What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-12-09 compared with 2019-12-05 · 267 added, 152 removed, 668 unchanged (39% of the section changed)

Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

Index to Consolidated Financial Statements Page

Financial Statements:

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Notes B and M to the consolidated financial statements, the Company changed the manner in which it accounts for leases in the year ended September 30, 2020.

Basis for Opinions

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A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Short-term investments 18,705 6,042

Restricted cash

Accounts receivable, less allowance for doubtful accounts of $ 510 and $ 301

69,957 112,093

Contract assets 50,995 55,374

Inventories 28,968 29,202

Income taxes receivable 467 233

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Property, plant and equipment, net 114,372 120,812

Restricted cash

Operating lease assets, net 5,217 —

Goodwill and intangible assets, net 1,161 1,337

Deferred income taxes 3,644 5,117

Other assets 12,226 11,577

Total Assets $ 472,278 $ 467,411

LIABILITIES AND STOCKHOLDERS' EQUITY

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Accrued product warranty 2,771 2,946

Current operating lease liabilities 2,352 —

Income taxes payable 1,861 913

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Deferred compensation (Note J) 6,710 6,447

Long-term operating lease liabilities 3,434 —

Other long-term liabilities 2,161 3,115

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Treasury stock, 806,018 shares at cost

( 24,999 ) ( 24,999 )

Accumulated other comprehensive loss ( 24,513 ) ( 24,547 )

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Year Ended September 30,

2020 2019 2018

Revenues $ 518,499 $ 517,180 $ 448,716

Cost of goods sold 423,924 430,204 383,361

Gross profit 94,575 86,976 65,355

Selling, general and administrative expenses 67,662 69,950 66,768

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Insurance proceeds — ( 950 ) —

Restructuring, separation and other expenses, net

Restructuring and other, net 1,400 11 787

Operating income (loss) 19,071 11,461 ( 9,122 )

Other income (Note F)

Other income ( 506 ) — ( 747 )

Interest expense 228 230 207

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Earnings (loss) per share:

Basic $ 1.43 $ 0.85 $ ( 0.62 )

Diluted $ 1.42 $ 0.85 $ ( 0.62 )

Weighted average shares:

Basic 11,624 11,571 11,507

Diluted 11,693 11,634 11,507

Dividends per share $ 1.04 $ 1.04 $ 1.04

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Year Ended September 30,

2020 2019 2018

Net income (loss) $ 16,660 $ 9,890 $ ( 7,152 )

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(In thousands)

Treasury Stock

Common Stock Additional

Capital Retained

Earnings Treasury Stock Accumulated

Comprehensive

Income/(Loss)

Shares Amount Shares Amount Total

Balance, September 30, 2017 12,234 $ 122 $ 54,329 $ 310,598 ( 806 ) $ ( 24,999 ) $ ( 18,754 ) $ 321,296

Net loss — — — ( 7,152 ) — — — ( 7,152 )

Foreign currency translation adjustments — — — — — — ( 3,100 ) ( 3,100 )

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Postretirement benefit adjustment, net of tax of $ 20

— — — — — — 75 75

Balance, September 30, 2018 12,281 $ 123 $ 56,769 $ 291,530 ( 806 ) $ ( 24,999 ) $ ( 21,779 ) $ 301,644

Net income — — — 9,890 — — — 9,890

Foreign currency translation adjustments — — — — — — ( 2,743 ) ( 2,743 )

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Postretirement benefit adjustment, net of tax of $ 7

— — — — — — ( 25 ) ( 25 )

Balance, September 30, 2019 12,373 $ 124 $ 59,153 $ 289,422 ( 806 ) $ ( 24,999 ) $ ( 24,547 ) $ 299,153

Net income — — — 16,660 — — — 16,660

Foreign currency translation adjustments — — — — — — 60 60

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Postretirement benefit adjustment, net of tax of $ 7

— — — — — — ( 26 ) ( 26 )

Balance, September 30, 2020 12,422 $ 124 $ 61,998 $ 294,016 ( 806 ) $ ( 24,999 ) $ ( 24,513 ) $ 306,626

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Year Ended September 30,

2020 2019 2018

Operating Activities:

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Stock-based compensation 3,474 3,839 3,152

Bad debt expense (recovery)

Bad debt expense 258 233 111

Deferred income taxes 1,473 820 ( 2,170 )

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Gain on cash surrender value of life insurance ( 506 ) — ( 240 )

Cash received from amended supply agreement

Changes in operating assets and liabilities:

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Contract assets and liabilities, net 12,546 55,333 ( 14,117 )

Inventories 304 ( 7,989 ) ( 3,023 )

Income taxes 720 6,681 996

Prepaid expenses and other current assets 662 ( 2,626 ) ( 237 )

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Accrued liabilities 465 1,419 8,859

Other, net ( 860 ) ( 230 ) 1,906

Net cash provided by (used in) operating activities 72,394 68,759 ( 28,543 )

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We develop, design, manufacture and service custom-engineered equipment and systems which (1) distribute, control and monitor the flow of electrical energy and (2) provide protection to motors, transformers and other electrically powered equipment.

Our principal products include integrated power control room substations (PCRs®), custom-engineered modules, electrical houses (E-Houses), traditional and arc-resistant distribution switchgear and control gear, medium-voltage circuit breakers, monitoring and control communications systems, motor control centers and bus duct systems.

These products are designed for application voltages ranging from 480 volts to 38,000 volts and are used in oil and gas refining, onshore and offshore oil and gas production, petrochemical, liquid natural gas terminals, pipeline, terminal, mining and metals, light rail traction power, electric utility, pulp and paper and other heavy industrial markets.

These products are designed for application voltages ranging from 480 volts to 38,000 volts and are used in oil and gas refining, onshore and offshore oil and gas production, petrochemical, liquefied natural gas (LNG) terminals, pipeline, terminal, mining and metals, light rail traction power, electric utility, pulp and paper and other heavy industrial markets.

Our product scope includes designs tested to meet both U.S.

