SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
POWELL INDUSTRIES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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POWELL INDUSTRIES, INC.
8550 MOSLEY DRIVE
HOUSTON, TEXAS 77075
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 7, 2003
To the Stockholders of Powell Industries, Inc.:
Notice is hereby given that the Annual Meeting of the Stockholders of
Powell Industries, Inc., a Nevada corporation (the "Company"), will be held at
the offices of the Company at 8550 Mosley Drive, in Houston, Texas on Friday,
March 7, 2003 at 11:00 a.m. Houston time, for the following purposes:
1. To elect three (3) members of the Company's Board of Directors,
with terms to expire in 2006; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The stock transfer books will not be closed. Stockholders of record as of
the close of business on January 20, 2003 are entitled to notice of, and to vote
at, the Annual Meeting or any adjournment thereof, notwithstanding any transfer
of stock on the books of the Company after such record date.
You are cordially invited to attend the meeting in person. YOU ARE URGED TO
COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND TO RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
By Order of the Board of Directors
/s/ THOMAS W. POWELL
------------------------------------
Thomas W. Powell
Chairman and Chief Executive Officer
Houston, Texas
January 24, 2003
POWELL INDUSTRIES, INC.
8550 MOSLEY DRIVE
HOUSTON, TEXAS 77075
---------------------
PROXY STATEMENT
JANUARY 24, 2003
---------------------
ANNUAL MEETING OF STOCKHOLDERS
MARCH 7, 2003
---------------------
SOLICITATION AND VOTING RIGHTS
The accompanying proxy is solicited by the Board of Directors of Powell
Industries, Inc., a Nevada corporation (the "Company"), for use at the Annual
Meeting of Stockholders of the Company to be held on Friday, March 7, 2003 at
11:00 a.m., Houston time, at the offices of the Company at 8550 Mosley Drive, in
Houston, Texas, or at any adjournment thereof.
This Proxy Statement and proxy and the accompanying Notice of Annual
Meeting, Summary Annual Report to Stockholders, and Form 10-K for the year ended
October 31, 2002, including consolidated financial statements, will be mailed to
stockholders on or about January 31, 2003. The cost of soliciting proxies in the
enclosed form will be borne by the Company. The Board of Directors of the
Company has fixed January 20, 2003, as the record date for determination of
stockholders entitled to receive notice of and to vote at the Annual Meeting. As
of January 20, 2003, there were 10,595,878 shares of the Company's Common Stock,
par value $.01 per share ("Common Stock"), outstanding. Each holder of Common
Stock will be entitled to one vote for each share owned, except as noted below.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock of the Company is necessary to constitute a
quorum at the meeting. The holders of shares represented by proxies reflecting
abstentions or "broker non-votes" are considered present at the meeting and
count toward a quorum. Brokers holding shares of record for their customers
generally are not entitled to vote on certain matters unless they receive voting
instructions from their customers. When brokers complete proxy forms, they
generally vote on those matters as to which they are entitled to vote. On those
matters as to which brokers are not entitled to vote without instructions from
their customers and have not received such instructions, brokers generally
indicate on their proxies that they lack voting authority as to those matters.
As to those matters, such indications are called "broker non-votes".
The persons receiving the greatest number of votes cast at the meeting to
fill the directorships with terms to expire in 2006 will be elected as directors
of the Company, class of 2006. Thus, abstentions and broker non-votes will have
no effect on the election of directors.
Regarding other matters, the vote of a majority of the voting power
present, in person or by proxy, and entitled to vote on the matters, at a
meeting at which a quorum is present, is the act of the stockholders.
Accordingly, abstentions will have the effect of negative votes with respect to
any such other matters. Broker
non-votes will have the effect of negative votes as to any such other matters as
to which the broker is entitled to vote, and no effect on those matters as to
which the broker is not entitled to vote.
The shares represented by each valid proxy received by the Company on the
form solicited by the Board of Directors will be voted in accordance with
instructions specified on the proxy. Under Nevada law, a stockholder giving a
duly executed proxy may revoke it before it is exercised only by filing with or
transmitting to the Secretary of the Company an instrument or transmission
revoking it, or a duly executed proxy bearing a later date.
COMMON STOCK OWNED BY
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth as of January 20, 2003 (except as otherwise
noted below), the number of shares of Common Stock owned by each person who is
known by the Company to own beneficially more than five percent (5%) of the
Company's outstanding Common Stock:
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL
OF BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
------------------- ----------------- ----------------
Thomas W. Powell...................................... 3,058,639(1) 28.9%
PO Box 12818
Houston, Texas 77217
Bonnie L. Powell...................................... 869,419(2) 8.2%
PO Box 112
Warda, Texas 78960
Royce & Associates, L.L.C............................. 1,203,000(3) 11.4%
1414 Avenue of the Americas, 9th Floor
New York, New York 10019
Wellington Trust Company, NA.......................... 679,600(4) 6.4%
75 State Street
Boston, Massachusetts 02109
Nationwide Trust Company, FSB......................... 644,915(5) 6.1%
Trustee of the Powell Industries, Inc.
