What changed in this filing

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Item 1. Financial Statements

2024-07-31 compared with 2024-05-01 · 96 added, 62 removed, 522 unchanged (23% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

March 31, 2024 September 30, 2023

June 30, 2024 September 30, 2023

Current Assets:

35 unchanged sentences

30,000,000 shares authorized;

12,793,856 and 12,668,001 shares issued, respectively;

11,987,838 and 11,861,983 shares outstanding, respectively

Shares issued:

12,793,856 and 12,668,001 , respectively

Shares outstanding:

11,987,838 and 11,861,983 , respectively

Additional paid-in capital 69,305 71,526

10 unchanged sentences

(In thousands, except per share data)

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

21 unchanged sentences

(In thousands)

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

1 unchanged sentence

Foreign currency translation adjustments ( 986 ) 2,089 ( 170 ) 4,694

Gain on cash flow commodity hedge — 111 — 329

Gain (loss) on cash flow commodity hedge — ( 35 ) — 293

Comprehensive income $ 45,237 $ 20,508 $ 103,626 $ 33,077

20 unchanged sentences

Balance, March 31, 2024 12,794 $ 128 $ 68,348 $ 376,401 ( 806 ) $ ( 24,999 ) $ ( 26,093 ) $ 393,785

Net income — — — 46,223 — — — 46,223

Foreign currency translation adjustments — — — — — — ( 986 ) ( 986 )

Stock-based compensation — — 957 — — — — 957

Shares withheld in lieu of employee tax withholding — — — — — — — —

Issuance of restricted stock — — — — — — — —

Dividends — — — ( 3,240 ) — — — ( 3,240 )

Balance, June 30, 2024 12,794 $ 128 $ 69,305 $ 419,384 ( 806 ) $ ( 24,999 ) $ ( 27,079 ) $ 436,739

The accompanying notes are an integral part of these condensed consolidated financial statements.

POWELL INDUSTRIES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands)

Additional Other

16 unchanged sentences

Balance, March 31, 2023 12,667 $ 126 $ 69,955 $ 286,777 ( 806 ) $ ( 24,999 ) $ ( 26,064 ) $ 305,795

Net income — — — 18,454 — — — 18,454

Foreign currency translation adjustments — — — — — — 2,089 2,089

Stock-based compensation — — 958 — — — — 958

Shares withheld in lieu of employee tax withholding — — — — — — — —

Issuance of restricted stock — — — — — — — —

Dividends — — — ( 3,191 ) — — — ( 3,191 )

Loss on cash flow commodity hedge — — — — — — ( 35 ) ( 35 )

Balance, June 30, 2023 12,667 $ 126 $ 70,913 $ 302,040 ( 806 ) $ ( 24,999 ) $ ( 24,010 ) $ 324,070

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Six months ended March 31,

Nine months ended June 30,

Operating Activities:

22 unchanged sentences

Proceeds from sale of property, plant and equipment 26 12

Net cash provided by (used in) investing activities ( 11,248 ) 346

Net cash used in investing activities ( 12,976 ) ( 15,398 )

Financing Activities:

19 unchanged sentences

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

We are headquartered in Houston, Texas, and serve the oil and gas and petrochemical markets, which include onshore and offshore production, liquefied natural gas (LNG) facilities and terminals, pipelines, refineries and petrochemical plants.

Additional markets include electric utility, data centers, renewable energy, mining and metals, light rail traction power, pulp and paper, and other municipal, commercial and industrial markets.

We are headquartered in Houston, Texas, and serve the oil and gas and petrochemical markets that include onshore and offshore production, hydrogen, carbon capture, liquefied natural gas (LNG) facilities and terminals, pipelines, refineries and petrochemical plants.

Additional markets include electric utility, light rail traction power, and commercial and other industrial markets that include end markets such as data centers, mining and metals, and pulp and paper.

Basis of Presentation

45 unchanged sentences

The following table reconciles basic and diluted weighted average shares used in the computation of earnings per share (in thousands, except per share data):

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

8 unchanged sentences

The components of inventories are summarized below (in thousands):

March 31, 2024 September 30, 2023

June 30, 2024 September 30, 2023

Raw materials, parts and sub-assemblies $ 90,839 $ 68,631

4 unchanged sentences

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

March 31, 2024 September 30, 2023

June 30, 2024 September 30, 2023

Land $ 21,563 $ 21,526

6 unchanged sentences

Total property, plant and equipment, net $ 96,468 $ 97,625

There were no assets under finance lease as of March 31, 2024 or September 30, 2023.

There were no assets under finance lease as of June 30, 2024 or September 30, 2023.

