UNITED STATES

SECURITIES AND EXCHANGE
COMMISSION WASHINGTON D.C. 20549

FORM 10-Q

(Mark one)

|[X] | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
                    of 1934 for the quarterly period ended January 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
0-6050

POWELL INDUSTRIES, INC.

---

(Exact
name of registrant as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|NEVADA                                                         |  | 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)

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

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.

YesX   No

Indicate
by X whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act).

YesX   No

Common Stock, par value $.01 per
share; 10,669,359 shares outstanding as of February 23, 2004.

1

---

Powell Industries, Inc.
and Subsidiaries

|                                           |         |                                                                                             |   
|------------------------------------------ | ------- | ------------------------------------------------------------------------------------------- | --
|Part I - Financial Information             |        
|                                           | Item 1. | Condensed Consolidated Financial Statements                                                 | 3 
|                                           | Item 2. | Management's Discussion and Analysis of
   Financial Condition and
   Results of Operations | 12
|                                           | Item 3. | Quantitative and Qualitative Disclosures
   About Market Risk                               | 16
|                                           | Item 4. | Controls and Procedures                                                                     | 17
|Part II - Other Information and Signatures | 18     

2

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Powell Industries, Inc. and Subsidiaries
                                          Condensed Consolidated Balance Sheets (unaudited)
                                           (In thousands, except share and per share data)

|                                                                                 | January 31,
2004 | October 31,
2003
|-------------------------------------------------------------------------------- | ---------------- | ----------------
|                                                                                 |                  |                 
|Assets                                                                           |                  |                 
|Current Assets:                                                                  |                  |                 
|Cash and cash equivalents                                                        |                  |                 
|Marketable securities                                                            |                  |                 
|Accounts receivable, less allowance for doubtful accounts of $1,280 and $1,283,  |                  |                 
|respectively                                                                     |                  |                 
|Costs and estimated earnings in excess of billings                               |                  |                 
|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                               |                  |                 
|Accrued product warranty                                                         |                  |                 
|Other accrued expenses                                                           |                  |                 
|                                                                                 |                  |                 
|Total Current Liabilities                                                        |                  |                 
|Long-term debt and capital lease obligations, net of current maturities          |                  |                 
|Deferred compensation expense                                                    |                  |                 
|Other liabilities                                                                |                  |                 
|                                                                                 |                  |                 
|Total Liabilities                                                                |                  |                 
|Commitments and contingencies                                                    |                  |                 
|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; 10,668,000 and 10,641,000 shares         |                  |                 
|outstanding, respectively                                                        |                  |                 
|Additional paid-in capital                                                       |                  |                 
|Retained earnings                                                                |                  |                 
|Treasury stock, 331,000 shares and 352,000 shares respectively, at cost          |                  |                 
|Accumulated other comprehensive income (loss):  fair value of interest rate swap |                  |                 
|and marketable securities, net of tax                                            |                  |                 
|Deferred compensation                                                            |                  |                 
|                                                                                 |                  |                 
|                                                                                 |                  |                 
|Total Stockholders' Equity                                                       |                  |                 
|                                                                                 |                  |                 
|Total Liabilities and Stockholders' Equity                                       |                  |                 
|                                                                                 |                  |                 

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

3

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Powell Industries, Inc. and Subsidiaries
                                     Condensed Consolidated Statements of Operations (unaudited)
                                                (In thousands, except per share data)

|                                                                                   | Three Months Ended January 31, | 
|---------------------------------------------------------------------------------- | ------------------------------ | 
|
|                                                                                   |                                | 
|Revenues                                                                           |                                | 
|Cost of goods sold                                                                 |                                | 
|                                                                                   |                                | 
|Gross profit                                                                       |                                | 
|Selling, general and administrative expenses                                       |                                | 
|                                                                                   |                                | 
|Income before interest and income taxes                                            |                                | 
|Interest expense                                                                   |                                | 
|Interest income                                                                    |                                | 
|                                                                                   |                                | 
|Income from continuing operations before income taxes and cumulative effect of     |                                | 
|change in accounting principle                                                     |                                | 
|Income tax provision                                                               |                                | 
|                                                                                   |                                | 
|Income from continuing operations before cumulative effect of change in accounting |                                | 
|principle                                                                          |                                | 
|Cumulative effect of change in accounting principle, net of $285 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 number of common shares outstanding                               |                                | 
|                                                                                   |                                | 
|Weighted average number of common and common equivalent shares outstanding         |                                | 
|                                                                                   |                                | 

