Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jun. 30, 2016 | Jul. 29, 2016 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | POWELL INDUSTRIES INC | |
Entity Central Index Key | 80,420 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Accelerated Filer | |
Trading Symbol | powl | |
Entity Common Stock, Shares Outstanding | 11,393,493 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Jun. 30, 2016 | Sep. 30, 2015 |
Current Assets: | ||
Cash and cash equivalents | $ 89,351 | $ 43,569 |
Accounts receivable, less allowance for doubtful accounts of $871 and $746 | 87,876 | 101,784 |
Inventories | 28,138 | 32,891 |
Costs and estimated earnings in excess of billings on uncompleted contracts | 80,026 | 104,793 |
Income taxes receivable | 2,822 | 1,232 |
Deferred income taxes | 4,054 | 3,910 |
Prepaid expenses | 3,715 | 5,004 |
Other current assets | 2,978 | 3,916 |
Total Current Assets | 298,960 | 297,099 |
Property, plant and equipment, net | 147,810 | 154,594 |
Goodwill and intangible assets, net | 2,148 | 2,393 |
Deferred income taxes | 681 | 2,288 |
Other assets | 10,807 | 10,117 |
Long-term receivable (Note D) | 2,333 | |
Total Assets | 460,406 | 468,824 |
Current Liabilities: | ||
Accounts payable | 35,925 | 48,008 |
Accrued salaries, bonuses and commissions | 22,851 | 19,223 |
Billings in excess of costs and estimated earnings on uncompleted contracts | 43,021 | 42,057 |
Current maturities of long-term debt | 400 | 400 |
Accrued product warranty | 4,729 | 4,930 |
Other accrued expenses | 6,280 | 7,521 |
Income taxes payable | 1,202 | 784 |
Deferred credit ─ short term (Note D) | 2,029 | 2,029 |
Total Current Liabilities | 116,437 | 124,952 |
Long-term debt, net of current maturities | 2,000 | 2,400 |
Deferred compensation | 5,562 | 4,950 |
Other long-term liabilities | 792 | 723 |
Deferred credit ─ long term (Note D) | 1,015 | 2,537 |
Total Liabilities | 125,806 | 135,562 |
Commitments and Contingencies (Note F) | ||
Stockholders' Equity: | ||
Preferred stock, par value $.01; 5,000,000 shares authorized; none issued | ||
Common stock, par value $.01; 30,000,000 shares authorized; 12,199,511 and 12,100,459 shares issued and outstanding, respectively | 122 | 121 |
Additional paid-in capital | 51,742 | 48,507 |
Retained earnings | 329,414 | 328,294 |
Treasury stock, 806,018 and 670,181 shares at cost, respectively | (24,999) | (21,259) |
Accumulated other comprehensive loss | (21,679) | (22,401) |
Total Stockholders' Equity | 334,600 | 333,262 |
Total Liabilities and Stockholders' Equity | $ 460,406 | $ 468,824 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2016 | Sep. 30, 2015 |
Statement Of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 871 | $ 746 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 12,199,511 | 12,100,459 |
Common stock, shares outstanding | 12,199,511 | 12,100,459 |
Treasury stock, shares | 806,018 | 670,181 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Income Statement [Abstract] | ||||
Revenues | $ 133,207 | $ 176,733 | $ 435,450 | $ 499,533 |
Cost of goods sold | 105,922 | 143,789 | 354,921 | 421,219 |
Gross profit | 27,285 | 32,944 | 80,529 | 78,314 |
Selling, general and administrative expenses | 19,362 | 18,013 | 57,787 | 58,293 |
Research and development expenses | 1,640 | 1,642 | 5,453 | 5,108 |
Amortization of intangible assets | 89 | 114 | 263 | 345 |
Restructuring and separation expenses | 647 | 1,406 | 7,703 | 2,738 |
Operating income | 5,547 | 11,769 | 9,323 | 11,830 |
Other income | (507) | (507) | (1,522) | (1,893) |
Interest expense | 38 | 42 | 112 | 111 |
Interest income | (42) | (113) | (88) | |
Income before income taxes | 6,058 | 12,234 | 10,846 | 13,700 |
Income tax provision | 1,164 | 5,185 | 844 | 10,573 |
Net income | $ 4,894 | $ 7,049 | $ 10,002 | $ 3,127 |
Income per share: | ||||
Basic | $ 0.43 | $ 0.60 | $ 0.88 | $ 0.26 |
Diluted | $ 0.43 | $ 0.60 | $ 0.87 | $ 0.26 |
Weighted average shares: | ||||
Basic | 11,397 | 11,802 | 11,387 | 11,953 |
Diluted | 11,473 | 11,845 | 11,435 | 11,991 |
Dividends per share | $ 0.26 | $ 0.26 | $ 0.78 | $ 0.78 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Consolidated Statement of Comprehensive Income (Loss) [Abstract] | ||||
Net income | $ 4,894 | $ 7,049 | $ 10,002 | $ 3,127 |
Foreign currency translation adjustments | (1,292) | 2,703 | 722 | (8,432) |
Comprehensive income (loss) | $ 3,602 | $ 9,752 | $ 10,724 | $ (5,305) |
Condensed Consolidated Stateme6
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - 9 months ended Jun. 30, 2016 - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) |
Balance at Sep. 30, 2015 | $ 333,262 | $ 121 | $ 48,507 | $ 328,294 | $ (21,259) | $ (22,401) |
Balance, shares at Sep. 30, 2015 | 12,100,459 | 12,100,000 | (670,000) | |||
Net income | $ 10,002 | 10,002 | ||||
Foreign currency translation adjustments | 722 | 722 | ||||
Stock-based compensation | 4,235 | 4,235 | ||||
Stock-based compensation, shares | 82,000 | |||||
Shares withheld in lieu of employee tax withholding | (1,000) | (1,000) | ||||
Issuance of restricted stock | 1 | $ 1 | ||||
Issuance of restricted stock, shares | 18,000 | |||||
Purchase of treasury value | (3,740) | $ (3,740) | ||||
Purchase of treasury shares | (136,000) | |||||
Dividends paid | (8,882) | (8,882) | ||||
Balance at Jun. 30, 2016 | $ 334,600 | $ 122 | $ 51,742 | $ 329,414 | $ (24,999) | $ (21,679) |
Balance, shares at Jun. 30, 2016 | 12,199,511 | 12,200,000 | (806,000) |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Operating Activities: | ||
Net income | $ 10,002 | $ 3,127 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 9,801 | 9,894 |
Amortization | 263 | 345 |
Stock-based compensation | 4,235 | 2,262 |
Bad debt expense | 221 | 31 |
Deferred income tax expense | 1,463 | 8,652 |
Gain on amended supply agreement | (1,522) | (1,522) |
Cash received from amended supply agreement | 2,333 | 2,333 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | 13,455 | (5,837) |
Costs and billings in excess of estimated earnings on uncompleted contracts | 25,337 | 5,598 |
Inventories | 4,639 | (3,809) |
Prepaid expenses and other current assets | 597 | 2,075 |
Accounts payable and income taxes payable | (11,282) | 308 |
Accrued liabilities | 2,310 | (4,336) |
Other, net | (52) | (533) |
Net cash provided by operating activities | 61,800 | 18,588 |
Investing Activities: | ||
Proceeds from sale of property, plant and equipment | 122 | 51 |
Purchases of property, plant and equipment | (2,000) | (34,246) |
Net cash used in investing activities | (1,878) | (34,195) |
Financing Activities: | ||
Payments on industrial development revenue bonds | (400) | (400) |
Shares withheld in lieu of employee tax withholding | (1,000) | (557) |
Purchase of treasury shares | (3,740) | (12,523) |
Dividends paid | (8,882) | (9,326) |
Net cash used in financing activities | (14,022) | (22,806) |
Net increase (decrease) in cash and cash equivalents | 45,900 | (38,413) |
Effect of exchange rate changes on cash and cash equivalents | (118) | (1,346) |
Cash and cash equivalents, beginning of period | 43,569 | 103,118 |
Cash and cash equivalents, end of period | $ 89,351 | $ 63,359 |
Overview and Summary of Signifi
