13 unchanged sentences
We have audited the accompanying consolidated balance sheets of Powell Industries, Inc.
−Removed: and its subsidiaries (the “Company”) as of September 30, 2022 and 2021, and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended September 30, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).
+Added: and its subsidiaries (the “Company”) as of September 30, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended September 30, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).
We also have audited the Company's internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
12 unchanged sentences
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
−Removed: Our audits also included performing such other
−Removed: procedures as we considered necessary in the circumstances.
+Added: Our audits also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audits provide a reasonable basis for our opinions.
9 unchanged sentences
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
−Removed: Revenue Recognition – Long-term fixed priced contracts
+Added: Revenue Recognition - Long-term fixed price contracts
As described in Notes B and E to the consolidated financial statements, approximately 94% of the Company’s total revenue of $699.3 million for the year ended September 30, 2023 was generated from the manufacturing of custom-engineered products and systems under long-term fixed-price contracts.
5 unchanged sentences
Management estimates the amount of variable consideration based on the expected value method, which is the sum of the probability-weighted amount, or the most likely amount method which uses various factors including experience with similar transactions and assessment of anticipated performance.
−Removed: The principal considerations for our determination that performing procedures relating to revenue recognized over time utilizing the cost-to-cost method is a critical audit matter are the significant judgment by management when determining the estimated total cost and revenue, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating management’s judgment about assumptions related to the estimates of costs to complete and liquidated damages.
+Added: The principal considerations for our determination that performing procedures relating to revenue recognized over time utilizing the cost-to-cost method is a critical audit matter are the
+Added: significant judgment by management when determining the estimated total cost and revenue, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating management’s judgment about assumptions related to the estimates of costs to complete and liquidated damages.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
14 unchanged sentences
Short-term investments 33,134 14,554
−Removed: Accounts receivable, less allowance for doubtful accounts of $ 344 and $ 333
+Added: Accounts receivable, less allowance for credit losses of $ 273 and $ 344
206,591 106,111
13 unchanged sentences
Current Liabilities:
−Removed: Current maturities of long-term debt $ — $ 400
Accounts payable $ 56,666 $ 63,423
6 unchanged sentences
Total Current Liabilities 395,686 186,373
−Removed: Long-term debt, net of current maturities — —
Deferred compensation (Note J) 9,145 7,749
29 unchanged sentences
Amortization of intangible assets — — 157
−Removed: Restructuring and other, net — — 1,400
Operating income 62,520 7,224 1,019
20 unchanged sentences
Foreign currency translation adjustments 1,915 ( 8,689 ) 4,253
−Removed: Loss on cash flow commodity hedge ( 325 ) — —
+Added: Gain (loss) on cash flow commodity hedge 325 ( 325 ) —
Postretirement benefit adjustment, net of tax ( 151 ) 372 ( 96 )
25 unchanged sentences
Dividends — — 77 ( 12,604 ) — — — ( 12,527 )
+Added: Loss on cash flow commodity hedge — — — — — — ( 325 ) ( 325 )
Postretirement benefit adjustment, net of tax of $ 99
6 unchanged sentences
Dividends — — 141 ( 12,882 ) — — — ( 12,741 )
−Removed: Loss on cash flow commodity hedge — — — — — — ( 325 ) ( 325 )
+Added: Gain on cash flow commodity hedge — — — — — — 325 325
Postretirement benefit adjustment, net of tax of $ 40
16 unchanged sentences
Deferred income taxes ( 7,847 ) ( 4,861 ) ( 995 )
−Removed: Gain on cash surrender value of life insurance — — ( 506 )
Changes in operating assets and liabilities:
34 unchanged sentences
Powell in 1947, which merged into the Company in 1977.
−Removed: Our major subsidiaries, all of which are wholly owned, include:
−Removed: Powell Electrical Systems, Inc.;
+Added: Our major subsidiaries, all of which are wholly owned, include Powell Electrical Systems, Inc.;
Powell (UK) Limited;
8 unchanged sentences
We assist customers by providing field service inspection, installation, commissioning, modification, and repair services, as well as spare parts, retrofit and retrofill components for existing systems, and replacement circuit breakers for obsolete switchgear no longer produced by the original manufacturer.
−Removed: We seek to establish long-term relationships with the end users of our systems as well as the design and construction engineering firms contracted by those end users.
+Added: We seek to establish long-term relationships with the end users of our systems as well as design and construction engineering firms contracted by those end users.
We believe that our culture of safety and focus on customer satisfaction, along with our financial strength, allow us to continue to capitalize on opportunities in the industries we serve.
References to Fiscal 2023, Fiscal 2022 and Fiscal 2021 used throughout these Notes to Consolidated Financial Statements relate to our fiscal years ended September 30, 2023, 2022 and 2021, respectively.
−Removed: Impact of Oil and Gas Commodity Market Volatility on Powell
−Removed: The consequences of a prolonged global macro-economic decline could include, but are not limited to, a continued reduction in commercial and industrial activity.
−Removed: Accordingly, the Company cannot reasonably estimate the duration or severity of a potential decline in demand, or the extent to which the disruption may materially impact our business, results of operations or cash flows.
−Removed: 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.
Summary of Significant Accounting Policies
8 unchanged sentences
We base our estimates on historical experience, forecasts and various other assumptions, as well as the specific circumstances surrounding these contingent liabilities, in evaluating the amount of liability that should be recorded.
