##### 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 June 30, 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(State or other jurisdiction of 
incorporation or organization)
    
    88-0106100(I.R.S. Employer
Identification No.)
 8550 Mosley Drive, 
Houston, Texas(Address of principal executive offices)
    
    77075-1180(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
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 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
    
    
    21Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    27Part II  Other Information
    
    
    28Item 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 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)
 June 30,
    
    
    September 30,2010
    
    
    2009(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    117,098
    
    
    $
    97,403Accounts receivable, less allowance for doubtful accounts of $1,740 and $1,607, respectively
    
    
    106,659
    
    
    
    114,274Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    35,018
    
    
    
    46,335Inventories, net
    
    
    38,665
    
    
    
    46,252Income taxes receivable
    
    
    1,224
    
    
    
    695Deferred income taxes
    
    
    4,296
    
    
    
    3,303Prepaid expenses and other current assets
    
    
    4,922
    
    
    
    6,741Total Current Assets
    
    
    307,882
    
    
    
    315,003Property, plant and equipment, net
    
    
    65,046
    
    
    
    61,036Goodwill
    
    
    12,899
    
    
    
    1,084Intangible assets, net
    
    
    25,223
    
    
    
    21,305Other assets
    
    
    7,944
    
    
    
    6,412Total Assets
    
    $
    418,994
    
    
    $
    404,840LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt and capital lease obligations
    
    $
    2,268
    
    
    $
    4,692Income taxes payable
    
    
    4,344
    
    
    
    7,637Accounts payable
    
    
    39,289
    
    
    
    48,124Accrued salaries, bonuses and commissions
    
    
    22,515
    
    
    
    24,503Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    34,630
    
    
    
    44,772Accrued product warranty
    
    
    6,247
    
    
    
    7,558Other accrued expenses
    
    
    8,741
    
    
    
    11,856Total Current Liabilities
    
    
    118,034
    
    
    
    149,142Long-term debt and capital lease obligations, net of current maturities
    
    
    17,595
    
    
    
    4,800Deferred compensation
    
    
    2,911
    
    
    
    2,685Postretirement benefit obligation
    
    
    830
    
    
    
    784Other liabilities
    
    
    204
    
    
    
    212Total Liabilities
    
    
    139,574
    
    
    
    157,623Commitments and Contingencies (Note I)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; 11,656,715 and 11,479,610
shares issued, respectively; 11,656,715 and 11,479,610 shares outstanding, respectively
    
    
    116
    
    
    
    115Additional paid-in capital
    
    
    33,364
    
    
    
    29,970Retained earnings
    
    
    249,751
    
    
    
    219,961Accumulated other comprehensive loss
    
    
    (2,997
    )
    
    
    (2,716
    )Deferred compensation
    
    
    (814
    )
    
    
    (569
    )Total Stockholders Equity
    
    
    279,420
    
    
    
    246,761Noncontrolling interest
    
    
    
    
    
    
    456Total Equity
    
    
    279,420
    
    
    
    247,217Total Liabilities and Equity
    
    $
    418,994
    
    
    $
    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
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009Revenues
    
    $
    138,880
    
    
    $
    165,942
    
    
    $
    416,931
    
    
    $
    500,530Cost of goods sold
    
    
    100,636
    
    
    
    124,835
    
    
    
    304,337
    
    
    
    391,077Gross profit
    
    
    38,244
    
    
    
    41,107
    
    
    
    112,594
    
    
    
    109,453Selling, general and administrative expenses
    
    
    22,216
    
    
    
    20,378
    
    
    
    66,014
    
    
    
    62,262Operating income
    
    
    16,028
    
    
    
    20,729
    
    
    
    46,580
    
    
    
    47,191Interest expense
    
    
    228
    
    
    
    196
    
    
    
    638
    
    
    
    930Interest income
    
    
    (49
    )
    
    
    (33
    )
    
    
    (206
    )
    
    
    (93
    )Income before income taxes
    
    
    15,849
    
    
    
    20,566
    
    
    
    46,148
    
    
    
    46,354Income tax provision
    
    
    5,530
    
    
    
    7,219
    
    
    
    16,199
    
    
    
    16,271Net income
    
    
    10,319
    
    
    
    13,347
    
    
    
    29,949
    
    
    
    30,083Net loss attributable to noncontrolling interest
    
    
    33
    
    
    
    209
    
    
    
    159
    
    
    
    240Net income attributable to Powell Industries, Inc.
    
