What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-11-20 compared with 2023-12-06 · 151 added, 119 removed, 768 unchanged (26% of the section changed)

32 unchanged sentences

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

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;

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;

13 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.

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.

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.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the determination of total estimated costs at completion of the performance obligation and determination of total contract price.

These procedures also included, among others, evaluating and testing management’s process for determining the estimated total cost and revenue for a sample of contracts, which included (i) obtaining executed purchase orders and agreements, (ii) evaluating the appropriateness of the method to measure estimated total cost and revenue, (iii) testing the completeness and accuracy of the underlying data used by management, and (iv) evaluating the reasonableness of significant assumptions related to the total estimated costs at completion and liquidated damages used by management and considering the factors that can affect the accuracy of those estimates.

Evaluating the reasonableness of significant assumptions related to estimated total cost involved assessing management’s ability to reasonably estimate total costs to complete and liquidated damages by testing management’s process to evaluate the remaining direct materials, labor, and indirect costs related to the performance obligation and evaluating the timely identification of circumstances which may warrant a modification to the total estimated costs or liquidated damages.

the accuracy of those estimates.

Evaluating the reasonableness of significant assumptions related to estimated total cost involved assessing management’s ability to reasonably estimate total costs to complete and liquidated damages by testing management’s process to evaluate the remaining costs related to the performance obligation and evaluating the timely identification of circumstances which may warrant a modification to the total estimated costs or liquidated damages.

/s/ PricewaterhouseCoopers LLP

Houston, Texas

December 6, 2023

November 20, 2024

We have served as the Company’s auditor since 2004.

7 unchanged sentences

Short-term investments 43,061 33,134

Accounts receivable, less allowance for credit losses of $ 273 and $ 344

Accounts receivable, less allowance for credit losses of $ 414 and $ 273 , respectively

214,405 206,591

8 unchanged sentences

Goodwill and intangible assets, net 1,503 1,003

Deferred income taxes 17,064 9,161

Deferred income tax assets 27,246 17,064

Other assets 18,313 13,129

12 unchanged sentences

Long-term operating lease liabilities 621 663

Deferred income tax liabilities 2,708 —

Other long-term liabilities 1,736 1,722

6 unchanged sentences

30,000,000 shares authorized;

12,668,001 and 12,588,011 shares issued, respectively

Shares issued:

12,795,256 and 12,668,001 , respectively

Shares outstanding:

11,989,238 and 11,861,983 , respectively

Additional paid-in capital 70,111 71,526

17 unchanged sentences

Research and development expenses 9,427 6,220 6,963

Amortization of intangible assets — — 157

Operating income 178,773 62,520 7,224

Other expenses (income):

Other income — — ( 2,285 )

39 unchanged sentences

Dividends — — 77 ( 12,604 ) — — — ( 12,527 )

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 )

Loss on cash flow commodity hedge — — — — — — ( 325 ) ( 325 )

Gain on cash flow commodity hedge — — — — — — 325 325

Postretirement benefit adjustment, net of tax of $ 40

6 unchanged sentences

Dividends — — 438 ( 12,935 ) — — — ( 12,497 )

Gain on cash flow commodity hedge — — — — — — 325 325

Postretirement benefit adjustment, net of tax of $ 4

11 unchanged sentences

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization 8,606 9,358 10,335

Depreciation 6,871 8,606 9,358

Gain on sale of division — — ( 2,006 )

Stock-based compensation 4,747 4,599 4,090

Unrealized mark-to-market gain on derivative contracts ( 326 ) — —

Bad debt expense, net 278 ( 54 ) 162

16 unchanged sentences

Proceeds from sale of property, plant and equipment 107 12 629

Proceeds from life insurance policy — — 474

Purchase of intangible assets ( 250 ) — —

Net cash provided by (used in) investing activities ( 21,874 ) ( 26,574 ) 6,465

4 unchanged sentences

Net cash used in financing activities ( 19,252 ) ( 13,059 ) ( 13,308 )

Net increase (decrease) in cash, cash equivalents and restricted cash 142,920 ( 10,425 ) ( 46,099 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash 1,001 ( 1,935 ) 197

Cash, cash equivalents and restricted cash at beginning of period 101,954 114,314 160,216

Cash, cash equivalents and restricted cash at end of period $ 245,875 $ 101,954 $ 114,314

Net increase (decrease) in cash and cash equivalents 67,535 142,920 ( 10,425 )

Effect of exchange rate changes on cash and cash equivalents 1,921 1,001 ( 1,935 )

Cash and cash equivalents at beginning of period 245,875 101,954 114,314

Cash and cash equivalents at end of period $ 315,331 $ 245,875 $ 101,954

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

4 unchanged sentences

Powell Industries, Inc.

