulations and strategies,
including the determination of deferred tax assets and liabilities and, if necessary, any
valuation allowances that may be required for deferred tax assets. We recorded a
state tax valuation allowance of approximately $54,000 during the year ended October 31, 2004. We have not recorded
any other valuation allowances as of October 31, 2004 because we believe that future
taxable income will, more likely than not, be sufficient to realize the benefits of those
assets as the temporary differences in basis reverse over time. Our judgments and tax
strategies are subject to audit by various taxing authorities. While we believe we have
provided adequately for our income tax liabilities in the consolidated financial
statements, adverse determinations by taxing authorities could have a material adverse
effect on our consolidated financial condition and results of operations.

# New Accounting Standards

In
November 2003, the Emerging Issues Task Force (EITF) reached a consensus opinion on EITF
03-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain
Investments. EITF 03-1 provides guidance on the new requirements for
other-than-temporary impairment and its application to debt and marketable equity
investments that are accounted for under SFAS No. 115. The new requirements are effective
for fiscal years ending after December 15, 2003. The adoption of EITF 03-1 during the
quarter ended January 31, 2004 had no impact on our consolidated financial position,
results of operations or cash flows.

In
March 2004, the EITF reached a consensus opinion on EITF 03-06, Participating
Securities and the Two-Class Method under FASB Statement No. 128, Earnings Per
Share. EITF 03-06 provides guidance in applying the two-class method of calculating
earnings per share for companies that have issued securities other than common stock that
contractually entitle the holder to participate in any dividends declared and earnings of
the company. The opinion defines what constitutes a participating security and how to
apply the two-class method of calculating earnings per share to those securities. EITF
03-06 became effective during the quarter ended July 31, 2004, and the adoption did not
have an impact on our calculation of earnings per share.

In
May 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP)
106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 to provide accounting and
disclosure guidance for employers that sponsor postretirement health care plans that
provide prescription drug benefits. The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (the Act) was signed into law on December 8, 2003.
The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy
to sponsors of retiree health care benefit plans that provide a benefit that is at least
actuarially equivalent to Medicare Part D. The new requirements are effective for interim
periods beginning after June 15, 2004. We provide postretirement health benefits that
include prescription drug benefits, but this benefit ends when the employee reaches the
age of 65. The adoption of FSP 106-2 during the quarter ended October 31, 2004 had no
impact on our postretirement benefit cost.

20

---

In
November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB
No. 43, Chapter 4. The amendments made by SFAS No. 151 clarify that abnormal amounts
of idle facility expense, freight, handling costs, and wasted materials (spoilage) should
be recognized as current-period charges and require the allocation of fixed production
overheads to inventory based on the normal capacity of the production facilities. The
guidance is effective for inventory costs incurred during fiscal years beginning after
November 23, 2004. We do not believe the adoption of SFAS No. 151 will have a material
impact on our consolidated financial position, results of operations or cash flows.

In
December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based
Payment. SFAS No. 123(R) will require that the compensation cost relating to
share-based payment transactions be recognized in financial statements. That cost will be
measured based on the fair value of the equity or liability instruments issued. SFAS No.
123(R) covers a wide range of share-based compensation arrangements including share
options, restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. SFAS No. 123(R) replaces FASB Statement No. 123,
Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees. SFAS No. 123, as originally issued
in 1995, established as preferable a fair value-based method of accounting for share-based
payment transactions with employees. However, that Statement permitted entities the option
of continuing to apply the guidance in APB Opinion No. 25, as long as the footnotes to
financial statements disclosed what net income would have been had the preferable fair
value-based method been used. Public entities will be required to apply SFAS No. 123(R) as
of the first interim or annual reporting period that begins after June 15, 2005. We are in
the process of evaluating the impact the adoption of SFAS No. 123(R) will have on our
consolidated financial position, results of operations and cash flows.

21

---

Item 7A.       Quantitative
and Qualitative Disclosures About Market Risk

We
are exposed to certain market risks arising from transactions we have entered into in the
normal course of business. These risks primarily relate to fluctuations in interest rates,
foreign exchange rates and commodity prices.

We
are subject to market risk resulting from changes in interest rates related to our
outstanding debt and investments in marketable debt securities. Regarding our various debt
instruments outstanding at October 31, 2004 and 2003, a 100 basis point increase in
interest rates would result in a total annual increase in interest expense of less than
$75,000. Our investments in marketable debt securities are carried at fair value on the
consolidated balance sheet, with unrealized gains and losses reported in other
comprehensive income. Changes in interest rates will affect the fair value of the
marketable securities as reported. While we do not currently have any derivative contracts
to hedge our exposure to interest rate risk, we have in the past and may in the future
enter into such contracts. Overall, we believe that changes in interest rates will not
have a material near-term impact on our future earnings or cash flows. During each of the
past three years, we have not experienced a significant effect on our business due to
changes in interest rates.

Our
market risk associated with foreign currency rates is not considered to be material, since
we primarily arrange compensation in U.S. dollars. During each of the past three years, we
have not experienced a significant effect on our business due to fluctuations in foreign
exchange rates.

We
are subject to market risk from fluctuating market prices of certain raw materials. While
such materials are typically available from numerous suppliers, commodity raw materials
are subject to price fluctuations. We attempt to pass along such commodity price increases
to our customers on a contract-by-contract basis to avoid profit margin erosion. While we
may do so in the future, we have not entered into any derivative contracts to hedge our
exposure to commodity risk in fiscal years 2004, 2003 or 2002. During 2004, we experienced
significant price pressures with some of our key raw materials. Competitive market
pressures limited our ability to pass these cost increases to our customers, thus eroding
our earnings in 2004. We did not experience a significant effect on our business due to
fluctuations in commodity prices in 2003 or 2002. Fluctuations in commodity prices may
have a material near-term effect on our future earnings and cash flows.

22

---

Item 8.       Financial
Statements and Supplementary Data

|                                                                    |     
|------------------------------------------------------------------- | ----
|Index to Consolidated Financial Statements                          | Page
|Financial Statements:                                              
|Report of Independent Registered Public Accounting Firm             | 24  
|Report of Independent Registered Public Accounting Firm             | 25  
|Consolidated Balance Sheets as of October 31, 2004 and 2003         | 26  
|Consolidated Statements of Operations for the years ended          
|October 31, 2004, 2003 and 2002                                     | 27  
|Consolidated Statements of Stockholders' Equity for the years ended
|October 31, 2004, 2003 and 2002                                     | 28  
|Consolidated Statements of Cash Flows for the years ended          
|October 31, 2004, 2003 and 2002                                     | 29  
|Notes to Consolidated Financial Statements                          | 30  

23

---

# Report of Independent
Registered Public Accounting Firm

To the Board of Directors and
Stockholders of Powell Industries, Inc:

In our opinion, the accompanying
consolidated balance sheet and the related consolidated statement of operations,
stockholders equity and cash flows present fairly, in all material respects, the
financial position of Powell Industries, Inc. and its subsidiaries at October 31, 2004,
and the results of their operations and their cash flows for the year then endedin
conformity with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Companys management; our
responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Houston, TexasJanuary 31,
2005

24

---

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Powell Industries, Inc.:

We have audited the accompanying consolidated
balance sheet of Powell Industries, Inc. and subsidiaries (the Company) as of October 31,
2003, and the related consolidated statements of operations, stockholders equity, and cash flows for each of the two years in the period
ended October 31, 2003.  These consolidated financial statements are the responsibility of the Companys management.  Our responsibility
is to express an opinion on these consolidated financial statements based on our audits.

We conducted  our audits in  accordance
with the  standards of the Public  Company  Accounting  Oversight  Board  (United  States).  Those
standards  require that we plan and perform the audit to obtain  reasonable  assurance  about whether the financial  statements are free of
material  misstatement.  An audit includes  examining,  on a test basis,  evidence  supporting the amounts and disclosures in the financial
statements.  An audit also includes  assessing the accounting  principles  used and  significant  estimates made by management,  as well as
evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such 2003 and 2002 consolidated
financial statements present fairly, in all material respects,  the financial position of
the Company as of October 31,  2003,  and the results of its  operations  and its cash flows for each of the two years in the period  ended
October 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note I to the consolidated financial statements,
the Company changed its method of accounting for goodwill and other
intangible assets to conform to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets on November
1, 2002.

As discussed in Note O, the 2003 and 2002 consolidated financial
statements have been restated.

DELOITTE & TOUCHE LLP

Houston, TexasDecember 19, 2003 (January 31, 2005 as to the effects of the restatement discussed in Note O)

25

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES 
CONSOLIDATED BALANCE
SHEETS 
(In thousands, except
share and per share data)

|                                                                  | October 31,
|----------------------------------------------------------------- | -----------
|
|
|
|Current Assets:                                                   |            
|Cash and cash equivalents                                         |            
|Marketable securities                                             |            
|Accounts receivable, less allowance for doubtful accounts of      |            
|$617 and $1,283, respectively                                     |            
|Costs and estimated earnings in excess of billings on uncompleted |            
|contracts                                                         |            
|Inventories                                                       |            
|Income taxes receivable                                           |            
|Deferred income taxes                                             |            
|Prepaid expenses and other current assets                         |            
|                                                                  |            
|Total Current Assets                                              |            
|Property, plant and equipment, net                                |            
|Other assets                                                      |            
|                                                                  |            
|Total Assets                                                      |            
|                                                                  |            

LIABILITIES AND STOCKHOLDERS' EQUITY

|                                                                          |  | 
|------------------------------------------------------------------------- |  | 
|Current Liabilities:                                                      |  | 
|Current maturities of long-term debt and capital lease obligations        |  | 
|Income taxes payable                                                      |  | 
|Accounts payable                                                          |  | 
|Accrued salaries, bonuses and commissions                                 |  | 
|Billings in excess of costs and estimated earnings on uncompleted         |  | 
|contracts                                                                 |  | 
|Accrued product warranty                                                  |  | 
|Other accrued expenses                                                    |  | 
|                                                                          |  | 
|Total Current Liabilities                                                 |  | 
|Long-term debt and capital lease obligations, net of current maturities   |  | 
|Deferred compensation                                                     |  | 
|Other liabilities                                                         |  | 
|                                                                          |  | 
|Total Liabilities                                                         |  | 
|                                                                          |  | 
|Commitments and contingencies (Note K)                                    |  | 
|Minority interest                                                         |  | 
|                                                                          |  | 
|Stockholders' Equity:                                                     |  | 
|Preferred stock, par value $.01; 5,000,000 shares authorized; none issued |  | 
|Common stock, par value $.01; 30,000,000 shares authorized;               |  | 
|11,000,000 and 10,994,000 shares issued, respectively; 10,730,000         |  | 
|and 10,641,000 shares outstanding, respectively                           |  | 
|Additional paid-in capital                                                |  | 
|Retained earnings                                                         |  | 
|Treasury stock, 270,000 and 352,000 shares respectively, at cost          |  | 
|Accumulated other comprehensive income (loss)                             |  | 
|Deferred compensation                                                     |  | 
|                                                                          |  | 
|Total Stockholders' Equity                                                |  | 
|                                                                          |  | 
|Total Liabilities and Stockholders' Equity                                |  | 
|                                                                          |  | 

The
accompanying notes are an integral part of these consolidated financial statements.

