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 April 30, 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

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

Common
 Stock, par value $.01 per share; 10,688,687 shares
outstanding as of June 7, 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                               | 17
|                                           | Item 4. | Controls and Procedures                                                                     | 18
|Part II - Other Information and Signatures | 19     

2

---

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

|                                                                                | April 30,
2004 | October 31,
2003
|------------------------------------------------------------------------------- | -------------- | ----------------
|                                                                                |                |                 
|Assets                                                                          |                |                 
|Current Assets:                                                                 |                |                 
|Cash and cash equivalents                                                       |                |                 
|Marketable securities                                                           |                |                 
|Accounts receivable, less allowance for doubtful accounts of $1,016 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                                                           |                |                 
|Other liabilities                                                               |                |                 
|                                                                                |                |                 
|Total Liabilities                                                               |                |                 
|Commitments and contingencies (Note I)                                          |                |                 
|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; 10,688,000 and 10,641,000 shares        |                |                 
|outstanding, respectively                                                       |                |                 
|Additional paid-in capital                                                      |                |                 
|Retained earnings                                                               |                |                 
|Treasury stock, 312,000 shares and 352,000 shares respectively, at cost         |                |                 
|Accumulated other comprehensive loss                                            |                |                 
|Deferred compensation                                                           |                |                 
|                                                                                |                |                 
|Total Stockholders' Equity                                                      |                |                 
|                                                                                |                |                 
|Total Liabilities and Stockholders' Equity                                      |                |                 
|                                                                                |                |                 

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

3

---

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

|                                                              | Three Months Ended April 30, |  | Six Months Ended April 30, |       
|------------------------------------------------------------- | ---------------------------- |  | -------------------------- | ------
|
|                                                              |                              |  |                            |       
|Revenues                                                      |                              |  | $                          | 51,476
|Cost of goods sold                                            |                              |  |                            | 42,857
|                                                              |                              |  |                            |       
|Gross profit                                                  |                              |  |                            | 8,619 
|Selling, general and administrative expenses                  |                              |  |                            | 8,187 
|                                                              |                              |  |                            |       
|Income before interest and income taxes                       |                              |  |                            | 432   
|Interest expense                                              |                              |  |                            | 34    
|Interest income                                               |                              |  |                            | (175  
|                                                              |                              |  |                            |       
|Income from continuing operations before income taxes and     |                              | 
|cumulative effect of change in accounting principle           |                              |  |                            | 573   
|Income tax provision                                          |                              |  |                            | 213   
|                                                              |                              |  |                            |       
|Income from continuing operations before cumulative effect of |                              | 
|change in accounting principle                                |                              |  |                            | 360   
|Cumulative effect of change in accounting principle, net of   |                              | 
|$285 tax                                                      |                              |  |                            | --    
|                                                              |                              |  |                            |       
|Net income                                                    |                              |  | $                          | 360   
|                                                              |                              |  |                            |       
|Net earnings per common share:                                |                              | 
|Basic:                                                        |                              | 
|Earnings from continuing operations                           |                              |  | $                          | 0.03  
|Cumulative effect of change in accounting principle           |                              |  |                            | --    
|                                                              |                              |  |                            |       
|Net earnings                                                  |                              |  | $                          | 0.03  
|                                                              |                              |  |                            |       
|Diluted:                                                      |                              | 
|Earnings from continuing operations                           |                              |  | $                          | 0.03  
|Cumulative effect of change in accounting principle           |                              |  |                            | --    
|                                                              |                              |  |                            |       
|Net earnings                                                  |                              |  | $                          | 0.03  
|                                                              |                              |  |                            |       
|Weighted average number of common shares outstanding -        |                              | 
|Basic                                                         |                              |  |                            | 10,676
|                                                              |                              |  |                            |       
|Weighted average number of common and common equivalent       |                              | 
|shares outstanding - Diluted                                  |                              |  |                            | 10,768
|                                                              |                              |  |                            |       