Employee Stock Ownership Trust
PO Box 1412
Austin, Texas 78767
Fleet Investment Advisors............................. 551,800(6) 5.2%
100 Federal Street
Boston, Massachusetts 02110
---------------
(1) Mr. Powell has sole voting power and sole investment power with respect to
2,724,542 of such shares, of which 85,150 are held directly, 78,720 are held
by Mr. Powell's IRA, 2,493,792 are held by TWP Holdings, Ltd., a partnership
controlled by Mr. Powell and 66,880 are shares subject to stock options
which are currently exercisable by Mr. Powell. Also includes 317,360 shares
held by the Thomas Walker
2
Powell Trust, of which Mr. Powell is a co-trustee and shares voting and
investment power with respect to the shares held by such trust with the
other co-trustees, Michael W. Powell and Holly C. Powell Arnold. Also
includes 2,818 shares allocated to the account of Mr. Powell under the
Powell Industries, Inc. Employee Stock Ownership Plan (see footnote (5) to
this table) and 919 shares held in trust for the account of Mr. Powell under
the Employees Incentive Savings Plan of the Company. Also includes 13,000
shares of restricted stock issued in connection with the exercise of options
by Mr. Powell that are subject to forfeiture if the related option shares
are not held for five years or if he leaves employment of the Company, other
than for retirement, within five years after receiving the shares. Mr.
Powell has sole voting rights but no investment power with respect to such
restricted stock.
(2) Mrs. Powell has sole voting power and sole investment power with respect to
523,919 of such shares. Also includes 345,500 shares held by Testamentary
Trust No. 1, of which Mrs. Powell is a co-trustee. Mrs. Powell shares voting
and investment power with respect to such shares held by Testamentary Trust
No. 1 with J. Suzzanne May, the other co-trustee of such trust. Any act of
such co-trustees requires the approval of a majority of them.
(3) The shares set forth in the table reflect the number of shares owned on
January 20, 2003 according to the records of the Company's Stock Transfer
Agent. As of July 31, 2002, based on a Schedule 13G dated August 8, 2002
filed by Royce & Associates, LLC, Royce & Associates, LLC owned beneficially
1,198,000 shares or 11.45% of the Common Stock of Powell Industries, Inc.
(4) The shares set forth in the table reflect the number of shares owned on
January 20, 2003 according to the records of the Company's Stock Transfer
Agent. As of December 31, 2001, based on a Schedule 13G dated February 14,
2002, filed by Wellington Management Company, LLP, the parent of Wellington
Trust Company, NA, Wellington Management Company, LLP owned beneficially
553,800 shares with shared dispositive power over all such shares and shared
voting power as to 342,300 of such shares.
(5) The shares set forth in the table reflect the number of shares owned on
January 20, 2003 according to the records of the Company. Nationwide Trust
Company, as Trustee for the Powell Industries, Inc. Employee Stock Ownership
Trust (the "ESOP"), as directed by the administrative committee for the ESOP
appointed by the Board of Directors of the Company, votes and disposes of
shares not allocated to the accounts of participants, and votes allocated
shares as to which no direction is received from the participant.
Participants have the right to direct the voting and tender of shares
allocated to their accounts. As of January 20, 2003, approximately 324,135
of the shares held by the ESOP were allocated to the accounts of
participants.
(6) The shares set forth in the table reflect the number of shares owned on
January 20, 2003 according to the records of the Company's Stock Transfer
Agent.
3
The following table sets forth, as of January 20, 2003, the number of
shares of the Common Stock beneficially owned by each director and nominee for
director, each of the executive officers listed in the Summary Compensation
Table below, and all executive officers and directors of the Company as a group.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
------------------------ ----------------- --------
Joseph L. Becherer......................................... 5,000(2) *
Eugene L. Butler........................................... 6,500(2) *
James F. Clark............................................. 3,000(3) *
Robert B. Gregory.......................................... 3,841(4) *
Don R. Madison............................................. 2,000(3) *
Thomas W. Powell........................................... 3,058,639(5) 28.9%
Stephen W. Seale, Jr. ..................................... 15,553(2) *
Lawrence R. Tanner......................................... 4,929(2) *
Robert C. Tranchon......................................... 2,100(3) *
Ronald J. Wolny............................................ 11,873(6) *
M. M. Zeller............................................... 46,731(7) *
All Executive Officers and Directors as a group (11
persons)................................................. 3,160,166
---------------
* Less than one percent (1%).
(1) The persons listed have sole voting power and sole investment power with
respect to the shares beneficially owned by them, except as otherwise
indicated.
(2) Includes 4,000 shares subject to stock options which are currently
exercisable.
(3) Includes 2,000 shares subject to stock options which are currently
exercisable.
(4) Includes 1,341 shares allocated to Mr. Gregory's account in the ESOP (see
footnote (5) to the preceding table) and 2,500 shares subject to stock
options which are currently exercisable.
(5) See footnote (1) to the preceding table.
(6) Includes 883 shares subject to stock options which are currently
exercisable.
(7) Includes 2,605 shares allocated to Mr. Zeller's account in the ESOP (see
footnote (5) to the preceding table) and 19,370 shares subject to stock
options which are currently exercisable. Also includes 2,446 shares of
restricted stock issued in connection with the exercise of options by Mr.
