##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 001-12488
 Powell Industries, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    88-0106100(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    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
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



POWELL INDUSTRIES, INC. AND SUBSIDIARIES
 TABLE OF CONTENTS
 PagePart I  Financial Information
    
    
    3Item 1. Condensed Consolidated Financial Statements (unaudited)
    
    
    3Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Operations
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    26Part II  Other Information
    
    
    27Item 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 6. Exhibits
    
    
    28Signatures
    
    
    29EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



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)
 March 31,
    
    
    September 30,2010
    
    
    2009(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    113,604
    
    
    $
    97,403Cash held in escrow
    
    
    2,454
    
    
    
    Accounts receivable, less allowance for doubtful accounts of $1,930 and $1,607, respectively
    
    
    102,888
    
    
    
    114,274Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    40,178
    
    
    
    46,335Inventories, net
    
    
    39,302
    
    
    
    46,252Income taxes receivable
    
    
    51
    
    
    
    695Deferred income taxes
    
    
    3,893
    
    
    
    3,303Prepaid expenses and other current assets
    
    
    3,101
    
    
    
    6,741Total Current Assets
    
    
    305,471
    
    
    
    315,003Property, plant and equipment, net
    
    
    66,041
    
    
    
    61,036Goodwill
    
    
    8,244
    
    
    
    1,084Intangible assets, net
    
    
    26,185
    
    
    
    21,305Other assets
    
    
    7,685
    
    
    
    6,412Total Assets
    
    $
    413,626
    
    
    $
    404,840LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt and capital lease obligations
    
    $
    2,320
    
    
    $
    4,692Income taxes payable
    
    
    4,636
    
    
    
    7,637Accounts payable
    
    
    38,220
    
    
    
    48,124Accrued salaries, bonuses and commissions
    
    
    22,739
    
    
    
    24,503Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    38,468
    
    
    
    44,772Accrued product warranty
    
    
    7,054
    
    
    
    7,558Other accrued expenses
    
    
    7,859
    
    
    
    11,856Total Current Liabilities
    
    
    121,296
    
    
    
    149,142Long-term debt and capital lease obligations, net of current maturities
    
    
    20,073
    
    
    
    4,800Deferred compensation
    
    
    2,922
    
    
    
    2,685Postretirement benefit obligation
    
    
    815
    
    
    
    784Other liabilities
    
    
    207
    
    
    
    212Total Liabilities
    
    
    145,313
    
    
    
    157,623Commitments and Contingencies (Note H)Equity:Stockholders Equity:Preferred stock, par value $.01; 5,000,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, par value $.01; 30,000,000 shares authorized; 11,576,804 and 11,479,610
shares issued, respectively; 11,576,804 and 11,479,610 shares outstanding, respectively
    
    
    116
    
    
    
    115Additional paid-in capital
    
    
    31,521
    
    
    
    29,970Retained earnings
    
    
    239,464
    
    
    
    219,961Accumulated other comprehensive income
    
    
    (2,832
    )
    
    
    (2,716
    )Deferred compensation
    
    
    (538
    )
    
    
    (569
    )Total Stockholders Equity
    
    
    267,731
    
    
    
    246,761Noncontrolling interest
    
    
    582
    
    
    
    456Total Equity
    
    
    268,313
    
    
    
    247,217Total Liabilities and Equity
    
    $
    413,626
    
    
    $
    404,840
  3




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##### Table of Contents



POWELL INDUSTRIES, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)
 Three Months Ended
    
    
    Six Months EndedMarch 31, 2010
    
    
    March 31, 2009
    
    
    March 31, 2010
    
    
    March 31, 2009Revenues
    
    $
    142,135
    
    
    $
    164,099
    
    
    $
    278,051
    
    
    $
    334,588Cost of goods sold
    
    
    105,602
    
    
    
    130,255
    
    
    
    203,701
    
    
    
    266,242Gross profit
    
    
    36,533
    
    
    
    33,844
    
    
    
    74,350
    
    
    
    68,346Selling, general and administrative expenses
    
    
    21,157
    
    
    
    20,323
    
    
    
    43,798
    
    
    
    41,884Operating income
    
    
    15,376
    
    
    
    13,521
    
    
    
    30,552
    
    
    
    26,462Interest expense
    
    
    228
    
    
    
    262
    
    
    
    410
    
    
    
    734Interest income
    
    
    (115
    )
    
    
    (3
    )
    
    
    (157
    )
    
    
    (60
    )Income before income taxes
    
    
    15,263
    
    
    
    13,262
    
    
    
    30,299
    
    
    
    25,788Income tax provision
    
    
    5,378
    
    
    
    4,655
    
    
    
    10,669
    
    
    
    9,052Net income
    
    
    9,885
    
    
    
    8,607
    
    
    
    19,630
    
    
    
    16,736Net (income) loss attributable to noncontrolling interest
    
    
    (25
    )
    
    
    245
    
    
    
    (126
    )
    
    
    (31
    )Net income attributable to Powell Industries, Inc.
    
