☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
incorporation or organization)
Title of Each Class | Trading Symbol(s) | Name of Exchange on which registered | ||
Common Stock ($.10 Par Value) | GENC | NASDAQ Global Market |
Large accelerated filer | ☐ | Accelerated Filer | ☒ | |||
Non-accelerated Filer | ☐ | Smaller Reporting Company | ☒ | |||
Emerging Growth Company | ☐ | |||||
☒
Class | Outstanding at | |
Common stock, $.10 par value | 12,287,337 shares | |
Class B stock, $.10 par value | 2,318,857 shares |
Index | Page | ||||||||||
Part I. | |||||||||||
Item 1. | Financial Statements | ||||||||||
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Item 2. | 14 | ||||||||||
Item 3. | 20 | ||||||||||
Item 4. | 20 | ||||||||||
Part II. | |||||||||||
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Item 1. | 21 | ||||||||||
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Item 1A. | 21 | ||||||||||
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Item 6. | 21 | ||||||||||
22 |
March 31, 2020 | September 30, 2019 | |||||||
ASSETS | (Unaudited) |
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Current Assets: | ||||||||
Cash and cash equivalents | $ | 18,738,000 | $ | 10,302,000 | ||||
Marketable securities at fair value (cost $105,967,000 at March 31, 2020 and $104,176,000 at September 30, 2019) | 102,275,000 | 105,322,000 | ||||||
Accounts receivable, less allowance for doubtful accounts of $474,000 at March 31, 2020 and $459,000 at September 30, 2019 | 2,366,000 | 1,603,000 | ||||||
Costs and estimated earnings in excess of billings | 8,792,000 | 13,838,000 | ||||||
Inventories, net | 27,063,000 | 25,366,000 | ||||||
Prepaid expenses and other current assets | 2,144,000 | 499,000 | ||||||
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Total Current Assets | 161,378,000 | 156,930,000 | ||||||
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Property and equipment, net | 8,276,000 | 8,389,000 | ||||||
Other assets | 53,000 | 53,000 | ||||||
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Total Assets | $ | 169,707,000 | $ | 165,372,000 | ||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 4,380,000 | $ | 1,907,000 | ||||
Customer deposits | 4,713,000 | 1,918,000 | ||||||
Accrued expenses | 2,721,000 | 2,660,000 | ||||||
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Total Current Liabilities | 11,814,000 | 6,485,000 | ||||||
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Deferred and other income taxes | 509,000 | 3,372,000 | ||||||
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Total Liabilities | 12,323,000 | 9,857,000 | ||||||
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Commitments and contingencies | ||||||||
Shareholders’ Equity: | ||||||||
Preferred stock, par value $.10 per share; 300,000 shares authorized; none issued | — | — | ||||||
Common stock, par value $.10 per share; 15,000,000 shares authorized; 12,277,337 shares issued and outstanding at March 31, 2020 and September 30, 2019 | 1,228,000 | 1,228,000 | ||||||
Class B Stock, par value $.10 per share; 6,000,000 shares authorized; 2,308,857 shares issued and outstanding at March 31, 2020 and September 30, 2019 | 231,000 | 231,000 | ||||||
Capital in excess of par value | 12,194,000 | 12,159,000 | ||||||
Retained earnings | 143,731,000 | 141,897,000 | ||||||
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Total Shareholders’ Equity | 157,384,000 | 155,515,000 | ||||||
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Total Liabilities and Shareholders’ Equity | $ | 169,707,000 | $ | 165,372,000 | ||||
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June 30, 2020 | September 30, 2019 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 18,564,000 | $ | 10,302,000 | ||||
Marketable securities at fair value (cost $105,388,000 at June 30, 2020 and $104,176,000 at September 30, 2019) | 105,675,000 | 105,322,000 | ||||||