−Removed: Additionally, the recognition of deferred tax assets requires estimates related to future income and other assumptions regarding timing and future profitability because the ultimate realization of net deferred tax assets is dependent on the generation of future taxable income during periods in which temporary differences become
+Added: Additionally, the recognition of deferred tax assets requires estimates related to future income and other assumptions regarding timing and future profitability because the ultimate realization of net deferred tax assets is dependent on the generation of future taxable income during periods in which temporary differences become deductible.
Estimates routinely change as new events occur, additional information becomes available or operating environments change.
11 unchanged sentences
Fair Value of Financial Instruments
−Removed: Financial instruments include cash, cash equivalents, short-term investments, restricted cash, receivables, deferred compensation, payables and debt obligations.
−Removed: Except as described below, due to the short-term nature of account receivables and account payables, the book value is representative of their fair value.
−Removed: The carrying value of debt approximates fair value as interest rates are indexed to the Federal Funds Rate or the bank’s prime rate.
+Added: Financial instruments include cash, cash equivalents, short-term investments, receivables, deferred compensation, payables and debt obligations.
+Added: Except as described below, due to the short-term nature of account receivables and account payables, their book values are representative of their fair values.
Accounts Receivable
5 unchanged sentences
However, we utilize letters of credit to secure payment on projects when possible.
−Removed: As of September 30, 2022 and 2021, accounts receivable included retention amounts of $ 6.9 million and $ 9.6 million, respectively.
Retention amounts are in accordance with applicable provisions of contracts and become due upon completion of contractual requirements.
+Added: As of September 30, 2023 and 2022, we had retention amounts of $ 7.4 million and $ 6.9 million, respectively.
Of the retained amount at September 30, 2023, $ 7.2 million is expected to be collected in the next twelve months and is recorded in accounts receivable.
23 unchanged sentences
Future events and unanticipated changes to assumptions could require a provision for impairment in a future period.
−Removed: The effect of any impairment would be reflected in income (loss) from operations in the Consolidated Statements of Operations.
+Added: The effect of any impairment would be reflected in operating income in the Consolidated Statements of Operations.
In addition, we estimate the useful lives of our property, plant and equipment and periodically review these estimates to determine whether these lives are appropriate.
16 unchanged sentences
Revenue from these contracts is generally recognized over time utilizing the cost-to-cost method.
−Removed: Under the cost-to-cost method, the extent of progress towards
−Removed: completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.
+Added: Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance
We believe that this method is the most accurate representation of our performance because it directly measures the value of the services transferred to the customer over time as we incur costs on our contracts.
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.
−Removed: We also have contracts to provide field service inspection, installation, commissioning, modification, and repair services, as well as spare parts, retrofill components for existing systems, and replacement circuit breakers for obsolete or out-of-production switchgear no longer produced by the original manufacturer.
−Removed: 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.
+Added: We also have contracts to provide field service inspection, installation, commissioning, modification, and repair services, as well as retrofit and retrofill components for existing systems.
+Added: 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.
26 unchanged sentences
All assets and liabilities of foreign operations are translated into U.S.
−Removed: Dollars using year-end exchange rates, and all revenues and expenses are translated at average rates during the respective period.
+Added: Dollars using period-end exchange rates, and all revenues and expenses are translated at average rates during the respective period.
Dollar results that arise from such translation, as well as exchange gains and losses on intercompany balances of a long-term investment nature, are included in the cumulative currency translation adjustments in accumulated other comprehensive loss in stockholders’ equity.
2 unchanged sentences
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.
−Removed: Excess income tax benefits related to share-based compensation expense are recognized as income tax expense or benefit in the Consolidated Statement of Operations.
+Added: Excess income tax benefits related to stock-based compensation expense are recognized as income tax expense or benefit in the Consolidated Statements of Operations.
Cash paid when directly withholding shares on an employee's behalf for tax withholding purposes is classified as a financing activity.
2 unchanged sentences
We compute basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period.
−Removed: Diluted earnings per common and potential common share includes the weighted average of additional shares associated with the incremental effect of dilutive restricted stock and restricted stock units, as prescribed by the Financial Accounting Standards Board (FASB) guidance on earnings per share.
+Added: Diluted earnings per common and potential common share include the weighted average of additional shares associated with the incremental effect of dilutive restricted stock and restricted stock units.
The following table reconciles basic and diluted weighted average shares used in the computation of earnings per share (in thousands, except per share data):
9 unchanged sentences
Detail of Selected Balance Sheet Accounts
−Removed: Allowance for Credit Losses
−Removed: Activity in our allowance for credit losses consisted of the following (in thousands):
−Removed: September 30,
−Removed: Balance at beginning of period $ 333 $ 510
−Removed: Bad debt expense, net 162 48
−Removed: Uncollectible accounts written off, net of recoveries ( 117 ) ( 242 )
−Removed: Change due to foreign currency translation ( 34 ) 17
−Removed: Balance at end of period $ 344 $ 333
The components of inventories are summarized below (in thousands):
September 30,
−Removed: Raw materials, parts and subassemblies $ 54,220 $ 33,149
+Added: Raw materials, parts and sub-assemblies $ 68,631 $ 54,220
Work-in-progress 1,379 1,202
−Removed: Provision for excess and obsolete inventory ( 5,007 ) ( 4,461 )
+Added: Provision for excess and obsolete inventories ( 6,145 ) ( 5,007 )
Total inventories $ 63,865 $ 50,415
28 unchanged sentences
Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.