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)

|                                                                                  | Six Months Ended April 30, | 
|--------------------------------------------------------------------------------- | -------------------------- | 
|
|                                                                                  |                            | 
|Operating Activities:                                                             |                            | 
|Net income                                                                        |                            | 
|Adjustments to reconcile net income to net cash provided by operating activities: |                            | 
|Cumulative effect of change in accounting principle, net of tax                   |                            | 
|Depreciation and amortization                                                     |                            | 
|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                                                             |                            | 
|Other liabilities                                                                 |                            | 
|                                                                                  |                            | 
|Net cash provided by operating activities                                         |                            | 
|                                                                                  |                            | 
|Investing Activities:                                                             |                            | 
|Purchases of property, plant and equipment                                        |                            | 
|                                                                                  |                            | 
|Net cash used in investing activities                                             |                            | 
|                                                                                  |                            | 
|Financing Activities:                                                             |                            | 
|Borrowings of short-term debt                                                     |                            | 
|Repayments of debt                                                                |                            | 
|Proceeds from issuance of common stock                                            |                            | 
|Proceeds from exercise of stock options                                           |                            | 
|                                                                                  |                            | 
|Net cash provided by (used in) financing activities                               |                            | 
|                                                                                  |                            | 
|Net increase in cash and cash equivalents                                         |                            | 
|Cash and cash equivalents at beginning of 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 $24 income   |                            | 
|taxes                                                                             |                            | 
|                                                                                  |                            | 
|Change in fair value of marketable securities during the period, net of $34       |                            | 
|income taxes                                                                      |                            | 
|                                                                                  |                            | 
|Issuance of common stock for deferred directors' fees                             |                            | 
|                                                                                  |                            | 
|Assets acquired under capital lease obligations                                   |                            | 
|                                                                                  |                            | 

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 during the quarter ended January 31, 2004 did not have a material
impact on our consolidated financial position, results of operations or cash flows. The
remaining provisions were adopted during the quarter ended April 30, 2004, and they 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 adoption of EITF 03-1 during
the quarter ended January 31, 2004 had no impact on our consolidated
financial position, results of operations or cash flows.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

B.    
          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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

---

| | If
compensation expense for our stock option plans had been determined based on the fair
value at the grant date for awards through April 30, 2004 consistent with the provisions
of SFAS No. 123, our net income and earnings per share would have been as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                               | Three Months Ended April 30, |  | Six Months Ended April 30, |     
|---------------------------------------------- | ---------------------------- |  | -------------------------- | ----
|
|                                               |                              |  |                            |     
|Net income, as reported                        |                              |  | $                          | 360 
|Less:  Total stock-based employee compensation |                              | 
|expense determined under fair value based      |                              | 
|method for all awards, net of related tax      |                              | 
|effects                                        |                              |  |                            | (228
|                                               |                              |  |                            |     
|Pro forma net income                           |                              |  | $                          | 132 
|                                               |                              |  |                            |     
|Basic earnings per share:                      |                              | 
|As reported                                    |                              |  | $                          | 0.03
|Pro forma                                      |                              |  | $                          | 0.01
|Diluted earnings per share:                    |                              | 
|As reported                                    |                              |  | $                          | 0.03
|Pro forma                                      |                              |  | $                          | 0.01

C.    
          EARNINGS PER SHARE

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

|                                                    | Three Months Ended April 30, |  | Six Months Ended April 30, |       
|--------------------------------------------------- | ---------------------------- |  | -------------------------- | ------
|
|                                                    |                              |  |                            |       
|Numerator:                                          |                              |  |                            |       
|Income from continuing operations available to      |                              | 
|common stockholders                                 |                              |  | $                          | 360   
|Cumulative effect of change in accounting           |                              | 
|principle, net of tax                               |                              |  |                            | --    
|                                                    |                              |  |                            |       
|Net income available to common stockholders         |                              |  | $                          | 360   
|                                                    |                              |  |                            |       
|Denominator:                                        |                              | 
|Denominator for basic earnings per share-weighted   |                              | 
|average shares                                      |                              |  |                            | 10,676
|Dilutive effect of stock options                    |                              |  |                            | 92    
|                                                    |                              |  |                            |       
|Denominator for diluted earnings per                |                              | 
|share-adjusted weighted average shares with         |                              | 
|assumed conversions                                 |                              |  |                            | 10,768
|                                                    |                              |  |                            |       
|Basic earnings per share:                           |                              | 
|Earnings from continuing operations                 |                              |  | $                          | 0.03  
|Cumulative effect of change in accounting principle |                              |  |                            | --    
|                                                    |                              |  |                            |       
|Net earnings                                        |                              |  | $                          | 0.03  
|                                                    |                              |  |                            |       
|Diluted earnings per share:                         |                              | 
|Earnings from continuing operations                 |                              |  | $                          | 0.03  
|Cumulative effect of change in accounting principle |                              |  |                            | --    
|                                                    |                              |  |                            |       
|Net earnings                                        |                              |  | $                          | 0.03  
|                                                    |                              |  |                            |       