    $
    9,860
    
    
    $
    8,852
    
    
    $
    19,504
    
    
    $
    16,705Earnings per share attributable to Powell Industries, Inc.:Basic
    
    $
    0.86
    
    
    $
    0.78
    
    
    $
    1.70
    
    
    $
    1.46Diluted
    
    $
    0.85
    
    
    $
    0.77
    
    
    $
    1.68
    
    
    $
    1.45Weighted average shares:Basic
    
    
    11,523
    
    
    
    11,413
    
    
    
    11,498
    
    
    
    11,413Diluted
    
    
    11,659
    
    
    
    11,495
    
    
    
    11,639
    
    
    
    11,487
  4




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POWELL INDUSTRIES, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
 Six Months EndedMarch 31, 2010
    
    
    March 31, 2009Operating Activities:Net income
    
    $
    19,630
    
    
    $
    16,736Adjustments to reconcile net income to net cash used in operating activities:Depreciation
    
    
    4,274
    
    
    
    3,764Amortization
    
    
    2,095
    
    
    
    1,738Stock-based compensation
    
    
    1,163
    
    
    
    1,253Bad debt expense
    
    
    692
    
    
    
    1,088Deferred income taxes
    
    
    (1,256
    )
    
    
    (1,726
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    28,280
    
    
    
    2,083Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    5,948
    
    
    
    26,249Inventories
    
    
    12,151
    
    
    
    12,386Prepaid expenses and other current assets
    
    
    7,156
    
    
    
    1,105Other assets
    
    
    (1,537
    )
    
    
    (21
    )Accounts payable and income taxes payable
    
    
    (19,392
    )
    
    
    (4,699
    )Accrued liabilities
    
    
    (7,283
    )
    
    
    (6,723
    )Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    (6,140
    )
    
    
    26,490Other
    
    
    246
    
    
    
    108Net cash provided by operating activities
    
    
    46,027
    
    
    
    79,831Investing Activities:Proceeds from sale of fixed assets
    
    
    14
    
    
    
    1Purchases of property, plant and equipment
    
    
    (1,460
    )
    
    
    (2,981
    )Acquisition of Powell Canada
    
    
    (21,828
    )
    
    
    Net cash used in investing activities
    
    
    (23,274
    )
    
    
    (2,980
    )Financing Activities:Borrowings on US revolving line of credit
    
    
    
    
    
    
    50,953Payments on US revolving line of credit
    
    
    
    
    
    
    (69,953
    )Payments on UK term loan
    
    
    
    
    
    
    (860
    )Borrowings on Canadian revolving line of credit
    
    
    891
    
    
    
    Payments on Canadian revolving line of credit
    
    
    (1,215
    )
    
    
    Payments on Canadian term loan
    
    
    (123
    )
    
    
    Payments on industrial development revenue bonds
    
    
    (400
    )
    
    
    (400
    )Payments on deferred acquisition payable
    
    
    (4,292
    )
    
    
    (5,220
    )Payments on short-term and other financing
    
    
    (402
    )
    
    
    (13
    )Proceeds from exercise of stock options
    
    
    617
    
    
    
    53Tax benefit from exercise of stock options
    
    
    139
    
    
    
    32Net cash used in financing activities
    
    
    (4,785
    )
    
    
    (25,408
    )Net increase in cash and cash equivalents
    
    
    17,968
    
    
    
    51,443Effect of exchange rate changes on cash and cash equivalents
    
    
    (1,767
    )
    
    
    (1,435
    )Cash and cash equivalents at beginning of period
    
    
    97,403
    
    
    
    10,134Cash and cash equivalents at end of period
    
    $
    113,604
    
    
    $
    60,142
  5




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POWELL INDUSTRIES, INC. AND SUBSIDIARIES
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
  Overview
    Basis of Presentation
    Use of Estimates
  6