    $
    10,286
    
    
    $
    13,138
    
    
    $
    29,790
    
    
    $
    29,843Earnings per share attributable to Powell Industries, Inc.:Basic
    
    $
    0.89
    
    
    $
    1.15
    
    
    $
    2.59
    
    
    $
    2.61Diluted
    
    $
    0.88
    
    
    $
    1.14
    
    
    $
    2.56
    
    
    $
    2.59Weighted average shares:Basic
    
    
    11,556
    
    
    
    11,420
    
    
    
    11,518
    
    
    
    11,416Diluted
    
    
    11,679
    
    
    
    11,521
    
    
    
    11,648
    
    
    
    11,501
  4




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POWELL
INDUSTRIES, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
 Nine Months EndedJune 30, 2010
    
    
    June 30, 2009Operating Activities:Net income
    
    $
    29,949
    
    
    $
    30,083Adjustments to reconcile net income to net cash used in operating activities:Depreciation
    
    
    6,753
    
    
    
    5,580Amortization
    
    
    3,244
    
    
    
    2,624Stock-based compensation
    
    
    1,492
    
    
    
    1,849Bad debt expense
    
    
    479
    
    
    
    1,172Deferred income taxes
    
    
    (2,087
    )
    
    
    (1,411
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    23,624
    
    
    
    13,765Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    11,107
    
    
    
    26,640Inventories
    
    
    11,922
    
    
    
    17,768Prepaid expenses and other current assets
    
    
    1,971
    
    
    
    (2,659
    )Other assets
    
    
    (516
    )
    
    
    77Accounts payable and income taxes payable
    
    
    (19,958
    )
    
    
    8,933Accrued liabilities
    
    
    (6,383
    )
    
    
    (5,141
    )Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    (9,978
    )
    
    
    12,932Other
    
    
    584
    
    
    
    8Net cash provided by operating activities
    
    
    52,203
    
    
    
    112,220Investing Activities:Proceeds from sale of fixed assets
    
    
    14
    
    
    
    15Purchases of property, plant and equipment
    
    
    (3,461
    )
    
    
    (6,412
    )Buyout of noncontrolling interest  Powell Asia
    
    
    (659
    )
    
    
    Acquisition of Powell Canada
    
    
    (23,394
    )
    
    
    Net cash used in investing activities
    
    
    (27,500
    )
    
    
    (6,397
    )Financing Activities:Borrowings on US revolving line of credit
    
    
    
    
    
    
    50,953Payments on US revolving line of credit
    
    
    
    
    
    
    (69,953
    )Payments on UK term loan
    
    
    
    
    
    
    (1,356
    )Borrowings on Canadian revolving line of credit
    
    
    891
    
    
    
    Payments on Canadian revolving line of credit
    
    
    (3,265
    )
    
    
    Payments on Canadian term loan
    
    
    (242
    )
    
    
    Payments on industrial development revenue bonds
    
    
    (400
    )
    
    
    (400
    )Payments on deferred acquisition payable
    
    
    (4,292
    )
    
    
    (5,220
    )Payments on short-term and other financing
    
    
    (686
    )
    
    
    (13
    )Proceeds from exercise of stock options
    
    
    1,575
    
    
    
    213Tax benefit from exercise of stock options
    
    
    419
    
    
    
    107Net cash used in financing activities
    
    
    (6,000
    )
    
    
    (25,669
    )Net increase in cash and cash equivalents
    
    
    18,703
    
    
    
    80,154Effect of exchange rate changes on cash and cash equivalents
    
    
    992
    
    
    
    (847
    )Cash and cash equivalents at beginning of period
    
    
    97,403
    
    
    