| | For
the three months ended April 30, 2004 and 2003, options to purchase a total of 354
thousand and 494 thousand shares, respectively, were excluded from the computation of
diluted earnings per share because the options exercise prices were greater than the
average market price of the common stock. For the six months ended April 30, 2004 and
2003, options to purchase a total of 356 thousand and 494 thousand shares, respectively,
were excluded from the computation of diluted earnings per share because the options
exercise prices were greater than the average market price of the common stock.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

---

D.    
          DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS

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

|                                              | Three Months Ended April 30, |  | Six Months Ended April 30, |      
|--------------------------------------------- | ---------------------------- |  | -------------------------- | -----
|
|                                              |                              |  |                            |      
|Balance at beginning of period                |                              |  | $                          | 1,280
|Adjustments to the reserve                    |                              |  |                            | (238 
|Deductions for uncollectible accounts written |                              | 
|off, net of recoveries                        |                              |  |                            | (26  
|                                              |                              |  |                            |      
|Balance at end of period                      |                              |  | $                          | 1,016
|                                              |                              |  |                            |      

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

|                                | Three Months Ended April 30, |  | Six Months Ended April 30, |      
|------------------------------- | ---------------------------- |  | -------------------------- | -----
|
|                                |                              |  |                            |      
|Balance at beginning of period  |                              |  | $                          | 1,833
|Adjustments to the reserve      |                              |  |                            | 344  
|Deductions for warranty charges |                              |  |                            | (414 
|                                |                              |  |                            |      
|Balance at end of period        |                              |  | $                          | 1,763
|                                |                              |  |                            |      

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

|                                       | April 30,
2004 | October 31,
2003
|-------------------------------------- | -------------- | ----------------
|                                       |                |                 
|Raw materials, parts and subassemblies |                |                 
|Work-in-process                        |                |                 
|                                       |                |                 
|Total inventories                      |                |                 
|                                       |                |                 

| | Property, plant and equipment is summarized below (in thousands):
| | -----------------------------------------------------------------

|                                         | April 30,
2004 | October 31,
2003
|---------------------------------------- | -------------- | ----------------
|                                         |                |                 
|Land                                     |                |                 
|Buildings and improvements               |                |                 
|Machinery and equipment                  |                |                 
|Furniture and fixtures                   |                |                 
|Construction in progress                 |                |                 
|                                         |                |                 
|                                         |                |                 
|Less-accumulated depreciation            |                |                 
|                                         |                |                 
|Total property, plant and equipment, net |                |                 
|                                         |                |                 

| | Depreciation
expense for the six months ended April 30, 2004 and 2003 was $2.3 million and $2.5
million, respectively.
| | ----------------------------------------------------------------------------------------------------------------------

| | The
components of costs and estimated earnings in excess of billings are summarized below (in
thousands)
| | --------------------------------------------------------------------------------------------------------

|                                                         | April 30,
2004 | October 31,
2003
|-------------------------------------------------------- | -------------- | ----------------
|                                                         |                |                 
|Costs and estimated earnings                             |                |                 
|Progress billings                                        |                |                 
|                                                         |                |                 
|Total costs and estimated earnings in excess of billings |                |                 
|                                                         |                |                 

8

---

| | The
components of billings in excess of costs and estimated earnings are summarized below (in
thousands):
| | ---------------------------------------------------------------------------------------------------------

|                                                         | April 30,
2004 | October 31,
2003
|-------------------------------------------------------- | -------------- | ----------------
|                                                         |                |                 
|Progress billings                                        |                |                 
|Costs and estimated earnings                             |                |                 
|                                                         |                |                 
|Total billings in excess of costs and estimated earnings |                |                 
|                                                         |                |                 

