10-Q

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 March 31, 2015

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 001-12488

Powell Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware	88-0106100
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
8550 Mosley Road Houston, Texas	77075-1180
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

(713) 944-6900

Indicate by check mark 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.    x  Yes     ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨	Accelerated filer  x	Non-accelerated filer  ¨	Smaller reporting company  ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

At April 30, 2015, there were 11,818,282 outstanding shares of the registrant’s common stock, par value $0.01 per share.

POWELL INDUSTRIES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

	Page
Part I — Financial Information	3
Item 1. Condensed Consolidated Financial Statements	3
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Operations	4
Condensed Consolidated Statements of Comprehensive Income (Loss)	5
Consolidated Statement of Stockholders’ Equity	6
Condensed Consolidated Statements of Cash Flows	7
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures About Market Risk	25
Item 4. Controls and Procedures	26
Part II — Other Information	26
Item 1. Legal Proceedings	26
Item 1A. Risk Factors	26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6. Exhibits	28
Signatures	29

2

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

POWELL INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share and per share data)

	March 31,			September 30,
	2015			2014
ASSETS
Current Assets:
Cash and cash equivalents	$	55,672		$	103,118
Accounts receivable, less allowance for doubtful accounts of $1,881 and $1,577		121,366			107,162
Costs and estimated earnings in excess of billings on uncompleted contracts		96,709			95,970
Inventories		35,735			32,815
Income taxes receivable		3,493			2,804
Deferred income taxes		5,170			5,297
Prepaid expenses		2,894			5,870
Other current assets		4,828			4,291
Total Current Assets		325,867			357,327
Property, plant and equipment, net		161,789			156,896
Goodwill		1,003			1,003
Intangible assets, net		1,607			1,904
Deferred income taxes		3,941			11,422
Other assets		9,824			8,224
Long-term receivable (Note D)		2,333			4,667
Total Assets	$	506,364		$	541,443
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt and capital lease obligations	$	400		$	400
Income taxes payable		966			705
Accounts payable		53,339			70,209
Accrued salaries, bonuses and commissions		19,388			25,206
Billings in excess of costs and estimated earnings on uncompleted contracts		64,171			48,702
Accrued product warranty		4,375			4,557
Other accrued expenses		4,603			6,291
Deferred credit ─ short term (Note D)		2,029			2,029
Total Current Liabilities		149,271			158,099
Long-term debt and capital lease obligations, net of current maturities		2,400			2,800
Deferred compensation		5,446			4,226
Other long-term liabilities		669			655
Deferred credit ─long term (Note D)		3,551			4,566
Total Liabilities	$	161,337		$	170,346
Commitments and Contingencies (Note F)
Stockholders' Equity:
Preferred stock, par value $.01; 5,000,000 shares authorized; none issued		—			—
Common stock, par value $.01; 30,000,000 shares authorized; 11,911,743 and 12,031,243 shares issued and outstanding, respectively		120			120
Additional paid-in capital		47,277			46,267
Retained earnings		321,027			331,213
Treasury stock, 171,416 shares at cost		(5,759	)		—
Accumulated other comprehensive loss		(17,638	)		(6,503	)
Total Stockholders' Equity		345,027			371,097
Total Liabilities and Stockholders' Equity	$	506,364		$	541,443

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

3

POWELL INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)

	Three months ended March 31,						Six months ended March 31,
	2015			2014			2015			2014
Revenues	$	170,199		$	162,295		$	322,800		$	334,167
Cost of goods sold		145,898			127,367			277,430			264,081
Gross profit		24,301			34,928			45,370			70,086
Selling, general and administrative expenses		19,464			22,088			40,279			43,722
Research and development expenses		1,626			2,157			3,466			3,996
Amortization of intangible assets		113			121			232			536
Restructuring and separation expenses		1,332			—			1,332			—
Operating income		1,766			10,562			61			21,832
Other income		(879	)		(507	)		(1,386	)		(507	)
Interest expense		33			41			69			110
Interest income		(84	)		(3	)		(88	)		(6	)
Income from continuing operations before income taxes		2,696			11,031			1,466			22,235
Income tax provision		6,379			4,055			5,388			7,992
Income (loss) from continuing operations		(3,683	)		6,976			(3,922	)		14,243
Income from discontinued operations, net of tax (Note J)		—			8,617			—			9,604
Net income (loss)	$	(3,683	)	$	15,593		$	(3,922	)	$	23,847
Earnings (loss) per share:
Continuing operations	$	(0.31	)	$	0.58		$	(0.33	)	$	1.19
Discontinued operations		—			0.72			—			0.80
Basic earnings (loss) per share	$	(0.31	)	$	1.30		$	(0.33	)	$	1.99
Continuing operations	$	(0.31	)	$	0.58		$	(0.33	)	$	1.18
Discontinued operations		—			0.71			—			0.80
Diluted earnings (loss) per share	$	(0.31	)	$	1.29		$	(0.33	)	$	1.98
Weighted average shares:
Basic		12,018			12,004			12,029			11,999
Diluted		12,018			12,064			12,029			12,057
Dividends per share	$	0.26		$	0.25		$	0.52		$	0.50

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

4

POWELL INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In thousands)

	Three months ended March 31,						Six months ended March 31,
	2015			2014			2015			2014
Net income (loss)	$	(3,683	)	$	15,593		$	(3,922	)	$	23,847
Foreign currency translation adjustments		(6,897	)		(1,442	)		(11,135	)		(3,036	)
Comprehensive income (loss)	$	(10,580	)	$	14,151		$	(15,057	)	$	20,811

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

5

POWELL INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity (Unaudited)

(In thousands)

															Accumulated
						Additional									Other
	Common Stock					Paid-in			Retained			Treasury			Comprehensive
	Shares			Amount		Capital			Earnings			Stock			Income/(Loss)			Total
Balance, September 30, 2014		12,031		$	120	$	46,267		$	331,213		$	—		$	(6,503	)	$	371,097
Net loss		—			—		—			(3,922	)		—			—			(3,922	)
Foreign currency translation adjustments		—			—		—			—			—			(11,135	)		(11,135	)
Stock-based compensation		36			—		1,567			—			—			—			1,567
Shares withheld in lieu of employee tax withholding		—			—		(557	)		—			—			—			(557	)
Issuance of restricted stock		16			—		—			—			—			—			—
Purchase of treasury shares		(171	)		—		—			—			(5,759	)		—			(5,759	)
Dividends paid		—			—		—			(6,264	)		—			—			(6,264	)
Balance, March 31, 2015		11,912		$	120	$	47,277		$	321,027		$	(5,759	)	$	(17,638	)	$	345,027

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

6

POWELL INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Six months ended March 31,
	2015			2014
Operating Activities:
Net income (loss)	$	(3,922	)	$	23,847
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		6,562			5,059
Amortization		232			536
Gain on sale of discontinued operations, net of tax		—			(8,563	)
Stock-based compensation		1,567			2,001
Bad debt expense (recovery)		469			(60	)
Deferred income tax expense (benefit)		7,549			(2,823	)
Gain on amended supply agreement		(1,015	)		(507	)
Cash received from amended supply agreement		2,333			10,000
Changes in operating assets and liabilities:
Accounts receivable, net		(18,321	)		(10,472	)
Costs and billings in excess of estimates on uncompleted contracts		13,050			(4,840	)
Inventories		(3,360	)		(495	)
Prepaid expenses and other current assets		1,613			959
Accounts payable and income taxes payable		(3,564	)		(10,407	)
Accrued liabilities		(6,845	)		(11,307	)
Other, net		(450	)		294
Net cash used in operating activities		(4,102	)		(6,778	)
Investing Activities:
Proceeds from sale of property, plant and equipment		43			60
Proceeds from sale of Transdyn		—			14,819
Purchases of property, plant and equipment		(28,692	)		(8,464	)
Net cash provided by (used in) investing activities		(28,649	)		6,415
Financing Activities:
Payments on industrial development revenue bonds		(400	)		(400	)
Cash paid for employee taxes in lieu of shares		(557	)		(499	)
Purchase of treasury shares		(5,759	)		—
Dividends paid		(6,264	)		(5,992	)
Payments on short-term and other financing		—			(16	)
Net cash used in financing activities		(12,980	)		(6,907	)
Net increase (decrease) in cash and cash equivalents		(45,731	)		(7,270	)
Effect of exchange rate changes on cash and cash equivalents		(1,715	)		1,252
Cash and cash equivalents, beginning of period		103,118			107,411
Cash and cash equivalents, end of period	$	55,672		$	101,393

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

7

POWELL INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

A. OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview

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 corporation was the successor to a company founded by William E. Powell in 1947, which merged into the Company in 1977. Our major subsidiaries, all of which are wholly owned, include: Powell Electrical Systems, Inc.; Powell (UK) Limited; Powell Canada Inc. and Powell Industries International, B.V.

We develop, design, manufacture and service custom-engineered equipment and systems for the distribution, control and monitoring of electrical energy designed to (1) distribute, monitor and control the flow of electrical energy and (2) provide protection to motors, transformers and other electrically powered equipment. Headquartered in Houston, Texas, we serve the transportation, energy, industrial and utility industries.

Basis of Presentation

These unaudited condensed consolidated financial statements include the accounts of Powell and its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information.  Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP), have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows with respect to the interim consolidated financial statements have been included. The results of operations for the interim periods are not necessarily indicative of the results for the entire fiscal year.  We believe that these financial statements contain all adjustments necessary so that they are not misleading. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Powell and its subsidiaries included in Powell’s Annual Report on Form 10-K for the year ended September 30, 2014, which was filed with the Securities and Exchange Commission (SEC) on December 3, 2014.

References to Fiscal 2015, Fiscal 2014 and Fiscal 2013 used throughout this report shall mean our fiscal years ended September 30, 2015, 2014 and 2013, respectively.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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 financial statements affect revenue and cost recognition for construction contracts, the allowance for doubtful accounts, provision for excess and obsolete inventory, goodwill and other intangible assets, self-insurance, warranty accruals and income taxes. The amounts recorded for insurance claims, warranties, legal, income taxes and other contingent liabilities require judgments regarding the amount of expenses that will ultimately be incurred. We base our estimates on historical experience and on 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.  Estimates may change as new events occur, additional information becomes available or operating environments change. Actual results may differ from our estimates.

Supplemental Disclosures of Cash Flow Information (in thousands):

	Six months ended March 31,
	2015		2014
Non-cash capital expenditures	$	3,351	$	389

8

New Accounting Standards

In July 2013, the FASB issued accounting guidance on the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, which would be our fiscal year ended September 30, 2015. This guidance should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this guidance has not had a significant impact on our consolidated financial position or results of operations.

In April 2014, the FASB issued an amendment to the financial reporting of discontinued operations.  The amendments in this update changed the criteria for reporting discontinued operations while enhancing disclosures in this area. It also addresses sources of confusion and inconsistent application related to the financial reporting of discontinued operations guidance in U.S. GAAP.  Under the new guidance, only disposals representing a strategic shift in operations that have a major effect on the organization’s operations and financial results should be presented as discontinued operations. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. This disclosure will provide users with information about the ongoing trends in a reporting organization’s results from continuing operations. The amendments in this update are effective in the first quarter of 2015, which would be our fiscal year end September 30, 2016. Early adoption is permitted for disposals that have not been previously reported as discontinued operations.

In May 2014, the FASB issued a new standard on revenue recognition that supersedes previously issued revenue recognition guidance.  This standard provides a five-step approach to be applied to all contracts with customers and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue (and the related cash flows) arising from customer contracts, significant judgments and changes in judgments used in applying the revenue model and the assets recognized from costs incurred to obtain or fulfill a contract.  This new standard is effective for us beginning in fiscal year 2018.  Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method therefore we are evaluating the effect that this new guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.

In June 2014, the FASB issued an amendment to the topic regarding share-based payments and instances where terms of an award provide that a performance target can be achieved after the requisite service period.  This guidance has been provided to resolve the diversity in practice concerning employee share-based payments that contain performance targets that could be achieved after the requisite service period. The updated guidance requires that a performance target that affects vesting and that can be achieved after the requisite service period be treated as a performance condition. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and is attributable to the periods for which service has been rendered. If the performance target becomes probable of being achieved before the end of the service period, the remaining unrecognized compensation cost for which requisite service has not yet been rendered is recognized prospectively over the remaining service period. The total amount of compensation cost recognized during and after the service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The updated guidance is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on our consolidated financial position or results of operations.

Discontinued operations

In January 2014, we sold our wholly owned subsidiary Transdyn Inc. (Transdyn).  For the quarter and six months ended March 31, 2014, we have presented the results of these operations as income from discontinued operations, net of tax.  See Note J.

9

B. EARNINGS PER SHARE

We compute basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common and potential common share includes the weighted average of additional shares associated with the incremental effect of dilutive restricted stock and restrictive stock units, as prescribed by the FASB guidance on earnings per share.

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,
	2015			2014		2015			2014
Numerator:
Income (loss) from continuing operations	$	(3,683	)	$	6,976	$	(3,922	)	$	14,243
Income from discontinued operations		—			8,617		—			9,604
Net income (loss)	$	(3,683	)	$	15,593	$	(3,922	)	$	23,847
Denominator:
Weighted average basic shares		12,018			12,004		12,029			11,999
Dilutive effect of restricted stock units		—			60		—			58
Weighted average diluted shares with assumed conversions		12,018			12,064		12,029			12,057
Net earnings (loss) per share:
Continuing operations	$	(0.31	)	$	0.58	$	(0.33	)	$	1.19
Discontinued operations		—			0.72		—			0.80
Basic earnings (loss) per share	$	(0.31	)	$	1.30	$	(0.33	)	$	1.99
Continuing operations	$	(0.31	)	$	0.58	$	(0.33	)	$	1.18
Discontinued operations		—			0.71		—			0.80
Diluted earnings (loss) per share	$	(0.31	)	$	1.29	$	(0.33	)	$	1.98

For the quarter and six months ended March 31, 2015, we incurred a net loss and therefore all potential common shares were deemed to be anti-dilutive.  

C. DETAIL OF SELECTED BALANCE SHEET ACCOUNTS

Allowance for Doubtful Accounts

Activity in our allowance for doubtful accounts receivable consisted of the following (in thousands):

	Three months ended March 31,						Six months ended March 31,
	2015			2014			2015			2014
Balance at beginning of period	$	1,844		$	673		$	1,577		$	572
Bad debt expense/(recovery)		186			(170	)		469			(60	)
Uncollectible accounts written off, net of recoveries		(120	)		—			(122	)		(9	)
Change in foreign currency translation		(29	)		(2	)		(43	)		(2	)
Balance at end of period	$	1,881		$	501		$	1,881		$	501

Inventories:

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

	March 31, 2015			September 30, 2014
Raw materials, parts and subassemblies	$	39,063		$	35,349
Work-in-progress		1,558			2,035
Provision for excess and obsolete inventory		(4,886	)		(4,569	)
Total inventories	$	35,735		$	32,815

10

Cost and Estimated Earnings on Uncompleted Contracts

The components of costs and estimated earnings and related amounts billed on uncompleted contracts are summarized below (in thousands):

	March 31,			September 30,
	2015			2014
Costs incurred on uncompleted contracts	$	618,778		$	604,939
Estimated earnings		161,724			157,562
		780,502			762,501
Less: Billings to date		(747,964	)		(715,233	)
Net underbilled position	$	32,538		$	47,268
Included in the accompanying balance sheets under the following captions:
Costs and estimated earnings in excess of billings on uncompleted contracts - underbilled	$	96,709		$	95,970
Billings in excess of costs and estimated earnings on uncompleted contracts - overbilled		(64,171	)		(48,702	)
Net underbilled position	$	32,538		$	47,268

Warranty Accrual

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

	Three months ended March 31,						Six months ended March 31,
	2015			2014			2015			2014
Balance at beginning of period	$	4,480		$	5,010		$	4,557		$	5,282
Increase to warranty expense		530			1,042			1,067			1,505
Deduction for warranty charges		(504	)		(1,196	)		(1,028	)		(1,926	)
Increase (decrease) due to foreign currency translations		(131	)		(23	)		(221	)		(28	)
Balance at end of period	$	4,375		$	4,833		$	4,375		$	4,833

D. INTANGIBLE ASSETS

Intangible assets balances, subject to amortization, at March 31, 2015 and September 30, 2014 consisted of the following (in thousands):

	March 31, 2015							September 30, 2014
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Value		Amortization			Value		Value		Amortization			Value
Purchased technology	$	11,749	$	(10,165	)	$	1,584	$	11,749	$	(9,918	)	$	1,831
Trade name		1,136		(1,113	)		23		1,136		(1,063	)		73
Total	$	12,885	$	(11,278	)	$	1,607	$	12,885	$	(10,981	)	$	1,904

Amortization of intangible assets recorded for the six months ended March 31, 2015 and 2014 was $0.2 million and $0.5 million, respectively.

