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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, 2001 or [ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to ---------------------- ---------------------- COMMISSION FILE NUMBER 0-6050 POWELL INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) NEVADA 88-0106100 - --------------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8550 Mosley Drive, Houston, Texas 77075-1180 - ---------------------------------------- ------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (713) 944-6900 -------------- Indicate by "X" whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Common Stock, par value $.01 per share; 10,422,730 shares outstanding as of June 7, 2001.

2 Powell Industries, Inc. and Subsidiaries Part I - Financial Information Item 1. Condensed Consolidated Financial Statements........................................3-9 Item 2. Management's Discussion and Analysis of Financial Condition and Quarterly Results of Operations..........................................................10-12 Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................................................13 Part II - Other Information and Signatures........................................................14-15 2

3 POWELL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA) APRIL 30, OCTOBER 31, 2001 2000 --------- ----------- (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents ...................................................... $ 1,093 $ 2,114 Accounts receivable, less allowance for doubtful accounts of $876 and $505, respectively ................................................ 57,048 54,205 Costs and estimated earnings in excess of billings ............................. 28,651 24,292 Inventories .................................................................... 21,900 17,523 Deferred income taxes and income taxes receivable .............................. 67 1,012 Prepaid expenses and other current assets ...................................... 1,898 827 --------- --------- Total Current Assets ....................................................... 110,657 99,973 Property, plant and equipment, net .................................................. 31,729 31,383 Deferred income taxes ............................................................... 1,565 1,419 Other assets ........................................................................ 5,110 5,151 --------- --------- Total Assets ............................................................... $ 149,061 $ 137,926 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt ................................................................ $ 3,000 $ -- Current maturities of long-term debt ........................................... 1,429 1,429 Accounts and income taxes payable .............................................. 15,671 16,373 Accrued salaries, bonuses and commissions ...................................... 6,927 6,736 Accrued product warranty ....................................................... 1,615 1,316 Other accrued expenses ......................................................... 5,529 5,296 Billings in excess of costs and estimated earnings ............................. 8,866 5,315 --------- --------- Total Current Liabilities .................................................. 43,037 36,465 Long-term debt, net of current maturities ........................................... 5,000 5,714 Deferred compensation expense ....................................................... 1,312 1,241 Postretirement benefits liability ................................................... 415 419 Commitments and contingencies Stockholders' Equity: Preferred stock, par value $.01; 5,000 shares authorized; none issued Common stock, par value $.01; 30,000 shares authorized; 10,883 and 10,821 shares issued ....................................................... 108 108 Additional paid-in capital ..................................................... 7,217 6,830 Accumulated other comprehensive income (loss): fair value of interest rate swap .................................................................. (40) -- Treasury stock, 530 shares and 505 shares respectively, at cost ................ (4,936) (4,669) Deferred compensation-ESOP ..................................................... (2,482) (2,607) Retained earnings .............................................................. 99,430 94,425 --------- --------- Total Stockholders' Equity ................................................. 99,297 94,087 --------- --------- Total Liabilities and Stockholders' Equity ................................. $ 149,061 $ 137,926 ========= ========= The accompanying notes are an integral part of these condensed consolidated financial statements. 3

4 POWELL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) THREE MONTHS ENDED APRIL 30, 2001 2000 -------- -------- Revenues ..................................................................... $ 68,719 $ 56,409 Cost of goods sold ........................................................... 54,493 46,905 -------- -------- Gross profit ................................................................. 14,226 9,504 Selling, general and administrative expenses ................................. 9,261 7,373 -------- -------- Earnings before interest and income taxes .................................... 4,965 2,131 Interest expense (income), net ............................................... 91 (14) -------- -------- Earnings before income taxes ................................................. 4,874 2,145 Income tax provision ......................................................... 1,753 716 -------- -------- Net earnings ................................................................. $ 3,121 $ 1,429 ======== ======== Net earnings per common share: Basic ..................................................................... $ 0.30 $ 0.14 Diluted ................................................................... 0.30 0.14 Weighted average number of common shares outstanding ......................... 10,343 10,447 ======== ======== Weighted average number of common and common equivalent shares outstanding ... 10,475 10,542 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements. 4