26

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF
OPERATIONS 
(In thousands, except
per share data)

|                                                                                                | Years Ended October 31,
|----------------------------------------------------------------------------------------------- | -----------------------
|                                                                                                |                        
|Revenues                                                                                        |                        
|Cost of goods sold                                                                              |                        
|                                                                                                |                        
|Gross profit                                                                                    |                        
|Selling, general and administrative expenses                                                    |                        
|                                                                                                |                        
|Income before interest, income taxes, and cumulative effect of   change in accounting principle |                        
|Interest expense                                                                                |                        
|Interest income                                                                                 |                        
|                                                                                                |                        
|Income from continuing operations before income taxes and                                       |                        
|cumulative effect of change in accounting principle                                             |                        
|Income tax provision (benefit)                                                                  |                        
|Minority interest in net loss                                                                   |                        
|                                                                                                |                        
|Income from continuing operations before cumulative effect of                                   |                        
|change in accounting principle                                                                  |                        
|Cumulative effect of change in accounting principle, net of tax                                 |                        
|                                                                                                |                        
|Net income                                                                                      |                        
|                                                                                                |                        
|Net earnings per common share:                                                                  |                        
|Basic:                                                                                          |                        
|Earnings from continuing operations                                                             |                        
|Cumulative effect of change in accounting principle                                             |                        
|                                                                                                |                        
|Net earnings                                                                                    |                        
|                                                                                                |                        
|Diluted:                                                                                        |                        
|Earnings from continuing operations                                                             |                        
|Cumulative effect of change in accounting principle                                             |                        
|                                                                                                |                        
|Net earnings                                                                                    |                        
|                                                                                                |                        
|Weighted average shares:                                                                        |                        
|Basic                                                                                           |                        
|                                                                                                |                        
|Diluted                                                                                         |                        
|                                                                                                |                        

The
accompanying notes are an integral part of these consolidated financial statements.

27

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS EQUITY 
(In thousands)

|                                                    | Other
Compre-
hensive
Income | Common Stock
Shares | Common Stock
Amount | Additional
Paid-In
Capital | Retained
Earnings | Treasury
Stock | Accumulated
Other
Compre-
hensive
Income
(Loss) | Deferred
Compen-
sation | Total
|--------------------------------------------------- | ---------------------------- | ------------------- | ------------------- | -------------------------- | ----------------- | -------------- | ----------------------------------------------- | ----------------------- | -----
|Balance, November 1, 2001                           |                              |                     |                     |                            |                   |                | 10,964                                          |                         | $    
|Net income (As Restated,   See Note O)              |                              |                     |                     | 17,798                     |                   |                |                                                 |                         |      
|Amortization of deferred                            |                              |                    
|compensation-ESOP                                   |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Change in value of interest rate                    |                              |                    
|swap, net of $33 income taxes                       |                              |                     |                     | 53                         |                   |                |                                                 |                         |      
|Exercise of stock options                           |                              |                     |                     |                            |                   |                | 15                                              |                         |      
|Income tax benefit from stock                       |                              |                    
|options exercised                                   |                              |                     |                     |                            |                   |                |                                                 |                         |      
|                                                    |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Comprehensive Income (As Restated, See Note O)      |                              |                     | $                   | 17,851                     |                  
|                                                    |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Balance, October 31, 2002 (As Restated, See Note O) |                              |                     |                     |                            |                   |                | 10,979                                          |                         |      
|Net income (As Restated,   See Note O)              |                              |                     |                     | 6,985                      |                   |                |                                                 |                         |      
|Amortization of deferred                            |                              |                    
|compensation-ESOP                                   |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Change in value of interest rate                    |                              |                    
|swap, net of $49 income taxes                       |                              |                     |                     | 87                         |                   |                |                                                 |                         |      
|Change in value of marketable                       |                              |                    
|securities, net of $64 income                       |                              |                     |                     | (118                       | )                 |                |                                                 |                         |      
|taxes                                               |                              |                    
|Exercise of stock options                           |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Income tax benefit from stock                       |                              |                    
|options exercised                                   |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Issuance of stock                                   |                              |                     |                     |                            |                   |                | 15                                              |                         |      
|                                                    |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Comprehensive Income (As Restated, See Note O)      |                              |                     | $                   | 6,954                      |                  
|                                                    |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Balance, October 31, 2003 (As Restated, See Note O) |                              |                     |                     |                            |                   |                | 10,994                                          |                         |      
|Net income                                          |                              |                     |                     | 1,669                      |                   |                |                                                 |                         |      
|Foreign currency translation                        |                              |                    
|adjustments, net of $11 income                      |                              |                    
|taxes                                               |                              |                     |                     | 17                         |                   |                |                                                 |                         |      
|Change in value of marketable                       |                              |                    
|securities, net of $85 income                       |                              |                    
|taxes and reclassification                          |                              |                     |                     | 155                        |                   |                |                                                 |                         |      
|adjustment (see Note B)                             |                              |                    
|Amortization of deferred                            |                              |                    
|compensation-ESOP                                   |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Exercise of stock options                           |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Income tax benefit from stock                       |                              |                    
|options exercised                                   |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Amortization of restricted stock                    |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Issuance of stock                                   |                              |                     |                     |                            |                   |                | 6                                               |                         |      
|                                                    |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Comprehensive Income                                |                              |                     | $                   | 1,841                      |                  
|                                                    |                              |                     |                     |                            |                   |                |                                                 |                         |      
|Balance, October 31, 2004                           |                              |                     |                     | 11,000                     |                   |                | 110                                             |                         |      
|                                                    |                              |                     |                     |                            |                   |                |                                                 |                         |      

The
accompanying notes are an integral part of these consolidated financial statements.

28

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF
CASH FLOWS 
(In thousands)

|                                                                    | Years Ended October 31,
|------------------------------------------------------------------- | -----------------------
|                                                                    |                        
|Operating Activities:                                               |                        
|Net income                                                          |                        
|Adjustments to reconcile net income to net cash provided by         |                        
|operating activities:                                               |                        
|Cumulative effect of change in accounting principle, net of tax     |                        
|Depreciation and amortization                                       |                        
|(Gain)loss on disposition of assets                                 |                        
|Loss on impairment of assets                                        |                        
|Deferred income taxes                                               |                        
|Changes in operating assets and liabilities:                        |                        
|Accounts receivable, net                                            |                        
|Costs and estimated earnings in excess of billings on               |                        
|uncompleted contracts                                               |                        
|Inventories                                                         |                        
|Prepaid expenses and other current assets                           |                        
|Other assets                                                        |                        
|Accounts payable and income taxes payable                           |                        
|Accrued liabilities                                                 |                        
|Billings in excess of costs and estimated earnings on               |                        
|uncompleted contracts                                               |                        
|Deferred compensation                                               |                        
|Other liabilities                                                   |                        
|                                                                    |                        
|Net cash provided by operating activities                           |                        
|                                                                    |                        
|Investing Activities:                                               |                        
|Proceeds from sale of fixed assets                                  |                        
|Purchases of property, plant and equipment                          |                        
|Purchase of additional interest in consolidated subsidiary          |                        
|Sales of marketable securities                                      |                        
|Purchases of marketable securities                                  |                        
|                                                                    |                        
|Net cash used in investing activities                               |                        
|                                                                    |                        
|Financing Activities:                                               |                        
|Borrowings on revolving line of credit                              |                        
|Repayments on revolving line of credit                              |                        
|Borrowing on long-term debt and capital lease obligations           |                        
|Repayments of long-term debt and capital lease obligations          |                        
|Proceeds from issuance of stock                                     |                        
|Proceeds from exercise of stock options                             |                        
|                                                                    |                        
|Net cash provided by (used in) financing activities                 |                        
|                                                                    |                        
|Net increase in cash and cash equivalents                           |                        
|Cash and cash equivalents at beginning of year                      |                        
|                                                                    |                        
|Cash and cash equivalents at end of year                            |                        
|                                                                    |                        
|Supplemental disclosures of cash flow information:                  |                        
|Cash paid during the period for:                                    |                        
|Interest                                                            |                        
|                                                                    |                        
|Income taxes                                                        |                        
|                                                                    |                        
|Non-cash investing and financing activities:                        |                        
|Change in fair value of interest rate swap, net of $0, $49, and $33 |                        
|income taxes, respectively                                          |                        
|                                                                    |                        
|Change in fair value of marketable securities, net of $85 and $64   |                        
|income taxes, respectively                                          |                        
|                                                                    |                        
|Issuance of common stock for deferred directors' fees               |                        
|                                                                    |                        
|Assets acquired under capital lease obligations                     |                        
|                                                                    |                        

The
accompanying notes are an integral part of these consolidated financial statements.

29

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

A.       Business and
Organization

We
develop, design, manufacture, and service equipment and systems for the management and
control of electrical energy and other critical processes. Headquartered in Houston, TX,
we serve the transportation, environmental, industrial, and utility industries.

Powell
Industries, Inc. (we, us, our, Powell, or
the Company) was incorporated in the state of Delaware in 2004 as a successor
to a Nevada company incorporated in 1968. The Nevada corporation was the successor to a
company founded by William E. Powell in 1947, which merged into the Company in 1977. Our
major subsidiaries, all of which are wholly-owned, include: Powell Electrical Systems,
Inc., Transdyn Controls, Inc. and Powell Industries International, Inc.

B.       Summary of
Significant Accounting Policies

Principles
of Consolidation

The
consolidated financial statements include the accounts of Powell Industries, Inc. and its
wholly-owned subsidiaries. The financial position and results of operation of our
Singapore joint venture, in which we acquired a majority ownership on August 1, 2004, have
been consolidated since August 1, 2004. As a result of this consolidation, we recorded
minority interest on our balance sheet for our joint venture partners share of
equity. All significant intercompany accounts and transactions are eliminated in
consolidation.

Use
of Estimates

The preparation
of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the periods reported. The amounts we record for insurance
claims, warranties, legal and other contingent liabilities require judgments regarding the
amount of expenses that will ultimately be incurred. We use past experience and history,
as well as the specific circumstances surrounding these contingent liabilities in
evaluating the amount of liability that should be recorded. Actual results could differ
from our estimates.

Cash
and Cash Equivalents

Cash and
cash equivalents include cash on hand, deposits with banks and highly liquid investments
with original maturities of three months or less.

Marketable
Securities

Marketable securities
consist of investment-grade corporate bonds that are classified as available-for-sale.
These investments are carried at fair value, with unrealized gains and losses, net of
related tax effects, included in other comprehensive income. The maturity dates of these
investments as of October 31, 2004 vary from one to nine years.

30

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Fair
Value of Financial Instruments

Financial
instruments include short-term investments, marketable securities and debt obligations.
Due to the short-term nature of the investments, the book value is representative of their
fair value. The carrying value of debt approximates fair value as interest rates are
indexed to LIBOR or the banks prime rate.

Accounts
Receivable and Market Risk

Accounts receivable
are stated net of allowances for doubtful accounts. We maintain and continually assess the
adequacy of an allowance for doubtful accounts representing our estimate for losses
resulting from the inability of our customers to pay amounts due to us. This estimated
allowance is based on historical experience of uncollected accounts, the level of past due
accounts, the overall level of outstanding accounts receivable, information about specific
customers with respect to their inability to make payments and expectations of future
conditions that could impact the collectibility of accounts receivable. However, future
changes in our customers operating performance and cash flows or in general economic
conditions could have an impact on their ability to fully pay these amounts which could
have a material impact on our operating results. Our domestic receivables are not
collateralized. However, we utilize letters of credit to secure payment on sales outside
of the U.S. and Canada. At October 31, 2004 and 2003, accounts receivable included
retention amounts of $7.5 million and $6.2 million, respectively. Retention amounts are in
accordance with applicable provisions of engineering and construction contracts and become
due upon completion of contractual requirements. Approximately $0.5 million of the
retained amount at October 31, 2004 is expected to be collected subsequent to October 31,
2005. No customers accounted for 10% or more of our consolidated accounts receivable
balances as of fiscal year ends 2004 and 2003.