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References to Fiscal 2020, Fiscal 2019 and Fiscal 2018 used throughout these Notes to Consolidated Financial Statements relate to our fiscal years ended September 30, 2020, 2019 and 2018, respectively.

Impact of the COVID-19 Pandemic and Oil and Gas Commodity Market Volatility on Powell

The spread of COVID-19 has created significant uncertainty and economic disruption across the world during the second half of Fiscal 2020 and continuing into Fiscal 2021.

This pandemic has negatively impacted energy demand, which in turn has resulted in considerable volatility across the oil and gas commodity markets.

As a result, some of our industrial customers are deferring or suspending their planned capital expenditures.

Certain of our customers have asked that we delay our manufacturing on their projects as their operations have been negatively impacted by this pandemic and the reduced oil and gas demand.

We continue to work with and review the contracts with our key suppliers who have been impacted by this pandemic to ensure that we are able to meet our customer commitments.

From an operational standpoint, although our facilities are located in areas that have been or continue to be subject to stay-at-home orders, we have not closed any of our facilities for an extended amount of time and have continued to operate as an "essential business" under these orders across all of our locations.

We continue to take the necessary steps to ensure the safety of our employees, customers and vendors.

These steps include, among others, promoting increased social distancing practices and enhanced cleaning efforts in our offices and facilities.

We are also using technology across our operations to further enhance social distancing and improve safety.

These increased safety precautions may have an adverse impact on our efficiency and productivity going forward.

As a result of the circumstances noted above, we anticipate that a decrease in commercial activity will negatively impact our business, results of operations and cash flows going forward.

We have and may need to continue to adjust our workforce and labor costs to correspond to the reduced customer demand.

We will take prudent measures to maintain our strong liquidity and cash position, which may include reducing our capital expenditures and research and development costs, as well as reducing or eliminating future dividend payments.

However, the extent to which the COVID-19 pandemic specifically will impact our business will depend on numerous factors that are hard to predict, some of which include:

the duration, spread and severity of the pandemic;

governmental actions in response to the pandemic, including travel restrictions and quarantine or related governmental orders;

any closures of our offices and facilities or those of our suppliers as a result of the pandemic, and how quickly and to what extent normal economic and operating conditions can resume.

Therefore, the magnitude of the impact on our business, results of operations and cash flows is not currently known.

Summary of Significant Accounting Policies

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Short-term Investments - Short-term investments include time deposits with original maturities of three months or more.

Restricted Cash - Restricted cash included cash and cash equivalents that were unavailable for withdrawal or usage for general obligations and represented a pledged cash collateral balance that was required under our prior credit agreement and was held in an interest-bearing savings account.

See Note G for further discussion on restricted cash.

Supplemental Disclosures of Cash Flow Information (in thousands):

Year Ended September 30,

2020 2019 2018

Cash paid (received) during the period for:

Interest paid, net of interest income

Income taxes paid, net of refunds

Interest received, net of interest expense $ ( 753 ) $ ( 873 ) $ ( 676 )

Income taxes paid (received), net of refunds 1,770 ( 5,219 ) 354

Non-cash capital expenditures 264 1,248 129

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Future changes in our customers’ operating performance and cash flows, or in general economic conditions, could have an impact on their ability to fully pay these amounts, which could have a material impact on our operating results.

In most cases, receivables are not collateralized.

In most cases,

receivables are not collateralized.

However, we utilize letters of credit to secure payment on projects when possible.

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Contract Balances

Contract assets, previously referred to as costs and estimated earnings in excess of billings on uncompleted contracts are recorded when revenues are recognized in excess of amounts billed for fixed-price contracts as determined by the billing milestone schedule.

The timing of revenue recognition, billings and cash collections affects accounts receivable, contract assets and contract liabilities in our Consolidated Balance Sheets.

Contract assets are recorded when revenues are recognized in excess of amounts billed for fixed-price contracts as determined by the billing milestone schedule.

Contract assets are transferred to accounts receivable when billing milestones have been met, or we have an unconditional right to payment.

Contract liabilities, previously referred to as billings in excess of costs and estimated earnings on uncompleted contracts, typically represent advance payments from contractual billing milestones and billings in excess of revenue recognized.

Contract liabilities typically represent advance payments from contractual billing milestones and billings in excess of revenue recognized.

It is unusual to have advanced milestone payments with a term greater than one year, which could represent a financing component on the contract.

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Developing our provision for income taxes requires significant judgment and expertise in federal, international and state income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and, if necessary, any valuation allowances that may be required for deferred tax assets.

In assessing the extent to which net deferred tax assets may be realized, we consider whether it is more likely than not that some portion or all of the net deferred tax assets may not be realized.

In assessing the extent to

which net deferred tax assets may be realized, we consider whether it is more likely than not that some portion or all of the net deferred tax assets may not be realized.

The ultimate realization of net deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible.

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Contract costs include all direct materials, labor and indirect costs related to contract performance, which may include indirect labor, supplies, tools, repairs and depreciation costs.

We also have contracts to provide value-added services such as field service inspection, installation, commissioning, modification and repair, as well as retrofit and retrofill components for existing systems.

As a practical expedient, if the service contract terms give us the right to invoice the customer for an amount that corresponds directly with the value of our performance completed to date (i.e., a service contract in which we bill a fixed amount for each hour of service provided), then we recognize revenue over

time in each reporting period corresponding to the amount with which we have the right to invoice.

We enter into contracts to provide value-added services such as field service inspection, installation, commissioning, modification and repair, as well as retrofit and retrofill components for existing systems.

Our performance obligations are satisfied as the work progresses.

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Warranty Costs

We provide for estimated warranty costs with the recognition of revenue based upon historical rates applicable to individual product lines.

In addition, specific provisions are made when the costs of such warranties are expected to exceed accruals.

Estimated costs of warranties are accrued based on historical warranty claim costs in relation to current revenues.

In addition, specific provisions are made when product failures are projected outside historical experience.

Our standard terms and conditions of sale include a warranty for parts and service for the earlier of 18 months from the date of shipment or 12 months from the date of energization, whichever occurs first.

Actual results could differ from our estimate.

Occasionally projects require warranty terms that are longer than our standard terms due to the nature of the project.