Zeller that are subject to forfeiture if the related option shares are not
held for five years or if he leaves employment of the Company, other than
for retirement, within five years after receiving the shares. Mr. Zeller has
sole voting rights but no investment power with respect to such restricted
stock.
4
ELECTION OF DIRECTORS
The terms of three directors expire in 2003 under the bylaws of the
Company. The terms of the remaining directors continue after the Annual Meeting.
The Nominating Committee has nominated Stephen W. Seale, Jr., Robert C. Tranchon
and James F. Clark for election as directors with terms to expire in 2006. Mr.
Seale, Mr. Tranchon and Mr. Clark currently serve as directors of the Company
with terms expiring in 2003. Although the Board of Directors does not
contemplate that any nominee will be unable to serve, if such a situation arises
prior to the Annual Meeting, the persons named in the enclosed form of proxy
will vote in accordance with their best judgment for a substitute nominee.
The following table sets forth for each nominee and for each director whose
term of office continues after the Annual Meeting, his name, age, principal
occupation and employment for the past five years, offices held with the
Company, the date he first became a director, and the date of expiration of his
current term as director.
PRINCIPAL OCCUPATION FOR DIRECTOR TERM
NAME AGE PAST FIVE YEARS(1) OFFICES HELD WITH COMPANY SINCE EXPIRES
---- --- ------------------------ ---------------------------- -------- -------
Eugene L. Butler............ 61 Chairman of the Board, Director 1990 2005
Intercoastal Terminal,
Inc. since 1991
Ronald J. Wolny............. 63 Vice President, Fluor Director 2001 2005
Daniel, Inc. until his
retirement in January
2003
Thomas W. Powell............ 62 Chairman of the Board, Director, Chairman of the 1984 2004
President and Chief Board, President and Chief
Executive Officer of the Executive Officer(2)
Company since 1984
Lawrence R. Tanner.......... 76 Director of Technical Director 1992 2004
Services, Compaq
Computer Company since
January 1989
Joseph L. Becherer.......... 60 Senior Vice President, Director 1997 2004
Eaton Corporation, from
September 1995 until his
retirement in October
1997; Operations Vice
President, Cutler
Hammer, a subsidiary of
Eaton Corporation,
February 1994 to
September 1995
5
PRINCIPAL OCCUPATION FOR DIRECTOR TERM
NAME AGE PAST FIVE YEARS(1) OFFICES HELD WITH COMPANY SINCE EXPIRES
---- --- ------------------------ ---------------------------- -------- -------
Stephen W. Seale, Jr. ...... 63 Director-Operations, Director 1985 2003
Materials and Structures
Division Southwest
Research Institute, an
independent research and
development
organization, until his
retirement in January
1998
Robert C. Tranchon.......... 62 President and CEO, Director 2000 2003
Reveille Technology,
since 1995; President,
Chief Executive Officer,
and Director of Ansaldo
Ross Hill from
1997-2000; Chairman of
the Board, President,
and Chief Executive
Officer, Westinghouse
Motor Company until 1995
James F. Clark.............. 56 Vice President, Square D Director 2001 2003
Corporation from 1989
until his retirement in
December 2000(3)
---------------
(1) None of the corporations listed (other than the Company) is an affiliate of
the Company.
(2) Mr. Powell also serves as a director of each subsidiary of the Company.
(3) Mr. Clark was appointed by the Board of Directors at its June 15, 2001
meeting to fill a vacancy in the class of 2003.
Only the directors who are not employees of the Company or any of its
subsidiaries or affiliates are entitled to receive a fee, plus reimbursement of
out-of-pocket expenses, for their services as directors. Under the Company's
standard arrangement for compensation of directors, outside directors receive a
quarterly retainer of $2,500 and a fee of $2,000 for each board meeting
attended. Members of a committee other than the chairman receive a fee of $800
for attending each committee meeting. Committee chairmen receive $1,250 for
attending each committee meeting.
In 1993, the Company adopted the Powell Industries, Inc. Directors' Fee
Program which permits directors to defer receipt of the directors' fees to which
they would otherwise be entitled and to have such deferred fees allocated to a
shadow account as if they were invested in Common Stock of the Company on the
date the fees were payable. Then upon expiration of the deferral period or the
retirement or death of the director, payment will be made in the form of shares
of Common Stock equal to the number of shares in his shadow account (plus any
distributions on the Common Stock that were credited to the shadow account).
6
The Shareholders voted at the March 16, 2002 meeting to approve the
Non-Employee Director Stock Option Plan which supersedes the 2000 Non-Employee
Stock Option Plan adopted by the Board of Directors in 2000. The total number of
shares of Common Stock reserved under the plan are 100,000 shares. The Plan is
administered by the Board of Directors. Eligibility to participate in the Plan
is limited to those individuals who are members of the Board of the Company and
who are not an employee of the Company or any affiliate of the Company. Options
have been issued to each of the non-employee directors to acquire shares of the
Company's common stock in accordance with the terms of the Plan.
Four meetings of the Board of Directors were held in the last fiscal year.
No incumbent director attended fewer than seventy-five percent (75%) of the
aggregate of (1) the total number of meetings of the Board of Directors and (2)
the total number of meetings held by all committees of the Board on which he
served.