Costs
and Estimated Earnings in Excess of Billings on Uncompleted Contracts

Costs and
estimated earnings in excess of billings on uncompleted contracts arise when revenues are
recorded on a percentage-of-completion basis but cannot be invoiced under the terms of the
contract. Such amounts are invoiced upon completion of contractual milestones.

Costs
and estimated earnings in excess of billings on uncompleted contracts also include certain
costs associated with unapproved change orders. These costs are included when change order
approval is probable. Amounts are carried at the lower of cost or net realizable value. No
profit is recognized on costs incurred until change order approval is obtained. We also
include claims for extra work or changes in scope of work to the extent of costs incurred
in contract revenues when we believe collection is probable. At October 31, 2004 and 2003,
we have included in contract costs approximately $1.9 million and $2.9 million,
respectively, relating to commercial contract claims whose final settlement is subject to
future determination through negotiations or other procedures that had not been completed.
As of October 31, 2004, we anticipate that $1.5 million of the claims included in contract
costs will not be settled within one year. The amounts recorded involve the use of
judgments and estimates; thus, actual recoverable amounts could differ from original
assumptions.

Assets
and liabilities related to costs and estimated earnings in excess of billings on
uncompleted contracts as well as billings in excess of costs and estimated earnings on
uncompleted contracts have been classified as current and non-current under the operating
cycle concept whereby all contract-related items are regarded as current regardless of
whether cash will be received or paid within a 12-month period.

Inventories

Inventories
are stated at the lower of cost or market using first-in, first-out (FIFO) or weighted
average methods and include the cost of material, labor and manufacturing overhead. We use
estimates in determining the level of reserves required to state inventory at the lower of
cost or market. Our estimates are based on market activity levels, production
requirements, the physical condition of products and technological innovation. Changes in
any of these factors may result in adjustments to the carrying value of inventory.

31

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Property,
Plant and Equipment

Property, plant
and equipment are stated at cost and are depreciated using the straight-line method over
the estimated useful lives of the assets. Expenditures for repairs and maintenance are
charged to expense when incurred. Expenditures for major renewals and improvements which
extend the useful lives of existing equipment are capitalized and depreciated. Upon
retirement or disposition of property, plant and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or loss is
recognized in the consolidated statement of operations.

Impairment
of Long-Lived Assets

We
evaluate the recoverability of the carrying amount of long-lived assets whenever events or
changes in circumstances indicate that the carrying value of an asset may not be fully
recoverable. The review for impairment of long-lived assets and goodwill takes into
account estimates of future cash flows. Our estimates of future cash flows are based upon
budgets and longer-range plans. These budgets and plans are used for internal purposes and
are also the basis for communication with outside parties about future business trends.
While we believe the assumptions we use to estimate future cash flows are reasonable,
there can be no assurance that the expected future cash flows will be realized. As a
result, impairment charges that possibly should have been recognized in earlier periods
may not be recognized until later periods if actual cash flows deviate unfavorably from
earlier estimates. For assets held for sale or disposal, the fair value of the asset is
measured using quoted market prices or an estimation of net realizable value. Based on
general economic conditions and conditions specific to our industry, the ultimate amounts
realized on assets held for sale may differ materially from their currently estimated
realizable values.

Intangible
Assets

We
adopted SFAS No. 142, Goodwill and Other Intangible Assets, on November 1,
2002. This statement requires that goodwill and other intangible assets with indefinite
useful lives are no longer amortized but instead requires a test for impairment to be
performed annually, or immediately if conditions indicate that impairment could exist.
Intangible assets with definite useful lives are amortized over their estimated useful
lives. For additional information regarding our intangible assets, see Note I.

Income
Taxes

We
account for income taxes in accordance with SFAS No. 109, Accounting for Income
Taxes. Under SFAS No. 109, deferred income tax assets and liabilities are computed
based on the difference between the financial statement and income tax bases of assets and
liabilities using enacted tax rates. Under this standard, the effect on deferred income
taxes of a change in tax rates is recognized in income in the period that the tax rate
changes.

Revenue
Recognition

Our
revenues are generated from the engineering and manufacturing of custom products. We
recognize revenues under both the completed contract method and the
percentage-of-completion method, depending upon the duration and the scope of the project.
At the onset of each project, the size, scope and duration of the contract is reviewed to
determine the appropriate revenue recognition method based upon company policy and
applicable accounting standards. Due to the long-term and fixed-price nature of the
projects in the Process Control Systems segment, all revenues are recorded using
percentage-of-completion. However, projects in the Electrical Power Products segment vary
widely; thus, both the completed contract and percentage-of-completion methods are used.

Under
the completed contract method, revenues are recognized upon the transfer of title, which
is generally at the time of shipment or delivery (depending upon the terms of the
contract), when all significant contractual obligations have been satisfied, the price is
fixed or determinable, and collectibility is reasonably assured. We use shipping documents
and customer acceptance, when applicable, to verify the transfer of title to the customer.
We assess whether the price is fixed or determinable based on the payment terms associated
with the transaction and whether the sales price is subject to refund or adjustment.
Collectibility is assessed based on the creditworthiness of the customer assessed through
credit verification, the customers payment history and other relevant factors.

32

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Under
the percentage-of-completion method, revenues are recognized as work is performed based on
the estimated completion to date calculated by multiplying the total contract price by
percentage of performance to date, based on total labor dollars or hours incurred to date
to the total estimated labor dollars or hours estimated at completion. Application of the
percentage of completion method of accounting requires the use of estimates of costs to be
incurred for the performance of the contract. Contract costs include all direct material
and labor costs and those indirect costs related to contract performance, such as indirect
labor, supplies, tools, repairs and all costs associated with operation of equipment
(excluding depreciation). The cost estimation process is based upon the professional
knowledge and experience of the companys engineers, project managers, and financial
professionals. Factors that are considered in estimating the work to be completed and
ultimate contract recovery include the availability and productivity of labor, the nature
and complexity of the work to be performed, the effect of change orders, the availability
of materials, the effect of any delays in performance and the recoverability of any
claims. Changes in job performance, job conditions, estimated profitability and final
contract settlements may result in revisions to costs and income and their effects are
recognized in the period in which the revisions are determined. Whenever revisions of
estimated contract costs and contract values indicate that the contract costs will exceed
estimated revenues, thus creating a loss, a provision for the total estimated loss is
recorded in that period.

Warranties

We
provide for estimated warranty costs at the time of sale based upon historical rates
applicable to individual product lines. In addition, specific provisions are made when the
costs of such warranties are expected to exceed accruals. Our standard terms and
conditions of sale include a warranty for parts and service for the earlier of 18 months
from the date of shipment or 12 months from the date of initial operations.

Research
and Development Expense

Research and
development costs are charged to expense as incurred. These costs are included as a
component of selling, general and administrative expenses on the consolidated statements
of operations. Such amounts were $3.5 million, $3.6 million, and $3.4 million in fiscal
years 2004, 2003 and 2002, respectively.

Foreign
Currency

Assets
and liabilities of our foreign joint venture operation, located in Singapore, are
translated at year-end exchange rates, and revenues and expenses are translated at average
exchange rates prevailing during the period. Translation adjustments are recorded as other
comprehensive income, a separate component of stockholders equity, in the
accompanying consolidated financial statements. Gains and losses from foreign currency
transactions are included in earnings.

Stock-Based
Compensation

In
accordance with the provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, we have elected to account for our stock-based employee compensation
plans under the intrinsic value method established by Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees.
Under APB No. 25, no compensation expense is recorded when the exercise price of the
employee stock option is greater than or equal to the market price of the common stock on
the grant date.

33

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

If
compensation expense for our stock option plans had been determined based on the fair
value at the grant date for awards consistent with the provisions of SFAS No. 123, our net
income and earnings per share would have been as follows:

|                                                                                                                                                   |                         |       |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------- | ----- | -
|                                                                                                                                                   | Years Ended October 31,
|                                                                                                                                                   |                         | 2004  |  
|Net income, as reported                                                                                                                            | $                       | 1,669 | $
|Less:  Total stock-based employee compensation expense
    determined under fair value based method for all awards,
    net of related tax effects |                         | (802) |  
|                                                                                                                                                   |                         |       |  
|Pro forma net income                                                                                                                               | $                       | 867   | $
|                                                                                                                                                   |                         |       |  
|Basic earnings per share:                                                                                                                          |                         |       |  
|As reported                                                                                                                                        | $                       | 0.16  | $
|Pro forma                                                                                                                                          | $                       | 0.08  | $
|Diluted earnings per share:                                                                                                                        |                         |       |  
|As reported                                                                                                                                        | $                       | 0.15  | $
|Pro forma                                                                                                                                          | $                       | 0.08  | $

The
effects of applying SFAS No. 123 in the pro forma disclosure above may not be indicative
of future amounts as additional awards in future years are anticipated.

The
fair value of each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:

|                                |  |         | 
|------------------------------- |  | ------- | 
|                                |  | 2004    | 
|Expected life of options        |  | 7 years | 
|Risk-free interest rate         |  | 4.03%   | 
|Expected dividend yield         |  | 0.00%   | 
|Expected stock price volatility |  | 37.28%  | 

Comprehensive
Income

Accumulated
other comprehensive income, which is included as a component of stockholders equity,
includes unrealized gains or losses on available-for-sale marketable securities and
derivative instruments and currency translation adjustments in foreign consolidated
subsidiaries.

During
2004, we sold two of our corporate bonds that were classified as available-for-sale
securities. We recognized the gain on the sale of these securities in our consolidated
statement of operations, and the unrealized gain shown in other comprehensive income for
the year ended October 31, 2004 was affected by this reclassification adjustment as
follows (in thousands):

|Unrealized holding gains arising during period                          | $ | 189  |  |  |  |  | 
|----------------------------------------------------------------------- | - | ---- |  |  |  |  | 
|Less:  Reclassification adjustment for gains included in net
    income |   | (34) |  |  |  |  | 
|                                                                        |   |      |  |  |  | 
|Net unrealized gains on marketable securities                           |   | 155  |  |  |  |  | 
|                                                                        |   |      |  |  |  | 

34

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

New
Accounting Standards

In
November 2003, the Emerging Issues Task Force (EITF) reached a consensus opinion on EITF
03-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain
Investments. EITF 03-1 provides guidance on the new requirements for
other-than-temporary impairment and its application to debt and marketable equity
investments that are accounted for under SFAS No. 115. The new requirements are effective
for fiscal years ending after December 15, 2003. The adoption of EITF 03-1 during the
quarter ended January 31, 2004 had no impact on our consolidated financial position,
results of operations or cash flows.

In
March 2004, the EITF reached a consensus opinion on EITF 03-06, Participating
Securities and the Two-Class Method under FASB Statement No. 128, Earnings Per
Share. EITF 03-06 provides guidance in applying the two-class method of calculating
earnings per share for companies that have issued securities other than common stock that
contractually entitle the holder to participate in any dividends declared and earnings of
the company. The opinion defines what constitutes a participating security and how to
apply the two-class method of calculating earnings per share to those securities. EITF
03-06 became effective during the quarter ended July 31, 2004, and the adoption did not
have an impact on our calculation of earnings per share.