On August 7, 2006, we purchased certain assets related to the manufacturing of ANSI medium-voltage switchgear and circuit breaker business from General Electric Company (GE).  In connection with the acquisition, we entered into a 15 year supply agreement with GE pursuant to which GE would purchase from the Company all of its requirements for ANSI medium-voltage switchgear and circuit breakers and other related equipment and components (the Products).  In connection with the acquisition, we recorded an intangible asset related to this supply agreement.  On December 30, 2013, the Company and GE amended the supply agreement to allow GE to manufacture similar Products for sale immediately and allow GE to begin purchasing Products from other suppliers beginning December 31, 2014.  In return, GE paid us $10 million upon execution of the amended supply agreement in the first quarter of Fiscal 2014 and agreed to pay an additional $7 million over three years.  The first payment of $2.3 million was received in March 2015.  We wrote off the intangible asset related to the original supply agreement and recorded a deferred credit in the amount of $8.1 million at December 31, 2013, the amount by which the proceeds from GE exceeded the unamortized balance of our intangible asset. This deferred credit is being amortized over the four year life of the agreement.

11

E. LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

	March 31, 2015			September 30, 2014
Industrial development revenue bonds	$	2,800		$	3,200
Less current portion		(400	)		(400	)
Total long-term debt and capital lease obligations	$	2,400		$	2,800

U.S. Revolver

In December 2013, we amended and restated our existing credit agreement (the Amended Credit Agreement) with a major domestic bank.  In December 2014, we entered into the Second Amendment of the Amended Credit Agreement (the Second Amendment).  The Second Amendment provides for the expansion of our Canadian manufacturing facility and allows for the repurchase of our common stock pursuant to a share repurchase program announced in December 2014. The Amended Credit Agreement provides for a $75.0 million revolving credit facility (U.S. Revolver). Obligations are collateralized by the stock of certain of our subsidiaries.

The interest rate for amounts outstanding under the Amended Credit Agreement for the U.S. Revolver is a floating rate based upon the higher of the Federal Funds Rate plus 0.5%, the bank’s prime rate, or the Eurocurrency rate plus 1.00%. Once the applicable rate is determined, a margin ranging up to 1.75%, as determined by our consolidated leverage ratio, is added to the applicable rate.

The U.S. Revolver provides for the issuance of letters of credit which reduce the amounts that may be borrowed under this revolver. The amount available under the U.S. Revolver was reduced by $18.0 million for our outstanding letters of credit at March 31, 2015.

There were no borrowings outstanding under the U.S. Revolver as of March 31, 2015. Amounts available under the U.S. Revolver were $57.0 million at March 31, 2015. The U.S. Revolver expires on December 31, 2018.

The Amended Credit Agreement contains certain restrictive and maintenance-type covenants, such as restrictions on the amount of capital expenditures allowed. It also contains financial covenants defining various financial measures and the levels of these measures with which we must comply, as well as a “material adverse change” clause. A “material adverse change” is defined as a material change in our operations, business, properties, liabilities or condition (financial or otherwise) or a material impairment of our ability to perform our obligations under our credit agreements.

The Amended Credit Agreement is collateralized by a pledge of 100% of the voting capital stock of each of our domestic subsidiaries and 65% of the voting capital stock of each non-domestic subsidiary, excluding Powell Canada. The Amended Credit Agreement provides for customary events of default and carries cross-default provisions with other existing debt agreements. If an event of default (as defined in the Amended Credit Agreement) occurs and is continuing, on the terms and subject to the conditions set forth in the Amended Credit Agreement, amounts outstanding under the Amended Credit Agreement may be accelerated and may become immediately due and payable. As of March 31, 2015, we were in compliance with all of the financial covenants of the Amended Credit Agreement.

Canadian Revolver

On April 15, 2015, we completed the renegotiation of a credit agreement with a major international bank in Canada (the Canadian Revolver) to provide working capital support and letters of credit for our operations in Canada to replace our $7.9 million agreement which expired on February 28, 2015. The Canadian Revolver provides for the issuance of letters of credit which reduce the amounts that may be borrowed under this revolver.  

The interest rate for amounts outstanding under the Canadian Revolver is a floating interest rate based upon either the Canadian Prime Rate, or the lender’s Bankers’ Acceptance Rate. Once the applicable rate is determined, a margin of 0.50% to 1.75%, as determined by our consolidated leverage ratio, is added to the applicable rate.

The principal financial covenants are consistent with those described in our Amended Credit Agreement. The Canadian Revolver contains a “material adverse effect” clause. A “material adverse effect” is defined as a material change in the operations of Powell or Powell Canada in relation to our financial condition, property, business operations, expected net cash flows, liabilities or capitalization.

The Canadian Revolver is secured by the assets of our Canadian operations and provides for customary events of default and carries cross-default provisions with our existing debt agreements. If an event of default (as defined in the Canadian Revolver) occurs and is continuing, per the terms and subject to the conditions set forth in the Canadian Revolver, amounts outstanding under the Canadian Revolver may be accelerated and may become immediately due and payable.

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Industrial Development Revenue Bonds

We borrowed $8.0 million in October 2001 through a loan agreement funded with proceeds from tax-exempt industrial development revenue bonds (Bonds). These Bonds were issued by the Illinois Development Finance Authority and were used for the completion of our Northlake, Illinois facility. Pursuant to the Bond issuance, a reimbursement agreement between us and a major domestic bank required an issuance by the bank of an irrevocable direct-pay letter of credit (Bond LC), as collateral, to the Bonds’ trustee to guarantee payment of the Bonds’ principal and interest when due. The Bond LC is subject to both early termination and extension provisions customary to such agreements, as well as various covenants, for which we were in compliance at March 31, 2015. While the Bonds mature in 2021, the reimbursement agreement requires annual redemptions of $0.4 million that commenced on October 25, 2002. A sinking fund is used for the redemption of the Bonds. At March 31, 2015, the balance in the restricted sinking fund was approximately $0.2 million and was recorded in cash and cash equivalents. The Bonds bear interest at a floating rate determined weekly by the Bonds’ remarketing agent, which was the underwriter for the Bonds and is an affiliate of the bank. This interest rate was 0.16% as of March 31, 2015.

F. COMMITMENTS AND CONTINGENCIES

Long-Term Debt

See Note E herein for discussion of our long-term debt.

Letters of Credit and Bonds

Certain customers require us to post bank letter of credit guarantees or performance bonds issued by a surety. These guarantees and performance bonds assure that we will perform under the terms of our contract. In the event of default, the counterparty may demand payment from the bank under a letter of credit or performance by the surety under a performance bond. To date, there have been no significant expenses related to either letters of credit or performance bonds for the periods reported. We were contingently liable for secured and unsecured letters of credit of $18.0 million as of March 31, 2015. We also had performance and maintenance bonds totaling $300.9 million that were outstanding, with additional bonding capacity of $299.1 million available, at March 31, 2015.

We have a $14.8 million facility agreement (Facility Agreement) between Powell (UK) Limited and a large international bank. This Facility Agreement provides Powell (UK) the ability to enter into bank guarantees as well as forward exchange contracts and currency options. At March 31, 2015, we had outstanding guarantees totaling $5.3 million under this Facility Agreement.  Amounts available under this Facility Agreement were $9.5 million as of March 31, 2015.

The Facility Agreement provides for financial covenants and customary events of default, and carries cross-default provisions with our Amended Credit Facility. If an event of default (as defined in the Facility Agreement) occurs and is continuing, per the terms and subject to the conditions set forth in the Facility Agreement, obligations outstanding under the Facility Agreement may be accelerated and may become or be declared immediately due and payable. As of March 31, 2015, we were in compliance with all of the financial covenants of the Facility Agreement.  

Litigation

We are involved in various legal proceedings, claims and other disputes arising in the ordinary course of business which, in general, are subject to uncertainties and in which the outcomes are not predictable. Although we can give no assurance about the outcome of pending or threatened litigation and the effect such outcomes may have on us, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on our consolidated financial position or results of operations or liquidity.

G. STOCK-BASED COMPENSATION

Refer to our Annual Report on Form 10-K for the fiscal year ended September 30, 2014 for a full description of our existing stock-based compensation plans.

In February 2014, our stockholders approved our 2014 Equity Incentive Plan (the 2014 Plan).  Persons eligible to receive awards under the 2014 Plan include certain officers and employees.  This Plan authorizes stock options, stock appreciation rights, restricted stock, restricted stock units and performance-based awards, as well as certain other awards.

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Restricted Stock Units

We issue restricted stock units (RSUs) to certain officers and key employees of the Company. The RSUs typically vest over a three-year period from their date of issuance. The fair value of the RSUs is based on the closing price of our common stock as reported on the NASDAQ Global Market on the grant dates. Sixty-percent of the actual amount of the RSUs earned will be based on the cumulative earnings as reported relative to the three-year performance cycle which begins October 1 of the year granted, and ranges from 0% to 150% of the target RSUs granted. The remaining forty-percent of the RSUs are time-based and vest over a three-year period. At March 31, 2015, there were 161,337 RSUs outstanding. The RSUs do not have voting rights and do not receive dividends on common stock; additionally, the shares of common stock underlying the RSUs are not considered issued and outstanding until actually issued.

RSU activity (number of shares) for the quarter is summarized below:

	Number of			Weighted
	Restricted			Average
	Stock			Fair Value
	Units			Per Share
Outstanding at September 30, 2014		106,845		$	51.30
Granted		88,000			41.88
Vested		(33,508	)		44.06
Forfeited		—			—
Outstanding at March 31, 2015		161,337		$	47.66

During the six months ended March 31, 2015 and 2014, we recorded compensation expense of $0.9 million and $1.5 million, respectively, related to the RSUs.

Restricted Stock

In February 2014 our stockholders also approved the 2014 Non-Employee Director Equity Incentive Plan (the 2014 Director Plan) for the benefit of members of the Board of Directors of the Company who, at the time of their service are not employees of the Company or any of its affiliates. The 2014 Director Plan authorizes stock options, stock appreciation rights, restricted stock, restricted stock units, as well as certain other awards.  In February 2015, 16,000 shares of restricted stock were issued to such directors at a price of $33.37 per share under the 2014 Director Plan.  The annual restricted stock grants vest 50% per year over a two-year period on each anniversary of the grant date.

During the six months ended March 31, 2015 and 2015, we recorded compensation expense of $0.7 million and $0.5 million, respectively, related to restricted stock grants.  

H. SHARE REPURCHASE PROGRAM

On December 17, 2014, our Board of Directors authorized a repurchase program (the Repurchase Program) under which we may repurchase up to $25 million of our outstanding stock.  The purchases may be made from time to time in the open market, through privately negotiated transactions and Rule 10b5-1 trading plans in accordance with applicable laws, rules and regulations.  The Repurchase Program will be funded from cash on hand and cash provided by operating activities.  The Repurchase Program will expire as of the close of business on December 31, 2015.  As of March 31, 2015, we have purchased 171,416 shares at cost of $5.8 million under this Repurchase Program.  The average price per share through March 31, 2015 has been $33.60.

I. FAIR VALUE MEASUREMENTS

We measure certain financial assets and liabilities at fair value. Fair value is defined as an “exit price” which represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in valuing an asset or liability. The accounting guidance requires the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. As a basis for considering such assumptions and inputs, a fair value hierarchy has been established which identifies and prioritizes three levels of inputs to be used in measuring fair value.

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The three levels of the fair value hierarchy are as follows:

Level 1 — Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Inputs other than the quoted prices in active markets that are observable either directly or indirectly, including: quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

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, 2015 (in thousands):

	Fair Value Measurements at March 31, 2015
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable		Fair Value at
	Identical Assets		Inputs		Inputs		March 31,
	(Level 1)		(Level 2)		(Level 3)		2015
Assets:
Cash equivalents	$	234	$	—	$	—	$	234
Deferred compensation		2,001		3,134		—		5,135
Liabilities:
Deferred compensation		—		4,947		—		4,947

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 September 30, 2014 (in thousands):

	Fair Value Measurements at September 30, 2014
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable		Fair Value at
	Identical Assets		Inputs		Inputs		September 30,
	(Level 1)		(Level 2)		(Level 3)		2014
Assets:
Cash equivalents	$	10,535	$	—	$	—	$	10,535
Deferred compensation		724		2,802		—		3,526
Liabilities:
Deferred compensation		—		3,688		—		3,688

Cash equivalents, primarily funds held in money market savings instruments, are reported at their current carrying value which approximates fair value due to the short-term nature of these instruments and are included in cash and cash equivalents in our Condensed Consolidated Balance Sheets.

Fair Value of Other Financial Instruments

Fair value guidance requires certain fair value disclosures be presented in both interim and annual reports.  The estimated fair value amounts of financial instruments have been determined using available market information and valuation methodologies described below.

Deferred Compensation – We hold investments in an irrevocable Rabbi Trust for our deferred compensation plan. These assets include various mutual fund investments and company-owned life insurance policies. Under the plan, participants designate investment options to serve as the basis for measurement of the notional value of their accounts.  The fair values of the underlying securities of these funds are based on quoted market prices and are categorized as Level I in the fair value measurement hierarchy.  The company-owned life insurance policies are valued at cash surrender value and are therefore categorized as Level 2 in the fair value measurement hierarchy.

Industrial Development Revenue Bond – The fair value of our long-term debt depends primarily on the coupon rate of our industrial development revenue bonds.  The carrying value of our long-term debt at March 31, 2015, approximates fair value based on the

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current coupon rate of the bonds, which is reset weekly, and is classified as a Level 2 input in the fair value measurement hierarchy as there is an active market for the trading of these industrial development revenue bonds.

There were no transfers between levels within the fair value measurement hierarchy during the six months ended March 31, 2015.

J. DISCONTINUED OPERATIONS

On January 15, 2014, we sold our wholly-owned subsidiary Transdyn to a global provider of electronic toll collection systems, headquartered in Vienna, Austria.  The purchase price from the sale of this subsidiary totaled $16.0 million, subject to working capital adjustments.  We received cash of $14.4 million and the remaining $1.6 million was placed into an escrow account, to be released subject to resolution of certain claims.  

We have presented the results of these operations as income from discontinued operations, net of tax, in the condensed consolidated statements of operations as of March 31, 2014.  

Summary comparative financial results of discontinued operations were as follows (in thousands):

	Three months ended March 31,				Six months ended March 31,
	2015		2014		2015		2014
Revenues	$	—	$	1,557	$	—	$	13,923
Income from discontinued operations, net of tax of zero, $131, zero and $633, respectively		—		54		—		1,041
Gain on sale of discontinued operations, net of tax of $5,218		—		8,563		—		8,563
Net income from discontinued operations, net of tax	$	—	$	8,617	$	—	$	9,604
Earnings per share information:
Basic	$	—	$	0.72	$	—	$	0.80
Diluted	$	—	$	0.71	$	—	$	0.80

K. INCOME TAXES

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

	Three months ended March 31,						Six months ended March 31,
	2015			2014			2015			2014
Income from continuing operations before income taxes	$	2,696		$	11,031		$	1,466		$	22,235
Income tax provision		6,379			4,055			5,388			7,992
Income (loss) from continuing operations	$	(3,683	)	$	6,976		$	(3,922	)	$	14,243
Effective tax rate		237	%		37	%		368	%		36	%

A reconciliation of the significant differences between the statutory U. S. income tax rate and the effective income tax rate, as computed on earnings (loss) before income tax provision for the six months ended March 31, 2015 and 2014, is as follows:

	Six months ended March 31,
	2015			2014
Statutory rate		35	%		35	%
Canadian valuation allowance		661			—
Research and Development Credit		(327	)		—
State rate		2			2
Domestic production activities deduction		(2	)		(2	)
Other		(1	)		1
Effective rate		368	%		36	%

We recorded a provision for income taxes from continuing operations of $6.4 million in the second quarter of Fiscal 2015, compared to the provision of $4.1 million recorded in the second quarter of Fiscal 2014.  The effective tax rate for the second quarter of Fiscal 2015 was 236.6% compared to an effective tax rate of 36.8% for the second quarter of Fiscal 2014, primarily due to certain discrete

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items recorded in the second quarter of Fiscal 2015. These discrete items include a valuation allowance recorded against our Canadian deferred tax assets in the amount of $9.0 million, as discussed below, partially offset by the release of a FIN 48 reserve related to the  Federal Research and Development Tax Credit (R&D Credit) in the amount of $4.1 million upon closing an Internal Revenue Service (IRS) audit. The effective tax rate for the quarter ended March 31, 2014 approximated the combined U.S. federal and state statutory rates as the majority of our income was attributable to the U.S.

We recorded a provision for income taxes from continuing operations of $5.4 million in the six months ended March 31, 2015, compared to the provision of $8.0 million recorded in the six months ended March 31, 2014.  The effective tax rate for the six months ended March 31, 2015 was 367.5% compared to an effective tax rate of 35.9% for the six months ended March 31, 2014 primarily due to a valuation allowance against our Canadian deferred tax assets partially offset by the release of a FIN 48 reserve related to the R&D Credit upon closing an IRS audit as well as the December 19, 2014 retroactive reinstatement of the R&D Credit from January 1, 2014 through December 31, 2014.  The effective tax rate for the six months ended March 31, 2014 approximated the combined U.S. federal and state statutory rate as the majority of our income was attributable to the U.S. 

At March 31, 2015, we had $32 million of gross foreign net operating loss carryforwards, the benefits of which are recorded as deferred tax assets and are subject to a 20-year carryforward period, the first of which will expire in 2031. During our quarterly assessment of deferred taxes, in the second quarter of Fiscal 2015, we established a valuation allowance in the amount of $9.0 million against Canadian net deferred tax assets.  In assessing the realizability of net deferred tax assets, we consider whether it is more-likely-than-not that some portion or all of the net deferred tax assets may not be realized.  The ultimate realization of net deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible.  In light of the historical Canadian losses, and recent changes in projected losses in the near term, we are required under the more-likely-than-not accounting standard to record a valuation allowance against the Canadian net deferred assets because we may not be able to realize the benefits of the net operating loss carryforwards and other deductible differences.