Extended warranty terms may be negotiated and included in our contracts.

We use past experience and historical claims to determine the estimated liability.

Actual results could differ from our estimate.

The allocated revenue associated with the extended warranty is deferred and recorded as a contract liability and recognized over the extended warranty period.

Research and Development Expense

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Compensation expense is recognized over the period during which the recipient is required to provide service in exchange for the awards, typically the vesting period.

Excess income tax benefits related to share-based compensation expense is recognized as income tax expense or benefit in the Consolidated Statement of Operations.

Excess income tax benefits related to share-based compensation expense are recognized as income tax expense or benefit in the Consolidated Statement of Operations.

Cash paid when directly withholding shares on an employee's behalf for tax withholding purposes is classified as a financing activity.

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New Accounting Standards

In May 2014, the Financial Accounting Standards Board (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.

Effective October 1, 2018, we adopted this standard using a modified retrospective basis.

After evaluating the impact of this new standard on contracts outstanding as of October 1, 2018, we determined that no adjustment to retained earnings was necessary.

See Note E for further discussion of revenue.

In February 2016, the FASB issued a new topic on leases that 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 topic is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years which will be our fiscal year ending September 30, 2020.

In Fiscal 2018, we acquired new lease software designed to assist in our compliance with this new topic.

We anticipate recording right-of-use assets and lease liabilities in similar amounts of less than $10 million on our Consolidated Balance Sheets as of October 1, 2019, and do not anticipate a material adjustment to retained earnings will be necessary.

We do not expect this topic to have a significant effect on our Consolidated Statements of Operations or Statements of Cash Flows.

In February 2016, the Financial Accounting Standards Board (FASB) issued a new topic on leases that requires lessees to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than twelve months.

Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

Effective October 1, 2019, we adopted the new lease accounting standard and recorded operating lease assets and operating lease liabilities of approximately $ 7.0 million and determined that no adjustment to retained earnings was necessary.

Financial results for reporting periods after October 1, 2019 are reported under the new standard;

however financial results for prior periods were not adjusted and will continue to be presented in accordance with the previous standard.

Upon adoption, we elected a package of practical expedients which, among other things, allowed for the historical classification of our existing leases to carry forward.

Additionally, we elected to separate non-lease components for our real estate and IT infrastructure asset classes.

All other asset classes account for both lease and non-lease components in the operating lease asset and operating lease liability calculations.

See Note M for further discussion of leases.

In June 2016, the FASB issued a new topic on measurement of credit losses.

The topic introduces an impairment model known as the current expected credit loss (CECL) model that is based on an expected loss methodology rather than an incurred loss methodology for financial instruments.

Under the new topic, an entity recognizes as an allowance its estimate of expected credit losses with the intention of improving financial reporting by requiring timelier recognition of such losses.

Enhanced disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management's estimate of expected credit losses and the reasons for those changes, will be required upon adoption.

We are still evaluating the impact this new topic will have on our consolidated financial statements which will be adopted in Fiscal 2021.

In November 2016, the FASB issued a new topic on the statement of cash flows that changes the presentation of restricted cash and cash equivalents on the statement of cash flows.

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We adopted this topic in Fiscal 2019, and our Consolidated Cash Flow Statements for all periods reflect this presentation.

In May 2017, the FASB issued a new topic on modification accounting with regards to stock-based compensation.

This new topic clarifies when a change to the terms or conditions of a share-based payment award should be accounted for as a modification.

An entity should account for the effects of a modification unless the fair value, vesting conditions and classification, as an equity instrument or a liability instrument, of the modified award are the same before and after a change to the terms or conditions of the share-based payment award.

We adopted this topic in Fiscal 2019, and it has not had a material impact on our Consolidated Balance Sheets or Statements of Operations.

Earnings Per Share

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Year Ended September 30,

2020 2019 2018

Net income (loss) $ 16,660 $ 9,890 $ ( 7,152 )

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Earnings (loss) per share:

For the years ended September 30, 2018 and 2017, we incurred net losses;

Basic $ 1.43 $ 0.85 $ ( 0.62 )

Diluted $ 1.42 $ 0.85 $ ( 0.62 )

For the year ended September 30, 2018, we incurred a net loss;

therefore, all potential common shares were deemed to be anti-dilutive.

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Property, plant and equipment are summarized below (in thousands):

September 30,

Buildings and improvements

Machinery and equipment

Furniture and fixtures

September 30, Range of

2020 2019 Asset Lives

Land $ 22,008 $ 21,963 —

Buildings and improvements 122,529 122,404 3 - 39 Years

Machinery and equipment 108,439 106,137 3 - 15 Years

Furniture and fixtures 3,611 3,611 3 - 10 Years

Construction in process 1,530 2,118 —

$ 258,117 $ 256,233

Accumulated depreciation ( 143,745 ) ( 135,421 )

Total property, plant and equipment, net $ 114,372 $ 120,812

There were no assets under capital lease as of September 30, 2019 or September 30, 2018 .

There were no assets under finance lease as of September 30, 2020 or September 30, 2019.

Depreciation expense was $ 10.4 million, $ 11.9 million and $ 12.7 million for fiscal years 2020, 2019, and 2018, respectively.

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Revenue Recognition

The majority of our revenues are generated from the manufacturing of custom-engineered products and systems under long-term fixed-price contracts under which we agree to manufacture various products such as traditional and arc-resistant distribution switchgear and control gear, medium-voltage circuit breakers, monitoring and control communications systems, motor control centers and bus duct systems.

Our revenues are primarily generated from the manufacturing of custom-engineered products and systems under long-term fixed-price contracts under which we agree to manufacture various products such as traditional and arc-resistant distribution switchgear and control gear, medium-voltage circuit breakers, monitoring and control communications systems, motor control centers, switches and bus duct systems.

These products may be sold separately as an engineered solution, but are typically integrated into custom-built enclosures which we also build.

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As a practical expedient, if the service contract terms give us the right to invoice the customer for an amount that corresponds directly with the value of our

performance completed to date (i.e., a service contract in which we bill a fixed amount for each hour of service provided), then we recognize revenue over time in each reporting period corresponding to the amount that we have the right to invoice.