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Fair Value Measurements
  Foreign Currency Translation
  Derivative Financial Instruments
      7




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Accumulated Other Comprehensive Income (Loss)
  Income Taxes
       New Accounting Standards
 Accounting
Standards Codification
  8




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9




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Accounts receivable
    
    $
    17,693Inventories
    
    
    5,191Prepaid expenses and other current assets
    
    
    858Property, plant and equipment
    
    
    7,863Intangible assets
    
    
    4,771Goodwill
    
    
    9,201Accounts payable and other current liabilities
    
    
    (6,010
    )Capital lease obligations
    
    
    (2,667
    )Bank debt assumed
    
    
    (15,072
    )Cash purchase price
    
    
    21,828Cash in escrow
    
    
    2,358Total purchase price
    
    $
    24,186
    Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Net income attributable to Powell Industries, Inc.
    
    $
    9,860
    
    
    $
    8,852
    
    
    $
    19,504
    
    
    $
    16,705Denominator:Weighted average basic shares
    
    
    11,523
    
    
    
    11,413
    
    
    
    11,498
    
    
    
    11,413Dilutive effect of stock options, restricted stock and
restricted stock units
    
    
    136
    
    
    
    82
    
    
    
    141
    
    
    
    74Weighted average diluted shares with assumed conversions
    
    
    11,659
    
    
    
    11,495
    
    
    
    11,639
    
    
    
    11,487Net earnings per share:Basic
    
    $
    0.86
    
    
    $
    0.78
    
    
    $
    1.70
    
    
    $
    1.46Diluted
    
    $
    0.85
    
    
    $
    0.77
    
    
    $
    1.68
    
    
    $
    1.45
    10




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Fair Value Measurements at March 31, 2010Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Fair Value at(Level 1)
    
    
    (Level 2)
    
    
    (Level 3 )
    
    
    March 31, 2010AssetsCash equivalents
    
    $
    66,799
    
    
    $
    
    
    
    $
    
    
    
    $
    66,799Total
    
    $
    66,799
    
    
    $
    
    
    
    $
    
    
    
    $
    66,799LiabilitiesForeign currency forward contracts
    
    $
    
    
    
    $
    189
    
    
    $
    
    
    
    $
    189Total
    
    $
    
    
    
    $
    189
    
    
    $
    
    
    
    $
    189
  Fair Value Measurements at September 30, 2009Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Fair Value at(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    September 30, 2009AssetsCash equivalents
    
    $
    59,324
    
    
    $
    
    
    
    $
    
    
    
    $
    59,324Total
    
    $
    59,324
    
    
    $
    
    
    
    $
    
    
    
    $
    59,324LiabilitiesForeign currency forward contracts
    
    $
    
    
    
    $
    752
    
    
    $
    
    
    
    $
    752Total
    
    $
    
    
    
    $
    752
    
    
    $
    
    
    
    $
    752
   11




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Allowance for Doubtful Accounts
  Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Balance at beginning of period
    
    $
    2,580
    
    
    $
    1,082
    
    
    $
    1,607
    
    
    $
    1,180Increase (decrease) to bad debt expense
    
    
    (609
    )
    
    
    754
    
    
    
    692
    
    
    
    1,088Deductions for uncollectible accounts written off, net of recoveries
    
    
    (27
    )
    
    
    (181
    )
    
    
    (397
    )
    
    
    (566
    )Increase (decrease) due to foreign currency translation
    
    
    (14
    )
    
    
    (46
    )
    
    
    28
    
    
    
    (93
    )Balance at end of period
    
    $
    1,930
    
    
    $
    1,609
    
    
    $
    1,930
    
    
    $
    1,609
 Warranty Accrual
  Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Balance at beginning of period
    
    $
    7,437
    
    
    $
    7,291
    
    
    $
    7,558
    
    
    $
    6,793Warranty expense
    
    
    559
    
    
    
    627
    
    
    
    1,350
    
    
    
    2,175Deductions for warranty charges
    
    
    (835
    )
    
    
    (1,564
    )
    
    
    (1,747
    )
    
    
    (2,208
    )Decrease due to foreign currency translation
    
    
    (107
    )
    
    
    (18
    )
    
    
    (107
    )
    
    
    (424
    )Balance at end of period
    
    $
    7,054
    
    
    $
    6,336
    
    
    $
    7,054
    
    
    $
    6,336
 Inventories
  March 31,
    
    
    September 30,2010
    
    
    2009Raw materials, parts and subassemblies
    
    $
    38,572
    
    
    $
    43,968Work-in-progress
    
    
    7,957
    
    
    