We believe that our deferred tax assets in other tax jurisdictions, with the exception of those related to certain foreign withholding taxes and the net operating losses of our Dutch entities, are more-likely-than-not realizable through future reversals of existing taxable temporary differences and our estimate of future taxable income. Estimates may change as new events occur, estimates of future taxable income during the carryforward period 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.

L. RESTRUCTURING AND SEPARATION COSTS

In the second quarter of Fiscal 2015, we incurred approximately $1.3 million in restructuring and separation costs associated with the departure of our former Chief Operating Officer and severance costs related to our Canadian operations and certain U.S. operations which were negatively impacted by deteriorating market conditions.  Of these costs, $0.8 million has been paid as of March 31, 2015 and the remaining $0.5 million will be distributed over the next sixteen months.  

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

We are including the following discussion to inform our existing and potential shareholders generally of some of the risks and uncertainties that can affect our Company and to take advantage of the “safe harbor” protection for forward-looking statements that applicable federal securities law affords.

From time to time, our management or persons acting on our behalf make forward-looking statements to inform existing and potential shareholders about our Company. These statements may include projections and estimates concerning the timing and success of specific projects and our future backlog, revenues, income, acquisitions and capital spending. Forward-looking statements include information concerning future results of operations and financial condition. Statements that contain words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will” or similar expressions may be forward-looking statements. In addition, sometimes we will specifically describe a statement as being a forward-looking statement and refer to this cautionary statement.

In addition, various statements in this Quarterly Report on Form 10-Q, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements speak only as of the date of this report; we disclaim any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:

· Economic uncertainty and financial market conditions may impact our customer base, suppliers and backlog.

· Our backlog is subject to unexpected adjustments and cancellations and, therefore, may not be a reliable indicator of our future earnings.

· The use of percentage-of-completion accounting on our fixed-price contracts could result in volatility in our results of operations.

· A portion of our contracts contain terms with penalty provisions.

· Fluctuations in the price and supply of raw materials used to manufacture our products may reduce our profits and could materially impact our ability to meet commitments to our customers.

· Our industry is highly competitive.

· Our operations could be adversely impacted by the effects of government regulations.

· Changes in tax laws and regulations may change our effective tax rate and could have a material effect on our financial results.

· Our international operations expose us to risks that are different from, or possibly greater than, the risks we are exposed to domestically and may adversely affect our operations.

· Acquisitions involve a number of risks.

· Our operating results may vary significantly from quarter to quarter.

· The departure of key personnel could disrupt our business.

· Our business requires skilled labor, and we may be unable to attract and retain qualified employees.

· Actual and potential claims, lawsuits and proceedings could ultimately reduce our profitability and liquidity and weaken our financial condition.

· Unforeseen difficulties with our enterprise resource planning, engineering and manufacturing process systems (Business Systems) could adversely affect our internal controls and our business.

· We carry insurance against many potential liabilities, but our management of risk may leave us exposed to unidentified or unanticipated risks.

· Technological innovations by competitors may make existing products and production methods obsolete.

· Catastrophic events could disrupt our business.

· Unforeseen difficulties with expansions or relocation of our existing facilities could adversely affect our operations.

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· Due to the cyclical nature of the oil and gas industry, our business may be adversely impacted by extended periods of low oil or natural gas prices or unsuccessful exploration efforts which may decrease our customers’ spending and therefore our results in the future.

We believe the items we have outlined above are important factors that could cause estimates included in our financial statements to differ materially from actual results and those expressed in a forward-looking statement made in this report or elsewhere by us or on our behalf.  We have discussed many of these factors in more detail in our Annual Report on Form 10-K for the year ended September 30, 2014. These factors are not necessarily all of the factors that could affect us. Unpredictable or unanticipated factors we have not discussed in this report could also have material adverse effects on actual results. We do not intend to update our description of important factors each time a potential important factor arises, except as required by applicable securities laws and regulations. We advise our shareholders that they should (1) be aware that factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution when considering our forward-looking statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations

The following discussion and analysis of our financial condition and results ofoperations should be read in conjunction with the accompanying condensedconsolidated financial statements and related notes included elsewhere in thisQuarterly Report on Form 10-Q and with our Annual Report on Form 10-K for theyear ended September 30, 2014 which was filed with the Securities and ExchangeCommission (SEC) on December 3, 2014 and is available on the SEC’s website atwww.sec.gov.

Overview

We develop, design, manufacture and service custom-engineered equipment and systems for the management and control of electrical energy and other critical processes. Headquartered in Houston, Texas, we serve the oil and gas refining, offshore oil and gas production, petrochemical, pipeline, terminal, pulp and paper, mining and metals, light rail traction power, and electric utility markets. Revenues and costs are primarily related to custom engineered-to-order equipment and systems and accounted for under percentage of completion accounting which precludes us from providing detailed price and volume information.

The markets in which we participate are capital intensive and cyclical in nature. Cyclicality is predominantly driven by customer demand, global economic conditions and anticipated environmental or regulatory changes which affect the manner in which our customers proceed with capital investments. Our customers analyze various factors including the demand and price for oil, gas and electrical energy, the overall financial environment, governmental budgets, regulatory actions and environmental concerns. These factors influence the release of new capital projects by our customers, which are traditionally awarded in competitive bid situations. Scheduling is matched to the customer requirements and projects may take a number of months to produce; schedules also may change during the course of any particular project. Our operating results can be impacted by factors outside of our control.  For example, many of our projects have contracting arrangements where the customer’s approval of engineering and design specifications may affect the timing of the project execution thus impacting the recognition of revenue and costs.

As of March 31, 2015, we have a backlog of unfilled orders of $498.5 million, which is a decrease from our backlog of unfilled orders of $507.1 million as of September 30, 2014. Our backlog includes various projects, some of which are petrochemical, oil and gas construction and transportation infrastructure projects which take a number of months to produce.

We anticipate that demand for our solutions in the western Canadian oil and gas markets will continue to be a contributor to our strategic position in the Canadian market place.  We completed the construction of our new Canadian facility and relocated operations in the fall of 2013 and we are nearing the completion of a $26 million expansion of this manufacturing facility, of which approximately $25 million has been incurred as of March 31, 2015. The stabilization of our Canadian operations has presented and continues to present challenges resulting in inefficiencies that have led to extended project delivery times, delayed project revenues, higher operating costs, gross margin deterioration and operating losses.  We continue to take actions to mitigate the risks associated with replicating our U.S. project-based integration model which allows for the design, fabrication, integration and testing of our products at a single location. Prior to the construction of our new Canadian facility, we performed only final assembly operations in Canada.

On January 15, 2014, we sold our wholly-owned subsidiary Transdyn to a global provider of electronic toll collection systems, headquartered in Vienna, Austria.  The purchase price from the sale of this subsidiary totaled $16.0 million, subject to working capital adjustments. We received cash of $14.4 million and the remaining $1.6 million was placed into an escrow account, to be released subject to resolution of certain claims. We have presented the results of these operations as income from discontinued operations, net of tax, in the condensed consolidated statements of operations for the quarter and six months ended March 31, 2014.  Accordingly, we have removed Transdyn from the Results of Operations discussions below.

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Results of Operations

Quarter Ended March 31, 2015 Compared to the Quarter Ended March 31, 2014 (Unaudited)

Revenue and Gross Profit

Revenues increased 4.9%, or $7.9 million, to $170.2 million in the second quarter of Fiscal 2015, compared to the second quarter of Fiscal 2014, primarily due to an increase in domestic revenues.  Domestic revenues increased by 31.0%, or $28.5 million, to $120.4 million in the second quarter of Fiscal 2015, compared to the second quarter of Fiscal 2014, and international revenues decreased by 29.3%, or $20.6 million, to $49.8 million in the second quarter of Fiscal 2015, compared to the second quarter of Fiscal 2014. This decrease in international revenues in the second quarter of Fiscal 2015 was primarily due to the substantial completion of a large international project in Fiscal 2014. Revenues from commercial and industrial customers increased $14.2 million to $128.8 million in the second quarter of Fiscal 2015, compared to the second quarter of Fiscal 2014. Revenues from public and private utilities decreased $12.2 million to $23.2 million in the second quarter of Fiscal 2015, compared to the second quarter of Fiscal 2014. Revenues from municipal and transit projects increased $5.9 million to $18.2 million in the second quarter of Fiscal 2015, compared to the second quarter of Fiscal 2014.

Gross profit for the second quarter of Fiscal 2015 decreased 30.4%, or $10.6 million, to $24.3 million, compared to the second quarter of Fiscal 2014.  Gross profit as a percentage of revenues decreased to 14.3% in the second quarter of Fiscal 2015, compared to 21.5% in the second quarter of Fiscal 2014 primarily due to the margins associated with the mix of projects types, the large international project noted above as well as continued inefficiencies and incremental costs to hold customers’ schedules associated with the expansion and stabilization of our Canadian operations.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $2.6 million to $19.5 million during the second quarter of Fiscal 2015 when compared to the second quarter of Fiscal 2014 partially due to a reduction in performance-based compensation, offset by an increase in personnel and administrative costs associated with the expansion of our Canadian operations.  Selling, general and administrative expenses, as a percentage of revenues, decreased to 11.4% during the second quarter of Fiscal 2015, compared to 13.6% during the second quarter of Fiscal 2014 due to the factors discussed above.  

Restructuring and separation costs

In the second quarter of Fiscal 2015, we incurred approximately $1.3 million in restructuring and separation costs associated with the departure of our former Chief Operating Officer and severance costs related to our Canadian operations and certain U.S. operations which were negatively impacted by deteriorating market conditions.  

Other Income

We recorded other income of $0.9 million during the second quarter of Fiscal 2015.  This was primarily the amortization of the deferred gain from the amended supply agreement, discussed in Note D of Notes to Condensed Consolidated Financial Statements, as well as death benefits received from our company-owned life insurance policy.  Other income was $0.5 million in the second quarter of Fiscal 2014 which was solely the amortization of the deferred gain.

Income Tax Provision

We recorded a provision for income taxes from continuing operations of $6.4 million in the second quarter of Fiscal 2015, compared to the provision of $4.1 million recorded in the second quarter of Fiscal 2014.  The effective tax rate for the second quarter of Fiscal 2015 was 236.6% compared to an effective tax rate of 36.8% in the second quarter of Fiscal 2014, primarily due to certain discrete items recorded in the second quarter of Fiscal 2015.  These discrete items include a valuation allowance recorded against our Canadian deferred tax assets in the amount of $9.0 million partially offset by the release of a FIN 48 reserve related to the Federal Research and Development Tax Credit (R&D Credit) in the amount of $4.1 million upon closing an Internal Revenue Service (IRS) audit. The effective tax rate for the second quarter of Fiscal 2014 approximated the combined U.S. federal and state statutory rates as the majority of our income was attributable to the U.S.

Income from continuing operations

In the second quarter of Fiscal 2015, we recorded a loss from continuing operations of $3.6 million, or a loss per share of $0.31, compared to income of $7.0 million, or $0.58 per diluted share, in the second quarter of Fiscal 2014.  This loss was primarily due to the valuation allowance recorded against our Canadian deferred tax assets mentioned above.

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Income from discontinued operations

In January 2014, we sold our wholly-owned subsidiary Transdyn to a global provider of electronic toll collection systems, headquartered in Vienna, Austria.  We presented the results of these operations as income from discontinued operations, net of tax, for the second quarter of Fiscal 2014.  We had no income from discontinued operations in the second quarter of Fiscal 2015, and in the second quarter of Fiscal 2014, we recorded $8.6 million, or $0.71 per diluted share which included the gain on the sale. For additional information about this disposition, see Note J in the Notes to Condensed Consolidated Financial Statements.

Backlog

The order backlog at March 31, 2015 was $498.5 million, compared to $507.1 million at September 30, 2014.  New orders placed during the second quarter of Fiscal 2015 totaled $167.1 million compared to $162.6 million in the second quarter of Fiscal 2014.  

Six Months Ended March 31, 2015 Compared to the Six Months Ended March 31, 2014 (Unaudited)

Revenue and Gross Profit

Revenues decreased 3.4%, or $11.4 million, to $322.8 million for the six months ended March 31, 2015, compared to the six months ended March 31, 2014.  Domestic revenues increased by 20.1%, or $36.4 million, to $217.3 million for the six months ended March 31, 2015, compared to the six months ended March 31, 2014, and international revenues decreased by 31.2%, or $47.8 million, to $105.5 million for the six months ended March 31, 2015, compared to the six months ended March 31, 2014.  International revenues decreased in the six months ended March 31, 2015 primarily due the substantial completion of a large international project in Fiscal 2014.  Revenues from commercial and industrial customers increased $12.2 million to $251.3 million for the six months ended March 31, 2015, compared to the six months ended March 31, 2014. Revenues from public and private utilities decreased $22.4 million to $47.7 million for the six months ended March 31, 2015, compared to the six months ended March 31, 2014. Revenues from municipal and transit projects decreased $1.2 million to $23.8 million for the six months ended March 31, 2015, compared to the six months ended March 31, 2014.

Gross profit for the six months ended March 31, 2015 decreased 35.3%, or $24.7 million, to $45.4 million, compared to the six months ended March 31, 2014.  Gross profit as a percentage of revenues was 14.1% for the six months ended March 31, 2015, compared to 21.0% for the six months ended March 31, 2014.  Our gross profit as a percentage of revenues was down in the six months ended March 31, 2015, compared to the six months ended March 31, 2014, primarily due to the costs associated with our Canadian operations, the international project noted above and the overall mix of project types.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $3.4 million to $40.3 million during six months ended March 31, 2015, compared to the six months ended March 31, 2014, primarily due to a reduction in performance-based compensation and overall cost cutting efforts.  Selling, general and administrative expenses, as a percentage of revenues, decreased slightly to 12.5% during the six months ended March 31, 2015, compared to 13.1% during the six months ended March 31, 2014.

Restructuring and separation costs

In the six months ended March 31, 2015, we incurred approximately $1.3 million in restructuring and separation costs associated with the departure of our former Chief Operating Officer and severance costs related to our Canadian operations and certain U.S. operations which were negatively impacted by deteriorating market conditions.  

Other Income

We recorded other income of $1.4 million in the six months ended March 31, 2015 which was the amortization of the deferred gain from the amended supply agreement, discussed in Note D of Notes to Condensed Consolidated Financial Statements, and the death benefit from our company-owned life insurance policy.  We recorded other income of $0.5 million in the same period in fiscal year 2014 which was solely the amortization of the deferred gain.

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Income Tax Provision

We recorded a provision for income taxes from continuing operations of $5.4 million for the six months ended March 31, 2015, compared to the provision of $8.0 million for the six months ended March 31, 2014.  The effective tax rate for the six months ended March 31, 2015 was 367.5%, compared to an effective tax rate of 35.9% for the six months ended March 31, 2014 primarily due to a valuation allowance recorded against our Canadian deferred tax assets partially offset by the release of a FIN 48 reserve related to the R&D Credit upon closing an IRS audit as well as the December 19, 2014 retroactive reinstatement of the R&D Credit from January 1, 2014 through December 31, 2014.  The effective tax rate for the six months ended March 31, 2014 approximated the combined U.S. federal and state statutory rate as the majority of our income was attributable to the U.S. 

Income from Continuing Operations

For the six months ended March 31, 2015, we recorded a loss from continuing operations of $3.9 million, or $0.33 per share, compared to income from continuing operations of $14.2 million, or $1.18 per diluted share, for the six months ended March 31, 2014.  This loss was primarily due to the valuation allowance recorded against our Canadian deferred tax assets mentioned above.

Income from Discontinued Operations

For the six months ended March 31, 2014, we recorded $9.6 million, or $0.80 per diluted share, of income from discontinued operations which included the gain on the sale.  For additional information about this disposition, see Note I in the Notes to Condensed Consolidated Financial Statements.

Backlog

The order backlog at March 31, 2015 was $498.5 million, compared to $507.1 million at September 30, 2014.  New orders placed during the six months ended March 31, 2015 totaled $321.5 million compared to $354.8 million for the six months ended March 31, 2014.  The year over year decrease in new orders was primarily due to the timing of certain complex oil and gas production and petrochemical projects.

Liquidity and Capital Resources

Cash and cash equivalents decreased to $55.7 million at March, 2015, compared to $103.1 million at September 30, 2014.  As of March 31, 2015, current assets exceeded current liabilities by 2.2 times and our debt to total capitalization was 0.81%.

We have a $75.0 million revolving credit facility in the U.S., which expires in December 2016. As of March 31, 2015, there were no amounts borrowed under this line of credit. Total long-term debt and capital lease obligations, including current maturities, totaled $2.8 million at March 31, 2015, compared to $3.2 million at September 30, 2014. Total letters of credit outstanding were $18.0 million and $21.5 million at March 31, 2015 and September 30, 2014, respectively, which reduce our availability under our U.S. credit facility. Amounts available at March 31, 2015 under the U.S. revolving credit facility was $57.0 million.  For further information regarding our debt, see Notes E and F of Notes to Condensed Consolidated Financial Statements.

