-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ClbxOfcz0wwLH2DxtoEHOeRVwrtc4NIgV4oVvRBQxQ2XY5do5O06NBtWWsCGdxbB 0f/v8WrFGsKqgojlBPdhqA== 0000950129-98-001071.txt : 19980318 0000950129-98-001071.hdr.sgml : 19980318 ACCESSION NUMBER: 0000950129-98-001071 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980317 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: POWELL INDUSTRIES INC CENTRAL INDEX KEY: 0000080420 STANDARD INDUSTRIAL CLASSIFICATION: SWITCHGEAR & SWITCHBOARD APPARATUS [3613] IRS NUMBER: 880106100 STATE OF INCORPORATION: NV FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12488 FILM NUMBER: 98567269 BUSINESS ADDRESS: STREET 1: 8550 MOSLEY DR STREET 2: POST OFFICE BOX 12818 CITY: HOUSTON STATE: TX ZIP: 77075 BUSINESS PHONE: 7139446900 MAIL ADDRESS: STREET 1: 8550 MOSLEY DRIVE P O BOX 12818 STREET 2: 8550 MOSLEY DRIVE P O BOX 12818 CITY: HOUSTON STATE: TX ZIP: 77075 FORMER COMPANY: FORMER CONFORMED NAME: PROCESS SYSTEMS INC DATE OF NAME CHANGE: 19780926 10-Q 1 POWELL INDUSTRIES, INC. - 1-31-98 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q (Mark one) [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended January 31, 1998 or [ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to -------- -------- COMMISSION FILE NUMBER 0-6050 POWELL INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) NEVADA 88-0106100 - ------------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8550 Mosley Drive, Houston, Texas 77075-1180 - ----------------------------------------- --------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (713) 944-6900 ----------------------------- Indicate by "X" whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Common Stock, par value $.01 per share; 10,645,484 shares outstanding on January 31, 1998. 2 Powell Industries, Inc. and Subsidiaries PART I - Financial Information Item 1. Financial Statements ............................... 3 - 7 Item 2. Management's Discussion and Analysis of Financial Condition and Quarterly Results of Operations ........................... 8 - 9 PART II - Other Information and Signatures ........................... 10 - 11 3 Powell Industries, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except share and per share data)
January 31, October 31, 1998 1997 Assets (unaudited) ----------- ----------- Current Assets: Cash and cash equivalents ............................................... $ 1,377 $ 2,219 Accounts receivable, less allowance for doubtful accounts of $477 and $465, respectively ........................................ 38,693 50,391 Costs and estimated earnings in excess of billings ...................... 20,681 18,986 Inventories ............................................................. 16,666 13,603 Deferred income taxes ................................................... 745 825 Income taxes receivable ................................................. 1,251 1,351 Prepaid expenses and other current assets ............................... 2,377 2,594 --------- --------- Total Current Assets .................................................. 81,790 89,969 Property, plant and equipment, net ........................................ 29,320 26,374 Deferred income taxes ..................................................... 1,578 1,578 Other assets .............................................................. 4,935 4,946 --------- --------- Total Assets .......................................................... $ 117,623 $ 122,867 ========= ========= Liabilities and Stockholders' Equity Current Liabilities: Accounts and income taxes payable ....................................... $ 10,865 $ 11,929 Accrued salaries, bonuses and commissions ............................... 3,666 6,737 Accrued product warranty ................................................ 1,525 1,511 Accrued legal expenses .................................................. 3,095 3,785 Other accrued expenses .................................................. 2,544 3,282 Billings in excess of costs and estimated earnings ...................... 8,778 10,956 --------- --------- Total Current Liabilities ............................................. 30,473 38,200 Long-term debt, net of current maturities ................................. 6,000 6,000 Deferred compensation expense ............................................. 1,127 1,128 Postretirement benefits liability ......................................... 1,192 1,232 Commitments and contingencies Stockholders' Equity: Preferred stock, par value $.01; 5,000,000 shares authorized; none issued Common stock, par value $.01; 30,000,000 shares authorized, 10,645,979 and 10,642,779 shares issued and outstanding ................ 107 106 Additional paid-in capital .............................................. 5,842 5,782 Retained earnings ....................................................... 75,970 73,572 Deferred compensation-ESOP .............................................. (3,088) (3,153) --------- --------- Total Stockholders' Equity ............................................ 78,831 76,307 --------- --------- Total Liabilities and Stockholders' Equity ............................ $ 117,623 $ 122,867 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 3 4 Powell Industries, Inc. and Subsidiaries Consolidated Statements of Operations (unaudited) (In thousands, except per share data)