5 POWELL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) SIX MONTHS ENDED APRIL 30, 2001 2000 --------- --------- Revenues ..................................................................... $ 123,870 $ 105,900 Cost of goods sold ........................................................... 98,430 87,354 --------- --------- Gross profit ................................................................. 25,440 18,546 Selling, general and administrative expenses ................................. 17,614 14,500 --------- --------- Earnings before interest and income taxes .................................... 7,826 4,046 Interest expense (income), net ............................................... 78 (71) --------- --------- Earnings before income taxes ................................................. 7,748 4,117 Income tax provision ......................................................... 2,743 1,384 --------- --------- Net earnings ................................................................. $ 5,005 $ 2,733 ========= ========= Net earnings per common share: Basic ..................................................................... $ 0.48 $ 0.26 Diluted ................................................................... 0.48 0.26 Weighted average number of common shares outstanding ......................... 10,330 10,554 ========= ========= Weighted average number of common and common equivalent shares outstanding ... 10,479 10,648 ========= ========= The accompanying notes are an integral part of these condensed consolidated financial statements. 5

6 POWELL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) SIX MONTHS ENDED APRIL 30, 2001 2000 --------- -------- Operating Activities: Net earnings ............................................................ $ 5,005 $ 2,733 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization ....................................... 2,204 2,266 (Gain)/loss on disposition of assets ................................ 7 -- Deferred income tax provision (benefit) ............................. (214) 582 Change in Postretirement benefits liability ......................... (4) (85) Changes in operating assets and liabilities: Accounts receivable, net ....................................... (2,843) (3,084) Costs and estimated earnings in excess of billings ............. (4,360) (2,424) Inventories .................................................... (4,376) (1,100) Prepaid expenses and other current assets ...................... (58) (516) Other assets ................................................... (61) (304) Accounts payable and income taxes payable or receivable ........ (702) 1,206 Accrued liabilities ............................................ 683 166 Billings in excess of costs and estimated earnings ............. 3,551 610 Deferred compensation expense .................................. 196 180 -------- -------- Net cash provided by (used in) operating activities ........ (972) 230 Investing Activities: Purchases of property, plant and equipment .............................. (2,456) (1,473) -------- -------- Net cash used in investing activities ...................... (2,456) (1,473) -------- -------- Financing Activities: Borrowings of short-term debt ........................................... 11,750 -- Repayments of short-term debt ........................................... (8,750) -- Repayments of long-term debt ............................................ (714) (1,714) Payments to reacquire common stock ...................................... (267) (3,424) Exercise of stock options ............................................... 388 421 -------- -------- Net cash provided by (used in) financing activities ........ 2,407 (4,717) -------- -------- Net decrease in cash and cash equivalents .................................... (1,021) (5,960) Cash and cash equivalents at beginning of period ............................. 2,114 10,646 -------- -------- Cash and cash equivalents at end of period ................................... $ 1,093 $ 4,686 ======== ======== Supplemental disclosure of cash flow information (in thousands): Cash paid during the period for: Interest ............................................................ $ 336 $ 298 Income taxes ........................................................ $ 1,600 $ 1,250 The accompanying notes are an integral part of these condensed consolidated financial statements. 6

7 Part I Item 1 POWELL INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A. BASIS OF PRESENTATION The accompanying unaudited condensed 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 cash flows. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's October 31, 2000 annual report on Form 10-K. In December 1999, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 101 (SAB101). The Staff has deferred the implementation date of SAB101 until no later than the fourth quarter of fiscal years beginning after December 15, 1999. SAB101 reflects the basic principles of revenue recognition in existing accounting principles generally accepted in the United States. SAB101 does not supersede any existing authoritative literature. The Company expects to implement SAB101 in the quarter beginning August 1, 2001. Management has reviewed the staff's views presented in SAB101 and does not believe the adoption of SAB101 will have a material impact on the financial position or results of operations of the Company. B. INVENTORY April 30, October 31, 2001 2000 --------- ----------- (unaudited) The components of inventory are summarized below (in thousands): Raw materials, parts and subassemblies ......................... $13,937 $11,162 Work-in-process ................................................ 7,963 6,361 ------- ------- Total inventories .............................................. $21,900 $17,523 ======= ======= C. PROPERTY, PLANT AND EQUIPMENT April 30, October 31, 2001 2000 --------- ----------- (unaudited) Property, plant and equipment is summarized below (in thousands): Land .......................................................... $ 3,193 $ 3,193 Buildings and improvements .................................... 30,823 30,640 Machinery and equipment ....................................... 30,453 29,001 Furniture & fixtures .......................................... 3,829 3,690 Construction in process ....................................... 1,762 1,141 -------- -------- 70,060 67,665 Less-accumulated depreciation ................................. (38,331) (36,282) -------- -------- Total property, plant and equipment, net ...................... $ 31,729 $ 31,383 ======== ======== 7

