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
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COMMISSION FILE NUMBER 0-6050
POWELL INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
NEVADA 88-0106100
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8550 Mosley Drive, Houston, Texas 77075-1180
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 944-6900
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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
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Common Stock, par value $.01 per share; 10,567,704 shares outstanding on April
30, 1996.
2
POWELL INDUSTRIES, INC.
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
3
Powell Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share Data)
April 30, October 31,
ASSETS 1996 1995
(unaudited)
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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
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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
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Total Assets....................................................... $109,739 $96,882
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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
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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)
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Total Stockholders' Equity......................................... 62,345 57,657
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Total Liabilities and Stockholders' Equity......................... $109,739 $96,882
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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)
Three Months Ended April 30,
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1996 1995
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Revenues................................................................ $53,521 $41,398
Cost of goods sold...................................................... 40,955 32,459
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Gross profit............................................................ 12,566 8,939
Selling, general and administrative expenses............................ 8,404 6,616
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Earnings from operations................................................ 4,162 2,323
Interest, net........................................................... 82 145
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Earnings before income taxes............................................ 4,080 2,178
Income tax provision.................................................... 1,437 720
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Net earnings............................................................ 2,643 1,458
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Net earnings per common and common equivalent share..................... $ 0.25 $ 0.14
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Weighted average number of shares outstanding........................... 10,753,695 10,534,371
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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)
Six Months Ended April 30,
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1996 1995
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Revenues................................................................ $103,090 $ 77,987
Cost of goods sold...................................................... 80,210 61,457
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Gross profit............................................................ 22,880 16,530
Selling, general and administrative expenses............................ 16,060 12,952
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Earnings from operations................................................ 6,820 3,578
Interest, net........................................................... 125 268
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Earnings before income taxes............................................ 6,695 3,310
Income tax provision.................................................... 2,369 1,049
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Net earnings............................................................ $ 4,326 $ 2,261
Net earnings per common and common equivalent share..................... $ 0.40 $ 0.21
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Weighted average number of shares outstanding........................... 10,745,361 10,526,037
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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)
Six Months Ended April 30,
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1996 1995
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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
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Net cash provided by (used in) in operating activities.................................... 1,204 (5,268)
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Investing Activities:
Purchases of property, plant, and equipment............................................. (1,366) (1,248)
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Net cash used in investing activities..................................................... (1,366) (1,248)
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Financing Activities:
Exercise of stock grants................................................................ 257 156
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Net cash provided by financing activities................................................. 257 156
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Net increase (decrease) in cash and cash equivalents...................................... 95 (6,360)
Cash and cash equivalents at beginning of period.......................................... 3,035 7,598
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Cash and cash equivalents at end of period................................................ $3,130 $1,238
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The accompanying notes are an integral part of these consolidated financial
statements.
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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
April 30, October 31,
1996 1995
(unaudited)
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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
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Total inventories......................................................................... $19,917 $20,114
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C. PROPERTY, PLANT AND EQUIPMENT
April 30, October 31,
1996 1995
(unaudited)
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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
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46,751 45,507
Less-accumulated depreciation............................................................. (30,833) (29,236)
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Total property, plant and equipment, net.................................................. $15,918 $16,271
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8
Part I
Item 1
D. Other Financial Information (unaudited)
Six months ended
April 30,
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1996 1995
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Supplemental disclosure of cash flow information (in thousands):
Cash paid during the period for:
Interest............................................................................. $ 357 $ 501
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Income taxes......................................................................... $ 1,500 $ 1,620
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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):
April 30, October 31,
1996 1995
(unaudited)
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Costs and estimated earnings......................................................... $40,937 $50,282
Progress billings.................................................................... (29,302) (35,557)
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Total costs and estimated earnings in excess of billings............................. $11,635 $14,725
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Progress billings.................................................................... $65,380 $29,682
Costs and estimated earnings......................................................... (55,972) (24,119)
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Total billings in excess of costs and estimated earnings............................. $ 9,408 $ 5,563
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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:
April 30, October 31, April 30,
1996 1995 1995
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
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.
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10
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of revenues, certain items from
the Consolidated Statements of Operations.
April 30,
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1996 1995
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three months six months three months six months
ended ended ended ended
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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
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.
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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
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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
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Date Thomas W. Powell
President and Chief Executive Officer
(Principal Executive Officer)
June 07, 1996 /s/ J. F. Ahart
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Date J.F. Ahart
Vice President,
Secretary-Treasurer
Chief Financial Officer
(Principal Financial and Accounting
Officer)
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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