    10,134Cash and cash equivalents at end of period
    
    $
    117,098
    
    
    $
    89,441
  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
    
    $
    17,115Inventories
    
    
    4,483Prepaid expenses and other current assets
    
    
    710Property, plant and equipment
    
    
    7,863Goodwill
    
    
    11,677Intangible assets
    
    
    7,075Accounts payable and other current liabilities
    
    
    (7,790
    )Capital lease obligations
    
    
    (2,667
    )Bank debt assumed
    
    
    (15,072
    )Total purchase price
    
    $
    23,394
   10




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##### Table of Contents



Goodwill
    
    
    Intangible AssetsBalance at September 30, 2009
    
    $
    1,084
    
    
    $
    21,305Acquisition of Powell Canada
    
    
    11,677
    
    
    
    7,075Amortization
    
    
    
    
    
    
    (3,193
    )Foreign currency translation adjustment
    
    
    138
    
    
    
    36Balance at June 30, 2010
    
    $
    12,899
    
    
    $
    25,223
    Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Net income attributable to Powell Industries, Inc.
    
    $
    10,286
    
    
    $
    13,138
    
    
    $
    29,790
    
    
    $
    29,843Denominator:Weighted average basic shares
    
    
    11,556
    
    
    
    11,420
    
    
    
    11,518
    
    
    
    11,416Dilutive effect of stock options, restricted stock and
restricted stock units
    
    
    123
    
    
    
    101
    
    
    
    130
    
    
    
    85Weighted average diluted shares with assumed conversions
    
    
    11,679
    
    
    
    11,521
    
    
    
    11,648
    
    
    
    11,501Net earnings per share:Basic
    
    $
    0.89
    
    
    $
    1.15
    
    
    $
    2.59
    
    
    $
    2.61Diluted
    
    $
    0.88
    
    
    $
    1.14
    
    
    $
    2.56
    
    
    $
    2.59
         11




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Fair Value Measurements at June 30, 2010Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Fair Value at(Level 1)
    
    
    (Level 2)
    
    
    (Level 3 )
    
    
    June 30, 2010AssetsCash equivalents
    
    $
    70,931
    
    
    $
    
    
    
    $
    
    
    
    $
    70,931Total
    
    $
    70,931
    
    
    $
    
    
    
    $
    
    
    
    $
    70,931LiabilitiesForeign currency forward contracts
    
    $
    
    
    
    $
    167
    
    
    $
    
    
    
    $
    167Total
    
    $
    
    
    
    $
    167
    
    
    $
    
    
    
    $
    167
  Fair Value Measurements at September 30, 2009Quoted Prices in
    
    
    Significant OtherActive Markets for
    
    
    Observable
    
    
    SignificantIdentical Assets
    
    
    Inputs
    
    
    Unobservable 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
    Allowance for Doubtful Accounts
  Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Balance at beginning of period
    
    $
    1,930
    
    
    $
    1,609
    
    
    $
    1,607
    
    
    $
    1,180Increase (decrease) to bad debt expense
    
    
    (214
    )
    
    
    84
    
    
    
    479
    
    
    
    1,172Deductions for uncollectible accounts written off, net of recoveries
    
    
    11
    
    
    
    (66
    )
    
    
    (387
    )
    
    
    (632
    )Increase (decrease) due to foreign currency translation
    
    
    13
    
    
    
    83
    
    
    
    41
    
    
    
    (10
    )Balance at end of period
    
    $
    1,740
    
    
    $
    1,710
    
    
    $
    1,740
    
    
    $
    1,710
 12




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Warranty Accrual
  Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Balance at beginning of period
    
    $
    7,054
    
    
    $
    6,336
    
    
    $
    7,558
    
    
    $
    6,793Increase (decrease) to warranty expense
    
    
    (461
    )
    
    
    918
    
    
    
    889
    
    
    
    3,029Deductions for warranty charges
    
    
    (344
    )
    
    
    (785
    )
    
    
    (2,092
    )
    
    
    (2,993
    )Increase (decrease) due to foreign currency translation
    
    
    (2
    )
    
    
    135
    
    
    
    (108
    )
    
    
    (225
    )Balance at end of period
    
    $
    6,247
    
    
    $
    6,604
    
    
    $
    6,247
    
    
    $
    6,604
 Inventories
  June 30,
    
    
    September 30,2010
    
    
    2009Raw materials, parts and subassemblies
    
    $
    38,904
    
    
    $
    43,968Work-in-progress
    
    
    6,494
    
    
    