    8,597Provision for obsolescence
    
    
    (7,227
    )
    
    
    (6,313
    )Total inventories
    
    $
    39,302
    
    
    $
    46,252
 Cost and Estimated Earnings on Uncompleted Contracts
  March 31,
    
    
    September 30,2010
    
    
    2009Costs incurred on uncompleted contracts
    
    $
    530,274
    
    
    $
    552,805Estimated earnings
    
    
    147,138
    
    
    
    136,603677,412
    
    
    
    689,408Less: Billings to date
    
    
    675,702
    
    
    
    687,845Net underbilled position
    
    $
    1,710
    
    
    $
    1,563Included in the accompanying balance sheets under the following captions:Costs and estimated earnings in excess of billings on uncompleted contracts  underbilled
    
    $
    40,178
    
    
    $
    46,335Billings in excess of costs and estimated earnings on uncompleted contracts  overbilled
    
    
    (38,468
    )
    
    
    (44,772
    )Net underbilled position
    
    $
    1,710
    
    
    $
    1,563
 12




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Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income attributable to Powell Industries, Inc.
    
    $
    9,860
    
    
    $
    8,852
    
    
    $
    19,504
    
    
    $
    16,705Unrealized gain (loss) on foreign currency translation, net of tax
    
    
    (685
    )
    
    
    (259
    )
    
    
    81
    
    
    
    (4,279
    )Unrealized gain (loss) on derivative contracts, net of tax
    
    
    44
    
    
    
    (202
    )
    
    
    (197
    )
    
    
    (1,933
    )Comprehensive income
    
    $
    9,219
    
    
    $
    8,391
    
    
    $
    19,388
    
    
    $
    10,493
   March 31,
    
    
    September 30,2010
    
    
    2009Canadian Revolver
    
    $
    12,874
    
    
    $
    Canadian Term Loan
    
    
    2,331
    
    
    
    Industrial development revenue bonds
    
    
    4,800
    
    
    
    5,200Capital lease obligations
    
    
    2,388
    
    
    
    Deferred acquisition payable
    
    
    
    
    
    
    4,292Subtotal long-term debt and capital lease obligations
    
    
    22,393
    
    
    
    9,492Less current portion
    
    
    (2,320
    )
    
    
    (4,692
    )Total long-term debt and capital lease obligations
    
    $
    20,073
    
    
    $
    4,800
 US and UK Revolvers
      13




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Minimum Tangible Net Worth
 Minimum Fixed Charge Coverage Ratio
 Maximum Leverage Ratio
  Canadian Revolver
      Canadian Term Loan
  14




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Industrial Development Revenue Bonds
  Deferred Acquisition Payable
 ®
  Letters of Credit and Bonds
    Litigation
  15




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Restricted Stock Units
   Restricted Stock
   Stock Options
  RemainingWeighted
    
    
    WeightedAverage
    
    
    Average
    
    
    AggregateStock
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Term (Years)
    
    
    Value(in thousands)Outstanding at September 30, 2009
    
    
    237,350
    
    
    $
    17.14Granted
    
    
    
    
    
    
    Exercised
    
    
    (38,600
    )
    
    
    15.97Forfeited / Cancelled
    
    
    
    
    
    
    Outstanding at March 31, 2010
    
    
    198,750
    
    
    $
    17.36
    
    
    
    2.34
    
    
    $
    3,451Exercisable at March 31, 2010
    
    
    159,750
    
    
    $
    17.10
    
    
    
    2.19
    
    
    $
    2,732
    16




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Asset Derivatives
    
    
    Liability DerivativesFair
    
    
    
    
    
    
    FairBalance Sheet Location
    
    
    Value
    
    
    Balance Sheet Location
    
    
    Value(in thousands)Derivatives designated as hedging instruments:Foreign exchange forwards
    
    Prepaid expenses and
    
    
    
    
    


    Other accruedother current assets
    
    $
    
    
    
    expenses
    
    $
    189Total derivatives
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    189
  Asset Derivatives
    
    
    Liability DerivativesFair
    
    
    
    
    
    
    FairBalance Sheet Location
    
    
    Value
    
    
    Balance Sheet Location
    
    
    Value(in thousands)Derivatives designated as hedging instruments:Prepaid expenses and
    
    
    
    
    

