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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): November 8, 2011
POWELL INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 001-12488 | 88-0106100 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) | (I.R.S. Employer Identification Number) |
||
| 8550 Mosley Drive Houston, Texas |
77075-1180 | |||
| (Address of Principal Executive Offices) | (Zip Code) |
(713) 944-6900
(Registrant’s Telephone Number, Including Area Code)
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17CFR230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Action (17CFR240.14D-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR240.13e-4(c))
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Item 2.02 Results of Operations and Financial Condition.
The Company issued a press release on November 8, 2011 (a copy of which is furnished hereto as
Exhibit 99.1 to this Form 8-K and incorporated herein by reference) disclosing information relating
to the restatement of the financial statements included in its Quarterly Reports on Form 10-Q for
the quarters ended March 31 and June 30, 2011 as more fully described under Item 4.02 below.
This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information
in this Item 2.02 is not incorporated by reference into any filings of the Company made under the
Securities Act of 1933, as amended, whether made before or after the date of this Current Report on
Form 8-K, regardless of any general incorporation language in the filing, unless specifically
stated so therein.
Item 2.06 Material Impairments.
In connection with the Company’s ongoing procedures relating to its fiscal year end review, the
Company’s management, on November 8, 2011 concluded that the Company will record an impairment of
the remaining intangible assets recorded in connection with the acquisition of Powell Canada
totaling $7.2 million, or $0.61 per diluted share. This intangible asset impairment is the result
of continued losses from Powell Canada, which have reduced and delayed the Company’s projections
for revenues and cash flow going forward. We do not expect that any of the impairment charge will
result in future cash expenditures. We expect to complete our intangible asset impairment testing
procedures in time to incorporate the related results into our Form 10-K to be filed for the year
ended September 30, 2011.
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or
Completed Interim Review.
On November 8, 2011, the Audit Committee of the board of directors (the “Audit Committee”) of
Powell Industries, Inc. (the “Company”), based on consultation with management, concluded that the
Company’s unaudited interim consolidated financial statements for the quarters ended March 31 and
June 30, 2011, each as previously filed with the Securities and Exchange Commission (“SEC”), should
no longer be relied upon because of accounting errors that occurred at Powell Canada relating to
the inaccurate recording of customer change orders, and an erroneous journal entry recorded in
accounts payable, incorrect close-out of costs on certain jobs and the application of an incorrect manufacturing overhead rate, all of which
caused earnings to be overstated in the respective quarters.
The Company will restate the unaudited interim consolidated financial statements identified above
to include such presentation and file such restated consolidated financial statements with the SEC
in amendments to the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31 and
June 30, 2011 filed with the SEC on May 4 and August 8, 2011, respectively (the “10-Q Amendments”).
To date, we've identified the aformentioned errors and have reflected
such errors in our "As Adjusted (Estimated)" table below. However, our review is ongoing and the amounts included in the "As Adjusted (Estimated)"
are preliminary. The cumulative effect in net income and earnings per share
as shown in the following table (in thousands, except per share data):
| Three Months Ended | Six Months Ended | |||||||
| March 31, 2011 | March 31, 2011 | |||||||
As reported: |
||||||||
Net Income attributable to Powell Industries, Inc. |
$ | 2,499 | $ | 4,931 | ||||
Earnings per share, diluted |
$ | 0.21 | $ | 0.42 | ||||
As adjusted (Estimated): |
||||||||
Net Income attributable to Powell Industries, Inc. |
$ | 1,198 | $ | 3,630 | ||||
Earnings per share, diluted |
$ | 0.10 | $ | 0.31 | ||||
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| Three Months Ended | Nine Months Ended | |||||||
| June 30, 2011 | June 30, 2011 | |||||||
As reported: |
||||||||
Net Income attributable to Powell Industries, Inc. |
$ | 1,707 | $ | 6,638 | ||||
Earnings per share, diluted |
$ | 0.14 | $ | 0.56 | ||||
As adjusted (Estimated): |
||||||||
Net Income attributable to Powell Industries, Inc. |
$ | 297 | $ | 3,927 | ||||
Earnings per share, diluted |
$ | 0.02 | $ | 0.33 | ||||
The Audit Committee and management have discussed the matters set forth herein with
PricewaterhouseCoopers LLP, the Company’s registered independent public accounting firm which was
also the Company’s independent public accounting firm for the periods impacted by this restatement
as described above.
In connection with the 10-Q Amendments, the Company’s management has identified material weaknesses
in the Company’s internal control over financial reporting and disclosure controls and procedures
as of the date the unaudited interim consolidated financial statements identified above were
originally filed. The Company will report these material weaknesses in the 10-Q Amendments.
Item 9.01 — Financial Statements and Exhibits.
(d) — Exhibits
| Exhibit | ||
| Number | Description | |
99.1
|
Press Release dated November 8, 2011 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
| POWELL INDUSTRIES, INC. |
||||
| Date: November 8, 2011 | By: | /s/ Don R. Madison | ||
| Don R. Madison | ||||
| Executive Vice President Chief Financial and Administrative Officer (Principal Financial Officer) |
||||
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Exhibit 99.1
|
Press Release |
| Contacts: | Don R. Madison, CFO | |||
| Powell Industries, Inc. | ||||
FOR IMMEDIATE RELEASE
|
713-947-4422 | |||
| Ken Dennard / ksdennard@drg-l.com | ||||
| Karen Roan / kcroan@drg-l.com | ||||
| DRG&L / 713-529-6600 |
POWELL INDUSTRIES TO RESTATE SECOND
AND THIRD QUARTER EARNINGS
AND THIRD QUARTER EARNINGS
Company finds accounting errors pertaining to its Canadian operations
Updates fiscal 2011 full year guidance
Updates fiscal 2011 full year guidance
HOUSTON, TX — NOVEMBER 8, 2011 — Powell Industries, Inc. (NASDAQ: POWL) has concluded that its
previously issued consolidated financial statements for the second and third quarters of fiscal
2011 contain certain accounting errors originating from its Canadian operations. Accordingly, such
financial statements should no longer be relied upon. The Company will restate its consolidated
financial statements for the second and third quarters of fiscal 2011through the filing of
amendments to the previously filed Forms 10-Q.