Intangible Asset

2 unchanged sentences

Activity in our product warranty accrual consisted of the following (in thousands):

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

16 unchanged sentences

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 95 % of revenues for the three months ended March 31, 2024, 94 % of revenues for the six months ended March 31, 2024, and 93 % of revenues for the three and six months ended March 31, 2023.

Revenues from our custom-engineered products and value-added services transferred to customers over time accounted for approximately 96 % and 95 % of revenues for the three and nine months ended June 30, 2024, respectively, and approximately 94 % and 93 % of revenues for the three and nine months ended June 30, 2023, 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 5 % of revenues for the three months ended March 31, 2024, 6 % of revenues for the six months ended March 31, 2024, and 7 % of revenues for the three and six months ended March 31, 2023.

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 4 % and 5 % of revenues for the three and nine months ended June 30, 2024, respectively, and approximately 6 % and 7 % of revenues for the three and nine months ended June 30, 2023, respectively.

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.

As of March 31, 2024, we had backlog of $ 1.3 billion, of which approximately $ 733 million is expected to be recognized as revenue within the next twelve

As of June 30, 2024, we had backlog of $ 1.3 billion, of which approximately $ 841 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.

7 unchanged sentences

Whenever revisions of estimated contract costs and contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period.

For the six months ended March 31, 2024 and 2023, our operating results were positively impacted by $ 7.8 million and $ 7.4 million, respectively, as a result of net changes in contract estimates related to projects in progress at the beginning of the respective period.

For the nine months ended June 30, 2024 and 2023, our operating results were positively impacted by $ 14.2 million and $ 13.2 million, respectively, as a result of net changes in contract estimates related to projects in progress at the beginning of the respective period.

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.

Gross unfavorable changes in contract estimates were immaterial for both the six months ended March 31, 2024 and 2023.

Project cancellations on two projects increased gross profit for the nine months ended June 30, 2023 by $ 3.4 million.

Gross unfavorable changes in contract estimates were immaterial for both the nine months ended June 30, 2024 and 2023.

Variable Consideration

13 unchanged sentences

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.

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

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.

Contract assets and liabilities as of March 31, 2024 and September 30, 2023 are summarized below (in thousands):

March 31, 2024 September 30, 2023

Contract assets and liabilities as of June 30, 2024 and September 30, 2023 are summarized below (in thousands):

June 30, 2024 September 30, 2023

Contract assets $ 90,955 $ 60,621

1 unchanged sentence

Net contract liability $ ( 191,969 ) $ ( 219,175 )

Our net contract billing position remained a net liability at both March 31, 2024 and September 30, 2023, primarily due to favorable contract billing milestones.

Our net contract billing position remained a net liability at both June 30, 2024 and September 30, 2023, primarily due to favorable contract billing milestones.

We typically allocate a significant percentage of the progress billing to the early stages of the contract.

These favorable billing milestones are driving the increase in the net contract liability at March 31, 2024.

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.

During the six months ended March 31, 2024, we recognized revenue of $ 185.4 million that was related to contract liabilities outstanding at September 30, 2023.

During the nine months ended June 30, 2024, we recognized revenue of $ 228.9 million that was related to contract liabilities outstanding at September 30, 2023.

The timing of our invoice process is typically dependent on the completion of certain milestones and contract terms and subject to agreement by our customer.

3 unchanged sentences

Based on our experience in recent years, the majority of these retainage balances are expected to be collected within approximately twelve months.

As of both March 31, 2024 and September 30, 2023, we had retention amounts of $ 7.4 million.

Of the retained amount at March 31, 2024, $ 7.1 million is expected to be collected in the next twelve months and is recorded in accounts receivable.

As of June 30, 2024 and September 30, 2023, we had retention amounts of $ 6.6 million and $ 7.4 million, respectively.

Of the retained amount at June 30, 2024, $ 5.9 million is expected to be collected in the next twelve months and is recorded in accounts receivable.

The remaining $ 0.7 million is recorded in other assets.

Disaggregation of Revenue

The following tables present our disaggregated revenue by geographic destination and market sector for the three and six months ended March 31, 2024 and 2023 (in thousands):

Three months ended March 31, Six months ended March 31,

The following tables present our disaggregated revenue by geographic destination and market sector for the three and nine months ended June 30, 2024 and 2023 (in thousands):

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

6 unchanged sentences

Total revenues by geographic destination $ 288,168 $ 192,365 $ 737,293 $ 490,667

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

13 unchanged sentences

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 March 31, 2024, there were no amounts borrowed under the U.S.

On June 26, 2024, in connection with the expected discontinuation of the publication of the Canadian Dollar Offered Rate (CDOR), we further amended the U.S.