Our performance obligations are satisfied as the work progresses.

Revenues from our custom-engineered products and value-added services transferred to customers over time accounted for approximately 94% of revenues for the year ended September 30, 2019 .

Revenues from our custom-engineered products and value-added services transferred to customers over time accounted for approximately 95 % and 94 % of revenues for the years ended September 30, 2020 and September 30, 2019, respectively.

We also have sales orders for spare parts and replacement circuit breakers for switchgear that are obsolete or that are no longer produced by the original manufacturer.

Revenues from these sales orders are recognized at the time we fulfill our performance obligation to the customer, which is typically upon shipment and represented approximately 6% of revenues for the year ended September 30, 2019 .

Revenues from these sales orders are recognized at the time we fulfill our performance obligation to the customer, which is typically upon shipment and represented approximately 5 % and 6 % of revenues for the years ended September 30, 2020 and September 30, 2019, respectively.

Additionally, some contracts may contain a cancellation clause that could limit the amount of revenue we are able to recognize over time.

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Contract Balances

The timing of revenue recognition, billings and cash collections affects accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) and billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) in our Consolidated Balance Sheet.

Contract assets, previously referred to as costs and estimated earnings in excess of billings on uncompleted contracts, are recorded when revenues are recognized in excess of amounts billed for fixed-price contracts as determined by the billing milestone schedule.

The timing of revenue recognition, billings and cash collections affects accounts receivable, contract assets and contract liabilities in our Consolidated Balance Sheets.

Contract assets are recorded when revenues are recognized in excess of amounts billed for fixed-price contracts as determined by the billing milestone schedule.

Contract assets are transferred to accounts receivable when billing milestones have been met, or we have an unconditional right to payment.

Contract liabilities typically represent advance payments from contractual billing milestones and billings in excess of revenue recognized.

It is unusual to have advanced milestone payments with a term greater than one year, which could represent a financing component on the contract.

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Contract liabilities ( 79,445 ) ( 71,464 )

Net contract asset (liability)

The decrease in net contract asset to a contract liability at September 30, 2019 from September 30, 2018 was primarily due to our progress towards completion on our projects and the timing of contract billing milestones and new orders.

Net contract liability $ ( 28,450 ) $ ( 16,090 )

The increase in net contract liability at September 30, 2020 from September 30, 2019 was primarily due to our progress towards completion on our projects and the timing of contract billing milestones and new orders.

This increase was primarily driven by the timing of contract billing milestones related to our recent contract award for a large industrial project in the United States.

To determine the amount of revenue recognized during the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance.

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As of September 30, 2020 and September 30, 2019, accounts receivable included retention amounts of $ 6.9 million and $ 5.6 million, respectively.

Of the retained amount at September 30, 2019 , $4.9 million is expected to be collected in the next twelve months.

Of the retained amount at September 30, 2020, $ 5.9 million is expected to be collected in the next twelve months and is recorded in accounts receivable.

The remaining $ 1.0 million is recorded in other assets.

Disaggregation of Revenue

The following tables present our disaggregated revenue by geographic destination and market sector for the year ended September 30, 2019 (in thousands):

The following tables present our disaggregated revenue by geographic destination and market sector for the years ended September 30, 2020 and September 30, 2019 (in thousands):

United States $ 397,983 $ 406,609

Canada 66,064 64,326

Europe, Middle East and Africa 34,028 32,166

Asia/Pacific 18,079 11,405

Mexico, Central and South America 2,345 2,674

Total revenues by geographic destination $ 518,499 $ 517,180

Oil and gas $ 195,209 $ 242,291

Petrochemical 126,698 93,391

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Traction power 42,373 26,781

All others 65,401 69,724

Total revenues by market sector $ 518,499 $ 517,180

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Intangible assets balances, subject to amortization, at September 30, 2020 and 2019 consisted of the following (in thousands):

September 30, 2019

September 30, 2018

September 30, 2020 September 30, 2019

Value Accumulated

Amortization Net

Value Accumulated

Amortization Net

Purchased technology $ 11,749 $ ( 11,592 ) $ 157 $ 11,749 $ ( 11,415 ) $ 334

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Estimated amortization expense for each of the five subsequent fiscal years is expected to be (in thousands):

Years Ended September 30,

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 its requirements for ANSI medium-voltage switchgear and circuit breakers and other related equipment and components (the Products).

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, beginning March 2015.

The final balance of $2.3 million was received in April 2017.

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 total proceeds from GE exceeded the unamortized balance of our intangible asset.

We amortized this deferred credit over the four -year life of the agreement and recorded $0.5 million in other income in Fiscal 2018, and $2.0 million in both Fiscal 2017 and 2016.

Years Ended September 30, Total

Long-Term Debt

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The annual maturities of long-term debt as of September 30, 2020, were as follows (in thousands):

Year Ending September 30,

Year Ending September 30, Long‑Term

Total long-term debt maturities $ 400

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As of September 30, 2020, there were no amounts borrowed under this facility, and letters of credit outstanding were $ 38.7 million.

As of September 30, 2019 , $61.6 million was available for the issuance of letters of credit and borrowing under the U.S.

In addition, the U.S.

Revolver includes a right of the Company to request from time to time an increase in the revolving line of credit of up to $50.0 million , provided that (i) no default exists, (ii) each request must be in a minimum amount of $15.0 million (or, if less, the remaining portion of the increase), (iii) the Company may make a maximum of four such requests and (iv) each lender may agree whether or not to increase its revolving commitment.

We are required to maintain certain financial covenants, the most significant of which are a consolidated leverage ratio greater than 3.0 to 1.0 and a consolidated interest coverage ratio of less than 3.0 to 1.0 .

There was $ 36.3 million available for the issuance of letters of credit and borrowings under the U.S.

Revolver as of September 30, 2020.

We are required to maintain certain financial covenants, the most significant of which are a consolidated leverage ratio less than 3.0 to 1.0 and a consolidated interest coverage ratio of greater than 3.0 to 1.0.