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

4

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# Powell Industries,
Inc. and Subsidiaries Condensed Consolidated
Statements of Cash Flows (unaudited) (In thousands)

|                                                                                | Three Months Ended January 31, | 
|------------------------------------------------------------------------------- | ------------------------------ | 
|
|                                                                                |                                | 
|Operating Activities:                                                           |                                | 
|Net income                                                                      |                                | 
|Adjustments to reconcile net income to net cash provided by (used in) operating |                                | 
|activities:                                                                     |                                | 
|Cumulative effect of change in accounting principle, net of tax                 |                                | 
|Depreciation and amortization                                                   |                                | 
|Deferred income tax provision                                                   |                                | 
|Other                                                                           |                                | 
|Changes in operating assets and liabilities:                                    |                                | 
|Accounts receivable, net                                                        |                                | 
|Costs and estimated earnings in excess of billings                              |                                | 
|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                              |                                | 
|Deferred compensation expense                                                   |                                | 
|Other liabilities                                                               |                                | 
|                                                                                |                                | 
|Net cash provided by (used in) operating activities                             |                                | 
|Investing Activities:                                                           |                                | 
|Purchases of property, plant and equipment                                      |                                | 
|                                                                                |                                | 
|Net cash used in investing activities                                           |                                | 
|                                                                                |                                | 
|Financing Activities:                                                           |                                | 
|Repayments of debt                                                              |                                | 
|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 period                                |                                | 
|                                                                                |                                | 
|Cash and cash equivalents at end of period                                      |                                | 
|                                                                                |                                | 
|Supplemental disclosures of cash flow information (in thousands):               |                                | 
|Cash paid during the period for:                                                |                                | 
|Interest                                                                        |                                | 
|                                                                                |                                | 
|Income taxes                                                                    |                                | 
|                                                                                |                                | 
|Non-cash investing and financing activities:                                    |                                | 
|Change in fair value of interest rate swap during the period, net of $0 and 11  |                                | 
|income taxes, respectively                                                      |                                | 
|                                                                                |                                | 
|Change in fair value of marketable securities during the period, net of $69 and |                                | 
|$0 income taxes, respectively                                                   |                                | 
|                                                                                |                                | 
|Issuance of common stock for deferred directors' fees                           |                                | 
|                                                                                |                                | 

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

5

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Part
I      Item 1

# POWELL INDUSTRIES,
INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)

A.    
          BASIS OF PRESENTATION

| | The
accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q. Certain information and footnote
disclosures normally included in consolidated financial statements prepared in accordance
with accounting principles generally accepted in the United States of America have been
condensed or omitted pursuant to these rules and regulations. In the opinion of
management, these condensed consolidated financial statements include all adjustments,
consisting of normal recurring adjustments, which are necessary for a fair presentation of
the Companys financial position, results of operations, and cash flows. 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, 2003. The interim period results are not necessarily indicative of the
results to be expected for the full fiscal year.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America 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 condensed consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | New Accounting Standards
| | ------------------------

| | In
January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No.
46, Consolidation of Variable Interest Entities (FIN 46). A variable interest
entity is a corporation, partnership, trust, or any other legal structure used for
business purposes that does not have equity investors with voting rights, or has equity
investors that do not provide sufficient financial resources for the entity to support its
activities. FIN 46 requires the consolidation of any variable interest entities in which a
company is subject to a majority of the risk of loss from the variable interest
entitys activities or entitled to receive a majority of the entitys residual
returns, or both. In December 2003, the FASB issued Interpretation No. 46R, a revision of
Interpretation No. 46. The provisions of FIN 46 and FIN 46R related to special-purpose
entities were effective for reporting periods ending after December 15, 2003. The adoption
of these provisions did not have a material impact on our consolidated financial position,
results of operations or cash flows. The remaining provisions of these Interpretations are
effective for the first reporting period ending after March 15, 2004. We are currently
assessing the impact the adoption of these Interpretations will have on our consolidated
financial position, results of operations and cash flows.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities. SFAS No. 149, which amends and clarifies
existing accounting pronouncements, addresses financial accounting and reporting for
derivative or other hybrid instruments to require similar accounting treatment for
contracts with comparable characteristics. This statement was effective for contracts
entered into or modified after June 30, 2003 and for hedging activities designated after
June 30, 2003. This statement did not have a material impact on our consolidated financial
position, results of operations or cash flows.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity. This statement addresses
financial accounting and reporting for certain financial instruments with characteristics
of both liabilities and equity. It requires that an issuer classify a financial instrument
within its scope as a liability, or asset as appropriate, to represent obligations of the
issuer. Many of the instruments covered by this statement have previously been classified
as equity. SFAS No. 150 was effective for all financial instruments created or modified
after May 31, 2003, and to other instruments as of September 1, 2003. This statement did
not have a material impact on our consolidated financial position, results of operations
or cash flows.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 implementation of EITF 03-1 did not
have a material impact on our consolidated financial position, results of operations or
cash flows.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

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B.    
          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 January 31, | 
|-------------------------------------------------------------------- | ------------------------------ | 
|
|                                                                     |                                | 
|Numerator:                                                           |                                | 
|Income from continuing operations available to common stockholders   |                                | 
|Cumulative effect of change in accounting principle, net of tax      |                                | 
|                                                                     |                                | 
|Net income available to common stockholders                          |                                | 
|                                                                     |                                | 
|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 three months ended January 31, 2004 and 2003, options to purchase a total of 357
thousand and 381 thousand shares of common stock, 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

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C.    
          DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS

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

|                                                                     | Three Months Ended January 31, | 
|-------------------------------------------------------------------- | ------------------------------ | 
|
|                                                                     |                                | 
|Balance at beginning of period                                       |                                | 
|Adjustments to the reserve                                           |                                | 
|Deductions for uncollectible accounts written off, net of recoveries |                                | 
|                                                                     |                                | 
|Balance at end of period                                             |                                | 
|                                                                     |                                | 

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

|                                | Three Months Ended January 31, | 
|------------------------------- | ------------------------------ | 
|
|                                |                                | 
|Balance at beginning of period  |                                | 
|Adjustments to the reserve      |                                | 
|Deductions for warranty charges |                                | 
|                                |                                | 
|Balance at end of period        |                                | 
|                                |                                | 

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

|                                       | January 31, |  | October 31,
|-------------------------------------- | ----------- |  | -----------
|
|                                       |             |  |            
|Raw materials, parts and subassemblies |             |  | $          
|Work-in-progress                       |             |  |            
|                                       |             |  |            
|Total inventories                      |             |  | $          
|                                       |             |  |            

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

|                                         | January 31, |  | October 31,
|---------------------------------------- | ----------- |  | -----------
|
|                                         |             |  |            
|Land                                     |             |  | $          
|Buildings and improvements               |             |  |            
|Machinery and equipment                  |             |  |            
|Furniture and fixtures                   |             |  |            
|Construction in process                  |             |  |            
|                                         |             |  |            
|                                         |             |  |            
|Less-accumulated depreciation            |             |  |            
|                                         |             |  |            
|Total property, plant and equipment, net |             |  | $          
|                                         |             |  |            

The components of costs and estimated
earnings in excess of billings (in thousands):

|                                                         | January 31, |  | October 31,
|-------------------------------------------------------- | ----------- |  | -----------
|
|                                                         |             |  |            
|Costs and estimated earnings                             |             |  | $          
|Progress billings                                        |             |  |            
|                                                         |             |  |            
|Total costs and estimated earnings in excess of billings |             |  | $          
|                                                         |             |  |            

The components of billings in excess
of costs and estimated earnings (in thousands):

|                                                         | January 31, |  | October 31,
|-------------------------------------------------------- | ----------- |  | -----------
|
|                                                         |             |  |            
|Costs and estimated earnings                             |             |  | $          
|Progress billings                                        |             |  |            
|                                                         |             |  |            
|Total billings in excess of costs and estimated earnings |             |  | $          
|                                                         |             |  |            

8

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D.    
          COMPREHENSIVE INCOME

| | Our
comprehensive income consists of net income and the change in fair value of marketable
securities. At January 31, 2004, marketable securities consisted of investment-grade
corporate bonds that we have classified as available-for-sale. The maturity dates of these
bonds vary from 5-9 years. These investments are carried at fair value, with unrealized
gains and losses, net of related tax effects, included in other comprehensive income. At
January 31, 2003, we had an interest rate swap agreement which was used as a cash flow
hedge in the management of interest rate exposure. The interest rate swap agreement was
settled in September 2003. Comprehensive income for the three month period ended January
31, 2004 and 2003 is as follows (in thousands):
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                              | Three Months Ended January 31, | 
|--------------------------------------------- | ------------------------------ | 
|
|                                              |                                | 
|Net income                                    |                                | 
|Change in fair value of hedge instrument      |                                | 
|Change in fair value of marketable securities |                                | 
|                                              |                                | 
|Comprehensive income                          |                                | 
|                                              |                                | 

E.    
          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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | If
compensation expense for our stock option plans had been determined based on the fair
value at the grant date for awards through January 31, 2004 consistent with the provisions
of SFAS No. 123, our net income and earnings per share would have been as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                        | Three Months Ended January 31, | 
|----------------------------------------------------------------------- | ------------------------------ | 
|
|                                                                        |                                | 
|Net income, as reported                                                 |                                | 
|Less:  Total stock-based employee compensation expense determined under |                                | 
|fair value based method for all awards, net of related tax effects      |                                | 
|                                                                        |                                | 
|Pro forma net income                                                    |                                | 
|                                                                        |                                | 
|Basic earnings per share:                                               |                                | 
|As reported                                                             |                                | 
|Pro forma                                                               |                                | 
|Diluted earnings per share:                                             |                                | 
|As reported                                                             |                                | 
|Pro forma                                                               |                                | 

F.    
          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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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
included in our annual report on Form 10-K for the year ended October 31, 2003. For
purposes of this presentation, all general corporate expenses have been allocated among
operating segments based primarily on revenues. The corporate assets are mainly cash and
cash equivalents and marketable securities.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

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

|                                                          | Three Months Ended January 31, | 
|--------------------------------------------------------- | ------------------------------ | 
|
|                                                          |                                | 
|Revenues:                                                 |                                | 
|Electrical Power Products                                 |                                | 
|Process Control Systems                                   |                                | 
|                                                          |                                | 
|Total                                                     |                                | 
|                                                          |                                | 
|Income from continuing operations before income taxes and |                                | 
|cumulative effect of change in accounting principle:      |                                | 
|Electrical Power Products                                 |                                | 
|Process Control Systems                                   |                                | 
|                                                          |                                | 
|Total                                                     |                                | 
|                                                          |                                | 

|                          | January 31, |  | October 31,
|------------------------- | ----------- |  | -----------
|
|                          |             |  |            
|Assets:                   |             |  |            
|Electrical Power Products |             |  | $          
|Process Control Systems   |             |  |            
|Corporate                 |             |  |            
|                          |             |  |            
|Total                     |             |  | $          
|                          |             |  |            

G.    
          GOODWILL AND OTHER INTANGIBLE ASSETS

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

|                                           | January 31, 2004 | October 31, 2003
|------------------------------------------ | ---------------- | ----------------
|                                           |                  |                 
|
|Goodwill                                   |                  |                 
|Intangible assets subject to amortization: |                  |                 
|Deferred loan costs                        |                  |                 
|Patents and Trademarks                     |                  |                 

| | The
above intangible assets are included in other assets on the consolidated balance sheet.
Amortization expense related to intangible assets subject to amortization for the three
months ended January 31, 2004 was $18 thousand. Estimated amortization expense for each of
the subsequent five fiscal years is expected to be approximately $70 thousand.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

H.    
          COMMITMENTS AND CONTINGENCIES

| | Certain
customers require us to post a bank letter of credit guarantee or performance bonds issued
by a surety. These assure our customers that we will perform under terms of our contract
and with associated vendors and subcontractors. 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 $2.1 million as of January 31, 2004. We also had performance bonds totaling
approximately $167.9 million that were outstanding at January 31, 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company is a partner in a 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. Part of the follow-on contractors claim
contains unsubstantiated allegations that such 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

---

| | 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. 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. Although an unfavorable outcome to the follow-on
contractors claim could have a material adverse effect on the Companys
financial condition, results of operations, and cash flows, the Company believes that an
unfavorable outcome with respect to these matters, under the circumstances and on the
basis of the information now available, is unlikely.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

I.    
          SUBSEQUENT EVENT

| | In
February 2004, we announced our decision to close our plant in Greenville, Texas, and
relocate the manufacture of the associated distribution switch product lines to our North
Canton, Ohio facility. We expect the transfer of the product lines to be completed during
the third quarter of fiscal 2004. Pre-tax expenses associated with the plant closing are
estimated to range from $500 to $750 thousand.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

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Part
I      Item 2

# MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be
read in conjunction with the accompanying condensed 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.

# Results of Operations

Revenue and Gross Profit

Consolidated revenues decreased 26%
to $53.2 million in the first quarter of fiscal 2004 as compared to first quarter 2003
revenues of $71.6 million, primarily due to a decline in new infrastructure investments in
the industrial and utility markets served by our Electrical Power Products segement.
Domestic revenues decreased $16.6 million to $45.3 million for the three months ended
January 31, 2004. International revenues decreased 18% in the first quarter 2004 to $7.9
million from $9.6 million in the same quarter of the prior year. Revenues outside of the
United States accounted for 15% of consolidated revenues in the first quarter of fiscal
2004 compared to 13% in the same period last year.

Electrical Power Products

Our Electrical Power Products segment
recorded revenues of $46.2 million for the three months ended January 31, 2004 compared to
$65.6 million for the same time period of the previous year. In the first quarter of 2004,
revenues from public and private utilities were 38% lower than the first quarter of fiscal
2003. This was primarily due to a significant decline in new investments in electrical
power generation facilities. Utility revenues were $19 million compared to $30 million in
the first quarter of 2003. Revenues from industrial customers totaled $21 million, a
decrease of $8 million, or 28%, from the same time period of the previous year. This
decrease in revenue from industrial customers resulted primarily from lower revenues
related to the manufacture and delivery of power control modules for new oil and gas
production facilities. Municipal and transit projects generated revenues of $13 million
during the first quarter of 2004 and 2003.

Gross profit, as a percentage of
revenues, was 17.8% in the first quarter of fiscal 2004, compared to 19.4% in the first
quarter of fiscal year 2003. Gross profit was 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
separation costs of $0.2 million as a result of reductions in our workforce.

Process Control Systems

Revenues in our Process Control
Systems segment increased 17% to $7.1 million compared to $6.0 million in the first
quarter of fiscal 2003. Our most significant project during the first quarter of 2004 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. First quarter
revenue attributable to this project totaled $2.8 million. Gross profit, as a percentage
of revenues, was 19.2% in the first quarter of fiscal 2004 compared to 25.1% in the first
quarter of 2003. Margins fell during the first quarter of 2004 due to a higher proportion
of segment revenue attributable to subcontract work, which carries substantially lower
margins.

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

Operating Expenses

Selling, general and administrative
expenses increased to 16.0% of revenues in the first quarter of 2004 compared to 13.1% of
revenues in the first quarter of fiscal year 2003. 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 $0.9 million in the first
quarter of fiscal 2004 compared to $0.7 million in last years first quarter. Our
research efforts are directed toward the discovery and development of new products and
processes as well as improvements in existing products and processes. For the full year,
we anticipate research and development spending will be comparable to fiscal year 2003
expenditures of $3.6 million.

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Interest Income and
Expense

We incurred $27 thousand in interest
expense on our outstanding industrial development revenue bonds during the quarter
compared to $86 thousand for the three months ended January 31, 2003. In September 2003,
we paid off our term debt, which accounted for the majority of the interest expense
incurred in the first quarter of 2003. As a result of lower levels of debt and decreased
interest rates, our interest expense has declined.

Interest income increased by $100
thousand to $192 thousand for the first quarter of 2004 compared to the same period of the
previous year. An increase in invested funds during 2004 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 36.7% in the first
quarter of fiscal 2004 compared to 37.2% in the first quarter of fiscal 2003. The decrease
in the provision is primarily due to the decrease in consolidated pre-tax earnings, which
has changed our effective federal income tax rate from 35% in 2003 to 34% in 2004.

Net Income

Net income was $747 thousand, or
$0.07 per diluted share, in the first quarter of fiscal 2004 compared to $2.5 million, or
$0.24 per diluted share, in the first quarter of fiscal 2003. The decrease in net income
primarily relates to lower business volume and decreased gross profits in fiscal 2004.

In the first quarter of fiscal 2003,
net income was negatively impacted as a result of the adoption of Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets. During that quarter, 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 $0.04 per diluted share.

Backlog

The order backlog on January 31,
2004, was $137.3 million, compared to $157.5 million at fiscal year end 2003 and $168.5
million at the end of the first quarter one year ago. New orders placed during the first
quarter totaled $33.1 million versus $36.3 million in our fourth quarter 2003 and $50.7
million for the same period last year. Capital spending on new infrastructure projects
has declined due to uncertainty with the U.S. economy, thus causing the decline in our
backlog and bookings.

# Liquidity and Capital
Resources

We have maintained a strong liquidity
position. Working capital was $97.7 million at January 31, 2004 compared to $96.9 million
at October 31, 2003. As of January 31, 2004, current assets exceeded current liabilities
by 3.3 times and our debt to capitalization ratio was less than 0.1 to 1.0.

As of January 31, 2004, we had cash
and cash equivalents of $37.3 million, as well as $5.7 million in marketable debt
securities, a slight increase from year end 2003. Long-term debt, including current
maturities, totaled $7.3 million at January 31, 2004 compared to $7.4 million at October
31, 2003. In addition to our long-term debt, we have a $15 million revolving credit
agreement expiring February 2006. As of January 31, 2004, there were no borrowings under
this line of credit. We were in compliance with all debt covenants as of January 31, 2004.

Operating Activities

For the three months ended January
31, 2004, cash from operating activities provided $1.8 million. A net reduction in
operating assets and liabilities provided $2.0 million compared to the net investment of
$5.2 million in operating assets in the first quarter of 2003. During the first quarter of
2004, the primary source of cash from operating activities was due to increased billings
on percentage of completion projects. In addition, reductions in inventory provided cash
from operations as opposed to the increases in inventory during the first quarter of 2003
partially offset by increases in accounts receivable.

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Investing Activities

Cash used for the purchase of
property, plant and equipment during the three months ended January 31, 2004 was $1.5
million, as compared to $1.8 million for the three months ended January 31, 2003. The
majority of our 2004 and 2003 capital expenditures were to increase our manufacturing
capabilities available for the manufacture of electrical power control modules. These
modules are provided to the oil and gas industry for use on offshore platforms.

Financing Activities

Financing activities provided $250
thousand in the first quarter of 2004. The primary source of cash from financing
activities was the proceeds from the exercise of stock options. During the first quarter
of 2003, the primary use of cash was to repay our term debt. The term loan was paid off in
September 2003.

# Outlook

For the second quarter of 2004, we
expect earnings from continuing operations to range between $0.04 and $0.09 per diluted
share. For the full year 2004, we expect earnings from continuing operations to range
between $0.35 and $0.50 per diluted share. Fiscal year 2004 revenue is expected to range
between $205 million and $220 million.

We will continue to invest in our
manufacturing capabilities and expect capital expenditures for full fiscal year 2004 to
range between $5.0 million and $8.0 million. During 2002, we initiated a project to
increase our manufacturing capacity available for the manufacture of electrical power
control modules. This project is expected to be completed in the first half of fiscal year
2004.

In spite of declining business
volumes, we anticipate that our cash position will improve slightly during 2004 due to
cost containment and investment income. We believe that working capital, borrowing
capabilities, and funds generated from operations should be sufficient to finance
anticipated operational activities, capital improvements, debt repayment and possible
future acquisitions for the foreseeable future.

# 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 critical
accounting policies have the greatest impact on the preparation of our consolidated
financial statements.

Revenue Recognition

Our revenues are generated from the
manufacture and delivery of custom-manufactured 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 and duration
of the contract is reviewed to determine the appropriate revenue recognition method based
upon company policy. Due to the 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 based on credit verification and the
customers payment history.

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Under the percentage-of-completion
method, revenues are recognized as work is performed based upon the ratio of labor dollars
or hours incurred to date to total estimated labor dollars or hours to measure the stage
of completion. The sales and gross profit recognized in each period are adjusted
prospectively for any revisions in the total estimated contract costs, total estimated
labor hours to complete the project, or total contract value. 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. Due to the number of estimates used in the
percentage-of-completion calculations, conditions such as changes in job performance, job
conditions, estimated contract costs and profitability may result in revisions to original
assumptions, thus causing actual results to differ from original estimates.

Valuation Accounts

Our most significant accounting
uncertainty for which a valuation account is set up is in the area of accounts receivable
collectibility.

An allowance for doubtful accounts
has been established to provide for estimated losses on our accounts receivable. 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. We
continually assess our allowance for doubtful accounts and may increase or decrease our
periodic provision as additional information regarding collectibility becomes available.

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. For long-lived assets to
be held and used, the evaluation is based on impairment indicators such as the nature of
the assets, the future economic benefit of the assets, any historical or future
profitability measurements and other external market conditions or factors that may be
present. If such impairment indicators are present or other factors exist that indicate
that the carrying amount of the asset may not be recoverable, we determine whether
impairment has occurred through the use of an undiscounted cash flows analysis of the
asset at the lowest level for which identifiable cash flows exist, or quoted market
prices. If an asset is considered to be impaired, a loss is recognized for the amount by
which the carrying amount of the asset exceeds its fair value. 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. Assets are classified as held for sale when there is a
plan for disposal and those assets meet the held for sale criteria of SFAS No. 144. Assets
to be disposed of are reported at the lower of the carrying amount or fair value less cost
to sell.

Accruals for Contingent
Liabilities

We account for contingencies in
accordance with SFAS No. 5, Accounting for Contingencies. SFAS No. 5 requires
that we record an estimated loss from a loss contingency when information available prior
to the issuance of our financial statements indicates that it is probable that an asset
has been impaired or a liability has been incurred at the date of the financial statements
and the amount of the loss can be reasonably estimated. 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 other specific circumstances surrounding these claims in
evaluating the amount of liability that should be recorded. Actual results could differ
from our estimates.

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Part
1      Item 3

# 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 manage our exposure to changes in
interest rates by optimizing the use of variable rate debt. A 1.0% increase in interest
rates would result in an annual increase in interest expense of less than $100 thousand.
In addition to variable rate debt, we also invest in marketable debt securities that 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. However, we believe that changes in
interest rates will not have a material near-term impact on our future earnings or cash
flows.

We manage our exposure to changes in
foreign exchange rates primarily through arranging compensation in U.S. dollars. Risks
associated with changes in commodity prices are primarily managed through utilizing
contracts with suppliers. Risks related to foreign exchange rates and commodity prices are
monitored and actions could be taken to hedge these risks in the future. We believe that
fluctuations in foreign exchange rates and commodity prices will not have a material
near-term effect on our future earnings and cash flows.

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Part
1      Item 4

# CONTROLS AND PROCEDURES

Management, with the participation of
our Chief Executive Officer (CEO) and Chief Financial Officer
(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 to ensure that information required to
be disclosed by us in reports that we file or submit under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules and forms and that such
information is accumulated and communicated to our management, including the CEO and CFO,
as appropriate, to allow timely decisions regarding required disclosures.

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 control 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 fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

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Part II

OTHER INFORMATION

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| | ITEM 1.
       
       
       
ITEM 2.
       
ITEM 3.
       
ITEM 4.
       
ITEM 5.
       
ITEM 6. | Legal Proceedings
The Company is a party to disputes  arising in the  ordinary  course of business.  Management  does not believe that
the ultimate  outcome of these disputes will materially  affect the financial  condition or results of operations of
the Company.
Changes in Securities and Use of Proceeds
None
Defaults Upon Senior Securities
Not applicable
Submission of Matters to a Vote of Security Holders
None
Other Information
None
Exhibits and Reports on Form 8-K
       a. Exhibits
          3.1 - Articles of  Incorporation  and  Certificates of Amendment of Powell  Industries,  Inc. dated 
                  July 20, 1987 and March 13, 1992 (filed as Exhibit 3 to our Form 10-K for the fiscal year 
                  ended October 31,  1982,  Form 10-Q  for the  quarter  ended  July 31,  1987,  and  Form  10-Q    
                  for the quarter  ended  April  30,  1992, respectively, and incorporated herein by reference).
          3.2 - Bylaws of Powell  Industries,  Inc.  (filed as Exhibit 3.2 to our Form 10-Q for the quarter ended 
                  April 30, 1995 and incorporated herein by reference).
         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.
       b. Reports on Form 8-K
           Form 8-K filed on February 27, 2004
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18

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SIGNATURES

Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

POWELL INDUSTRIES, INC. Registrant

|                   |                                                                                                                              
|------------------ | -----------------------------------------------------------------------------------------------------------------------------
|March 1, 2004
Date | /s/      THOMAS W. POWELL             
Thomas W. Powell
President & Chief Executive Officer
(Principal Executive Officer)    
|March 1, 2004
Date | /s/    DON R. MADISON                  
Don R. Madison
Vice President & Chief Financial Officer
(Principal Financial Officer)

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