Approximately $4.3 million of our cash at March 31, 2015, was held outside of the United States for international operations.  It is our intention to indefinitely reinvest all current and future foreign earnings internationally in order to ensure sufficient working capital and support and expand these international operations.  In the event that we elect to repatriate some or all of the foreign earnings that were previously deemed to be indefinitely reinvested outside the U.S., under current tax laws we would incur additional tax expense upon such repatriation.

We believe that cash available and borrowing capacity under our existing credit facilities should be sufficient to finance anticipated operating activities, capital improvements and expansions, debt repayments and share repurchases, for the foreseeable future. We continue to monitor the factors that drive our markets and strive to maintain our leadership and competitive advantage in the markets we serve while aligning our cost structures with market conditions.

Operating Activities

Cash used in operating activities was $4.1 million during the first six months of Fiscal 2015, compared to cash provided by operating activities of $6.8 million during the first six months of Fiscal 2014.  This decrease was primarily due to the reduction in earnings and an increase in accounts receivable, partially offset by the improvement in our net underbilled position. Cash flow from operations is primarily influenced by demand for our products and services and is impacted as our progress payment terms with our customers are matched with the payment terms with our suppliers.  

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Investing Activities

Purchases of property, plant and equipment during the first six months of Fiscal 2015 totaled $28.7 million compared to $8.5 million during the first six months of Fiscal 2014.  This increase results from the expansion of our Canadian facility in Fiscal 2015.

Financing Activities

Net cash used in financing activities was $13.0 million during the first six months of Fiscal 2015 and $6.9 million during the first six months of Fiscal 2014.  This increase in the use of cash in the same period in Fiscal 2015 was primarily driven by our share repurchase program discussed below.   During the first six months of Fiscal 2015, we have spent $5.8 million to repurchase shares of our common stock.

Share Repurchase Program

On December 17, 2014, our Board of Directors authorized a share repurchase program under which we may repurchase up to $25 million of our outstanding stock.  The purchases may be made from time to time in the open market, through privately negotiated transactions and Rule 10b5-1 trading plans in accordance with applicable laws, rules and regulations.  The Repurchase Program will be funded from cash on hand and cash provided by operating activities.  The Repurchase Program will expire as of the close of business on December 31, 2015. As of March 31, 2015, a total of $5.8 million of our stock (171,416 shares) has been purchased under the Repurchase Program.

New Accounting Standards

See Note A to our condensed consolidated financial statements included in this report for information on new accounting standards.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates.

There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended September 30, 2014.

Outlook

The markets in which we participate are capital-intensive and cyclical in nature. Cyclicality is predominantly driven by customer demand, global economic conditions and anticipated environmental or regulatory changes which affect the manner in which our customers proceed with capital investments. Our customers analyze various factors including the demand and price for oil, gas and electrical energy, the overall financial environment, governmental budgets, regulatory actions and environmental concerns. These factors influence the release of new capital projects by our customers, which are traditionally awarded in competitive bid situations. Scheduling is matched to the customer requirements; and projects may take a number of months to produce; schedules also may change during the course of any particular project.

A significant portion of our revenues are derived from the oil and gas market sectors.  Due to the decline in oil prices, many of our customers have reduced their capital budgets and cuts costs, and in certain instances have deferred or cancelled projects that we were pursuing.  We believe that lower oil prices will impact future orders due to reduced capital spending and project deferrals by our customers.  Market price pressures have intensified.  This reduction in orders and market price pressures will ultimately negatively impact our revenues, operating results and cash flows from operations.  Accordingly, we are reviewing our cost structure in all operating locations as well as our corporate office and are taking actions to align our operating cost structure with expected revenues in the near-term.  

Prior to these recent economic challenges, our orders over the past two years have been strong, driven primarily by the oil and gas and petrochemical industries overall, along with the specific demand associated with Canadian projects. Our operating results are frequently impacted by the timing and resolution of change orders and project close-out which could cause gross margins to improve or deteriorate during the period in which these items are approved and finalized with customers. Our operating results are also

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impacted by other factors, such as projects that have contract arrangements where the customer approval of final engineering and design specifications may delay the timing of the project execution.

We completed the construction of our new Acheson, Alberta facility and relocated operations in the fall of 2013 and are nearing the completion of a $26 million expansion of this facility. The production ramp and stabilization of our Canadian operations has presented and may continue to present challenges resulting in inefficiencies and extended project delivery times. These challenges resulted in delayed project revenues, incremental costs to hold customers’ schedules, gross margin deterioration and operating losses.  We continue to take actions to stabilize our Canadian operations and mitigate the risks associated with replicating our U.S. project-based integration model which allows for the design, fabrication, integration and testing of our products at a single location.  However, we may continue to incur operating losses in Canada in the near term as we continue to improve our training and execution as well as enhance our engineering and project management competencies.  Prior to the construction of our new Canadian facility, we performed only final assembly operations in Canada.

We have funded the construction and expansion of our Canadian facility from our existing cash and cash equivalents and future cash flows from operations. We expect the expansion to be completed in the third quarter of Fiscal 2015.

We believe that cash available and borrowing capacity under our existing credit facilities should be sufficient to finance anticipated operating activities, capital improvements, debt repayments and share repurchases for the foreseeable future. We continue to monitor our markets and will strive to maintain our leadership and competitive advantage in the markets we serve.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain market risks arising from transactions we have entered into in the normal course of business. These risks primarily relate to fluctuations in market conditions, commodity prices, foreign exchange rates and interest rates.

Market Risk

We are exposed to general market risk and its potential impact on accounts receivable or costs and estimated earnings in excess of billings on uncompleted contracts. The amounts recorded may be at risk if our customers’ ability to pay these obligations is negatively impacted by economic conditions. Our customers and their industries are typically EPC firms, oil and gas refining, offshore oil and gas production, petrochemical, pipeline, terminal, pulp and paper, mining and metals, light rail traction power, electric utility and other large industrial customers. We maintain ongoing discussions with customers regarding contract status with respect to payment status, change orders and billing terms in an effort to monitor collections of amounts billed

Commodity Price Risk

We are subject to market risk from fluctuating market prices of certain raw materials. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We attempt to pass along such commodity price increases to our customers on a contract-by-contract basis to avoid a negative effect on profit margin. While we may do so in the future, we have not currently entered into any derivative contracts to hedge our exposure to commodity risk. We continue to experience price volatility with some of our key raw materials and components. Fixed-price contracts may limit our ability to pass cost increases to our customers, thus negatively impacting our earnings. Fluctuations in commodity prices may have a material impact on our future earnings and cash flows.

Foreign Currency Transaction Risk

We have operations that expose us to currency risk in the British Pound Sterling, the Canadian Dollar and to a lesser extent the Euro. Amounts invested in our foreign operations are translated into U.S. Dollars at the exchange rates in effect at the balance sheet date. The resulting translation adjustments are recorded as accumulated other comprehensive income (loss), a component of stockholders’ equity in our consolidated balance sheets. We believe the exposure to the effects that fluctuating foreign currencies have on our consolidated results of operations is limited because the foreign operations primarily invoice customers and collect obligations in their respective currencies or U.S. Dollars. Our international operations are financed utilizing local credit facilities denominated in local currencies. Additionally, expenses associated with these transactions are generally contracted and paid for in the same local currencies.

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Interest Rate Risk

If we decide to borrow under one of our credit facilities, we will be subject to market risk resulting from changes in interest rates related to our floating rate bank credit facility. If we were to make such borrowings, a hypothetical 100 basis point increase in variable interest rates may result in a material impact to our financial statements. While we do not currently have any derivative contracts to hedge our exposure to interest rate risk, in the past we have entered and may in the future enter into such contracts. During each of the past three years, we have not experienced a significant effect on our business due to changes in interest rates.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established and maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosures.

Management, with the participation of our CEO and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q.  Based on such evaluation, our CEO and CFO have each concluded that as of the end of the period, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in various legal proceedings, claims and other disputes arising in the ordinary course of business which, in general, are subject to uncertainties and the outcomes are not predictable.  We do not believe that the ultimate conclusion of these disputes could materially affect our financial position or results of operations.

Item 1A. Risk Factors

There are no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2014.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below summarizes information about our purchases of common stock, based on settlement date, during the quarter ended March 31, 2015:

					Total Number		Maximum
					of Shares		Dollar Value of
					Purchased as		Shares that May
	Total Number		Average Price		Part of Publicly		Yet Be Purchased
	of Shares		Paid per		Announced Plans		Under the Plans
	Purchased		Share (1)		or Programs(2)		or Programs
January 1 - January 31		—	$	—		—	$	25,000,000
February 1 - February 28		69,495		33.73		69,495		22,655,689
March 1 - March 31		101,921		33.51		101,921		19,240,556
Total activity for the quarter ended March 31, 2015		171,416	$	33.60		171,416	$	19,240,556
(1)Includes commissions. (2)On December 18, 2014, we announced that on December 17, 2014 our Board of Directors authorized a repurchase program (the Repurchase Program) under which we may repurchase up to $25 million of our outstanding stock.  The Repurchase Program will expire as of the close of business on December 31, 2015.

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Item 6. Exhibits

Number		Description of Exhibits
3.1	—	Certificate of Incorporation of Powell Industries, Inc. filed with the Secretary of State of the State of Delaware on February 11, 2004 (filed as Exhibit 3.1 to our Form 8-A/A filed November 1, 2004, and incorporated herein by reference).
3.2	—	Amended and Restated Bylaws of Powell Industries, Inc. (filed as Exhibit 3.1 to our Form 8-K filed October 12, 2012, and incorporated herein by reference).
*10.1	—	Amending Agreement to Amended and Restated Credit Agreement, effective as of March 31, 2015, between Powell Canada Inc., Powell Industries, Inc., Nextron Limited, PCG Northern Services Inc. and HSBC Bank Canada.
*31.1	—	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
*31.2	—	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
*32.1	—	Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	—	Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*101.INS	—	XBRL Instance Document
*101.SCH	—	XBRL Taxonomy Extension Schema Document
*101.CAL	—	XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF	—	XBRL Taxonomy Extension Definition Linkbase Document
*101.LAB	—	XBRL Taxonomy Extension Label Linkbase Document
*101.PRE	—	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

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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)
Date:  May 6, 2015	By:	/s/  Michael A. Lucas
		Michael A. Lucas
		President and Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/  Don R. Madison
		Don R. Madison
		Executive Vice President
		Chief Financial and Administrative Officer
		(Principal Financial Officer)

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EXHIBIT INDEX

Number		Exhibit Title
3.1	—	Certificate of Incorporation of Powell Industries, Inc. filed with the Secretary of State of the State of Delaware on February 11, 2004 (filed as Exhibit 3.1 to our Form 8-A/A filed November 1, 2004, and incorporated herein by reference).
3.2	—	Amended and Restated Bylaws of Powell Industries, Inc. (filed as Exhibit 3.1 to our Form 8-K filed October 12, 2012, and incorporated herein by reference).
*10.1	—	Amending Agreement to Amended and Restated Credit Agreement, effective as of March 31, 2015, between Powell Canada Inc., Powell Industries, Inc., Nextron Limited, PCG Northern Services Inc. and HSBC Bank Canada.
*31.1	—	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
*31.2	—	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
*32.1	—	Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	—	Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*101.INS	—	XBRL Instance Document
*101.SCH	—	XBRL Taxonomy Extension Schema Document
*101.CAL	—	XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF	—	XBRL Taxonomy Extension Definition Linkbase Document
*101.LAB	—	XBRL Taxonomy Extension Label Linkbase Document
*101.PRE	—	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

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EX-10.1

Exhibit 10.1

AMENDING AGREEMENT

to the AMENDED AND RESTATED CREDIT AGREEMENT dated April 26, 2012

This Agreement is made effective as of March 31, 2015

BETWEEN:

POWELL CANADA INC., a Canada Corporation

OF THE FIRST PART

POWELL INDUSTRIES, INC., a Delaware Corporation

OF THE SECOND PART

NEXTRON LIMITED, a Canada Corporation

OF THE THIRD PART

PCG NORTHERN SERVICES INC., a Canada Corporation

OF THE FOURTH PART

HSBC BANK CANADA, a Canadian Chartered Bank

OF THE FIFTH PART

WHEREAS the parties hereto wish to extend and renew those certain credit facilities set out in the Amended and Restated Credit Agreement dated April 26, 2012 (the "Agreement");

AND WHEREAS the parties hereto wish to amend certain terms of the Agreement to reflect the extension and renewal of the credit facilities contained therein;

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements contained in the Agreement and herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby conclusively acknowledged by each of the parties hereto, the parties hereto covenant and agree as follows:

1. PPC Technical Services Inc. is removed as a party to the Agreement.

2. PCG Northern Services Inc. is added as a party to the Agreement.

3. The words "NEXTRON LIMITED, a Canada Corporation, and PPC TECHNICAL SERVICES INC. a Canada Corporation (hereinafter sometimes referred to as "Nextron" and "PPC Technical" respectively, and sometimes referred to as the "Subsidiaries")" in the third part of the style and cause, located on Page 4 of the Agreement are hereby deleted in their entirety and replaced with:

""NEXTRON LIMITED, a Canada Corporation, and PCG Northern Services Inc., a Canada Corporation (hereinafter sometimes referred to as "Nextron" and "PCG" respectively and sometimes referred to as the "Subsidiaries")"

4. The definition of "Canadian Prime Rate" as set out on page 7 of the Agreement is deleted in its entirety and replaced with:

""Canadian Prime Rate" means, for any day, the variable annual rate of interest per annum established from time to time by the Lender as the reference rate of interest for the determination of interest rates that the Lender will charge to customers in Canada for Canadian Dollar prime rate loans and which was 2.85%pa on March 24, 2015."

5. The definition of "Closing Date" as set out on page 7 of the Agreement is deleted in its entirety and replaced with:

""Closing Date" means March 31, 2015."

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6. The definition of "DSL Facility" as set out on pages 10 and 11 of the Agreement is deleted in its entirety and replaced with:

""DSL Facility" means the foreign exchange daily settlement facility in the maximum principal amount of U.S. $5,000,000.00 to be made available to the Borrower by the Lender in accordance with the provisions hereof, subject to any reduction in accordance with the provisions hereof."

7. The definition of "DSL Facility Commitment" as set out on page 11 of the Agreement is deleted in its entirety and replaced with:

""DSL-Facility Commitment" means-the maximum principal amount the Lender has agreed to make available to the Borrower under the DSL Facility, being U.S. $5,000,000.00, subject to reductions or adjustments pursuant to the terms hereof."

8. The definition of "F/X Facility" as set out on page 13 of the Agreement is deleted in its entirety and replaced with:

""F/X Facility" means the foreign exchange forward contract facility in the maximum principal amount of U.S. $5,000,000.00 to be made available to the Borrower by the Lender in accordance with the provisions hereof, subject to any reduction in accordance with the provisions hereof, and to be governed by the terms of the Lender's Agreement for Foreign Exchange Contracts."

9. The definition of "F/X Facility Commitment" as set out on page 14 of the Agreement is deleted in its entirety and replaced with:

""F/X Facility Commitment" means the maximum principal amount the Lender has agreed to make available to the Borrower under the F/X Facility, being U.S. $5,000,000.00, subject to reductions or adjustments pursuant to the terms hereof."

10. The definition of "Maturity Date" as set out on page 16 of the Agreement is deleted in its entirety and replaced with:

""Maturity Date" means March 31, 2018."

11. The definition of "Subsidiary" as set out on pages 23 and 24 of the Agreement is deleted in its entirety and replaced with:

""Subsidiary" means, with respect to any person ("X"):

a) any corporation of which at least a majority of the outstanding shares having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time shares of any other class or classes of such corporation might have voting power by reason of the happening of any contingency, unless the contingency has occurred and then only for as long as it continues) is at the time directly, indirectly or beneficially owned or controlled by X or one or more of its Subsidiaries, or X and one or more of its Subsidiaries;

b) any partnership of which, at the time, X, or one or more of its Subsidiaries, or X and one or more of its Subsidiaries: (i) directly, indirectly or beneficially own or control more than 50% of the income, capital, beneficial or ownership Interests (however designated) thereof; and (ii) is a general partner, in the case of limited partnerships, or is a partner or has authority to bind the partnership, in all other cases; or

c) any other person of which at least a majority of the income, capital, beneficial or ownership interests (however designated) are at the time directly, indirectly or beneficially owned or controlled by X, or one or more of its Subsidiaries, or X and one or more of its Subsidiaries,

provided that, unless otherwise expressly provided or the context otherwise requires, references herein to "Subsidiary" or Subsidiaries" shall be and shall be deemed to be references to Subsidiaries of the Borrower, and shall include Nextron and PCG."

12. The definition of "U.S. Base Rate" as set out page 24 of the Agreement is deleted in its entirety and replaced with: ""U.S. Base Rate" means the variable annual rate of interest per annum established from time to time by the Lender as the reference rate of Interest for the determination of interest rates that the Lender will charge to customers in Canada for United States Dollar base rate loans in Canada and which was 3.75%pa on March 24, 2015."

13. Section 2.15, found on pages 30 and 31 of the Agreement is deleted in its entirety and replaced with:

"2.15 Commitment and Renewal Fees

The Borrower will pay to the Lender, on or before the Closing Date, an up-front commitment fee equal to 0.30% of the Revolving Facility Commitment.  Fees collected by the Lender shall be its property as consideration for the time, effort and expense incurred by it in the review and administration of documents and financial statements, and

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the Borrower acknowledges and agrees that the determination of these costs is not feasible and that the fees set out herein represent a reasonable estimate of such costs."