    8,597Provision for excess and obsolete inventory
    
    
    (6,733
    )
    
    
    (6,313
    )Total inventories
    
    $
    38,665
    
    
    $
    46,252
 Cost and Estimated Earnings on Uncompleted Contracts
  June 30,
    
    
    September 30,2010
    
    
    2009Costs incurred on uncompleted contracts
    
    $
    505,925
    
    
    $
    552,805Estimated earnings
    
    
    149,433
    
    
    
    136,603655,358
    
    
    
    689,408Less: Billings to date
    
    
    654,970
    
    
    
    687,845Net underbilled position
    
    $
    388
    
    
    $
    1,563Included in the accompanying balance sheets under the following captions:Costs and estimated earnings in excess of billings on uncompleted contracts  underbilled
    
    $
    35,018
    
    
    $
    46,335Billings in excess of costs and estimated earnings on uncompleted contracts  overbilled
    
    
    (34,630
    )
    
    
    (44,772
    )Net underbilled position
    
    $
    388
    
    
    $
    1,563
   Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income attributable to Powell Industries, Inc.
    
    $
    10,286
    
    
    $
    13,138
    
    
    $
    29,790
    
    
    $
    29,843Unrealized gain (loss) on foreign currency translation, net of tax
    
    
    (159
    )
    
    
    2,333
    
    
    
    (77
    )
    
    
    (1,946
    )Unrealized gain (loss) on derivative contracts, net of tax
    
    
    (7
    )
    
    
    1,829
    
    
    
    (203
    )
    
    
    (104
    )Comprehensive income
    
    $
    10,120
    
    
    $
    17,300
    
    
    $
    29,510
    
    
    $
    27,793
 13




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June 30,
    
    
    September 30,2010
    
    
    2009Canadian Revolver
    
    $
    10,524
    
    
    $
    Canadian Term Loan
    
    
    2,148
    
    
    
    Industrial development revenue bonds
    
    
    4,800
    
    
    
    5,200Capital lease obligations
    
    
    2,391
    
    
    
    Deferred acquisition payable
    
    
    
    
    
    
    4,292Subtotal long-term debt and capital lease obligations
    
    
    19,863
    
    
    
    9,492Less current portion
    
    
    (2,268
    )
    
    
    (4,692
    )Total long-term debt and capital lease obligations
    
    $
    17,595
    
    
    $
    4,800
 US and UK Revolvers
       Minimum Tangible Net Worth
 Minimum Fixed Charge Coverage Ratio
 14




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Maximum Leverage Ratio
  Canadian Revolver
      Canadian Term Loan
  15




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Industrial Development Revenue Bonds
  Deferred Acquisition Payable
 ®
  Letters of Credit and Bonds
    Litigation
    Restricted Stock Units
  16




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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
    
    
    (101,950
    )
    
    
    15.46Forfeited / Cancelled
    
    
    
    
    
    
    Outstanding at June 30, 2010
    
    
    135,400
    
    
    $
    18.40
    
    
    
    2.97
    
    
    $
    2,492Exercisable at June 30, 2010
    
    
    135,400
    
    
    $
    18.40
    
    
    
    2.97
    
    
    $
    2,492
    17




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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 current assets
    
    $
    
    
    
    Other accrued expenses
    
    $
    167Total derivatives
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    167
  Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    Fair
    
    
    
    
    
    
    FairLocation
    
    
    Value
    
    
    Balance Sheet Location
    
    
    Value(in thousands)Derivatives designated as hedging instruments:Foreign exchange forwards
    
    Prepaid expenses and 
other current assets
    
    $
    
    
    
    Other accrued 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
    
    
    Nine Months
    
    
    
    
    
    
    Three Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Location of Gain (Loss)
    
    
    Ended
    
    
    EndedJune 30,
    
    
    June 30,
    
    
    Reclassified from Accumulated
    
    
    June 30,
    
    
    June 30,Derivatives designated:
    
    2010
    
    
    2010
    
    
    Other comprehensive Income into Income
    
    
    2010
    
    
    2010(in thousands)
    
    
    