−Removed: We believe that this method is the most accurate representation of our
−Removed: performance, because it directly measures the value of the services transferred to the customer over time as we incur costs on our contracts.
+Added: We believe that this method is the most accurate representation of our performance because it directly measures the value of the services transferred to the customer over time as we incur costs on our contracts.
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.
2 unchanged sentences
Our performance obligations are satisfied as the work progresses.
−Removed: Revenues from our custom-engineered products and value-added services transferred to customers over time accounted for approximately 94 % and 93 % of revenues for the years ended September 30, 2022 and September 30, 2021, respectively.
+Added: Revenues from our custom-engineered products and value-added services transferred to customers over time accounted for approximately 94 % of revenues for each of the years ended September 30, 2023 and September 30, 2022.
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.
−Removed: 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 % and 7 % of revenues for the years ended September 30, 2022 and September 30, 2021, respectively.
+Added: 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 each of the years ended September 30, 2023 and September 30, 2022.
Additionally, some contracts may contain a cancellation clause that could limit the amount of revenue we are able to recognize over time.
16 unchanged sentences
Remaining unsatisfied performance obligations, which we refer to as backlog, represent the estimated transaction price for goods and services for which we have a material right, but work has not been performed.
−Removed: As of September 30, 2022, we had backlog of $ 592.2 million, of which approximately $ 375.0 million is expected to be recognized as revenue within the next twelve months.
+Added: As of September 30, 2023, we had backlog of $ 1.3 billion, of which approximately $ 648.0 million is expected to be recognized as revenue within the next twelve months .
Backlog may not be indicative of future operating results as orders may be cancelled or modified by our customers.
8 unchanged sentences
For the years ended September 30, 2023 and 2022, our operating results were positively impacted by $ 13.6 million and $ 11.3 million, respectively, as a result of changes in contract estimates related to projects in progress at the beginning of the respective period.
−Removed: These changes in estimates resulted primarily from favorable project execution and negotiations of variable consideration, discussed below, as well as revenue and reduced costs recognized from project cancellations and other changes in facts and circumstances during these periods.
+Added: These changes in estimates resulted primarily from favorable project execution, reduced cost estimates and negotiations of variable consideration, discussed below, as well as revenue recognized from project cancellations and other changes in facts and circumstances during these periods.
+Added: Project cancellations on four projects increased gross profit for the year ended September 30, 2023 by $ 4.3 million.
+Added: Gross unfavorable changes in contract estimates were immaterial for the years ended September 30, 2023 and 2022.
Variable Consideration
15 unchanged sentences
Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period and are generally classified as current.
−Removed: The timing of contract billing milestones related to our Fiscal 2020 contract award for a large industrial project contributed significantly to our net contract liability at September 31, 2020.
Contract assets and liabilities as of September 30, 2023 and September 30, 2022 are summarized below (in thousands):
2 unchanged sentences
Contract liabilities ( 279,796 ) ( 79,857 )
−Removed: Net contract asset $ 8,494 $ 11,766
−Removed: The decrease in net contract asset at September 30, 2022 from September 30, 2021 was primarily due to the timing of contract billing milestones and new orders as well as cash used on our large industrial project awarded in Fiscal 2020.
+Added: Net contract asset (liability) $ ( 219,175 ) $ 8,494
+Added: Our net contract billing position improved to a net liability at September 30, 2023 from a net asset position at September 30, 2022 primarily due to favorable contract billing milestones.
+Added: We typically allocate a significant percentage of the progress billing to the early stages of the contract.
+Added: These favorable billing milestones along with our increase in project backlog are driving the increase in the net contract liability at September 30, 2023.
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.
5 unchanged sentences
Based on our experience in recent years, the majority of these retainage balances are expected to be collected within approximately twelve months.
−Removed: As of September 30, 2022 and September 30, 2021, accounts receivable included retention amounts of $ 6.9 million and $ 9.6 million, respectively.
+Added: As of September 30, 2023 and September 30, 2022, we had retention amounts of $ 7.4 million and $ 6.9 million, respectively.
Of the retained amount at September 30, 2023, $ 7.2 million is expected to be collected in the next twelve months and is recorded in accounts receivable.
1 unchanged sentence
Disaggregation of Revenue
−Removed: The following tables present our disaggregated revenue by geographic destination and market sector for the years ended September 30, 2022 and September 30, 2021 (in thousands):
+Added: The following tables present our disaggregated revenue by geographic destination and market sector for the years ended September 30, 2023, 2022 and 2021 (in thousands):
+Added: 2023 2022 2021
United States $ 557,934 $ 404,973 $ 351,422
Canada 84,090 81,218 68,655
−Removed: Europe, Middle East and Africa 38,411 39,642
+Added: Middle East and Africa 14,998 20,712 26,615
Asia/Pacific 6,188 4,885 8,889
+Added: Europe 26,699 17,699 13,027
Mexico, Central and South America 9,399 3,095 1,951
Total revenues by geographic destination $ 699,308 $ 532,582 $ 470,559
+Added: 2023 2022 2021
Oil and gas (excludes petrochemical) $ 273,117 $ 215,235 $ 187,660
9 unchanged sentences
No impairment expense has been recorded for the last three fiscal years.