Accounts receivable, less allowance for doubtful accounts of $419,000 at June 30, 2020 and $459,000 at September 30, 2019 | 1,609,000 | 1,603,000 | ||||||
Costs and estimated earnings in excess of billings | 10,064,000 | 13,838,000 | ||||||
Inventories, net | 24,562,000 | 25,366,000 | ||||||
Prepaid expenses and other current assets | 1,649,000 | 499,000 | ||||||
Total Current Assets | 162,123,000 | 156,930,000 | ||||||
Property and equipment, net | 8,391,000 | 8,389,000 | ||||||
Other assets | 53,000 | 53,000 | ||||||
Total Assets | $ | 170,567,000 | $ | 165,372,000 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 2,089,000 | $ | 1,907,000 | ||||
Customer deposits | 2,651,000 | 1,918,000 | ||||||
Accrued expenses and other current liabilities | 2,694,000 | 2,660,000 | ||||||
Total Current Liabilities | 7,434,000 | 6,485,000 | ||||||
Deferred and other income taxes | 1,306,000 | 3,372,000 | ||||||
Total Liabilities | 8,740,000 | 9,857,000 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ equity: | ||||||||
Preferred stock, par value $.10 per share; 300,000 shares authorized; NaN issued | — | — | ||||||
Common stock, par value $.10 per share; 15,000,000 shares authorized; | 1,229,000 | 1,228,000 | ||||||
Class B Stock, par value $.10 per share; 6,000,000 shares authorized; | 232,000 | 231,000 | ||||||
Capital in excess of par value | 12,313,000 | 12,159,000 | ||||||
Retained earnings | 148,053,000 | 141,897,000 | ||||||
Total Shareholders’ Equity | 161,827,000 | 155,515,000 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 170,567,000 | $ | 165,372,000 | ||||
Income
For the Quarters Ended March 31, | For the Six Months Ended March 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net revenue | $ | 25,993,000 | $ | 26,670,000 | $ | 44,023,000 | $ | 47,997,000 | ||||||||
Costs and expenses: | ||||||||||||||||
Production costs | 18,655,000 | 16,759,000 | 32,365,000 | 33,169,000 | ||||||||||||
Product engineering and development | 689,000 | 823,000 | 1,455,000 | 1,546,000 | ||||||||||||
Selling, general and administrative | 2,561,000 | 2,474,000 | 4,943,000 | 4,664,000 | ||||||||||||
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21,905,000 | 20,056,000 | 38,763,000 | 39,379,000 | |||||||||||||
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Operating income | 4,088,000 | 6,614,000 | 5,260,000 | 8,618,000 | ||||||||||||
Other income (expense), net: | ||||||||||||||||
Interest and dividend income, net of fees | 763,000 | 507,000 | 1,395,000 | 1,041,000 | ||||||||||||
Net realized and unrealized gains (losses) on marketable securities | (5,670,000 | ) | 2,204,000 | (4,353,000 | ) | 57,000 | ||||||||||
Other | — | — | (10,000 | ) | — | |||||||||||
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(4,907,000 | ) | 2,711,000 | (2,968,000 | ) | 1,098,000 | |||||||||||
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Income (loss) before income tax expense (benefit) | (819,000 | ) | 9,325,000 | 2,292,000 | 9,716,000 | |||||||||||
Income tax expense (benefit) | (164,000 | ) | 1,865,000 | 458,000 | 1,943,000 | |||||||||||
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Net income (loss) | $ | (655,000 | ) | $ | 7,460,000 | $ | 1,834,000 | $ | 7,773,000 | |||||||
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Basic Income (Loss) per Common Share: | ||||||||||||||||
Net income (loss) per share | $ | (0.04 | ) | $ | 0.51 | $ | 0.13 | $ | 0.53 | |||||||
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Diluted Income (Loss) per Common Share: | ||||||||||||||||
Net income (loss) per share | $ | (0.04 | ) | $ | 0.51 | $ | 0.12 | $ | 0.53 | |||||||
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For the Quarters Ended June 30, | For the Nine Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net revenue | $ | 22,940,000 | $ | 18,848,000 | $ | 66,963,000 | $ | 66,845,000 | ||||||||
Costs and expenses: | ||||||||||||||||