The consolidated leverage ratio is our most restrictive covenant and a decrease in our earnings before interest, taxes, depreciation and amortization (EBITDA) could restrict our ability to issue letters of credit under the U.S.

Additionally, we must maintain a consolidated cash balance of $ 30 million at all times.

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As of September 30, 2020, we were in compliance with all of the financial covenants of the U.S.

As of September 30, 2018, the balance in the cash collateral account was $25.1 million and was recorded as restricted cash in our Consolidated Balance Sheets, which was required by our prior credit agreement.

The portion of the cash collateral account associated with the outstanding letters of credit that were due to expire beyond twelve months was classified as non-current restricted cash.

Revolver removes the previous requirement for all letters of credit and borrowings to be collateralized at 102% .

Revolver allows the Company to elect that any borrowing under the facility bear an interest rate based on either the base rate or the eurocurrency rate, in each case, plus the applicable rate.

The base rate is generally the highest of (a) the federal funds rate plus 0.50% , (b) the Bank of America prime rate and (c) the London Interbank Offered Rate (“LIBOR”) plus 1.00% , subject to certain interest rate floors set forth in the U.S.

The eurocurrency rate is generally (i) LIBOR for credit extensions denominated in U.S.

dollars, euros or pound sterling, (ii) the Canadian dollar offered rate for credit extensions denominated in Canadian dollars and (iii) the rate designated by Bank of America for credit extensions denominated in other currencies.

The applicable rate is generally a range from (0.25)% to 0.25% for base rate loans and 1.25% to 1.75% for eurocurrency rate loans, in each case based on the Company's consolidated leverage ratio, provided that the applicable rate is initially (0.25)% for base rate loans and 1.25% for eurocurrency rate loans until January 1, 2020.

Revolver allows the Company to elect that any borrowing under the facility bears an interest rate based on either the base rate or the eurocurrency rate, in each case, plus the applicable rate.

The base rate is generally the highest of (a) the federal funds rate plus 0.50 %, (b) the Bank of America prime rate or (c) the London Interbank Offered Rate (“LIBOR”) plus 1.00 %.

The applicable rate is generally a range from ( 0.25 )% to 1.75 % depending on the type of loan and the Company's consolidated leverage ratio.

Revolver 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.

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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.

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 September 30, 2020.

While the Bonds mature in 2021, the reimbursement agreement requires annual redemptions of $ 0.4 million that commenced on October 25, 2002.

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This interest rate was 0.27 % as of September 30, 2020.

As of September 30, 2019 , we were in compliance with all of the covenants of the Bonds.

Commitments and Contingencies

We lease certain offices, facilities and equipment under operating leases expiring at various dates through 2023.

We also sublease certain facilities that we are no longer occupying.

Our sublease terms do not fully cover the existing rental commitments on certain facilities.

At September 30, 2019 , the future minimum annual rental commitments and expected receipts under non-cancelable operating leases having terms in excess of one year were as follows (in thousands):

Years Ended September 30,

Operating Leases Payments

Operating Sublease Income

Total lease commitments

Lease expense and sublease income from third parties was as follows (in thousands):

Year Ended September 30,

Lease expense

Sublease income from third parties

In Fiscal 2019, we recorded additional lease expense of $0.7 million related to certain facility leases in Canada that are no longer utilized in our operations.

In Fiscal 2018, we incurred approximately $0.8 million due to anticipated losses on the sublet of a Canadian facility we exited in a prior period.

Letters of Credit, Bank Guarantees and Bonds

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In the event of default, the counterparty may demand payment from the bank under a letter of credit or bank guarantee, or performance by the surety under a bond.

To date, there have been no significant expenses related to security instruments for the periods reported.

We were contingently liable for letters of credit of $13.4 million as of September 30, 2019 .

We also had outstanding surety bonds totaling $170.5 million , with additional bonding capacity of $579.5 million available, at September 30, 2019 .

We have an $11.1 million facility agreement (Facility Agreement) between Powell (UK) Limited and a large international bank that provides Powell (UK) Limited the ability to enter into bank guarantees as well as forward exchange contracts and currency options.

To date, there have been no significant draws or claims related to security instruments for the periods reported.

We were contingently liable for letters of credit of

$ 38.7 million as of September 30, 2020.

We also had surety bonds totaling $ 162.4 million that were outstanding, with additional bonding capacity of $ 587.6 million available, at September 30, 2020.

We have a $ 9.0 million facility agreement ("Facility Agreement") between Powell (UK) Limited and a large international bank that provides Powell (UK) Limited the ability to enter into bank guarantees as well as forward exchange contracts and currency options.

At September 30, 2020, we had outstanding guarantees totaling $ 7.2 million and amounts available under this Facility Agreement were $ 1.8 million.

The Facility Agreement expires in May 2020 and provides for financial covenants and customary events of default, and carries cross-default provisions with our U.S.

The Facility Agreement provides for financial covenants and customary events of default, and carries cross-default provisions with our U.S.

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.

Additionally, we are required to maintain cash collateral for guarantees greater than two years .

As of September 30, 2020, we were in compliance with all of the financial covenants of the Facility Agreement.

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We will attempt to obtain change orders, contract extensions or accelerate project completion, which may resolve the potential for any unrecorded liquidated damage.

We have claimed force majeure on certain contracts due to delays associated with the COVID-19 pandemic.

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.

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Year Ended September 30,

2020 2019 2018

Federal $ 945 $ 1,350 $ 973

State 1,186 186 201

Foreign 66 88 449

2,197 1,624 1,623

Federal 1,045 366 ( 1,834 )

State ( 91 ) 457 ( 247 )

Foreign 519 ( 3 ) ( 89 )

1,473 820 ( 2,170 )

Total income tax provision (benefit) $ 3,670 $ 2,444 $ ( 547 )

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Year Ended September 30,

Other than U.S.