Revolver by entering into a Canadian benchmark replacement conforming changes amendment with Bank of America, N.A.

that added and amended certain terms related to the replacement of the CDOR as a benchmark rate with the forward-looking term rate based on the Canadian Overnight Repo Rate Average.

As of June 30, 2024, there were no amounts borrowed under the U.S.

Revolver, and letters of credit outstanding were $ 68.4 million.

There was $ 81.6 million available for the issuance of letters of credit and borrowings under the U.S.

Revolver as of March 31, 2024.

As of March 31, 2024, we were in compliance with all of the financial covenants of the U.S.

Revolver as of June 30, 2024.

As of June 30, 2024, we were in compliance with all of the financial covenants of the U.S.

Commitments and Contingencies

4 unchanged sentences

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 $ 87.8 million as of March 31, 2024.

We also had surety bonds totaling $ 481.9 million that were outstanding, with additional bonding capacity of $ 718.1 million available, at March 31, 2024.

We were contingently liable for letters of credit of $ 68.4 million as of June 30, 2024.

We also had surety bonds totaling $ 422.1 million that were outstanding, with additional bonding capacity of $ 777.9 million available, at June 30, 2024.

We have strong surety relationships;

however, a change in market conditions or the sureties' assessment of our financial position could cause the sureties to require cash collateralization for undischarged liabilities under the bonds.

We have an $ 18.9 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 March 31, 2024, we had outstanding guarantees totaling $ 7.4 million, with an additional capacity of $ 11.5 million available under this Facility Agreement.

We have a $ 19.0 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 June 30, 2024, we had outstanding guarantees totaling $ 6.4 million, with an additional capacity of $ 12.6 million available under this Facility Agreement.

The Facility Agreement provides for customary events of default and carries cross-default provisions with the U.S.

1 unchanged sentence

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

As of March 31, 2024, we were in compliance with all of the financial covenants of the Facility Agreement.

As of June 30, 2024, we were in compliance with all of the financial covenants of the Facility Agreement.

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 for which the outcomes are not predictable.

3 unchanged sentences

Each individual contract defines the conditions under which the customer may make a claim against us.

As of March 31, 2024, certain contracts had a probable exposure to liquidated damages claims of $ 1.7 million, which could possibly increase to $ 2.1 million under certain circumstances.

As of June 30, 2024, certain contracts had a probable exposure to liquidated damages claims of $ 2.5 million, which

could possibly increase to $ 2.8 million under certain circumstances.

Based on our actual or projected failure to meet these various contractual commitments, $ 1.7 million has been recorded as a reduction to revenue.

9 unchanged sentences

The performance-based shares vest based on the three-year earnings and safety performance of the Company following the grant date.

At March 31, 2024, there were 193,346 RSUs outstanding.

At June 30, 2024, there were 194,981 RSUs outstanding.

The RSUs do not have voting rights but do receive dividend equivalents upon vesting which are accrued quarterly.

Additionally, the shares of common stock underlying the RSUs are not considered issued and outstanding until vested and common stock is issued.

Total RSU activity (number of shares) for the six months ended March 31, 2024 is summarized below:

Total RSU activity (number of shares) for the nine months ended June 30, 2024 is summarized below:

Units Weighted

3 unchanged sentences

Forfeited/canceled ( 925 ) 120.02

Outstanding at March 31, 2024 193,346 $ 34.34

During the six months ended March 31, 2024 and 2023, we recorded compensation expense of $ 2.7 million and $ 2.5 million, respectively, related to the RSUs.

Outstanding at June 30, 2024 194,981 $ 35.38

During both the nine months ended June 30, 2024 and 2023, we recorded compensation expense of $ 3.4 million related to the RSUs.

Restricted Stock

7 unchanged sentences

In February 2024, 4,620 shares of restricted stock were issued to our non-employee directors at a price of $ 153.81 per share.

During the six months ended March 31, 2024 and 2023, we recorded compensation expense of $ 0.2 million and $ 0.5 million, respectively, related to restricted stock.

During the nine months ended June 30, 2024 and 2023, we recorded compensation expense of $ 0.4 million and $ 0.5 million, respectively, related to restricted stock.

Fair Value Measurements

9 unchanged sentences

Level 3 — Unobservable inputs that are supported by little or no market data and require the reporting entity to develop its own assumptions.

The following table summarizes the fair value of our assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2024 (in thousands):

Fair Value Measurements at March 31, 2024

The following table summarizes the fair value of our assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2024 (in thousands):

Fair Value Measurements at June 30, 2024

Quoted Prices in

30 unchanged sentences

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

There were no transfers between levels within the fair value measurement hierarchy during the quarter ended March 31, 2024.