E.    
          COMPREHENSIVE INCOME

| | Comprehensive income in 2004 consists of net income and the change in fair value of marketable
securities. At April 30, 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
April 30, 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 and six month periods ended April
30, 2004 and 2003 is as follows (in thousands):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                 | Three Months Ended April 30, |  | Six Months Ended April 30, |    
|------------------------------------------------ | ---------------------------- |  | -------------------------- | ---
|
|                                                 |                              |  |                            |    
|Net income                                       |                              |  | $                          | 360
|Change in fair value of marketable securities,   |                              | 
|net of tax                                       |                              |  |                            | (66
|Change in fair value of hedge instrument, net of |                              | 
|tax                                              |                              |  |                            | -- 
|                                                 |                              |  |                            |    
|Comprehensive income                             |                              |  | $                          | 294
|                                                 |                              |  |                            |    

F.    
          POSTRETIREMENT BENEFITS

| | The
following table illustrates the components of net periodic postretirement benefit expense
in the employee retiree benefit plan (in thousands):
| | --------------------------------------------------------------------------------------------------------------------------------------------------

|                                            | Post-Retirement Plan Benefits | 
|------------------------------------------- | ----------------------------- | 
|
|
|                                            |                               | 
|Service cost                                |                               | 
|Interest cost                               |                               | 
|Amortization of prior service cost          |                               | 
|Amortization of net (gain) loss             |                               | 
|                                            |                               | 
|Net periodic postretirement benefit expense |                               | 
|                                            |                               | 

G.    
          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

---

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

|                                                          | Three Months Ended April 30, |  | Six Months Ended April 30, |       
|--------------------------------------------------------- | ---------------------------- |  | -------------------------- | ------
|
|                                                          |                              |  |                            |       
|Revenues:                                                 |                              |  |                            |       
|Electrical Power Products                                 |                              |  | $                          | 43,993
|Process Control Systems                                   |                              |  |                            | 7,483 
|                                                          |                              |  |                            |       
|Total                                                     |                              |  | $                          | 51,476
|                                                          |                              |  |                            |       
|Gross profit:                                             |                              | 
|Electrical Power Products                                 |                              |  | $                          | 7,024 
|Process Control Systems                                   |                              |  |                            | 1,595 
|                                                          |                              |  |                            |       
|Total                                                     |                              |  | $                          | 8,619 
|                                                          |                              |  |                            |       
|Income from continuing operations before income taxes and |                              | 
|cumulative effect of change in accounting principle:      |                              | 
|Electrical Power Products                                 |                              |  | $                          | 270   
|Process Control Systems                                   |                              |  |                            | 303   
|                                                          |                              |  |                            |       
|Total                                                     |                              |  | $                          | 573   
|                                                          |                              |  |                            |       

|                          | April 30,
2004 | October 31,
2003
|------------------------- | -------------- | ----------------
|                          |                |                 
|Assets:                   |                |                 
|Electrical Power Products |                |                 
|Process Control Systems   |                |                 
|Corporate                 |                |                 
|                          |                |                 
|Total                     |                |                 
|                          |                |                 

H.    
          GOODWILL AND OTHER INTANGIBLE ASSETS

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

|                                           | April 30, 2004 |  | October 31, 2003        |    
|------------------------------------------ | -------------- |  | ----------------------- | ---
|                                           |                |  |                         |    
|                                           | HistoricalCost |  | AccumulatedAmortization |    
|Goodwill                                   |                |  | $                       | 304
|Intangible assets subject to amortization: |                | 
|Deferred loan costs                        |                |  |                         | 233
|Patents and Trademarks                     |                |  |                         | 837

| | 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
and six months ended April 30, 2004 was $17 thousand and $35 thousand, respectively.
Estimated amortization expense for each of the subsequent five fiscal years is expected to
be approximately $70 thousand.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

I.    
          COMMITMENTS AND CONTINGENCIES

Litigation

| | We
are involved in various legal proceedings arising in the oridinary course of business. We
do not believe that the ultimate outcome of these disputes will materially affect our
financial position or future results of operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

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Letters of Credit and
Bonds

| | 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 $10.7 million as of April 30, 2004. We also had performance bonds totaling
approximately $162.6 million that were outstanding at April 30, 2004.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Contingencies

| | 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

J.    
          PLANT CLOSING COSTS

| | 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.  Pre-tax expenses associated with the plant closing are
estimated to range from $0.5 million to $0.75 million, of which $0.3 million was recorded in the second quarter 2004.  This includes
involuntary termination benefits of $0.25 million for 43 employees at our Greenville facility.  These expenses are primarily
included on the Statement of Operations in cost of goods sold.  To date, there have not been any involuntary termination benefits
paid associated with this plant closing.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