Three Months Ended January 31, ------------------------------ 1998 1997 ------------ ------------ Revenues ................................................................. $ 46,350 $ 43,128 Cost of goods sold ....................................................... 35,719 32,840 ------------ ------------ Gross profit ............................................................. 10,631 10,288 Selling, general and administrative expenses ............................. 7,129 6,888 ------------ ------------ Earnings from operations before interest and income taxes ................ 3,502 3,400 Interest expense (income), net ........................................... 23 (138) ------------ ------------ Earnings from operations before income taxes ............................. 3,479 3,538 Income tax provision ..................................................... 1,081 1,169 ------------ ------------ Net earnings ............................................................. $ 2,398 $ 2,369 ============ ============ Net earnings per common share: Basic .................................................................. $ 0.23 $ 0.22 Diluted ................................................................ 0.22 0.22 Weighted average number of common shares outstanding ..................... 10,643,586 10,606,442 ============ ============ Weighted average number of common and common equivalent shares outstanding 10,757,675 10,743,588 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4 5 Powell Industries, Inc. and Subsidiaries Consolidated Statements of Cash Flows (unaudited) (In thousands)
Three Months Ended January 31, ------------------------------ 1998 1997 -------- -------- Operating Activities: Net earnings .......................................................... $ 2,398 $ 2,369 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization ....................................... 946 830 Deferred income taxes ............................................... 80 288 Postretirement benefits liability ................................... (40) (44) Changes in operating assets and liabilities: Accounts receivable ............................................... 11,698 4,774 Costs and estimated earnings in excess of billings ................ (1,695) (2,943) Inventories ....................................................... (3,063) 2,933 Prepaid expenses and other current assets ......................... 217 (643) Other assets ...................................................... (48) (99) Accounts payable and income taxes payable or receivable ........... (964) 734 Accrued liabilities ............................................... (4,485) (2,301) Billings in excess of costs and estimated earnings ................ (2,178) (434) Deferred compensation expense ..................................... 64 (728) -------- -------- Net cash provided by operating activities ............................... 2,930 4,736 -------- -------- Investing Activities: Purchases of property, plant and equipment ............................ (3,833) (3,575) -------- -------- Net cash used in investing activities ................................... (3,833) (3,575) -------- -------- Financing activities: Exercise of stock options ............................................. 61 2 -------- -------- Net cash provided by financing activities ............................... 61 2 -------- -------- Net increase (decrease) in cash and cash equivalents .................... (842) 1,163 Cash and cash equivalents at beginning of period ........................ 2,219 8,935 -------- -------- Cash and cash equivalents at end of period .............................. $ 1,377 $ 10,098 Supplemental disclosure of cash flow information (in thousands): Cash paid during the quarter for: Interest ........................................................... $ 169 $ 195 ======== ======== Income taxes ....................................................... -- -- ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 5 6 Part I Item 1 POWELL INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of management, reflect all adjustments which are of a normal recurring nature necessary for a fair presentation of financial position, results of operations, and cash flows. B. INVENTORY
January 31, October 31, 1998 1997 (unaudited) ------- ------- The components of inventory are summarized below (in thousands): Raw materials and subassemblies ....................................... $10,129 $ 8,706 Work-in-process ....................................................... 6,537 4,897 ------- ------- Total inventories ..................................................... $16,666 $13,603 ======= =======
C. PROPERTY, PLANT AND EQUIPMENT
January 31, October 31, 1998 1997 (unaudited) ------- ------- Property, plant and equipment is summarized below (in thousands): Land .................................................................. $ 3,078 $ 2,720 Buildings and improvements ............................................ 21,337 20,662 Machinery and equipment ............................................... 25,026 24,912 Furniture & fixtures .................................................. 3,179 3,121 Construction in process ............................................... 7,224 4,596 ------- ------- 59,844 56,011 Less-accumulated depreciation ......................................... 30,524 29,637 ------- ------- Total property, plant and equipment, net .............................. $29,320 $26,374 ======= =======
6 7 Part I Item 1 D. PRODUCTION CONTRACTS For contracts in which the percentage-of-completion accounting method is used, costs and estimated earnings in excess of billings are shown as a current asset and billings in excess of costs and estimated earnings are shown as a current liability.