2020 2019 2018

$ 21,243 $ 11,859 $ ( 2,103 )

Foreign ( 913 ) 475 ( 5,596 )

Income (loss) before income taxes $ 20,330 $ 12,334 $ ( 7,699 )

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Year Ended September 30,

2020 2019 2018

Statutory rate 21 % 21 % 25 %

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Foreign withholding — 1 ( 3 )

Foreign valuation allowance

NOL carryback impact on deductions

Valuation allowance 4 ( 2 ) ( 20 )

Deferred tax rate differential — — ( 4 )

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As a result, the U.S.

federal statutory rate for Fiscal 2019 is 21%, compared to the blended statutory rate of 24.5% effective for Fiscal 2018.

federal statutory rate for Fiscal 2020 and 2019 is 21%, compared to the blended statutory rate of 24.5 % effective for Fiscal 2018.

Our income tax provision (benefit) reflects an effective tax rate on pre-tax results of 18 % in Fiscal 2020 compared to 20 % and 7 % in Fiscal 2019 and 2018, respectively.

The effective rate for Fiscal 2019 approximated the U.S.

federal statutory rate as favorable adjustments related to the utilization of net operating loss carryforwards in Canada that were fully reserved with a valuation allowance and the Research and Development Tax Credit (R&D Tax Credit) were largely offset by unfavorable adjustments primarily related to state income taxes and other permanent items.

The effective tax rate of 18 % for Fiscal 2020 was favorably impacted by the current year estimated Research and Development Tax Credit ("R&D Tax Credit") as well as the utilization of net operating loss carryforwards in Canada that were fully reserved with a valuation allowance.

Likewise, the discrete items recorded in the third quarter of Fiscal 2020 in the amount of $ 1.7 million associated with the release of reserves for unrecognized tax benefits as a result of the expiration of statutes of limitations and the IRS audit settlement favorably impacted the effective tax rate.

The effective tax rate was negatively impacted by the discrete item recorded in the second quarter of Fiscal 2020 for the valuation allowance against our U.K.

deferred tax assets in the amount of $ 0.5 million as well as by the losses recognized in various foreign jurisdictions that were reserved with a valuation allowance.

The effective tax rate for Fiscal 2019 approximated the U.S.

federal statutory rate as favorable adjustments related to the utilization of net operating loss carryforwards in Canada that were fully reserved with a valuation allowance, and the R&D Tax Credit were largely offset by unfavorable adjustments primarily related to state income taxes and other permanent items.

Due to the loss position in Fiscal 2018, the effective tax rate was negatively impacted by foreign losses reserved for with a valuation allowance as well as $ 0.5 million of tax expense related to the re-measurement of U.S.

deferred tax assets as a result of tax reform.

Likewise, due to the loss in Fiscal 2017, the effective tax rate was favorably impacted by the relative amounts of income/loss recognized in the various tax jurisdictions, the utilization of net operating loss carryforwards in Canada that have been fully reserved with a valuation allowance, the lower tax rate in the U.K., as well as $0.9 million of discrete items recognized during the year, primarily related to the R&D Tax Credit.

During our assessment of deferred income taxes, in the second quarter of Fiscal 2020, we recorded a valuation allowance of $ 0.5 million against our U.K.

net deferred tax assets.

In assessing the realizability of net deferred tax assets, we determined it was more-likely-than-not that the net deferred tax assets may not be realized based upon recent U.K.

tax losses and anticipated results in the near term.

Estimates may change as new events occur, estimates of future taxable income are reduced or increased, additional information becomes available, or operating environments change, which may result in a full or partial reversal of the valuation allowance.

We have not recorded deferred income taxes on $ 16.1 million of undistributed earnings of our foreign subsidiaries because of management’s intent to indefinitely reinvest such earnings.

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September 30,

Gross assets $ 18,326 $ 18,851

Gross liabilities and valuation allowance ( 14,682 ) ( 13,734 )

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Postretirement benefits liability 111 110

Other 379 344

Deferred tax assets $ 18,326 $ 18,851

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Depreciation and amortization $ ( 5,035 ) $ ( 5,138 )

Retention and other ( 620 ) ( 365 )

Deferred tax liabilities $ ( 5,655 ) $ ( 5,503 )

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The majority of these tax credit carryforwards expire beginning in 2030.

In addition, we had international net operating loss carryforwards of $2.9 million that were not reserved with a valuation allowance available to offset future taxable income in the respective jurisdictions, with less than 10% expiring in 2029 and the remainder having an indefinite carryforward period.

We have established a valuation allowance in the amount of $8.2 million primarily related to the Canadian net deferred tax assets.

In addition, we had international net operating loss carryforwards of $ 0.8 million that were not reserved with a valuation allowance available to offset future taxable income in the respective jurisdictions, with approximately $ 0.2 million expiring in 2029 and 2030 and the remainder having an indefinite carryforward period.

We have established a valuation allowance in the amount of $ 9.0 million primarily related to the Canadian and U.K.

net deferred tax assets.

The net change in the total valuation allowance during the year was $ 0.8 million which was largely a result of the establishment of a valuation allowance on the net deferred tax assets of the U.K.

In assessing the realizability of net deferred tax assets, we consider whether it is more-likely-than-not that some portion or all of the net deferred tax assets may not be realized.

The ultimate realization of net deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible.

A rollforward of the valuation allowance for the past three years is summarized below:

Balance at September 30, 2016

Charged to cost and expenses

Charged to other accounts

Balance at September 30, 2017

Charged to cost and expenses

Charged to other accounts

Balance at September 30, 2018

Charged to cost and expenses

Charged to other accounts

Balance at September 30, 2019

A reconciliation of the beginning and ending amount of the unrecognized tax benefits that if recognized would affect the effective tax rate follows (in thousands):

A reconciliation of the beginning and ending amount of the unrecognized tax benefits follows (in thousands):

Year Ended September 30,

2020 2019 2018

Balance at beginning of period $ 2,703 $ 1,854 $ 1,219

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Balance at end of period $ 1,252 $ 2,703 $ 1,854

Included in the balance of unrecognized tax benefits at the end of Fiscal 2020, 2019, and 2018 are $ 0.8 million, $ 2.1 million, and $ 1.3 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

Our policy is to recognize interest and penalties related to income tax matters as tax expense.