The Board of Directors has a standing Audit Committee which met five times
during the last fiscal year. The Audit Committee consists of Mr. Butler, Mr.
Seale and Mr. Tanner. The Audit Committee has the responsibility to assist the
Board of Directors in fulfilling its fiduciary responsibilities as to accounting
policies and reporting practices of the Company and its subsidiaries and the
sufficiency of the audits of all Company activities. It is the Board's agent in
ensuring the integrity of financial reports of the Company and its subsidiaries,
and the adequacy of disclosures to shareholders. The Audit Committee is the
focal point for communication between other directors, the independent auditors,
internal auditors and management as their duties relate to financial accounting,
reporting, and controls. During fiscal 2000, the Board of Directors adopted an
Audit Committee Charter, which was attached as Appendix A to the Proxy Statement
for the Company's Annual Meeting of Stockholders on March 16, 2001. A copy of
the Audit Committee Charter may be obtained at the offices of the Company in
Houston, Texas. The current members of the Audit Committee are "independent" as
that term is defined by Rule 4200(a)(15) of the listing standards of the
National Association of Securities Dealers. All meetings of the Audit Committee
were separate and apart from meetings of the full Board of Directors during
fiscal 2002.
AUDIT COMMITTEE REPORT
The Audit Committee has (1) reviewed the Company's audited financial
statements for fiscal 2002 and discussed them with Management, (2) discussed
with the Company's independent accountants the matters required to be discussed
by Statement of Auditing Standards No. 61, as amended, (3) received written
disclosures and a letter from the Company's independent accountants required by
Independence Standards Board Statement No. 1, and (4) discussed the independence
of the Company's accountants with the accountants. Based on the foregoing
discussions, the Audit Committee recommended to the Company's Board of Directors
that the Company's audited financial statements be included in its annual report
on Form 10-K for the year ended October 31, 2002.
The Audit Committee of the Board of Directors:
Eugene L. Butler, Chairman
Stephen W. Seale, Jr.
Lawrence R. Tanner
The Board of Directors also has a standing Compensation Committee comprised
of Mr. Becherer, Mr. Wolny and Mr. Tranchon, all of whom are non-employee
directors of the Company. The Compensation
7
Committee, which held three meetings during the last fiscal year, provides
oversight on behalf of the full Board on development and administration of the
Company's executive compensation program and each component plan in which
officers and directors are eligible to participate. The Compensation Committee
also administers the Stock Option Plan, the Director's Fee Program, Incentive
Compensation Plan and the Non-Employee Director Stock Option Plan of the
Company.
The Board of Directors approved a resolution to create a standing
Nominating Committee at its September 20, 2002 meeting appointing Mr. Powell,
Mr. Wolny and Mr. Butler to serve as the initial members. The Nominating
Committee evaluates candidates and recommends nominees for election to the
Company's Board of Directors at each annual meeting. The Nominating Committee
held meetings and/or acted by unanimous consent one time to designate the
nominees for the directors with terms to expire in 2006 to be elected at the
Annual Meeting. The Nominating Committee does not consider recommendations from
shareholders for nomination to the Board of Directors.
EXECUTIVE OFFICERS
The following table provides information regarding the executive officers
of the Company who are not also a director or a nominee for director. The
officers of the Company serve at the discretion of the Board of Directors of the
Company.
NAME AGE SINCE POSITION
---- --- ----- --------
Don R. Madison(1)..... 45 2001 Vice President and Chief Financial
Officer of Company
M. M. Zeller(2)....... 64 1990 Vice President of Company and President
of Powell Electrical Manufacturing
Company ("PEMCO")
Robert B. Gregory..... 47 2000 Controller of Company
---------------
(1) Mr. Madison was appointed Vice President and Chief Financial Officer of the
Company by the Board of Directors at its September 7, 2001 meeting which
became effective on October 1, 2001. For more than five years prior to
joining the Company, Mr. Madison served in several capacities with ABB, Inc.
including Vice President of Finance.
(2) Mr. Zeller was appointed Vice President of the Company by the Board of
Directors at its January 18, 2002 meeting which became effective on that
date. This appointment is in addition to Mr. Zeller's position as President
of PEMCO, a wholly owned subsidiary of the Company.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of the Chief Executive Officer of the Company, and of the Company's
most highly compensated executive officers for the last fiscal
8
year (other than the CEO) whose total annual salary and bonus exceeded $100,000,
for each of the Company's fiscal years ending October 31, 2002, October 31,
2001, and October 31, 2000.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------- -----------------------
(a) (b) (c) (d) (e) (f)
RESTRICTED SECURITIES (g)
STOCK UNDERLYING ALL OTHER
AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#)(1) (#) ($)(2)
--------------------------- ---- --------- -------- ---------- ---------- ------------
Thomas W. Powell.................. 2002 354,231 322,700 7,000 0 57,448(3)
CEO of Company 2001 335,000 256,095 0 42,500 56,408(3)
2000 315,000 0 6,000 0 53,310(3)
Don R. Madison(4)................. 2002 181,731 118,000 0 0 10,048
Vice President and 2001 14,583 47,500 0 10,000 750
CFO of Company
M. M. Zeller...................... 2002 220,097 201,600 1,926 0 14,500
Vice President of Company 2001 210,000 200,000 0 20,000 14,100
and President of PEMCO 2000 195,326 83,467 520 0 14,100
Robert B. Gregory................. 2002 114,815 53,000 0 0 5,894
Controller of Company 2001 110,000 40,695 0 7,500 3,300
2000 94,600 7,750 0 0 2,800
---------------
(1) As of October 31, 2002, the aggregate number of shares of restricted stock
held by named executive officers of the Company was 15,446, and the value of
such shares as of such date was $242,657. These officers have the right to
receive dividends with respect to such restricted stock awards to the extent
dividends are paid generally on the Common Stock. However, the Company has
not previously paid dividends and it is not anticipated that dividends will
be paid in the immediate future. Such awards were made to these officers in
connection with their exercise of stock options granted by the Company,
pursuant to a provision in the stock option agreement designed to encourage
retention of shares received upon exercise of options.