Production costs | 17,555,000 | 14,098,000 | 49,920,000 | 47,267,000 | ||||||||||||
Product engineering and development | 849,000 | 881,000 | 2,304,000 | 2,427,000 | ||||||||||||
Selling, general and administrative | 2,522,000 | 2,471,000 | 7,465,000 | 7,135,000 | ||||||||||||
20,926,000 | 17,450,000 | 59,689,000 | 56,829,000 | |||||||||||||
Operating income | 2,014,000 | 1,398,000 | 7,274,000 | 10,016,000 | ||||||||||||
Other income (expense), net: | ||||||||||||||||
Interest and dividend income, net of fees | 512,000 | 567,000 | 1,907,000 | 1,608,000 | ||||||||||||
Net realized and unrealized gains (losses) on marketable securities | 2,888,000 | 1,090,000 | (1,465,000 | ) | 1,147,000 | |||||||||||
Other | (10,000 | ) | — | (20,000 | ) | — | ||||||||||
3,390,000 | 1,657,000 | 422,000 | 2,755,000 | |||||||||||||
Income before income tax expense | 5,404,000 | 3,055,000 | 7,696,000 | 12,771,000 | ||||||||||||
Income tax expense | 1,082,000 | 611,000 | 1,540,000 | 2,554,000 | ||||||||||||
Net income | $ | 4,322,000 | $ | 2,444,000 | $ | 6,156,000 | $ | 10,217,000 | ||||||||
Basic Income per Common Share: | ||||||||||||||||
Net income per share | $ | 0.30 | $ | 0.17 | $ | 0.42 | $ | 0.70 | ||||||||
Diluted Income per Common Share: | ||||||||||||||||
Net income per share | $ | 0.29 | $ | 0.17 | $ | 0.42 | $ | 0.69 | ||||||||
Common Stock | Class B Stock | Capital in Excess of | Retained | Total Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Par Value | Earnings | Equity | ||||||||||||||||||||||
September 30, 2019 | 12,277,337 | $ | 1,228,000 | 2,308,857 | $ | 231,000 | $ | 12,159,000 | $ | 141,897,000 | $ | 155,515,000 | ||||||||||||||||
Net income | — | — | — | — | — | 2,489,000 | 2,489,000 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 18,000 | — | 18,000 | |||||||||||||||||||||
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December 31, 2019 | 12,277,337 | $ | 1,228,000 | 2,308,857 | $ | 231,000 | $ | 12,177,000 | $ | 144,386,000 | $ | 158,022,000 | ||||||||||||||||
Net loss | — | — | — | — | — | (655,000 | ) | (655,000 | ) | |||||||||||||||||||
Stock-based compensation | — | — | — | — | 17,000 | — | 17,000 | |||||||||||||||||||||
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March 31, 2020 | 12,277,337 | $ | 1,228,000 | 2,308,857 | $ | 231,000 | $ | 12,194,000 | $ | 143,731,000 | $ | 157,384,000 | ||||||||||||||||
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For the Six Months Ended March 31, 2019
Common Stock | Class B Stock | Capital in Excess of | Retained | Total Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Par Value | Earnings * | Equity * | ||||||||||||||||||||||
September 30, 2018 | 12,252,337 | $ | 1,225,000 | 2,288,857 | $ | 229,000 | $ | 11,862,000 | $ | 131,701,000 | $ | 145,017,000 | ||||||||||||||||
Net income | — | — | — | — | — | 313,000 | 313,000 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 17,000 | — | 17,000 | |||||||||||||||||||||
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December 31, 2018 | 12,252,337 | 1,225,000 | 2,288,857 | 229,000 | 11,879,000 | 132,014,000 | 145,347,000 | |||||||||||||||||||||
Net income | — | — | — | — | — | 7,460,000 | 7,460,000 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 18,000 | — | 18,000 | |||||||||||||||||||||
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March 31, 2019 | 12,252,337 | $ | 1,225,000 | 2,288,857 | $ | 229,000 | $ | 11,897,000 | $ | 139,474,000 | $ | 152,825,000 | ||||||||||||||||
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Common Stock | Class B Stock | Capital in Excess of | Retained Earnings | Total Shareholders’ Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Par Value | ||||||||||||||||||||||||
September 30, 2019 | 12,277,337 | $ | 1,228,000 | 2,308,857 | $ | 231,000 | $ | 12,159,000 | $ | 141,897,000 | $ | 155,515,000 | ||||||||||||||||
Net income | — | — | — | — | — | 2,489,000 | 2,489,000 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 18,000 | — | 18,000 | |||||||||||||||||||||