8 D. PRODUCTION CONTRACTS For contracts for which the percentage-of-completion method is used, costs and estimated earnings in excess of billings are shown as a current asset and billings in excess of costs and estimated earnings are shown as a current liability. The components of these contracts are as follows (in thousands): April 30, October 31, 2001 2000 --------- ----------- (unaudited) Costs and estimated earnings ................................. $ 166,691 $ 120,641 Progress billings ............................................ (138,040) (96,349) --------- --------- Total costs and estimated earnings in excess of billings ..... $ 28,651 $ 24,292 ========= ========= Progress billings ............................................ $ 99,504 $ 91,766 Costs and estimated earnings ................................. (90,638) (86,451) --------- --------- Total billings in excess of costs and estimated earnings ..... $ 8,866 $ 5,315 ========= ========= E. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data): Three Months Ended April 30, Six Months Ended April 30, 2001 2000 2001 2000 ---------- ---------- ---------- ---------- (unaudited) (unaudited) Numerator: Numerator for basic and diluted earnings per share-earnings from operations available to common stockholders .................... $ 3,121 $ 1,429 $ 5,005 $ 2,733 ======= ======= ======= ======= Denominator: Denominator for basic earnings per share- weighted average shares .............................. 10,343 10,447 10,330 10,554 Effect of dilutive securities-employee stock options .. 132 95 149 94 ------- ------- ------- ------- Denominator for diluted earnings per share- adjusted weighted-average shares with assumed conversions ......................................... 10,475 10,542 10,479 10,648 ======= ======= ======= ======= Basic earnings per share .................................. $ 0.30 $ 0.14 $ 0.48 $ 0.26 ======= ======= ======= ======= Diluted earnings per share ................................ $ 0.30 $ 0.14 $ 0.48 $ 0.26 ======= ======= ======= ======= 8

9 F. COMPREHENSIVE INCOME The Company adopted SFAS No. 133 as amended on November 1, 2000. Accordingly, the Company recorded an asset of $192,000 representing the fair value of its interest rate swap agreement which is used by the Company in the management of interest rate exposure. The Company also realized this amount as a component of comprehensive income. The Company's comprehensive income, which encompasses net income and the change in fair value of hedge instruments, is as follows (in thousands): Three Months Six Months Ended April 30, Ended April 30, 2001 2001 --------------- --------------- Net income .......................................... 3,121 $ 5,005 Initial adoption of SFAS 133 ........................ 192 192 Change in fair value of hedge instrument ............ (56) (232) ------- ------- Comprehensive income(loss) .......................... $ 3,257 $ 4,965 ======= ======= G. BUSINESS SEGMENTS The Company has three reportable segments: 1. Switchgear and related equipment and service (Switchgear) for distribution, control and management of electrical energy, 2. Bus duct products (Bus Duct) for distribution of electric power, and 3. Process Control Systems which consists principally of instrumentation, computer control, communications and data management systems for the control of dynamic processes. The tables below reflect certain information relating to the Company's operations by segment. Substantially all revenues represent sales to unaffiliated customers. The accounting policies of the segments are the same as those described in the summary of significant accounting policies as discussed in the Company's annual report on Form 10-K for the year ended October 31, 2000. For purposes of this presentation, all general corporate expenses have been allocated among operating segments based primarily on revenues. In addition, the corporate assets are mainly cash and cash equivalents transferred to the corporate office from the segments. Interest charges and credits to the segments from the corporate office are based on use of funds. The required disclosures for the business segments are set forth below (in thousands): Three Months Ended April 30, Six Months Ended April 30, 2001 2000 2001 2000 ------- -------- -------- --------- (unaudited) (unaudited) Revenues: Switchgear ................................................ $50,831 $ 41,313 $ 90,354 $ 76,698 Bus Duct .................................................. 10,842 7,948 20,004 14,775 Process Control Systems ................................... 7,046 7,148 13,512 14,427 ------- -------- -------- --------- Total Revenues ............................................... $68,719 $ 56,409 $123,870 $ 105,900 ======= ======== ======== ========= Earnings from operations before income taxes: Switchgear ................................................ $ 3,004 $ 1,406 $ 4,152 $ 2,218 Bus Duct .................................................. 1,748 1,472 3,381 2,471 Process Control Systems ................................... 122 (733) 215 (572) ------- -------- -------- --------- Total earnings from operations before income taxes ........... $ 4,874 $ 2,145 $ 7,748 $ 4,117 ======= ======== ======== ========= April 30, October 31, 2001 2000 --------- ----------- (unaudited) Assets Switchgear ................................................ $112,376 $100,071 Bus Duct .................................................. 16,551 15,608 Process Control Systems ................................... 16,389 14,331 Corporate ................................................. 3,745 7,916 -------- -------- Total Assets ................................................. $149,061 $137,926 ======== ======== 9