Overview and Summary of Significant Accounting Policies | 9 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Overview and Summary of Significant Accounting Policies | A. OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Overview Powell Industries, Inc. (we, us, our, Powell or the Company) was incorporated in the state of Delaware in 2004 as a successor to a Nevada company incorporated in 1968. The Nevada corporation was the successor to a company founded by William E. Powell in 1947, which merged into the Company in 1977. Our major subsidiaries, all of which are wholly owned, include: Powell Electrical Systems, Inc.; Powell (UK) Limited; Powell Canada Inc. and Powell Industries International, B.V. We develop, design, manufacture and service custom-engineered equipment and systems for the distribution, control and monitoring of electrical energy. Headquartered in Houston, Texas, we serve the oil and gas refining, offshore oil and gas production, petrochemical, pipeline, terminal, mining and metals, light rail traction power, electric utility, pulp and paper and other industrial markets. Basis of Presentation These unaudited condensed consolidated financial statements include the accounts of Powell and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP), have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations for the interim periods are not necessarily indicative of the results for the entire fiscal year. We believe that these financial statements contain all adjustments necessary so that they are not misleading. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Powell and its subsidiaries included in Powell’s Annual Report on Form 10-K for the year ended September 30, 2015, which was filed with the Securities and Exchange Commission (SEC) on December 2, 2015. References to Fiscal 2016, Fiscal 2015 and Fiscal 2014 used throughout this report shall mean our fiscal years ended September 30, 2016, 2015 and 2014, respectively. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying footnotes as of the date they were prepared. The most significant estimates used in our financial statements affect revenue and cost recognition for contracts, allowance for doubtful accounts, provision for excess and obsolete inventory, goodwill and intangible assets, self-insurance, warranty accruals, liquidated damages and income taxes. The amounts recorded in the condensed consolidated financial statements require judgments that could change in future periods and actual amounts may differ from those recorded in the condensed consolidated financial statements. We base our estimates on historical experience and on various other assumptions, as well as the specific circumstances surrounding contingent liabilities, in evaluating the amount of liability that should be recorded. Additionally, the recognition of deferred tax assets, and our determination of whether the value of our long-lived assets has been impaired, requires estimates related to future income and other assumptions regarding timing and future profitability. Estimates may change as new events occur, additional information becomes available or operating conditions change. New Accounting Standards In May 2014, the FASB issued a new standard on revenue recognition that supersedes previously issued revenue recognition guidance. This standard provides a five-step approach to be applied to all contracts with customers and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue (and the related cash flows) arising from customer contracts, significant judgments and changes in judgments used in applying the revenue model and the assets recognized from costs incurred to obtain or fulfill a contract. This guidance is now effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, which would be our fiscal year ending September 30, 2019. The standard permits the use of either the retrospective or cumulative effect transition method; therefore, we are evaluating the effect that this new guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting. In July 2015, the FASB issued a new topic on simplifying the measurement of inventory. The current standard is to measure inventory at lower of cost or market; where market could be replacement cost, net realizable value, or net realizable value less an approximate normal profit margin. This topic updates this guidance to measure inventory at the lower of cost and net realizable value; where net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This update is effective for annual reporting periods beginning after December 15, 2016, which would be our fiscal year ending September 30, 2018. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. This topic is not expected to have a material impact on our consolidated financial position or results of operations. In November 2015, the FASB issued an amendment to the topic regarding income taxes which requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in the statement of financial position. Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. Deferred tax liabilities and assets that are not related to an asset or liability for financial reporting are classified according to the expected reversal date of the temporary difference. To simplify the presentation of deferred income taxes, the amendments require that deferred income tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This amendment is effective for annual reporting periods beginning after December 15, 2016, which would be our fiscal year ending September 30, 2018. We have no plans for early adoption. The adoption of this guidance is not expected to our consolidated financial position or results of operations. In February 2016, the FASB issued a new topic on leases which requires lessees to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. This would be our fiscal year ending September 30, 2020. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial position or results of operations. In March 2016, the FASB issued new guidance on stock-based compensation. The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public companies, the amendments in this standard are effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. This would be our fiscal year ending September 30, 2018. The adoption of this guidance is not expected to have a material impact on our consolidated financial position, results of operations or cash flows. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Jun. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | B. EARNINGS PER SHARE We compute basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common and potential common share includes the weighted average of additional shares associated with the incremental effect of dilutive restricted stock and restricted stock units, as prescribed by the FASB guidance on earnings per share. The following table reconciles basic and diluted weighted average shares used in the computation of earnings per share (in thousands, except per share data): Three months ended June 30, Nine months ended June 30, 2016 2015 2016 2015 Numerator: Net income $ 4,894 $ 7,049 $ 10,002 $ 3,127 Denominator: Weighted average basic shares 11,397 11,802 11,387 11,953 Dilutive effect of restricted stock units 76 43 48 38 Weighted average diluted shares with assumed conversions 11,473 11,845 11,435 11,991 Net income per share: Basic $ 0.43 $ 0.60 $ 0.88 $ 0.26 Diluted $ 0.43 $ 0.60 $ 0.87 $ 0.26 |
Detail of Selected Balance Shee
Detail of Selected Balance Sheet Accounts | 9 Months Ended |
Jun. 30, 2016 | |
Disclosure Text Block Supplement [Abstract] | |
Detail of Selected Balance Sheet Accounts | C. DETAIL OF SELECTED BALANCE SHEET ACCOUNTS Allowance for Doubtful Accounts Activity in our allowance for doubtful accounts receivable consisted of the following (in thousands): Three months ended June 30, Nine months ended June 30, 2016 2015 2016 2015 Balance at beginning of period $ 976 $ 1,881 $ 746 $ 1,577 Bad debt expense (recovery) (118 ) (438 ) 221 31 Uncollectible accounts written off, net of recoveries 16 (145 ) (98 ) (267 ) Change in foreign currency translation (3 ) 14 2 (29 ) Balance at end of period $ 871 $ 1,312 $ 871 $ 1,312 Inventories: The components of inventories are summarized below (in thousands): June 30, 2016 September 30, 2015 Raw materials, parts and subassemblies, net $ 27,308 $ 31,807 Work-in-progress 830 1,084 Total inventories $ 28,138 $ 32,891 Cost and Estimated Earnings on Uncompleted Contracts The components of costs and estimated earnings and related amounts billed on uncompleted contracts are summarized below (in thousands): June 30, 2016 September 30, 2015 Costs incurred on uncompleted contracts $ 1,048,831 $ 912,237 Estimated earnings 332,472 271,640 1,381,303 1,183,877 Less: Billings to date (1,344,298 ) (1,121,141 ) Net underbilled position $ 37,005 $ 62,736 Included in the accompanying balance sheets under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts – underbilled $ 80,026 $ 104,793 Billings in excess of costs and estimated earnings on uncompleted contracts – overbilled (43,021 ) (42,057 ) Net underbilled position $ 37,005 $ 62,736 Warranty Accrual Activity in our product warranty accrual consisted of the following (in thousands): Three months ended June 30, Nine months ended June 30, 2016 2015 2016 2015 Balance at beginning of period $ 4,787 $ 4,375 $ 4,930 $ 4,557 Increase to warranty expense 1,174 1,033 3,332 2,100 Deduction for warranty charges (1,206 ) (766 ) (3,481 ) (1,794 ) Change in foreign currency translation (26 ) 81 (52 ) (140 ) Balance at end of