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United States securities and exchange commission logo
March 17, 2023
Michael W. Metcalf
Chief Financial Officer
Powell Industries, Inc.
8550 Mosley Road
Houston, TX 77075-1180
Re: Powell Industries,
Inc.
Form 10-K for the
Fiscal Year Ended September 30, 2022
Filed December 6,
2022
Form 8-K, Filed
January 31, 2023
File No. 001-12488
Dear Michael W. Metcalf:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the Fiscal Year Ended September 30, 2022
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations, page 20
1. We note from your
disclosure in Note E that a significant amount of your revenue is
generated from
long-term fixed price contracts that is generally recognized over time
utilizing the
cost-to-cost method. Under the cost-to-cost method, the extent of progress
towards completion is
measured based on the ratio of costs incurred to date to the total
estimated costs at
completion of the performance obligation. We also note your
disclosure that for the
years ended September 30, 2022 and 2021, your operating results
were positively
impacted by $ 11.3 million and $ 12.5 million, respectively, as a result of
changes in contract
estimates related to projects in progress at the beginning of the
respective period.
Please revise your results of operations disclosure in MD&A to
separately quantify
gross favorable and gross unfavorable changes in estimates material to
Michael W. Metcalf
FirstName LastNameMichael W. Metcalf
Powell Industries, Inc.
Comapany
March NamePowell Industries, Inc.
17, 2023
March2 17, 2023 Page 2
Page
FirstName LastName
your results, accompanied by an appropriate level of analysis.
2. We note your disclosure that gross profit increased by 13%, or $10.0
million, to $85.0
million in fiscal 2022, but despite the increase in revenues, gross
profit as a percentage of
revenues remained flat to the prior fiscal year at 16% in fiscal 2022
due to increased costs
impacting older projects in your backlog that were subject to
inflationary pressures on raw
materials and components, with little or no recourse from the customer
to reprice the
project. We also note that favorable project execution, volume
leverage and product mix,
including fast track service and replacement projects across your
service division, all
helped to offset the negative inflationary pressure carried by the
older projects in the
backlog. In future filings where you describe two or more factors that
contributed to a
material change in a financial statement line item between periods,
especially when there
are offsetting amounts, please quantify each material factor that
contributed to the overall
change in that line item. Refer to Item 303 of Regulation S-K and
Section III.D of SEC
Release No. 33-6835.
Consolidated Statements of Operations, page 33
3. We note from your disclosure in Note E on page 43 that in addition to
manufacturing
custom-engineered products and systems, you recognize revenue from
contracts to
provide field service inspection, installation, commissioning,
modification, and repair
services, as well as retrofit and retrofill components for existing
systems. We also note
from some of the discussion during the year end 2022 earnings call,
that this service
revenue was a significant contributor to your business during 2022.
Please tell us the
amount of revenue related to services as compared to products for the
year ended
September 30, 2022. If the amount is greater than 10% of the
consolidated revenue
amount, please revise future filings to separately present revenue and
cost of goods sold
for products and services. See requirement in Rule 5-03(b)(1) and
(b)(2) of Regulation S-
X.
Form 8-K Furnished January 31, 2023
Exhibit 99.1 Earnings Release, page 1
4. We note that your Key Highlights section at the top of your earnings
release includes the
disclosure of your book-to-bill ratio. Please disclose how you compute
the book-to-
bill ratio and explain the significance of this ratio in understanding
your business. As part
of your disclosure, please define "new orders" and disclose any
limitations on the new
orders amounts, such as any pertinent termination clauses or
contingencies, that may
ultimately impact the realizations of such amounts as revenues. Refer
to the metrics
guidance set forth in SEC Release No. 33-10751.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
Michael W. Metcalf
Powell Industries, Inc.
March 17, 2023
Page 3
You may contact Beverly Singleton at (202) 551-3328 or Claire Erlanger at
(202) 551-
3301 with any questions.
FirstName LastNameMichael W. Metcalf Sincerely,
Comapany NamePowell Industries, Inc.
Division of
Corporation Finance
March 17, 2023 Page 3 Office of
Manufacturing
FirstName LastName