−Removed: Amortization of intangible assets recorded for each of the years ended September 30, 2021 and 2020 was $ 0.2 million.
+Added: Amortization of intangible assets recorded for the year ended September 30, 2021 was $ 0.2 million.
Long-Term Debt
−Removed: Long-term debt consisted of the following (in thousands):
−Removed: September 30,
−Removed: Industrial development revenue bonds $ — $ 400
−Removed: current portion — ( 400 )
−Removed: Total long-term debt $ — $ —
−Removed: We have a credit agreement with Bank of America, N.A.
−Removed: Revolver), which is a $ 75.0 million revolving credit facility that is available for both borrowings and letters of credit and expires September 27, 2024.
−Removed: Revolver states that up to $ 30 million may be deducted from the amount of letters of credit outstanding (not to be less than zero ) when calculating the consolidated funded indebtedness which is a component of the consolidated net leverage ratio.
−Removed: Additionally, we have the option to cash collateralize all or a portion of the letters of credit outstanding, which would favorably impact the consolidated funded indebtedness calculation and the consolidated net leverage ratio.
+Added: On March 31, 2023, we entered into a second amendment (the Second Amendment) to our credit agreement with Bank of America, N.A.
+Added: (as amended, the U.S.
+Added: The Second Amendment increased the revolving credit facility, which is available for both borrowings and letters of credit, from $ 75.0 million to $ 125.0 million.
+Added: As amended by the Second Amendment, the U.S.
+Added: Revolver states that the lesser of $ 50 million or 50 % of available cash may be deducted from the amount of letters of credit outstanding (not to be less than zero ) when calculating the consolidated funded indebtedness, which is a component of the consolidated net leverage ratio.
+Added: We have the option to cash collateralize all or a portion of the letters of credit outstanding, which would favorably impact the consolidated funded indebtedness calculation and the consolidated net leverage ratio.
As of September 30, 2023, there were no amounts borrowed under the U.S.
2 unchanged sentences
Revolver as of September 30, 2023.
−Removed: We are required to maintain certain financial covenants, the most significant of which are a consolidated net leverage ratio less than 3.0 to 1.0 and a consolidated interest coverage ratio of greater than 3.0 to 1.0.
+Added: As of September 30, 2023, we are required to maintain certain financial covenants, the most significant of which are a consolidated net leverage ratio less than 3.0 to 1.0 and a consolidated interest coverage ratio of greater than 3.0 to 1.0.
Our most restrictive covenant, the consolidated net leverage ratio, is the ratio of earnings before interest, taxes, depreciation, amortization and stock-based compensation (EBITDAS) to funded indebtedness.
1 unchanged sentence
Additionally, we must maintain a consolidated cash balance of $ 50 million at all times, which can be deducted from the letters of credit outstanding as noted above.
−Removed: Revolver also contains a "material adverse effect" clause which is a material change in our operations, business, properties, liabilities or condition (financial or otherwise) or a material impairment of our ability to perform our obligations under our credit agreements.
+Added: Revolver also contains a "material adverse effect" clause which is a material change in our operations, business, properties, liabilities or condition (financial or otherwise) or a material impairment of our ability to perform our obligations under the U.S.
As of September 30, 2023, we were in compliance with all of the financial covenants of the U.S.
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.
−Removed: 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) successor rate plus 1.00 %.
+Added: 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 Bloomberg Short-Term Bank Yield Index (BSBY) rate plus 1.00 %.
The applicable rate is generally a range from 0 % to 2 % depending on the type of loan and the Company's consolidated net leverage ratio.
−Removed: On December 31, 2021, the Company entered into a LIBOR Transition Agreement with Bank of America that states that LIBOR will be replaced with a successor rate in accordance with the U.S.
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.
4 unchanged sentences
Revolver may be accelerated and may become immediately due and payable.
+Added: On October 4, 2023, we entered into a third amendment to the U.S.
+Added: Revolver (the Third Amendment) with Bank of America, N.A.
+Added: and Texas Capital Bank has agreed to join as an additional lender under the U.S.
+Added: The Third Amendment increased the amount of the revolving line of credit from $ 125.0 million to $ 150.0 million and extended the expiry date to October 4, 2028.
+Added: The aggregate commitment of $ 150.0 million consists of $ 100.0 million committed by Bank of America and $ 50.0 million committed by Texas Capital Bank.
+Added: As amended by the Third Amendment, the lesser of $ 60.0 million or 60 % of readily and available cash may be deducted from the amount of letters of credit outstanding (not to be less than zero ) when calculating the consolidated funded indebtedness, which is a component of the consolidated net leverage ratio.
+Added: We are now required to maintain a consolidated cash balance of $ 60.0 million at all times, which can be deducted from the letters of credit outstanding as stated above.
Industrial Development Revenue Bonds
We borrowed $ 8.0 million in October 2001 through a loan agreement funded with proceeds from tax-exempt industrial development revenue bonds (Bonds) for the completion of our Northlake, Illinois facility.
−Removed: The Bonds matured on October 1, 2021, and our final payment of $ 0.4 million was made.
+Added: The Bonds matured on October 1, 2021, and our final payment of $ 0.4 million was made upon maturity.
Commitments and Contingencies
5 unchanged sentences
We were contingently liable for letters of credit of $ 89.1 million as of September 30, 2023.
