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Rigrodsky & Long, P.A. announces that it has launched an investigation into Powell Industries, Inc. (“Powell Industries” or the “Company”) (Nasdaq:
POWL) for possible violations of the federal securities laws concerning certain statements made by the Company between May 3, 2011 and November 8, 2011 about its business, operations and financial condition that may have been materially false and/or misleading.
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Powell Industries is engaged in the design, development, manufacture, and servicing of custom engineered-to-order equipment and systems for the management and control of electrical energy and other critical processes in transportation, environmental, energy, industrial, and utility industries.
On November 8, 2011, Powell Industries issued a press release wherein it announced that its previously issued consolidated financial statements for the second and third quarters of fiscal 2011 contain certain accounting errors originating from its Canadian operations and, as a result, those financial statements can no longer be relied upon and the Company now must restate those financial statements. Specifically, the accounting errors occurred at Powell Canada as a result of inaccurate recording of customer change orders, an erroneous journal entry recorded in accounts payable, incorrect close-out of costs on certain jobs and the application of an incorrect manufacturing overhead rate, which overstated earnings in the second and third quarters. These errors indicate material weaknesses in internal controls over financial reporting.
Moreover, the cumulative effect of these issues will cause a reduction in previously reported net income for the nine months ended June 30, 2011 of approximately $2.7 million, or $0.23 per diluted share. As a result, the Company is updating its previous guidance for fiscal year 2011 and now expects full year fiscal 2011 revenues to be approximately $560 million and full year fiscal 2011 net loss to range between ($0.20) and ($0.25) per share.