    Other accruedForeign exchange forwards
    
    other current assets
    
    $
    
    
    
    expenses
    
    $
    752Foreign exchange forwards
    
    Deferred income taxes
    
    
    164
    
    
    Other liabilities
    
    
    Total derivatives
    
    
    
    
    
    $
    164
    
    
    
    
    
    
    $
    752
  Amount of Gain (Loss)Amount of Gain (Loss)
    
    
    
    
    
    
    Reclassified fromRecognized in Other
    
    
    
    
    
    
    Accumulated OtherComprehensive Income on
    
    
    
    
    
    
    Comprehensive IncomeDerivatives 1
    
    
    
    
    
    
    into Income 1Three Months
    
    
    Six Months
    
    
    Location of Gain (Loss)

    
    
    Three Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Reclassified from Accumulated
    
    
    Ended
    
    
    EndedMarch 31,
    
    
    March 31,
    
    
    Other comprehensive Income
    
    
    March 31,
    
    
    March 31,2010
    
    
    2010
    
    
    into Income
    
    
    2010
    
    
    2010Derivatives designated:
    
    (in thousands)
    
    
    
    
    
    (in thousands)Derivatives designated as cash flow hedges:Foreign exchange forwards
    
    $
    71
    
    
    $
    771
    
    
    Revenues
    
    $
    (328
    )
    
    $
    (186
    )Total designated cash flow hedges
    
    $
    71
    
    
    $
    771
    
    
    
    
    
    
    $
    (328
    )
    
    $
    (186
    )
 
 1
    
    For the three and six month periods ended March 31, 2010, we recorded in revenues an
immaterial amount of ineffectiveness from cash flow hedges. 17




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##### Table of Contents



Amount of Gain (Loss)Amount of Gain (Loss)
    
    
    
    
    
    
    Reclassified fromRecognized in Other
    
    
    
    
    
    
    Accumulated OtherComprehensive Income on
    
    
    
    
    
    
    Comprehensive IncomeDerivatives1
    
    
    
    
    
    
    into Income1Three Months
    
    
    Six Months
    
    
    Location of Gain (Loss)
    
    
    Three Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Reclassified from Accumulated
    
    
    Ended
    
    
    EndedMarch 31,
    
    
    March 31,
    
    
    Other comprehensive Income
    
    
    March 31,
    
    
    March 31,Derivatives designated:
    
    2009
    
    
    2009
    
    
    into Income
    
    
    2009
    
    
    2009( in thousands)
    
    
    
    
    
    
    (in thousands)Derivatives designated as cash flow hedges:Foreign exchange forwards
    
    $
    (311
    )
    
    $
    (2,978
    )
    
    Revenues
    
    $
    8
    
    
    $
    8Total designated cash flow hedges
    
    $
    (311
    )
    
    $
    (2,978
    )
    
    
    
    
    
    $
    8
    
    
    $
    8
 
 1
    
    For the three and six month periods ended March 31, 2009, we recorded in revenues an
immaterial amount of ineffectiveness from cash flow hedges.  Cash Flow Hedges
       18




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##### Table of Contents



Credit Risk
      Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Electrical Power Products
    
    $
    135,133
    
    
    $
    158,291
    
    
    $
    265,643
    
    
    $
    322,201Process Control Systems
    
    
    7,002
    
    
    
    5,808
    
    
    
    12,408
    
    
    
    12,387Total
    
    $
    142,135
    
    
    $
    164,099
    
    
    $
    278,051
    
    
    $
    334,588Gross profit:Electrical Power Products
    
    $
    34,564
    
    
    $
    31,960
    
    
    $
    70,321
    
    
    $
    64,132Process Control Systems
    
    
    1,969
    
    
    
    1,884
    
    
    
    4,029
    
    
    
    4,214Total
    
    $
    36,533
    
    
    $
    33,844
    
    
    $
    74,350
    
    
    $
    68,346Income before income taxes:Electrical Power Products
    
    $
    15,076
    
    
    $
    13,143
    
    
    $
    30,063
    
    
    $
    25,262Process Control Systems
    
    
    187
    
    
    
    119
    
    
    
    236
    
    
    
    526Total
    
    $
    15,263
    
    
    $
    13,262
    
    
    $
    30,299
    
    
    $
    25,788
   19




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis 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 Quarterly Report on Form 10-Q and with our Annual Report
on Form 10-K for the year ended September 30, 2009, which was filed with the Securities and
Exchange Commission on December 11, 2009 and is available on the SECs website at www.sec.gov.
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
    
    
    The current economic uncertainty and financial market conditions have negatively impacted
and may continue to impact our customer base, suppliers and backlogs.
    