14. Subsection 3.2(q), found on page 32 of the Agreement is deleted in its entirety and replaced with:

"(q) as at the date of such Drawdown, no material adverse change in the business, affairs, assets, properties, operations, or condition, financial or otherwise, of Powell or of the Borrower and its Subsidiaries taken as a whole, shall have occurred since December 31, 2014;"

15. Subsection 3.2(u), found on page 32 of the Agreement is deleted in its entirety.

16. Sub-subsection 10.1(j)(v), found on page 54 of the Agreement is deleted in its entirety and replaced with:

"(v) any of the Borrower or Subsidiary acquiring (whether by purchase, lease or otherwise) an interest in real property where such property has a fair market value in excess of Cdn. $2,000,000 (or the Equivalent Amount thereof in any other currency)."

17. Subsection 10.2(e), found on page 57 of the Agreement is deleted in its entirety and replaced with:

"(e) Limit on Purchase or Sale of Assets

Except for Permitted Dispositions, the Borrower shall not, and shall not permit its Subsidiaries to:

i) sell, transfer or otherwise dispose of any of their respective property or assets during the continuance of a Default or Event of Default; or

ii) purchase, sell, transfer or otherwise dispose of property or assets in any period of twelve consecutive months, whether in one or a series of transactions, having an aggregate fair market value in excess of Cdn. $2,000,000.00 (or the Equivalent Amount thereof in any other currency), other than in the ordinary course of its business.

Notwithstanding this Section 10.2(e), it is understood and agreed that the Borrower's previous purchase of land and buildings was not a violation of Section 10.2 and the subsequent purchase of property and equipment for the purposes of expanding its Canadian headquarters will not be a violation of this Section 10.2."

18. Subsection 10.3(c), found on page 59 of the Agreement is deleted in its entirety and replaced with:

"(c) Consolidated Tangible Net Worth

As at each Quarter End, commencing with the Quarter ending March 31, 2015, the Consolidated Tangible Net Worth of Powell shall be equal or greater than the sum of:

i) U.S. $172,500,000, plus

ii) an amount equal to 50% of the Net Income for each fiscal Quarter commencing with the fiscal quarter ended March 31, 2015, and for each fiscal quarter thereafter (with no deduction for any net loss in any fiscal quarter), plus

iii) an amount equal to 100% of the aggregate increase in Shareholders' Equity of Powell and its Subsidiaries after the date hereof by reason of the issuance and sale of any Equity Interests of Powell or any of its Subsidiaries (other than issuances to Powell or a Wholly-Owned Subsidiary), including upon any conversion of any debt securities of Powell into capital stock or other equity interests."

19. Subsection 11.1(d), found on page 60 of the Agreement is deleted in its entirety and replaced with:

"(d) unlimited guarantee of the indebtedness of the Borrower to the Lender executed by each of the Subsidiaries of the Borrower from time to time, including Nextron and PCG supported by a general security agreement creating a first priority security interest in all present and after acquired personal property of each such Subsidiary and a floating charge over all of each such Subsidiary's present and after acquired real property;"

20. Subsection 15.2(a), found on page 73 of the Agreement is deleted in its entirety and replaced with:

"(a) Notices Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by registered mail or sent by telecopier to the addresses or telecopier numbers specified below or, if to a Subsidiary, in care of the Borrower.  Notices sent by hand or overnight courier service, or mailed by registered mail, shall be deemed to have been given when received, notices sent by telecopier shall be deemed to have been given when sent (except that, if not given on a business day between 9:00 a.m. and

- 4 –

5:00 p.m. local time where the recipient is located, shall be deemed to have been given at 9:00 a.m. on the next business day for the recipient).  The respective parties' addresses and contact information shall be as follows:

To the Borrower, Nextron and PCG:

Powell Canada Inc.

Acheson Range Road Facility- Head Office

53032 Range Road 263A, Acheson, Alberta T7X 5A5

Attention:  Don Madison

Facsimile: _____________

To Powell:

Powell Industries Inc.

8550 Mosley Drive

Post Office Box 12818

Houston, Texas, USA 77075

Attention:  Don Madison

Facsimile: _____________

To the Lender:

HSBC Bank Canada

9th Floor, 10250-101 Street NW

Edmonton, Alberta, Canada T5J 3P4

Attention:  Keith Peters

Fax: (780) 426-2660

21. HSBC hereby acknowledges, that as of the effective date of this Amending Agreement all conditions precedent to Closing (as defined in the Agreement) set out in Section 3.2 of the Agreement are currently satisfied.

22. This Amending Agreement shall enure to the benefit of and be binding upon the successors and assigns of the parties hereto.

23. Save and except as amended herein, all terms, representations, warranties, conditions and provisions of the Agreement shall continue in full force and effect unabated.

24. This Amending Agreement shall be construed, enforced and governed by the laws of the Province of Alberta.

25. This Amending Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument, and it shall not be necessary in making proof of this Amending Agreement to produce or account for more than one such counterpart.  Delivery of an executed counterpart of a signature page of this Amending Agreement by telecopy or by sending a scanned copy by electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement

- 5 –

IN WITNESS WHEREOF the parties hereto have executed this Agreement.

POWELL CANADA INC.		POWELL INDUSTRIES, INC.
Per:	/s/ Don R. Madison	Per:	/s/ Don R. Madison
	Name: Don R. Madison Title: Director		Name: Don R. Madison Title: Chief Financial and Administrative Officer

NEXTRON LIMITED		PCG NORTHERN SERVICES INC.
Per:	/s/ Don R. Madison	Per:	/s/ Don R. Madison
	Name: Don R. Madison Title: Director		Name: Don R. Madison Title: Director

HSBC BANK CANADA
Per:	/s/ Keith Peters
	Name: Keith Peters   Title: Asst. Vice President, Commercial Banking
Per:	/s/ Marissa Adams
	Name: Marissa Adams Title: Asst. Vice President, Commercial Banking

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Michael A. Lucas, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Powell Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Michael A. Lucas

Michael A. Lucas

President and Chief Executive Officer

(Principal Executive Officer)

Date: May 6, 2015

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Don R. Madison, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Powell Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Don R. Madison

Don R. Madison

Executive Vice President

Chief Financial and Administrative Officer

(Principal Financial Officer)

Date: May 6, 2015

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report (the “Report”) on Form 10-Q of Powell Industries, Inc. (the “Company”) for the quarter ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof, I, Michael A. Lucas, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael A. Lucas

Michael A. Lucas

President and Chief Executive Officer

Date: May 6, 2015

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report (the “Report”) on Form 10-Q of Powell Industries, Inc. (the “Company”) for the quarter ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof, I, Don R. Madison, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company.

/s/ Don R. Madison

Don R. Madison

Executive Vice President

Chief Financial and Administrative Officer

Date: May 6, 2015

XML

Long Term Debt (Narrative) (Details) (USD $)	6 Months Ended
	Mar. 31, 2015	Dec. 31, 2014	Feb. 28, 2015	Oct. 31, 2001
Line Of Credit Facility [Line Items]
Balance in the restricted sinking fund	$ 200,000
U.S. Revolver
Line Of Credit Facility [Line Items]
Revolving credit facility		75,000,000
Revolving credit interest rate	The interest rate for amounts outstanding under the Amended Credit Agreement for the U.S. Revolver is a floating rate based upon the higher of the Federal Funds Rate plus 0.5%, the bank’s prime rate, or the Eurocurrency rate plus 1.00%.
Outstanding letters of credit	18,000,000
Amount of credit facility remaining borrowing capacity	57,000,000
Credit facility expiration date	Dec. 31, 2018
Revolving credit facility, current borrowing capacity	0
Percentage of voting capital stock pledged as collateral	100.00%
Non-domestic subsidiaries of voting capital stock	65.00%
U.S. Revolver | Maximum
Line Of Credit Facility [Line Items]
Basis spread on variable rate	1.75%
U.S. Revolver | Federal Funds Rate
Line Of Credit Facility [Line Items]
Basis spread on variable rate	0.50%
U.S. Revolver | Eurocurrency Rate
Line Of Credit Facility [Line Items]
Basis spread on variable rate	1.00%
Canadian Revolver
Line Of Credit Facility [Line Items]
Revolving credit facility			7,900,000
Credit facility expiration date	Feb. 28, 2015
Canadian Revolver | Maximum
Line Of Credit Facility [Line Items]
Basis spread on variable rate	1.75%
Canadian Revolver | Minimum
Line Of Credit Facility [Line Items]
Basis spread on variable rate	0.50%
Industrial Development Revenue Bonds
Line Of Credit Facility [Line Items]
Borrowings				8,000,000
Reimbursement agreement requires annual redemptions	$ 400,000
Interest rate	0.16%

XML

Discontinued Operations (Schedule of Operating Results) (Parenthetical) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Discontinued Operations And Disposal Groups [Abstract]
Income from discontinued operations, tax	$ 0	$ 131	$ 0	$ 633
Gain on sale of discontinued operations, tax	$ 5,218

XML

Discontinued Operations (Narrative) (Details) (USD $)	0 Months Ended	6 Months Ended
	Jan. 15, 2014	Mar. 31, 2014
Discontinued Operations And Disposal Groups [Abstract]
Purchase price from the sale of Transdyn, Inc	$ 16,000,000
Cash received from sale of subsidiary	14,400,000	14,819,000
Escrow cash	$ 1,600,000

XML

Detail of Selected Balance Sheet Accounts (Components of Inventories) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Sep. 30, 2014
Balance Sheet Related Disclosures [Abstract]
Raw materials, parts and subassemblies	$ 39,063	$ 35,349
Work-in-progress	1,558	2,035
Provision for excess and obsolete inventory	(4,886)	(4,569)
Total inventories	$ 35,735	$ 32,815

XML

Long-Term Debt (Tables)

6 Months Ended

Mar. 31, 2015

Debt Disclosure [Abstract]

Components of Long-Term Debt

Long-term debt consisted of the following (in thousands):

	March 31, 2015			September 30, 2014
Industrial development revenue bonds	$	2,800		$	3,200
Less current portion		(400	)		(400	)
Total long-term debt and capital lease obligations	$	2,400		$	2,800

XML

Income Taxes (Schedule of Effective Income Tax Rate Reconciliation) (Details)	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Income Tax Disclosure [Abstract]
Statutory rate			35.00%	35.00%
Canadian valuation allowance			661.00%
Research and Development Credit			(327.00%)
State rate			2.00%	2.00%
Domestic production activities deduction			(2.00%)	(2.00%)
Other			(1.00%)	1.00%
Effective rate	236.60%	36.80%	367.50%	35.90%

XML

Stock-Based Compensation (Schedule of Restricted Stock Units Activity) (Details) (Restricted Stock Units (RSUs), USD $)	6 Months Ended
	Mar. 31, 2015
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Outstanding Beginning Balance, Number of Restricted Stock Units	106,845
Granted, Number of Restricted Stock Units	88,000
Vested, Number of Restricted Stock Units	(33,508)
Forfeited, Number of Restricted Stock Units	0
Outstanding Ending balance, Number of Restricted Stock Units	161,337
Outstanding Beginning Balance, Weighted Average Fair Value Per Share	$ 51.30
Granted, Weighted Average Fair Value Per Share	$ 41.88
Vested, Weighted Average Fair Value Per Share	$ 44.06
Forfeited, Weighted Average Fair Value Per Share	$ 0
Outstanding Ending balance, Weighted Average Fair Value Per Share	$ 47.66

XML

Intangible Assets (Narrative) (Details) (USD $)	3 Months Ended			6 Months Ended
	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2013
Finite Lived Intangible Assets [Line Items]
Amortization of intangible assets	$ 113,000		$ 121,000	$ 232,000	$ 536,000
Cash received from amended supply agreement		10,000,000		2,333,000	10,000,000
Deferred credit amortization period				4 years
General Electric Company
Finite Lived Intangible Assets [Line Items]
Additional amount paid on execution of agreement				7,000,000
Acquired finite-lived intangible assets, period				3 years
Deferred credit						$ 8,100,000
Supply Agreement
Finite Lived Intangible Assets [Line Items]
Useful life of intangible asset				15 years

XML

Restructuring and Separation Costs (Narrative) (Details) (USD $)	3 Months Ended	6 Months Ended
	Mar. 31, 2015	Mar. 31, 2015
Restructuring And Related Activities [Abstract]
Restructuring and separation costs	$ 1,332,000	$ 1,332,000
Restructuring and separation costs paid		800,000
Restructuring and separation costs distributed over next sixteen months	$ 500,000	$ 500,000

XML

Discontinued Operations (Schedule of Operating Results) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended	6 Months Ended
	Mar. 31, 2014	Mar. 31, 2014
Discontinued Operations And Disposal Groups [Abstract]
Revenues	$ 1,557	$ 13,923
Income from discontinued operations, net of tax of zero, $131, zero and $633, respectively	54	1,041
Gain on sale of discontinued operations, net of tax of $5,218	8,563	8,563
Net income from discontinued operations, net of tax	$ 8,617	$ 9,604
Earnings (loss) per share:
Basic	$ 0.72	$ 0.80
Diluted	$ 0.71	$ 0.80

XML

Earnings Per Share

6 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Earnings Per Share

B. EARNINGS PER SHARE

We compute basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common and potential common share includes the weighted average of additional shares associated with the incremental effect of dilutive restricted stock and restrictive stock units, as prescribed by the FASB guidance on earnings per share.

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,
	2015			2014		2015			2014
Numerator:
Income (loss) from continuing operations	$	(3,683	)	$	6,976	$	(3,922	)	$	14,243
Income from discontinued operations		—			8,617		—			9,604
Net income (loss)	$	(3,683	)	$	15,593	$	(3,922	)	$	23,847
Denominator:
Weighted average basic shares		12,018			12,004		12,029			11,999
Dilutive effect of restricted stock units		—			60		—			58
Weighted average diluted shares with assumed conversions		12,018			12,064		12,029			12,057
Net earnings (loss) per share:
Continuing operations	$	(0.31	)	$	0.58	$	(0.33	)	$	1.19
Discontinued operations		—			0.72		—			0.80
Basic earnings (loss) per share	$	(0.31	)	$	1.30	$	(0.33	)	$	1.99
Continuing operations	$	(0.31	)	$	0.58	$	(0.33	)	$	1.18
Discontinued operations		—			0.71		—			0.80
Diluted earnings (loss) per share	$	(0.31	)	$	1.29	$	(0.33	)	$	1.98

For the quarter and six months ended March 31, 2015, we incurred a net loss and therefore all potential common shares were deemed to be anti-dilutive.  

XML

Share Repurchase Program (Narrative) (Details) (USD $)	6 Months Ended
	Mar. 31, 2015	Dec. 17, 2014
Equity Class Of Treasury Stock [Line Items]
Stock Repurchase Program Expiration Date	Dec. 31, 2015
Stock purchased under repurchase program	171,416
Stock purchased under repurchase program, value	$ 5,759,000
Stock purchased under Repurchased program, Average Price Per Share	$ 33.60
Maximum
Equity Class Of Treasury Stock [Line Items]
Stock Repurchase Program, Authorized Amount		$ 25,000,000

XML

Income Taxes (Tables)

6 Months Ended

Mar. 31, 2015

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rate

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

	Three months ended March 31,						Six months ended March 31,
	2015			2014			2015			2014
Income from continuing operations before income taxes	$	2,696		$	11,031		$	1,466		$	22,235
Income tax provision		6,379			4,055			5,388			7,992
Income (loss) from continuing operations	$	(3,683	)	$	6,976		$	(3,922	)	$	14,243
Effective tax rate		237	%		37	%		368	%		36	%

A reconciliation of the significant differences between the statutory U. S. income tax rate and the effective income tax rate, as computed on earnings (loss) before income tax provision for the six months ended March 31, 2015 and 2014, is as follows:

	Six months ended March 31,
	2015			2014
Statutory rate		35	%		35	%
Canadian valuation allowance		661			—
Research and Development Credit		(327	)		—
State rate		2			2
Domestic production activities deduction		(2	)		(2	)
Other		(1	)		1
Effective rate		368	%		36	%

XML

Discontinued Operations (Tables)

6 Months Ended

Mar. 31, 2015

Discontinued Operations And Disposal Groups [Abstract]

Schedule of Discontinued Operations

Summary comparative financial results of discontinued operations were as follows (in thousands):

	Three months ended March 31,				Six months ended March 31,
	2015		2014		2015		2014
Revenues	$	—	$	1,557	$	—	$	13,923
Income from discontinued operations, net of tax of zero, $131, zero and $633, respectively		—		54		—		1,041
Gain on sale of discontinued operations, net of tax of $5,218		—		8,563		—		8,563
Net income from discontinued operations, net of tax	$	—	$	8,617	$	—	$	9,604
Earnings per share information:
Basic	$	—	$	0.72	$	—	$	0.80
Diluted	$	—	$	0.71	$	—	$	0.80

XML

Fair Value Measurements (Fair Value of Assets Measured on Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Sep. 30, 2014
Assets:
Cash equivalents	$ 234	$ 10,535
Deferred compensation	5,135	3,526
Liabilities:
Deferred compensation	4,947	3,688
Fair Value, Inputs, Level 1
Assets:
Cash equivalents	234	10,535
Deferred compensation	2,001	724
Fair Value, Inputs, Level 2
Assets:
Deferred compensation	3,134	2,802
Liabilities:
Deferred compensation	$ 4,947	$ 3,688

XML

Overview and Summary of Significant Accounting Policies (Supplemental Disclosures of Cash Flow Information) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Supplemental Cash Flow Information [Abstract]
Non-cash capital expenditures	$ 3,351	$ 389

XML

Earnings Per Share (Computation of Basic and Diluted Earnings Per Share) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Numerator:
Income (loss) from continuing operations	$ (3,683)	$ 6,976	$ (3,922)	$ 14,243
Income from discontinued operations		8,617		9,604
Net income (loss)	$ (3,683)	$ 15,593	$ (3,922)	$ 23,847
Denominator:
Weighted average basic shares	12,018	12,004	12,029	11,999
Dilutive effect of restricted stock units		60		58
Weighted average diluted shares with assumed conversions	12,018	12,064	12,029	12,057
Net earnings (loss) per share:
Continuing operations	$ (0.31)	$ 0.58	$ (0.33)	$ 1.19
Discontinued operations		$ 0.72		$ 0.80
Basic earnings (loss) per share	$ (0.31)	$ 1.30	$ (0.33)	$ 1.99
Continuing operations	$ (0.31)	$ 0.58	$ (0.33)	$ 1.18
Discontinued operations		$ 0.71		$ 0.80
Diluted earnings (loss) per share	$ (0.31)	$ 1.29	$ (0.33)	$ 1.98

XML

Overview and Summary of Significant Accounting Policies

6 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Overview and Summary of Significant Accounting Policies

A. OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview

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 corporation was the successor to a company founded by William E. Powell in 1947, which merged into the Company in 1977. Our major subsidiaries, all of which are wholly owned, include: Powell Electrical Systems, Inc.; Powell (UK) Limited; Powell Canada Inc. and Powell Industries International, B.V.