January 31, October 31, 1998 1997 (unaudited) -------- -------- The components of these contracts are as follows (in thousands): Costs and estimated earnings ........................................ $ 79,622 $ 85,126 Progress billings ................................................... (58,941) (66,140) -------- -------- Total costs and estimated earnings in excess of billings ............ $ 20,681 $ 18,986 ======== ======== Progress billings ................................................... $ 75,712 $ 69,213 Costs and estimated earnings ........................................ (66,934) (58,257) -------- -------- Total billings in excess of costs and estimated earnings ............ $ 8,778 $ 10,956 ======== ========
E. EARNINGS PER SHARE In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings per Share. Statement No. 128 replaced the previously reported primary and fully diluted earnings per share with basic and and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options. Diluted earnings per share is very similar to the previously reported earnings per share. Earnings per share amounts for each period have been presented and restated to conform to the Statement 128 requirements. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except share and per share data):
Three months ended January 31, =============================== 1998 1997 (unaudited) --------------- ----------- Numerator: Numerator for basic and diluted earnings per share- income available to common shareholders $ 2,398 $ 2,369 =============== =========== Denominator: Denominator for basic earnings per share weighted-average shares 10,643,586 10,606,442 Effect of dilutive securities: Employee incentive stock options 114,089 137,146 --------------- ----------- Denominator for diluted earnings per share-adjusted weighted-average shares assumed conversions 10,757,675 10,743,588 =============== =========== Basic earnings per share $ 0.22 $ 0.22 =============== =========== Diluted earnings per share $ 0.23 $ 0.22 =============== ===========
7 8 Part I Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND QUARTERLY RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, as a percentage of revenues, certain items from the Consolidated Statements of Operations.
Quarters ended January 31 1998 1997 - -------------------------------------------------------------------------------- Revenues 100.0% 100.0% Gross Profit 22.9 23.9 Selling, general and administrative expenses 15.4 16.0 Net earnings before income taxes 7.5 8.2 Income tax provision 2.3 2.7 Net earnings 5.2 5.5
Revenues for the quarter ended January 31, 1998 were up seven percent to $46,350,000 from $43,128,000 in the first quarter of last year. This increase in volume was due primarily to higher electrical distribution equipment revenues. Export sales were $21,928,000 or 47.3 percent of sales, an increase of 25.7 percent from $17,444,000 in the first quarter of 1997. Gross profit, as a percentage of revenues, was 22.9 percent and 23.9 percent for the quarters ended January 31, 1998 and 1997, respectively. The lower percentage in the first quarter of 1998 was due to changes in product mix shipped during 1998 which were partially offset by efficiencies due to the increased volume of activity. Selling, general and administrative expenses as a percentage of revenues were 15.4 percent and 16.0 percent for the quarters ended January 31, 1998 and 1997, respectively. The decrease in percentages reflects lower spending levels for selling, general and administrative functions relative to increased volume of revenues. Income tax provision The effective tax rate was 31.1 percent and 33.0 percent for the quarters ended January 31, 1998 and 1997, respectively. The decrease was primarily due to lower projected tax rates for 1998 due to an increased level of foreign sales credits. Net earnings from operations were $2,398,000 for the first quarter of fiscal 1998, unchanged from $2,369,000 for the first quarter of fiscal 1997, or $.22 per diluted earnings per share for both periods reported. Backlog The order backlog at January 31, 1998 was $138.7 million compared to $137.3 million at October 31, 1997. 8 9 LIQUIDITY AND CAPITAL RESOURCES In August 1997, the Company entered into a $20,000,000 revolving line of credit agreement with a major domestic bank. The Company had borrowings outstanding of $6,000,000 under this line on January 31, 1998. The Company's ability to satisfy its cash requirements is evaluated by analyzing key measures of liquidity applicable to the Company. The following table is a summary of the measures which are significant to management:
January 31, October 31, January 31, 1998 1997 1997 Working Capital $51,327,000 $51,769,000 $45,157,000 Current Ratio 2.68 to 1 2.36 to 1 2.52 to 1 Debt to Capitalization .1 to 1 .1 to 1 .1 to 1