In
May 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP)
106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 to provide accounting and
disclosure guidance for employers that sponsor postretirement health care plans that
provide prescription drug benefits. The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (the Act) was signed into law on December 8, 2003.
The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy
to sponsors of retiree health care benefit plans that provide a benefit that is at least
actuarially equivalent to Medicare Part D. The new requirements are effective for interim
periods beginning after June 15, 2004. We provide postretirement health benefits that
include prescription drug benefits, but this benefit ends when the employee reaches the
age of 65. The adoption of FSP 106-2 during the quarter ended October 31, 2004 had no
impact on our postretirement benefit cost.

In
November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB
No. 43, Chapter 4. The amendments made by SFAS No. 151 clarify that abnormal amounts
of idle facility expense, freight, handling costs, and wasted materials (spoilage) should
be recognized as current-period charges and require the allocation of fixed production
overheads to inventory based on the normal capacity of the production facilities. The
guidance is effective for inventory costs incurred during fiscal years beginning after
November 23, 2004. We do not believe the adoption of SFAS No. 151 will have a material
impact on our consolidated financial position, results of operations or cash flows.

In
December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based
Payment. SFAS No. 123(R) will require that the compensation cost relating to
share-based payment transactions be recognized in financial statements. That cost will be
measured based on the fair value of the equity or liability instruments issued. SFAS No.
123(R) covers a wide range of share-based compensation arrangements including share
options, restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. SFAS No. 123(R) replaces FASB Statement No. 123,
Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees. SFAS No. 123, as originally issued
in 1995, established as preferable a fair value-based method of accounting for share-based
payment transactions with employees. However, that Statement permitted entities the option
of continuing to apply the guidance in APB Opinion No. 25, as long as the footnotes to
financial statements disclosed what net income would have been had the preferable fair
value-based method been used. Public entities will be required to apply SFAS No. 123(R) as
of the first interim or annual reporting period that begins after June 15, 2005. We are in
the process of evaluating the impact the adoption of SFAS No. 123(R) will have on our
consolidated financial position, results of operations and cash flows.

35

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

# C.       Stock-Based
Compensation

We
provide an employee stock option plan in which 2.1 million shares of our common stock
would be made available through an incentive program for certain employees. The awards
available under the plan include both stock options and stock grants, and are subject to
certain conditions and restrictions as determined by the Compensation Committee of the
Board of Directors. There were no stock grants during fiscal years 2004, 2003 and 2002.
Stock options granted to the employees are non-qualified and are granted at an exercise
price equal to the fair market value of the common stock on the date of grant. Generally,
options granted have an expiration date of seven years from the grant date and will vest
in increments of 20 percent per year over a five year period. Pursuant to the stock option
plan, option holders who exercise their options and hold the underlying shares of common
stock for five years, vest in a stock grant equal to 20 percent of the original option
shares. While restricted until the expiration of five years, the stock grant is considered
issued at the date of the stock option exercise and included in earnings per share. There
were 154,232 shares available to be granted under this plan as of October 31, 2004.

In
2002, stockholders approved the Non-Employee Director Stock Option Plan for the benefit of
members of the Board of Directors of the Company who, at the time of their service, are
not employees of the Company or any of its affiliates. Annually, each eligible Director
who is continuing to serve as a Director, will receive a grant of an option to purchase
2,000 shares of our Common Stock. The total number of shares of our common stock available
under this plan was 35,117 as of October 31, 2004. Stock options granted to the Directors
are non-qualified and are granted at an exercise price equal to the fair market value of
the common stock at the date of grant. Generally, options granted have expiration terms of
seven years from the date of grant and will vest in full one year from the grant date.

Stock
option activity (number of shares) for the Company during fiscal years 2004, 2003 and 2002
was as follows:

|                                |  |             
|------------------------------- |  | ------------
|                                |  | StockOptions
|Outstanding at October 31, 2001 |  | 834,300     
|Granted                         |  | 26,883      
|Exercised                       |  | (118,970)   
|Forfeited                       |  | (22,040)    
|                                |  |             
|Outstanding at October 31, 2002 |  | 720,173     
|Granted                         |  | 320,700     
|Exercised                       |  | (53,510)    
|Forfeited                       |  | (600)       
|                                |  |             
|Outstanding at October 31, 2003 |  | 986,763     
|Granted                         |  | 27,000      
|Exercised                       |  | (82,986)    
|Forfeited                       |  | (103,384)   
|                                |  |             
|Outstanding at October 31, 2004 |  | 827,393     
|                                |  |             

The
following table summarizes information about stock options outstanding as of October 31,
2004:

|                        |                               |                                            |                                |                               |                                
|----------------------- | ----------------------------- | ------------------------------------------ | ------------------------------ | ----------------------------- | -------------------------------
|Outstanding             | Exercisable                  
|                        |                              
|Range ofExercise Prices | Number Outstanding at10/31/04 | Weighted Average
RemainingContractual Life | Weighted
AverageExercise Price | Number
Exercisable at10/31/04 | Weighted Average Exercise Price
|$8.44 - $8.50           |                               |                                            | 150,410                        |                               | 1.9 years                      
|13.06 - 15.10           |                               |                                            | 304,783                        |                               | 5.6                            
|16.30 - 17.85           |                               |                                            | 348,200                        |                               | 3.7                            
|23.48 - 27.10           |                               |                                            | 24,000                         |                               | 4.3                            
|Total Options           |                               |                                            | 827,393                        |                               | 4.1                            
|                        |                               |                                            |                                |                               |                                
|                        |                               |                                            |                                |                               |                                

36

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The
weighted average fair value of options granted was $7.63, $7.16, and $10.83 per option for
the fiscal years ended October 31, 2004, 2003, and 2002, respectively.

# D.       Earnings per Share

The
following table sets forth the computation of basic and diluted earnings per share (in
thousands, except per share data):

|                                                                 | Years Ended October 31,
|---------------------------------------------------------------- | -----------------------
|                                                                 |                        
|Numerator:                                                       |                        
|Income from continuing operations                                |                        
|Cumulative effect of change in accounting principle, net of tax  |                        
|                                                                 |                        
|Net income                                                       |                        
|                                                                 |                        
|Denominator:                                                     |                        
|Denominator for basic earnings per share-weighted average shares |                        
|Dilutive effect of stock options                                 |                        
|                                                                 |                        
|Denominator for diluted earnings per share-adjusted weighted     |                        
|average shares with assumed conversions                          |                        
|                                                                 |                        
|Basic earnings per share:                                        |                        
|Earnings from continuing operations                              |                        
|Cumulative effect of change in accounting principle              |                        
|                                                                 |                        
|Net earnings                                                     |                        
|                                                                 |                        
|Diluted earnings per share:                                      |                        
|Earnings from continuing operations                              |                        
|Cumulative effect of change in accounting principle              |                        
|                                                                 |                        
|Net earnings                                                     |                        
|                                                                 |                        

For
the years ended October 31, 2004, 2003 and 2002, options to purchase approximately
352,000, 380,000 and 26,000 shares, respectively, were excluded from the computation of
diluted earnings per share because the options exercise prices were greater than the
average market price of our common stock.

# E.       Detail of Selected
Balance Sheet Accounts

Activity in our allowance for doubtful accounts receivable account consists of the following (in thousands):

|                                                                     |             |         
|-------------------------------------------------------------------- | ----------- | --------
|                                                                     | October 31,
|                                                                     |             |         
|                                                                     |             | 2004    
|Balance at beginning of period                                       |             | $ 1,283 
|Adjustments to the allowance                                         |             | (498    
|Deductions for uncollectible accounts written off, net of recoveries |             | (168    
|                                                                     |             |         
|Balance at end of period                                             |             | $    617
|                                                                     |             |         

37

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Activity in our accrued product warranty account consists of the following (in thousands):

|                                |             |        
|------------------------------- | ----------- | -------
|                                | October 31,
|                                |             |        
|                                |             | 2004   
|Balance at beginning of period  |             | $ 1,929
|Additions to the accrual        |             | 1,387  
|Deductions for warranty charges |             | (1,771 
|                                |             |        
|Balance at end of period        |             | $ 1,545
|                                |             |        

The
components of inventories are summarized below (in thousands):

|                                       |             |         
|-------------------------------------- | ----------- | --------
|                                       | October 31,
|                                       |             |         
|                                       |             | 2004    
|Raw materials, parts and subassemblies |             | $  9,167
|Work-in-progress                       |             | 6,165   
|                                       |             |         
|Total inventories                      |             | $ 15,332
|                                       |             |         

The components of costs and estimated earnings on uncompleted contracts (in thousands):

|                                                                                                                         |             |          
|------------------------------------------------------------------------------------------------------------------------ | ----------- | ---------
|                                                                                                                         | October 31,
|                                                                                                                         |             |          
|                                                                                                                         |             | 2004     
|Costs incurred on uncompleted contracts                                                                                  |             | $ 271,442
|Estimated earnings                                                                                                       |             | 49,691   
|                                                                                                                         |             |          
|                                                                                                                         |             | 321,133  
|Less: Billings to date                                                                                                   |             | 316,485  
|                                                                                                                         |             |          
|                                                                                                                         |             | $ 4,648  
|                                                                                                                         |             |          
|Included in accompanying balance sheets under the following
                                             captions:       |             |          
|Costs and estimated earnings in excess of billings on uncompleted
                                             contracts |             | $ 19,822 
|Billings in excess of costs and estimated earnings on uncompleted
                                             contracts |             | (15,174  
|                                                                                                                         |             |          
|                                                                                                                         |             | $ 4,648  
|                                                                                                                         |             |          

Property,
plant and equipment are summarized below (in thousands):

|                                         |             |           |  
|---------------------------------------- | ----------- | --------- | -
|                                         | October 31, | Range of  |  
|                                         |             |           |  
|                                         |             | 2004      |  
|Land                                     |             | $   4,720 |  
|Buildings and improvements               |             | 39,629    |  
|Machinery and equipment                  |             | 29,804    |  
|Furniture and fixtures                   |             | 2,752     |  
|Construction in progress                 |             | 5,336     |  
|                                         |             |           |  
|                                         |             | 82,241    |  
|Less-accumulated depreciation            |             | (37,200   | )
|                                         |             |           |  
|Total property, plant and equipment, net |             | $ 45,041  |  
|                                         |             |           |  

Included
in property and equipment are assets under capital lease of $325,000 and $177,000 at
October 31, 2004 and 2003, with related accumulated depreciation of $80,000 and $74,000,
respectively. Depreciation expense, including the depreciation of capital leases, was $4.3
million, $5.0 million, and $4.7 million for fiscal years 2004, 2003 and 2002,
respectively.

# F.       Employee Benefit Plans

We
have a defined employee contribution 401(k) plan for substantially all of our employees.
We match 50% of employee contributions up to an employee contribution of six percent of
each employees salary. We recognized expenses of $1.2 million, $1.4 million and $1.4
million in fiscal years 2004, 2003 and 2002, respectively, under this plan.