(we, us, our, Powell or the Company) was incorporated in the state of Delaware in 2004 as a successor to a Nevada company incorporated in 1968.

The Nevada company was the successor to a company founded by William E.

Powell in 1947, which merged into the Company in 1977.

(we, us, our, Powell or the Company) is a Delaware corporation founded by William E.

Powell in 1947.

Our major subsidiaries, all of which are wholly owned, include Powell Electrical Systems, Inc.;

2 unchanged sentences

and Powell Industries International, B.V.

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, switches and bus duct systems.

We are headquartered in Houston, Texas, and primarily serve the oil and gas and petrochemical markets, the electric utility market, and commercial and other industrial markets.

Beyond these major markets, we also provide products and services to the light rail traction power market and other markets that include universities and government entities.

We are continuously developing new channels to electrical markets through original equipment manufacturers and distribution market channels.

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 c ontrol centers, switches and bus duct systems.

These products are designed for application voltages ranging from 480 volts to 38,000 volts.

Our products are used in the oil and gas markets, onshore and offshore production, liquefied natural gas (LNG) facilities and terminals, pipeline, refineries and petrochemical plants.

Additionally, we manufacture products for the electric utility, light rail traction power as well as mining and metals, pulp and paper and other municipal, commercial and other industrial markets.

Our product scope includes designs tested to meet both United States (U.S.) and international standards, under both the American National Standards Institute (ANSI) and International Electrotechnical Commission (IEC).

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.

We also provide spare parts, retrofit and retrofill components for existing systems, and replacement circuit breakers for obsolete switchgear no longer produced by the original manufacturer.

Our principal services include field service inspection, installation, commissioning, modification and repair services.

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.

8 unchanged sentences

GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying footnotes.

The most significant estimates used in our consolidated financial statements affect revenue recognition and estimated cost recognition on our customer contracts, the allowance for credit losses, provision for excess and obsolete inventory, warranty accruals and income taxes.

The most significant estimates used in our consolidated financial statements affect revenue recognition and estimated cost recognition on our customer contracts, allowance for credit losses, provision for excess and obsolete inventory, warranty accruals and income taxes.

The amounts recorded for warranties, legal, income taxes, impairment of long-lived assets (when applicable), liquidated damages and other contingent liabilities require judgments regarding the amount of expenses that will ultimately be incurred.

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.

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.

Additionally, the basis for 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.

23 unchanged sentences

Of the retained amount at September 30, 2024, $ 6.1 million is expected to be collected in the next twelve months and is recorded in accounts receivable.

The remaining $ 0.2 million is recorded in other assets and is expected to be collected in the fiscal year ending September 30, 2025.

The remaining $ 1.0 million is recorded in other assets and is expected to be collected beyond September 30, 2025.

Contract Balances

40 unchanged sentences

Revenue from these contracts is generally recognized over time utilizing the cost-to-cost method.

Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance

Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

We 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.

1 unchanged sentence

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.

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.

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.

34 unchanged sentences

We account for forfeitures as they occur, rather than estimate expected forfeitures.

Accounting Standards Updates and Disclosure Rules Issued but Not Yet Adopted

In November 2023, the Financial Accounting Standard Board (FASB) issued Accounting Standards Update (ASU) 2023-07,

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires that public entities disclose significant segment expenses that are regularly provided to the chief operating decision maker (CODM) on an annual and interim basis.

It also requires that public entities disclose the title and position of the CODM and an explanation of how the CODM uses the reported measures in assessing segment performance and resource allocation.

Additionally, it requires that all existing annual disclosures about segment profit or loss and assets must be provided on an interim basis and clarifies that single

reportable segment entities are subject to the disclosure requirement under Topic 280 in its entirety.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within those fiscal years beginning after December 15, 2024.

A public entity should apply ASU 2023-07 retrospectively to all prior periods presented in the financial statements.

Early adoption is permitted.

We are currently evaluating the impacts of the new standard.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , which enhances the transparency of income tax disclosures.

It requires greater disaggregation of information in the tax rate reconciliation and income taxes paid disaggregated by jurisdiction.

This ASU is effective for fiscal years beginning after December 15, 2024, and should be applied on a prospective basis.