We develop, design, manufacture and service custom-engineered equipment and systems for the distribution, control and monitoring of electrical energy designed to (1) distribute, monitor and control the flow of electrical energy and (2) provide protection to motors, transformers and other electrically powered equipment. Headquartered in Houston, Texas, we serve the transportation, energy, industrial and utility industries.

Basis of Presentation

These unaudited condensed consolidated financial statements include the accounts of Powell and its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information.  Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP), have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows with respect to the interim consolidated financial statements have been included. The results of operations for the interim periods are not necessarily indicative of the results for the entire fiscal year.  We believe that these financial statements contain all adjustments necessary so that they are not misleading. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Powell and its subsidiaries included in Powell’s Annual Report on Form 10-K for the year ended September 30, 2014, which was filed with the Securities and Exchange Commission (SEC) on December 3, 2014.

References to Fiscal 2015, Fiscal 2014 and Fiscal 2013 used throughout this report shall mean our fiscal years ended September 30, 2015, 2014 and 2013, respectively.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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 financial statements affect revenue and cost recognition for construction contracts, the allowance for doubtful accounts, provision for excess and obsolete inventory, goodwill and other intangible assets, self-insurance, warranty accruals and income taxes. The amounts recorded for insurance claims, warranties, legal, income taxes and other contingent liabilities require judgments regarding the amount of expenses that will ultimately be incurred. We base our estimates on historical experience and on 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.  Estimates may change as new events occur, additional information becomes available or operating environments change. Actual results may differ from our estimates.

Supplemental Disclosures of Cash Flow Information (in thousands):

	Six months ended March 31,
	2015		2014
Non-cash capital expenditures	$	3,351	$	389

New Accounting Standards

In July 2013, the FASB issued accounting guidance on the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, which would be our fiscal year ended September 30, 2015. This guidance should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this guidance has not had a significant impact on our consolidated financial position or results of operations.

In April 2014, the FASB issued an amendment to the financial reporting of discontinued operations.  The amendments in this update changed the criteria for reporting discontinued operations while enhancing disclosures in this area. It also addresses sources of confusion and inconsistent application related to the financial reporting of discontinued operations guidance in U.S. GAAP.  Under the new guidance, only disposals representing a strategic shift in operations that have a major effect on the organization’s operations and financial results should be presented as discontinued operations. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. This disclosure will provide users with information about the ongoing trends in a reporting organization’s results from continuing operations. The amendments in this update are effective in the first quarter of 2015, which would be our fiscal year end September 30, 2016. Early adoption is permitted for disposals that have not been previously reported as discontinued operations.

In May 2014, the FASB issued a new standard on revenue recognition that supersedes previously issued revenue recognition guidance.  This standard provides a five-step approach to be applied to all contracts with customers and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue (and the related cash flows) arising from customer contracts, significant judgments and changes in judgments used in applying the revenue model and the assets recognized from costs incurred to obtain or fulfill a contract.  This new standard is effective for us beginning in fiscal year 2018.  Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method therefore we are evaluating the effect that this new guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.

In June 2014, the FASB issued an amendment to the topic regarding share-based payments and instances where terms of an award provide that a performance target can be achieved after the requisite service period.  This guidance has been provided to resolve the diversity in practice concerning employee share-based payments that contain performance targets that could be achieved after the requisite service period. The updated guidance requires that a performance target that affects vesting and that can be achieved after the requisite service period be treated as a performance condition. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and is attributable to the periods for which service has been rendered. If the performance target becomes probable of being achieved before the end of the service period, the remaining unrecognized compensation cost for which requisite service has not yet been rendered is recognized prospectively over the remaining service period. The total amount of compensation cost recognized during and after the service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The updated guidance is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on our consolidated financial position or results of operations.

Discontinued operations

In January 2014, we sold our wholly owned subsidiary Transdyn Inc. (Transdyn).  For the quarter and six months ended March 31, 2014, we have presented the results of these operations as income from discontinued operations, net of tax.  See Note J.

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Detail of Selected Balance Sheet Accounts (Activity in Allowance for Doubtful Accounts) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Balance Sheet Related Disclosures [Abstract]
Balance at beginning of period	$ 1,844	$ 673	$ 1,577	$ 572
Bad debt expense/(recovery)	186	(170)	469	(60)
Uncollectible accounts written off, net of recoveries	(120)		(122)	(9)
Change in foreign currency translation	(29)	(2)	(43)	(2)
Balance at end of period	$ 1,881	$ 501	$ 1,881	$ 501

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Commitments and Contingencies (Narrative) (Details) (USD $)	Mar. 31, 2015
Guarantee Obligations [Line Items]
Additional bonding capacity	$ 299,100,000
Powell (UK) Limited
Guarantee Obligations [Line Items]
Guarantee liability	5,300,000
Revolving credit facility	14,800,000
Amount of credit facility remaining borrowing capacity	9,500,000
Financial Standby Letter of Credit
Guarantee Obligations [Line Items]
Guarantee liability	18,000,000
Performance Guarantee
Guarantee Obligations [Line Items]
Guarantee liability	$ 300,900,000

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Sep. 30, 2014
Current Assets:
Cash and cash equivalents	$ 55,672	$ 103,118
Accounts receivable, less allowance for doubtful accounts of $1,881 and $1,577	121,366	107,162
Costs and estimated earnings in excess of billings on uncompleted contracts	96,709	95,970
Inventories	35,735	32,815
Income taxes receivable	3,493	2,804
Deferred income taxes	5,170	5,297
Prepaid expenses	2,894	5,870
Other current assets	4,828	4,291
Total Current Assets	325,867	357,327
Property, plant and equipment, net	161,789	156,896
Goodwill	1,003	1,003
Intangible assets, net	1,607	1,904
Deferred income taxes	3,941	11,422
Other assets	9,824	8,224
Long-term receivable (Note D)	2,333	4,667
Total Assets	506,364	541,443
Current Liabilities:
Current maturities of long-term debt and capital lease obligations	400	400
Income taxes payable	966	705
Accounts payable	53,339	70,209
Accrued salaries, bonuses and commissions	19,388	25,206
Billings in excess of costs and estimated earnings on uncompleted contracts	64,171	48,702
Accrued product warranty	4,375	4,557
Other accrued expenses	4,603	6,291
Deferred credit ─ short term (Note D)	2,029	2,029
Total Current Liabilities	149,271	158,099
Long-term debt and capital lease obligations, net of current maturities	2,400	2,800
Deferred compensation	5,446	4,226
Other long-term liabilities	669	655
Deferred credit ─ long term (Note D)	3,551	4,566
Total Liabilities	161,337	170,346
Commitments and Contingencies (Note F)
Stockholders' Equity:
Preferred stock, par value $.01; 5,000,000 shares authorized; none issued
Common stock, par value $.01; 30,000,000 shares authorized; 11,911,743 and 12,031,243 shares issued and outstanding, respectively	120	120
Additional paid-in capital	47,277	46,267
Retained earnings	321,027	331,213
Treasury stock, 171,416 shares at cost	(5,759)
Accumulated other comprehensive loss	(17,638)	(6,503)
Total Stockholders' Equity	345,027	371,097
Total Liabilities and Stockholders' Equity	$ 506,364	$ 541,443

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Fair Value Measurements (Narrative) (Details) (USD $)	6 Months Ended
	Mar. 31, 2015
Fair Value Disclosures [Abstract]
Transfers between measurement levels	$ 0

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Consolidated Statement of Stockholders' Equity (USD $) In Thousands, except Share data	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Income/(Loss)
Balance at Sep. 30, 2014	$ 371,097	$ 120	$ 46,267	$ 331,213		$ (6,503)
Balance, shares at Sep. 30, 2014	12,031,243	12,031,000
Net loss	(3,922)			(3,922)
Foreign currency translation adjustments	(11,135)					(11,135)
Stock-based compensation	1,567		1,567
Stock-based compensation, shares		36,000
Shares withheld in lieu of employee tax withholding	(557)		(557)
Issuance of restricted stock, shares		16,000
Purchase of treasury value	(5,759)				(5,759)
Purchase of treasury shares	(171,416)	(171,000)
Dividends paid	(6,264)			(6,264)
Balance at Mar. 31, 2015	$ 345,027	$ 120	$ 47,277	$ 321,027	$ (5,759)	$ (17,638)
Balance, shares at Mar. 31, 2015	11,911,743	11,912,000

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Detail of Selected Balance Sheet Accounts (Activity in Product Warranty Accrual) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Balance Sheet Related Disclosures [Abstract]
Balance at beginning of period	$ 4,480	$ 5,010	$ 4,557	$ 5,282
Increase to warranty expense	530	1,042	1,067	1,505
Deduction for warranty charges	(504)	(1,196)	(1,028)	(1,926)
Increase (decrease) due to foreign currency translations	(131)	(23)	(221)	(28)
Balance at end of period	$ 4,375	$ 4,833	$ 4,375	$ 4,833

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Earnings Per Share (Tables)

6 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings Per Share

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,
	2015			2014		2015			2014
Numerator:
Income (loss) from continuing operations	$	(3,683	)	$	6,976	$	(3,922	)	$	14,243
Income from discontinued operations		—			8,617		—			9,604
Net income (loss)	$	(3,683	)	$	15,593	$	(3,922	)	$	23,847
Denominator:
Weighted average basic shares		12,018			12,004		12,029			11,999
Dilutive effect of restricted stock units		—			60		—			58
Weighted average diluted shares with assumed conversions		12,018			12,064		12,029			12,057
Net earnings (loss) per share:
Continuing operations	$	(0.31	)	$	0.58	$	(0.33	)	$	1.19
Discontinued operations		—			0.72		—			0.80
Basic earnings (loss) per share	$	(0.31	)	$	1.30	$	(0.33	)	$	1.99
Continuing operations	$	(0.31	)	$	0.58	$	(0.33	)	$	1.18
Discontinued operations		—			0.71		—			0.80
Diluted earnings (loss) per share	$	(0.31	)	$	1.29	$	(0.33	)	$	1.98

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Intangible Assets (Schedule of Intangible Assets Subject to Amortization) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Sep. 30, 2014
Finite Lived Intangible Assets [Line Items]
Gross Carrying Value	$ 12,885	$ 12,885
Accumulated Amortization	(11,278)	(10,981)
Net Carrying Value	1,607	1,904
Purchased Technology
Finite Lived Intangible Assets [Line Items]
Gross Carrying Value	11,749	11,749
Accumulated Amortization	(10,165)	(9,918)
Net Carrying Value	1,584	1,831
Trade Name
Finite Lived Intangible Assets [Line Items]
Gross Carrying Value	1,136	1,136
Accumulated Amortization	(1,113)	(1,063)
Net Carrying Value	$ 23	$ 73

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Intangible Assets (Tables)

6 Months Ended

Mar. 31, 2015

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets Subject to Amortization

Intangible assets balances, subject to amortization, at March 31, 2015 and September 30, 2014 consisted of the following (in thousands):

	March 31, 2015							September 30, 2014
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Value		Amortization			Value		Value		Amortization			Value
Purchased technology	$	11,749	$	(10,165	)	$	1,584	$	11,749	$	(9,918	)	$	1,831
Trade name		1,136		(1,113	)		23		1,136		(1,063	)		73
Total	$	12,885	$	(11,278	)	$	1,607	$	12,885	$	(10,981	)	$	1,904

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Operating Activities:
Net income (loss)	$ (3,922)	$ 23,847
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	6,562	5,059
Amortization	232	536
Gain on sale of discontinued operations, net of tax		(8,563)
Stock-based compensation	1,567	2,001
Bad debt expense (recovery)	469	(60)
Deferred income tax expense (benefit)	7,549	(2,823)
Gain on amended supply agreement	(1,015)	(507)
Cash received from amended supply agreement	2,333	10,000
Changes in operating assets and liabilities:
Accounts receivable, net	(18,321)	(10,472)
Costs and billings in excess of estimates on uncompleted contracts	13,050	(4,840)
Inventories	(3,360)	(495)
Prepaid expenses and other current assets	1,613	959
Accounts payable and income taxes payable	(3,564)	(10,407)
Accrued liabilities	(6,845)	(11,307)
Other, net	(450)	294
Net cash used in operating activities	(4,102)	(6,778)
Investing Activities:
Proceeds from sale of property, plant and equipment	43	60
Proceeds from sale of Transdyn		14,819
Purchases of property, plant and equipment	(28,692)	(8,464)
Net cash provided by (used in) investing activities	(28,649)	6,415
Financing Activities:
Payments on industrial development revenue bonds	(400)	(400)
Cash paid for employee taxes in lieu of shares	(557)	(499)
Purchase of treasury shares	(5,759)
Dividends paid	(6,264)	(5,992)
Payments on short-term and other financing		(16)
Net cash used in financing activities	(12,980)	(6,907)
Net increase (decrease) in cash and cash equivalents	(45,731)	(7,270)
Effect of exchange rate changes on cash and cash equivalents	(1,715)	1,252
Cash and cash equivalents, beginning of period	103,118	107,411
Cash and cash equivalents, end of period	$ 55,672	$ 101,393

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2015	Sep. 30, 2014
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts	$ 1,881	$ 1,577
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	11,911,743	12,031,243
Common stock, shares outstanding	11,911,743	12,031,243
Treasury stock, shares	171,416	171,416

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Discontinued Operations

6 Months Ended

Mar. 31, 2015

Discontinued Operations And Disposal Groups [Abstract]

Discontinued Operations

J. DISCONTINUED OPERATIONS

On January 15, 2014, we sold our wholly-owned subsidiary Transdyn to a global provider of electronic toll collection systems, headquartered in Vienna, Austria.  The purchase price from the sale of this subsidiary totaled $16.0 million, subject to working capital adjustments.  We received cash of $14.4 million and the remaining $1.6 million was placed into an escrow account, to be released subject to resolution of certain claims.  

We have presented the results of these operations as income from discontinued operations, net of tax, in the condensed consolidated statements of operations as of March 31, 2014.  

Summary comparative financial results of discontinued operations were as follows (in thousands):

	Three months ended March 31,				Six months ended March 31,
	2015		2014		2015		2014
Revenues	$	—	$	1,557	$	—	$	13,923
Income from discontinued operations, net of tax of zero, $131, zero and $633, respectively		—		54		—		1,041
Gain on sale of discontinued operations, net of tax of $5,218		—		8,563		—		8,563
Net income from discontinued operations, net of tax	$	—	$	8,617	$	—	$	9,604
Earnings per share information:
Basic	$	—	$	0.72	$	—	$	0.80
Diluted	$	—	$	0.71	$	—	$	0.80

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Document and Entity Information	6 Months Ended
	Mar. 31, 2015	Apr. 30, 2015
Document And Entity Information [Abstract]
Entity Registrant Name	POWELL INDUSTRIES INC
Entity Central Index Key	0000080420
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--09-30
Entity Filer Category	Accelerated Filer
Trading Symbol	powl
Entity Common Stock, Shares Outstanding		11,818,282

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Income Taxes

6 Months Ended

Mar. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

K. INCOME TAXES

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

	Three months ended March 31,						Six months ended March 31,
	2015			2014			2015			2014
Income from continuing operations before income taxes	$	2,696		$	11,031		$	1,466		$	22,235
Income tax provision		6,379			4,055			5,388			7,992
Income (loss) from continuing operations	$	(3,683	)	$	6,976		$	(3,922	)	$	14,243
Effective tax rate		237	%		37	%		368	%		36	%

A reconciliation of the significant differences between the statutory U. S. income tax rate and the effective income tax rate, as computed on earnings (loss) before income tax provision for the six months ended March 31, 2015 and 2014, is as follows:

	Six months ended March 31,
	2015			2014
Statutory rate		35	%		35	%
Canadian valuation allowance		661			—
Research and Development Credit		(327	)		—
State rate		2			2
Domestic production activities deduction		(2	)		(2	)
Other		(1	)		1
Effective rate		368	%		36	%

We recorded a provision for income taxes from continuing operations of $6.4 million in the second quarter of Fiscal 2015, compared to the provision of $4.1 million recorded in the second quarter of Fiscal 2014.  The effective tax rate for the second quarter of Fiscal 2015 was 236.6% compared to an effective tax rate of 36.8% for the second quarter of Fiscal 2014, primarily due to certain discrete items recorded in the second quarter of Fiscal 2015. These discrete items include a valuation allowance recorded against our Canadian deferred tax assets in the amount of $9.0 million, as discussed below, partially offset by the release of a FIN 48 reserve related to the  Federal Research and Development Tax Credit (R&D Credit) in the amount of $4.1 million upon closing an Internal Revenue Service (IRS) audit. The effective tax rate for the quarter ended March 31, 2014 approximated the combined U.S. federal and state statutory rates as the majority of our income was attributable to the U.S.