−Removed: We also had surety bonds totaling $ 241.0 million that were outstanding, with additional bonding capacity of $ 359.0 million available, at September 30, 2022.
+Added: We also had outstanding surety bonds totaling $ 393.4 million, with additional bonding capacity of $ 556.6 million available, at September 30, 2023.
We have strong surety relationships;
1 unchanged sentence
We have a $ 9.8 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.
−Removed: At September 30, 2022, we had outstanding guarantees totaling $ 3.1 million and amounts available under this Facility Agreement were $ 2.5 million.
−Removed: The Facility Agreement provides for customary events of default, and carries cross-default provisions with our U.S.
−Removed: If an event of default (as defined in the Facility Agreement) occurs and is continuing, per
−Removed: the terms and subject to the conditions set forth therein, obligations outstanding under the Facility Agreement may be accelerated and declared immediately due and payable.
+Added: At September 30, 2023, we had outstanding guarantees totaling $ 7.6 million, with additional capacity of $ 2.2 million available under this Facility Agreement.
+Added: The Facility Agreement provides for customary events of default and carries cross-default provisions with the U.S.
+Added: 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 declared immediately due and payable.
Additionally, we are required to maintain cash collateral for guarantees greater than two years .
1 unchanged sentence
We are involved in various legal proceedings, claims and other disputes arising from our commercial operations, projects, employees and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable.
−Removed: Although we can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on us, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on our consolidated financial position or results of operations or liquidity.
+Added: Although we can give no assurances about the resolution of pending claims, litigation or other disputes, and the effect such outcomes may have on us, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.
Liquidated Damages
1 unchanged sentence
Each individual contract defines the conditions under which the customer may make a claim against us.
−Removed: As of September 30, 2022, our exposure to possible liquidated damages was $ 3.5 million, of which approximately $ 2.2 million was probable.
+Added: As of September 30, 2023, certain contracts had a probable exposure to liquidated damages of $ 2.7 million, which could possibly increase to $ 3.9 million under certain circumstances.
Based on our actual or projected failure to meet these various contractual commitments, $ 0.7 million has been recorded as a reduction to revenue.
We will attempt to obtain change orders, contract extensions or accelerate project completion, which may resolve the potential for any unrecorded liquidated damage.
−Removed: 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.
32 unchanged sentences
Effective rate 21 % ( 40 ) % 42 %
−Removed: (1) Certain prior year amounts have not been reclassified for consistency with the current year presentation.
−Removed: Our income tax benefit reflects an effective tax rate on pre-tax results of negative 40 % in Fiscal 2022 compared to 42 % and 18 % in Fiscal 2021 and 2020, respectively.
−Removed: The income tax benefit for Fiscal 2022 was largely a result of the reversal of a valuation allowance on the Canadian deferred tax assets that were previously fully reserved, in addition to the current year estimated Research and Development Tax Credit (R&D Tax Credit).
+Added: Our income tax provision reflects an effective tax rate on pre-tax results of 21 % in Fiscal 2023 compared to negative 40 % and 42 % in Fiscal 2022 and 2021, respectively.
+Added: The income tax provision for Fiscal 2023 was favorably impacted by the reversal of a valuation allowance on the United Kingdom (U.K.) deferred tax assets that were previously fully reserved, in addition to the current year estimated Research and Development Tax Credit (R&D Tax Credit).
+Added: These items were offset by state tax expense, the tax expense related to certain nondeductible expenses and an inclusion related to U.S.
+Added: global intangible income.
+Added: The income tax benefit for Fiscal 2022 was largely a result of the reversal of a valuation allowance on the Canadian deferred tax assets that were previously fully reserved, in addition to the estimated R&D Tax Credit.
These items were partially offset by the tax expense related to certain nondeductible expenses, the gain on the disposition of a small, non-core division of our Canadian operations and an inclusion related to U.S.
global intangible income.
−Removed: The tax provision for Fiscal 2021 and 2020 was favorably impacted by the estimated R&D Tax Credit as well as the utilization of net operating loss carryforwards in Canada that were fully reserved with a valuation allowance.
−Removed: In Fiscal 2021, the tax provision was negatively impacted by the losses recognized in other foreign jurisdictions, primarily in the United Kingdom (U.K.), that were reserved with a valuation allowance as well as the establishment of a valuation allowance against the deferred tax assets in Mexico.
−Removed: While in Fiscal 2020, discrete items recorded in the third quarter 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.
−Removed: 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.
−Removed: 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.
+Added: The income tax provision for Fiscal 2021 was favorably impacted by the estimated R&D Tax Credit as well as the utilization of net operating loss carryforwards in Canada that were fully reserved with a valuation allowance.
+Added: In Fiscal 2021, the tax provision was negatively impacted by the losses recognized in other foreign jurisdictions, primarily in the U.K., that were reserved with a valuation allowance as well as the establishment of a valuation allowance against the deferred tax assets in Mexico.
We record and maintain valuation allowances against the deferred tax assets of various foreign jurisdictions until sufficient evidence is available to demonstrate that it is more likely than not that the net deferred tax assets will be recognized.
As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.
−Removed: During the period ended June 30, 2022, management determined that there was sufficient positive evidence to conclude that Canadian net deferred tax assets of $ 5.9 million were realizable.
−Removed: This determination was based on current and anticipated market conditions, continued market diversification, operating results over the past three years and anticipated future taxable income from our Canadian operations.
+Added: During the period ended September 30, 2023, management determined that there was sufficient positive evidence to conclude that the U.K.
+Added: net deferred tax assets of $ 1.9 million were realizable.
+Added: This determination was based on operating results over the past three years and anticipated future taxable income from our U.K.
The valuation allowance was released accordingly, and a $ 1.9 million tax benefit and corresponding increase in the deferred tax assets were recorded.
−Removed: During our assessment of deferred income taxes in Fiscal 2020 and 2021, we recorded a valuation allowance of $ 0.5 million against our U.K.
−Removed: net deferred tax assets in the second quarter of Fiscal 2020 and a valuation allowance of $ 0.1 million against our Mexican net deferred tax assets in the fourth quarter of Fiscal 2021.
−Removed: 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.
−Removed: and Mexican tax losses and anticipated results in the near term.
+Added: Likewise, during the period ended June 30, 2022, management concluded that Canadian net deferred tax assets of $ 5.9 million were realizable based on current and anticipated market conditions, continued market diversification, operating results over the past three years and anticipated future taxable income from our Canadian operations.
+Added: The release of the Canadian valuation allowance resulted in a $ 5.9 million tax benefit and a corresponding increase in the deferred tax assets.
+Added: During our assessment of deferred income taxes in Fiscal 2021, we recorded a valuation allowance of $ 0.1 million against our Mexican net deferred tax assets.
+Added: 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 Mexican 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.
5 unchanged sentences
We do not consider any state in which we do business to be a major tax jurisdiction.
−Removed: We remain open to examination in the other jurisdictions as follows:
−Removed: Canada 2015 – 2021, United Kingdom 2021 and the United States 2019 – 2021.
+Added: The significant jurisdictions that remain open to examination are as follows:
+Added: Canada 2016 – 2022, U.K.
+Added: 2022 and the U.S.
As of September 30, 2023, we did not have any state audits underway that would have a material impact on our financial position or results of operations.
9 unchanged sentences
Net operating loss $ 7,432 $ 10,186
−Removed: Credit carryforwards 1,332 1,598
+Added: Depreciation and amortization 4,573 —
Deferred compensation 2,274 1,897
−Removed: Uniform capitalization and inventory 1,506 1,222
Stock-based compensation 1,555 1,083
+Added: Credit carryforwards 1,378 1,332
+Added: Uniform capitalization and inventory 1,253 1,506
Reserve for accrued employee benefits 988 872
Warranty accrual 752 559
−Removed: Accrued legal 161 130
−Removed: Postretirement benefits liability — 156
−Removed: Other 345 326
Deferred tax assets $ 20,522 $ 17,941
5 unchanged sentences
Net deferred tax asset $ 17,064 $ 9,161
−Removed: As of September 30, 2022, our tax credit carryforwards are fully reserved with a valuation allowance.
−Removed: We had deferred tax assets related to international net operating loss carryforwards of $ 7.7 million that were not reserved with a valuation allowance available to offset future tax liabilities in the respective jurisdictions.
+Added: (1) Certain prior year amounts have been reclassified for consistency with the current year presentation.
+Added: We have deferred tax assets related to international net operating loss carryforwards of $ 6.8 million that are not reserved with a valuation allowance available to offset future tax liabilities in the respective jurisdictions.
The majority of these net operating loss carryforwards are related to our Canadian operations and expire beginning in 2033.
−Removed: The remaining unreserved carryforwards related to other jurisdictions have an indefinite carryforward period.
−Removed: We have established a valuation allowance in the amount of $ 3.8 million primarily related to the U.K.
−Removed: net deferred tax assets.
−Removed: The net decrease in the total valuation allowance during the year was $ 6.7 million which was largely a result of the reversal of the Canadian valuation allowance.
+Added: The remaining unreserved net operating loss carryforwards related to other jurisdictions have an indefinite carryforward period.
+Added: As of September 30, 2023, the majority of our tax credit carryforwards are fully reserved with a valuation allowance.
+Added: The net decrease in the total valuation allowance during the year was $ 1.8 million, which was largely a result of the reversal of the U.K.
+Added: valuation allowance.
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.
13 unchanged sentences
Management believes that, within the next twelve months, it is reasonably possible that the unrecognized tax benefits will decrease by approximately $ 0.6 million due to the expiration of certain federal statutes of limitations.
−Removed: 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 years ended September 30, 2019 – 2022.
+Added: We are unable to make
+Added: 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 years ended September 30, 2019 – 2023.
Management believes that an adequate provision has been made for any adjustments that may result from tax examinations.
7 unchanged sentences
Deferred Compensation
−Removed: We offer a non-qualified deferred compensation plan to a select group of management and highly compensated individuals.
−Removed: The plan permits the deferral of up to 50 % of a participant’s base salary and/or 100 % of a participant’s annual incentive bonus.
+Added: We offer a non-qualified deferred compensation plan to a select group of highly compensated individuals (as defined).
+Added: The plan permits the deferral of up to 50 % of a participant’s base salary and/or 100 % of a participant’s annual incentive.
The deferrals are held in a separate irrevocable rabbi trust (the Rabbi Trust), which has been established to administer the plan.
2 unchanged sentences
Consequently, the Rabbi Trust qualifies as a grantor trust for income tax purposes.
−Removed: We make periodic payments into company-owned life insurance policies held in this Rabbi Trust to fund the expected obligations arising under this plan.