Retrospective application and early adoption are permitted.

We are currently evaluating the impacts of the new standard.

In March 2024, the SEC adopted final rules designed to enhance and standardize disclosures related to the risks and impacts of climate-related matters.

The final rules require registrants to disclose certain climate-related information in registration statements and annual reports.

Such information relates to climate-related risks and risk management processes for, and governance and oversight activities of, such risks.

The final rules also include requirements to disclose the financial effects of severe weather events and other natural conditions in the audited financial statements.

In addition, larger registrants will be required to disclose information about greenhouse gas emissions, which will be subject to a phased-in assurance requirement.

These disclosure requirements were scheduled to be effective for the Company's fiscal year beginning October 1, 2025.

However, in April 2024, the SEC voluntarily stayed the final rules as a result of pending legal challenges.

We are currently evaluating the impacts of the final rules on our consolidated financial statements and related disclosures.

Earnings Per Share

6 unchanged sentences

Weighted average basic shares 11,982 11,879 11,797

Dilutive effect of restricted stock units 241 146 84

Dilutive effect of restricted stock and restricted stock units 206 241 146

Weighted average diluted shares 12,188 12,120 11,943

23 unchanged sentences

Depreciation expense was $ 6.9 million, $ 8.6 million and $ 9.4 million for fiscal years 2024, 2023, and 2022, respectively.

On July 1, 2024, we acquired land and buildings in Houston, Texas, for a total cash purchase price of approximately $ 5.6 million to help further facilitate executing the current backlog as well as planning for modest future volume growth.

Accrued Product Warranty

18 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 94 % of revenues for each of the years ended September 30, 2023 and September 30, 2022.

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, 2024 and September 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 6 % of revenues for each of the years ended September 30, 2023 and September 30, 2022.

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, 2024 and September 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.

26 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 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.

For the years ended September 30, 2024 and 2023, our operating results were positively impacted by $ 16.9 million and $ 13.6 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.

Project cancellations on four projects increased gross profit for the year ended September 30, 2023 by $ 4.3 million.

Project cancellations increased gross profit by $ 2.2 million and $ 4.3 million, respectively, for the years ended September 30, 2024 and September 30, 2023.

Gross unfavorable changes in contract estimates were immaterial for the years ended September 30, 2024 and 2023.

20 unchanged sentences

Contract liabilities ( 287,763 ) ( 279,796 )

Net contract asset (liability) $ ( 219,175 ) $ 8,494

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.

Net contract liability $ ( 184,936 ) $ ( 219,175 )

Our net contract billing position remained a net liability at both September 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 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.

During the year ended September 30, 2023, we recognized revenue of approximately $ 70.5 million related to contract liabilities outstanding at September 30, 2022.

During the year ended September 30, 2024, we recognized revenue of $ 246.2 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.

11 unchanged sentences

Canada 106,521 84,090 81,218

Middle East and Africa 14,998 20,712 26,615

Asia/Pacific 6,188 4,885 8,889

Europe 31,388 26,699 17,699

Middle East and Africa 13,440 14,998 20,712

Mexico, Central and South America 7,631 9,399 3,095

Asia/Pacific 6,850 6,188 4,885

Total revenues by geographic destination $ 1,012,356 $ 699,308 $ 532,582

3 unchanged sentences

Electric utility 186,547 158,400 122,361

Traction power 28,112 44,930 59,106

Commercial and other industrial 149,899 103,966 56,448

Light rail traction power 22,019 28,112 44,930

All others 51,115 41,525 27,070

1 unchanged sentence

Goodwill and Intangible Assets

Our intangible assets consist of goodwill of $ 1.0 million, which is not being amortized.

In Fiscal 2021, our purchased technology was fully amortized, and we no longer have any intangible assets subject to amortization.

In December 2023, we acquired intellectual property for a total consideration of $ 0.5 million, of which $ 250 thousand was paid in cash at the acquisition date.

The intellectual property is not yet subject to amortization.

Our intangible assets also include goodwill of $ 1.0 million, which is not being amortized.

No impairment expense has been recorded for the last three fiscal years.

Amortization of intangible assets recorded for the year ended September 30, 2021 was $ 0.2 million.

Long-Term Debt

On March 31, 2023, we entered into a second amendment (the Second Amendment) to our credit agreement with Bank of America, N.A.

On October 4, 2023, we entered into a third amendment (the Third Amendment) to our credit agreement with Bank of America, N.A.