The amount of interest and penalty expense recorded for the year ended September 30, 2020 was not material.

Due to the expiration of certain federal statutes of limitations and voluntary filings, management believes that, within the next 12 months, it is reasonably possible that the unrecognized tax benefits will decrease by approximately $0.9 million and would positively impact our effective tax rate.

We are unable to make reasonably reliable estimates regarding the timing of future cash outflows, if any, associated with the remaining unrecognized tax benefits.

In November 2018, we received a refund of $6.6 million related to the U.S.

federal carryback claim filed for the Fiscal 2017 net operating loss.

Subsequently, we were notified that the IRS would conduct a review of the carryback claim.

Due to the expiration of certain federal statutes of limitations and the settlement of the IRS audit discussed above, management believes that, within the next twelve months, it is reasonably possible that the unrecognized tax benefits will decrease by approximately $ 0.1 million due to the settlement with taxing authorities related to voluntary filings.

We are unable to make reasonably reliable estimates regarding the timing of future cash outflows, if any, associated with the remaining unrecognized tax benefits for the open periods of Fiscal 2018 – 2020.

Management believes that an adequate provision has been made for any adjustments that may result from tax examinations.

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We make periodic payments into company-owned life insurance policies held in this Rabbi Trust to fund the expected obligations arising under this plan.

The assets and liabilities of the plan are recorded in other assets and deferred compensation, respectively, in the accompanying Consolidated Balance Sheets.

Changes in the deferred compensation balance are recorded to compensation expense and reflected within the selling, general and administrative line in the Consolidated Statements of Operations.

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We have the following stock-based compensation plans:

2014 Equity Incentive Plan

Restricted Stock Units

In February 2014, our stockholders approved and adopted at the Annual Meeting of Stockholders the 2014 Equity Incentive Plan (the 2014 Plan), which replaced our 2006 Equity Compensation Plan (2006 Plan).

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Total RSU activity (number of shares) for the past fiscal year is summarized below:

Units Weighted

Outstanding at September 30, 2019 131,850 $ 33.76

Granted 72,551 38.13

Vested ( 49,617 ) 35.16

Forfeited/cancelled ( 750 ) 33.16

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As of September 30, 2020, there were 530,036 shares of common stock available for future grants.

2014 Non-Employee Director Equity Incentive Plan

Restricted Stock

In February 2014, our stockholders approved the 2014 Non-Employee Director Equity Incentive Plan (the 2014 Director Plan).

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Fifty percent of the restricted stock granted to each of our non-employee directors vests immediately, while the remaining fifty percent vests on the anniversary of the grant date.

Compensation expense is based on the closing share price on the grant date and recognized immediately for the first fifty percent of the restricted stock granted, while compensation expense for the remaining fifty percent will be recognized over the remaining vesting period.

Under this 2014 Director Plan, in February 2019, 7,000 shares of common stock and 7,000 shares of restricted stock were issued to our non-employee directors at a price of $34.02 per share.

In February 2018, we issued 6,000 shares of restricted stock to our non-employee directors at a price of $27.88 per share, and in April 2018, we issued 1,000 shares of restricted stock to a single non-employee director at a price of $27.15 .

Compensation expense is recognized immediately for the first fifty percent of the restricted stock granted, while compensation expense for the remaining fifty percent is recognized over the remaining vesting period.

Under this 2014 Director Plan, in February 2020, 16,800 shares of restricted stock were issued to our non-employee directors at a price of $ 36.25 per share.

In February 2019, we issued 14,000 shares of restricted stock to our non-employee directors at a

price of $ 34.02 per share.

The total number of shares of common stock available for future awards under the 2014 Director plan was 39,800 shares as of September 30, 2020.

At both September 30, 2019 and 2018 , there were 7,000 shares of unvested restricted stock outstanding.

At September 30, 2020 and 2019, there were 8,400 and 7,000 shares of unvested restricted stock outstanding, respectively.

Total compensation expense related to restricted stock grants under all plans was $ 0.6 million, $ 0.5 million and $ 0.5 million for the years ended September 30, 2020, 2019 and 2018, respectively.

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Identical Assets

Significant Other

Fair Value at September 30, 2019

(Level 1) Significant Other

(Level 2) Significant

(Level 3) Fair Value at September 30, 2020

Cash and cash equivalents $ 160,216 $ — $ — $ 160,216

Short-term investments 18,705 — — 18,705

Other assets — 7,351 — 7,351

Deferred compensation — 6,569 — 6,569

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Identical Assets

Significant Other

Fair Value at September 30, 2018

(Level 1) Significant Other

(Level 2) Significant

(Level 3) Fair Value at September 30, 2019

Cash and cash equivalents $ 118,639 $ — $ — $ 118,639

Short-term investments 6,042 — — 6,042

Restricted cash

Other assets — 6,825 — 6,825

Deferred compensation — 6,249 — 6,249

Fair value guidance requires certain fair value disclosures be presented in both interim and annual reports.

Fair value guidance requires certain fair value disclosures to 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.

Cash and cash equivalents

Cash and 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 Consolidated Balance Sheets.

Cash and cash equivalents - Cash and 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 Consolidated Balance Sheets.

Short-term Investments - Short-term investments include time deposits with original maturities of three months or more.

Restricted Cash - Restricted cash represented a pledged cash collateral balance, which was required under our prior credit agreement and was held in an interest-bearing savings account.

See Note G for further discussion on restricted cash.

Other Assets and Deferred Compensation – We hold investments in an irrevocable Rabbi Trust for our deferred compensation plan.

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Because the deferred compensation liability is intended to offset the plan assets, it is therefore also categorized as Level 2 in the fair value measurement hierarchy.

Geographic Information

Our leases consist primarily of office and manufacturing space, construction equipment and office equipment.

All of our future lease obligations are related to non-cancelable operating leases.

The most significant portion of our lease portfolio relates to leases of office and manufacturing facilities in Canada which we no longer occupy.

We currently sublease the majority of these Canadian facilities.