There were no transfers between levels within the fair value measurement hierarchy during the quarter ended June 30, 2024.

Our leases consist primarily of office and construction equipment.

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

The following table provides a summary of lease cost components for the three and six months ended March 31, 2024 and 2023, respectively (in thousands):

Three months ended March 31, Six months ended March 31,

The following table provides a summary of lease cost components for the three and nine months ended June 30, 2024 and 2023, respectively (in thousands):

Three months ended June 30, Nine months ended June 30,

Lease Cost 2024 2023 2024 2023

9 unchanged sentences

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

The following table provides a summary of the operating lease assets and operating lease liabilities included in our Condensed Consolidated Balance Sheets as of March 31, 2024 and September 30, 2023, respectively (in thousands):

Operating Leases March 31, 2024 September 30, 2023

The following table provides a summary of the operating lease assets and operating lease liabilities included in our Condensed Consolidated Balance Sheets as of June 30, 2024 and September 30, 2023, respectively (in thousands):

Operating Leases June 30, 2024 September 30, 2023

Operating lease assets, net $ 909 $ 1,436

2 unchanged sentences

Total lease liabilities $ 909 $ 1,436

The following table provides the maturities of our operating lease liabilities as of March 31, 2024 (in thousands):

The following table provides the maturities of our operating lease liabilities as of June 30, 2024 (in thousands):

Operating Leases

3 unchanged sentences

Present value of lease liabilities $ 909

The weighted average discount rate as of March 31, 2024 was 3.81 %.

The weighted average remaining lease term was 2.57 years at March 31, 2024.

The weighted average discount rate as of June 30, 2024 was 3.82 %.

The weighted average remaining lease term was 2.42 years at June 30, 2024.

The calculation of the effective tax rate is as follows (in thousands):

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

3 unchanged sentences

Effective tax rate 25 % 22 % 23 % 22 %

Our income tax provision reflects an effective tax rate on pre-tax income of 24 % and 22 % for the three and six months ended March 31, 2024, respectively, compared to 23 % for both the three and six months ended March 31, 2023.

The effective tax rate for the three and six months ended March 31, 2024 was favorably impacted by the estimated Research and Development Tax Credit (R&D Tax Credit) as well as discrete items related to the vesting of RSUs and the release of a reserve for unrecognized tax benefits upon expiration of the statute of limitations.

These items were offset by an inclusion related to U.S.

Our income tax provision reflects an effective tax rate on pre-tax income of 25 % and 23 % for the three and nine months ended June 30, 2024, respectively, compared to 22 % for both the three and nine months ended June 30, 2023.

The effective tax rate for the three and nine months ended June 30, 2024 was favorably impacted by the estimated Research and Development Tax Credit (R&D Tax Credit).

The effective tax rate for the nine months ended June 30, 2024 was also favorably impacted by discrete items primarily related to the vesting of RSUs.

These items were offset by an income inclusion related to U.S.

global intangible income and the tax expense related to certain nondeductible expenses.

The effective tax rate for the three and six months ended March 31, 2023 was favorably impacted by the estimated R&D Tax Credit and the projected utilization of net operating loss carryforwards in the U.K.

The effective tax rate for the three and nine months ended June 30, 2023 approximated the U.S.

federal statutory rate and was favorably impacted by the estimated R&D Tax Credit and the projected utilization of net operating loss carryforwards in the U.K.

that had been fully reserved with a valuation allowance.

2 unchanged sentences

Subsequent Events

Cash Acquisition of Property, Plant and Equipment

On July 1, 2024, we acquired land and buildings in Houston, Texas, for a total cash purchase price of approximately $ 5.5 million to help further facilitate executing the current backlog as well as planning for modest future volume growth.

Hurricane Beryl

During the second week of July 2024, operations across our three facilities located in Houston, Texas, experienced a temporary power outage and subsequent shutdown of our operations resulting from Hurricane Beryl.

These facilities resumed limited operations within the same week.

We are evaluating the potential financial impact, if any, associated with this event.

Quarterly Dividend Declared

On April 30, 2024, our Board of Directors declared a quarterly cash dividend on our common stock in the amount of $ 0.2650 per share.

The dividend is payable on June 12, 2024 to stockholders of record at the close of business on May 15, 2024.

On July 30, 2024, our Board of Directors declared a quarterly cash dividend on our common stock in the amount of $ 0.2650 per share.

The dividend is payable on September 18, 2024 to stockholders of record at the close of business on August 14, 2024.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

56 unchanged sentences

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-Q

Item 1. Financial Statements