−Removed: 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.
+Added: We make periodic payments into company-owned life insurance policies held in the Rabbi Trust to fund the expected obligations arising under this plan.
+Added: Changes in the deferred compensation balance are recorded to compensation expense and reflected within the selling, general and administrative expenses line in the Consolidated Statements of Operations.
The plan is not qualified under Section 401 of the Internal Revenue code.
−Removed: We recorded net compensation expense adjustments of $ 0.3 million related to this plan in Fiscal 2022.
−Removed: At September 30, 2022, total assets held by the trustee were $ 7.7 million and recorded in other assets and the liability was $ 7.7 million and recorded in deferred compensation in our Consolidated Balance Sheets.
−Removed: The $ 7.7 million of assets held by the trustee is invested in company-owned life insurance policies.
−Removed: Certain former executives were provided an executive benefit plan that provides for fixed payments upon normal retirement on or after age 65 and the completion of at least 10 years of continuous employment.
−Removed: The estimated present value of these payments was accrued over the service life of these individuals, and less than $ 0.1 million is recorded in deferred compensation related to this executive benefit plan.
−Removed: To assist in funding the deferred compensation liability, we invested in company-owned life insurance policies.
−Removed: The cash surrender value of these policies is presented in other assets and was $ 3.4 million at September 30, 2022.
+Added: We recorded net compensation expense adjustments of $ 0.8 million related to this plan in Fiscal 2023 and $ 0.3 million in Fiscal 2022.
+Added: At September 30, 2023, total assets held in the Rabbi Trust were $ 9.1 million and recorded in other assets and the liability was $ 9.1 million and recorded in deferred compensation in our Consolidated Balance Sheets.
+Added: The $ 9.1 million of assets held in the Rabbi Trust is invested in company-owned life insurance policies.
Retiree Medical Plan
1 unchanged sentence
The current plan provides coverage for employees with at least 10 years of service who are age 55 or older but less than 65 .
−Removed: Effective January 1, 2023, eligibility requirements to participate in the plan are changing.
−Removed: At that time, current employees between the ages of 50 to 64 will be eligible to participate in the retiree medical plan once they have completed at least 10 years of service and retire between the ages of 60 and 64 .
+Added: Effective January 1, 2023, eligibility for postretirement medical benefits changed to age 60 with 10 years of continuous service.
+Added: Employees who are under age 50 as of January 1, 2023 or who are hired after January 1, 2023 are no longer eligible for postretirement medical benefits.
The retiree is required to pay the COBRA rate less a subsidy provided by us based on years of service at the time of retirement.
The unfunded liability is recorded in other long-term liabilities and was $ 0.5 million as of September 30, 2023 and $ 0.4 million as of September 30, 2022.
−Removed: Our net periodic postretirement benefit expenses were $ 0.1 million in Fiscal 2022 and less than $ 0.1 million for both Fiscal 2021 and 2020.
+Added: Our net periodic postretirement costs were immaterial for all periods presented in the Consolidated Statements of Operations.
Due to the immateriality of the costs and liabilities of this plan, no further disclosure is being presented.
4 unchanged sentences
Persons eligible to receive awards under the 2014 Plan include our officers and employees.
−Removed: The 2014 Plan authorizes stock options, stock appreciation rights, restricted stock, restricted stock units and performance-based awards, as well as certain other awards.
−Removed: In accordance with the 2014 Plan, the Compensation Committee has authorized grants of restricted stock units (RSUs) to certain officers and key employees of the company.
+Added: The 2014 Plan authorizes stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs) and performance-based awards, as well as certain other awards.
+Added: On February 15, 2023, at the 2023 Annual Meeting of Stockholders, our stockholders approved an amendment to the 2014 Plan that extended the term of the 2014 Plan by five years and increased the number of shares of common stock that may be issued under the plan by 600,000 shares for a total of 1,350,000 shares.
+Added: In accordance with the 2014 Plan, the Compensation Committee has authorized grants of RSUs to certain officers and key employees of the Company.
The fair value of the RSUs is based on the price of our common stock as reported on the NASDAQ Global Market on the grant dates.
12 unchanged sentences
Outstanding at September 30, 2023 292,497 $ 22.90
−Removed: We have reserved 750,000 shares of common stock for issuance under the 2014 Plan.
Restricted Stock
3 unchanged sentences
Under the terms of the 2014 Director Plan, the maximum number of shares that may be granted during any calendar year to any individual is 12,000 shares.
−Removed: The total number of shares that may be issued for awards to any single participant during a calendar year for other stock-based awards (excluding stock options and SARs) is 4,000 shares.
+Added: The total number of shares that may be issued for awards to any single participant during a calendar year for other stock-based awards (excluding stock options and stock appreciation rights) is 4,000 shares.
The Compensation Committee has determined that each non-employee director will receive 2,400 restricted shares of the Company’s common stock annually.
−Removed: Fifty percent of the restricted stock granted to each of our non-employee directors vests immediately, while the remaining fifty
−Removed: percent vests on the anniversary of the grant date.
+Added: 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 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.
17 unchanged sentences
Level 1 — Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
−Removed: Level 2 — Inputs other than the quoted prices in active markets that are observable either directly or indirectly, including:
−Removed: quoted prices for similar assets and liabilities in active markets;
+Added: Level 2 — Inputs other than the quoted prices in active markets that are observable either directly or indirectly, including quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.