December 31, 2019 | 12,277,337 | 1,228,000 | 2,308,857 | 231,000 | 12,177,000 | 144,386,000 | 158,022,000 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (655,000 | ) | (655,000 | ) | |||||||||||||||||||
Stock-based compensation | — | — | — | — | 17,000 | — | 17,000 | |||||||||||||||||||||
March 31, 2020 | 12,277,337 | 1,228,000 | 2,308,857 | 231,000 | 12,194,000 | 143,731,000 | 157,384,000 | |||||||||||||||||||||
Net income | — | — | — | — | — | 4,322,000 | 4,322,000 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 18,000 | — | 18,000 | |||||||||||||||||||||
Stock options exercised | 10,000 | 1,000 | 10,000 | 1,000 | 101,000 | — | 103,000 | |||||||||||||||||||||
June 30, 2020 | 12,287,337 | $ | 1,229,000 | 2,318,857 | $ | 232,000 | $ | 12,313,000 | $ | 148,053,000 | $ | 161,827,000 | ||||||||||||||||
Common Stock | Class B Stock | Capital in Excess of | Retained Earnings | Total Shareholders’ Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Par Value | ||||||||||||||||||||||||
September 30, 2018 | 12,252,337 | $ | 1,225,000 | 2,288,857 | $ | 229,000 | $ | 11,862,000 | $ | 131,701,000 | $ | 145,017,000 | ||||||||||||||||
Net income | — | — | — | — | — | 313,000 | 313,000 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 17,000 | — | 17,000 | |||||||||||||||||||||
December 31, 2018 | 12,252,337 | 1,225,000 | 2,288,857 | 229,000 | 11,879,000 | 132,014,000 | 145,347,000 | |||||||||||||||||||||
Net income | — | — | — | — | — | 7,460,000 | 7,460,000 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 18,000 | — | 18,000 | |||||||||||||||||||||
March 31, 2019 | 12,252,337 | 1,225,000 | 2,288,857 | 229,000 | 11,897,000 | 139,474,000 | 152,825,000 | |||||||||||||||||||||
Net income | — | — | — | — | — | 2,444,000 | 2,444,000 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 18,000 | — | 18,000 | |||||||||||||||||||||
June 30, 2019 | 12,252,337 | $ | 1,225,000 | 2,288,857 | $ | 229,000 | $ | 11,915,000 | $ | 141,918,000 | $ | 155,287,000 |
* | The balances as of September 30, 2018, December 31, 2018, |
For the Six Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Cash flows from operations: | ||||||||
Net income | $ | 1,834,000 | $ | 7,773,000 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Purchases of marketable securities | (73,393,000 | ) | (112,663,000 | ) | ||||
Proceeds from sale and maturity of marketable securities | 72,181,000 | 113,767,000 | ||||||
Change in fair value of marketable securities | 4,259,000 | (202,000 | ) | |||||
Deferred income taxes | (2,863,000 | ) | (156,000 | ) | ||||
Depreciation and amortization | 831,000 | 783,000 | ||||||
Provision for doubtful accounts | 25,000 | 50,000 | ||||||
Stock-based compensation | 35,000 | 35,000 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (788,000 | ) | (1,469,000 | ) | ||||
Costs and estimated earnings in excess of billings | 5,046,000 | (2,113,000 | ) | |||||
Inventories | (1,697,000 | ) | (1,925,000 | ) | ||||
Prepaid expenses and other current assets | (1,645,000 | ) | 978,000 | |||||
Accounts payable | 2,473,000 | 317,000 | ||||||
Customer deposits | 2,795,000 | (543,000 | ) | |||||
Accrued expenses | 61,000 | 202,000 | ||||||
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Total adjustments | 7,320,000 | (2,939,000 | ) | |||||
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Cash flows provided by operating activities | 9,154,000 | 4,834,000 | ||||||
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Cash flows used in investing activities: | ||||||||
Capital expenditures | (718,000 | ) | (1,260,000 | ) | ||||
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Cash flows used in investing activities | (718,000 | ) | (1,260,000 | ) | ||||
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Net increase in cash | 8,436,000 | 3,574,000 | ||||||
Cash and cash equivalents at: | ||||||||
Beginning of period | 10,302,000 | 8,012,000 | ||||||