38

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

We
have established an employee stock ownership plan (ESOP) for the benefit of
substantially all full-time employees other than employees covered by a collective
bargaining agreement to which the ESOP has not been extended by any agreement or action of
ours. The ESOP initially purchased 793,525 shares of the Companys common stock from
a major stockholder. At October 31, 2004 and 2003 there were 606,912 and 634,629 shares in
the trust with 375,858 and 358,712 shares allocated to participants, respectively. The
funding for this plan was provided through a loan from the Company of $4.5 million. This
loan will be repaid by the ESOP over a twenty-year period with equal payments of $424,000
per year including interest at 7 percent. We recorded deferred compensation as a
contra-equity account for the amount loaned to the ESOP in the accompanying consolidated
balance sheets. We are required to make annual contributions to the ESOP to enable it to
repay its loan to us. The deferred compensation account is amortized as compensation
expense over twenty years as employees earn their shares for services rendered. The loan
agreement also provides for prepayment of the loan if we elect to make any additional
contributions. Compensation expense for fiscal years 2004, 2003 and 2002 was $297,000,
$277,000, and $252,000, respectively and interest income for fiscal years 2004, 2003 and
2002 was $128,000, $148,000, and $166,000, respectively. The receivable from the ESOP is
recorded as a reduction from stockholders equity and the allocated and unallocated
shares of the ESOP are treated as outstanding common stock in the computation of earnings
per share. As of October 31, 2004 and 2003, the remaining ESOP receivable was $1.5 million
and $1.8 million, respectively.

In
October 1985 and February 1987, we entered into Executive Benefit Agreements with several
key officers and employees. Three participants remain in this plan, which provides for
payments in accordance with a predetermined plan upon retirement or death. We recognize
the cost of this plan over the projected years of service of the participant. We have
insured the lives of these key employees to assist in the funding of the deferred
compensation liability.

In
November 1992, we established a plan to extend to retirees health benefits which are
available to active employees under our existing health plans. Participants became
eligible for retiree health care benefits when they retired from active service at age 55
with a minimum of ten years of service. Generally, the health plans paid a stated
percentage of medical and dental expenses reduced for any deductible and co-payment. These
plans are unfunded. Medical coverage may be continued by the retired employee up to age 65
at the average cost to the Company of active employees. At the age of 65, when the
employee became eligible for Medicare, the benefits provided by the Company were to be
reduced by the amount provided by Medicare and the cost to the retired employee would be
reduced to 50 percent of the average cost to the Company of active employees.

In
1994, we modified our postretirement benefits to provide retiree health care benefits to
only current retirees and active employees who were eligible to retire by December 31,
1999. Participants eligible for such benefits were required to pay between 20 percent and
100 percent of our average cost of benefits based on years of service. In addition,
benefits would end upon the employees attainment of age 65. The effect of these
modifications significantly reduced our postretirement benefit cost and accumulated
benefit obligation.

The
plan was amended effective January 1, 2000 to provide coverage for employees, age 55 or
more but less than 65, who retire on or after January 1, 2000 with at least 10 years of
service. The retiree is required to pay the full retiree cost less the amount paid by the
Company, which is a percentage of the year 2000 cost. Effective as of the November 1, 2002
valuation date, retirees are required to pay the COBRA rate, instead of the full retiree
cost, less the Companys subsidy.

39

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

For the year ended October 31, 2004, the
measurement of postretirement benefit expense was based on assumptions used to value the
postretirement benefit liability as of November 1, 2003, our measurement date. The following
table illustrates the components of net periodic benefit expense, funded status, the
change in funded status, and the change in accumulated benefit obligation of the
postretirement benefit plans (in thousands):

|                                                           |  | October 31, |  
|---------------------------------------------------------- |  | ----------- | -
|                                                           |  | 2004        |  
|Components of net periodic postretirement benefit expense: | 
|Service cost                                               |  | $      75   |  
|Interest cost                                              |  | 73          |  
|Prior service cost                                         |  | 108         |  
|Net (gain) loss recognized                                 |  | (26         | )
|                                                           |  |             |  
|Net periodic postretirement benefit expense                |  | $    230    |  
|                                                           |  |             |  
|Funded Status:                                             | 
|Retirees                                                   |  | $    94     |  
|Fully eligible active participants                         |  | 507         |  
|Other actual participants                                  |  | 754         |  
|                                                           |  |             |  
|Accumulated postretirement benefit obligation              |  | 1,355       |  
|Less unrecognized balances:                                | 
|Prior service cost                                         |  | 822         |  
|Net actuarial (gain) loss                                  |  | (544        | )
|                                                           |  |             |  
|Net amount recognized                                      |  | $   1,077   |  
|                                                           |  |             |  
|Changes in accumulated postretirement benefit obligation:  | 
|Balance at beginning of year                               |  | $   1,723   |  
|Service cost                                               |  | 75          |  
|Interest cost                                              |  | 73          |  
|Loss due to plan change                                    |  | --          |  
|Actuarial (gain) loss                                      |  | (316        | )
|Curtailment (gain)                                         |  | (150        | )
|Benefits paid                                              |  | (50         | )
|                                                           |  |             |  
|Balance at end of year                                     |  | $ 1,355     |  
|                                                           |  |             |  
|Fair value of plan assets                                  |  | --          |  
|                                                           |  |             |  
|Weighted average assumptions:                              | 
|Discount rate                                              |  | 5.8%        |  

It is
assumed that 70% of employees who are eligible will elect medical coverage, decreasing to 40% in 2014. The
assumed health care cost trend measuring the accumulated postretirement benefit obligation
was 9% in fiscal year 2004. This trend is expected to grade down to 5% in fiscal year 2008.
If the health care trend rate assumptions were
increased or decreased by 1% as of October 31, 2004, the effect of this change on the
accumulated postretirement benefit obligation would be approximately $80,000. The effect
on the aggregate service and interest cost components of the net periodic postretirement
benefit cost from a 1% increase or decrease would be approximately $12,000.

40

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

As
of October 31, 2004, the cash flow estimates for expected benefit payments during each of
the next ten years are as follows (in thousands):

|                  | 
|----------------- | 
|                  | 
|Years Ending      | 
|October 31,       | 
|2005              | 
|2006              | 
|2007              | 
|2008              | 
|2009              | 
|2010 through 2014 | 
|                  | 

# G.       Long-Term Debt

Long-term
debt consists of the following (in thousands):

|                                                          |             |        
|--------------------------------------------------------- | ----------- | -------
|                                                          | October 31,
|                                                          |             | 2004   
|Industrial development revenue bonds, maturing in October |            
|2021, with annual sinking fund payments of $400,000       |             | $ 6,800
|Capital lease obligations                                 |             | 223    
|Other borrowings                                          |             | 77     
|                                                          |             |        
|Subtotal long-term debt and capital lease obligations     |             | 7,100  
|Less current portion                                      |             | (474   
|                                                          |             |        
|Total long-term debt and capital lease obligations        |             | $ 6,626
|                                                          |             |        

We
borrowed $8 million in October 2001 through a loan agreement funded with proceeds from
tax-exempt industrial development revenue bonds (Bonds). These Bonds were
issued by the Illinois Development Finance Authority and were used for the completion of
our Northlake, IL facility. Pursuant to the Bond issuance, a reimbursement agreement
between the Company and a major domestic bank required an issuance by the bank of an
irrevocable direct-pay letter of credit (Bond LC) to the Bonds trustee
to guarantee payment of the Bonds principal and interest when due. The Bond LC
periodically changes in amount to equal the outstanding balance of the bonds and
terminates on October 25, 2006. The Bond LC is subject to both early termination and
extension provisions customary to such agreements. While the Bonds mature in 2021, the
reimbursement agreement requires annual redemptions of $400,000 beginning on October 25,
2002. A sinking fund is used for the redemption of the Bonds. The Bonds bear interest at a
floating rate determined weekly by the Bonds remarketing agent, which was the
underwriter for the Bonds and is an affiliate of the bank. This interest rate was 1.9% per
annum on October 31, 2004.

We
have a $15 million revolving line of credit agreement with a major domestic bank, which
was amended in October 2004 to extend the maturity date to February 2007. The $15 million
revolving line of credit agreement also provides for the issuance of letters of credit.
The revolving line of credit allows us to elect an interest rate on amounts borrowed of
(1) the banks prime rate, which was 4.75% at October 31, 2004, less .5% on the first
$5 million and the banks prime rate on additional borrowings, or (2) the LIBOR rate,
which was 2.3% at October 31, 2004, plus an additional percentage of .75% to 1.25% based
on our performance. A fee of .20% to .25% is charged on the unused balance of the line.
The agreement contains customary affirmative and negative covenants and requirements to
maintain a minimum level of tangible net worth and profitability. The amount available
under this agreement is reduced by $3.4 million for our outstanding letters of credit,
which excludes the Bond LC that does not affect the available credit under this agreement.
There were no borrowings under this line of credit as of October 31, 2004 or 2003.

Some
machinery and equipment used in our manufacturing facilities were financed through capital
lease agreements. These capital lease agreements are collateralized by the leased
property. The capital lease obligations are at a fixed interest rate of 3%.

41

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The
annual maturities of long-term debt as of October 31, 2004 are as follows (in thousands):

|                                |                          |              | 
|------------------------------- | ------------------------ | ------------ | 
|Year EndingOctober 31,          | Long-TermDebt Maturities | CapitalLease | 
|2005                            |                          | $   419      | 
|2006                            |                          | 458          | 
|2007                            |                          | 400          | 
|2008                            |                          | 400          | 
|2009                            |                          | 400          | 
|Thereafter                      |                          | 4,800        | 
|                                |                          |              | 
|Total long-term debt maturities |                          | $ 6,877      | 
|                                |                          |              | 

# H.       Income Taxes

The net
deferred income tax asset (liability) is comprised of the following (in thousands):

|                                                  |             |        
|------------------------------------------------- | ----------- | -------
|                                                  | October 31,
|                                                  |             | 2004   
|Current deferred income taxes:                    |            
|Gross assets                                      |             | $ 3,289
|Gross liabilities                                 |             | (2,560 
|                                                  |             |        
|Net current deferred income tax asset (liability) |             | 729    
|                                                  |             |        
|Noncurrent deferred income taxes:                 |            
|Gross assets                                      |             | 1,757  
|Gross liabilities                                 |             | (1,145 
|                                                  |             |        
|Net noncurrent deferred income tax asset          |             | 612    
|                                                  |             |        
|Net deferred income tax asset (liability)         |             | $ 1,341
|                                                  |             |        

As
of October 31, 2004, the noncurrent deferred income tax asset is included in other assets
on the consolidated balance sheet. As of October 31, 2003, the current and noncurrent
deferred income tax liabilities are included in other accrued expenses and other
liabilities, respectively, on the consolidated balance sheet.

