UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ -------------
Commission file number 0-3821
---------
GENCOR INDUSTRIES, INC.
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 59-0933147
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporated or organization) Identification No.)
5201 North Orange Blossom Trail, Orlando, Florida 32810
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(407) 290-6000
--------------
(Registrant's telephone number, including area code)
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 and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- --------
Indicate number of shares outstanding of each of the issuer's classes of common
stock as of the latest practicable date.
Class Outstanding at August 3, 1995
----- -----------------------------
Common stock, $.10 par value 1,338,832 shares
Class B stock, $.10 par value 434,032 shares
1
Gencor Industries, Inc.
Form 10-Q for the Quarter Ended June 30, 1995
Index
-----
PAGE
----
Part I. Financial Information
Item 1. Financial Statements
a) Consolidated Balance Sheet -
June 30, 1995 and
September 30, 1994 3
b) Consolidated Income Statement -
Three and Nine Months Ended
June 30, 1995 and 1994 4
c) Consolidated Statement of Cash Flows -
Nine Months Ended
June 30, 1995 and 1994 5
d) Notes to Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Position and Results of Operations
Part II. Other Information 8
Exhibit 11 10
Signatures 11
2
PART 1. FINANCIAL INFORMATION
ITEM 1.
GENCOR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)
JUNE 30, SEPTEMBER 30,
1995 1994
-------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,444 $ 3,925
Accounts and notes receivable, less allowance
for doubtful accounts of $2,533 6,576 5,532
Inventories:
Raw materials 8,283 6,348
Work-in-process 5,333 1,059
Finished goods 4,133 4,703
------- -------
17,749 12,110
Prepaid expenses, including deferred income
taxes of $1,360 and $1,210 1,519 1,871
------- -------
Total current assets 27,288 23,438
Property and equipment, net 10,484 10,699
Other assets 359 432
------- -------
$38,131 $34,539
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 276 $ 964
Current portion of long-term debt 2,612 2,602
Accounts payable 7,986 3,700
Customer deposits 1,669 1,513
Accrued expenses 5,180 5,086
Income taxes payable 379 1,307
------- -------
Total current liabilities 18,102 15,172
Long-term debt 10,426 11,623
Deferred income taxes 546 644
Shareholders' equity:
Preferred stock, par value $0.10 per share;
authorized 300,000 shares, none issued - -
Common stock, par value $0.10 per share;
authorized 5,000,000 shares; 1,605,267 and
1,459,507 shares issued, respectively 161 146
Class B stock, par value $0.10 per share;
authorized 3,000,000 shares; 434,032 and
394,575 shares issued, respectively 43 40
Capital in excess of par value 7,741 6,807
Retained earnings 1,739 744
Cumulative translation adjustment 323 316
------- -------
10,007 8,053
Subscription receivable from officer (95) (100)
Less common stock in treasury, at cost (266,435
and 242,214 shares, respectively) (855) (853)
------- -------
9,057 7,100
Contingencies (Note 2)
------- -------
$38,131 $34,539
======= =======
See accompanying notes to consolidated financial statements.
3
GENCOR INDUSTRIES, INC.
CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
------- ------- ------- -------
Net revenue $16,550 $19,064 $46,694 $48,542
Cost and expenses:
Production costs 12,779 14,279 33,937 36,479
Product engineering and development 519 441 1,461 1,479
Selling, general and administrative 2,636 2,566 7,693 7,058
------ ------ ------ ------
15,934 17,286 43,091 45,016
------ ------ ------ ------
Operating income 616 1,778 3,603 3,526
Other income (expense)
Interest income 8 26 18 63
Interest expense (279) (236) (786) (715)
Miscellaneous 40 2 286 (40)
------ ------ ------ ------
Income before income taxes 385 1,570 3,121 2,834
Provision for income taxes 89 565 1,174 1,035
------ ------ ------ ------
Net income $ 296 $1,005 $1,947 $1,799
====== ====== ====== ======
Net income per common share $ 0.17 $ 0.62 $ 1.13 $ 1.12
====== ====== ====== ======
See accompanying notes to consolidated financial statements.