    
    
    (in thousands)Derivatives designated as cash flow hedges:Foreign exchange forwards
    
    $
    (10
    )
    
    $
    761
    
    
    Revenues
    
    $
    32
    
    
    $
    (154
    )Total designated cash flow hedges
    
    $
    (10
    )
    
    $
    761
    
    
    
    
    
    
    $
    32
    
    
    $
    (154
    )
 
 1
    
    For the three and nine month periods ended June 30, 2010, we recorded in revenues an
immaterial amount of ineffectiveness from cash flow hedges. 18




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Amount of Gain (Loss)Amount of Gain (Loss)
    
    
    
    
    
    
    Reclassified fromRecognized in Other
    
    
    
    
    
    
    Accumulated OtherComprehensive Income on
    
    
    
    
    
    
    Comprehensive IncomeDerivatives 1
    
    
    
    
    
    
    into Income 1Three Months
    
    
    Nine Months
    
    
    
    
    
    
    Three Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Location of Gain (Loss)
    
    
    Ended
    
    
    EndedJune 30,
    
    
    June 30,
    
    
    Reclassified from Accumulated
    
    
    June 30,
    
    
    June 30,Derivatives designated:
    
    2009
    
    
    2009
    
    
    Other comprehensive Income into Income
    
    
    2009
    
    
    2009( in thousands)
    
    
    
    
    
    (in thousands)Derivatives designated as cash flow hedges:Foreign exchange forwards
    
    $
    2,818
    
    
    $
    (160
    )
    
    Revenues
    
    $
    60
    
    
    $
    68Total designated cash flow hedges
    
    $
    2,818
    
    
    $
    (160
    )
    
    
    
    
    
    $
    60
    
    
    $
    68
 
 1
    
    For the three and nine month periods ended June 30, 2009, we recorded in revenues an
immaterial amount of ineffectiveness from cash flow hedges.  Cash Flow Hedges
       19




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##### Table of Contents



Credit Risk
      Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Electrical Power Products
    
    $
    131,191
    
    
    $
    156,077
    
    
    $
    396,834
    
    
    $
    478,278Process Control Systems
    
    
    7,689
    
    
    
    9,865
    
    
    
    20,097
    
    
    
    22,252Total
    
    $
    138,880
    
    
    $
    165,942
    
    
    $
    416,931
    
    
    $
    500,530Gross profit:Electrical Power Products
    
    $
    36,118
    
    
    $
    36,038
    
    
    $
    106,439
    
    
    $
    100,170Process Control Systems
    
    
    2,126
    
    
    
    5,069
    
    
    
    6,155
    
    
    
    9,283Total
    
    $
    38,244
    
    
    $
    41,107
    
    
    $
    112,594
    
    
    $
    109,453Income before income taxes:Electrical Power Products
    
    $
    15,825
    
    
    $
    17,731
    
    
    $
    45,888
    
    
    $
    42,993Process Control Systems
    
    
    24
    
    
    
    2,835
    
    
    
    260
    
    
    
    3,361Total
    
    $
    15,849
    
    
    $
    20,566
    
    
    $
    46,148
    
    
    $
    46,354
   20




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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
 21




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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
  22




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##### Table of Contents



Electrical Power Products
     Process Control Systems
  23




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##### Table of Contents



Consolidated Selling, General and Administrative Expenses
   Interest Expense and Income
   Provision for Income Taxes
  Net Income Attributable to Powell Industries, Inc.
  24




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##### Table of Contents



Backlog
  Liquidity and Capital Resources
    Operating Activities
  Investing Activities
  Financing Activities
  25




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##### Table of Contents



New Accounting Standards
  Critical Accounting Policies
   Outlook for Fiscal 2010
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
  26




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##### Table of Contents



Foreign Currency Transaction Risk
   Commodity Price Risk
  Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   27




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##### Table of Contents



Internal Control over Financial Reporting
  Design and Operation of Control Systems
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 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)Date August 4, 2010
    By:
    /s/ Patrick L. McDonaldPatrick L. McDonaldPresident and Chief Executive Officer

(Principal Executive Officer)Date August 4, 2010
    By:
    /s/ Don R. MadisonDon 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