K.    
          SUBSEQUENT EVENT

| | In June 2004, we decided to close our facility in Elyria,  Ohio, and relocate  operations to our facility in Northlake,
     Illinois.  Accordingly,  pre-tax  expenses  associated  with the plant closing are estimated to range from $1.25 million to $1.75
     million,  of which we  anticipate  $0.5  million  to  $0.75  million  will be  recorded  in the  quarter  ending  July 31,  2004.
     Consolidation of these two operations is expected to be complete by the end of the first quarter of fiscal 2005.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.

Overview

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

Although we currently face reduced
demand and prices, there are encouraging early signs of a U.S. economic recovery.
Historically, business expansion within our principal markets  public and private
utilities, heavy industry and public agencies  have lagged these general economic
trends by six to twelve months as our revenues are principally driven by new capital
investments. One of the positive trends we have experienced is an increase in bookings
activity. New orders booked in the second quarter of fiscal 2004 totaled $45.3 million, an
increase of $12.2 million over the first quarter of 2004. This positive new order trend
follows three consecutive quarters of bookings totaling $35.8 million, $36.3 million and
$33.1 million for the three months ended July 31, 2003, October 31, 2003 and January 31,
2004, respectively. We are optimistic that we will see further improvements in the third
and fourth quarters of fiscal 2004.

In anticipation of improving business
opportunities, we are taking advantage of lower production volumes to make necessary
capital improvements to our manufacturing facility in Houston, Texas. We have committed to
projects totaling $5.6 million. These projects include a new metal finishing and paint
system and replacement of some older metal fabricating equipment with a major laser cut
fabricating center and material handling system. Consistent with other lean initiatives,
these investments will improve our quality and efficiency as well as lead to lower working
capital requirements. We have also taken the difficult decision to consolidate some of our
businesses. In February 2004, we announced the closing of our Greenville, Texas facility and
the relocation of our switch product lines to our North Canton, Ohio operation. Pre-tax
expenses associated with the plant closing are estimated to range between $0.5 million and $0.75 million,
 of which $0.3 million was recorded in the second quarter of 2004.
 The Greenville facility is expected to be idle by the end of the fiscal
year. In June 2004, we decided to close our facility in Elyria, Ohio, and relocate
operations to our facility in Northlake, Illinois. Accordingly, pre-tax expenses
associated with the plant closing are estimated to range from $1.25 million to $1.75
million, of which we anticipate $0.5 million to $0.75 million will be recorded in the quarter
ending July 31, 2004. We expect the consolidation of these two operations to be completed
by the end of the first quarter of fiscal 2005.

We continue to focus on managing our
working capital. As of April 30, 2004, Powell Industries held cash, cash equivalents and
marketable securities of $52 million, an increase of nearly $10 million from year-end
2003. We believe we are well-positioned to take advantage of improving economic and market
conditions.

Results of Operations

Revenue and Gross Profit

Consolidated revenues decreased 20%
to $51.5 million in the second quarter of fiscal 2004 compared to the second quarter of
fiscal year 2003 revenues of $64.2 million. Domestic revenues decreased $12.0 million to
$43.1 million for the three months ended April 30, 2004 compared to the same period a year
ago. Revenues outside of the United States accounted for 16% of consolidated revenues in
the second quarter of fiscal 2004 compared to 14% for the three months ended April 30,
2003.

For the six months ended April 30,
2004, consolidated revenues decreased 23% to $104.7 million compared to the six months
ended April 30, 2003 revenues of $135.8 million. Domestic revenues for the first six months of fiscal 2004 were $88.4
million compared to $117.1 million for the first six months of fiscal 2003. For the six
months ended April 30, 2004, revenues outside of the United States accounted for 16% of
consolidated revenues compared to 14% for the same period a year ago. We anticipate that
international revenues will continue to strengthen throughout fiscal 2004.