period $ 4,729 $ 4,723 $ 4,729 $ 4,723 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Jun. 30, 2016 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | D. GOODWILL AND INTANGIBLE ASSETS Our intangible assets consist of goodwill, which is not being amortized, and purchased technology, which is amortized over its estimated useful life. Intangible assets balances, subject to amortization, at June 30, 2016 and September 30, 2015 consisted of the following (in thousands): June 30, 2016 September 30, 2015 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying Value Amortization Value Value Amortization Value Purchased technology $ 11,749 $ (10,604 ) $ 1,145 $ 11,749 $ (10,359 ) $ 1,390 Goodwill 1,003 — 1,003 1,003 — 1,003 Total $ 12,752 $ (10,604 ) $ 2,148 $ 12,752 $ (10,359 ) $ 2,393 Amortization of intangible assets was $0.3 million for the nine months ended June 30, 2016 and 2015. On August 7, 2006, we purchased certain assets related to the manufacturing of ANSI medium-voltage switchgear and circuit breaker business from General Electric Company (GE). In connection with the acquisition, we entered into a 15 year supply agreement with GE pursuant to which GE would purchase from us all of their requirements for ANSI medium-voltage switchgear and circuit breakers and other related equipment and components (the Products). In connection with the acquisition, we recorded an intangible asset related to this supply agreement. On December 30, 2013, we and GE amended the supply agreement to allow GE to manufacture similar Products for sale immediately and allow them to begin purchasing Products from other suppliers beginning December 31, 2014. In return, GE paid us $10 million upon execution of the amended supply agreement and agreed to pay an additional $7 million over three years, subject to certain conditions. As of June 30, 2016, we had $2.3 million recorded in other current assets. We wrote off the intangible asset related to the original supply agreement and recorded a deferred credit in the amount of $8.1 million at December 31, 2013, the amount by which the proceeds from GE exceeded the unamortized balance of our intangible asset. We are amortizing this deferred credit over the four-year life of the agreement and have recognized gains in other income of $1.5 million for the nine months ended June 30, 2016 and 2015. |
Long-Term Debt
Long-Term Debt | 9 Months Ended |
Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | E. LONG-TERM DEBT Long-term debt consisted of the following (in thousands): June 30, 2016 September 30, Industrial development revenue bonds $ 2,400 $ 2,800 Less current portion (400 ) (400 ) Total long-term debt and capital lease obligations $ 2,000 $ 2,400 U.S. Revolver In Fiscal 2015, we entered into the Second Amendment (the Second Amendment) of our existing amended and restated credit agreement (as amended, the Amended Credit Agreement). The Second Amendment provided for the expansion of our Canadian manufacturing facility and allowed for the repurchase of our common stock pursuant to a share repurchase program announced in December 2014. The Amended Credit Agreement provides for a $75.0 million revolving credit facility (U.S. Revolver). The interest rate for amounts outstanding under the Amended Credit Agreement for the U.S. Revolver is a floating rate based upon the higher of the Federal Funds Rate plus 0.5%, the bank’s prime rate, or the Eurocurrency rate plus 1.00%. Once the applicable rate is determined, a margin ranging up to 1.75%, as determined by our consolidated leverage ratio, is added to the applicable rate. The U.S. Revolver provides for the issuance of letters of credit which reduce the amounts that may be borrowed under this revolver. The amount available under the U.S. Revolver was reduced by $26.8 million for our outstanding letters of credit at June 30, 2016. There were no borrowings outstanding under the U.S. Revolver as of June 30, 2016. Amounts available under the U.S. Revolver were $48.2 million at June 30, 2016. The U.S. Revolver expires on December 31, 2018. The Amended Credit Agreement contains certain restrictive and maintenance-type covenants, such as restrictions on the amount of capital expenditures allowed. It also contains financial covenants defining various financial measures and the levels of these measures with which we must comply, as well as a “material adverse change” clause. A “material adverse change” is defined as a material change in our operations, business, properties, liabilities or condition (financial or otherwise) or a material impairment of our ability to perform our obligations under our credit agreements. The Amended Credit Agreement is collateralized by a pledge of 100% of the voting capital stock of each of our domestic subsidiaries and 65% of the voting capital stock of each non-domestic subsidiary, excluding Powell Canada Inc. The Amended Credit Agreement provides for customary events of default and carries cross-default provisions with other existing debt agreements. If an event of default (as defined in the Amended Credit Agreement) occurs and is continuing, on the terms and subject to the conditions set forth in the Amended Credit Agreement, amounts outstanding under the Amended Credit Agreement may be accelerated and may become immediately due and payable. As of June 30, 2016, we were in compliance with all of the financial covenants of the Amended Credit Agreement. Canadian Revolver We have a $7.7 million credit agreement with a major international bank in Canada (the Canadian Revolver) to provide working capital support and letters of credit for our operations in Canada. The Canadian Revolver provides for the issuance of letters of credit which reduce the amounts that may be borrowed under this revolver. There were no outstanding letters of credit under the Canadian Revolver at June 30, 2016. There were no borrowings outstanding under the Canadian Revolver as of June 30, 2016 and amounts available under the Canadian Revolver were $7.7 million at June 30, 2016. The interest rate for amounts outstanding under the Canadian Revolver is a floating interest rate based upon either the Canadian Prime Rate, or the lender’s Bankers’ Acceptance Rate. Once the applicable rate is determined, a margin of 0.50% to 1.75%, as determined by our consolidated leverage ratio, is added to the applicable rate. The Canadian Revolver expires on March 31, 2018. The principal financial covenants are consistent with those described in our Amended Credit Agreement. The Canadian Revolver contains a “material adverse effect” clause. A “material adverse effect” is defined as a material change in the operations of Powell or Powell Canada Inc. in relation to our financial condition, property, business operations, expected net cash flows, liabilities or capitalization. The Canadian Revolver is secured by the assets of our Canadian operations and provides for customary events of default and carries cross-default provisions with our existing debt agreements. If an event of default (as defined in the Canadian Revolver) occurs and is continuing, per the terms and subject to the conditions set forth in the Canadian Revolver, amounts outstanding under the Canadian Revolver may be accelerated and may become immediately due and payable. As of June 30, 2016, we were in compliance with all of the financial covenants of the Canadian Revolver. Industrial Development Revenue Bonds We borrowed $8.0 million in October 2001 through a loan agreement funded with proceeds from tax-exempt industrial development revenue bonds (Bonds). These Bonds were issued by the Illinois Development Finance Authority and were used for the completion of our Northlake, Illinois facility. Pursuant to the Bond issuance, a reimbursement agreement between us and a major domestic bank required an issuance by the bank of an irrevocable direct-pay letter of credit (Bond LC), as collateral, to the Bonds’ trustee to guarantee payment of the Bonds’ principal and interest when due. The Bond LC is subject to both early termination and extension provisions customary to such agreements, as well as various covenants, for which we were in compliance at June 30, 2016. While the Bonds mature in 2021, the reimbursement agreement requires annual redemptions of $0.4 million that commenced on October 25, 2002. A sinking fund is used for the redemption of the Bonds. The Bonds bear interest at a floating rate determined weekly by the Bonds’ remarketing agent, which was the underwriter for the Bonds and is an affiliate of the bank. This interest rate was 0.58% as of June 30, 2016. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Jun. 30, 2016 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | F. COMMITMENTS AND CONTINGENCIES Long-Term Debt See Note E herein for discussion of our long-term debt. Letters of Credit and Surety Bonds Certain customers require us to post bank letter of credit guarantees or surety bonds. These guarantees and surety bonds assure that we will perform under the terms of our contract. In the event of default, the counterparty may demand payment from the bank under a letter of credit or performance by the surety under a bond. To date, there have been no significant expenses related to either letters of credit or surety bonds for the periods reported. We were contingently liable for secured and unsecured letters of credit of $26.8 million as of June 30, 2016. We also had surety bonds totaling $233.0 million that were outstanding, with additional bonding capacity of $517.0 million available, at June 30, 2016. We have a $9.4 million facility agreement (Facility Agreement) between Powell (UK) Limited and a large international bank. This Facility Agreement provides Powell (UK) Limited the ability to enter into bank guarantees as well as forward exchange contracts and currency options. At June 30, 2016, we had outstanding guarantees totaling $3.0 million under this Facility Agreement and amounts available under this Facility Agreement were $6.4 million. This facility expires in November 2016. The Facility Agreement provides for financial covenants and customary events of default, and carries cross-default provisions with our Amended Credit Agreement. If an event of default (as defined in the Facility Agreement) occurs and is continuing, per the terms and subject to the conditions set forth therein, obligations outstanding under the Facility Agreement may be accelerated and may become or be declared immediately due and payable. As of June 30, 2016, we were in compliance with all of the financial covenants of the Facility Agreement. Litigation We are involved in various legal proceedings, claims and other disputes arising from our commercial operations, projects, employees and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable. Although we can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on us, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on our consolidated financial position or results of operations or liquidity. Liquidated Damages Certain of our customer contracts have schedule and performance obligation clauses that, if we fail to meet them, could require us to pay liquidated damages. Each individual contract defines the conditions under which the customer may make a claim against us. As of June 30, 2016, our exposure to possible liquidated damages was $7.4 million, of which approximately $1.7 million is estimated to be probable. Based on our actual or projected failure to meet these various contractual commitments, $1.7 million has been recorded as a reduction to revenue. We will attempt to obtain change orders or contract extensions that may resolve the potential for any unaccrued liquidated damage. Should we fail to achieve relief on some or all of these contractual obligations, we could be required to pay additional liquidated damages, which could negatively impact our future operating results. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Jun. 30, 2016 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Stock-Based Compensation | G. STOCK-BASED COMPENSATION Refer to our Annual Report on Form 10-K for the fiscal year ended September 30, 2015 for a full description of our existing stock-based compensation plans. Restricted Stock Units We issue restricted stock units (RSUs) to certain officers and key employees of the Company. The fair value of the RSUs is based on the closing price of our common stock as reported on the NASDAQ Global Market on the grant dates. These grants vest over a three-year period from their date of issuance. In February 2016, the Board of Directors voted to modify the RSU awards. The modification provides that sixty percent of the grant is time-based and vests over a three-year period on each anniversary of the grant date, based on continued employment. The remaining forty percent of the grant will be earned based on the three-year earnings performance of the Company following the grant date. At June 30, 2016, there were 142,688 RSUs outstanding. The RSUs do not have voting rights but receive dividend equivalents upon vesting; additionally, the shares of common stock underlying the RSUs are not considered issued and outstanding until vested and common stock is issued. RSU activity (number of shares) for the nine months ending June 30, 2016 is summarized below: Number of Weighted Restricted Average Stock Fair Value Units Per Share Outstanding at September 30, 2015 133,506 $ 50.26 Granted 136,800 29.80 Vested (1) (116,568 ) 33.10 Forfeited/cancelled (11,050 ) 30.27 Outstanding at June 30, 2016 142,688 $ 46.22 (1) Includes the accelerated vesting of 84,043 shares previously issued to our former Chief Executive Officer and other senior managers as part of their separation packages, see Note J. During the nine months ended June 30, 2016 and 2015, we recorded compensation expense of $3.7 million and $1.3 million, respectively, related to the RSUs. The increase in compensation expense recorded in the nine months ended June 30, 2016, was primarily due to the early vesting of shares associated with executive separation costs, see Note J. Restricted Stock Restricted stock grants vest equally over their respective vesting period on each anniversary of the grant date and compensation expense is recognized over their respective vesting periods based on the price per share on the grant date. In February 2016, 16,000 shares of restricted stock were issued to our non-employee directors at a price of $25.63 per share under the 2014 Director Plan. In April 2016, we issued 1,000 shares of restricted stock to a non-employee director at a price of $29.38 per share. The annual restricted stock grants vest 50% per year over a two-year period on each anniversary of the grant date. During the nine months ended June 30, 2016 and 2015, we recorded compensation expense of $0.6 million and $1.0 million, respectively, related to restricted stock grants. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Jun. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | H. FAIR VALUE MEASUREMENTS We measure certain financial assets and liabilities at fair value. Fair value is defined as an “exit price” which represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in valuing an asset or liability. The accounting guidance requires the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. As a basis for considering such assumptions and inputs, a fair value hierarchy has been established which identifies and prioritizes three levels of inputs to be used in measuring fair value. The three levels of the fair value hierarchy are as follows: Level 1 — Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 — Inputs other than the quoted prices in active markets that are observable either directly or indirectly, including: quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data. Level 3 — Unobservable inputs that are supported by little or no market data and require the reporting entity to develop its own assumptions. The following table summarizes the fair value of our assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2016 (in thousands): Fair Value Measurements at June 30, 2016 Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Fair Value at Identical Assets Inputs Inputs March 31, (Level 1) (Level 2) (Level 3) 2016 Assets: Cash equivalents $ 335 $ — $ — $ 335 Deferred compensation 1,609 3,972 — 5,581 Liabilities: Deferred compensation — 5,154 — 5,154 The following table summarizes the fair value of our assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2015 (in thousands): Fair Value Measurements at September 30, 2015 Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Fair Value at Identical Assets Inputs Inputs September 30, (Level 1) (Level 2) (Level 3) 2015 Assets: Cash equivalents $ 434 $ — $ — $ 434 Deferred compensation 1,879 2,904 — 4,783 Liabilities: Deferred compensation — 4,487 — 4,487 Cash equivalents, primarily funds held in money market savings instruments, are reported at their current carrying value which approximates fair value due to the short-term nature of these instruments and are included in cash and cash equivalents in our Condensed Consolidated Balance Sheets. Fair Value of Other Financial Instruments Fair value guidance requires certain fair value disclosures be presented in both interim and annual reports. The estimated fair value amounts of financial instruments have been determined using available market information and valuation methodologies described below. Deferred Compensation – We hold investments in an irrevocable Rabbi Trust for our deferred compensation plan. These assets include both mutual fund investments and company-owned life insurance policies. Under the plan, participants designate investment options to serve as the basis for measurement of the notional value of their accounts. The fair values of the underlying securities of these funds are based on quoted market prices and are categorized as Level 1 in the fair value measurement hierarchy. The company-owned life insurance policies are valued at cash surrender value and are therefore categorized as Level 2 in the fair value measurement hierarchy. Industrial Development Revenue Bond – The fair value of our long-term debt depends primarily on the coupon rate of our industrial development revenue bonds. The carrying value of our long-term debt at June 30, 2016, approximates fair value based on the current coupon rate of the bonds, which is reset weekly, and is classified as a Level 2 input in the fair value measurement hierarchy as there is an active market for the trading of these industrial development revenue bonds. There were no transfers between levels within the fair value measurement hierarchy during the three months ended June 30, 2016. |
Income Taxes
Income Taxes | 9 Months Ended |
Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | I. INCOME TAXES The calculation of the effective tax rate is as follows (in thousands): Three months ended June 30, Nine months ended June 30, 2016 2015 2016 2015 Income before income taxes $ 6,058 $ 12,234 $ 10,846 $ 13,700 Income tax provision 1,164 5,185 844 10,573 Net income $ 4,894 $ 7,049 $ 10,002 $ 3,127 Effective tax rate 19 % 42 % 8 % 77 % Nine months ended June 30, 2016 2015 Statutory rate 35 % 35 % Foreign valuation allowance (11 ) 76 Research and development credit (12 ) (34 ) State income taxes, net of federal benefit 1 2 Rate differential and other (5 ) (2 ) Effective tax rate 8 % 77 % We recorded an income tax provision of $0.8 million for the nine months ended June 30, 2016, compared to an income tax provision of $10.6 million for the nine months ended June 30, 2015. The effective tax rate for the nine months ended June 30, 2016 was 8% compared to an effective tax rate of 77% for the nine months ended June 30, 2015. The effective tax rate for Fiscal 2016 was favorably impacted by the mix of income from our Canadian operations and the utilization of net operating loss carryforwards in Canada that have been fully reserved with a valuation allowance. Additionally, the effective tax rate for the nine months ended June 30, 2016 was favorably impacted by a $0.8 million discrete item recorded in the first quarter of Fiscal 2016 related to the retroactive reinstatement of the Research and Development Tax Credit (R&D Tax Credit) for the previously expired period from January 1, 2015 to September 30, 2015. On December 18, 2015, the “Protecting Americans from Tax Hikes Act of 2015” was enacted which retroactively reinstated and made permanent the R&D Tax Credit. In the first nine months of Fiscal 2015, our effective tax rate increased due to a $9.0 million valuation allowance recorded against our Canadian deferred tax assets during the second quarter of Fiscal 2015. Due to the historical Canadian losses, and the losses that we projected at the time of determination, we were required under the more-likely-than-not accounting standard to record a valuation allowance against the Canadian net deferred tax assets because we anticipated that we may not be able to realize the benefits of the net operating loss carryforwards and other deductible differences. This was partially offset by the release of a $4.1 million FIN 48 reserve related to the R&D Tax Credit upon closing an IRS audit. We recorded a $0.6 million discrete item for the nine months ended June 30, 2015 that was also related to the retroactive reinstatement of the R&D Tax Credit referred to above. |
Restructuring and Separation Co
Restructuring and Separation Costs | 9 Months Ended |
Jun. 30, 2016 | |
Restructuring And Related Activities [Abstract] | |
Restructuring and Separation Costs | J. RESTRUCTURING AND SEPARATION COSTS We have taken various actions during Fiscal 2016 in response to challenging conditions primarily in the oil and gas markets. In the third quarter of Fiscal 2016, we incurred approximately $0.4 million of separation costs as we continued to align our workforce with future production requirements. Additionally in the third quarter of Fiscal 2016, we incurred approximately $0.3 million of restructuring costs related to a leased Canadian facility that we exited in the third quarter of Fiscal 2015. In the third quarter of Fiscal 2015, we incurred $1.4 million of restructuring and separation costs. Of this, $0.8 million were restructuring costs related to the termination of a Canadian facility lease and the write-off of associated leasehold improvements. The remaining $0.6 million were separation costs due to additional headcount reductions in Canada and certain U.S. operations as we responded to market conditions at the time and aligned our workforce with future production requirements. For the nine months ended June 30, 2016, we incurred approximately $7.7 million in restructuring and separation costs, of which $3.8 million were separation costs related to the departure of our former Chief Executive Officer in December 2015. Of the $7.7 million in restructuring and separation costs recorded in Fiscal 2016, $5.3 million has been paid and the remaining $2.4 million will be paid over the next fifteen months. For the nine months ended June 30, 2015, we incurred $2.7 million in restructuring and separation costs. Of this, $1.9 million was from separation costs, and the remaining $0.8 million resulted from the termination of a Canadian facility lease and the write-off of associated leasehold improvements. |
Overview and Summary of Signi18
Overview and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Overview | Overview Powell Industries, Inc. (we, us, our, Powell or the Company) was incorporated in the state of Delaware in 2004 as a successor to a Nevada company incorporated in 1968. The Nevada corporation was the successor to a company founded by William E. Powell in 1947, which merged into the Company in 1977. Our major subsidiaries, all of which are wholly owned, include: Powell Electrical Systems, Inc.; Powell (UK) Limited; Powell Canada Inc. and Powell Industries International, B.V. We develop, design, manufacture and service custom-engineered equipment and systems for the distribution, control and monitoring of electrical energy. Headquartered in Houston, Texas, we serve the oil and gas refining, offshore oil and gas production, petrochemical, pipeline, terminal, mining and metals, light rail traction power, electric utility, pulp and paper and other industrial markets. |