The
tax effect of temporary differences between GAAP accounting and federal income tax
accounting creating deferred income tax assets and liabilities are as follows (in
thousands):

|                                          |             |         
|----------------------------------------- | ----------- | --------
|                                          | October 31,
|                                          |             | 2004    
|Allowance for doubtful accounts           |             | $    232
|Reserve for accrued employee benefits     |             | 881     
|Warranty reserves                         |             | 581     
|Uncompleted long-term contracts           |             | (2,560  
|Depreciation and amortization             |             | (441    
|Deferred compensation                     |             | 656     
|Postretirement benefits liability         |             | 354     
|Accrued legal                             |             | 357     
|Uniform capitalization and inventory      |             | 1,114   
|Software development costs                |             | (494    
|Deferred rent                             |             | 167     
|Other                                     |             | 494     
|                                          |             |         
|Net deferred income tax asset (liability) |             | $ 1,341 
|                                          |             |         

42

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The
components of the income tax provision (benefit) consist of the following (in thousands):

|                           |                         |          |  
|-------------------------- | ----------------------- | -------- | -
|                           | Years Ended October 31,
|                           |                         | 2004     |  
|Current:                   |                        
|Federal                    |                         | $  1,318 |  
|State                      |                         | 186      |  
|Deferred                   |                         | (1,786   | )
|                           |                         |          |  
|Total income tax provision |                         | $   (282 | )
|                           |                         |          |  

A
reconciliation of the statutory U.S. income tax rate and the effective income tax rate, as
computed on earnings before income tax provision in each of the three years presented in
the Consolidated Statements of Operations is as follows:

|                                            |                         |       |  
|------------------------------------------- | ----------------------- | ----- | -
|                                            | Years Ended October 31,
|                                            |                         | 2004  |  
|Statutory rate                              |                         | 34%   |  
|Revised state tax exposure                  |                         | (15   | )
|State income taxes, net of federal benefit  |                         | 5     |  
|Release of capital loss valuation allowance |                         | (20   | )
|Federal extraterritorial income exclusion   |                         | (27   | )
|Non-taxable interest income                 |                         | (8    | )
|Other permanent tax items                   |                         | 8     |  
|Other                                       |                         | 2     |  
|                                            |                         |       |  
|Effective rate                              |                         | (21)% |  
|                                            |                         |       |  

Our
(benefit) provision for income taxes reflects an effective tax rate on earnings before
income taxes of (21%) in fiscal 2004 compared to 45% in fiscal 2003. During 2004, we
recorded several non-recurring tax adjustments related to the following items:

|a) | A $363,000 benefit was recorded primarily for the benefit of revised
          extraterritorial income exclusion amounts for the years ended 2002 and 2003.
          This benefit was derived by calculating the extraterritorial income exclusion
          amount on a transaction by transaction basis in 2004, as opposed to an aggregate
          basis as originally estimated,
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | A $268,000 valuation allowance related to capital losses was released in 2004.
          We entered into an agreement in 2004 to sell a capital asset that will trigger
          enough capital gain to utilize the capital loss carryforward, and
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c) | We released $200,000 of state income tax reserve in 2004 due to acceptance by
          certain state taxing authorities of voluntary disclosure agreements in 2004.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

Without these adjustments, our 2004 effective tax rate would have
been 40%.

# I.       Goodwill and Other
Intangible Assets

Effective
November 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible
Assets. Under the new rules, goodwill and other intangible assets with indefinite
useful lives are no longer subject to amortization. As a result, we discontinued the
amortization of goodwill beginning November 1, 2002, and the fiscal year 2003 results were
favorably impacted by this reduction in amortization expense by $90,000, net of $53,000
taxes, or $0.01 per diluted share. The statement requires a test for impairment to be
performed annually, or immediately if conditions indicate that impairment could exist.
Intangible assets with definite useful lives will continue to be amortized over their
estimated useful lives.

Upon
adoption, we estimated the fair value of our reporting units using a present value method
that discounted estimated future cash flows. The cash flow estimates incorporated
assumptions on future cash flow growth, terminal values and discount rates. Because the
fair value of some reporting units was below their carrying value, application of SFAS No.
142 required us to complete the second step of the goodwill impairment test and compare
the implied fair value of each reporting units goodwill with the carrying value. As
a result of completing the impairment test, we recorded an impairment charge of $510,000,
net of $285,000 taxes, to write-off the impaired goodwill amounts as a cumulative effect
of a change in accounting principle in the first quarter of 2003. We recorded an
impairment charge of $380,000, net of $214,000 taxes, to write off the full value of
goodwill in our Process Control Systems segment. In our Electrical Power Products segment,
we recorded an impairment charge of $130,000, net of $71,000 taxes. All remaining goodwill
is in our Electrical Power Products segment. No additional impairment was identified as a
result of performing our annual impairment test for 2003 and 2004.

43

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The
following pro forma information is presented to reflect the net income and net earnings
per share to exclude amortization of goodwill for the year ended October 31, 2002 as if
SFAS No. 142 had been adopted as of the beginning of fiscal year 2002 (in thousands,
except per share data):

|                                                              |                        
|------------------------------------------------------------- | -----------------------
|                                                              | Years Ended October 31,
|                                                              |                        
|Income from continuing operations before cumulative effect of |                        
|change in accounting principle                                |                        
|Cumulative effect of change in accounting principle           |                        
|                                                              |                        
|Reported net income                                           |                        
|Addback:  Amortization of goodwill, net of $53 taxes          |                        
|                                                              |                        
|Adjusted net income                                           |                        
|                                                              |                        
|Basic earnings per share:                                     |                        
|Net earnings per share - as reported                          |                        
|Amortization of goodwill                                      |                        
|                                                              |                        
|Adjusted net earnings per share                               |                        
|                                                              |                        
|Diluted earnings per share:                                   |                        
|Net earnings per share - as reported                          |                        
|Amortization of goodwill                                      |                        
|                                                              |                        
|Adjusted net earnings per share                               |                        
|                                                              |                        

A
summary of goodwill and other intangible assets follows (in thousands):

|                                           |                  |                  |  |             
|------------------------------------------ | ---------------- | ---------------- |  | ------------
|                                           | October 31, 2004 | October 31, 2003
|                                           |                  |                 
|                                           |                  | Historical       |  | Accumulated 
|                                           |                  | Cost             |  | Amortization
|Goodwill                                   |                  | $384             |  | $181        
|Intangible assets subject to amortization: |                 
|Deferred loan costs                        |                  | 233              |  | 35          
|Patents and Trademarks                     |                  | 837              |  | 563         

The
above intangible assets are included in other assets on the consolidated balance sheet.
The additional $80,000 of goodwill recorded in 2004 was due to the purchase of an
additional ten percent interest in Powell Industries Asia Private Limited (PIA) on August
1, 2004. Since that time, PIA has been fully consolidated into our financial statements.
  The effect of our acquisition of PIA to our 2004 and 2003 financial statements is not material.
Amortization expense related to intangible assets subject to amortization for the years
ended October 31, 2004, 2003, and 2002 was $70,000, $72,000, and $67,000, respectively.
Estimated amortization expense for each of the subsequent five fiscal years is expected to
be approximately $80,000.

44

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

# J.       Significant Sales Data

No
single customer or export country accounted for more than 10 percent of consolidated
revenues in fiscal years 2004, 2003 or 2002.

|                                                  |                         |            | 
|------------------------------------------------- | ----------------------- | ---------- | 
|Export sales are as follows (in thousands):       | Years Ended October 31,
|                                                  |                         | 2004       | 
|Europe (including former Soviet Union)            |                         | $      402 | 
|Far East                                          |                         | 5,550      | 
|Middle East and Africa                            |                         | 12,384     | 
|North, Central and South America (excluding U.S.) |                         | 10,675     | 
|                                                  |                         |            | 
|Total export sales                                |                         | $ 29,011   | 
|                                                  |                         |            | 

# K.       Commitments and
Contingencies

Leases

We
lease certain offices, facilities and equipment under operating leases expiring at various
dates through 2009. At October 31, 2004, the minimum annual rental commitments under
leases having terms in excess of one year are as follows (in thousands):

|                        | 
|----------------------- | 
|                        | 
|Years Ending            | 
|October 31,             | 
|2005                    | 
|2006                    | 
|2007                    | 
|2008                    | 
|2009                    | 
|Thereafter              | 
|                        | 
|Total lease commitments | 
|                        | 

Lease
expense for all operating leases was $1.8 million, $1.7 million and $1.7 million for
fiscal years 2004, 2003 and 2002, respectively.

Letters
of Credit and Bonds

We
are contingently liable for secured and unsecured letters of credit of $10.3 million as of
October 31, 2004. We also had performance bonds totaling approximately $167.9 million that
were outstanding at October 31, 2004. Performance bonds are used to guarantee contract
performance to our customers.

Litigation

We
are involved in various legal proceedings, claims, and other disputes arising in the
ordinary course of business which, in general, are subject to uncertainties and the
outcomes are not predictable. However, we do not believe that the ultimate conclusion of
these disputes will materially affect our financial position or results of operations.

Other
Contingencies

The
Company is a party to a construction joint venture (the Joint Venture), which provided
process control systems to the Central Artery/Tunnel Project (the Project) in
Boston, Massachusetts, under a contract with the Massachusetts Turnpike Authority (the
MTA). The Joint Venture has submitted claims against the MTA seeking
additional reimbursement for work done by the Joint Venture on the project. In a separate
matter, the Joint Venture received notice dated May 9, 2002 (the Notice) from
the MTA that a follow-on contractor has asserted a claim against the MTA in connection
with work done or to be done by the follow-on contractor on the project. One component of
the Project involved the Joint Venture performing specific work that the MTA then bid for
the follow-on contractor to complete. The follow-on contractors claim, in part,
includes allegations that work performed by the Joint Venture was
insufficient and defective, thus possibly contributing to the follow-on contractors
claims for damages against the MTA. In the Notice of the potential claim, the MTA advised
the Joint Venture that if it is required to pay the follow-on contractor additional
amounts and such payment is the result of defective work by the Joint Venture, the MTA
will seek indemnification from the Joint Venture for such additional amounts.

45

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The
Joint Venture has no reason to believe the systems it delivered under contract to the MTA
were defective and accordingly it intends to vigorously defend any such allegations. An unfavorable
 outcome to the follow-on contractors claim could have a material adverse effect on the Companys financial condition and
results of operations.The
ultimate disposition of the Joint Ventures claim against the MTA and the MTAs
potential claim for indemnification based on the follow-on contractors claims are
not presently determinable.

# L.       Business Segments

We
manage our business through operating subsidiaries, which are combined into two reportable
business segments: Electrical Power Products and Process Control Systems. Electrical Power
Products includes equipment and systems for the distribution and control of electrical
energy. Process Control Systems consists principally of instrumentation, computer
controls, communications and data management systems to control and manage critical
processes.

The
tables below reflect certain information relating to our operations by segment. All
revenues represent sales from unaffiliated customers. The accounting policies of the
segments are the same as those described in the summary of significant accounting
policies. Corporate expenses and certain assets are allocated to the operating segments
primarily based on revenues. The corporate assets are mainly cash, cash equivalents and
marketable securities.

Detailed
information regarding our business segments is shown below (in thousands):

|                          |                         |           | 
|------------------------- | ----------------------- | --------- | 
|                          | Years Ended October 31,
|                          |                         | 2004      | 
|Revenues:                 |                        
|Electrical Power Products |                         | $ 173,456 | 
|Process Control Systems   |                         | 32,686    | 
|                          |                         |           | 
|Total                     |                         | $ 206,142 | 
|                          |                         |           | 
|Gross profit:             |                        
|Electrical Power Products |                         | $  29,122 | 
|Process Control Systems   |                         | 6,855     | 
|                          |                         |           | 
|Total                     |                         | $  35,977 | 
|                          |                         |           | 

| | Income (loss) from continuing operations before income 
  taxes and cumulative effect of change in
accounting   principle:
| | --------------------------------------------------------------------------------------------------------------------------

|                          |  |            |  
|------------------------- |  | ---------- | -
|Electrical Power Products |  | $      (87 | )
|Process Control Systems   |  | 1,451      |  
|                          |  |            |  
|Total                     |  | $  1,364   |  
|                          |  |            |  

46

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

|                              |  |                
|----------------------------- |  | ---------------
|                              | 
|                              |  | October 31,2004
|Identifiable tangible assets: | 
|Electrical Power Products     |  | $ 114,374      
|Process Control Systems       |  | 11,889         
|Corporate                     |  | 69,270         
|                              |  |                
|Total                         |  | $ 195,533      
|                              |  |                

# M.       Consolidation of
Operations

To
reduce overhead costs and improve efficiency, we initiated a consolidation plan in fiscal
2004 to reduce the number of operations within our Electrical Power Products segment. As
of June 30, 2004, the consolidation of our Greenville, Texas and North Canton, Ohio
facilities was complete, resulting in the transfer of our distribution switch product
lines. In October 2004, we completed the consolidation of our bus duct product lines by
combining our Elyria, Ohio and Northlake, Illinois facilities. By the end of the first
quarter 2005, we expect to complete our consolidation plan with the closure of our
Watsonville, California facility. This facility is under lease, with the lease expiring in
February 2005. The completed consolidations have resulted in the involuntary termination
of 90 employees. The closure of our Watsonville facility will result in the termination of
approximately 12 employees.

As
of October 31, 2004, the unpaid balance of the consolidation costs is included in accrued
salaries, bonuses and commissions and accounts payable on the consolidated balance sheet.

Details
of the consolidation reserve during the current period are as follows:

|                                |                               |                             |                                |          
|------------------------------- | ----------------------------- | --------------------------- | ------------------------------ | ---------
|                                |                               |                             |                                |          
|                                | Accrued Chargesat November 1, | Year Ended October 31, 2004 | Accrued Charges at October 31,
|                                | 2003                          | Charges                     |                                | Payments 
|                                |                               | (In thousands)              |                               
|Cash charges:                   |                               |                             |                                |          
|Severance and employee benefits |                               | $        --                 |                                | $   1,084
|Shutdown costs                  |                               | --                          |                                | 551      
|                                |                               |                             |                                |          
|Subtotal                        |                               | $        --                 |                                | 1,635    
|                                |                               |                             |                                |          
|Noncash charges:                |                               |                             |                                |          
|Write-down of inventory         |                               |                             |                                | 535      
|                                |                               |                             |                                |          
|Total charges                   |                               |                             |                                | $   2,170
|                                |                               |                             |                                |          

The
majority of our consolidation charges relate to severance and employee benefits expense for
involuntary terminations during fiscal 2004. The shutdown costs shown above
include relocation expenses for employees, equipment, and inventory incurred during fiscal
2004. The relocation and setup of equipment constitutes approximately $400,000 of the
shutdown costs shown above. Consolidation costs were recorded in the consolidated
statement of operations for the year ended October 31, 2004 as follows:

|                                    |                  |          | 
|----------------------------------- | ---------------- | -------- | 
|                                    |                  |          | 
|                                    | October 31, 2004
|Cost of sales                       |                  | $  1,777 | 
|Selling and administrative expenses |                  | 393      | 
|                                    |                  |          | 
|Total                               |                  | $  2,170 | 
|                                    |                  |          | 

We
expect to incur an additional $400,000 in consolidation expenses in fiscal 2005 to
complete the consolidation of our Watsonville facility.

47

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

# N.       Quarterly Results of
Operations (unaudited)

The
table below sets forth the unaudited consolidated operating results by fiscal quarter for
the years ended October 31, 2004 and 2003 (in thousands, except per share data):

|                                  |               |  |   |        | 
|--------------------------------- | ------------- |  | - | ------ | 
|                                  | 2004 Quarters
|                                  |              
|                                  |               |  |   | First  | 
|Revenues                          |               |  | $ | 53,227 | 
|Gross profit                      |               |  |   | 9,555  | 
|Net income (loss)                 |               |  |   | 747    | 
|Basic earnings (loss) per share   |               |  |   | 0.07   | 
|Diluted earnings (loss) per share |               |  |   | 0.07   | 

|                                          |               |  |   |                               | 
|----------------------------------------- | ------------- |  | - | ----------------------------- | 
|                                          | 2003 Quarters
|                                          |              
|                                          |               |  |   | First(As Restated,See Note O) | 
|Revenues                                  |               |  | $ | 71,580                        | 
|Gross profit                              |               |  |   | 14,186                        | 
|Income from continuing operations before  |               | 
|cumulative effect of change in accounting |               | 
|principle                                 |               |  |   | 2,998                         | 
|Net income                                |               |  |   | 2,488                         | 
|Basic earnings per share:                 |               | 
|Earnings from continuing operations       |               |  |   | 0.28                          | 
|Net earnings                              |               |  |   | 0.24                          | 
|Diluted earnings per share:               |               | 
|Earnings from continuing operations       |               |  |   | 0.28                          | 
|Net earnings                              |               |  |   | 0.23                          | 

|                                          |               |  |   |                              | 
|----------------------------------------- | ------------- |  | - | ---------------------------- | 
|                                          | 2003 Quarters
|                                          |              
|                                          |               |  |   | First(As PreviouslyReported) | 
|Revenues                                  |               |  | $ | 71,580                       | 
|Gross profit                              |               |  |   | 14,232                       | 
|Income from continuing operations before  |               | 
|cumulative effect of change in accounting |               | 
|principle                                 |               |  |   | 3,034                        | 
|Net income                                |               |  |   | 2,524                        | 
|Basic earnings per share:                 |               | 
|Earnings from continuing operations       |               |  |   | 0.29                         | 
|Net earnings                              |               |  |   | 0.24                         | 
|Diluted earnings per share:               |               | 
|Earnings from continuing operations       |               |  |   | 0.28                         | 
|Net earnings                              |               |  |   | 0.24                         | 

The sum of the individual earnings
per share amounts may not agree with year-to-date earnings per share as each periods
computation is based on the weighted average number of shares outstanding during the
period.

48

---

POWELL INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

# O.       Restatement

Subsequent to the issuance of our consolidated financial
 statements for the year ended October 31, 2003, we determined that rent
expense for two lease agreements with escalation clauses had been recorded on a cash paid basis rather than straight line basis over
the term of the lease.  As a result, the accompanying consolidated financial statements for the years ended October 31, 2003 and
2002 have been restated from amounts previously reported.

A summary of the significant effects of the restatement
 is as follows (in thousands, except per share data):

|                                                                                                                    |                            |                            |  |              
|------------------------------------------------------------------------------------------------------------------- | -------------------------- | -------------------------- |  | -------------
|                                                                                                                    | Year EndedOctober 31, 2003 | Year EndedOctober 31, 2002
|                                                                                                                    |                            |                           
|                                                                                                                    |                            | As PreviouslyReported      |  | As Restated  
|Consolidated Statements of Operations                                                                               |                           
|Cost of goods sold                                                                                                  |                            | $   204,415                |  | $   204,585  
|Gross Profit                                                                                                        |                            | 48,966                     |  | 48,796       
|Selling, general and administrative expenses                                                                        |                            | 35,297                     |  | 35,339       
|Income before interest , income taxes, and    cumulative effect of change in accounting    principle                |                            | 13,669                     |  | 13,457       
|Income from continuing operations before income
   taxes and cumulative effect of change in    accounting principle |                            | 13,844                     |  | 13,632       
|Income tax provision (benefit)                                                                                      |                            | 6,216                      |  | 6,137        
|Income from continuing operations before    cumulative effect of change in accounting    principle                  |                            | 7,628                      |  | 7,495        
|Net income                                                                                                          |                            | 7,118                      |  | 6,985        
|Net earnings per common share:   Basic:                                                                             |                            |                            |  |              
|Earnings from continuing operations                                                                                 |                            | $        0.72              |  | $        0.71
|Net earnings                                                                                                        |                            | $        0.67              |  | $        0.66
|Diluted:                                                                                                            |                            |                            |  |              
|Earnings from continuing operations                                                                                 |                            | $        0.71              |  | $        0.70
|Cumulative effect of change in accounting         principle                                                         |                            | $        0.04              |  | $        0.05
|                                                                                                                    |                            |                            |  |              
|Net earnings                                                                                                        |                            | $        0.67              |  | $        0.65
|                                                                                                                    |                            |                            |  |              

|                                           | As of October 31, 2003
|------------------------------------------ | ----------------------
|                                           | As PreviouslyReported 
|Consolidated Balance Sheet                 |                       
|Other assets                               |                       
|Total Assets                               |                       
|Other accrued expenses                     |                       
|Total Current Liabilities                  |                       
|Other liabilities                          |                       
|Total Liabilities                          |                       
|Retained earnings                          |                       
|Total Stockholders Equity                 |                       
|Total Liabilities and Stockholders Equity |                       

49

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Item 9.          Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure

Information
concerning a change in accountants is included in the Companys Form 8-K filed with
the Securities and Exchange Commission on May 13, 2004.

Item 9A.       Controls and
Procedures

We maintain disclosure
controls and procedures that are designed to ensure that information  required to be disclosed in our
reports filed with the Securities and Exchange  Commission  pursuant to the  Securities  Exchange Act of 1934 is recorded,  processed,
summarized  and reported  within the time periods  specified in the rules and forms of the  Commission  and that such  information  is
accumulated  and  communicated to our management,  including our Chief Executive  Officer (CEO) and Chief Financial  Officer (CFO), as
appropriate, to allow timely decisions regarding required disclosures.

In connection with the year-end
review of our consolidated  financial statements for the year ended October 31,  2004 and the audit of
those statements by our independent  public  accountants,  we determined that a subsidiary had unintentionally misapplied an accounting
principle.  Specifically,  lease expenses were recorded  incorrectly  for the years ended  October 31,  2003 and 2002 with respect to
two lease  agreements with escalation  clauses,  which were recorded based on actual cash paid rather than straight line over the term
of the lease.  As a result of this  discovery,  we have  corrected  the  accounting  treatment of these  leases and have  restated our
earnings for the years ended  October 31,  2003 and 2002. We have concluded that the  misapplication  of this accounting  principle is
the result of a significant  deficiency in the design or operation of our internal  controls  regarding the  application  of generally
accepted  accounting  principles and the review process of the  implementation  of accounting  guidance.  A significant  deficiency is
defined as a control  deficiency,  or  combination  of  deficiencies,  that  adversely  affects  the  company's  ability to  initiate,
authorize,  record,  process or report external  financial data reliably in accordance with generally accepted  accounting  principles
such  that  there is more than a remote  likelihood  that a  misstatement  of the  company's  financial  statements  that is more than
inconsequential  will not be prevented or detected.  A material  weakness is a significant  deficiency,  or combination of significant
deficiencies,  that results in more than a remote  likelihood  that a material  misstatement  of the financial  statements will not be
prevented or detected.  We have concluded that the misapplication  was not a material weakness because,  among other things, the error
resulting in the unintentional misapplication  occurred at a single  subsidiary,  did not result in any material  restatement  of our  consolidated
financial  statements  for the  years  ended  October 31,  2003 and 2002  and,  based on  conservative  future  consolidated  earnings
projections,  would not result in more than a remote likelihood that a material misstatement of our consolidated  financial statements
would not be prevented or detected.

We have discussed the significant  deficiency  described above with the Audit Committee.  Our
management  is working  with our Audit  Committee  to  identify  and  implement  corrective  actions  where  required  to improve  the
effectiveness of our internal  controls,  including the enhancement of our systems and procedures.  Specifically,  we are implementing
the following measures:

| |  | reviewing financial controls and procedures for recording expenses;
|- |  | -------------------------------------------------------------------

| |  | additional training of our accounting staff on complex accounting matters, including recording of expenses;
|- |  | -----------------------------------------------------------------------------------------------------------

| |  | modifying controls and procedures to ensure appropriate accounting treatment of the accounting for leases at the inception
                  of the lease.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

Management,  with the participation
of our CEO and CFO, has evaluated the effectiveness of our disclosure  controls and procedures (as
defined in Rules  13a-15(e) and 15d-15(e) of the  Securities  Exchange Act of 1934, as amended) as of the end of the period covered by
this  report.  Based on such  evaluation,  our CEO and CFO have  each  concluded  that as of the end of such  period,  our  disclosure
controls and procedures were effective.

50

---

We also  maintain a system of internal  accounting  controls  that are  designed to provide  reasonable  assurance  that our books and
records  accurately  reflect our  transactions  and that our policies and procedures are followed.  There have not been any changes in
our  internal  controls over  financial  reporting  (as such term is defined in Rules  13a-15(f)  and  15d-15(f)  under the  Securities
Exchange Act of 1934, as amended) during the fourth quarter of our 2004 fiscal year that have materially  affected,  or are reasonably
likely to materially affect, our internal control over financial reporting.

Item 9B.       Other
Information

None

# PART III

Items 10, 11, 12, 13,
and 14. Directors and Executive Officers of the Registrant; Executive Compensation;
Security Ownership of CertainBeneficial Owners and Management; Certain Relationships
and Related Transactions; and Principal Accountant Fees and Services

The
information required by these items is incorporated in this Annual Report by reference to
our definitive proxy statement pursuant to Regulation 14A, to be filed with the Securities
and Exchange Commission not later than 120 days after the close of our fiscal year ended
October 31, 2004, under the headings set forth above.

# PART IV

# Item 15.    Exhibits and
Financial Statement Schedules

The following exhibits are filed as part of this Annual Report on Form 10-K, or
          are incorporated herein by reference. Where an exhibit is filed with this Annual
          Report, an asterisk (*) precedes the exhibit number.

|   |                                                                                                                                                                                       
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                       
|1. | Financial Statements.  Reference is made to the Index to Consolidated Financial Statements at Item 8 of this report.                                                                  
|2. | All schedules are omitted because they are not applicable or the required information is shown in the financial
                  statements or the notes to the financial statements.

51

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|         |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-------- | -------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.       | Exhibits
|3.1 -    |          | Certificate of Incorporation of Powell Industries, Inc. filed with the Secretary of State of the State of Delaware
                        on February 11, 2004 (filed as Exhibit 3.1 to our Form 8-A/A filed November 1, 2004, and incorporated herein by
                        reference).                                                                                                                                                     
|3.2 -    |          | By-laws of Powell Industries, Inc. (filed as Exhibit 3.2 to our Form 8-A/A filed November 1, 2004, and
                        incorporated herein by reference).                                                                                                                                                                                                                                                                                  
|10.1 -   |          | Powell Industries, Inc., Incentive Compensation Plan (filed as Exhibit 10.1 to our Form 10-K for the fiscal year
                        ended October 31, 2003, and incorporated herein by reference).                                                                                                                                                                                                                                            
|10.2 -   |          | Description of Supplemental Executive Benefit Plan (filed as Exhibit 10 to our Form 10-K for the fiscal year ended
                        October 31, 1984, and incorporated herein by reference).                                                                                                                                                                                                                                                
|10.3 -   |          | 1992 Powell Industries, Inc. Stock Option Plan (filed as an exhibit to our preliminary proxy statement dated
                        January 24, 1992, and incorporated herein by reference).                                                                                                                                                                                                                                                      
|10.4 -   |          | Amendment to 1992 Powell Industries, Inc. Stock Option Plan (filed as Exhibit 10.8 to our Form 10-Q for the
                        quarter ended April 30, 1996 and incorporated herein by reference).                                                                                                                                                                                                                                            
|10.5 -   |          | Amendment to 1992 Powell Industries, Inc. Stock Option Plan (the cover of the 1992 Powell Industries, Inc. Stock
                        Option Plan has been noted to reflect the increase in the number of shares authorized for issuance under the Plan
                        from 1,500,000 to 2,100,000, which increase was approved by the stockholders of the Company at the 2001 Annual
                        Meeting of Stockholders).
|10.6 -   |          | Powell Industries, Inc. Directors' Fees Program (filed as Exhibit 10.7 to our Form 10-K for the fiscal year ended
                        October 31, 1992, and incorporated herein by reference).                                                                                                                                                                                                                                                 
|10.7 -   |          | Powell Industries, Inc. Executive Severance Protection Plan (filed as Exhibit 10.7 to our Form 10-K for the fiscal
                        year ended October 31, 2002, and incorporated herein by reference).                                                                                                                                                                                                                                     
|10.8 -   |          | Powell Industries, Inc. Non-Employee Directors Stock Option Plan (filed as Exhibit 10.9 to our Form 10-K for the
                        fiscal year ended October 31, 2002, and incorporated herein by reference).                                                                                                                                                                                                                                
|10.9 -   |          | Powell Industries, Inc. Deferred Compensation Plan (filed as Exhibit 10.9 to our Form 10-K for the fiscal year
                        ended October 31, 2002, and incorporated herein by reference).                                                                                                                                                                                                                                              
|*10.10 - |          | Amended Loan Agreement dated October 29, 2004, between Powell Industries, Inc. and Bank of America, N.A.                                                                                                                                                                                                                                                                                                                                           
|*10.11 - |          | Amended Letter of Credit and Reimbursement Agreement dated April 15, 2004, between Powell Industries, Inc. and
                        Bank of America, N.A.                                                                                                                                                                                                                                                                                       
|*21.1 -  |          | Subsidiaries of Powell Industries, Inc.                                                                                                                                                                                                                                                                                                                                                                                                            
|*23.1 -  |          | Consent of Deloitte & Touche LLP                                                                                                                                                                                                                                                                                                                                                                                                                   
|*23.2 -  |          | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                                                                                                                                                                                                                              
|*31.1 -  |          | Certification of Thomas W. Powell pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                                                                                                                                                                                                                                                                                            

|        |  |                                                                                                                                                                            
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  |                                                                                                                                                                            
|*31.2 - |  | Certification of Don R. Madison pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                      
|*32.1 - |  | Certification of Thomas W. Powell Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
                        of the Sarbanes-Oxley Act of 2002.
|*32.2 - |  | Certification of Don R. Madison Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
                        the Sarbanes-Oxley Act of 2002.  

52

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SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, there unto duly authorized.

| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | POWELL INDUSTRIES, INC.                                                                                                                                     
| | By/s/      THOMAS W. POWELL             
   Thomas W. Powell
   President and Chief Executive Officer
   (Principal Executive Officer)                      
| | By   /s/    DON R. MADISON                  
   Don R. Madison
   Vice President and Chief Financial Officer
   (Principal Financial and Accounting Officer)

Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant in the capacities and on the date indicated:

|                                                            |  |                      
|----------------------------------------------------------- |  | ---------------------
|Signature                                                   |  | Title                
|/s/ THOMAS W. POWELL 
           Thomas W. Powell           |  | Chairman of the Board
|/s/ JOSEPH L. BECHERER 
           Joseph L. Becherer       |  | Director             
|/s/ EUGENE L. BUTLER 
           Eugene L. Butler           |  | Director             
|/s/ JAMES F. CLARK 
           James F. Clark               |  | Director             
|/s/ STEPHEN W. SEALE, JR. 
           Stephen W. Seale, Jr. |  | Director             
|/s/ ROBERT C. TRANCHON 
           Robert C. Tranchon       |  | Director             
|/s/ RONALD J. WOLNY 
           Ronald J. Wolny             |  | Director             

Date: January 31, 2005

53

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# EXHIBIT INDEX

|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Number   |  | Exhibit Title                                                                                                                                                                                                                                                                                                                                                                                                                                      
|3.1 -    |  | Certificate of Incorporation of Powell Industries, Inc. filed with the Secretary of State of the State of Delaware
                        on February 11, 2004 (filed as Exhibit 3.1 to our Form 8-A/A filed November 1, 2004, and incorporated herein by
                        reference).                                                                                                                                                     
|3.2 -    |  | By-laws of Powell Industries, Inc. (filed as Exhibit 3.2 to our Form 8-A/A filed November 1, 2004, and
                        incorporated herein by reference).                                                                                                                                                                                                                                                                                  
|10.1 -   |  | Powell Industries, Inc., Incentive Compensation Plan (filed as Exhibit 10.1 to our Form 10-K for the fiscal year
                        ended October 31, 2003, and incorporated herein by reference).                                                                                                                                                                                                                                            
|10.2 -   |  | Description of Supplemental Executive Benefit Plan (filed as Exhibit 10 to our Form 10-K for the fiscal year ended
                        October 31, 1984, and incorporated herein by reference).                                                                                                                                                                                                                                                
|10.3 -   |  | 1992 Powell Industries, Inc. Stock Option Plan (filed as an exhibit to our preliminary proxy statement dated
                        January 24, 1992, and incorporated herein by reference).                                                                                                                                                                                                                                                      
|10.4 -   |  | Amendment to 1992 Powell Industries, Inc. Stock Option Plan (filed as Exhibit 10.8 to our Form 10-Q for the
                        quarter ended April 30, 1996 and incorporated herein by reference).                                                                                                                                                                                                                                            
|10.5 -   |  | Amendment to 1992 Powell Industries, Inc. Stock Option Plan (the cover of the 1992 Powell Industries, Inc. Stock
                        Option Plan has been noted to reflect the increase in the number of shares authorized for issuance under the Plan
                        from 1,500,000 to 2,100,000, which increase was approved by the stockholders of the Company at the 2001 Annual
                        Meeting of Stockholders).
|10.6 -   |  | Powell Industries, Inc. Directors' Fees Program (filed as Exhibit 10.7 to our Form 10-K for the fiscal year ended
                        October 31, 1992, and incorporated herein by reference).                                                                                                                                                                                                                                                 
|10.7 -   |  | Powell Industries, Inc. Executive Severance Protection Plan (filed as Exhibit 10.7 to our Form 10-K for the fiscal
                        year ended October 31, 2002, and incorporated herein by reference).                                                                                                                                                                                                                                     
|10.8 -   |  | Powell Industries, Inc. Non-Employee Directors Stock Option Plan (filed as Exhibit 10.9 to our Form 10-K for the
                        fiscal year ended October 31, 2002, and incorporated herein by reference).                                                                                                                                                                                                                                
|10.9 -   |  | Powell Industries, Inc. Deferred Compensation Plan (filed as Exhibit 10.9 to our Form 10-K for the fiscal year
                        ended October 31, 2002, and incorporated herein by reference).                                                                                                                                                                                                                                              
|*10.10 - |  | Amended Loan Agreement dated October 29, 2004, between Powell Industries, Inc. and Bank of America, N.A.                                                                                                                                                                                                                                                                                                                                           
|*10.11 - |  | Amended Letter of Credit and Reimbursement Agreement dated April 15, 2004, between Powell Industries, Inc. and
                        Bank of America, N.A.                                                                                                                                                                                                                                                                                       
|*21.1 -  |  | Subsidiaries of Powell Industries, Inc.                                                                                                                                                                                                                                                                                                                                                                                                            
|*23.1 -  |  | Consent of Deloitte & Touche LLP                                                                                                                                                                                                                                                                                                                                                                                                                   
|*23.2 -  |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                                                                                                                                                                                                                              
|*31.1 -  |  | Certification of Thomas W. Powell pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                                                                                                                                                                                                                                                                                            

54

---

|        |  |                                                                                                                                                                            
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  |                                                                                                                                                                            
|*31.2 - |  | Certification of Don R. Madison pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                      
|*32.1 - |  | Certification of Thomas W. Powell Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
                        of the Sarbanes-Oxley Act of 2002.
|*32.2 - |  | Certification of Don R. Madison Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
                        the Sarbanes-Oxley Act of 2002.  

55

---