10 Part I Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND QUARTERLY RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, as a percentage of revenues, certain items from the Condensed Consolidated Statements of Operations. April 30, 2001 April 30, 2000 --------------------------- ---------------------------- Three Months Six Months Three Months Six Months Ended Ended Ended Ended ------------ ---------- ------------ ---------- Revenues 100.0% 100.0% 100.0% 100.0% Gross profit 20.7 20.5 16.8 17.5 Selling, general and administrative Expenses 13.5 14.2 13.1 13.7 Interest expense, net 0.1 0.1 -- -- Earnings from operations before income taxes 7.1 6.3 3.8 3.9 Income tax provision 2.6 2.3 1.3 1.3 Net earnings 4.5 4.0 2.5 2.6 Revenues for the quarter ended April 30, 2001 were up 21.8 percent to $68,719,000 from $56,409,000 in the second quarter of last year. Revenues for the six months ended April 30, 2001, were up 17.0 percent to $123,870,000 from $105,900,000 for the same six-month period last year. The increase in revenues was in the Switchgear products and Bus duct segments due to increasing demand for our products and services from the domestic electric power production and distribution and the oil and gas production markets. Gross profit, as a percentage of revenues, was 20.7 percent and 16.8 percent for the quarter ended April 30, 2001 and 2000, respectively. Gross profit, as a percentage of revenues, was 20.5 percent and 17.5 percent for the six months ended April 30, 2001 and 2000, respectively. The higher percentages in 2001 were mainly due to increased volume and higher prices. The second quarter of 2000 was also adversely effected by recognition of additional costs to complete on two major contracts in the Process Control segment. Selling, general and administrative expenses as a percentage of revenues were 13.5 percent and 13.1 percent for the quarter ended April 30, 2001 and 2000, respectively. Selling, general and administrative expenses as a percent of revenues were 14.2 percent and 13.7 percent for the six months ended April 30, 2001 and 2000, respectively. The higher percentages related to the quarter were due to increases in wages, insurance and payroll related expenses. Interest expense (income), net The following schedule shows the amounts for interest expense and income: April 30, 2001 April 30, 2000 Three Months Six Months Three Months Six Months Ended Ended Ended Ended ------------ ---------- ------------ ---------- Expense............................. $ 180 $ 286 $ 141 $ 298 Income.............................. (89) (208) (155) (369) ------ ----- ----- ----- Net................................. $ 91 $ 78 $ (14) $ (71) ====== ===== ===== ===== Interest expense in fiscal year 2001 and 2000 was primarily related to bank notes payable at rates between 5.2 percent and 8.0 percent. Sources of the interest income were related to notes receivable and short-term investment of available funds at various rates between 2.3 percent and 7.0 percent. Income tax provision The effective tax rate on earnings was 36.0 percent and 33.4 percent for the quarters ended April 30, 2001 and 2000, respectively. The effective tax rate on earnings was 35.4 percent and 33.6 percent for the six-months ended April 30, 2001 and 10