Basis of Presentation | Basis of Presentation These unaudited condensed consolidated financial statements include the accounts of Powell and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP), have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations for the interim periods are not necessarily indicative of the results for the entire fiscal year. We believe that these financial statements contain all adjustments necessary so that they are not misleading. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Powell and its subsidiaries included in Powell’s Annual Report on Form 10-K for the year ended September 30, 2015, which was filed with the Securities and Exchange Commission (SEC) on December 2, 2015. References to Fiscal 2016, Fiscal 2015 and Fiscal 2014 used throughout this report shall mean our fiscal years ended September 30, 2016, 2015 and 2014, respectively. |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying footnotes as of the date they were prepared. The most significant estimates used in our financial statements affect revenue and cost recognition for contracts, allowance for doubtful accounts, provision for excess and obsolete inventory, goodwill and intangible assets, self-insurance, warranty accruals, liquidated damages and income taxes. The amounts recorded in the condensed consolidated financial statements require judgments that could change in future periods and actual amounts may differ from those recorded in the condensed consolidated financial statements. We base our estimates on historical experience and on various other assumptions, as well as the specific circumstances surrounding contingent liabilities, in evaluating the amount of liability that should be recorded. Additionally, the recognition of deferred tax assets, and our determination of whether the value of our long-lived assets has been impaired, requires estimates related to future income and other assumptions regarding timing and future profitability. Estimates may change as new events occur, additional information becomes available or operating conditions change. |
New Accounting Standards | New Accounting Standards In May 2014, the FASB issued a new standard on revenue recognition that supersedes previously issued revenue recognition guidance. This standard provides a five-step approach to be applied to all contracts with customers and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue (and the related cash flows) arising from customer contracts, significant judgments and changes in judgments used in applying the revenue model and the assets recognized from costs incurred to obtain or fulfill a contract. This guidance is now effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, which would be our fiscal year ending September 30, 2019. The standard permits the use of either the retrospective or cumulative effect transition method; therefore, we are evaluating the effect that this new guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting. In July 2015, the FASB issued a new topic on simplifying the measurement of inventory. The current standard is to measure inventory at lower of cost or market; where market could be replacement cost, net realizable value, or net realizable value less an approximate normal profit margin. This topic updates this guidance to measure inventory at the lower of cost and net realizable value; where net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This update is effective for annual reporting periods beginning after December 15, 2016, which would be our fiscal year ending September 30, 2018. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. This topic is not expected to have a material impact on our consolidated financial position or results of operations. In November 2015, the FASB issued an amendment to the topic regarding income taxes which requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in the statement of financial position. Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. Deferred tax liabilities and assets that are not related to an asset or liability for financial reporting are classified according to the expected reversal date of the temporary difference. To simplify the presentation of deferred income taxes, the amendments require that deferred income tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This amendment is effective for annual reporting periods beginning after December 15, 2016, which would be our fiscal year ending September 30, 2018. We have no plans for early adoption. The adoption of this guidance is not expected to our consolidated financial position or results of operations. In February 2016, the FASB issued a new topic on leases which requires lessees to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. This would be our fiscal year ending September 30, 2020. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial position or results of operations. In March 2016, the FASB issued new guidance on stock-based compensation. The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public companies, the amendments in this standard are effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. This would be our fiscal year ending September 30, 2018. The adoption of this guidance is not expected to have a material impact on our consolidated financial position, results of operations or cash flows. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Earnings Per Share [Abstract] | |
Computation of Basic and Diluted Earnings Per Share | The following table reconciles basic and diluted weighted average shares used in the computation of earnings per share (in thousands, except per share data): Three months ended June 30, Nine months ended June 30, 2016 2015 2016 2015 Numerator: Net income $ 4,894 $ 7,049 $ 10,002 $ 3,127 Denominator: Weighted average basic shares 11,397 11,802 11,387 11,953 Dilutive effect of restricted stock units 76 43 48 38 Weighted average diluted shares with assumed conversions 11,473 11,845 11,435 11,991 Net income per share: Basic $ 0.43 $ 0.60 $ 0.88 $ 0.26 Diluted $ 0.43 $ 0.60 $ 0.87 $ 0.26 |
Detail of Selected Balance Sh20
Detail of Selected Balance Sheet Accounts (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Disclosure Text Block Supplement [Abstract] | |
Activity in Allowance for Doubtful Accounts | Activity in our allowance for doubtful accounts receivable consisted of the following (in thousands): Three months ended June 30, Nine months ended June 30, 2016 2015 2016 2015 Balance at beginning of period $ 976 $ 1,881 $ 746 $ 1,577 Bad debt expense (recovery) (118 ) (438 ) 221 31 Uncollectible accounts written off, net of recoveries 16 (145 ) (98 ) (267 ) Change in foreign currency translation (3 ) 14 2 (29 ) Balance at end of period $ 871 $ 1,312 $ 871 $ 1,312 |
Components of Inventories | The components of inventories are summarized below (in thousands): June 30, 2016 September 30, 2015 Raw materials, parts and subassemblies, net $ 27,308 $ 31,807 Work-in-progress 830 1,084 Total inventories $ 28,138 $ 32,891 |
Cost and Estimated Earnings on Uncompleted Contracts | The components of costs and estimated earnings and related amounts billed on uncompleted contracts are summarized below (in thousands): June 30, 2016 September 30, 2015 Costs incurred on uncompleted contracts $ 1,048,831 $ 912,237 Estimated earnings 332,472 271,640 1,381,303 1,183,877 Less: Billings to date (1,344,298 ) (1,121,141 ) Net underbilled position $ 37,005 $ 62,736 Included in the accompanying balance sheets under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts – underbilled $ 80,026 $ 104,793 Billings in excess of costs and estimated earnings on uncompleted contracts – overbilled (43,021 ) (42,057 ) Net underbilled position $ 37,005 $ 62,736 |
Activity in Product Warranty Accrual | Activity in our product warranty accrual consisted of the following (in thousands): Three months ended June 30, Nine months ended June 30, 2016 2015 2016 2015 Balance at beginning of period $ 4,787 $ 4,375 $ 4,930 $ 4,557 Increase to warranty expense 1,174 1,033 3,332 2,100 Deduction for warranty charges (1,206 ) (766 ) (3,481 ) (1,794 ) Change in foreign currency translation (26 ) 81 (52 ) (140 ) Balance at end of period $ 4,729 $ 4,723 $ 4,729 $ 4,723 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets Subject to Amortization | Intangible assets balances, subject to amortization, at June 30, 2016 and September 30, 2015 consisted of the following (in thousands): June 30, 2016 September 30, 2015 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying Value Amortization Value Value Amortization Value Purchased technology $ 11,749 $ (10,604 ) $ 1,145 $ 11,749 $ (10,359 ) $ 1,390 Goodwill 1,003 — 1,003 1,003 — 1,003 Total $ 12,752 $ (10,604 ) $ 2,148 $ 12,752 $ (10,359 ) $ 2,393 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