(2) The amounts in this column include contributions matched by the Company for
the Employees Incentive Savings Plan (401(k) plan), estate planning and
automobile allowance.
(3) In addition to the items noted above, with respect to Mr. Powell, the
amounts in this column also include $28,230 for all years for premiums paid
by the Company with respect to life insurance for the benefit of Mr. Powell.
(4) Mr. Madison was appointed Vice President and Chief Financial Officer of the
Company by the Board of Directors at its September 7, 2001 meeting and
assumed his duties on October 1, 2001.
9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED VALUE UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ON EXERCISE REALIZED AT OCTOBER 31, 2002(#) OCTOBER 31, 2002($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------------ -------------------------
Thomas W. Powell........ 35,000(1) 561,050 66,880/52,920 204,620/136,413
Don R. Madison.......... -- -- 2,000/8,000 0/0
M. M. Zeller............ 28,130(2) 356,869 19,370/24,000 86,520/57,680
Robert B. Gregory....... 6,000 58,882 2,500/8,000 7,210/14,420
---------------
(1) In connection with this option exercise, Mr. Powell also received 7,000
shares of restricted stock that are subject to forfeiture if Mr. Powell does
not hold the option shares for five years or if he leaves the employment of
the Company, other than for retirement, within five years after receiving
the shares.
(2) In connection with this option exercise, Mr. Zeller also received 1,926
shares of restricted stock that are subject to forfeiture if Mr. Zeller does
not hold the option shares for five years or if he leaves the employment of
the Company, other than for retirement, within five years after receiving
the shares.
Each of the named executive officers is covered by the Company's Executive
Severance Protection Plan, which provides severance pay and other specified
benefits upon termination of employment other than for cause (as defined in the
Plan) within three years of a change in control of the Company. The benefits
payable in such event (grossed up for taxes) are (1) three times the officer's
current annual base salary, plus (2) three times the maximum incentive
opportunity for the officer under the Company's then current Incentive
Compensation Plan, plus (3) continuation of medical, dental, and life insurance
benefits for three years or until the officer is covered under another plan,
whichever is earlier.
Thomas W. Powell is covered by the Company's Executive Benefit Plan.
Pursuant to Mr. Powell's Executive Benefit Agreement executed under such Plan,
he is entitled to the following payments: (1) if he should die while in active
employment with the Company, a lump sum benefit of $630,000 payable to his
designated beneficiary; (2) upon normal retirement on or after age 65 and the
completion of at least ten years of continuous employment, salary continuation
payments of $150,000 per year for five years and then $75,000 per year for ten
years; (3) upon termination of employment prior to qualifying for normal
retirement but after attaining age 55 and the completion of at least ten years
of continuous employment with the Company, the salary continuation payments
payable upon normal retirement, reduced by 1/2% for each month prior to age 65
that employment is terminated, commencing on the later of the date of retirement
or attainment of age 60; and (4) upon a sale of all or substantially all of the
property and assets of the Company other than in the usual course of its
business, or a merger of the Company wherein the Company is not the surviving
corporation, and within two years thereafter Mr. Powell's employment with the
Company is terminated or he resigns following a change of his position to one of
less responsibility, Mr. Powell would be entitled to receive salary continuation
payments of $150,000 per year for five years and then $75,000 per year for ten
years. If Mr. Powell entered into competition with the Company following
termination or retirement described in (3) above, he would (a) forfeit all
further payments if the competition occurred within 36 months following
termination, or (b) not be entitled to any further payments until age 60, if the
competition occurred after 36 months following termination.
10
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information about the Company's equity
compensation plans as of October 31, 2002. All outstanding awards relate to the
Company's common stock.