We recorded a provision for income taxes from continuing operations of $5.4 million in the six months ended March 31, 2015, compared to the provision of $8.0 million recorded in the six months ended March 31, 2014.  The effective tax rate for the six months ended March 31, 2015 was 367.5% compared to an effective tax rate of 35.9% for the six months ended March 31, 2014 primarily due to a valuation allowance against our Canadian deferred tax assets partially offset by the release of a FIN 48 reserve related to the R&D Credit upon closing an IRS audit as well as the December 19, 2014 retroactive reinstatement of the R&D Credit from January 1, 2014 through December 31, 2014.  The effective tax rate for the six months ended March 31, 2014 approximated the combined U.S. federal and state statutory rate as the majority of our income was attributable to the U.S. 

At March 31, 2015, we had $32 million of gross foreign net operating loss carryforwards, the benefits of which are recorded as deferred tax assets and are subject to a 20-year carryforward period, the first of which will expire in 2031. During our quarterly assessment of deferred taxes, in the second quarter of Fiscal 2015, we established a valuation allowance in the amount of $9.0 million against Canadian net deferred tax assets.  In assessing the realizability of net deferred tax assets, we consider whether it is more-likely-than-not that some portion or all of the net deferred tax assets may not be realized.  The ultimate realization of net deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible.  In light of the historical Canadian losses, and recent changes in projected losses in the near term, we are required under the more-likely-than-not accounting standard to record a valuation allowance against the Canadian net deferred assets because we may not be able to realize the benefits of the net operating loss carryforwards and other deductible differences.

We believe that our deferred tax assets in other tax jurisdictions, with the exception of those related to certain foreign withholding taxes and the net operating losses of our Dutch entities, are more-likely-than-not realizable through future reversals of existing taxable temporary differences and our estimate of future taxable income. Estimates may change as new events occur, estimates of future taxable income during the carryforward period 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.

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Income Statement [Abstract]
Revenues	$ 170,199	$ 162,295	$ 322,800	$ 334,167
Cost of goods sold	145,898	127,367	277,430	264,081
Gross profit	24,301	34,928	45,370	70,086
Selling, general and administrative expenses	19,464	22,088	40,279	43,722
Research and development expenses	1,626	2,157	3,466	3,996
Amortization of intangible assets	113	121	232	536
Restructuring and separation expenses	1,332		1,332
Operating income	1,766	10,562	61	21,832
Other income	(879)	(507)	(1,386)	(507)
Interest expense	33	41	69	110
Interest income	(84)	(3)	(88)	(6)
Income from continuing operations before income taxes	2,696	11,031	1,466	22,235
Income tax provision	6,379	4,055	5,388	7,992
Income (loss) from continuing operations	(3,683)	6,976	(3,922)	14,243
Income from discontinued operations, net of tax (Note J)		8,617		9,604
Net income (loss)	$ (3,683)	$ 15,593	$ (3,922)	$ 23,847
Earnings (loss) per share:
Continuing operations	$ (0.31)	$ 0.58	$ (0.33)	$ 1.19
Discontinued operations		$ 0.72		$ 0.80
Basic earnings (loss) per share	$ (0.31)	$ 1.30	$ (0.33)	$ 1.99
Continuing operations	$ (0.31)	$ 0.58	$ (0.33)	$ 1.18
Discontinued operations		$ 0.71		$ 0.80
Diluted earnings (loss) per share	$ (0.31)	$ 1.29	$ (0.33)	$ 1.98
Weighted average shares:
Basic	12,018	12,004	12,029	11,999
Diluted	12,018	12,064	12,029	12,057
Dividends per share	$ 0.26	$ 0.25	$ 0.52	$ 0.50

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Long-Term Debt

6 Months Ended

Mar. 31, 2015

Debt Disclosure [Abstract]

Long-Term Debt

E. LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

	March 31, 2015			September 30, 2014
Industrial development revenue bonds	$	2,800		$	3,200
Less current portion		(400	)		(400	)
Total long-term debt and capital lease obligations	$	2,400		$	2,800

U.S. Revolver

In December 2013, we amended and restated our existing credit agreement (the Amended Credit Agreement) with a major domestic bank.  In December 2014, we entered into the Second Amendment of the Amended Credit Agreement (the Second Amendment).  The Second Amendment provides for the expansion of our Canadian manufacturing facility and allows for the repurchase of our common stock pursuant to a share repurchase program announced in December 2014. The Amended Credit Agreement provides for a $75.0 million revolving credit facility (U.S. Revolver). Obligations are collateralized by the stock of certain of our subsidiaries.

The interest rate for amounts outstanding under the Amended Credit Agreement for the U.S. Revolver is a floating rate based upon the higher of the Federal Funds Rate plus 0.5%, the bank’s prime rate, or the Eurocurrency rate plus 1.00%. Once the applicable rate is determined, a margin ranging up to 1.75%, as determined by our consolidated leverage ratio, is added to the applicable rate.

The U.S. Revolver provides for the issuance of letters of credit which reduce the amounts that may be borrowed under this revolver. The amount available under the U.S. Revolver was reduced by $18.0 million for our outstanding letters of credit at March 31, 2015.

There were no borrowings outstanding under the U.S. Revolver as of March 31, 2015. Amounts available under the U.S. Revolver were $57.0 million at March 31, 2015. The U.S. Revolver expires on December 31, 2018.

The Amended Credit Agreement contains certain restrictive and maintenance-type covenants, such as restrictions on the amount of capital expenditures allowed. It also contains financial covenants defining various financial measures and the levels of these measures with which we must comply, as well as a “material adverse change” clause. A “material adverse change” is defined as a material change in our operations, business, properties, liabilities or condition (financial or otherwise) or a material impairment of our ability to perform our obligations under our credit agreements.

The Amended Credit Agreement is collateralized by a pledge of 100% of the voting capital stock of each of our domestic subsidiaries and 65% of the voting capital stock of each non-domestic subsidiary, excluding Powell Canada. The Amended Credit Agreement provides for customary events of default and carries cross-default provisions with other existing debt agreements. If an event of default (as defined in the Amended Credit Agreement) occurs and is continuing, on the terms and subject to the conditions set forth in the Amended Credit Agreement, amounts outstanding under the Amended Credit Agreement may be accelerated and may become immediately due and payable. As of March 31, 2015, we were in compliance with all of the financial covenants of the Amended Credit Agreement.

Canadian Revolver

On April 15, 2015, we completed the renegotiation of a credit agreement with a major international bank in Canada (the Canadian Revolver) to provide working capital support and letters of credit for our operations in Canada to replace our $7.9 million agreement which expired on February 28, 2015. The Canadian Revolver provides for the issuance of letters of credit which reduce the amounts that may be borrowed under this revolver.  

The interest rate for amounts outstanding under the Canadian Revolver is a floating interest rate based upon either the Canadian Prime Rate, or the lender’s Bankers’ Acceptance Rate. Once the applicable rate is determined, a margin of 0.50% to 1.75%, as determined by our consolidated leverage ratio, is added to the applicable rate.

The principal financial covenants are consistent with those described in our Amended Credit Agreement. The Canadian Revolver contains a “material adverse effect” clause. A “material adverse effect” is defined as a material change in the operations of Powell or Powell Canada in relation to our financial condition, property, business operations, expected net cash flows, liabilities or capitalization.

The Canadian Revolver is secured by the assets of our Canadian operations and provides for customary events of default and carries cross-default provisions with our existing debt agreements. If an event of default (as defined in the Canadian Revolver) occurs and is continuing, per the terms and subject to the conditions set forth in the Canadian Revolver, amounts outstanding under the Canadian Revolver may be accelerated and may become immediately due and payable.

Industrial Development Revenue Bonds

We borrowed $8.0 million in October 2001 through a loan agreement funded with proceeds from tax-exempt industrial development revenue bonds (Bonds). These Bonds were issued by the Illinois Development Finance Authority and were used for the completion of our Northlake, Illinois facility. Pursuant to the Bond issuance, a reimbursement agreement between us and a major domestic bank required an issuance by the bank of an irrevocable direct-pay letter of credit (Bond LC), as collateral, to the Bonds’ trustee to guarantee payment of the Bonds’ principal and interest when due. The Bond LC is subject to both early termination and extension provisions customary to such agreements, as well as various covenants, for which we were in compliance at March 31, 2015. While the Bonds mature in 2021, the reimbursement agreement requires annual redemptions of $0.4 million that commenced on October 25, 2002. A sinking fund is used for the redemption of the Bonds. At March 31, 2015, the balance in the restricted sinking fund was approximately $0.2 million and was recorded in cash and cash equivalents. The Bonds bear interest at a floating rate determined weekly by the Bonds’ remarketing agent, which was the underwriter for the Bonds and is an affiliate of the bank. This interest rate was 0.16% as of March 31, 2015.

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Intangible Assets

6 Months Ended

Mar. 31, 2015

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets

D. INTANGIBLE ASSETS

Intangible assets balances, subject to amortization, at March 31, 2015 and September 30, 2014 consisted of the following (in thousands):

	March 31, 2015							September 30, 2014
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Value		Amortization			Value		Value		Amortization			Value
Purchased technology	$	11,749	$	(10,165	)	$	1,584	$	11,749	$	(9,918	)	$	1,831
Trade name		1,136		(1,113	)		23		1,136		(1,063	)		73
Total	$	12,885	$	(11,278	)	$	1,607	$	12,885	$	(10,981	)	$	1,904

Amortization of intangible assets recorded for the six months ended March 31, 2015 and 2014 was $0.2 million and $0.5 million, respectively.

On August 7, 2006, we purchased certain assets related to the manufacturing of ANSI medium-voltage switchgear and circuit breaker business from General Electric Company (GE).  In connection with the acquisition, we entered into a 15 year supply agreement with GE pursuant to which GE would purchase from the Company all of its requirements for ANSI medium-voltage switchgear and circuit breakers and other related equipment and components (the Products).  In connection with the acquisition, we recorded an intangible asset related to this supply agreement.  On December 30, 2013, the Company and GE amended the supply agreement to allow GE to manufacture similar Products for sale immediately and allow GE to begin purchasing Products from other suppliers beginning December 31, 2014.  In return, GE paid us $10 million upon execution of the amended supply agreement in the first quarter of Fiscal 2014 and agreed to pay an additional $7 million over three years.  The first payment of $2.3 million was received in March 2015.  We wrote off the intangible asset related to the original supply agreement and recorded a deferred credit in the amount of $8.1 million at December 31, 2013, the amount by which the proceeds from GE exceeded the unamortized balance of our intangible asset. This deferred credit is being amortized over the four year life of the agreement.

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Detail of Selected Balance Sheet Accounts (Tables)

6 Months Ended

Mar. 31, 2015

Disclosure Text Block Supplement [Abstract]

Activity in Allowance for Doubtful Accounts

Activity in our allowance for doubtful accounts receivable consisted of the following (in thousands):

	Three months ended March 31,						Six months ended March 31,
	2015			2014			2015			2014
Balance at beginning of period	$	1,844		$	673		$	1,577		$	572
Bad debt expense/(recovery)		186			(170	)		469			(60	)
Uncollectible accounts written off, net of recoveries		(120	)		—			(122	)		(9	)
Change in foreign currency translation		(29	)		(2	)		(43	)		(2	)
Balance at end of period	$	1,881		$	501		$	1,881		$	501

Components of Inventories

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

	March 31, 2015			September 30, 2014
Raw materials, parts and subassemblies	$	39,063		$	35,349
Work-in-progress		1,558			2,035
Provision for excess and obsolete inventory		(4,886	)		(4,569	)
Total inventories	$	35,735		$	32,815

Cost and Estimated Earnings on Uncompleted Contracts

The components of costs and estimated earnings and related amounts billed on uncompleted contracts are summarized below (in thousands):

	March 31,			September 30,
	2015			2014
Costs incurred on uncompleted contracts	$	618,778		$	604,939
Estimated earnings		161,724			157,562
		780,502			762,501
Less: Billings to date		(747,964	)		(715,233	)
Net underbilled position	$	32,538		$	47,268
Included in the accompanying balance sheets under the following captions:
Costs and estimated earnings in excess of billings on uncompleted contracts - underbilled	$	96,709		$	95,970
Billings in excess of costs and estimated earnings on uncompleted contracts - overbilled		(64,171	)		(48,702	)
Net underbilled position	$	32,538		$	47,268

Activity in Product Warranty Accrual

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

	Three months ended March 31,						Six months ended March 31,
	2015			2014			2015			2014
Balance at beginning of period	$	4,480		$	5,010		$	4,557		$	5,282
Increase to warranty expense		530			1,042			1,067			1,505
Deduction for warranty charges		(504	)		(1,196	)		(1,028	)		(1,926	)
Increase (decrease) due to foreign currency translations		(131	)		(23	)		(221	)		(28	)
Balance at end of period	$	4,375		$	4,833		$	4,375		$	4,833

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Restructuring and Separation Costs

6 Months Ended

Mar. 31, 2015

Restructuring And Related Activities [Abstract]

Restructuring and Separation Costs

L. RESTRUCTURING AND SEPARATION COSTS

In the second quarter of Fiscal 2015, we incurred approximately $1.3 million in restructuring and separation costs associated with the departure of our former Chief Operating Officer and severance costs related to our Canadian operations and certain U.S. operations which were negatively impacted by deteriorating market conditions.  Of these costs, $0.8 million has been paid as of March 31, 2015 and the remaining $0.5 million will be distributed over the next sixteen months.  

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Share Repurchase Program

6 Months Ended

Mar. 31, 2015

Share Repurchase Program [Abstract]

Share Repurchase Program

H. SHARE REPURCHASE PROGRAM

On December 17, 2014, our Board of Directors authorized a repurchase program (the Repurchase Program) under which we may repurchase up to $25 million of our outstanding stock.  The purchases may be made from time to time in the open market, through privately negotiated transactions and Rule 10b5-1 trading plans in accordance with applicable laws, rules and regulations.  The Repurchase Program will be funded from cash on hand and cash provided by operating activities.  The Repurchase Program will expire as of the close of business on December 31, 2015.  As of March 31, 2015, we have purchased 171,416 shares at cost of $5.8 million under this Repurchase Program.  The average price per share through March 31, 2015 has been $33.60.

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Commitments and Contingencies

6 Months Ended

Mar. 31, 2015

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

F. COMMITMENTS AND CONTINGENCIES

Long-Term Debt

See Note E herein for discussion of our long-term debt.

Letters of Credit and Bonds

Certain customers require us to post bank letter of credit guarantees or performance bonds issued by a surety. These guarantees and performance bonds assure that we will perform under the terms of our contract. In the event of default, the counterparty may demand payment from the bank under a letter of credit or performance by the surety under a performance bond. To date, there have been no significant expenses related to either letters of credit or performance bonds for the periods reported. We were contingently liable for secured and unsecured letters of credit of $18.0 million as of March 31, 2015. We also had performance and maintenance bonds totaling $300.9 million that were outstanding, with additional bonding capacity of $299.1 million available, at March 31, 2015.

We have a $14.8 million facility agreement (Facility Agreement) between Powell (UK) Limited and a large international bank. This Facility Agreement provides Powell (UK) the ability to enter into bank guarantees as well as forward exchange contracts and currency options. At March 31, 2015, we had outstanding guarantees totaling $5.3 million under this Facility Agreement.  Amounts available under this Facility Agreement were $9.5 million as of March 31, 2015.

The Facility Agreement provides for financial covenants and customary events of default, and carries cross-default provisions with our Amended Credit Facility. If an event of default (as defined in the Facility Agreement) occurs and is continuing, per the terms and subject to the conditions set forth in the Facility Agreement, obligations outstanding under the Facility Agreement may be accelerated and may become or be declared immediately due and payable. As of March 31, 2015, we were in compliance with all of the financial covenants of the Facility Agreement.  

Litigation

We are involved in various legal proceedings, claims and other disputes arising in the ordinary course of business which, in general, are subject to uncertainties and in which the outcomes are not predictable. Although we can give no assurance about the outcome of pending or threatened litigation and the effect such outcomes may have on us, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on our consolidated financial position or results of operations or liquidity.

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Stock-Based Compensation

6 Months Ended

Mar. 31, 2015

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

G. STOCK-BASED COMPENSATION

Refer to our Annual Report on Form 10-K for the fiscal year ended September 30, 2014 for a full description of our existing stock-based compensation plans.

