<PAGE> 1
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, 2000
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)
<TABLE>
<S> <C>
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)
</TABLE>
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.
Yes X No
---
Common Stock, par value $.01 per share; 10,367,000 shares outstanding on April
30, 2000.
<PAGE> 2
Powell Industries, Inc. and Subsidiaries
Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements..................3-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Quarterly
Results of Operations...................................10-12
Item 3. Quantitative and Qualitative Disclosures
About Market Risk..........................................13
Part II - Other Information and Signatures.................................14-16
2
<PAGE> 3
POWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
2000 1999
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................................... $ 4,686 $ 10,646
Accounts receivable, less allowance for doubtful accounts of
$969 and $852, respectively............................................................. 46,087 43,003
Costs and estimated earnings in excess of billings.......................................... 18,615 16,191
Inventories ............................................................................... 16,273 15,173
Deferred income taxes....................................................................... 469 1,028
Prepaid expenses and other current assets................................................... 2,608 1,795
-------- --------
Total Current Assets.................................................................... 88,738 87,836
Property, plant and equipment, net............................................................... 32,583 33,286
Deferred income taxes............................................................................ 1,293 1,316
Other assets ............................................................................... 5,307 5,093
-------- --------
Total Assets............................................................................ $127,921 $127,531
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term debt........................................................ $ 1,429 $ 2,429
Accounts and income taxes payable........................................................... 11,415 9,911
Accrued salaries, bonuses and commissions................................................... 5,494 5,447
Accrued product warranty.................................................................... 1,347 1,335
Other accrued expenses...................................................................... 4,834 4,727
Billings in excess of costs and estimated earnings.......................................... 4,815 4,205
-------- --------
Total Current Liabilities............................................................... 29,334 28,054
Long-term debt, net of current maturities ....................................................... 6,428 7,143
Deferred compensation expense.................................................................... 1,199 1,127
Postretirement benefits liability................................................................ 350 435
-------- --------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, par value $.01; 5,000 shares authorized; none issued
Common stock, par value $.01; 30,000 shares authorized; 10,744 and
10,675 shares issued.................................................................... 107 107
Additional paid-in capital.................................................................. 6,464 6,043
Retained earnings........................................................................... 90,096 87,364
Treasury stock (377 shares at cost)......................................................... (3,424) ---
Deferred compensation-ESOP.................................................................. (2,633) (2,742)
-------- --------
Total Stockholders' Equity.............................................................. 90,610 90,772
-------- --------
Total Liabilities and Stockholders' Equity.............................................. $127,921 $127,531
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE> 4
POWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
2000 1999
------- -------
<S> <C> <C>
Revenues............................................................................ $56,409 $56,331
Cost of goods sold.................................................................. 46,905 46,093
------- -------
Gross profit........................................................................ 9,504 10,238
Selling, general and administrative expenses........................................ 7,373 7,497
------- -------
Earnings before interest and income taxes........................................... 2,131 2,741
Interest expense (income), net...................................................... (14) 137
------- -------
Earnings before income taxes........................................................ 2,145 2,604
Income tax provision................................................................ 716 784
------- -------
Net earnings........................................................................ $ 1,429 $ 1,820
======= =======
Net earnings per common share:
Basic............................................................................ $ 0.14 $ 0.17
Diluted.......................................................................... 0.14 0.17
Weighted average number of common shares outstanding................................ 10,447 10,661
======= =======
Weighted average number of common and common equivalent shares outstanding.......... 10,542 10,720
======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE> 5
POWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30,
2000 1999
-------- --------
<S> <C> <C>
Revenues............................................................................ $105,900 $110,465
Cost of goods sold.................................................................. 87,354 89,295
-------- --------
Gross profit........................................................................ 18,546 21,170
Selling, general and administrative expenses........................................ 14,500 15,008
-------- --------
Earnings before interest and income taxes........................................... 4,046 6,162
Interest expense (income), net...................................................... (71) 273
-------- --------
Earnings before income taxes........................................................ 4,117 5,889
Income tax provision................................................................ 1,384 1,891
-------- --------
Net earnings........................................................................ $ 2,733 $ 3,998
======== ========
Net earnings per common share:
Basic............................................................................ $ .26 $ .38
Diluted.......................................................................... .26 .37
Weighted average number of common shares outstanding................................ 10,554 10,660
======== ========
Weighted average number of common and common equivalent shares outstanding.......... 10,648 10,744
======== ========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
5
<PAGE> 6
POWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30,
2000 1999
------- -------
<S> <C> <C>
Operating Activities:
Net earnings ....................................................................... $ 2,733 $ 3,998
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization................................................... 2,266 2,185
Deferred income tax provision................................................... 582 (51)
Postretirement benefits liability............................................... (85) (84)
Changes in operating assets and liabilities:
Accounts receivable, net................................................... (3,084) (9,215)
Costs and estimated earnings in excess of billings......................... (2,424) 2,480
Inventories................................................................ (1,100) (668)
Prepaid expenses and other current assets.................................. (516) (905)
Other assets............................................................... (304) (463)
Accounts payable and income taxes payable or receivable.................... 1,206 1,035
Accrued liabilities........................................................ 166 (2,749)
Billings in excess of costs and estimated earnings......................... 610 3,157
Deferred compensation expense.............................................. 180 82
------- -------
Net cash provided by (used in) operating activities.................... 230 (1,198)
Investing Activities:
Purchases of property, plant and equipment.......................................... (1,473) (3,743)
------- -------
Net cash used in investing activities........................................... (1,473) (3,743)
------- -------
Financing Activities:
Borrowings of long-term debt........................................................ -- 17,500
Repayments of long-term debt........................................................ (1,714) (12,713)
Payments to reacquire common stock.................................................. (3,424) --
Exercise of stock options........................................................... 421 31
------- -------
Net cash provided by (used in) financing activities............................. (4,717) 4,818
------- -------
Net decrease in cash and cash equivalents................................................ (5,960) (123)
Cash and cash equivalents at beginning of period......................................... 10,646 601
------- -------
Cash and cash equivalents at end of period............................................... $ 4,686 $ 478
======= =======
Supplemental disclosure of cash flow information (in thousands):
Cash paid during the period for:
Interest ....................................................................... $ 298 $ 570
======= =======
Income taxes.................................................................... $ 1,250 --
======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
<PAGE> 7
Part I
Item 1
POWELL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and, in the
opinion of management, reflect all adjustments which are of a normal
recurring nature necessary for a fair presentation of financial position,
results of operations, and cash flows. These financial statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's October 31, 1999 annual report on Form 10-K.
In June 1998 the Financial Accounting Standards Board (FASB) issued SFAS
No. 133 - "Accounting for Derivative Instruments and Hedging Activities".
In June 1999 the FASB issued SFAS No. 137, which amended the effective
adoption date of SFAS No. 133. This statement establishes accounting and
reporting standards for derivative instruments, including derivative
instruments embedded in other contracts, and for hedging activities. The
statement, as amended and which is to be applied prospectively, is
effective for the Company's quarter ending January 31, 2001. The Company is
currently evaluating the impact of SFAS No. 133 on its future results of
operations and financial position.
On December 3, 1999, the United States Securities and Exchange Commission
released Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition, to
provide guidance on the recognition, presentation and disclosure of revenue
in financial statements. The Company reviewed its revenue recognition
procedures and is satisfied that it is in compliance with SAB No. 101.
B. INVENTORIES
<TABLE>
<CAPTION>
April 30, October 31,
2000 1999
------- -------
(Unaudited)
<S> <C> <C>
The components of inventories are summarized below (in thousands):
Raw materials and subassemblies............................................ $10,414 $ 9,058
Work-in-process............................................................ 5,859 6,115
------- -------
Total inventories.......................................................... $16,273 $15,173
======= =======
</TABLE>
C. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
April 30, October 31,
2000 1999
------ -------
(Unaudited)
<S> <C> <C>
Property, plant and equipment is summarized below (in thousands):
Land....................................................................... $ 3,193 $ 3,193
Buildings and improvements................................................. 28,643 30,638
Machinery and equipment.................................................... 33,371 30,409
Furniture & fixtures....................................................... 3,923 4,464
Construction in process.................................................... 1,337 1,035
------- -------
70,467 69,739
Less-accumulated depreciation.............................................. (37,884) (36,453)
------- -------
Total property, plant and equipment, net................................... $32,583 $33,286
======= =======
</TABLE>
7
<PAGE> 8
D. PRODUCTION CONTRACTS
For contracts for which the percentage-of-completion method is used, costs
and estimated earnings in excess of billings are shown as a current asset
and billings in excess of costs and estimated earnings are shown as a
current liability. The components of these contracts are as follows (in
thousands):
<TABLE>
<CAPTION>
April 30, October 31,
2000 1999
------- -------
(unaudited)
<S> <C> <C>
Costs and estimated earnings............................................... $95,011 $79,723
Progress billing........................................................... (76,396) (63,532)
------- -------
Total costs and estimated earnings in excess of billings................... $18,615 $16,191
======= =======
Progress billings.......................................................... $83,126 $89,146
Costs and estimated earnings............................................... (78,311) (84,941)
------- -------
Total billings in excess of costs and estimated earnings................... $ 4,815 $ 4,205
======= =======
</TABLE>
E. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended April 30, Six Months Ended April 30,
2000 1999 2000 1999
------- ------- ------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted earnings per
share-earnings from operations
available to common stockholders..................... $ 1,429 $ 1,820 $ 2,733 $ 3,998
======= ======= ======= =======
Denominator:
Denominator for basic earnings per share-
weighted average shares............................... 10,447 10,661 10,554 10,660
Effect of dilutive securities-Employee stock options... 95 59 94 84
------- ------- ------- -------
Denominator for diluted earnings per share-
adjusted weighted-average shares with assumed
conversions.......................................... 10,542 10,720 10,648 10,744
======= ======= ======= =======
Basic earnings per share................................... $0.14 $0.17 $0.26 $0.38
===== ===== ===== =====
Diluted earnings per share................................. $0.14 $0.17 $0.26 $0.37
===== ===== ===== =====
</TABLE>
8
<PAGE> 9
F. BUSINESS SEGMENTS
The Company has three reportable segments: 1. Switchgear and related
equipment and service (Switchgear) for distribution, control and management
of electrical energy, 2. Bus duct products (Bus Duct) for distribution of
electric power, and 3. Process Control Systems, which consists principally
of instrumentation, computer control, communications and data management
system for the control of dynamic processes.
The tables below reflect certain information relating to the Company's
operations by segment. Substantially all revenues represent sales to
unaffiliated customers. The accounting policies of the segments are the
same as those described in the summary of significant accounting policies
as discussed in the Company's annual report on Form 10-K for year ended
October 31, 1999. For purposes of this presentation, all general corporate
expenses have not been allocated between operating segments. In addition,
the corporate assets are mainly cash and cash equivalents transferred to
the corporate office from the segments. The interest charges and credits to
the segments from the corporate office are based on use of funds.
The required disclosures for the business segments are set forth below (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended April 30, Six Months Ended April 30,
2000 1999 2000 1999
------- ------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Switchgear............................................. $41,313 $40,374 $ 76,698 $ 81,901
Bus Duct............................................... 7,948 7,517 14,775 13,757
Process Control Systems................................ 7,148 8,440 14,427 14,807
------- ------- ------- --------
Total Revenues............................................ $56,409 $56,331 $105,900 $110,465
======= ======= ======== ========
Earnings from operations before income taxes:
Switchgear............................................. $ 2,026 $ 1,999 $ 2,817 $ 5,051
Bus Duct............................................... 1,529 1,386 2,524 2,474
Process Control Systems................................ (681) 301 (525) 549
Corporate.............................................. (729) (1,082) (699) (2,185)
------- ------- ------- -------
Total earnings from operations before income taxes........ $ 2,145 $ 2,604 $ 4,117 $ 5,889
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
April 30, October 31,
2000 1999
-------- --------
(unaudited)
<S> <C> <C>
Assets
Switchgear.......................................................... $91,008 $ 85,157
Bus Duct............................................................ 14,297 14,764
Process Control Systems............................................. 11,709 10,997
Corporate........................................................... 10,907 16,613
-------- --------
Total Assets........................................................... $127,921 $127,531
======== ========
</TABLE>
9
<PAGE> 10
Part I
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND QUARTERLY RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of revenues, certain items from
the Condensed Consolidated Statements of Operations.
<TABLE>
<CAPTION>
April 30, 2000 April 30, 1999
------------------------- --------------------------
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Gross profit 16.8 17.5 18.2 19.2
Selling, general and administrative
expenses 13.1 13.7 13.3 13.6
Interest expense, net -- -- .2 .2
Earnings from operations before income
taxes 3.8 3.9 4.6 5.3
Net earnings 2.5 2.6 3.2 3.6
</TABLE>
Revenues for the quarter ended April 30, 2000, were up 0.1 percent to
$56,409,000 from $56,331,000 in the second quarter of last year. Revenue
increases in both the Switchgear and Bus Duct business segments were offset by a
decline in revenues for the Process Control Systems segments. Revenues for the
six-months ended April 30, 2000, were down 4.1 percent to $105,900,000 from
$110,465,000 for the same six-month period of last year. The decrease in
revenues was mainly in the international markets, primarily consisting of sales
decreases from the Switchgear business segment, offset, in part, by an increase
in the Bus Duct business segment.
Gross profit, as a percentage of revenues, was 16.8 percent and 18.2 percent for
the quarter ended April 30, 2000 and 1999, respectively. The decrease in the
gross profit for the three-month period was due mainly to changes in scope in
two major contracts in the Process Control Systems segment. Gross profit, as a
percentage of revenues, was 17.5 percent and 19.2 percent for the six-months
ended April 30, 2000 and 1999, respectively. The lower percentages in 2000 were
mainly due to the decline in volume of the Switchgear business segment and lower
prices from the domestic industrial markets and due to changes in scope in two
major contracts in the Process Control Systems segment.
Selling, general and administrative expenses as a percentage of revenues were
13.1 percent and 13.3 percent for the quarter ended April 30, 2000 and 1999,
respectively. Selling, general and administrative expenses as a percentage of
revenues were 13.7 percent and 13.6 percent for the six-months ended April 30,
2000 and 1999, respectively. The lower percentage related to the quarter was due
to decreases in administrative and legal expenses.
Interest expense (income), net The following schedule shows the amounts for
interest expense and income:
<TABLE>
<CAPTION>
April 30, 2000 April 30, 1999
Three Months Six Months Three Month Six Months
Ended Ended Ended Ended
------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Expense............................. $ 141 $ 298 $ 216 $ 429
Income.............................. (155) (369) (79) (156)
----- ----- ----- -----
Net................................. $ (14) $ (71) $ 137 $ 273
===== ===== ===== =====
</TABLE>
Sources of interest expense in fiscal year 2000 and 1999 were primarily related
to bank notes payable at rates between 5.2% and 7.0%. Sources of interest income
were related to notes receivable and short-term investment of available funds at
various rates between 5.1% and 7.0%.
10
<PAGE> 11
Income tax provision The effective tax rate on earnings was 33.4 percent and
30.1 percent for the quarter ended April 30, 2000 and 1999, respectively. The
effective tax rate on earnings was 33.7 percent and 32.2 percent for the
six-months ended April 30, 2000 and 1999, respectively. The increases were
primarily due to lower estimated foreign sales corporation credits compared to
the prior year.
Net Earnings were $1,429,000 or $.14 per diluted share for the second quarter of
fiscal 2000, a decrease from $1,820,000 or $.17 per diluted share for the same
period last year. The decrease was mainly due to lower gross margins in the
Process Control Systems business segment. Net Earnings were $2,733,000 or $.26
per diluted share for the first six-months of fiscal 2000, a decrease from
$3,998,000 or $.37 per diluted share for the same period last year. The decrease
was mainly due to lower gross margins in the Switchgear business segment and the
cost of changes in scope in two major contracts in the Process Control System
segment.
Backlog at April 30, 2000 the backlog was $160,588,000 as compared to
$165,273,000 and $156,143,000 at January 31, 2000 and October 31, 2000,
respectively, a decrease of $4,685,000 for three months and an increase of
$4,445,000 for six months. All business segments experienced decreases during
the quarter with the exception of a slight increase in the Bus Duct segment.
Backlog by product group at April 30, 2000, January 31, 2000, and October 31,
1999 was as follows (in thousands of dollars):
<TABLE>
<CAPTION>
April January October
2000 2000 1999
-------- -------- --------
<S> <C> <C> <C>
Switchgear.......................... $106,559 $108,334 $105,116
Bus Duct............................ 22,661 19,954 17,412
Process Control..................... 31,368 36,985 33,615
-------- -------- --------
Total............................... $160,588 $165,273 $156,143
======== ======== ========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
In September 1998, the Company amended a revolving line of credit agreement with
a major domestic bank. The amendment provided for a $10,000,000 term loan and a
revolving line of credit of $20,000,000. In December 1999 the revolving line of
credit was amended to reduce the line to $15,000,000 and to extend the maturity
date to February 2002. The term of the loan was five years with four years
remaining. The effective interest rate, after including an interest rate swap
negotiated with the trust company of the same domestic bank, is 5.20 percent per
annum plus a .75 to 1.25 percent fee based on financial performance ratios. As
of April 30, 2000, the Company had no borrowings outstanding under this
revolving line of credit.
The Company's ability to satisfy its cash requirements is evaluated by analyzing
key measures of liquidity applicable to the Company. The following table is a
summary of the measures which are significant to management:
<TABLE>
<CAPTION>
April 30, October 31,
2000 1999
----------- -----------
<S> <C> <C>
Working Capital $59,404,000 $59,782,000
Current Ratio 3.03 to 1 3.13 to1
Long-term Debt to Capitalization .1 to 1 .1 to 1
</TABLE>
Management believes that the Company continues to maintain a strong liquidity
position. The decrease in working capital at April 30,, 2000, as compared to
October 31, 1999, is due mainly to a decrease in cash and cash equivalents.
Cash and cash equivalents decreased by $5,960,000 during the six months ended
April 30, 2000. The primary use of cash during this period was due to the
increases in costs and estimated earnings in excess of billings and inventories.
The decrease in net borrowings for the quarter was the result of a quarterly
payment on the bank loan.
The Company has a stock repurchase plan under which the Company is authorized to
spend up to $5,000,000 for purchases of its common stock. Pursuant to this plan,
the Company repurchased 377,000 shares of its common stock at an aggregate cost
of approximately $3,424,000 at April 30, 2000. Repurchased shares are added to
treasury stock and are available for general corporate purposes including
issuance under the Company's employee stock option plan.
The Company's fiscal 2000 asset management program will continue to focus on the
collection of receivables and reduction in inventories. The Company believes it
will be able to satisfy its capital requirements and operating needs over the
next twelve months primarily with funds available in cash and cash equivalents
of $4,686,000 funds generated from operating activities and funds available
under its existing revolving credit line.
11
<PAGE> 12
The previous discussion should be read in conjunction with the consolidated
financial statements.
Year 2000 Readiness
The Year 2000 readiness issue results from the historical use in computer
software programs and operating systems of a two digit number to represent the
year. Concerns arose as to whether certain software and hardware would fail to
properly function when confronted with dates that contain "00" as a two-digit
year. To address the potential risk for disruption of operations, each
subsidiary of the Company developed a compliance plan and conducted numerous
tests as to the effectiveness of applied solutions. The costs to the Company to
achieve Year 2000 readiness were approximately $150,000.
To date, the Company has not experienced any material problems relating to the
Year 2000 readiness issue. However, the Company may not have yet experienced all
factors that might have Year 2000 readiness implications.
Any forward looking statements in the preceding paragraphs of this Form 10-Q are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that such forward looking statements
involve risks and uncertainty in that actual results may differ materially from
those projected in the forward looking statements. These risks and uncertainties
include, without limitation, difficulties which could arise in obtaining
materials or components in sufficient quantities as needed for the Company's
manufacturing and assembly operations, unforeseen political or economic problems
in countries to which the Company exports its products in relation to the
Company's principal competitors, any significant decrease in the Company's
backlog of orders, any material employee relations problems, or any material
litigation or claims made against the Company, as well as general market
conditions, competition and pricing.
12
<PAGE> 13
Part 1
Item 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's financial instruments include cash and equivalents, accounts
receivable, accounts payable, debt obligations and interest rate swaps. The book
value of cash and cash equivalents, accounts receivable, the short-term note
payable and accounts payable are considered to be representative of fair value
because of the short maturity of these instruments. The Company believes that
the carrying value of its borrowings under the credit agreement approximate
their fair value as they bear interest at rates indexed to the Bank's IBOR. The
Company's accounts receivable are not concentrated in one customer or one
industry and are not viewed as an unusual credit risk. The Company had recorded
an allowance for doubtful accounts of $969,000 at April 30, 2000 and $852,000 at
October 31, 1999, respectively.
The interest rate swap agreement, which is used by the Company in the management
of interest rate exposure, is accounted for on the accrual basis. Income and
expense resulting from this agreement is recorded in the same category as
interest expense accrued on the related term loan. Amounts to be paid or
received under the interest rate swap agreement are recognized as an adjustment
to expense in the periods in which they occur.
At April 30, 2000 the Company had $7,857,000 in borrowings subject to the
interest rate swap at a rate of 5.20% through September 30, 2003. The 5.20% rate
is currently approximately 1.17% below market and should represent approximately
$84,000 of reduced interest expense for fiscal year 2000 assuming the current
market interest rates do not change. The approximate fair value of the swap
agreement at April 30, 2000 is $341,000. The fair value is the estimated amount
the Company would receive to terminate the contract. The agreement requires that
the Company pay the counterparty at the above fixed swap rate and requires the
counterparty to pay the Company interest at the 90 day LIBOR rate. The closing
90 day LIBOR rate on April 30, 2000 was 6.37%.
13
<PAGE> 14
Part II
OTHER INFORMATION
ITEM 1. 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 position of results of operations of the Company.
ITEM 2. Changes in Securities and Use of Proceeds
None
ITEM 3. 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 17, 2000, Stephen W. Seale, Jr. and Robert C. Tranchon
were elected as directors of the Company with terms ending in
2003. The directors continuing in office after the meeting are
Bonnie L. Powell, Thomas W. Powell, J. F. Ahart, Eugene L.
Butler, Lawrence R. Tanner and Joseph L. Becherer. 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:
<TABLE>
<CAPTION>
Nominee Votes Cast for Votes Cast Against Votes Withheld Abstentions Non-Votes
------- -------------- ------------------ -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Stephen W. Seale, Jr. 8,679,486 23,886 45,558 -- 1,944,700
Robert C. Tranchon 8,679,486 23,886 46,088 -- 1,944,170
</TABLE>
At the annual meeting, the stockholders also approved and
ratified the actions of the directors and officers of the
Company during fiscal 1999 as the acts of the Company. 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:
<TABLE>
<CAPTION>
Votes Cast For Votes Cast Against Abstentions Non-Votes
-------------- ------------------ ----------- ---------
<S> <C> <C> <C>
8,749,460 -- -- 1,944,170
</TABLE>
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
27.0 Financial Data Schedule
b. Reports on Form 8-K
None
14
<PAGE> 15
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 14, 2000
------------- -----------------------------------------
Date Thomas W. Powell
President and Chief Executive Officer
(Principal Executive Officer)
June 14, 2000
------------- -----------------------------------------
Date J.F. Ahart
Vice President,
Secretary-Treasurer
Chief Financial Officer
(Principal Financial and Accounting Officer)
15
<PAGE> 16
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
27 Financial Data Schedule