28 unchanged sentences
Short-term Investments – Short-term investments include time deposits with original maturities of three months or more.
−Removed: Other Assets and Deferred Compensation – We hold investments in an irrevocable Rabbi Trust for our deferred compensation plan.
+Added: Other Assets and Deferred Compensation – We hold investments in the Rabbi Trust for our deferred compensation plan.
The assets are primarily related to company-owned life insurance policies and are included in other assets in the accompanying Consolidated Balance Sheets.
3 unchanged sentences
There were no transfers between levels within the fair value measurement hierarchy during the year ended September 30, 2023.
−Removed: Our leases consist primarily of office and manufacturing space, construction equipment and office equipment.
+Added: Our leases consist primarily of office space and construction equipment.
All of our future lease obligations are related to non-cancelable operating leases.
−Removed: The most significant portion of our lease portfolio relates to leases of office and manufacturing facilities in Canada which we no longer occupy.
−Removed: We currently sublease the majority of these Canadian facilities.
+Added: The decrease of our lease portfolio relates to the wind down of our Canadian facility leases.
The following table provides a summary of lease cost components for the years ended September 30, 2023, 2022 and 2021 respectively (in thousands):
4 unchanged sentences
Short-term lease cost (2)
+Added: 1,864 1,643 1,281
Total lease cost $ 3,175 $ 3,561 $ 3,453
3 unchanged sentences
Leases with initial terms of twelve months or less are not recorded in our Consolidated Balance Sheets.
−Removed: As of September 30, 2022 and 2021, our operating lease assets have been reduced
−Removed: by a lease accrual of $ 0.1 million and $ 0.4 million, respectively, 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, 2023 and 2022, respectively (in thousands):
10 unchanged sentences
Present value of lease liabilities $ 1,436
−Removed: The weighted average discount rate as of September 30, 2022 was 3.73 %.
−Removed: The weighted average remaining lease term was 1.51 years at September 30, 2022.
+Added: The weighted average discount rate as of September 30, 2023 and 2022 was 3.32 % and 3.73 %, respectively.
+Added: The weighted average remaining lease term was 2.67 years and 1.51 years, respectively, at September 30, 2023 and 2022.
Segment Information
20 unchanged sentences
2023 Quarters
−Removed: Second Third (2)
Revenues $ 126,858 $ 171,444 $ 192,365 $ 208,641 $ 699,308
5 unchanged sentences
(1) The results for the first quarter of Fiscal 2023 demonstrated normal seasonality and were negatively impacted by holidays and work schedules compared to other quarterly periods.
−Removed: (2) The results for the third quarter of Fiscal 2022 were positively impacted by the release of a $ 5.9 million Canadian valuation allowance and a $ 2.0 million pre-tax gain on the sale of a non-core business within our Canadian operations.
−Removed: (3) The results for the fourth quarter of Fiscal 2022 were positively impacted by a $ 2.5 million settlement of a claim for cost overruns from prior years related to a U.S.
−Removed: based municipal transit project.
+Added: (2) The results for the second quarter of Fiscal 2023 were positively impacted by a project cancellation of $ 1.6 million.
+Added: (3) The results for the third quarter of Fiscal 2023 were positively impacted by a project cancellation of $ 1.7 million.
+Added: (4) The results for the fourth quarter of Fiscal 2023 were positively impacted by project cancellations of $ 1.0 million and the reversal of a $ 1.9 million valuation allowance against the U.K.
+Added: net deferred tax assets.
2022 Quarters
+Added: Second Third (2)
Revenues $ 106,569 $ 127,854 $ 135,483 $ 162,676 $ 532,582
5 unchanged sentences
(1) The results for the first quarter of Fiscal 2022 demonstrated normal seasonality and were negatively impacted by holidays and work schedules compared to other quarterly periods.
−Removed: Gross profit decreased during the first three quarters of Fiscal 2021 as compared to Fiscal 2020 due to a decrease in volume, as well as project delays and cancellations of potential projects associated with the global economic impact resulting from the COVID-19 pandemic and associated reduction in demand across our industrial end markets.
−Removed: (2) The results for the fourth quarter of Fiscal 2021 were positively impacted by higher volume and favorable productivity across the service and manufacturing entities.
+Added: (2) The results for the third quarter of Fiscal 2022 were positively impacted by the release of a $ 5.9 million Canadian valuation allowance and a $ 2.0 million pre-tax gain on the sale of a non-core business within our Canadian operations.
+Added: (3) The results for the fourth quarter of Fiscal 2022 were positively impacted by a $ 2.5 million settlement of a claim for cost overruns from prior years related to a U.S.
+Added: based municipal transit project.
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.
1 unchanged sentence
We recorded a $ 2.0 million pre-tax gain on this transaction, which has been presented in other income on our Consolidated Statement of Operations for the year ended September 30, 2023.
−Removed: Separation Costs
−Removed: 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.
−Removed: 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 Event
Quarterly Dividend Declared
−Removed: On November 3, 2022, our Board of Directors declared a quarterly cash dividend on our common stock in the amount of $ 0.26 per share.
+Added: On October 31, 2023, our Board of Directors declared a quarterly cash dividend on our common stock in the amount of $ 0.2625 per share.
The dividend is payable on December 13, 2023 to shareholders of record at the close of business on November 15, 2023.
1 unchanged sentence
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.