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End of period | $ | 18,738,000 | $ | 11,586,000 | ||||
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For the Nine Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Cash flows from operations: | ||||||||
Net income | $ | 6,156,000 | $ | 10,217,000 | ||||
Adjustments to reconcile net income to cash flows provided by operating activities: | ||||||||
Purchases of marketable securities | (112,668,000 | ) | (152,063,000 | ) | ||||
Proceeds from sale and maturity of marketable securities | 110,805,000 | 152,678,000 | ||||||
Change in fair value of marketable securities | 1,510,000 | (1,324,000 | ) | |||||
Deferred income taxes | (2,066,000 | ) | (25,000 | ) | ||||
Depreciation and amortization | 1,244,000 | 1,188,000 | ||||||
Provision for doubtful accounts | 50,000 | 100,000 | ||||||
Stock-based compensation | 53,000 | 53,000 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (56,000 | ) | (589,000 | ) | ||||
Costs and estimated earnings in excess of billings | 3,774,000 | (8,622,000 | ) | |||||
Inventories | 804,000 | (1,781,000 | ) | |||||
Prepaid expenses and other current assets | (1,150,000 | ) | 959,000 | |||||
Accounts payable | 182,000 | 756,000 | ||||||
Customer deposits | 733,000 | (2,101,000 | ) | |||||
Accrued expenses and other current liabilities | 34,000 | 577,000 | ||||||
Total adjustments | 3,249,000 | (10,194,000 | ) | |||||
Cash flows provided by operating activities | 9,405,000 | 23,000 | ||||||
Cash flows used in investing activities: | ||||||||
Capital expenditures | (1,246,000 | ) | (1,600,000 | ) | ||||
Cash flows used in investing activities | (1,246,000 | ) | (1,600,000 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from stock option exercises | 103,000 | — | ||||||
Cash flows provided by financing activities | 103,000 | — | ||||||
Net increase (decrease) in cash | 8,262,000 | (1,577,000 | ) | |||||
Cash at: | ||||||||
Beginning of period | 10,302,000 | 8,012,000 | ||||||
End of period | $ | 18,564,000 | $ | 6,435,000 | ||||
financial performance.
and Fair Value Measurements
Fair Value Measurements | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equities | $ | 12,458,000 | $ | — | $ | — | $ | 12,458,000 | ||||||||
Mutual Funds | 2,290,000 | — | — | 2,290,000 | ||||||||||||
Exchange-Traded Funds | 4,005,000 | — | — | 4,005,000 | ||||||||||||
Corporate Bonds | — | 39,721,000 | — | 39,721,000 | ||||||||||||
Government Securities | 40,315,000 | — | — | 40,315,000 | ||||||||||||
Cash and Money Funds | 3,486,000 | — | — | 3,486,000 | ||||||||||||
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Total | $ | 62,554,000 | $ | 39,721,000 | $ | — | $ | 102,275,000 | ||||||||
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Net
Fair Value Measurements | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equities | �� | $ | 12,089,000 | $ | — | $ | — | $ | 12,089,000 | |||||||
Mutual Funds | 3,983,000 | — | — | 3,983,000 | ||||||||||||
Exchange-Traded Funds | 7,140,000 | — | — | 7,140,000 | ||||||||||||
Corporate Bonds | — | 38,058,000 | — | 38,058,000 | ||||||||||||
Government Securities | 33,789,000 | — | — | 33,789,000 | ||||||||||||
Cash and Money Funds | 10,616,000 | — | — | 10,616,000 | ||||||||||||
$ | 67,617,000 | $ | 38,058,000 | $ | — | $ | 105,675,000 | |||||||||
9
Fair Value Measurements | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equities | $ | 10,412,000 | $ | — | $ | — | $ | 10,412,000 | ||||||||
Mutual Funds | 3,987,000 | — | — | 3,987,000 | ||||||||||||
Exchange-Traded Funds | 5,163,000 | — | — | 5,163,000 | ||||||||||||
Corporate Bonds | — | 38,690,000 | — | 38,690,000 | ||||||||||||
Government Securities | 45,171,000 | — | — | 45,171,000 | ||||||||||||
Cash and Money Funds | 1,899,000 | — | — | 1,899,000 | ||||||||||||
$ | 66,632,000 | $ | 38,690,000 | $ | — | $ | 105,322,000 | |||||||||
Net
March 31, 2020 | September 30, 2019 | |||||||