    Our industry is highly competitive.
    
    International and political events may adversely affect our operations.
    
    Fluctuations in the price and supply of raw materials used to manufacture our products
may reduce our profits.
    
    Our use of percentage-of-completion accounting could result in a reduction or elimination
of previously reported profits.
    
    Our dependence upon fixed-price contracts could result in reduced profits or, in some
cases, losses, if costs increase above our estimates.
    
    Our acquisition strategy involves a number of risks.
    
    We may not be able to fully realize the revenue value reported in our backlog.
    
    Our operating results may vary significantly from quarter to quarter.
    
    We may be unsuccessful at generating profitable internal growth.
    
    The departure of key personnel could disrupt our business.
    
    Our business requires skilled labor, and we may be unable to attract and retain qualified
employees.
    
    Actual and potential claims, lawsuits and proceedings could ultimately reduce our
profitability and liquidity and weaken our
 20




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##### Table of Contents



financial condition.
 
    
    We carry insurance against many potential liabilities, and our management of risk may
leave us exposed to unidentified or unanticipated risks.
    
    Technological innovations by competitors may make existing products and production
methods obsolete.
    
    Catastrophic events could disrupt our business.
  Overview
   Results of Operations
 Revenue and Gross Profit
   21




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##### Table of Contents



Electrical Power Products
     Process Control Systems
    Consolidated Selling, General and Administrative Expenses
  22




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##### Table of Contents



Interest Expense and Income
   Provision for Income Taxes
  Net Income Attributable to Powell Industries, Inc.
  Backlog
  Liquidity and Capital Resources
   23




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##### Table of Contents



Operating Activities
  Investing Activities
  Financing Activities
  New Accounting Standards
  Critical Accounting Policies
   24




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##### Table of Contents



Outlook for Fiscal 2010
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
  Foreign Currency Transaction Risk
   25




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##### Table of Contents



Commodity Price Risk
  Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Internal Control over Financial Reporting
  Design and Operation of Control Systems
  26




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 4. Submission of Matters to a Vote of Security Holders
  Votes CastNominee
    
    Votes Cast For
    
    
    Against
    
    
    Votes Withheld
    
    
    Abstentions
    
    
    Non-VotesJoseph L. Becherer
    
    
    9,328,393
    
    
    
    
    
    
    
    565,219
    
    
    
    
    
    
    
    Patrick L. McDonald
    
    
    9,576,730
    
    
    
    
    
    
    
    316,882
    
    
    
    
    
    
    
    Thomas W. Powell
    
    
    9,474,574
    
    
    
    
    
    
    
    419,038
    
    
    
    
    
    
    
    
 27




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##### Table of Contents



Item 6. Exhibits
 Number
    
    
    
    Description of Exhibits3.1
    
    
    
    Certificate of Incorporation of Powell Industries, Inc. filed with the
Secretary of State of the State of Delaware on February 11, 2004 (filed as
Exhibit 3.1 to our Form 8-A/A filed November 1, 2004, and incorporated herein
by reference).3.2
    
    
    
    By-laws of Powell Industries, Inc. (filed as Exhibit 3.2 to our Form 8-A/A
filed November 1, 2004, and incorporated herein by reference).*31.1
    
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).*31.2
    
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).*32.1
    
    
    
    Certification of Chief Executive Officer 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 Chief Financial Officer Pursuant to Section 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 *
    
    Filed herewith 28




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##### Table of Contents



SIGNATURES
  POWELL INDUSTRIES, INC.
(Registrant)May 5, 2010
    By:
    /s/ Patrick L. McDonaldDate
    
    Patrick L. McDonaldPresident and Chief Executive Officer
(Principal Executive Officer) May 5, 2010
    By:
    /s/ Don R. MadisonDate
    
    Don R. MadisonExecutive Vice President

Chief Financial and Administrative Officer
(Principal Financial and Accounting Officer) 29




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##### Table of Contents



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
    
    
    
    By-laws of Powell Industries, Inc. (filed as Exhibit 3.2 to our Form 8-A/A
filed November 1, 2004, and incorporated herein by reference).*31.1
    
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).*31.2
    
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).*32.1
    
    
    
    Certification of Chief Executive Officer 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 Chief Financial Officer Pursuant to Section 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 *
    
    Filed herewith 30