Management believes that the Company continues to maintain a strong liquidity position. The small decrease in working capital at January 31, 1998, as compared to October 31, 1997 is due mainly to a decrease in current assets (primarily accounts receivable) offset by a smaller decrease in current liabilities. Cash and cash equivalents decreased by $842,000 during the three months ended January 31, 1998. The primary use of cash during this period was for capital expenditures related to the plant expansion and due to decreased current liabilities. The Company's fiscal 1998 asset management program will continue to focus on the collection of receivables and reduction in inventories. The Company plans to satisfy its fiscal 1998 capital requirements and operating needs primarily with funds available in cash and cash equivalents of $1,377,000, funds generated from operating activities and funds available under its existing revolving credit line. The previous discussion should be read in conjunction with the consolidated financial statements. Any forward looking statements in the preceding paragraphs of this Form 10-Q are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward looking statements involve risks and uncertainty in that actual results may differ materially from those projected in the forward looking statements. These risks and uncertainties include, without limitation, difficulties which could arise in obtaining materials or components in sufficient quantities as needed for the Company's manufacturing and assembly operations, unforeseen political or economic problems in countries to which the Company exports its products in relation to the Company's principal competitors, any significant decrease in the Company's backlog of orders, any material employee relations problems, or any material litigation or claims made against the Company, as well as general market conditions, competition and pricing. 9 10 Part II OTHER INFORMATION ITEM 1. Legal Proceedings On August 5, 1993, the Company was served with a lawsuit by National Westminster Bank plc ("NatWest") alleging the Company had defaulted on a Construction Guaranty provided to NatWest in 1992 in connection with a project at MacDill Air Force Base. NatWest is seeking damages in excess of $20,000,000. The Company has denied the substantive allegations of the complaint and has filed counterclaims for damages against NatWest alleging fraud, bad faith and failure to preserve and protect its collateral and seeking a declaratory judgment that the Company is not in default of the Construction Guaranty. On February 4, 1998, the United States District Court, Southern District of New York, issued a memorandum and order denying the Company's motion for summary judgment, and granting NatWest's motion for partial summary judgment, with respect to certain defenses and one counterclaim of the Company. The Court dismissed several of the Company's alleged defenses, in particular, (1) its defense that the Company was fraudulently induced by NatWest into executing the Construction Guaranty, (2) its defense that the contract between NatWest's borrower, Empire Energy Management Systems, Inc., and the United States Air Force was terminated for the convenience of the government, and (3) its defense of secondary liability. Both NatWest and the Company have requested a trial date. The ultimate disposition of the NatWest litigation is not presently determinable. However, an unfavorable outcome to the NatWest litigation could have a material effect on the Company's financial position and results of operations. ITEM 2. Changes in Securities None ITEM 3. Defaults Upon Senior Securities Not applicable ITEM 4. Submission of Matters to a Vote of Security Holders None ITEM 5. Other Information None ITEM 6. Exhibits and Reports on Form 8-K a. Exhibits 27.0 Financial Data Schedule b. Reports on Form 8K None 10 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. POWELL INDUSTRIES, INC. Registrant March 12, 1998 /s/ Thomas W. Powell - ----------------------- -------------------------------------------- Date Thomas W. Powell President and Chief Executive Officer (Principal Executive Officer) March 12, 1998 /s/ J.F. Ahart - ----------------------- -------------------------------------------- Date J.F. Ahart Vice President, Secretary-Treasurer Chief Financial Officer (Principal Financial and Accounting Officer) 12 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27.0 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED JANUARY 31, 1998 AND IS QUAILIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS OCT-31-1998 JAN-31-1998 1,377 0 39,170 477 16,666 81,790 59,843 30,523 117,623 30,473 0 0 0 107 78,724 117,623 46,350 46,350 35,719 35,719 7,129 0 23 3,479 1,081 2,398 0 0 0 2,398 0.23 0.22
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