11 2000, respectively. The increases were primarily due to lower estimated foreign sales corporation credits because of lower export sales compared to the prior year. The increase was also due to higher graduated federal and state tax rates based upon higher pre-tax earnings. Net earnings were $3,121,000 or $0.30 per diluted share for the second quarter of fiscal 2001, an increase from $1,429,000 or $0.14 per diluted share for the same period last year. Net earnings were $5,005,000 or $0.48 per diluted share for the first six months of fiscal 2001, an increase from $2,733,000 or $0.26 per diluted share for the same period last year. The increase was mainly due to higher volume and gross margins in the Switchgear and Bus Duct segments. Backlog at April 30, 2001 was $187,364,000, compared to $182,247,000 and $155,850,000 at January 31, 2001, and at October 31, 2000, respectively, an increase of $5,117,000 for the three months and $31,514,000 for the six months. The increase in backlog was primarily in the Switchgear products segment. The increase in bookings is mainly from the domestic electric power production and distribution market. April January October 2001 2001 2000 ------------ ------------ ------------- Switchgear.......................... $133,327,000 $125,928,000 $ 98,472,000 Bus Duct............................ 26,120,000 28,064,000 27,986,000 Process Control..................... 27,917,000 28,255,000 29,392,000 ------------ ------------ ------------- Total $187,364,000 $182,247,000 $155,850,000 ============ ============ ============ LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- In September 1998, the Company amended a revolving line of credit agreement with a major domestic bank. The amendment provided for a $10,000,000 term loan and a revolving line of credit of $20,000,000. In December 1999 the revolving line of credit was amended to reduce the line to $15,000,000 and to extend the maturity date to February 2002. The term of the loan was five years with nineteen equal quarterly payments of $357,143 and a final payment of the remaining principal balance on September 30, 2003. The effective interest rate, after including an interest rate swap negotiated with the trust company of the same domestic bank, is 5.2 percent per annum plus a .75 to 1.25 percent fee based on financial covenants. Funds provided by the revolving line of credit for the six months ending April 30, 2001 were approximately $3,000,000, which included borrowing of approximately $11,750,000 offset by repayments of approximately $8,750,000. 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, 2001 2000 ----------- ----------- Working Capital $67,660,000 $63,508,000 Current Ratio 2.57 to 1 2.75 to 1 Long-term Debt to Capitalization .1 to 1 .1 to 1 Management believes that the Company continues to maintain a strong liquidity position. The $4,152,000 increase in working capital during the six months ending April 30, 2001 reflects the Company's increasing level of manufacturing activity as measured by higher revenues and increasing backlog. The Company is working to reduce inventory levels relative to the level of manufacturing activity, and to minimize its investment in other working capital assets through timely invoicing and collection and negotiation of prompt payment terms with customers. Cash and cash equivalents decreased by $1,020 during the three months ended April 30, 2001. The primary use of cash during this period was to fund working capital increases. The increase in net borrowings for the quarter was the result of borrowings on the revolving line of credit. The Company had a stock repurchase plan under which the Company was authorized to spend up to $5,000,000 for purchases of its common stock. Pursuant to this plan, the Company repurchased 530,100 shares of its common stock at an aggregate cost of approximately $4,936,000 through January 31, 2001, and concurrently the plan was completed. Repurchased shares are added to treasury stock and are available for general corporate purposes including issuance under the Company's employee stock option plan. On April 30, 2001, the Board of Directors approved the Company's planned plant expansion in the Chicago operations of the Bus Duct segment. The Company expects to invest a total of approximately $7.0 million during fiscal 2001 and 2002. 11

12 The Company also expects to request in the third quarter of fiscal 2001 approval from the Board of Directors for additional capital expenditures in fiscal 2001 and 2002 in excess of the amount so far approved for the Chicago expansion. The Company believes the current credit facilities coupled with the Company's additional borrowing capacity along with cash generated from operations will be sufficient to fund the Company's current operations, internal growth and possible acquisitions. The previous discussion should be read in conjunction with the consolidated financial statements. FORWARD-LOOKING STATEMENT - ------------------------- Any forward-looking statements in the preceding paragraphs of the Form 10-Q 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 uncertainty in that actual results may differ materially from those projected in the forward-looking statements. These risks and uncertainties include, without limitation, difficulties which could arise in obtaining materials or components in sufficient quantities as needed for the Company's manufacturing and assembly operations, unforeseen political or economic problems in countries to which the Company exports its products in relation to the Company's principal competitors, any significant decrease in the Company's backlog of orders, any material employee relations problems, or any material litigation or claims made against the Company, as well as general market conditions, competition and pricing. 12