The following table provides a summary of lease cost components for the year ended September 30, 2020 (in thousands):

Lease Cost 2020

Operating lease cost $ 2,389

sublease income ( 555 )

Variable lease cost (1)

Short-term lease cost (2)

Total lease cost $ 2,862

(1) Variable lease cost represents common area maintenance charges related to our Canadian office space lease.

(2) Short-term lease cost includes leases and rentals with initial terms of one year or less.

For the years ended September 30, 2019 and 2018, rent expense related to operating leases was $ 3.5 million and $ 3.4 million;

however, these amounts did not include rent expense related to leases and rentals with initial terms of one year or less, which are included in short-term cost in the table above.

For the years ended September 30, 2019 and 2018, sublease income from third parties was $ 1.3 million and $ 1.5 million;

however, these amounts included common area maintenance charges, which are included in variable lease cost in the table above.

In Fiscal 2019, we recorded additional lease expense of $ 0.7 million related to certain facility leases in Canada that are no longer utilized in our operations.

In Fiscal 2018, we incurred approximately $ 0.8 million due to anticipated losses on the sublet of a Canadian facility we exited in a prior period.

We recognize operating lease assets and operating lease liabilities representing the present value of the remaining lease payments for leases with initial terms greater than twelve months.

Leases with initial terms of twelve months or less are not recorded in our Consolidated Balance Sheets.

Our operating lease assets have been reduced by a lease accrual of $ 0.6 million related to certain unused facility leases in Canada.

The following table provides a summary of the operating lease assets and operating lease liabilities included in our Consolidated Balance Sheets as of September 30, 2020 (in thousands):

Operating Leases September 30, 2020

Operating lease assets, net $ 5,217

Current operating lease liabilities 2,352

Long-term operating lease liabilities 3,434

Total lease liabilities $ 5,786

The following table provides the maturities of our operating lease liabilities as of September 30, 2020 (in thousands):

Operating Leases

Total future minimum lease payments $ 6,084

present value discount (imputed interest) ( 298 )

Present value of lease liabilities $ 5,786

The weighted average discount rate as of September 30, 2020 was 4.19 %.

The weighted average remaining lease term was 2.55 years at September 30, 2020.

Segment Information

We manage our business as one reportable operating segment related to the development, design, manufacturing and servicing of custom-engineered equipment and systems for the distribution, control and monitoring of electrical energy.

Revenues by country represent sales to unaffiliated customers as determined by the ultimate destination of our products and services, summarized for the last three fiscal years by region in the table below (in thousands):

Year Ended September 30,

2020 2019 2018

United States $ 397,983 $ 406,609 $ 335,743

Canada 66,064 64,326 42,235

Middle East and Africa 18,162 18,420 38,490

Far East 18,079 11,405 12,976

Europe 15,866 13,746 10,538

Mexico, Central and South America 2,345 2,674 8,734

Total revenues $ 518,499 $ 517,180 $ 448,716

Long-lived assets by country consist of property, plant and equipment, net of accumulated depreciation and are determined based on the location of the tangible assets, summarized for the last two fiscal years in the table below (in thousands):

September 30,

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United States $ 67,071 $ 71,325

Canada 42,580 44,933

United Kingdom 4,721 4,554

Long-lived assets by country consist of property, plant and equipment, net of accumulated depreciation and are determined based on the location of the tangible assets.

Total $ 114,372 $ 120,812

Quarterly Information

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2020 Quarters

Net income (loss)

Earnings (loss) per share:

Third (1) (2)

Fourth (1) (3)

Revenues $ 134,150 $ 151,570 $ 118,062 $ 114,717 $ 518,499

Gross profit 21,826 29,685 21,344 21,720 94,575

Net income 2,775 7,421 3,481 2,983 16,660

Earnings per share:

Basic $ 0.24 $ 0.64 $ 0.30 $ 0.26 $ 1.43

Diluted $ 0.24 $ 0.64 $ 0.30 $ 0.25 $ 1.42

(1) The results for the first quarter of Fiscal 2020 demonstrated normal seasonality and were negatively impacted by holidays and work schedules related to other quarterly periods.

The results for the second quarter of Fiscal 2020 improved due to the timing of orders and execution of backlog while revenues and gross profit decreased during the third and fourth quarters of Fiscal 2020 due to a decrease in orders resulting from a decline in demand across our industrial end markets, as well as project delays, cancellations and scope reductions associated with the global decline in demand across the oil and gas markets resulting from COVID-19.

(2) The results for the third quarter of Fiscal 2020 were negatively impacted by separation costs of $ 1.4 million as a result of workforce reductions.

(3) The results for the fourth quarter of Fiscal 2020 were positively impacted by other income of $ 0.5 million related to a death benefit received from our company-owned life insurance policy related to a retired employee.

2019 Quarters

Third (1) (2)

Revenues $ 109,351 $ 123,737 $ 135,588 $ 148,504 $ 517,180

Gross profit 14,631 20,075 23,715 28,555 86,976

Net income (loss) ( 2,695 ) 958 5,089 6,538 9,890

Earnings (loss) per share:

Basic $ ( 0.23 ) $ 0.08 $ 0.44 $ 0.56 $ 0.85

Diluted $ ( 0.23 ) $ 0.08 $ 0.44 $ 0.56 $ 0.85

(1) The results for the first quarter of Fiscal 2019 demonstrated normal seasonality and were negatively impacted by holidays and work schedules relative to other quarterly periods.

The results for the subsequent quarters of Fiscal 2019 improved due to the timing of orders and execution of backlog.

(2) The results for the third quarter of Fiscal 2019 were favorably impacted by the receipt of a $ 1.0 million non-recurring business interruption insurance settlement recognized within operating income.

The sum of the individual earnings per share amounts may not agree with year-to-date earnings per share as each period’s computation is based on the weighted-average number of shares outstanding during the period.

Separation Costs

In response to the COVID-19 pandemic, reductions in oil and gas demand and volatility of commodity prices, we implemented workforce reductions at most of our locations.

As a result, we recorded $ 1.4 million of separation costs in restructuring and other, net on the Consolidated Statement of Operations during the third quarter of Fiscal 2020.

Subsequent Events

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data