(as amended, the U.S.

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.

As amended by the Second Amendment, the U.S.

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.

The Third Amendment which added Texas Capital Bank as Syndication Agent and a lender, 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.

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.

As amended by the Third Amendment, the lesser of (a) $ 60.0 million, (b) 60 % of available cash, and (c) the aggregate face amount of the issued but undrawn letters of credit that are not cash-secured shall be deducted from consolidated funded indebtedness, when calculating the consolidated net leverage ratio.

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.

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.

On September 24, 2024, in connection with the expected discontinuation of the publication of the Bloomberg Short-Term Bank Yield Index Rate as administered by the Bloomberg Index Service Limited (BSBY), we further amended the U.S.

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

that added and amended certain terms related to the replacement of the BSBY as a benchmark rate with the Secured Overnight Financing Rate (SOFR) as administered by the Federal Reserve Bank of New York.

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

9 unchanged sentences

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 Bloomberg Short-Term Bank Yield Index (BSBY) rate plus 1.00 %.

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 BSBY rate plus 1.00 %.

The BSBY rate will be replaced by the SOFR rate, effective November 20, 2024.

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.

5 unchanged sentences

Revolver may be accelerated and may become immediately due and payable.

On October 4, 2023, we entered into a third amendment to the U.S.

Revolver (the Third Amendment) with Bank of America, N.A.

and Texas Capital Bank has agreed to join as an additional lender under the U.S.

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.

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.

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.

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

22 unchanged sentences

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

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.

As of September 30, 2024, certain contracts had a probable exposure to liquidated damage claims of $ 4.1 million, which could possibly increase to $ 4.6 million under certain circumstances.

Based on our actual or projected failure to meet these various contractual commitments, $ 3.2 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.

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

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.

25 unchanged sentences

Foreign rate differential — — 1

Foreign taxes — — 10

Valuation allowance — ( 3 ) ( 62 )

3 unchanged sentences

global intangible taxes and benefits 1 1 3

Stock-based compensation ( 1 ) — —

Effective rate 24 % 21 % ( 40 ) %

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.

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).

These items were offset by state tax expense, the tax expense related to certain nondeductible expenses and an inclusion related to U.S.

Our income tax provision reflects an effective tax rate on pre-tax results of 24 % in Fiscal 2024 compared to 21 % and negative 40 % in Fiscal 2023 and 2022, respectively.

The income tax provision for Fiscal 2024 was favorably impacted by the current year estimated Research and Development (R&D) Tax Credit and benefits related to the vesting of restricted stock units.

These items were offset by state income tax expense, the tax expense related to certain nondeductible expenses and an income inclusion related to U.S.

global intangible income.

These items were offset by state tax expense, the tax expense related to certain nondeductible expenses and an income inclusion related to U.S.

global intangible income.

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.

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.

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.

During Fiscal 2024, management determined that there was sufficient positive evidence to conclude that certain Canadian tax credits in the amount of $ 0.5 million were realizable.

The determination was based on the operating results of the past three years and the anticipated future taxable income from our Canadian operations.

The release of the valuation allowance resulted in a $ 0.5 million tax benefit and a corresponding increase in the deferred tax assets.

During the period ended September 30, 2023, management determined that there was sufficient positive evidence to conclude that the U.K.

4 unchanged sentences

The release of the Canadian valuation allowance resulted in a $ 5.9 million tax benefit and a corresponding increase in the deferred tax assets.

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.

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.

We have not recorded deferred income taxes on $ 23.0 million of undistributed earnings of our foreign subsidiaries because of management’s intent to indefinitely reinvest such earnings.

3 unchanged sentences

We are subject to income tax in the U.S., multiple state jurisdictions and certain international jurisdictions, primarily the U.K.

We do not consider any state in which we do business to be a major tax jurisdiction.

The significant jurisdictions that remain open to examination are as follows:

Canada 2017 – 2023, U.K.

2022 and the U.S.

federal and state 2020 – 2023.

As of September 30, 2024, we did not have any state audits underway that would have a material impact on our financial position or results of operations.

The net deferred income tax asset was comprised of the following (in thousands):

September 30,

Gross assets $ 20,522 $ 17,941

Gross liabilities and valuation allowance ( 3,458 ) ( 8,780 )

Net deferred income tax asset $ 17,064 $ 9,161

The tax effect of temporary differences between U.S.