Raw materials | $ | 15,155,000 | $ | 14,158,000 | ||||
Work in process | 3,092,000 | 1,397,000 | ||||||
Finished goods | 8,776,000 | 9,811,000 | ||||||
Used equipment | 40,000 | — | ||||||
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$ | 27,063,000 | $ | 25,366,000 | |||||
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June 30, | September 30, | |||||||
Raw materials | $ | 15,090,000 | $ | 14,158,000 | ||||
Work in process | 580,000 | 1,397,000 | ||||||
Finished goods | 8,852,000 | 9,811,000 | ||||||
Used equipment | 40,000 | — | ||||||
$ | 24,562,000 | $ | 25,366,000 | |||||
March 31, 2020 | September 30, 2019 | |||||||
Costs incurred on uncompleted contracts | $ | 17,950,000 | $ | 18,707,000 | ||||
Estimated earnings | 7,489,000 | 9,063,000 | ||||||
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25,439,000 | 27,770,000 | |||||||
Billings to date | 16,647,000 | 13,932,000 | ||||||
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Costs and estimated earnings in excess of billings | $ | 8,792,000 | $ | 13,838,000 | ||||
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June 30, | September 30, | |||||||
Costs incurred on uncompleted contracts | $ | 13,792,000 | $ | 18,707,000 | ||||
Estimated earnings | 5,555,000 | 9,063,000 | ||||||
19,347,000 | 27,770,000 | |||||||
Billings to date | 9,283,000 | 13,932,000 | ||||||
Costs and estimated earnings in excess of billings | $ | 10,064,000 | $ | 13,838,000 | ||||
The Condensed Consolidated Financial Statements include basic and diluted earnings per share information.
Quarter Ended March 31, | Six Months Ended March 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net Income (Loss) | $ | (655,000 | ) | $ | 7,460,000 | $ | 1,834,000 | $ | 7,773,000 | |||||||
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Common Shares: | ||||||||||||||||
Weighted average common shares outstanding | 14,586,000 | 14,541,000 | 14,586,000 | 14,541,000 | ||||||||||||
Effect of dilutive stock options | — | 167,000 | 128,000 | 164,000 | ||||||||||||
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Diluted shares outstanding | 14,586,000 | 14,708,000 | 14,714,000 | 14,705,000 | ||||||||||||
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Basic: | ||||||||||||||||
Net earnings (loss) per share | $ | (0.04 | ) | $ | 0.51 | $ | 0.13 | $ | 0.53 | |||||||
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Diluted: | ||||||||||||||||
Net earnings (loss) per share | $ | (0.04 | ) | $ | 0.51 | $ | 0.12 | $ | 0.53 | |||||||
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Quarter Ended June 30, | Nine Months Ended | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net Income | $ | 4,322,000 | $ | 2,444,000 | $ | 6,156,000 | $ | 10,217,000 | ||||||||
Common Shares: | ||||||||||||||||
Weighted average common shares outstanding | 14,601,000 | 14,541,000 | 14,592,000 | 14,541,000 | ||||||||||||
Effect of dilutive stock options | 118,000 | 164,000 | 125,000 | 163,000 | ||||||||||||
Diluted shares outstanding | 14,719,000 | 14,705,000 | 14,717,000 | 14,704,000 | ||||||||||||
Basic: | ||||||||||||||||
Net earnings per share | $ | 0.30 | $ | 0.17 | $ | 0.42 | $ | 0.70 | ||||||||
Diluted: | ||||||||||||||||
Net earnings per share | $ | 0.29 | $ | 0.17 | $ | 0.42 | $ | 0.69 | ||||||||
For the quarter ended March 31, 2020, there were no common stock equivalents included in the diluted earnings per share calculation. The weighted-average shares issuable upon the exercise of stock options included in the diluted earnings per share calculation for the six months ended March 31, 2020 were 260,000, which equates to 128,000 dilutive common stock equivalents. There were 30,000 weighted-average shares issuable upon the exercise of stock
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options, which were not included in the diluted earnings per share calculation for the six months ended March 31, 2020 because they were anti-dilutive.