13 Part 1 Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company's financial instruments include cash and equivalents, accounts receivable, accounts payable, debt obligations and an interest rate swap. The book value of cash and cash equivalents, accounts receivable and accounts payable are considered to be representative of fair value because of the short maturity of these instruments. The Company believes that the carrying value of its borrowings under the credit agreement approximate their fair value as they bear interest at rates indexed to the Bank's IBOR. The Company's accounts receivable are not concentrated in one customer or one industry and are not viewed as an unusual credit risk. The Company had recorded an allowance for doubtful accounts of $876, 000 at April 30, 2001 and $505,000 at October 31, 2000, respectively. The interest rate swap agreement, which is used by the Company in the management of interest rate exposure, is accounted for on the accrual basis. Income and expense resulting from this agreement is recorded in the same category as interest expense accrued on the related term note. Amounts to be paid or received under the interest rate swap agreement are recognized as adjustments to interest expense in the periods in which they occur. At April 30, 2001 the Company had $6,429,000 in borrowings subject to the interest rate swap at a rate of 5.20 percent through September 30, 2003. The 5.20 percent rate is currently approximately 0.3 percent above market and should represent approximately $5,000 of increased interest expense for fiscal year 2001 assuming the current market interest rates do not change. The approximate fair value of the swap agreement at April 30, 2001 is ($40,163). The fair value is the estimated amount the Company would pay to terminate the contract. The agreements require that the Company pay the counterparty at the above fixed swap rate and require the counterparty to pay the Company interest at the 90 day LIBOR rate. The closing 90 day LIBOR rate on April 30, 2001 was 4.9 percent. 13

14 Part II OTHER INFORMATION ITEM 1. Legal Proceedings The Company is a party to disputes arising in the ordinary course of business. Management does not believe that the ultimate outcome of these disputes will materially affect the financial position of results of operations of the Company. ITEM 2. Changes in Securities and Use of Proceeds None ITEM 3. Defaults Upon Senior Securities Not applicable ITEM 4. Submission of Matters to a Vote of Security Holders At the annual meeting of stockholders of the Company held on March 16, 2001, Thomas W. Powell, Lawrence R. Tanner and Joseph L. Becherer were elected as directors of the Company with terms ending in 2004. The directors continuing in office after the meeting are Bonnie L. Powell, Steven W. Seale, Jr., Eugene L. Butler, and Robert C. Tranchon. As to each nominee for director, the number of votes cast for or withheld, as well as the number of abstentions and broker non-votes, were as follows: Nominee Votes Cast for Votes Cast Against Votes Withheld Abstentions Non-Votes ------- -------------- ------------------ -------------- ----------- --------- Thomas W. Powell 8,377,483 495,151 -- 0 1,457,275 Lawrence R. Tanner 8,377,983 494,151 -- 0 1,457,775 Joseph L. Becher 8,377,983 494,151 -- 0 1,457,775 At the annual meeting, the stockholders also approved and ratified the actions of the directors and officers of the Company during fiscal 2000 as the acts of the Company. The number of votes cast for, against, or withheld, as well as the number of abstentions and broker non-votes, with respect to such matter was as follows: Votes Cast For Votes Cast Against Abstentions Non-Votes -------------- ------------------ ----------- --------- 8,872,634 -- -- 1,457,275 Also at the annual meeting, the stockholders approved an amendment to the 1992 Powell Industries, Inc. Stock Option Plan increasing the number of shares authorized for issuance under the Plan from 1,500,000 to 2,100,000. The number of votes cast for or against, as well as the number broker non-votes and abstentions, with respect to such matter was as follows: Votes Cast For Votes Cast Against Abstentions Non-Votes -------------- ------------------ ----------- --------- 7,728,192 -- -- 2,601,717 ITEM 5. Other Information None ITEM 6. Exhibits and Reports on Form 8-K a. Exhibits 10.1 1992 Powell Industries, Inc. Stock Option Plan-the cover of the 1992 Powell Industries, Inc. Stock Option Plan has been noted to reflect the increase in the number of shares authorized for issuance under the Plan from 1,500,000 to 2,100,000, which increase was approved by the shareholders of the Company at the 2001 Annual Meeting of Stockholders. b. Reports on Form 8-K None 14

15 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 13, 2001 /s/ THOMAS W. POWELL - ------------- ------------------------------------ Date Thomas W. Powell President and Chief Executive Officer (Principal Executive and Financial Officer) June 13, 2001 /s/ ROBERT B. GREGORY - ------------- ------------------------------------ Date Robert B. Gregory Corporate Controller (Principal Accounting Officer) 15