2 unchanged sentences

Deferred Tax Assets:

Net operating loss $ 7,432 $ 10,186

Depreciation and amortization 4,573 —

Research and experimental expenditures (1)

$ 12,552 $ 8,118

Long-term contracts 7,480 —

Deferred compensation 2,868 2,274

Stock-based compensation 1,555 1,083

Credit carryforwards 1,378 1,332

Uniform capitalization and inventory 1,511 1,253

Reserve for accrued employee benefits 988 872

Credit carryforwards 1,304 1,378

Warranty accrual 1,304 752

Stock-based compensation 1,269 1,555

Net operating loss 1,248 7,432

Reserve for accrued employee benefits 1,029 988

Other 655 317

Deferred tax assets $ 31,220 $ 24,067

1 unchanged sentence

Depreciation and amortization (1)

$ ( 3,773 ) $ ( 3,545 )

Retention and other ( 1,310 ) ( 1,491 )

7 unchanged sentences

As of September 30, 2024, the majority of our tax credit carryforwards are fully reserved with a valuation allowance.

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.

valuation allowance.

The net decrease in the total valuation allowance during the year was $ 0.4 million, which was largely a result of the reversal of the Canadian valuation allowance on certain tax credits.

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.

10 unchanged sentences

Included in the balance of unrecognized tax benefits at the end of Fiscal 2024, 2023, and 2022 are $ 1.5 million, $ 1.6 million, and $ 1.1 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.

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, 2024 was not material.

Management believes that, within the next twelve months, it is reasonably possible that the unrecognized tax benefits will decrease by approximately $ 0.3 million due to the expiration of certain federal statutes of limitations.

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 – 2023.

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, 2021 – 2024.

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

8 unchanged sentences

We offer a non-qualified deferred compensation plan to a select group of highly compensated individuals (as defined).

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 plan permits the deferral of up to 50 % of a participant’s base salary and 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.

23 unchanged sentences

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.

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.

In accordance with the 2014 Plan, the Compensation Committee has authorized grants of RSUs to certain officers and key employees of the Company.

In February 2023, 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.

In accordance with the 2014 Plan, the Compensation and Human Capital 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.

10 unchanged sentences

Vested ( 143,431 ) 25.98

Forfeited/cancelled ( 15,461 ) 37.91

Forfeited/canceled ( 1,725 ) 74.22

Outstanding at September 30, 2024 192,011 $ 35.38

1 unchanged sentence

In February 2022, our stockholders approved an amendment to the 2014 Non-Employee Director Equity Incentive Plan (the 2014 Director Plan) that extended the term of the 2014 Director Plan by ten years and increased the number of shares of common stock that may be issued under the 2014 Director Plan by 200,000 shares for a total of 350,000 shares.

The plan is administered by the Compensation Committee.

The plan is administered by the Compensation and Human Capital Committee.

Eligibility to participate in the plan is limited to those individuals who are members of the Board of Directors of the Company and who are not employees of the Company or any affiliate of the Company.

1 unchanged sentence

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.

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.

In December 2023, the Company's Compensation and Human Capital Committee revised the non-employee directors' annual restricted stock compensation from a fixed-shares arrangement to a fixed-value arrangement, retrospectively effective on October 1, 2023.

Prior to October 1, 2023, each non-employee director received 2,400 restricted shares of the Company’s common stock annually.

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

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

Subsequent to October 1, 2023, each non-employee director shall receive restricted shares of the Company's common stock valued at $ 0.1 million annually.

The number of granted shares is calculated by dividing the $ 0.1 million by the average of high and low prices of our common stock on the grant date.

The shares shall vest on the earlier of the grant anniversary date or the date of the next annual meeting of stockholders, whichever occurs first.

Under this 2014 Director Plan, in February 2024, 4,620 shares of restricted stock were issued to our non-employee directors at a price of $ 153.81 per share.

In February 2023, we issued 16,800 shares of restricted stock to our non-employee directors at a price of $ 43.22 per share.

The total number of shares of common stock available for future awards under the 2014 Director plan was 190,600 shares as of September 30, 2023.

The total number of shares of common stock available for future awards under the 2014 Director plan

was 185,980 shares as of September 30, 2024.

At September 30, 2024 and 2023, there were 4,620 shares and 8,400 shares, respectively, of unvested restricted stock outstanding.

4 unchanged sentences

As of September 30, 2024 and 2023, amounts of deferred compensation expense not yet recognized related to non-vested stock and RSUs totaled $ 2.1 million and $ 1.4 million, respectively.