Components of Long-Term Debt | Long-term debt consisted of the following (in thousands): June 30, 2016 September 30, Industrial development revenue bonds $ 2,400 $ 2,800 Less current portion (400 ) (400 ) Total long-term debt and capital lease obligations $ 2,000 $ 2,400 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Schedule of Restricted Stock Units Activity | RSU activity (number of shares) for the nine months ending June 30, 2016 is summarized below: Number of Weighted Restricted Average Stock Fair Value Units Per Share Outstanding at September 30, 2015 133,506 $ 50.26 Granted 136,800 29.80 Vested (1) (116,568 ) 33.10 Forfeited/cancelled (11,050 ) 30.27 Outstanding at June 30, 2016 142,688 $ 46.22 (1) Includes the accelerated vesting of 84,043 shares previously issued to our former Chief Executive Officer and other senior managers as part of their separation packages, see Note J. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Assets and Liabilities Measured on Recurring Basis | The following table summarizes the fair value of our assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2016 (in thousands): Fair Value Measurements at June 30, 2016 Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Fair Value at Identical Assets Inputs Inputs March 31, (Level 1) (Level 2) (Level 3) 2016 Assets: Cash equivalents $ 335 $ — $ — $ 335 Deferred compensation 1,609 3,972 — 5,581 Liabilities: Deferred compensation — 5,154 — 5,154 The following table summarizes the fair value of our assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2015 (in thousands): Fair Value Measurements at September 30, 2015 Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Fair Value at Identical Assets Inputs Inputs September 30, (Level 1) (Level 2) (Level 3) 2015 Assets: Cash equivalents $ 434 $ — $ — $ 434 Deferred compensation 1,879 2,904 — 4,783 Liabilities: Deferred compensation — 4,487 — 4,487 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of Effective Income Tax Rate | The calculation of the effective tax rate is as follows (in thousands): Three months ended June 30, Nine months ended June 30, 2016 2015 2016 2015 Income before income taxes $ 6,058 $ 12,234 $ 10,846 $ 13,700 Income tax provision 1,164 5,185 844 10,573 Net income $ 4,894 $ 7,049 $ 10,002 $ 3,127 Effective tax rate 19 % 42 % 8 % 77 % Nine months ended June 30, 2016 2015 Statutory rate 35 % 35 % Foreign valuation allowance (11 ) 76 Research and development credit (12 ) (34 ) State income taxes, net of federal benefit 1 2 Rate differential and other (5 ) (2 ) Effective tax rate 8 % 77 % |
Earnings Per Share (Computation
Earnings Per Share (Computation of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Numerator: | ||||
Net income | $ 4,894 | $ 7,049 | $ 10,002 | $ 3,127 |
Denominator: | ||||
Weighted average basic shares | 11,397 | 11,802 | 11,387 | 11,953 |
Dilutive effect of restricted stock units | 76 | 43 | 48 | 38 |
Weighted average diluted shares with assumed conversions | 11,473 | 11,845 | 11,435 | 11,991 |
Net income per share: | ||||
Basic | $ 0.43 | $ 0.60 | $ 0.88 | $ 0.26 |
Diluted | $ 0.43 | $ 0.60 | $ 0.87 | $ 0.26 |
Detail of Selected Balance Sh27
Detail of Selected Balance Sheet Accounts (Activity in Allowance for Doubtful Accounts) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Balance Sheet Related Disclosures [Abstract] | ||||
Balance at beginning of period | $ 976 | $ 1,881 | $ 746 | $ 1,577 |
Bad debt expense (recovery) | (118) | (438) | 221 | 31 |
Uncollectible accounts written off, net of recoveries | 16 | (145) | (98) | (267) |
Change in foreign currency translation | (3) | 14 | 2 | (29) |
Balance at end of period | $ 871 | $ 1,312 | $ 871 | $ 1,312 |
Detail of Selected Balance Sh28
Detail of Selected Balance Sheet Accounts (Components of Inventories) (Details) - USD ($) $ in Thousands | Jun. 30, 2016 | Sep. 30, 2015 |
Balance Sheet Related Disclosures [Abstract] | ||
Raw materials, parts and subassemblies, net | $ 27,308 | $ 31,807 |
Work-in-progress | 830 | 1,084 |
Total inventories | $ 28,138 | $ 32,891 |
Detail of Selected Balance Sh29
Detail of Selected Balance Sheet Accounts (Cost and Estimated Earnings on Uncompleted Contracts) (Details) - USD ($) $ in Thousands | Jun. 30, 2016 | Sep. 30, 2015 |
Balance Sheet Related Disclosures [Abstract] | ||
Costs incurred on uncompleted contracts | $ 1,048,831 | $ 912,237 |
Estimated earnings | 332,472 | 271,640 |
Total | 1,381,303 | 1,183,877 |
Less: Billings to date | (1,344,298) | (1,121,141) |
Net underbilled position | 37,005 | 62,736 |
Included in the accompanying balance sheets under the following captions: | ||
Costs and estimated earnings in excess of billings on uncompleted contracts – underbilled | 80,026 | 104,793 |
Billings in excess of costs and estimated earnings on uncompleted contracts – overbilled | (43,021) | (42,057) |
Net underbilled position | $ 37,005 | $ 62,736 |
Detail of Selected Balance Sh30
Detail of Selected Balance Sheet Accounts (Activity in Product Warranty Accrual) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Balance Sheet Related Disclosures [Abstract] | ||||
Balance at beginning of period | $ 4,787 | $ 4,375 | $ 4,930 | $ 4,557 |
Increase to warranty expense | 1,174 | 1,033 | 3,332 | 2,100 |
Deduction for warranty charges | (1,206) | (766) | (3,481) | (1,794) |
Change in foreign currency translation | (26) | 81 | (52) | (140) |
Balance at end of period | $ 4,729 | $ 4,723 | $ 4,729 | $ 4,723 |
Goodwill and Intangible Asset31
Goodwill and Intangible Assets (Schedule of Intangible Assets Subject to Amortization) (Details) - USD ($) $ in Thousands | Jun. 30, 2016 | Sep. 30, 2015 |
Finite Lived Intangible Assets [Line Items] | ||
Accumulated Amortization | $ (10,604) | $ (10,359) |
Goodwill Gross Carrying Value | 1,003 | 1,003 |
Goodwill Net Carrying Value | 1,003 | 1,003 |
Gross Carrying Value | 12,752 | 12,752 |
Net Carrying Value | 2,148 | 2,393 |
Purchased Technology | ||
Finite Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | 11,749 | 11,749 |
Accumulated Amortization | (10,604) | (10,359) |
Net Carrying Value | $ 1,145 | $ 1,390 |
Goodwill and Intangible Asset32
Goodwill and Intangible Assets (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2014 | Jun. 30, 2016 | Jun. 30, 2015 | Sep. 30, 2015 | Dec. 31, 2013 | |
Finite Lived Intangible Assets [Line Items] | |||||||
Amortization of intangible assets | $ 89 | $ 114 | $ 263 | $ 345 | |||
Cash received from amended supply agreement | 2,333 | 2,333 | |||||
Other current assets | 2,978 | $ 2,978 | $ 3,916 | ||||
Deferred credit amortization period | 4 years | ||||||
Gains in other income | 507 | $ 507 | $ 1,522 | 1,893 | |||
General Electric Company | |||||||
Finite Lived Intangible Assets [Line Items] | |||||||
Cash received from amended supply agreement | $ 10,000 | ||||||
Additional amount paid on execution of agreement | $ 7,000 | ||||||
Acquired finite-lived intangible assets, period | 3 years | ||||||
Other current assets | $ 2,300 | $ 2,300 | |||||
Deferred credit | $ 8,100 | ||||||
Supply Agreement | |||||||
Finite Lived Intangible Assets [Line Items] | |||||||
Useful life of intangible asset | 15 years | ||||||
Other Income | General Electric Company | |||||||
Finite Lived Intangible Assets [Line Items] | |||||||
Gains in other income | $ 1,500 | $ 1,500 |
Long-Term Debt (Components of L
Long-Term Debt (Components of Long-Term Debt) (Details) - USD ($) $ in Thousands | Jun. 30, 2016 | Sep. 30, 2015 |
Debt Disclosure [Abstract] | ||
Industrial development revenue bonds | $ 2,400 | $ 2,800 |
Less current portion | (400) | (400) |
Total long-term debt and capital lease obligations | $ 2,000 | $ 2,400 |
Long Term Debt (Narrative) (Det
Long Term Debt (Narrative) (Details) - USD ($) | 9 Months Ended | ||
Jun. 30, 2016 | Sep. 30, 2015 | Oct. 31, 2001 | |
U.S. Revolver | |||
Line Of Credit Facility [Line Items] | |||
Revolving credit facility | $ 75,000,000 | ||
Revolving credit interest rate | The interest rate for amounts outstanding under the Amended Credit Agreement for the U.S. Revolver is a floating rate based upon the higher of the Federal Funds Rate plus 0.5%, the bank’s prime rate, or the Eurocurrency rate plus 1.00%. | ||
Outstanding letters of credit | $ 26,800,000 | ||
Amount of credit facility remaining borrowing capacity | $ 48,200,000 | ||
Credit facility expiration date | Dec. 31, 2018 | ||
Revolving credit facility borrowings, outstanding amount | $ 0 | ||
Percentage of voting capital stock pledged as collateral | 100.00% | ||
Non-domestic subsidiaries of voting capital stock | 65.00% | ||
U.S. Revolver | Maximum | |||
Line Of Credit Facility [Line Items] | |||
Basis spread on variable rate | 1.75% | ||
