##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON D.C. 20549
 FORM 10-Q/A
 (Amendment No. 1)
  þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 for the quarterly period ended July 31, 2006.
 or
 o
    
    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.
  DELAWARE
    
    88-0106100(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 8550 Mosley Drive, Houston, Texas
    
    77075-1180(Address of principal executive offices)
    
    (Zip Code)
 (713) 944-6900
  þ o
  o þ o
  o þ




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##### 



Explanatory NotePart I  Financial InformationItem 1. Condensed Consolidated Financial StatementsCondensed Consolidated Balance SheetsCondensed Consolidated Statements of OperationsCondensed Consolidated Statements of Cash FlowsNotes to Condensed Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II  Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 6. ExhibitsSignatures
 2




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##### 



EXPLANATORY NOTE
     3




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##### 



Three Months
    
    
    Nine MonthsEnded
    
    
    EndedJuly 31, 2006
    
    
    July 31, 2006Cost of goods sold:As previously reported
    
    $
    84,928
    
    
    $
    231,652Adjustments
    
    
    321
    
    
    
    1,257As restated
    
    $
    85,249
    
    
    $
    232,909Gross Profit:As previously reported
    
    $
    19,093
    
    
    $
    54,613Adjustments to cost of goods sold
    
    
    (321
    )
    
    
    (1,257
    )As restated
    
    $
    18,772
    
    
    $
    53,356Income before interest, income taxes and minority interest:As previously reported
    
    $
    3,388
    
    
    $
    12,073Adjustments to cost of goods sold
    
    
    (321
    )
    
    
    (1,257
    )As restated
    
    $
    3,067
    
    
    $
    10,816Income before income taxes and minority interest:As previously reported
    
    $
    3,109
    
    
    $
    11,672Adjustments to cost of goods sold
    
    
    (321
    )
    
    
    (1,257
    )As restated
    
    $
    2,788
    
    
    $
    10,415Net income:As previously reported
    
    $
    1,757
    
    
    $
    6,995Adjustments to cost of goods sold
    
    
    (321
    )
    
    
    (1,257
    )Income tax benefit
    
    
    114
    
    
    
    445As restated
    
    $
    1,550
    
    
    $
    6,183Net earnings per common share:Basic:As previously reported
    
    $
    0.16
    
    
    $
    0.64Adjustments
    
    
    (0.02
    )
    
    
    (0.07
    )As restated
    
    $
    0.14
    
    
    $
    0.57Diluted:As previously reported
    
    $
    0.16
    
    
    $
    0.63Adjustments
    
    
    (0.02
    )
    
    
    (0.07
    )As restated
    
    $
    0.14
    
    
    $
    0.56
 4




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##### 



Three Months
    
    
    Nine MonthsEnded
    
    
    EndedJuly 31, 2005
    
    
    July 31, 2005Cost of goods sold:As previously reported
    
    $
    54,354
    
    
    $
    145,556Adjustments
    
    
    305
    
    
    
    305As restated
    
    $
    54,659
    
    
    $
    145,861Gross Profit:As previously reported
    
    $
    12,561
    
    
    $
    27,962Adjustments to cost of goods sold
    
    
    (305
    )
    
    
    (305
    )As restated
    
    $
    12,256
    
    
    $
    27,657Income before interest, income taxes and minority interest:As previously reported
    
    $
    2,674
    
    
    $
    (799
    )Adjustments to cost of goods sold
    
    
    (305
    )
    
    
    (305
    )As restated
    
    $
    2,369
    
    
    $
    (1,104
    )Income before income taxes and minority interest:As previously reported
    
    $
    2,833
    
    
    $
    (262
    )Adjustments to cost of goods sold
    
    
    (305
    )
    
    
    (305
    )As restated
    
    $
    2,528
    
    
    $
    (567
    )Net income:As previously reported
    
    $
    2,132
    
    
    $
    411Adjustments to cost of goods sold
    
    
    (305
    )
    
    
    (305
    )Income tax benefit
    
    
    101
    
    
    
    101As restated
    
    $
    1,928
    
    
    $
    207Net earnings per common share:Basic:As previously reported
    
    $
    0.20
    
    
    $
    0.04Adjustments
    
    
    (0.02
    )
    
    
    (0.02
    )As restated
    
    $
    0.18
    
    
    $
    0.02Diluted:As previously reported
    
    $
    0.19
    
    
    $
    0.04Adjustments
    
    
    (0.02
    )
    
    
    (0.02
    )As restated
    
    $
    0.17
    
    
    $
    0.02
 5




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##### 



July 31, 2006Inventories:As previously reported
    
    $
    30,295Adjustments
    
    
    (382
    )As restated
    
    $
    29,913Income taxes receivable:As previously reported
    
    $
    44Adjustments
    
    
    214As restated
    
    $
    258Deferred income taxes:As previously reported
    
    $
    643Reclassification
    
    
    437As restated
    
    $
    1,080Accounts payable:As previously reported
    
    $
    31,214Adjustments
    
    
    1,501As restated
    
    $
    32,715Retained earnings:As previously reported
    
    $
    143,665Adjustments
    
    
    (1,232
    )As restated
    
    $
    142,433
 6




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##### 



PART I  FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements
 Powell Industries, Inc. and Subsidiaries
 
 Condensed Consolidated Balance Sheets
 (In thousands, except share and per share data)
 July 31,
    
    
    October 31,2006
    
    
    2005(Unaudited)(As restated,
    
    
    (As restated,see Note L)
    
    
    see Note L)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    27,833
    
    
    $
    24,844Marketable securities
    
    
    
    
    
    
    8,200Accounts receivable, less allowance for doubtful accounts of $825 and $567, respectively
    
    
    84,549
    
    
    
    65,385Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    39,767
    
    
    
    35,328Inventories, net
    
    
    29,913
    
    
    
    21,529Income taxes receivable
    
    
    258
    
    
    
    713Deferred income taxes
    
    
    1,080
    
    
    
    1,836Prepaid expenses and other current assets
    
    
    2,776
    
    
    
    4,461Total Current Assets
    
    
    186,176
    
    
    
    162,296Property, plant and equipment, net
    
    
    56,591
    
    
    
    55,678Goodwill
    
    
    203
    
    
    
    203Intangible assets, net
    
    
    4,625
    
    
    
    3,505Other assets
    
    
    6,144
    
    
    
    5,096Total Assets
    
    $
    253,739
    
    
    $
    226,778Liabilities and Stockholders EquityCurrent Liabilities:Current maturities of long-term debt and capital lease obligations
    
    $
    3,415
    
    
    $
    2,095Income taxes payable
    
    
    4,086
    
    
    
    1,185Accounts payable
    
    
    32,715
    
    
    
    22,643Accrued salaries, bonuses and commissions
    
    
    12,367
    
    
    
    9,820Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    15,537
    
    
    