Two different customers accounted for 14.2% and 11.2% of net revenues for
Quarter Ended March 31, | Six Months Ended March 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Equipment sales recognized over time | $ | 9,829,000 | $ | 12,006,000 | $ | 21,919,000 | $ | 28,359,000 | ||||||||
Equipment sales recognized at a point in time | 10,044,000 | 8,929,000 | 11,951,000 | 10,443,000 | ||||||||||||
Parts and component sales | 4,675,000 | 4,466,000 | 7,821,000 | 7,517,000 | ||||||||||||
Freight revenue | 1,201,000 | 1,030,000 | 2,104,000 | 1,432,000 | ||||||||||||
Other | 244,000 | 239,000 | 228,000 | 246,000 | ||||||||||||
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Net revenue | $ | 25,993,000 | $ | 26,670,000 | $ | 44,023,000 | $ | 47,997,000 | ||||||||
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Quarter Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Equipment sales recognized over time | $ | 10,350,000 | $ | 7,844,000 | $ | 32,269,000 | $ | 36,203,000 | ||||||||
Equipment sales recognized at a point in time | 8,995,000 | 6,747,000 | 20,946,000 | 17,190,000 | ||||||||||||
Parts and component sales | 2,671,000 | 2,870,000 | 10,492,000 | 10,387,000 | ||||||||||||
Freight revenue | 822,000 | 1,312,000 | 2,926,000 | 2,744,000 | ||||||||||||
Other | 102,000 | 75,000 | 330,000 | 321,000 | ||||||||||||
Net revenue | $ | 22,940,000 | $ | 18,848,000 | $ | 66,963,000 | $ | 66,845,000 | ||||||||
In January 2020, the World Health Organization (the “WHO”) announced a global health emergency because of a new strain of coronavirusCOVID-19 originating in Wuhan, China and the risks to the international community as the virus spread globally beyond its point of origin. In March 2020, the WHO classified theCOVID-19 outbreak as a pandemic based on the rapid increase in global exposure.
As of the date of issuance of these unaudited Condensed Consolidated Financial Statements, our operations have not been significantly impacted. However, the full impact of theCOVID-19 pandemic continues to evolve subsequent to the three and six months ended March
Blaw-Knox paver line through selected Volvo CE dealers.
sales compared with parts sales, which have a higher gross margin.
June 30, 2019 as a result of increased sales headcount.
higher revenues and production volumes.
The effective income tax rate for the quarter ended March 31, 2020 was a benefit of (20.0%) versus expense of 20.0% for the quarter ended March 31, 2019. Net loss for the quarter ended March 31, 2020 was $(655,000), or ($0.04) per diluted share, versus net income of $7,460,000, or $0.51 per diluted share, for the quarter ended March 31, 2019.
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Six Months Ended March 31, 2020 versus March 31, 2019
Net sales for the sixnine months ended March 31, 2020 and 2019 were $44,023,000 and $47,997,000, respectively, a decrease of $3,974,000, reflecting a normalizing in order level from the significant growth in business over the past couple of years.
Gross profit margins decreased to 26.5% in the six months ended March 31, 2020 from 30.9% in the six months ended March 31, 2019. The gross margin achieved in quarter ended March 31, 2019, benefitted from an unusually strong pricing environment for plant and equipment sales.
Product engineering and development expenses decreased $91,000 in the six months ended March 31, 2020, compared to the six months ended March 31, 2019. SG&A expenses increased $279,000 in the six months ended March 31, 2020, compared to the six months ended March 31, 2019. As a percentage of net revenues, SG&A expenses were 11.2% for the six months ended March 31, 2020, compared to 9.7% in the six months ended March 31, 2019. The higher SG&A expenses in 2020 were due to increased headcount, travel and trade show expenses during the first six months of fiscal 2020.
The Company had operating income of $5,260,000 for the six months ended March 31, 2020 versus $8,618,000 for the six months ended March 31, 2019. Operating margins were 11.9% for the six months ended March 31, 2020, compared to 18.0% in the six months ended March 31, 2019.
For the six months ended March 31, 2020, interest and dividend income, net of fees, from the investment portfolio was $1,395,000, as compared to $1,041,000 for the six months ended March 31, 2019. The increase was due to additional interest income from a larger investment in corporate bonds and higher average yield to maturities. Net realized and unrealized losses on marketable securities were $(4,353,000) for the six months ended March 31,June 30, 2020 versus net realized and unrealized gains of $57,000$1,147,000 for the sixnine months ended March 31,June 30, 2019. The current year investment losses reflect the decline in the domestic equity markets from the impact of the
In April 2020, a financial institution issued an irrevocable standby letter of credit (“letter of credit”) on behalf of the Company for the benefit of one of the Company’s insurance carriers. The maximum amount that can be drawn by the beneficiary under the letter of credit is $150,000. The letter of credit expires in April 2021, unless terminated earlier, and can be extended, as provided by the agreement. The Company intends to renew the letter of credit for as long as the Company does business with the beneficiary insurance carrier. The letter is collateralized by restricted cash of the same amount on any outstanding drawings. To date, no amounts have been drawn under the letter of credit.
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The Company’s business, results of operations, financial condition, cash flows, and the stock price of our common stock could be adversely affected by theCOVID-19 pandemic.
Our business, results of operations financial condition, cash flows, and the stock price of our common stock can be adversely affected by pandemics or other public health emergencies, such as the recent outbreak ofCOVID-19. In March 2020, the WHO declaredCOVID-19 as a pandemic. TheCOVID-19 pandemic has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures.
The outbreak ofCOVID-19 and any preventive or protective actions taken by governmental authorities may have a material adverse effect on our operations, supply chain, customers, and transportation networks, including business shutdown or disruptions. The extent to whichCOVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, depends upon the severity and duration of the outbreak and the effectiveness of actions taken globally to contain or mitigate its effect. Any resulting financial impact cannot be estimated reasonably at this time, but may materially adversely affect our business, results of operations, financial condition, and cash flows. Even after theCOVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression. Additionally, concerns over the economic impact ofCOVID-19 have caused extreme volatility in financial and other capital markets, which has and may continue to adversely impact our stock price, our ability to access capital markets, and the value of our investment portfolio. To the extent theCOVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks describedPart II, Item 1A, “Risk Factors” in our AnnualQuarterly Report on
The Company may suffer adverse consequences if it is deemed an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
Under Section 3(a)(1)(A) of the Investment Company Act, a company is deemed to be an investment company if it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities. We believe that we are not an investment company under Section 3(a)(1)(A) of the Investment Company Act because we do not hold ourselves out as being engaged primarily in the business of investing, reinvesting, or trading in securities. Rather, we have been a manufacturer of heavy equipment used in the production of asphalt for highway construction and environmental control equipment for over 50 years. Our core products include asphalt plants, combustion systems, and fluid heat transfer systems.
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Under Section 3(a)(1)(C) of the Investment Company Act, a company is deemed to be an investment company if it is engaged, or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. Government securities and cash items) on an unconsolidated basis. As reflected on our balance sheet atquarter end March 31, 2020, we own a significant amount of marketable securities, which include cash, cash equivalents, government and corporate bonds, mutual funds, exchange-traded funds and equities. Section 3(a)(2) defines the term “investment securities”, as used in Section 3(a)(1)(C) to include all marketable securities except government securities and cash and cash equivalents. The value of the Company’s investment securities exceeds 40% of the value of our total assets (excluding government securities and cash items). Because of the value of our investment securities, we may be deemed an investment company. We believe that we are not an investment company under Section 3(a)(1)(C) of the Investment Company Act because we do not propose to engage in the business of investing, reinvesting, owning, holding, or trading in securities. In addition, even if we were deemed an investment company under Section 3(a)(1)(C), we believe that we qualify for an exemption from the definition of an investment company as we are primarily engaged in a business other than that of investing, reinvesting, owning, holding, or trading in securities. As noted above, we are primarily engaged in the manufacturing of heavy equipment. If the Securities and Exchange Commission (the “SEC”) or a court challenged our status as an operating company, we could incur significant legal expenses.
If we are deemed to be, and were required to register as, an investment company, we would be forced to comply with the legal requirements of the Investment Company Act that would regulate the manner in which we would be permitted to conduct our business activities. As an investment company, we would be (i) subjected to disclosure and accounting guidance geared toward investment, rather than operating, companies; (ii) significantly limited in our ability to borrow money, issue options, issue multiple classes of stock and debt, and engage in transactions with affiliates; and (iii) required to undertake significant costs and expenses to meet other disclosure, reporting, and regulatory requirements to which we would be subject as a registered investment company.
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Certification of Chief Executive Officer Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as amended | ||
Certification of | ||
Certifications of Chief Executive Officer and | ||
Interactive Data File | ||
101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH | XBRL Schema Document | |
XBRL | ||
XBRL | ||
XBRL | ||
XBRL | ||
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL |
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Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.GENCOR INDUSTRIES, INC. John E. Elliott Chief Executive Officer May 4,August 7, 2020Eric E. Mellen Chief Financial Officer (Principal Financial and Accounting Officer) May 4,August 7, 202024