NUMBER OF SECURITIES WEIGHTED-AVERAGE NUMBER OF SECURITIES REMAINING
TO BE ISSUED UPON EXERCISE PRICE OF AVAILABLE FOR FUTURE ISSUANCE
EXERCISE OF OUTSTANDING OUTSTANDING UNDER EQUITY COMPENSATION
OPTIONS, WARRANTS OPTIONS, WARRANTS PLANS (EXCLUDING SECURITIES
PLAN CATEGORY AND RIGHTS AND RIGHTS REFLECTED IN COLUMN(A))
------------- ----------------------- ----------------- ------------------------------
(a) (b) (c)
Equity compensation plans
approved by security
holders....................... 720,173 $14.82 480,086
Equity compensation plans not
approved by security
holders(1).................... 0 0 0
Total........................... 720,173 $14.82 480,086
---------------
(1) In 1993, the Company adopted the Powell Industries, Inc. Directors' Fee
Program (the "Program"). Under the Program, directors may defer receipt of
the directors' fees and have such fees allocated to a shadow account as if
they were invested in the Company's common stock based on the fair market
value on the date the fees are payable. Upon expiration of the deferral
period elected by the director, or upon death, the shares held in his shadow
stock account are distributed, along with any distributions on the Common
Stock that were credited to the shadow stock account. As of October 31, 2002
a total of 20,542 shares of Common Stock were held in shadow stock accounts
for the directors. The program was not approved by the Company's
shareholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year of the Company, Mr. Becherer, Mr. Wolny, and
Mr. Tranchon served on the Compensation Committee of the Board of Directors of
the Company. None of them has ever served as an officer or employee of the
Company or any of its subsidiaries. Also, during the last fiscal year, no
executive officer of the Company served as a member of the Compensation
Committee or Board of Directors of another entity, one of whose executive
officers served on the Company's Board of Directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of your Board of Directors is
pleased to present to the shareholders its annual report on executive
compensation. This report summarizes the responsibilities of the Committee, the
compensation policy and objectives that guide the development and administration
of the executive compensation program, each major component of the program, and
the basis on which the compensation for the Chief Executive Officer, corporate
officers and other key executives was determined for the fiscal year ended
October 31, 2002.
The Compensation Committee, at the December 5, 2002 committee meeting,
adopted the Powell Industries, Inc. Deferred Compensation Plan. The plan allows
for a select group of management and highly compensated employees to defer
compensation with respect to any bonus eligible for deferral prior to December
31, 2002 and January 1, 2003 for compensation and future bonuses eligible for
deferral on and after January 1, 2003. The company reserves the right to amend
and restate the Plan from time to time.
11
The Compensation Committee, which held three meetings during the last
fiscal year, provides oversight on behalf of the full Board on development and
administration of the Company's executive compensation program and each
subcomponent plan under which officers or directors are eligible to participate.
The Compensation Committee also administers the Stock Option Plan, Directors'
Fee Program, Incentive Compensation Plan and the Non-Employee Director Stock
Option Plan of the Company.
Executive Compensation Philosophy
The philosophy of the Committee is that the Company's executive
compensation program should be an effective tool for fostering the creation of
shareholder value. The following objectives guide the Committee in its
deliberations:
- Provide a competitive compensation program that enables the Company to
attract and retain key executives and Board members.
- Assure a strong relationship between the performance results of the
Company or subsidiary and the total compensation received.
- Balance both annual and longer performance objectives of the Company.
- Encourage executives to acquire and retain meaningful levels of Common
Stock of the Company.
- Work closely with the Chief Executive Officer to assure that the
compensation program supports the management style and culture of the
Company.
In addition to normal employee benefits, the executive total compensation
program includes base salary, annual cash incentive compensation, and
longer-term stock based grants and awards.
Comparisons are made and surveys taken periodically to determine
competitive compensation levels and practices for certain benchmark positions in
the Company. Such analysis covers a broad group of manufacturing companies and
the results are adjusted for differences in factors such as company size and
position responsibilities. This comparison group is broader than the published
industry index of companies included in the cumulative total return performance
graph presented elsewhere in this Proxy Statement because it is more
representative of the executive market in which the Company competes for talent
and provides a consistent and stable market reference from year to year. Other
comparative information from national survey databases, proxy statement
disclosures, and general trend data provided by compensation consultants is also
considered.
Variable incentives, both annual and longer term, are important components
of the program and are used to link pay and performance results. Variable
incentive awards and performance standards are calibrated such that total
compensation will generally approximate the market 50th percentile when Company
performance results are at target levels which approximate the recent historical
performance of the Company (subject to certain minimum target levels), and will
exceed the 50th percentile when performance exceeds targets. However, changes in
the mission and strategy of the Company or certain of its subsidiaries as well
as projected profit and growth are also important considerations in the
calibration of the Company's total executive compensation program.
The Internal Revenue Code (Section 162(m)) imposes a $1,000,000 limit, with
certain exceptions, on the deductibility of compensation paid to each of the
five highest paid executives. In particular, compensation that is determined to
be "performance based" is exempt from this limitation. To be "performance
based,"
12
incentive payments must use predetermined objective standards, limit the use of
discretion in making awards, and be certified by the Compensation Committee made
up of "outside directors." While the Committee believes that the use of
discretion is appropriate in specific circumstances, it believes that the annual
incentive compensation and longer term stock plans comply with the provisions of
Section 162(m) as "performance based". It is not anticipated that any executive
will receive compensation in excess of this limit during fiscal year 2003. The
Committee will continue to monitor this situation and will take appropriate
action if it is warranted in the future.
Following is a discussion of each of the principal components of the
executive total compensation program.
BASE SALARY
The base salary program targets the median of the primary comparison group
for corporate officers and managers. Since subsidiary presidents generally have
a higher incentive opportunity relative to comparable positions in the market,
base salaries for subsidiary presidents are targeted somewhat below the market
median. Each executive's base salary is reviewed individually each year. Salary
adjustments are based on the individual's experience and background, performance
during the prior year, the general movement of salaries in the marketplace, and
the Company's financial position. Due to these factors, an executive's base
salary may be above or below the target point at any point in time.