    15,742Accrued product warranty
    
    
    3,384
    
    
    
    1,836Other accrued expenses
    
    
    7,549
    
    
    
    5,957Total Current Liabilities
    
    
    79,053
    
    
    
    59,278Long-term debt and capital lease obligations, net of current maturities
    
    
    17,450
    
    
    
    19,436Deferred compensation
    
    
    1,733
    
    
    
    1,918Other liabilities
    
    
    1,526
    
    
    
    1,871Total Liabilities
    
    
    99,762
    
    
    
    82,503Commitments and contingencies (Note G)
Minority interest
    
    
    303
    
    
    
    281Stockholders Equity:Preferred stock, par value $.01; 5,000,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, par value $.01; 30,000,000 shares authorized; 11,001,733 and 11,001,733
shares issued, respectively; 10,907,546 and 10,849,278 shares outstanding, respectively
    
    
    110
    
    
    
    110Additional paid-in capital
    
    
    12,510
    
    
    
    10,252Retained earnings
    
    
    142,433
    
    
    
    136,250Treasury stock, 94,187 and 152,455 shares, respectively, at cost
    
    
    (847
    )
    
    
    (1,417
    )Accumulated other comprehensive income (loss)
    
    
    432
    
    
    
    (11
    )Deferred compensation
    
    
    (964
    )
    
    
    (1,190
    )Total Stockholders Equity
    
    
    153,674
    
    
    
    143,994Total Liabilities and Stockholders Equity
    
    $
    253,739
    
    
    $
    226,778
  7




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##### 



Powell Industries, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Operations (unaudited)
 (In thousands, except per share data)
 Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2006
    
    
    2005
    
    
    2006
    
    
    2005(As restated,
    
    
    (As restated,
    
    
    (As restated,
    
    
    (As restated,see Note L)
    
    
    see Note L)
    
    
    see Note L)
    
    
    see Note L)Revenues
    
    $
    104,021
    
    
    $
    66,915
    
    
    $
    286,265
    
    
    $
    173,518Cost of goods sold
    
    
    85,249
    
    
    
    54,659
    
    
    
    232,909
    
    
    
    145,861Gross profit
    
    
    18,772
    
    
    
    12,256
    
    
    
    53,356
    
    
    
    27,657Selling, general and administrative expenses
    
    
    15,705
    
    
    
    9,887
    
    
    
    42,540
    
    
    
    28,761Income (loss) before interest, income taxes and
minority interest
    
    
    3,067
    
    
    
    2,369
    
    
    
    10,816
    
    
    
    (1,104
    )Interest expense
    
    
    476
    
    
    
    130
    
    
    
    1,137
    
    
    
    346Interest income
    
    
    (197
    )
    
    
    (289
    )
    
    
    (736
    )
    
    
    (883
    )Income (loss) before income taxes and minority interest
    
    
    2,788
    
    
    
    2,528
    
    
    
    10,415
    
    
    
    (567
    )Income tax provision (benefit)
    
    
    1,231
    
    
    
    594
    
    
    
    4,210
    
    
    
    (781
    )Minority interest in net income
    
    
    7
    
    
    
    6
    
    
    
    22
    
    
    
    7Net income
    
    $
    1,550
    
    
    $
    1,928
    
    
    $
    6,183
    
    
    $
    207Net earnings per common share:Basic
    
    $
    0.14
    
    
    $
    0.18
    
    
    $
    0.57
    
    
    $
    0.02Diluted
    
    $
    0.14
    
    
    $
    0.17
    
    
    $
    0.56
    
    
    $
    0.02Weighted average shares:Basic
    
    
    10,888
    
    
    
    10,775
    
    
    
    10,869
    
    
    
    10,757Diluted
    
    
    11,140
    
    
    
    10,939
    
    
    
    11,090
    
    
    
    10,886
  8




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##### 



Powell Industries, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows (unaudited)
 (In thousands)
 Nine Months Ended July 31,2006
    
    
    2005(As restated,
    
    
    (As restated,see Note L)
    
    
    see Note L)Operating Activities:Net income
    
    $
    6,183
    
    
    $
    207Adjustments to reconcile net income to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    4,906
    
    
    
    3,244Amortization of unearned restricted stock
    
    
    138
    
    
    
    91Stock-based compensation
    
    
    1,841
    
    
    
    Bad debt expense
    
    
    254
    
    
    
    30Loss (gain) on disposition of assets
    
    
    79
    
    
    
    (21
    )Net realized gain on available-for-sale securities
    
    
    
    
    
    
    (28
    )Deferred income taxes
    
    
    (1,428
    )
    
    
    (1,048
    )Other
    
    
    22
    
    
    
    149Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (18,681
    )
    
    
    (19,961
    )Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    (4,238
    )
    
    
    (5,680
    )Inventories
    
    
    (8,195
    )
    
    
    (3,432
    )Prepaid expenses and other current assets
    
    
    2,166
    
    
    
    (2,862
    )Other assets
    
    
    573
    
    
    
    68Accounts payable and income taxes payable
    
    
    12,652
    
    
    
    (393
    )Accrued liabilities
    
    
    5,578
    
    
    
    128Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    (302
    )
    
    
    1,473Deferred compensation
    
    
    (60
    )
    
    
    351Other liabilities
    
    
    85
    
    
    
    (37
    )Net cash provided by (used in) operating activities
    
    
    1,573
    
    
    
    (27,721
    )Investing Activities:Proceeds from sale of fixed assets
    
    
    29
    
    
    
    46Proceeds from maturities and sales of available-for-sale securities
    
    
    
    
    
    
    3,817Purchases of property, plant and equipment
    
    
    (4,803
    )
    
    
    (3,226
    )Proceeds from sale of short-term auction rate securities
    
    
    8,200
    
    
    
    43,060Purchases of short-term auction rate securities
    
    
    
    
    
    
    (5,000
    )Acquisition of S&I
    
    
    
    
    
    
    (18,460
    )Acquisition of UMS
    
    
    (1,524
    )
    
    
    Net cash provided by investing activities
    
    
    1,902
    
    
    
    20,237Financing Activities:Borrowings on U.S. revolving line of credit
    
    
    3,791
    
    
    
    5,905Payments on U.S. revolving line of credit
    
    
    (3,791
    )
    
    
    (5,905
    )Borrowings on UK term loan
    
    
    
    
    
    
    10,598Payments on UK term loan
    
    
    (1,107
    )
    
    
    Payments on UK revolving line of credit
    
    
    (913
    )
    
    
    Proceeds from short-term financing
    
    
    897
    
    
    
    Payments on short-term financing
    
    
    (160
    )
    
    
    Payments on capital lease obligations
    
    
    (73
    )
    
    
    (119
    )Debt issue costs
    
    
    
    
    
    
    (461
    )Tax benefit from exercise of stock options
    
    
    134
    
    
    
    234Proceeds from exercise of stock options
    
    
    640
    
    
    
    1,350Net cash (used in) provided by financing activities
    
    
    (582
    )
    
    
    11,602Net increase in cash and cash equivalents
    
    
    2,893
    
    
    
    4,118Effect of exchange rate changes on cash and cash equivalents
    
    
    96
    
    
    
    Cash and cash equivalents at beginning of period
    
    
    24,844
    
    
    
    8,974Cash and cash equivalents at end of period
    
    $
    27,833
    
    
    $
    13,092
  9




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##### 



POWELL INDUSTRIES, INC. AND SUBSIDIARIES
 
 Notes To Condensed Consolidated Financial Statements (Unaudited)
 A.
    
    OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESOverviewWe develop, design, manufacture and service equipment and systems for the management and control
of electrical energy and other critical processes. Headquartered in Houston, Texas, we serve the
transportation, environmental, industrial, and utility industries. 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 I herein.Note B contains information related to our acquisitions of Switchgear & Instrumentation Limited
in July 2005, herein referred to as S&I, and Utility Metering Specialists, Inc. in July 2006,
herein referred to as UMS. The operating results of both acquisitions are included in our
Electrical Power Products business segment.Subsequent to the period covered by this report, we acquired certain assets from General Electric
Companys Consumer and Industrial Division as described in Note K herein.Basis of PresentationThe condensed consolidated financial statements include the accounts of Powell Industries, Inc.
and its wholly-owned subsidiaries (we, us, our, Powell, or the Company). All
significant intercompany accounts and transactions are eliminated in consolidation. The
accompanying unaudited condensed consolidated financial statements have been prepared using
accounting principles generally accepted in the United States of America (GAAP) for interim
financial information in accordance with the rules of Regulation S-X of the Securities and
Exchange Commission. Accordingly, these interim financial statements do not include all annual
disclosures required by GAAP. These financial statements should be read in conjunction with the
financial statements and related footnotes included in the Companys annual report on Form 10-K
for the year ended October 31, 2005. In the opinion of management, these condensed consolidated
financial statements include all adjustments, consisting of normal recurring adjustments that are
necessary for a fair presentation of our financial position, results of operations and cash
flows. The interim period results are not necessarily indicative of the results to be expected
for the full fiscal year.Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the condensed consolidated
financial statements and accompanying footnotes. 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 base our estimates on historical experience and on
various other assumptions, as well as the specific circumstances surrounding these contingent
liabilities, in evaluating the amount of liability that should be recorded. Estimates may change
as new events occur, additional information becomes available, or operating environments change.
Actual results may differ from our estimates. The most significant estimates used in our
financial statements affect revenue and cost recognition for construction contracts, legal
accruals, the allowance for doubtful accounts, self-insurance, warranty accruals and
postretirement benefit obligations.Foreign Currency TranslationThe functional currency for our foreign subsidiaries is the local currency in which the entity is
located. The financial statements of all subsidiaries with a functional currency other than the
U.S. Dollar have been translated into U.S. Dollars in accordance with Statement of Financial
Accounting Standards No. 52, Foreign Currency Translation. All assets and liabilities of
foreign operations are translated into U.S. Dollars using period-end exchange rates and all
revenues and expenses are translated at average rates during the respective period. The U.S.
Dollar results that arise from such translation, as well as exchange gains and losses on
intercompany balances of a long-term investment nature, are included in the cumulative currency
translation adjustments in accumulated other comprehensive income (loss) in stockholders equity.
 10




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##### 



Supplemental disclosures of cash flow information
 Nine Months Ended July 31,2006
    
    2005Cash paid during the period for:Interest
    
    $
    934
    
    
    $
    326Income taxes
    
    
    2,645
    
    
    
    562Non-cash investing and financing activities:Change in fair value of marketable securities during
the period, net of $0 and $9 income taxes,
respectively
    
    $
    
    
    
    $
    26Receivable for stock options exercised
    
    
    24
    
    
    
    Issuance of common stock for deferred directors fees
    
    
    24
    
    
    
    14Restricted stock grants
    
    
    129
    
    
    
    Unrealized gain on forward contracts
    
    
    
    
    
    
    13Unrealized foreign currency gain/(loss)
    
    
    443
    
    
    
    (67
    )Accrued acquisition costs
    
    
    
    
    
    
    485
 Stock-Based CompensationIn the first quarter of fiscal 2006, we adopted Statement of Financial Accounting Standards No.
123 (revised 2004), Share-Based Payment (SFAS No. 123R). We adopted the new statement using
the modified prospective method of adoption, which does not require restatement of prior periods.
The revised standard eliminated the intrinsic value method of accounting for share-based employee
compensation under APB Opinion No. 25, Accounting for Stock-Based Compensation, which we
previously used (see pro-forma disclosure of prior period included herein). The revised standard
generally requires the recognition of the cost of employee services for share-based compensation
based on the grant date fair value of the equity or liability instruments issued and any unearned
or deferred compensation (contra-equity accounts) related to awards prior to adoption be
eliminated against the appropriate equity accounts. Also under the new standard, excess income
tax benefits related to share-based compensation expense that must be recognized directly in
equity are considered financing rather than operating cash flow activities. The effect of the
adoption of the new standard on cash flows in the third quarter of 2006 was not material.Under SFAS No. 123R, we continue to use the Black-Scholes option pricing model to estimate the
fair value of our stock options. However, we will apply the expanded guidance under SFAS No. 123R
for the development of our assumptions used as inputs for the Black-Scholes option pricing model
for grants issued after November 1, 2005. Expected volatility is determined using historical
volatilities based on historical stock prices for a period equal to the expected term. The
expected volatility assumption is adjusted if future volatility is expected to vary from
historical experience. The expected term of options represents the period of time that options
granted are expected to be outstanding and falls between the options vesting and contractual
expiration dates. The risk-free interest rate is based on the yield at the date of grant of a
zero-coupon U.S. Treasury bond whose maturity period equals the options expected term.Accumulated Other Comprehensive Income (Loss)Accumulated other comprehensive income (loss), which is included as a component of stockholders
equity net of tax, includes unrealized gains or losses on available-for-sale marketable
securities, derivative instruments and currency translation adjustments in foreign consolidated
subsidiaries.New Accounting PronouncementIn July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes(FIN 48). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in the Companys financial statements in accordance with
FASB Statement No. 109, Accounting for Income Taxes.FIN 48 also prescribes a recognition
threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return and provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, disclosure
and transition. The provisions of FIN 48 are to be applied to all tax positions upon initial
adoption of this standard. Only tax positions that meet the more likely than not recognition
threshold at the effective date may be recognized or continue to be recognized upon adoption of
FIN 48. FIN 48 is effective for our fiscal year beginning October 1, 2007. The Company is
currently evaluating the impact of adopting FIN 48.ReclassificationsCertain reclassifications have been made in prior period financial statements to conform to
current period presentation. These reclassifications had no effect on net income, financial
position or cash flows.
 11




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##### 



B.
    
    ACQUISITIONUtility Metering Specialists, Inc. (UMS)On July 14, 2006, we acquired certain assets and hired the service and administrative employees
of an electrical services company in Louisiana for approximately $1.5 million. The purchase price
was paid from existing cash and short-term marketable securities. This acquisition allows us to
extend sales and service to the Eastern Gulf Coast Region. As this acquisition is not material to
the consolidated financial results or financial position of the Company, no additional disclosure
is included in these Notes to Condensed Consolidated Financial Statements. Approximately $1.5
million of the purchase price is included in intangible assets in the Condensed Consolidated
Balance Sheets. The purchase price resulted primarily in additional intangible assets and as a
result such amounts are subject to further adjustment as information becomes available.Switchgear & Instrumentation Limited (S&I)On July 4, 2005, we acquired selected assets and assumed certain operating liabilities and
contracts of Switchgear & Instrumentation Limited. S&Is primary manufacturing facility is in the
United Kingdom. This acquisition is part of our overall strategy to increase our international
presence. S&I affords us the opportunity to serve our customers with products covering a wider
range of electrical standards and opens new geographic markets previously closed due to a lack of
product portfolio. The fit, culture and market position of Powell and S&I are favorably
comparable with similar reputations in engineered-to-order solutions. S&I is a supplier of
medium- and low-voltage switchgear, intelligent motor control systems, and power distribution
solutions to a wide range of process industries, with a focus on oil and gas, petrochemical and
other process-related industries. Total consideration paid for S&I was approximately $18.0
million (excluding expenses of approximately $1.2 million). Approximately $10.3 million was
funded from existing cash and investments and the balance was provided from the UK Term Loan (as
defined in Note F herein). The results of operations of S&I are included in our Condensed
Consolidated Financial Statements from July 4, 2005. The Condensed Consolidated Balance Sheets
include an allocation of the purchase price to the assets acquired and liabilities assumed based
on estimates of fair value.The purchase price allocation was as follows (in thousands):
 Accounts receivable
    
    $
    4,730Costs and estimated earnings in excess of billings
    
    
    4,492Inventories
    
    
    3,745Prepaid expenses and other current assets
    
    
    379Property, plant and equipment
    
    
    9,542Intangible assets
    
    
    3,846Accounts payable
    
    
    (5,793
    )Billings in excess of costs and estimated earnings
    
    
    (1,440
    )Other accrued expenses
    
    
    (334
    )Total purchase price
    
    $
    19,167
 The amounts assigned to property, plant and equipment were based on independent appraisals of the
property and plant, as well as the more significant pieces of machinery and equipment.The amounts allocated to intangible assets related to the S&I acquisition were as follows (in
thousands):
 EstimatedAmount
    
    
    LifeUnpatented technology
    
    $
    2,175
    
    
    7 yearsTradenames
    
    
    1,025
    
    
    10 yearsBacklog
    
    
    646
    
    
    6 monthsTotal
    
    $
    3,846
 12




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##### 



Three Months Ended
    
    Nine Months EndedJuly 31, 2005
    
    July 31, 2005(As restated,
    
    (As restated,see Note L)
    
    see Note L)Revenues
    
    $
    73,791
    
    
    $
    213,880Net income
    
    $
    1,254
    
    
    $
    42Net earnings per common share:Basic
    
    $
    0.12
    
    
    $
    Diluted
    
    $
    0.11
    
    
    $
    
 The unaudited pro forma information includes the operating results of S&I prior to the
acquisition date adjusted to include the pro forma impact of the following:
 1)
    
    Impact of additional interest expense related to the portion of the purchase price
financed with the UK Term Loan and lower interest income as a result of the sale of
available-for-sale securities used to fund the remainder of the purchase price;2)
    
    Elimination of the operating results of certain businesses of S&I which were not
acquired;3)
    
    Elimination of lease expense and recording of additional depreciation expense related to
assets which were previously leased from S&Is previous parent;4)
    
    Impact of amortization expense related to intangible assets;5)
    
    Adjustment to the income tax provision to reflect the statutory rate in the United
Kingdom.
 The unaudited pro forma results above do not purport to be indicative of the results that would
have been obtained if the acquisition occurred as of the beginning of the period presented or
that may be obtained in the future.Prior to the acquisition by Powell, S&Is operating results were reported under accounting
principles generally accepted in the United Kingdom (UK GAAP). Revenues and costs related to
long-term contracts accounted for under UK GAAP were not recognized on a percentage-of-completion
basis of accounting. UK GAAP allows companies to recognize revenue on long-term contracts when
the contract is complete (completed contract method). The unaudited pro forma results above were
prepared based on the Companys best estimate of percentage-of-completion for long-term contracts
under SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type
Contracts.C.
    
    EARNINGS PER SHARE
 The following table sets forth the computation of basic and diluted earnings per share (in
thousands, except per share data):
 Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2006
    
    
    2005
    
    
    2006
    
    
    2005(As restated,
    
    
    (As restated,
    
    
    (As restated,
    
    
    (As restated,see Note L)
    
    
    see Note L)
    
    
    see Note L)
    
    
    see Note L)Numerator:Net income
    
    $
    1,550
    
    
    $
    1,928
    
    
    $
    6,183
    
    
    $
    207Denominator:Denominator for basic earnings
per share-weighted average
shares
    
    
    10,888
    
    
    
    10,775
    
    
    
    10,869
    
    
    
    10,757Dilutive effect of stock options
    
    
    252
    
    
    
    164
    
    
    
    221
    
    
    
    129Denominator for diluted
earnings per share-adjusted
weighted average shares with
assumed conversions
    
    
    11,140
    
    
    
    10,939
    
    
    
    11,090
    
    
    
    10,886Net earnings per share:Basic
    
    $
    0.14
    
    
    $
    0.18
    
    
    $
    0.57
    
    
    $
    0.02Diluted
    
    $
    0.14
    
    
    $
    0.17
    
    
    $
    0.56
    
    
    $
    0.02
 Excluded from the computation of diluted earnings per share were options to purchase
approximately 24,000 shares of common stock for the three and nine months ended July 31, 2006,
and options to purchase approximately 24,000 and 297,000 shares of common stock for the three and
nine months ended July 31, 2005, respectively. These options were excluded from the computation
because the effect of the options was not dilutive as their exercise prices were greater than the
average market price of our common stock.
 13




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##### 



D.
    
    DETAIL OF SELECTED BALANCE SHEET ACCOUNTSAllowance for Doubtful AccountsActivity in our allowance for doubtful accounts receivable consists of the following (in
thousands):
 Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Balance at beginning of period
    
    $
    756
    
    
    $
    678
    
    
    $
    567
    
    
    $
    617Adjustments to the allowance
    
    
    67
    
    
    
    (35
    )
    
    
    248
    
    
    
    30Deductions for uncollectible accounts
written off, net of recoveries
    
    
    1
    
    
    
    
    
    
    
    6
    
    
    
    (4
    )Increase due to foreign currency translation
    
    
    1
    
    
    
    
    
    
    
    4
    
    
    
    Balance at end of period
    
    $
    825
    
    
    $
    643
    
    
    $
    825
    
    
    $
    643
 Warranty Accrual
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Balance at beginning of period
    
    $
    3,337
    
    
    $
    1,373
    
    
    $
    1,836
    
    
    $
    1,545Adjustments to the accrual
    
    
    848
    
    
    
    441
    
    
    
    3,159
    
    
    
    1,078Deductions for warranty charges
    
    
    (816
    )
    
    
    (207
    )
    
    
    (1,652
    )
    
    
    (1,016
    )Increase due to foreign currency translation
    
    
    15
    
    
    
    
    
    
    
    41
    
    
    
    Balance at end of period
    
    $
    3,384
    
    
    $
    1,607
    
    
    $
    3,384
    
    
    $
    1,607
 For the three and nine months ended July 31, 2006, our warranty accrual includes approximately
$0.8 million for estimated costs related to the resolution of a specific product performance
issue that was identified in the second quarter of 2006.
 InventoriesThe components of inventories are summarized below (in thousands):
 July 31,
    
    
    October 31,2006
    
    
    2005(As restated,
    
    (As restated,see Note L)
    
    see Note L)Raw materials, parts and subassemblies
    
    $
    17,342
    
    
    $
    12,794Work-in-progress
    
    
    12,571
    
    
    
    8,735Total Inventories
    
    $
    29,913
    
    
    $
    21,529
 Costs and Estimated Earnings on Uncompleted Contracts
  July 31,
    
    
    October 31,2006
    
    
    2005Costs incurred on uncompleted contracts
    
    $
    274,914
    
    
    $
    293,741Estimated earnings
    
    
    59,709
    
    
    
    55,360334,623
    
    
    
    349,101Less: Billings to date
    
    
    310,393
    
    
    
    329,515$
    24,230
    
    
    $
    19,586Included in the accompanying balance sheets under the following captions:Costs and estimated earnings in excess of billings on uncompleted contracts
    
    $
    39,767
    
    
    $
    35,328Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    (15,537
    )
    
    
    (15,742
    )$
    24,230
    
    
    $
    19,586
 14




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##### 



E.
    
    COMPREHENSIVE INCOMEComprehensive income for the three and nine months ended July 31, 2006 and 2005 is as follows (in
thousands):
 Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2006
    
    
    2005
    
    
    2006
    
    
    2005(As restated,
    
    
    (As restated,
    
    
    (As restated,
    
    
    (As restated,see Note L)
    
    
    see Note L)
    
    
    see Note L)
    
    
    see Note L)Net income
    
    $
    1,550
    
    
    $
    1,928
    
    
    $
    6,183
    
    
    $
    207Other comprehensive income, net of taxUnrealized gain (loss) on marketable securities
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (26
    )Unrealized gain (loss) on foreign currency translation
    
    
    (51
    )
    
    
    (48
    )
    
    
    443
    
    
    
    (67
    )Unrealized gain on fair value hedge
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    13Comprehensive income
    
    $
    1,499
    
    
    $
    1,895
    
    
    $
    6,626
    
    
    $
    127
 F.
    
    LONG-TERM DEBTUS and UK RevolversOn June 29, 2005, we entered into a new senior credit agreement (Credit Agreement) with a major
domestic bank and certain other financial institutions which replaced our existing revolving line
of credit. The Credit Agreement also replaced an existing letter of credit facility used to
guarantee payment of our existing loan agreement that was funded with proceeds from tax-exempt
industrial development revenue bonds. This expanded credit facility was put in place to partially
fund the acquisition of and provide working capital support for S&I.The Credit Agreement provides for a 1) $22.0 million revolving credit facility (US Revolver),
2) £4.0 million (pound sterling) (approximately $7.0 million) revolving credit facility (UK
Revolver) and 3) £6.0 million (approximately $10.7 million) single advance term loan (UK Term
Loan). The Credit Agreement contains customary affirmative and negative covenants and restricts
our ability to pay dividends. In addition, there are various restrictive covenants pertaining to
maintenance of net worth and certain financial ratios. Obligations are secured by the stock of
our subsidiaries. The interest rate for amounts outstanding under the Credit Agreement is a
floating rate based upon LIBOR plus a margin which can range from 1.25% to 2.25%, as determined
by the Companys consolidated leverage ratio as defined in the Credit Agreement.The US Revolver and the UK Revolver provide for the issuance of letters of credit which would
reduce the amounts which may be borrowed under the respective revolvers. The amount available
under this agreement is reduced by $11.9 million for our outstanding letters of credit at July
31, 2006. There was £1.9 million, or approximately $3.5 million, outstanding under the UK
revolver as of July 31, 2006, with interest rates ranging from 5.60% to 5.635%. No amounts were
borrowed on the US Revolver as of July 31, 2006. The US Revolver and the UK Revolver expire on
June 30, 2008.UK Term LoanThe UK Term Loan is a single advance term loan of £6.0 million, or approximately $10.7 million,
used for financing the acquisition of S&I. Approximately £5.0 million, or approximately $8.9
million, of this facility was used to finance the portion of the purchase price of S&I that was
denominated in pounds sterling. The remaining £1.0 million, or approximately $1.8 million, was
utilized as the initial working capital for S&I. Quarterly installments of £300,000, or
approximately $532,000, began March 31, 2006, with the final payment due on March 31, 2010. As of
July 31, 2006, £5.4 million, or approximately $10.1 million of the UK Term Loan was outstanding
and the per annum interest rate was 5.75%.Expenses associated with the issuance of the Credit Agreement are classified as deferred loan
costs and totaled $501,000 and are being amortized as a non-cash charge to interest expense over
the term of the agreement (three years).Tax Exempt Industrial Development Revenue BondsWe borrowed $8.0 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,
Illinois facility. While the Bonds mature in 2021, the reimbursement agreement requires annual
redemptions of $400,000. 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. At July 31, 2006, approximately $6.4
million was outstanding on the bonds and the interest rate is based on similar types of
short-term municipal securities and was 3.73% per annum on July 31, 2006.We are currently engaged in an audit with the Internal Revenue Service (IRS) related to our tax
exempt industrial
 15




---



##### 



development revenue bonds. We have furnished the IRS with various requested materials in
connection with the audit. The IRS is reviewing these materials and has not yet informed us as to
their conclusions. Based on discussions with the IRS, management does not believe the outcome
will have a material impact on its consolidated financial position or results of operations.Capital LeasesSome machinery and equipment used in our manufacturing facilities was 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%.
 G.
    
    COMMITMENTS AND CONTINGENCIESLetters of Credit and BondsCertain customers require us to post a bank letter of credit guarantee or performance bonds
issued by a surety. These guarantees and performance bonds assure our customers that we will
perform under terms of our contract. In the event of default, the customer may demand payment
from the bank under a letter of credit or performance by the surety under a performance bond. To
date, there have been no significant expenses related to either for the periods reported. We were
contingently liable for secured and unsecured letters of credit of $12.5 million as of July 31,
2006. We also had performance bonds totaling approximately $125.3 million outstanding at July 31,
2006.In November 2005, we entered into a new facility agreement (Facility Agreement) with a large
international bank. The Facility Agreement provides for 1) £15.0 million in bonds (approximately
$26.0 million), 2) £1.5 million of forward exchange contracts and currency options (approximately
$2.6 million), and 3) the issuance of bonds and the entering into of forward exchange contracts
and currency options. At July 31, 2006, we had outstanding bonds of £0.6 million, or
approximately $1.1 million.ContingenciesThe Company previously entered into a construction joint venture agreement to supply, install,
and commission a Supervisory Control and Data Acquisition System (SCADA) to monitor and control
the distribution and delivery of fresh water to the City and County of San Francisco Public
Utility Commission (Commission). The project was substantially completed and has been
performing to the satisfaction of the Commission. However, various factors outside of the control
of the Company and its joint venture partner caused numerous changes and additions to the work
that in turn delayed the completion of the project. The Commission has withheld liquidated
damages and earned contract payments from the joint venture. The Company has made claims against
the Commission for various matters including compensation for extra work and delay to the
project.The Company is currently pursuing the recovery of amounts owed under the contract, as well as
legal and other costs incurred to prosecute its claim. Unless this matter is otherwise resolved,
this claim is scheduled to go to trial in 2006. As of July 31, 2006, the Company had
approximately $1.6 million recorded in the consolidated balance sheet for contractually owed
amounts in accounts receivable and costs and estimated earnings in excess of billings on
uncompleted contracts related to its portion of this contract. Consistent with Company policy,
only revenue to the extent of costs of directed change orders have been recorded by the Company.
No amounts have been recorded by the Company related to the Companys claims and counterclaims
alleging breach of the agreement. Although a failure to recover the amounts recorded could have a
material adverse effect on the Companys results of operations, the Company believes that, under
the circumstances and on the basis of information now available, an unfavorable outcome is
unlikely.The Company was 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 submitted claims against the MTA seeking additional reimbursement for work done by the
Joint Venture on the project. These claims were settled and resulted in a net increase in the
contract amount of approximately $2.0 million, of which $1.5 million was reflected as additional
revenues by the Company for the three and nine months ended July 31, 2005.See Note F for discussion related to our tax exempt industrial development revenue bonds.
  Refer to the Companys Annual Report on Form 10-K for the fiscal year ended October 31, 2005 for
a full description of the Companys stock-based compensation plans.
 16




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##### 



Modification to Stock Option VestingIn July 2006, the Compensation Committee of the Board of Directors modified the vesting
requirements for stock options upon retirement. The Committee voted to automatically vest granted
options upon retirement at age 60 with 10 years of service or at age 62 regardless of service.
Stock options are vested at retirement and will remain exercisable for the remaining life of the
option. All other terms of stock options remain the same.
 In accordance with SFAS No. 123R, we recognized approximately $0.9 million in non-cash
compensation expense in the third quarter of 2006 related to the modification. This non-cash
expense was recorded in selling, general and administrative expenses in July 2006. After the
modification adjustment, there is $1.8 million of unrecognized non-cash compensation expense
related to non-vested stock options at July 31, 2006. Of the $1.8 million unrecognized
compensation expense, $0.5 million will be expensed over a revised weighted-average period of
approximately 1.7 years. The remaining $1.3 million is expected to be recognized over a
weighted-average period of approximately 2.1 years. In addition, at July 31, 2006, there was
approximately $0.1 million of total unrecognized compensation expense related to restricted stock
which is expected to be recognized over a period of less than one year.Pro Forma Earnings Per ShareThe following table presents the pro forma effect on net income and earnings per share as if we
had applied the fair value recognition to stock-based compensation prior to the adoption of SFAS
No. 123R during the three and nine month period ended July 31, 2005 (in thousands except per
share amounts):
 Three Months Ended
    
    
    Nine Months EndedJuly 31, 2005
    
    
    July 31, 2005(As restated,
    
    
    (As restated,see Note L)
    
    
    see Note L)Net income as reported
    
    $
    1,928
    
    
    $
    207Less: Stock option compensation expense, net of taxes
    
    
    (185
    )
    
    
    (504
    )Net income (loss) pro forma
    
    $
    1,743
    
    
    $
    (297
    )Basic earnings (loss) per share:As reported
    
    $
    0.18
    
    
    $
    0.02Pro forma
    
    $
    0.16
    
    
    $
    (0.03
    )Diluted earnings (loss) per share:As reported
    
    $
    0.17
    
    
    $
    0.02Pro forma
    
    $
    0.16
    
    
    $
    (0.03
    )
 Stock Options
 Stock option activity for the nine months ended July 31, 2006 is as follows:
 RemainingWeighted-
    
    Weighted-Average
    
    AggregateStock
    
    Average
    
    Contractual Term
    
    Intrinsic ValueOptions
    
    Exercise Price
    
    (years)
    
    (in thousands)Outstanding at October 31, 2005
    
    
    908,690
    
    
    $
    16.37Granted
    
    
    
    
    
    
    Exercised
    
    
    44,800
    
    
    
    14.82Forfeited
    
    
    
    
    
    
    Outstanding at July 31, 2006
    
    
    863,890
    
    
    
    16.45
    
    
    
    4.07
    
    
    $
    4,567Exercisable at July 31, 2006
    
    
    643,610
    
    
    
    16.11
    
    
    
    3.49
    
    
    $
    3,605
 17




---



##### 



I.
    
    BUSINESS SEGMENTSWe manage our business through operating subsidiaries, which are comprised of 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.On July 14, 2006, we acquired certain assets and hired the service and administrative employees
of an electrical services company in Louisiana (UMS). The operating results of UMS are included
in our Electrical Power Products business segment as of that date. On July 4, 2005, we acquired
selected assets and assumed certain operating liabilities and contracts of Switchgear &
Instrumentation Limited in the United Kingdom (S&I). The operating results and tangible assets
of S&I are included in our Electrical Power Products business segment as of that date.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):
 Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2006
    
    
    2005
    
    
    2006
    
    
    2005(As restated,
    
    
    (As restated,
    
    
    (As restated,
    
    
    (As restated,see Note L)
    
    
    see Note L)
    
    
    see Note L)
    
    
    see Note L)Revenues:Electrical Power Products
    
    $
    96,896
    
    
    $
    58,214
    
    
    $
    265,413
    
    
    $
    146,362Process Control Systems
    
    
    7,125
    
    
    
    8,701
    
    
    
    20,852
    
    
    
    27,156Total
    
    $
    104,021
    
    
    $
    66,915
    
    
    $
    286,265
    
    
    $
    173,518Gross profit:Electrical Power Products
    
    $
    17,110
    
    
    $
    8,916
    
    
    $
    48,020
    
    
    $
    20,098Process Control Systems
    
    
    1,662
    
    
    
    3,340
    
    
    
    5,336
    
    
    
    7,559Total
    
    $
    18,772
    
    
    $
    12,256
    
    
    $
    53,356
    
    
    $
    27,657Income (loss) before income taxes and minority interest:Electrical Power Products
    
    $
    2,621
    
    
    $
    689
    
    
    $
    9,522
    
    
    $
    (3,445
    )Process Control Systems
    
    
    167
    
    
    
    1,839
    
    
    
    893
    
    
    
    2,878Total
    
    $
    2,788
    
    
    $
    2,528
    
    
    $
    10,415
    
    
    $
    (567
    )
 July 31,
    
    
    October 31,2006
    
    
    2005(As restated,
    
    
    (As restated,see Note L)
    
    
    see Note L)Identifiable tangible assets:Electrical Power Products
    
    $
    208,127
    
    
    $
    172,457Process Control Systems
    
    
    10,406
    
    
    
    10,762Corporate
    
    
    29,299
    
    
    
    39,219Total
    
    $
    247,832
    
    
    $
    222,438
 In addition, the Electrical Power Products business segment had $203,000 and $203,000 of goodwill
and $4,625,000 and $3,505,000 of intangible assets as of July 31, 2006 and October 31, 2005,
respectively. Additionally, Corporate had $1,079,000 and $632,000 of deferred loan costs and
other assets as of July 31, 2006 and October 31, 2005, respectively, which are not included in
identifiable tangible assets above.
 J.
    
    CONSOLIDATION OF OPERATIONSTo reduce overhead costs and improve efficiency, we initiated a consolidation plan in fiscal 2004
to reduce the number of operating locations within our Electrical Power Products segment. The
majority of the costs related to this consolidation related to severance and employee benefit
expenses for involuntary terminations in 2004. During the first nine months of fiscal 2005,
$66,000 of additional shutdown costs and write downs of fixed assets were expensed and included
in the Condensed Consolidated Statements of Operations.
 18




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##### 



K.
    
    SUBSEQUENT EVENTOn August 7, 2006, we purchased certain assets related to the American National Standards
Institute (ANSI) medium voltage switchgear and circuit breaker business of General Electric
Companys (GE) Consumer & Industrial unit located at its West Burlington, Iowa facility for $32
million, not including expenses. An initial payment of $8.5 million was paid at closing from
existing cash and short-term marketable securities with the remainder payable in four
installments every 10 months over the next 40 months of $5.5 million, $6.25 million, $6.25
million and $5.5 million, respectively. The deferred installments result in a discounted purchase
price of approximately $28.8 million. We are also required to purchase the remaining inventory
for additional consideration and have the option to purchase additional equipment after
completion of the transition and product relocation to Houston, Texas.In connection with the acquisition, we entered into a 15 year supply agreement with GE pursuant
to which GE will purchase from the Company (subject to limited conditions for exceptions) all of
its requirements for ANSI medium voltage switchgear and circuit breakers and other related
equipment and components. We have also agreed to purchase certain of our required product
components and subassemblies from GE. In addition, GE has agreed to provide services related to
transitioning the product line from West Burlington, Iowa to the Companys Houston, Texas
facility.In connection with the acquisition, we entered into a lease agreement for a facility in Houston,
Texas, which increased our manufacturing space by approximately 140,000 square feet. The lease
will cost approximately $34,000 per month.Additionally, we amended our existing Credit Agreement with Bank of America, N.A. to increase the
US Revolver by $20.0 million to $42.0 million. This increase in our credit facility was made to
assist with future payments related to the GE acquisition and to finance the increase in working
capital associated with the start-up, relocation and operation of the product line. This amended
line of credit expires on December 31, 2010. Certain financial covenants were changed in
conjunction with this amendment to our credit facility.L.
    
    ACCOUNTING RESTATEMENTThe Company previously restated the Consolidated Financial Statements for the eleven month
transition period ended September 30, 2006 and the fiscal year ended October 31, 2005 for errors
at one of its domestic divisions related to work-in-process inventory and accounts payable. The
accounting errors resulted from incorrectly analyzing and adjusting work-in-process inventory
balances and received goods accounts payable. These accounting errors were discovered by a new
controller who had just joined the division. This restatement increased cost of goods sold and
reduced net income for the periods stated below. Additionally, the previously issued Condensed
Consolidated Balance Sheet as of July 31, 2006 is being restated to reflect a reclassification
between net deferred income taxes and income taxes receivable related to a long-term contract.
The income tax provision included in the previously issued Condensed Consolidated Statements of
Operations for the three and nine months ended July 31, 2006 is not impacted by the
reclassification of income tax accounts on the Condensed Consolidated Balance Sheet.
 19




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##### 



Three Months
    
    
    Nine MonthsEnded
    
    
    EndedJuly 31, 2006
    
    
    July 31, 2006Cost of goods sold:As previously reported
    
    $
    84,928
    
    
    $
    231,652Adjustments
    
    
    321
    
    
    
    1,257As restated
    
    $
    85,249
    
    
    $
    232,909Gross Profit:As previously reported
    
    $
    19,093
    
    
    $
    54,613Adjustments to cost of goods sold
    
    
    (321
    )
    
    
    (1,257
    )As restated
    
    $
    18,772
    
    
    $
    53,356Income before interest, income taxes and minority interest:As previously reported
    
    $
    3,388
    
    
    $
    12,073Adjustments to cost of goods sold
    
    
    (321
    )
    
    
    (1,257
    )As restated
    
    $
    3,067
    
    
    $
    10,816Income before income taxes and minority interest:As previously reported
    
    $
    3,109
    
    
    $
    11,672Adjustments to cost of goods sold
    
    
    (321
    )
    
    
    (1,257
    )As restated
    
    $
    2,788
    
    
    $
    10,415Net income:As previously reported
    
    $
    1,757
    
    
    $
    6,995Adjustments to cost of goods sold
    
    
    (321
    )
    
    
    (1,257
    )Income tax benefit
    
    
    114
    
    
    
    445As restated
    
    $
    1,550
    
    
    $
    6,183Net earnings per common share:Basic:As previously reported
    
    $
    0.16
    
    
    $
    0.64Adjustments
    
    
    (0.02
    )
    
    
    (0.07
    )As restated
    
    $
    0.14
    
    
    $
    0.57Diluted:As previously reported
    
    $
    0.16
    
    
    $
    0.63Adjustments
    
    
    (0.02
    )
    
    
    (0.07
    )As restated
    
    $
    0.14
    
    
    $
    0.56
 20




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##### 



Three Months
    
    
    Nine MonthsEnded
    
    
    EndedJuly 31, 2005
    
    
    July 31, 2005Cost of goods sold:As previously reported
    
    $
    54,354
    
    
    $
    145,556Adjustments
    
    
    305
    
    
    
    305As restated
    
    $
    54,659
    
    
    $
    145,861Gross Profit:As previously reported
    
    $
    12,561
    
    
    $
    27,962Adjustments to cost of goods sold
    
    
    (305
    )
    
    
    (305
    )As restated
    
    $
    12,256
    
    
    $
    27,657Income before interest, income taxes and minority interest:As previously reported
    
    $
    2,674
    
    
    $
    (799
    )Adjustments to cost of goods sold
    
    
    (305
    )
    
    
    (305
    )As restated
    
    $
    2,369
    
    
    $
    (1,104
    )Income before income taxes and minority interest:As previously reported
    
    $
    2,833
    
    
    $
    (262
    )Adjustments to cost of goods sold
    
    
    (305
    )
    
    
    (305
    )As restated
    
    $
    2,528
    
    
    $
    (567
    )Net income:As previously reported
    
    $
    2,132
    
    
    $
    411Adjustments to cost of goods sold
    
    
    (305
    )
    
    
    (305
    )Income tax benefit
    
    
    101
    
    
    
    101As restated
    
    $
    1,928
    
    
    $
    207Net earnings per common share:Basic:As previously reported
    
    $
    0.20
    
    
    $
    0.04Adjustments
    
    
    (0.02
    )
    
    
    (0.02
    )As restated
    
    $
    0.18
    
    
    $
    0.02Diluted:As previously reported
    
    $
    0.19
    
    
    $
    0.04Adjustments
    
    
    (0.02
    )
    
    
    (0.02
    )As restated
    
    $
    0.17
    
    
    $
    0.02
 21




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##### 



July 31, 2006Inventories:As previously reported
    
    $
    30,295Adjustments
    
    
    (382
    )As restated
    
    $
    29,913Income taxes receivable:As previously reported
    
    $
    44Adjustments
    
    
    214As restated
    
    $
    258Deferred income taxes:As previously reported
    
    $
    643Reclassification
    
    
    437As restated
    
    $
    1,080Accounts payable:As previously reported
    
    $
    31,214Adjustments
    
    
    1,501As restated
    
    $
    32,715Retained earnings:As previously reported
    
    $
    143,665Adjustments
    
    
    (1,232
    )As restated
    
    $
    142,433
 22




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##### 



Item 2. Managements Discussion And Analysis Of Financial Condition And Results Of Operations
 The following discussion of our financial condition and results of operations should be read in
conjunction with the accompanying condensed consolidated financial statements and related notes
included elsewhere in this Form 10-Q/A and our Annual Report on Form 10-K as filed with the
Securities and Exchange Commission for the year ended October 31, 2005. 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 actual results may
differ materially from those projected in the forward-looking statements.
 As discussed in Note L of Notes to Condensed Consolidated Financial Statements, our financial
statements as of and for the three and nine months ended July 31, 2006 have been restated. The
accompanying managements discussion and analysis gives effect to that restatement.
 Overview
  Results of Operations
 Revenue and Gross Profit
   Electrical Power Products
   23




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##### 



Process Control Systems
    Consolidated Selling, General, and Administrative Expenses
 Share-Based
Payment
  24




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##### 



Interest Income and Expense
   Provision for Income Taxes
    Net Income
  Backlog
  Liquidity and Capital Resources
    25




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##### 



Operating Activities
  Investing Activities
   Financing Activities
  Outlook
    
 Item 3. Quantitative And Qualitative Disclosures About Market Risk
   26




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##### 



Item 4. Controls And Procedures
 Restatement
   Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  27




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##### 



Remediation Plan
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
 The Company previously entered into a construction joint venture agreement to supply, install,
and commission a Supervisory Control and Data Acquisition System (SCADA) to monitor and
control the distribution and delivery of fresh water to the City and County of San Francisco
Public Utility Commission (Commission). The project was substantially completed and has been
performing to the satisfaction of the Commission. However, various factors outside of the
control of the Company and its joint venture partner caused numerous changes and additions to
the work that in turn delayed the completion of the project. The Commission has withheld
liquidated damages and earned contract payments from the joint venture. The Company has made
claims against the Commission for various matters including compensation for extra work and
delay to the project.
 The Company is currently pursuing the recovery of amounts owed under the contract, as well as
legal and other costs incurred to prosecute its claim. Unless this matter is otherwise resolved,
it is expected to go to trial in 2006 in Alameda County Superior Court, State of California. As
of July 31, 2006, the Company had approximately $1.6 million recorded in the consolidated
balance sheet for contractually owed amounts in accounts receivable and costs and estimated
earnings in excess of billings on uncompleted contracts related to its portion of this contract.
Consistent with Company policy, only costs of directed change orders have been recorded by the
Company. No amounts have been recorded by the Company related to the Companys claims and
counterclaims alleging breach of the agreement. Although a failure to recover the amounts
recorded could have a material adverse effect on the Companys results of operations, the
Company believes that, under the circumstances and on the basis of information now available, an
unfavorable outcome is unlikely.The Company was 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 submitted claims against the MTA seeking additional reimbursement for work done by the
Joint Venture on the project. These claims were settled and resulted in a net increase in the
contract amount of approximately $2.0 million, of which $1.5 million was reflected as additional
revenues by the Company for the three and nine months ended July 31, 2005.
 
 Item 1A. Risk Factors
 There are no material changes from the risk factors previously disclosed in the Companys Annual
Report on Form 10-K for the fiscal year ended October 31, 2005.
 
 Item 6. 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 -
    
    Bylaws of Powell Industries, Inc. (filed as Exhibit 3.2 to our Form 8-A/A filed November 1, 2004,
and incorporated herein by reference).*31.1 -
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2 -
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1 -
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*32.2 -
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
  28




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##### 



SIGNATURES
  
 July 20, 2007
    
    /s/ THOMAS W. POWELLDate
    
    Thomas W. PowellChairman and Chief Executive Officer(Principal Executive Officer)July 20, 2007
    
    /s/ DON R. MADISONDate
    
    Don R. MadisonExecutive Vice PresidentChief Financial and Administrative Officer(Principal Financial and Accounting Officer)
 29




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##### 



EXHIBIT INDEX
 Number
    
    Exhibit Title3.1 -
    
    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 -
    
    Bylaws of Powell Industries, Inc. (filed as Exhibit 3.2 to our Form 8-A/A filed November 1, 2004,
and incorporated herein by reference).*31.1 -
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2 -
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1 -
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*32.2 -
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
  30