U.S. Revolver | Federal Funds Rate | |||
Line Of Credit Facility [Line Items] | |||
Basis spread on variable rate | 0.50% | ||
U.S. Revolver | Eurocurrency Rate | |||
Line Of Credit Facility [Line Items] | |||
Basis spread on variable rate | 1.00% | ||
Canadian Revolver | |||
Line Of Credit Facility [Line Items] | |||
Revolving credit facility | $ 7,700,000 | ||
Outstanding letters of credit | 0 | ||
Amount of credit facility remaining borrowing capacity | $ 7,700,000 | ||
Credit facility expiration date | Mar. 31, 2018 | ||
Revolving credit facility borrowings, outstanding amount | $ 0 | ||
Canadian Revolver | Maximum | |||
Line Of Credit Facility [Line Items] | |||
Basis spread on variable rate | 1.75% | ||
Canadian Revolver | Minimum | |||
Line Of Credit Facility [Line Items] | |||
Basis spread on variable rate | 0.50% | ||
Industrial Development Revenue Bonds | |||
Line Of Credit Facility [Line Items] | |||
Borrowings | $ 8,000,000 | ||
Reimbursement agreement requires annual redemptions | $ 400,000 | ||
Interest rate | 0.58% |
Commitments and Contingencies (
Commitments and Contingencies (Narrative) (Details) | 9 Months Ended |
Jun. 30, 2016USD ($) | |
Guarantee Obligations [Line Items] | |
Additional bonding capacity | $ 517,000,000 |
Liquidated damages | 7,400,000 |
Probable liquidated damages | 1,700,000 |
Loss contingency, estimate of actual or projected loss | 1,700,000 |
Facility Agreement | Powell (UK) Limited | |
Guarantee Obligations [Line Items] | |
Guarantee liability | 3,000,000 |
Revolving credit facility | 9,400,000 |
Amount of credit facility remaining borrowing capacity | 6,400,000 |
Financial Standby Letter of Credit | |
Guarantee Obligations [Line Items] | |
Guarantee liability | 26,800,000 |
Surety Bonds | |
Guarantee Obligations [Line Items] | |
Guarantee liability | $ 233,000,000 |
Stock-Based Compensation (Narra
Stock-Based Compensation (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 9 Months Ended | |||
Apr. 30, 2016 | Feb. 29, 2016 | Jun. 30, 2016 | Jun. 30, 2015 | Sep. 30, 2015 | |
Restricted Stock Units (RSUs) | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Unvested restricted stock outstanding | 142,688 | 133,506 | |||
Compensation expense | $ 3.7 | $ 1.3 | |||
Restricted Stock Units (RSUs) | Time Based Restricted Stock Unit | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Actual amount of RSUs earned based on cumulative earnings | 60.00% | ||||
Vesting period | 3 years | ||||
Restricted Stock Units (RSUs) | Performance Based Restricted Stock Unit | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Vesting period | 3 years | ||||
Target RSUs granted range | 40.00% | ||||
Restricted Stock | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Compensation expense | $ 0.6 | $ 1 | |||
Restricted Stock | 2014 Non-Employee Director Equity Incentive Plan | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Vesting period | 2 years | ||||
Shares issued under the plan | 1,000 | 16,000 | |||
Shares issued, price per share | $ 29.38 | $ 25.63 | |||
Restricted Stock | 2014 Non-Employee Director Equity Incentive Plan | Vesting of First Anniversary | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Vesting percentage | 50.00% | ||||
Restricted Stock | 2014 Non-Employee Director Equity Incentive Plan | Vesting of Second Anniversary | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Vesting percentage | 50.00% |
Stock-Based Compensation (Sched
Stock-Based Compensation (Schedule of Restricted Stock Units Activity) (Details) - Restricted Stock Units (RSUs) | 9 Months Ended | |
Jun. 30, 2016$ / sharesshares | ||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Outstanding Beginning Balance, Number of Restricted Stock Units | shares | 133,506 | |
Granted, Number of Restricted Stock Units | shares | 136,800 | |
Vested, Number of Restricted Stock Units | shares | (116,568) | [1] |
Forfeited/cancelled, Number of Restricted Stock Units | shares | (11,050) | |
Outstanding Ending Balance, Number of Restricted Stock Units | shares | 142,688 | |
Outstanding Beginning Balance, Weighted Average Fair Value Per Share | $ / shares | $ 50.26 | |
Granted, Weighted Average Fair Value Per Share | $ / shares | 29.80 | |
Vested, Weighted Average Fair Value Per Share | $ / shares | 33.10 | [1] |
Forfeited/cancelled, Weighted Average Fair Value Per Share | $ / shares | 30.27 | |
Outstanding Ending Balance, Weighted Average Fair Value Per Share | $ / shares | $ 46.22 | |
[1] | Includes the accelerated vesting of 84,043 shares previously issued to our former Chief Executive Officer and other senior managers as part of their separation packages, see Note J. |
Stock-Based Compensation (Sch38
Stock-Based Compensation (Schedule of Restricted Stock Units Activity) (Parenthetical) (Details) | 9 Months Ended |
Jun. 30, 2016shares | |
Restricted Stock Units (RSUs) | Chief Executive Officer and Other Senior Managers | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Share-based compensation accelerated vesting shares | 84,043 |
Fair Value Measurements (Fair V
Fair Value Measurements (Fair Value of Assets and Liabilities Measured on Recurring Basis) (Details) - USD ($) $ in Thousands | Jun. 30, 2016 | Sep. 30, 2015 |
Assets: | ||
Cash equivalents | $ 335 | $ 434 |
Deferred compensation | 5,581 | 4,783 |
Liabilities: | ||
Deferred compensation | 5,154 | 4,487 |
Fair Value, Inputs, Level 1 | ||
Assets: | ||
Cash equivalents | 335 | 434 |
Deferred compensation | 1,609 | 1,879 |
Fair Value, Inputs, Level 2 | ||
Assets: | ||
Deferred compensation | 3,972 | 2,904 |
Liabilities: | ||
Deferred compensation | $ 5,154 | $ 4,487 |
Fair Value Measurements (Narrat
Fair Value Measurements (Narrative) (Details) | 3 Months Ended |
Jun. 30, 2016USD ($) | |
Fair Value Disclosures [Abstract] | |
Transfers between measurement levels | $ 0 |
Income Taxes (Schedule of Effec
Income Taxes (Schedule of Effective Tax Rate) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Income Tax Disclosure [Abstract] | ||||
Income before income taxes | $ 6,058 | $ 12,234 | $ 10,846 | $ 13,700 |
Income tax provision | 1,164 | 5,185 | 844 | 10,573 |
Net income | $ 4,894 | $ 7,049 | $ 10,002 | $ 3,127 |
Effective tax rate | 19.00% | 42.00% | 8.00% | 77.00% |
Income Taxes (Schedule of Eff42
Income Taxes (Schedule of Effective Income Tax Rate Reconciliation) (Details) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Income Tax Disclosure [Abstract] | ||||
Statutory rate | 35.00% | 35.00% | ||
Foreign valuation allowance | (11.00%) | 76.00% | ||
Research and development credit | (12.00%) | (34.00%) | ||
State income taxes, net of federal benefit | 1.00% | 2.00% | ||
Rate differential and other | (5.00%) | (2.00%) | ||
Effective tax rate | 19.00% | 42.00% | 8.00% | 77.00% |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Mar. 31, 2015 | |
Income Tax Contingency [Line Items] | |||||
Income tax provision | $ 1,164 | $ 5,185 | $ 844 | $ 10,573 | |
Effective tax rate | 19.00% | 42.00% | 8.00% | 77.00% | |
Retroactive tax benefit | $ 800 | $ 600 | |||
Deferred Tax Assets, Valuation Allowance | $ 9,000 | $ 9,000 | |||
Release of a FIN 48 reserve related to the federal research and development tax credit | $ 4,100 | ||||
R&D Tax Credit | |||||
Income Tax Contingency [Line Items] | |||||
Tax credit carryforward description | On December 18, 2015, the “Protecting Americans from Tax Hikes Act of 2015” was enacted which retroactively reinstated and made permanent the R&D Tax Credit |
Restructuring and Separation 44
Restructuring and Separation Costs (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Jun. 30, 2016 | Dec. 31, 2015 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Sep. 30, 2016 | |
Restructuring Cost And Reserve [Line Items] | ||||||
Separation costs | $ 400 | $ 1,900 | ||||
Restructuring costs related to termination of Canadian facility lease and write-off of associated leasehold improvements | 300 | $ 800 | 800 | |||
Restructuring and separation costs | 647 | $ 3,800 | 1,406 | $ 7,703 | 2,738 | |
Remaining restructuring costs additional headcount reductions | $ 600 | $ 600 | ||||
Restructuring and separation costs paid | 5,300 | |||||
Restructuring and separation costs payable over the next fifteen months | $ 2,400 | $ 2,400 | ||||
Scenario, Forecast | ||||||
Restructuring Cost And Reserve [Line Items] | ||||||
Restructuring and separation costs | $ 7,700 |