The accounting errors occurred at Powell Canada as a result of inaccurate recording of
customer change orders, an erroneous journal entry recorded in accounts payable, incorrect
close-out of costs on certain jobs and the application of an incorrect manufacturing overhead rate,
which overstated earnings in the second and third quarters. These errors indicate material
weaknesses in internal controls over financial reporting. The Company is in the process of
analyzing the control deficiencies and developing remediation plans. The cumulative effect of
these issues will cause a reduction in previously reported net income for the nine months ended
June 30, 2011 of approximately $2.7 million, or $0.23 per diluted share.
The Company has taken the following steps to strengthen its financial reporting and project
management for its Canadian operations: 1) the Company has hired a new Controller for Powell
Canada and that individual is currently in place, 2) members of the accounting and operations staff
have received additional training, and 3) the Company has hired a full time specialist on-site in
Canada to evaluate and make recommendations for improvement in the estimating, operations, and
project management functions.
In addition, in the fourth quarter of fiscal 2011, the Company will record an impairment of
the remaining intangible assets recorded in connection with the acquisition of Powell Canada,
totaling $7.2 million, or $0.61 per diluted share. This non-cash impairment charge is the result
of continued losses from Powell Canada, which have delayed and reduced the Company’s
projections for revenues and cash flow going forward.
Tom Powell, President and Chief Executive Officer, stated, “Powell Canada is strategic to our
ability to serve our customers, many of whom have major projects planned for the western Canadian
oil sands. While we are disappointed with current results, we believe that oil and gas activity in
Canada will be important to the future of energy development and reiterate our long-term commitment
to the Canadian market.”
Lastly, the Company’s operations have experienced continued margin pressure, which will
negatively impact its fourth quarter results. This is the result of project backlog that continues
to experience schedule delays due to customer timing, as well as general market price pressures.
As previously announced, the Company also recorded a non-recurring charge associated with the
departure of the former President and Chief Executive Officer during the fourth quarter of fiscal
2011.
As a result of the cumulative impact of these items, the Company is updating its previous
guidance for fiscal year 2011 and now expects full year fiscal 2011 revenues to be approximately
$560 million and full year fiscal 2011 net loss to range between ($0.20) and ($0.25) per share.
As set forth in the Non-GAAP Forecasted Earnings Reconciliation table included below,
excluding the above mentioned non-cash charge for the impairment of intangible assets and the
non-recurring charge, earnings for the full year would be expected to range between $0.51 and $0.56
per diluted share.
CONFERENCE CALL
Powell Industries has scheduled a conference call to discuss these issues for Wednesday,
November 9, 2011 at 9:00 a.m. eastern time / 8:00 a.m. central time. To participate in the
conference call, dial 480-629-9867 at least 10 minutes before the call begins and ask for the
Powell Industries conference call. A replay of the call will be available approximately two hours
after the live broadcast ends and will be accessible until November 16, 2011. To access the
replay, dial 303-590-3030 using a passcode of 4485830#.
Investors, analysts and the general public will also have the opportunity to listen to the
conference call over the Internet by visiting http://www.powellind.com. To listen to the live call
on the web, please visit the website at least fifteen minutes before the call begins to register,
download and install any necessary audio software. For those who cannot listen to the live
webcast, an archive will be available shortly after the call and will remain available for
approximately 90 days at http://www.powellind.com.
Powell Industries, Inc., headquartered in Houston, engineers packaged solutions and systems for the
control, distribution and management of electrical energy and other dynamic processes. Powell
markets include large industrial customers such as utilities, oil and gas producers, refineries,
petrochemical plants, pulp and paper producers, mining operations, commuter railways and other
vehicular transportation facilities. For more information, please visit www.powellind.com.
Any forward-looking statements in the preceding paragraphs of this release are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that such forward-looking statements involve risks and uncertainties in that actual
results may differ materially from those projected in the forward-looking statements. In the
course of operations, we are subject to certain risk factors, competition and competitive
pressures, sensitivity to general economic and industrial conditions, international political and
economic risks, availability and price of raw materials and execution of business strategy. For
further information, please refer to the Company’s filings with the Securities and Exchange
Commission, copies of which are available from the Company without charge.
POWELL INDUSTRIES, INC. & SUBSIDIARIES
NON-GAAP FORECASTED EARNINGS RECONCILIATION
NON-GAAP FORECASTED EARNINGS RECONCILIATION
In millions, except per share data
| Year ended | ||||||||
| September 30, 2011 | ||||||||
| High | Low | |||||||
| Estimate | Estimate | |||||||
Net loss |
$ | (2.4 | ) | $ | (2.9 | ) | ||
Non-recurring charge, net of income taxes |
1.8 | 1.8 | ||||||
Impairment of intangible assets, net of income taxes |
7.2 | 7.2 | ||||||
Adjusted net income |
$ | 6.6 | $ | 6.1 | ||||
Net loss per diluted share |
$ | (0.20 | ) | $ | (0.25 | ) | ||
Non-recurring charge per diluted share |
0.15 | 0.15 | ||||||
Impairment of intangible assets per diluted share |
0.61 | 0.61 | ||||||
Adjusted net income per diluted share |
$ | 0.56 | $ | 0.51 | ||||
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