ANNUAL INCENTIVE COMPENSATION
The Company administers an annual incentive plan for its corporate officers
and managers, and subsidiary presidents and selected subsidiary managers. The
goal of the plan is to reward participants in proportion to the performance of
the Company and/or the subsidiary for which they have direct responsibility, and
their individual contributions to the Company's performance.
The amount of annual incentive compensation each participant is eligible to
earn varies based on his potential contribution to the future performance of his
subsidiary or the Company. The amount of such compensation actually earned by
each participant is based on the actual financial performance of his subsidiary
or the Company for the year compared to profit and growth target ranges which
are set at the beginning of that year. Historical performance, current mission
and strategy, and projected profit and growth capability are considered in
setting the targets for each subsidiary and the Company.
STOCK BASED COMPENSATION
Stock ownership is encouraged through the use of a stock plan that provides
for the grant of stock options and stock awards. Stock option grants are made on
a periodic basis (typically every other year) and are based on competitive
multiples of base salary. Senior executives typically have a higher multiple
and, as a result, have a greater portion of their total compensation linked to
the longer term success of the Company. In determining the appropriate grant
multiples, the Company targets the market median among publicly held
manufacturing companies of similar size. To encourage stock retention,
participants who retain the shares obtained through the exercise of an option
receive a restricted stock award equal to one additional restricted share for
every five option shares retained for five years from the date they were
acquired.
13
Compensation of the Chief Executive Officer
The Chief Executive Officer, Mr. Thomas W. Powell, participates in the
executive compensation program described in this report.
In establishing the total compensation program for Mr. Powell, the
Committee assessed the pay levels for CEOs in similar companies in the
manufacturing industry and the profit performance of the Company.
The Compensation Committee of the Board of Directors:
Joseph L. Becherer, Chairman
Ronald J. Wolny
Robert C. Tranchon
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS
(PERFORMANCE GRAPH)
--------------------------------------------------------------------------------------------------
10/31/1997 10/30/1998 10/29/1999 10/31/2000 10/31/2001 10/31/2002
--------------------------------------------------------------------------------------------------
Powell Ind Inc 100.00 62.71 51.69 74.16 143.66 106.51
Industrial
Electrical Eqp 100.00 82.25 103.49 130.84 74.83 57.97
NASDAQ Market Index 100.00 113.07 186.63 219.50 110.07 88.57
Assumes $100 Invested On November 1, 1997
Assumes Dividend Reinvested
Fiscal Year Ending October 31, 2002
14
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater-than ten percent stockholders are required by
the regulation to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on the Company's review of the copies of such forms received
by it, or written representations from certain reporting persons that no Form 5
reports were required for those persons, the Company believes that all filing
requirements applicable to its officers and directors and greater-than ten
percent beneficial owners during the 2002 fiscal year were complied with, except
that Ronald J. Wolny, one of the Company's directors, failed to file a report on
Form 4 with respect to one transaction, which was subsequently reported on Mr.
Wolny's Form 5 for the year ended October 31, 2002.
INDEPENDENT AUDITORS
On May 23, 2002, Deloitte & Touche LLP was appointed by the Company's Board
of Directors to serve as the principal accountants for the Company for the
fiscal year ending October 31, 2002, and such firm will continue to serve as the
Company's principal accountants for fiscal 2003. Representatives of Deloitte &
Touche LLP are expected to be present at the Annual Meeting of Stockholders.
They will have the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions. Prior to the
appointment of Deloitte & Touche LLP, Arthur Andersen LLP served as the
Company's principal accountants. The decision to replace Arthur Andersen with
Deloitte & Touche was made pursuant to the recommendation of the Company's Board
of Directors and its Audit Committee.
Andersen's report on the Company's financial statements for the two fiscal
years ended October 31, 2000, and October 31, 2001, did not contain an adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles.
During the Company's two fiscal years ended October 31, 2000, and October
31, 2001, and the subsequent interim periods preceding the decision to change
independent public accountants, there were no disagreements with Andersen on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to Andersen's satisfaction
would have caused them to make reference to the subject matter of the
disagreement in connection with the audit reports of the Company's consolidated
financial statements for such years. There were no reportable events as
described under Item 304(a)(1)(v) of Regulation S-K.
The Company provided Andersen with a copy of the foregoing disclosures. A
letter from Andersen dated May 23, 2002, stating its agreement with these
statements is attached to this Proxy Statement as Appendix A.
In the years ended October 31, 2000 and October 31, 2001, and through the
date hereof, the Company did not consult Deloitte with respect to the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, or any other matters or reportable events as
set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
15
AUDIT FEES
The aggregate fees billed by Deloitte & Touche LLP for professional
services rendered for the audit of the Company's annual financial statements for
the fiscal year ended October 31, 2002 and for the review of the financial
statements included in the Company's third quarter report on Form 10-Q for the
same fiscal year were $209,000.