In February 2014, our stockholders approved our 2014 Equity Incentive Plan (the 2014 Plan).  Persons eligible to receive awards under the 2014 Plan include certain officers and employees.  This Plan authorizes stock options, stock appreciation rights, restricted stock, restricted stock units and performance-based awards, as well as certain other awards.

Restricted Stock Units

We issue restricted stock units (RSUs) to certain officers and key employees of the Company. The RSUs typically vest over a three-year period from their date of issuance. The fair value of the RSUs is based on the closing price of our common stock as reported on the NASDAQ Global Market on the grant dates. Sixty-percent of the actual amount of the RSUs earned will be based on the cumulative earnings as reported relative to the three-year performance cycle which begins October 1 of the year granted, and ranges from 0% to 150% of the target RSUs granted. The remaining forty-percent of the RSUs are time-based and vest over a three-year period. At March 31, 2015, there were 161,337 RSUs outstanding. The RSUs do not have voting rights and do not receive dividends on common stock; additionally, the shares of common stock underlying the RSUs are not considered issued and outstanding until actually issued.

RSU activity (number of shares) for the quarter is summarized below:

	Number of			Weighted
	Restricted			Average
	Stock			Fair Value
	Units			Per Share
Outstanding at September 30, 2014		106,845		$	51.30
Granted		88,000			41.88
Vested		(33,508	)		44.06
Forfeited		—			—
Outstanding at March 31, 2015		161,337		$	47.66

During the six months ended March 31, 2015 and 2014, we recorded compensation expense of $0.9 million and $1.5 million, respectively, related to the RSUs.

Restricted Stock

In February 2014 our stockholders also approved the 2014 Non-Employee Director Equity Incentive Plan (the 2014 Director Plan) for the benefit of members of the Board of Directors of the Company who, at the time of their service are not employees of the Company or any of its affiliates. The 2014 Director Plan authorizes stock options, stock appreciation rights, restricted stock, restricted stock units, as well as certain other awards.  In February 2015, 16,000 shares of restricted stock were issued to such directors at a price of $33.37 per share under the 2014 Director Plan.  The annual restricted stock grants vest 50% per year over a two-year period on each anniversary of the grant date.

During the six months ended March 31, 2015 and 2015, we recorded compensation expense of $0.7 million and $0.5 million, respectively, related to restricted stock grants.  

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Fair Value Measurements

6 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

I. FAIR VALUE MEASUREMENTS

We measure certain financial assets and liabilities at fair value. Fair value is defined as an “exit price” which represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in valuing an asset or liability. The accounting guidance requires the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. As a basis for considering such assumptions and inputs, a fair value hierarchy has been established which identifies and prioritizes three levels of inputs to be used in measuring fair value.

The three levels of the fair value hierarchy are as follows:

Level 1 — Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Inputs other than the quoted prices in active markets that are observable either directly or indirectly, including: quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

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, 2015 (in thousands):

	Fair Value Measurements at March 31, 2015
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable		Fair Value at
	Identical Assets		Inputs		Inputs		March 31,
	(Level 1)		(Level 2)		(Level 3)		2015
Assets:
Cash equivalents	$	234	$	—	$	—	$	234
Deferred compensation		2,001		3,134		—		5,135
Liabilities:
Deferred compensation		—		4,947		—		4,947

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 September 30, 2014 (in thousands):

	Fair Value Measurements at September 30, 2014
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable		Fair Value at
	Identical Assets		Inputs		Inputs		September 30,
	(Level 1)		(Level 2)		(Level 3)		2014
Assets:
Cash equivalents	$	10,535	$	—	$	—	$	10,535
Deferred compensation		724		2,802		—		3,526
Liabilities:
Deferred compensation		—		3,688		—		3,688

Cash equivalents, primarily funds held in money market savings instruments, are reported at their current carrying value which approximates fair value due to the short-term nature of these instruments and are included in cash and cash equivalents in our Condensed Consolidated Balance Sheets.

Fair Value of Other Financial Instruments

Fair value guidance requires certain fair value disclosures be presented in both interim and annual reports.  The estimated fair value amounts of financial instruments have been determined using available market information and valuation methodologies described below.

Deferred Compensation – We hold investments in an irrevocable Rabbi Trust for our deferred compensation plan. These assets include various mutual fund investments and company-owned life insurance policies. Under the plan, participants designate investment options to serve as the basis for measurement of the notional value of their accounts.  The fair values of the underlying securities of these funds are based on quoted market prices and are categorized as Level I in the fair value measurement hierarchy.  The company-owned life insurance policies are valued at cash surrender value and are therefore categorized as Level 2 in the fair value measurement hierarchy.

Industrial Development Revenue Bond – The fair value of our long-term debt depends primarily on the coupon rate of our industrial development revenue bonds.  The carrying value of our long-term debt at March 31, 2015, approximates fair value based on the current coupon rate of the bonds, which is reset weekly, and is classified as a Level 2 input in the fair value measurement hierarchy as there is an active market for the trading of these industrial development revenue bonds.

There were no transfers between levels within the fair value measurement hierarchy during the six months ended March 31, 2015.

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Detail of Selected Balance Sheet Accounts (Cost and Estimated Earnings on Uncompleted Contracts) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Sep. 30, 2014
Balance Sheet Related Disclosures [Abstract]
Costs incurred on uncompleted contracts	$ 618,778	$ 604,939
Estimated earnings	161,724	157,562
Total	780,502	762,501
Less: Billings to date	(747,964)	(715,233)
Net underbilled position	32,538	47,268
Included in the accompanying balance sheets under the following captions:
Costs and estimated earnings in excess of billings on uncompleted contracts - underbilled	96,709	95,970
Billings in excess of costs and estimated earnings on uncompleted contracts - overbilled	(64,171)	(48,702)
Net underbilled position	$ 32,538	$ 47,268

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Income Taxes (Narrative) (Details) (USD $)	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Income Tax Contingency [Line Items]
Income tax provision	$ 6,379,000	$ 4,055,000	$ 5,388,000	$ 7,992,000
Effective tax rate	236.60%	36.80%	367.50%	35.90%
Deferred tax assets	9,000,000		9,000,000
Release of a FIN 48 reserve related to the federal research and development tax credit	4,100,000		4,100,000
Operating loss carryforwards	32,000,000		32,000,000
Operating loss carryforwards, expiration period (in years)			20 years
Operating loss carryforwards, expiration date			2031
Operating loss carryforwards, valuation allowance	$ 9,000,000		$ 9,000,000
R&D Tax Credit
Income Tax Contingency [Line Items]
Tax credit carryforward description			The effective tax rate for the six months ended March 31, 2015 was 367.5% compared to an effective tax rate of 35.9% for the six months ended March 31, 2014 primarily due to a valuation allowance against our Canadian deferred tax assets partially offset by the release of a FIN 48 reserve related to the R&D Credit upon closing an IRS audit as well as the December 19, 2014 retroactive reinstatement of the R&D Credit from January 1, 2014 through December 31, 2014.
Tax credit expiration date			Dec. 31, 2014

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Overview and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Supplemental Disclosures of Cash Flow Information

Supplemental Disclosures of Cash Flow Information (in thousands):

	Six months ended March 31,
	2015		2014
Non-cash capital expenditures	$	3,351	$	389

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Stock-Based Compensation (Tables)

6 Months Ended

Mar. 31, 2015

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Schedule of Restricted Stock Units Activity

RSU activity (number of shares) for the quarter is summarized below:

	Number of			Weighted
	Restricted			Average
	Stock			Fair Value
	Units			Per Share
Outstanding at September 30, 2014		106,845		$	51.30
Granted		88,000			41.88
Vested		(33,508	)		44.06
Forfeited		—			—
Outstanding at March 31, 2015		161,337		$	47.66

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Income Taxes (Schedule of Effective Tax Rate) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Income Tax Disclosure [Abstract]
Income from continuing operations before income taxes	$ 2,696	$ 11,031	$ 1,466	$ 22,235
Income tax provision	6,379	4,055	5,388	7,992
Income (loss) from continuing operations	$ (3,683)	$ 6,976	$ (3,922)	$ 14,243
Effective tax rate	236.60%	36.80%	367.50%	35.90%

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Stock-Based Compensation (Narrative) (Details) (USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended		1 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Feb. 28, 2015	Sep. 30, 2014
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period	3 years
Unvested restricted stock outstanding	161,337			106,845
Compensation expense	$ 0.9	$ 1.5
Restricted Stock Units (RSUs) | Performance Based Restricted Stock Unit
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period	3 years
Actual amount of RSUs earned based on cumulative earnings	60.00%
Restricted Stock Units (RSUs) | Time Based Restricted Stock Unit
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period	3 years
Target RSUs granted range	40.00%
Restricted Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Compensation expense	$ 0.7	$ 0.5
Restricted Stock | 2014 Non-Employee Director Equity Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period			2 years
Shares issued under the plan			16,000
Shares issued, price per share			$ 33.37
Restricted Stock | 2014 Non-Employee Director Equity Incentive Plan | Vesting of First Anniversary
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting percentage			50.00%
Restricted Stock | 2014 Non-Employee Director Equity Incentive Plan | Vesting of Second Anniversary
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting percentage			50.00%
Minimum | Restricted Stock Units (RSUs) | Performance Based Restricted Stock Unit
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Target RSUs granted range	0.00%
Maximum | Restricted Stock Units (RSUs) | Performance Based Restricted Stock Unit
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Target RSUs granted range	150.00%

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Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Consolidated Statement of Comprehensive Income (Loss) [Abstract]
Net income (loss)	$ (3,683)	$ 15,593	$ (3,922)	$ 23,847
Foreign currency translation adjustments	(6,897)	(1,442)	(11,135)	(3,036)
Comprehensive income (loss)	$ (10,580)	$ 14,151	$ (15,057)	$ 20,811

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Detail of Selected Balance Sheet Accounts

6 Months Ended

Mar. 31, 2015

Disclosure Text Block Supplement [Abstract]

Detail of Selected Balance Sheet Accounts

C. DETAIL OF SELECTED BALANCE SHEET ACCOUNTS

Allowance for Doubtful Accounts

Activity in our allowance for doubtful accounts receivable consisted of the following (in thousands):

	Three months ended March 31,						Six months ended March 31,
	2015			2014			2015			2014
Balance at beginning of period	$	1,844		$	673		$	1,577		$	572
Bad debt expense/(recovery)		186			(170	)		469			(60	)
Uncollectible accounts written off, net of recoveries		(120	)		—			(122	)		(9	)
Change in foreign currency translation		(29	)		(2	)		(43	)		(2	)
Balance at end of period	$	1,881		$	501		$	1,881		$	501

Inventories:

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

	March 31, 2015			September 30, 2014
Raw materials, parts and subassemblies	$	39,063		$	35,349
Work-in-progress		1,558			2,035
Provision for excess and obsolete inventory		(4,886	)		(4,569	)
Total inventories	$	35,735		$	32,815

Cost and Estimated Earnings on Uncompleted Contracts

The components of costs and estimated earnings and related amounts billed on uncompleted contracts are summarized below (in thousands):

	March 31,			September 30,
	2015			2014
Costs incurred on uncompleted contracts	$	618,778		$	604,939
Estimated earnings		161,724			157,562
		780,502			762,501
Less: Billings to date		(747,964	)		(715,233	)
Net underbilled position	$	32,538		$	47,268
Included in the accompanying balance sheets under the following captions:
Costs and estimated earnings in excess of billings on uncompleted contracts - underbilled	$	96,709		$	95,970
Billings in excess of costs and estimated earnings on uncompleted contracts - overbilled		(64,171	)		(48,702	)
Net underbilled position	$	32,538		$	47,268

Warranty Accrual

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

	Three months ended March 31,						Six months ended March 31,
	2015			2014			2015			2014
Balance at beginning of period	$	4,480		$	5,010		$	4,557		$	5,282
Increase to warranty expense		530			1,042			1,067			1,505
Deduction for warranty charges		(504	)		(1,196	)		(1,028	)		(1,926	)
Increase (decrease) due to foreign currency translations		(131	)		(23	)		(221	)		(28	)
Balance at end of period	$	4,375		$	4,833		$	4,375		$	4,833

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Fair Value Measurements (Tables)

6 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value of Assets Measured on Recurring Basis

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, 2015 (in thousands):

	Fair Value Measurements at March 31, 2015
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable		Fair Value at
	Identical Assets		Inputs		Inputs		March 31,
	(Level 1)		(Level 2)		(Level 3)		2015
Assets:
Cash equivalents	$	234	$	—	$	—	$	234
Deferred compensation		2,001		3,134		—		5,135
Liabilities:
Deferred compensation		—		4,947		—		4,947

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 September 30, 2014 (in thousands):

	Fair Value Measurements at September 30, 2014
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable		Fair Value at
	Identical Assets		Inputs		Inputs		September 30,
	(Level 1)		(Level 2)		(Level 3)		2014
Assets:
Cash equivalents	$	10,535	$	—	$	—	$	10,535
Deferred compensation		724		2,802		—		3,526
Liabilities:
Deferred compensation		—		3,688		—		3,688

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Long-Term Debt (Components of Long-Term Debt) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Sep. 30, 2014
Debt Disclosure [Abstract]
Industrial development revenue bonds	$ 2,800	$ 3,200
Less current portion	(400)	(400)
Total long-term debt and capital lease obligations	$ 2,400	$ 2,800

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Overview and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Overview

Overview

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 corporation was the successor to a company founded by William E. Powell in 1947, which merged into the Company in 1977. Our major subsidiaries, all of which are wholly owned, include: Powell Electrical Systems, Inc.; Powell (UK) Limited; Powell Canada Inc. and Powell Industries International, B.V.

We develop, design, manufacture and service custom-engineered equipment and systems for the distribution, control and monitoring of electrical energy designed to (1) distribute, monitor and control the flow of electrical energy and (2) provide protection to motors, transformers and other electrically powered equipment. Headquartered in Houston, Texas, we serve the transportation, energy, industrial and utility industries.

Basis of Presentation

Basis of Presentation

These unaudited condensed consolidated financial statements include the accounts of Powell and its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information.  Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP), have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows with respect to the interim consolidated financial statements have been included. The results of operations for the interim periods are not necessarily indicative of the results for the entire fiscal year.  We believe that these financial statements contain all adjustments necessary so that they are not misleading. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Powell and its subsidiaries included in Powell’s Annual Report on Form 10-K for the year ended September 30, 2014, which was filed with the Securities and Exchange Commission (SEC) on December 3, 2014.

References to Fiscal 2015, Fiscal 2014 and Fiscal 2013 used throughout this report shall mean our fiscal years ended September 30, 2015, 2014 and 2013, respectively.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. 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 financial statements affect revenue and cost recognition for construction contracts, the allowance for doubtful accounts, provision for excess and obsolete inventory, goodwill and other intangible assets, self-insurance, warranty accruals and income taxes. The amounts recorded for insurance claims, warranties, legal, income taxes and other contingent liabilities require judgments regarding the amount of expenses that will ultimately be incurred. We base our estimates on historical experience and on 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.  Estimates may change as new events occur, additional information becomes available or operating environments change. Actual results may differ from our estimates.

New Accounting Standards

New Accounting Standards

In July 2013, the FASB issued accounting guidance on the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, which would be our fiscal year ended September 30, 2015. This guidance should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this guidance has not had a significant impact on our consolidated financial position or results of operations.

In April 2014, the FASB issued an amendment to the financial reporting of discontinued operations.  The amendments in this update changed the criteria for reporting discontinued operations while enhancing disclosures in this area. It also addresses sources of confusion and inconsistent application related to the financial reporting of discontinued operations guidance in U.S. GAAP.  Under the new guidance, only disposals representing a strategic shift in operations that have a major effect on the organization’s operations and financial results should be presented as discontinued operations. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. This disclosure will provide users with information about the ongoing trends in a reporting organization’s results from continuing operations. The amendments in this update are effective in the first quarter of 2015, which would be our fiscal year end September 30, 2016. Early adoption is permitted for disposals that have not been previously reported as discontinued operations.

In May 2014, the FASB issued a new standard on revenue recognition that supersedes previously issued revenue recognition guidance.  This standard provides a five-step approach to be applied to all contracts with customers and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue (and the related cash flows) arising from customer contracts, significant judgments and changes in judgments used in applying the revenue model and the assets recognized from costs incurred to obtain or fulfill a contract.  This new standard is effective for us beginning in fiscal year 2018.  Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method therefore we are evaluating the effect that this new guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.

In June 2014, the FASB issued an amendment to the topic regarding share-based payments and instances where terms of an award provide that a performance target can be achieved after the requisite service period.  This guidance has been provided to resolve the diversity in practice concerning employee share-based payments that contain performance targets that could be achieved after the requisite service period. The updated guidance requires that a performance target that affects vesting and that can be achieved after the requisite service period be treated as a performance condition. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and is attributable to the periods for which service has been rendered. If the performance target becomes probable of being achieved before the end of the service period, the remaining unrecognized compensation cost for which requisite service has not yet been rendered is recognized prospectively over the remaining service period. The total amount of compensation cost recognized during and after the service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The updated guidance is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on our consolidated financial position or results of operations.

Discontinued Operations

Discontinued operations

In January 2014, we sold our wholly owned subsidiary Transdyn Inc. (Transdyn).  For the quarter and six months ended March 31, 2014, we have presented the results of these operations as income from discontinued operations, net of tax.  See Note J.