As of September 30, 2023, the total weighted average remaining contractual life of our non-vested restricted stock and RSUs is approximately six months and 1.5 years, respectively.

As of September 30, 2024, the total weighted average remaining contractual life of our non-vested restricted stock and RSUs is approximately five months and 1.23 years, respectively.

Fair Value Measurements

19 unchanged sentences

Short-term investments 43,061 — — 43,061

Other assets — 9,117 — 9,117

Rabbi trust assets — 12,324 — 12,324

Deferred compensation — 12,027 — 12,027

9 unchanged sentences

Short-term investments 33,134 — — 33,134

Other assets — 7,730 — 7,730

Rabbi trust assets — 9,117 — 9,117

Deferred compensation — 9,145 — 9,145

3 unchanged sentences

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

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

Rabbi trust assets and deferred compensation – We hold investments in an irrevocable 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.

Because the mutual funds and company-owned life insurance policies are combined in the plan, they are therefore categorized as Level 2 in the fair value measurement hierarchy.

Because the mutual funds and company-owned life insurance policies are combined in the plan, they are categorized as Level 2 in the fair value measurement hierarchy.

The deferred compensation liability represents the investment options that the plan participants have designated to serve as the basis for measurement of the notional value of their accounts.

3 unchanged sentences

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

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, 2024, 2023 and 2022 respectively (in thousands):

10 unchanged sentences

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

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):

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, 2024 and 2023, respectively (in thousands):

September 30,

9 unchanged sentences

Present value of lease liabilities $ 1,216

The weighted average discount rate as of September 30, 2023 and 2022 was 3.32 % and 3.73 %, respectively.

The weighted average discount rates as of September 30, 2024 and 2023 were 5.44 % and 3.32 %, respectively.

The weighted average remaining lease term was 2.47 years and 2.67 years, respectively, at September 30, 2024 and 2023.

6 unchanged sentences

Canada 106,521 84,090 81,218

Middle East and Africa 14,998 20,712 26,615

Asia/Pacific 6,188 4,885 8,889

Europe 31,388 26,699 17,699

Middle East and Africa 13,440 14,998 20,712

Mexico, Central and South America 7,631 9,399 3,095

Asia/Pacific 6,850 6,188 4,885

Total revenues $ 1,012,356 $ 699,308 $ 532,582

9 unchanged sentences

2024 Quarters

Second Third Fourth (2)

Revenues $ 194,017 $ 255,108 $ 288,168 $ 275,063 $ 1,012,356

Gross profit 48,194 62,720 81,740 80,434 273,088

Net income (loss) 1,162 8,473 18,454 26,436 54,525

Earnings (loss) per share:

Net income 24,085 33,488 46,223 46,052 149,848

Earnings per share:

Basic $ 2.02 $ 2.79 $ 3.85 $ 3.84 $ 12.51

1 unchanged sentence

(1) The results for the first quarter of Fiscal 2024 demonstrated normal seasonality and were negatively impacted by holidays and work schedules compared to other quarterly periods.

(2) The results for the second quarter of Fiscal 2023 were positively impacted by a project cancellation of $ 1.6 million.

(3) The results for the third quarter of Fiscal 2023 were positively impacted by a project cancellation of $ 1.7 million.

(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.

net deferred tax assets.

(2) The results for the fourth quarter of Fiscal 2024 were positively impacted by project cancellations of $ 2.2 million.

2023 Quarters

Second Third (2)

Revenues $ 126,858 $ 171,444 $ 192,365 $ 208,641 $ 699,308

Gross profit 19,464 33,437 42,670 51,982 147,553

Net income (loss) ( 2,846 ) ( 1,217 ) 9,061 8,739 13,737

Earnings (loss) per share:

Net income 1,162 8,473 18,454 26,436 54,525

Earnings per share:

Basic $ 0.10 $ 0.71 $ 1.55 $ 2.22 $ 4.59

1 unchanged sentence

(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.

(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.

(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.

based municipal transit project.

(2) The results for the second quarter of Fiscal 2023 were positively impacted by a project cancellation of $ 1.6 million.

(3) The results for the third quarter of Fiscal 2023 were positively impacted by a project cancellation of $ 1.7 million.

(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.

net deferred tax assets.

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.

3 unchanged sentences

Quarterly Dividend Declared

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.

On November 5, 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 December 18, 2024 to shareholders of record at the close of business on November 20, 2024.

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.

What changed 10-K

Item 8. Financial Statements and Supplementary Data