12

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Electrical Power Products

Our Electrical Power Products segment
recorded revenues of $44.0 million for the three months ended April 30, 2004 compared to
$58.2 million for the second quarter of fiscal 2003. A decline in revenues from industrial
customers had the most significant impact on our second quarter revenues as compared to
the prior year. Revenues from industrial customers decreased to $30 million, an 18%
reduction, or nearly $7 million. Declining demand for the manufacture and delivery of
power control modules for new oil and gas production facilities led to this decrease. Many
of the long-term projects to construct new oil and gas production facilities that were
entered into our backlog during 2001 and 2002 have been completed. Revenues from public
and private utilities were $11 million, a decline of $3 million. Municipal and transit
projects generated revenues of $3 million compared to nearly $7 million a year ago.

For the six months ended April 30,
2004, this segment recorded revenues of $90.2 million compared to $123.7 million for the
first six months of fiscal 2003. During the first six months of 2004, revenues from all
markets were down from the same period a year ago. Utility revenues totaled nearly $30
million, a decline of 33%; industrial revenues were $52 million, a decline of 21%; and
revenues from municipal and transit projects totaled nearly $9 million, down 35%.

Gross profit, as a percentage of
revenues, was 16.0% in the second quarter of 2004 compared to 18.3% in the second quarter
of 2003. Inflationary pressures, primarily from higher commodity prices, have contributed
to lower gross profits. During the second quarter 2004, direct material expenses increased by
approximately 3.5%, or $750 thousand, primarily due to higher commodity prices in copper,
aluminum and steel compared to the same period a year ago. Gross profit was also adversely
impacted by one-time expenses of $335 thousand associated with our decision to consolidate
our Greenville, Texas and North Canton, Ohio operations. These expenses include employee
severance of $250 thousand, training and equipment relocation costs.

For the six months ended April 30,
2004, gross profit as a percentage of revenues decreased to 16.9% from 18.9% for the first
six months of fiscal 2003. Higher commodity price levels have contributed to lower gross
profit. Direct material costs increased approximately 2.9%, or $1.2 million, during the
first six months of 2004 compared to the same period a year ago. In addition, we incurred
separation costs and other one-time expenses of $0.5 million as a result of reductions in
our workforce and our decision to consolidate operations.

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

Process Control Systems

Revenues in our Process Control
Systems segment were $7.5 million and $14.6 million for the three and six months ended
April 30, 2004 compared to $6.0 million and $12.1 million for the same time period of the
previous year. The most significant project in our backlog is a contract to design and
build Intelligent Transportation Systems (ITS) for the Holland and Lincoln tunnels for the
Port Authority of New York and New Jersey valued at $37.5 million. Revenue attributable to
this project totaled $2.3 million and $5.1 million for the three and six months ended
April 30, 2004. As of April 30, 2004 the remaining value associated with this project in
our backlog is $28.3 million.

Gross profit was $1.6 million and
$3.0 million for the three and six months ended April 30, 2004 compared to $1.5 million
and $3.0 million for the same time period of the previous year.

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

Operating Expenses

Selling, general and administrative
expenses were $8.2 million, or 15.9% of revenues, in the three months ended April 30, 2004
compared to $8.9 million, or 13.9% of revenues, in the second quarter of fiscal 2003. We
have reduced our expenses by $0.7 million in the second quarter compared to the same
period a year ago; however, we have maintained our focus on developing our markets and new
product development. As a result, selling, general and administrative expenses as a
percentage of revenues have increased. Our research efforts are directed toward the
discovery and development of new products and processes as well as improvements in
existing products and processes. These costs are included in selling, general and
administrative expenses. Research and development expenditures were $0.9 million in the
three months ended April 30, 2004 compared to $0.7 million in the second quarter of fiscal
2003.

For the six months ended April 30,
2004, selling, general and administrative expenses were $16.7 million, or 16.0% of
revenues, compared to $18.3 million, or 13.5% of revenues, for the first six months of
fiscal 2003. For the six months ended April 30, 2004, research and development
expenditures were $1.8 million compared to $1.5 million in first six months of fiscal
2003. For the full year, we anticipate research and development spending will be
comparable to fiscal year 2003 expenditures of $3.6 million.

13

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Interest Income and
Expense

We incurred $34 thousand in interest
expense in the second quarter of 2004 compared to $81 thousand in the same period a year
ago. Interest expense has been reduced by a lower average balance on our industrial
revenue bond debt and favorable interest rates. Additionally, during the second quarter of
2003, we incurred $57 thousand in interest expense on our term loan and the associated
interest rate swap. In September 2003, we paid the remaining principal balance on our term
loan which has reduced our interest expense.

For the six months ended April 30,
2004, we incurred $62 thousand in interest expense compared to $167 thousand for the same
time period of fiscal 2003. In the six months ended April 30, 2003, we incurred $121
thousand in interest expense on our term loan and the associated interest rate swap which
were settled in September 2003.

Interest income increased by $87
thousand to $175 thousand for the second quarter 2004 compared to the same period of the
previous year. For the first six months of 2004, interest income increased by $187
thousand to $367 thousand compared the first six months of 2003. Interest income for the
three and six month periods ended April 30, 2004 increased compared to the same periods of
last year due primarily to higher levels of invested funds. In addition,  we hold corporate
 bonds as discussed in Note E of the Notes to Condensed  Consolidated  Financial  Statements that yield
higher interest rates than the previous years investments.

Provision for Income Taxes

Our provision for income taxes
reflects an effective income tax rate on earnings before income taxes of 37.2% in the
second quarter of fiscal 2004 compared to 37.4% in the second quarter of fiscal 2003. For
the six months ended April 30, 2004, our provision for income taxes reflects an effective
income tax rate on earnings before income taxes of 36.9% compared to 37.3% for the same
period a year ago. The lower effective tax rate is primarily due to increased interest
income from investments in non-taxable securities. As overall pre-tax income has declined,
income from non-taxable investments has become a higher percentage of taxable income.

Net income

Net income was $360 thousand, or
$0.03 per diluted share, in the second quarter of fiscal year 2004 compared to $2.0
million, or $0.19 per diluted share, in the second quarter of fiscal year 2003.

For the six months ended April 30,
2004, net income was $1.1 million, or $0.10 per diluted share, compared to $4.5 million,
or $0.43 per diluted share, for the first six months of 2003. For the first six months 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 the
first quarter of fiscal 2003, we recorded a goodwill  impairment  loss of $0.5 million as a
cumulative  effect of a change in  accounting  principle.  The goodwill  impairment
charge accounted for a loss of $0.04 per diluted share.

Lower selling, general and
administrative expenses, along with higher interest income, have partially offset a
decline in business volume and lower gross profits which have resulted in earnings
weakening during fiscal 2004.

Backlog

The order backlog on April 30, 2004,
was $131.2 million, compared to $157.5 million at fiscal year end 2003 and $203.0 million
at the end of the second quarter one year ago. New orders placed during the second quarter
totaled $45.3 million versus $33.1 million in the first quarter of 2004 and $98.7 million
in our second quarter 2003.

Liquidity and Capital
Resources

We have maintained a strong liquidity
position. Working capital was $97.9 million at April 30, 2004 compared to $96.9 million at
October 31, 2003. The improvement was mainly due to billing and collection of our net
investment in long-term contracts. As of April 30, 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 April 30, 2004, we had cash and
cash equivalents of $46.4 million, as well as $5.6 million in marketable debt securities,
a $9.6 million increase in cash and cash equivalents from the end of fiscal 2003.
Long-term debt, including current maturities, totaled $7.6 million at April 30, 2004
compared to $7.4 million at October 31, 2003, our fiscal year end. As of April 30, 2004,
our long-term debt was limited to our industrial revenue bonds, with the next payment of
$400 thousand on these bonds scheduled for October 2004. In addition to our long-term
debt, we have a $15 million revolving credit agreement expiring February 2006. As of April
30, 2004, there was $107 thousand borrowed under this line of credit. We were in
compliance with all debt covenants as of April 30, 2004.

Operating Activities

For the six months ended April 30,
2004, cash from operating activities provided $12.1 million. A net reduction in
investments in contract costs and inventories provided $14.4 million as projects in our
backlog reached contractual billing milestones. For the six months ended April 30, 2003,
cash from operating activities provided $18.8 million. Both periods provided substantial
cash due to decreases in operating assets such as contract costs, accounts receivable and
inventories. Lower sales volumes have equated into less cash being reinvested in operating
assets.

14

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Investing Activities

Cash used for the purchase of
property, plant and equipment during the six months ended April 30, 2004 was $3.1 million,
compared to $2.8 million for the six months ended April 30, 2003. The majority of our 2004
capital investments will be used to improve our capabilities to manufacture switchgear and
electrical power control rooms. We have committed to capital projects totaling $5.6
million to acquire a new metal finishing and paint system, a major laser cut fabricating
center, and material handling system. Consistent with other lean initiatives, these
investments will improve our quality and efficiency as well as lead to lower working
capital requirements.

Financing Activities

Financing activities provided $579
thousand in the first six months of 2004. These financing activities were primarily from
the exercise of stock options. Net cash used in financing activities for the six months
ended April 30, 2003 was $634 thousand. The decrease in cash used in financing activities
during the first six months of 2004 as compared to the same period in 2003 is due to lower
levels of debt as the remaining principal balance on our term loan was paid in September 2003 per the contract terms.

Outlook

We expect continued weakness and
depressed price levels in the Electrical Power Products markets we serve throughout the
balance of fiscal 2004. We expect full year revenues to range between $205 million and
$220 million. Full year earnings from continuing operations are expected to range between
$0.16 and $0.26 per diluted share. For the third quarter of 2004, we expect earnings from
continuing operations to range between $0.01 and $0.06 per diluted share. These full year
and third quarter estimates include the one-time costs associated with combining our Elyria, Ohio and Northlake,
Illinois operations as discussed in Note K of the Notes to Condensed Consolidated
Financial Statements.

We will continue to invest in our
manufacturing capabilities and expect capital expenditures for full fiscal year 2004 to
range between $6.0 million and $8.0 million. The majority of these investments will be
used to improve the efficiency and quality of our manufacturing operations at our Houston,
Texas facility.

We anticipate that our cash position
will remain relatively unchanged for the balance of fiscal 2004. We believe that working
capital, borrowing capabilities, and funds generated from operations will be sufficient to
finance anticipated operational activities, capital improvements, debt repayment and
possible future acquisitions for the foreseeable future.

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.

15

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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, warranties, legal and other contingencies 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.

16

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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
short-term, fixed price 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 will not have a material near-term effect on our
future earnings and cash flows; however, fluctuations in commodity prices may have a
short-term effect on our future earnings and cash flows.

17

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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.

18

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Part II

OTHER INFORMATION

| |                                                         |                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ITEM 1.
       
       
       
ITEM 2.
       
ITEM 3. | 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, Use of Proceeds, and Issuer Purchases of Equity Securities
None
Defaults Upon Senior Securities
Not applicable
| |                                                         |                                                                                                                                                                                                                                                                                                                                                                                                               

| |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ITEM 4. | Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders of the Company held on March 5, 2004, Joseph L.
Becherer and Thomas W. Powell were elected as directors of the Company with terms ending
in 2007. The directors continuing in office after the meeting are James F. Clark, Stephen
W. Seale, Jr., Robert C. Tranchon, Eugene L. Butler, and Ronald J. Wolny. As to each
nominee for director, the number of votes cast for or withheld, as well as the number of
abstentions and broker non-votes, were as follows:
| |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |                                             |                                   
| | ------------------------------------------- | ----------------------------------
| | Nominee
Joseph L. Becherer
Thomas W. Powell | Votes Cast For
9,956,865
9,002,561

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | At
the annual meeting the stockholders also approved and ratified the proposal to change the
state of incorporation of the Company from Nevada to Delaware by merging the Company into a
wholly owned subsidiary of the Company that is incorporated under the laws of Delaware.
The number of votes cast for, against, or withheld, as well as the number of abstentions
and broker non-votes, with respect to such matter was as follows:
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                            

| |                          |                           
| | ------------------------ | --------------------------
| | Votes Cast For
6,897,687 | Votes Cast Against
600,744

| |                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ITEM 5.
       
ITEM 6. | 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
           Form 8-K filed on May 13, 2004           Form 8-K filed on June 8, 2004
| |                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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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

|                   |                                                                                                                              
|------------------ | -----------------------------------------------------------------------------------------------------------------------------
|June 11, 2004
Date | /s/      THOMAS W. POWELL             
Thomas W. Powell
President & Chief Executive Officer
(Principal Executive Officer)    
|June 11, 2004
Date | /s/    DON R. MADISON                  
Don R. Madison
Vice President & Chief Financial Officer
(Principal Financial Officer)

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EXHIBIT INDEX

|Number | Exhibit Title
|------ | -------------

|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 -- | By-laws 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.
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------

21

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