The aggregate fees billed by Arthur Andersen LLP for professional services
rendered for reviews of the financial statements included in the Company's first
and second quarter reports on Form 10-Q for the 2002 fiscal year were $22,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by Deloitte & Touche LLP or Arthur Andersen LLP
for professional services rendered for information technology services related
to financial information systems design and implementation for the fiscal year
ended October 31, 2002.
ALL OTHER FEES
The aggregate fees billed by Deloitte & Touche LLP for services other than
the services described under "Audit Fees" and "Financial Information Systems
Design and Implementation Fees" above, for the fiscal year ended October 31,
2002 were $53,375, which amount included, among other things, fees for general
and specific tax work and tax advice and review of the Company's benefit plans.
The aggregate fees billed by Arthur Andersen LLP for services other than
the services described under "Audit Fees" and "Financial Information Systems
Design and Implementation Fees" above, for the fiscal year ended October 31,
2002 were $5,000, which amount included fees for general and specific tax work
and tax advice.
The Audit Committee has considered whether the provision of non-audit
services by Deloitte & Touche LLP and Arthur Andersen LLP is compatible with
maintaining the independent auditor's independence. It is the judgment of the
Audit Committee that the level of effort and mix of professional services does
not constitute a conflict of interest and therefore does not compromise the
auditor's independence.
OTHER MATTERS
As of the date of this statement, the Board of Directors has no knowledge
of any business which will be presented for consideration at the meeting other
than the election of three directors of the Company. Should any other matters be
properly presented, it is intended that the enclosed proxy will be voted in
accordance with the best judgment of the persons voting the matter.
ANNUAL REPORT
A Summary Annual Report to Stockholders and an Annual Report on Form 10-K
covering the fiscal year of the Company ended October 31, 2002 are enclosed
herewith. These reports do not form any part of the material for solicitation of
proxies.
16
STOCKHOLDER PROPOSALS
Proposals of stockholders to be presented at the Annual Meeting of
Stockholders to be held in 2004 must be received at the office of the Secretary
of the Company no later than September 25, 2003 in order to be included in the
Company's proxy statement and form of proxy relating to that meeting.
A stockholder that intends to present business at the 2004 annual meeting
and has not submitted such proposal by the date set forth above must notify the
Secretary of the Company no later than December 10, 2003. If such notice is
received after December 10, 2003, then the notice will be considered untimely,
and the Company is not required to present such business at the 2004 annual
meeting.
All proposals must comply with applicable SEC regulations and the Company's
By-laws as amended to date.
By Order of the Board of Directors
/s/ THOMAS W. POWELL
------------------------------------
Thomas W. Powell
Chairman and Chief Executive Officer
Dated: January 24, 2003
17
[ARTHUR ANDERSON LOGO]
ARTHUR ANDERSEN LLP
Suite 1300
711 Louisiana Street
May 23, 2002 Houston TX 77002-2780
Tel 713 237 2323
Fax 713 237 2785
www.andersen.com
Office of the Chief Accountant
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Powell Industries, Inc.
Ladies and Gentlemen:
We have read Item 4 in the Form 8-K dated May 29, 2002 of Powell Industries,
Inc. to be filed with the Securities and Exchange Commission and are in
agreement with the statements contained therein as they relate to Arthur
Andersen LLP.
Very truly yours,
/s/ ARTHUR ANDERSEN LLP
Copy to: Don R. Madison
Vice President
Chief Financial Officer
Powell Industries, Inc
P.O. Box 12818
Houston, Texas 77217
A-1
POWELL INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MARCH 7, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Thomas W. Powell and Eugene L. Butler, and each of
them, attorneys and agents with full power of substitution to vote all shares of
common stock of Powell Industries, Inc. which the undersigned would be entitled
to vote if personally present at the Annual Meeting of Stockholders of Powell
Industries, Inc., to be held at the offices of Powell Industries, Inc., 8550
Mosley, Houston, Texas, at 11:00 a.m. Houston time, on March 7, 2003 and at any
adjournment thereof, as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF ALL NOMINEES
1. [ ] FOR the election (except as indicated below) to the Board of Directors,
class of 2006, of James F. Clark, Stephen W. Seale, Jr. and Robert C.
Tranchon.
Instructions: To withhold authority to vote for an individual nominee,
write that nominee's names on the line provided below.
------------------------------------------------------------------------
[ ] WITHHOLD authority to vote for all nominees listed above.
(continued on reverse side)
(continued from other side)
2. In their discretion with respect to (1) any other matters as may properly
come before the meeting and any adjournment thereof, (2) approval of the
minutes of the prior meeting, if such approval does not amount to
ratification of the action taken at that meeting, (3) the election of any
other person as a director if a nominee named above is unable to serve or for
good cause will not serve, and (4) matters incident to the conduct of the
meeting.
If properly executed, this proxy will be voted as directed above.
IF NO DIRECTION IS INDICATED WITH RESPECT TO THE ABOVE PROPOSALS, THIS PROXY
WILL BE VOTED "FOR" THE BOARD OF DIRECTORS' NOMINEES.
------------------------------------------
------------------------------------------
(Please sign exactly as name appears
hereon. Joint owners should each sign.
Executors, administrators, trustees, etc.,
should indicate the capacity in which
signing.)
Dated: ____________________________, 2003
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE!