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, 1996 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 (I.R.S. Employer incorporation or organization) Identification No.) 8550 Mosley Drive, Houston, Texas 77075-1180 - ------------------------------------------- ------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (713) 944-6900 -------------- 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; 10,567,704 shares outstanding on April 30, 1996.
2 POWELL INDUSTRIES, INC. <TABLE> <S> <C> PART I - Financial Information Item 1. Financial Statements ........................... 3 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Quarterly Results of Operations........................ 9 - 10 PART II - Other Information and Signatures ....................... 11 - 12 </TABLE>
3 Powell Industries, Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands, Except Share Data) <TABLE> <CAPTION> April 30, October 31, ASSETS 1996 1995 (unaudited) ----------- ----------- <S> <C> <C> Current Assets: Cash and cash equivalents............................................ $ 3,130 $ 3,035 Accounts receivable, less allowance for doubtful accounts of $1,083 and $724, respectively.................................. 50,028 32,181 Costs and estimated earnings in excess of billings................... 11,635 14,725 Inventories.......................................................... 19,917 20,114 Deferred income taxes................................................ 486 1,039 Income taxes receivable.............................................. --- 718 Prepaid expenses and other current assets............................ 1,501 1,889 -------- ------- Total Current Assets............................................... 86,697 73,701 Property, plant and equipment, net..................................... 15,918 16,271 Deferred income taxes, noncurrent...................................... 1,667 1,286 Other assets........................................................... 5,457 5,624 -------- ------- Total Assets....................................................... $109,739 $96,882 ======== ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts and income taxes payable.................................... $ 14,856 $10,843 Accrued salaries, bonuses and commissions............................ 5,106 5,387 Accrued product warranty............................................. 3,505 3,015 Other accrued expenses............................................... 3,864 3,706 Billings in excess of costs and estimated earnings .................. 9,408 5,563 Current maturities of long-term debt................................. 2,813 2,813 -------- ------- Total Current Liabilities.......................................... 39,552 31,327 Long-term debt......................................................... 3,750 3,750 Deferred compensation expense.......................................... 2,079 2,006 Postretirement benefits liability...................................... 2,013 2,142 Stockholders' Equity: Preferred stock, par value $.01; 5,000,000 shares authorized; none issued Common stock, par value $.01; 15,000,000 shares authorized; 10,567,704 and 10,542,704, respectively, shares issued and outstanding ........... 106 105 Additional paid-in capital........................................... 5,318 5,062 Retained earnings.................................................... 60,509 56,183 Deferred compensation-ESOP........................................... (3,588) (3,693) -------- ------- Total Stockholders' Equity......................................... 62,345 57,657 -------- ------- Total Liabilities and Stockholders' Equity......................... $109,739 $96,882 ======== ======= </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 3
4 Powell Industries, Inc. and Subsidiaries Consolidated Statements of Operations (unaudited) (In Thousands, Except Per Share Data) <TABLE> <CAPTION> Three Months Ended April 30, ---------------------------- 1996 1995 ---------- ---------- <S> <C> <C> Revenues................................................................ $53,521 $41,398 Cost of goods sold...................................................... 40,955 32,459 ---------- ---------- Gross profit............................................................ 12,566 8,939 Selling, general and administrative expenses............................ 8,404 6,616 ---------- ---------- Earnings from operations................................................ 4,162 2,323 Interest, net........................................................... 82 145 ---------- ---------- Earnings before income taxes............................................ 4,080 2,178 Income tax provision.................................................... 1,437 720 ---------- ---------- Net earnings............................................................ 2,643 1,458 ========== ========== Net earnings per common and common equivalent share..................... $ 0.25 $ 0.14 ========== ========== Weighted average number of shares outstanding........................... 10,753,695 10,534,371 ========== ========== </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 4
5 Powell Industries, Inc. and Subsidiaries Consolidated Statements of Operations (unaudited) (In Thousands, Except Per Share Data) <TABLE> <CAPTION> Six Months Ended April 30, -------------------------- 1996 1995 ----------- ----------- <S> <C> <C> Revenues................................................................ $103,090 $ 77,987 Cost of goods sold...................................................... 80,210 61,457 ----------- ----------- Gross profit............................................................ 22,880 16,530 Selling, general and administrative expenses............................ 16,060 12,952 ----------- ----------- Earnings from operations................................................ 6,820 3,578 Interest, net........................................................... 125 268 ----------- ----------- Earnings before income taxes............................................ 6,695 3,310 Income tax provision.................................................... 2,369 1,049 ----------- ----------- Net earnings............................................................ $ 4,326 $ 2,261 Net earnings per common and common equivalent share..................... $ 0.40 $ 0.21 =========== =========== Weighted average number of shares outstanding........................... 10,745,361 10,526,037 =========== =========== </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 5
6 Powell Industries, Inc. and Subsidiaries Consolidated Statements of Cash Flows (unaudited) (In Thousands) <TABLE> <CAPTION> Six Months Ended April 30, ----------------------------- 1996 1995 ----------- ----------- <S> <C> <C> Operating Activities: Net earnings............................................................................ $4,326 $2,261 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization......................................................... 1,974 1,710 Deferred income taxes................................................................. 172 (415) Postretirement benefits liability..................................................... (129) (48) Changes in operating assets and liabilities: Accounts receivable................................................................. (17,847) (2,568) Costs and estimated earnings in excess of billings.................................. 3,090 (3,736) Inventories......................................................................... 197 (4,402) Prepaid expenses and other current assets........................................... 388 (655) Other assets........................................................................ (88) (168) Accounts payable and income taxes payable or receivable............................. 4,731 2,700 Accrued liabilities................................................................. 367 (2,589) Billings in excess of costs and estimated earnings.................................. 3,845 2,297 Deferred compensation expense....................................................... 178 345 ----------- ----------- Net cash provided by (used in) in operating activities.................................... 1,204 (5,268) ----------- ----------- Investing Activities: Purchases of property, plant, and equipment............................................. (1,366) (1,248) ----------- ----------- Net cash used in investing activities..................................................... (1,366) (1,248) ----------- ----------- Financing Activities: Exercise of stock grants................................................................ 257 156 ----------- ----------- Net cash provided by financing activities................................................. 257 156 ----------- ----------- Net increase (decrease) in cash and cash equivalents...................................... 95 (6,360) Cash and cash equivalents at beginning of period.......................................... 3,035 7,598 ----------- ----------- Cash and cash equivalents at end of period................................................ $3,130 $1,238 =========== =========== </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 6
7 Part I Item 1 POWELL INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. BASIS OF PRESENTATION The accompanying unaudited 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 of cash flows. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's latest annual report on Form 10K. B. INVENTORY <TABLE> <CAPTION> April 30, October 31, 1996 1995 (unaudited) ------------ ----------- <S> <C> <C> The components of inventory are summarized below (in thousands): Raw materials, parts and subassemblies.................................................... $13,355 $12,469 Work-in-process........................................................................... 6,562 7,645 ----------- ----------- Total inventories......................................................................... $19,917 $20,114 =========== =========== </TABLE> C. PROPERTY, PLANT AND EQUIPMENT <TABLE> <CAPTION> April 30, October 31, 1996 1995 (unaudited) ------------ ----------- <S> <C> <C> Property, plant and equipment is summarized below (in thousands): Land...................................................................................... $ 2,514 $ 2,514 Buildings and improvements................................................................ 14,866 14,777 Machinery and equipment................................................................... 24,724 23,889 Furniture & fixtures...................................................................... 4,090 3,910 Construction in progress.................................................................. 557 417 ----------- ----------- 46,751 45,507 Less-accumulated depreciation............................................................. (30,833) (29,236) ----------- ----------- Total property, plant and equipment, net.................................................. $15,918 $16,271 =========== =========== </TABLE> 7
8 Part I Item 1 D. Other Financial Information (unaudited) <TABLE> <CAPTION> Six months ended April 30, -------------------------- 1996 1995 ----------- ----------- <S> <C> <C> Supplemental disclosure of cash flow information (in thousands): Cash paid during the period for: Interest............................................................................. $ 357 $ 501 =========== =========== Income taxes......................................................................... $ 1,500 $ 1,620 =========== =========== </TABLE> E. Production Contracts For contracts in which the percentage-of-completion method is used, costs and estimated earnings in excess of billings are reported as a current asset and billings in excess of costs and estimated earnings are reported as a current liability. The components of these contracts are as follows (in thousands): <TABLE> <CAPTION> April 30, October 31, 1996 1995 (unaudited) ------------ ----------- <S> <C> <C> Costs and estimated earnings......................................................... $40,937 $50,282 Progress billings.................................................................... (29,302) (35,557) ---------- ----------- Total costs and estimated earnings in excess of billings............................. $11,635 $14,725 =========== =========== Progress billings.................................................................... $65,380 $29,682 Costs and estimated earnings......................................................... (55,972) (24,119) ---------- ---------- Total billings in excess of costs and estimated earnings............................. $ 9,408 $ 5,563 =========== =========== </TABLE> 8
9 Part I Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND QUARTERLY RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES During 1990, the Company concluded a private placement of $15,000,000 in term notes, of which $6,563,000 was outstanding as of April 30, 1996. These notes are unsecured with a fixed interest rate of 10.4 percent. The notes mature through June 1997, with the next payment of $2,813,000 due in June 1996. In October 1995, the Company entered into a $15,000,000 revolving line of credit agreement with a major domestic bank. As of April 30, 1996, the Company did not have borrowings outstanding under this line. 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, April 30, 1996 1995 1995 <S> <C> <C> <C> Working Capital $47,145,000 $42,374,000 $42,109,000 Current Ratio 2.19 to 1 2.35 to 1 2.38 to 1 Debt to Capitalization .10 to 1 .10 to 1 .15 to 1 </TABLE> The consolidated statements of cash flows show that approximately $95,000 of cash was generated during the six months ended April 30, 1996. The increases in accounts receivable requiring the use of cash was due to the increased volume of business and product shipment delays. Increases in billings in excess of costs and estimated earnings and accounts payable had a positive effect on the Company's cash flow during the quarter. The use of cash for capital expenditures during the six months of 1996 was $1,366,000 which was mainly invested in machinery and equipment. The Company's fiscal 1996 asset management program will continue to focus on the collection of receivables and reduction in inventories. The Company plans to satisfy its fiscal 1996 capital requirements and operating needs primarily with funds available in cash and cash equivalents of $3,130,000, funds generated from operating activities and funds available under its existing revolving credit line. 9
10 RESULTS OF OPERATIONS The following table sets forth, as a percentage of revenues, certain items from the Consolidated Statements of Operations. <TABLE> <CAPTION> April 30, --------- 1996 1995 - ---------------------------------------------------------------------------------------------------------- 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 23.5 22.2 21.6 21.2 Selling, general and administrative expenses 15.7 15.6 16.0 16.6 Interest, net .2 .1 .4 .4 Net earnings before income tax 7.6 6.5 5.2 4.2 Income tax provision 2.7 2.3 1.7 1.3 Net earnings 4.9 4.2 3.5 2.9 </TABLE> Revenues for the quarter ended April 30, 1996 were up 29 percent to $53,521,000 from $41,398,000 in the second quarter of last year. Revenues for the six months ended April 30, 1996 were up 32 percent to $103,090,000 from $77,987,000 in the first six months of last year. This increase in volume was due to higher electrical distribution equipment product line revenues which were partially offset by lower revenues from process control product lines. Gross profit, as a percentage of revenues, was 23.5 percent and 21.6 percent for the quarters ended April 30, 1996 and 1995. The gross profit percentage for the six months ended April 30, 1996 and 1995 was 22.2 percent and 21.2 percent, respectively. The higher percents in 1996 were due to changes in product mix shipped during 1996 and efficiencies due to the increased volume of activity. Selling, general and administrative expenses as a percentage of revenues was 15.7 percent and 16 percent for the quarters ended April 30, 1996 and 1995. These percentages for the six months ended April 30, 1996 and 1995 were 15.6 percent and 16.6 percent. The change in percent reflects the effect of higher revenue volume without a corresponding increase in expenses. Interest, net is lower in 1996 than in 1995 due to the scheduled annual reduction in outstanding debt. Income tax provision The effective tax rate was 35.2 percent and 33.1 percent for the quarters ended April 30, 1996 and 1995. For the six months ended April 30, 1996 and 1995 the effective tax rate was 35.4 percent and 31.7 percent respectively. The increase was primarily due to higher foreign sales corporation credits in the previous year and the higher projected tax rate for 1996 due to an increased level of taxable income. Net earnings were $2,643,000 or $.25 per share for the second quarter of fiscal 1996, an increase of 81 percent from $1,458,000 or $.14 per share for the same period last year. For the six months ended April 30, 1996, net earnings were $4,326,000 or $.40 per share, compared with $2,261,000 or $.21 per share for the first six months of fiscal 1995, an increase of 91 percent. The increases for the two quarters of 1996 were mainly due to the higher revenue volumes. The order backlog at April 30, 1996 was $130.4 million compared to $112.6 million at October 31, 1995. 10
11 Part II OTHER INFORMATION ITEM 1. Legal Proceedings No material developments in litigation previously reported. ITEM 2. Changes in Securities None ITEM 3. Defaults Upon Senior Securities Not applicable ITEM 4. Submission of Matters to a Vote of Security Holders None ITEM 5. Other Information None ITEM 6. Exhibits and Reports on Form 8-K a. Exhibits 10.7 Powell Industries, Inc. Executive Severance Protection Plan dated March 15, 1996. 10.8 Powell Industries, Inc. Amendment to Employee Stock Option Plan. 27.0 Financial Data Schedule b. Reports on Form 8K None 11
12 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 07, 1996 /s/ Thomas W. Powell - ------------- ---------------------------------------------- Date Thomas W. Powell President and Chief Executive Officer (Principal Executive Officer) June 07, 1996 /s/ J. F. Ahart - ------------- ---------------------------------------------- Date J.F. Ahart Vice President, Secretary-Treasurer Chief Financial Officer (Principal Financial and Accounting Officer)
13 EXHIBIT INDEX 10.7 Powell Industries, Inc. Executive Severance Protection Plan dated March 15, 1996. 10.8 Powell Industries, Inc. Amendment to Employee Stock Option Plan. 27.0 Financial Data Schedule