4
GENCOR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Nine Months Ended
June 30,
---------------------
1995 1994
------ ------
Net Income
Adjustments to reconcile net income to cash $1,947 $1,799
provided by operations:
Depreciation and amortization 593 617
Loss (gain) on equipment disposal 3 3
Loss on foreign exchange __ 4
Deposits to escrow account __ (400)
Change in assets and liabilities:
Increase in receivables (1,036) (393)
Decrease (increase) in inventories (5,636) 140
Decrease in prepaid expenses 353 368
Increase (decrease) in deferred
income taxes (98) 134
Increase (decrease) in accounts
payable and customer deposits 4,433 (2,150)
Increase (decrease) in accrued expenses 91 679
Increase (decrease) in income taxes
payable (928) 662
------ ------
Total adjustments (2,225) (336)
------ ------
Cash provided by (used for) operations (278) 1,463
Cash flows from investing activities:
Capital expenditures (328) (391)
Other, net 8 (135)
------ ------
Cash used for investing activities (320) (526)
Cash flows from financing activities:
Net reduction under lines of credit
and other notes payable (1,879) (837)
Other, net (2) 14
------ ------
Cash used for financing activities (1,881) (823)
Effect of exchange rate changes on cash (2) (2)
------ ------
Net increase (decrease) in cash (2,481) 112
Cash and cash equivalents at:
Beginning of period 3,925 429
End of period $1,444 $ 541
====== ======
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 735 $ 608
====== ======
Income Taxes $2,179 $ 437
====== ======
See accompanying notes to consolidated financial statements.
5
Gencor Industries, Inc.
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and regulations.
The accompanying unaudited interim consolidated financial statements and related
notes should be read in conjunction with the financial statements and related
notes included in the Company's 1994 Annual Report on Form 10-K. In the opinion
of management, all material adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation have been included in
the accompanying unaudited interim consolidated financial statements. Operating
results for the nine months ended June 30, 1995, are not necessarily indicative
of the results that may be expected for the year ending September 30, 1995.
NOTE 2 - LITIGATION
In September 1994, the Company settled its patent litigation with Standard
Havens Products, Inc. The secondary liens on various assets and the restricted
cash equivalents held in escrow were released in accordance with a confidential
settlement agreement in October 1994.
The Company is involved in various other litigation matters arising in the
ordinary course of business. Management has reviewed all claims and lawsuits
and, upon the advice of counsel, has made provision for estimable losses and
expenses of litigation relating to claims against the Company.
NOTE 3 - NOTES PAYABLE AND LONG-TERM DEBT
In July 1995, the Company satisfied the second mortgage on its Orlando property
at a discount. The retirement of the note, which had been in default, resulted
in an extraordinary gain of approximately $486,000 ($.28 per share) net of
income taxes of approximately $324,000.
In August 1995, the Company finalized a new credit facility with a bank under
which the Company may borrow, subject to certain financial limitations, up to
$21,000,000. Approximately $8,000,000 of the proceeds will be used to retire
the old credit facility. The Company also intends to use a portion of the
proceeds to refinance the interim financing used to satisfy the second mortgage
discussed above.
NOTE 4 - STOCK DIVIDEND
On December 30, 1994, the Company issued a 10% stock dividend to all
shareholders of record on November 16, 1994. Accordingly, amounts equal to the
fair market value (based on quoted market prices) of the additional shares
issued have been charged to retained earnings, to the extent available, and
credited to Common and Class B Stock and capital in excess of par value.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
A. Consolidated Results of Operations
----------------------------------
Results of operations for the quarter ended June 30, 1995, as compared to the
-----------------------------------------------------------------------------
quarter ended June 30, 1994:
----------------------------
Total net revenue for the quarter ended June 30, 1995 was $16,550,000 versus
$19,064,000 for the same period of 1994, a decrease of $2,514,000 or 13.2%, due
to a decrease in sales of asphalt production equipment.
Production costs were $12,779,000 or 77.2% of net revenue in the third quarter
of fiscal 1995, versus $14,279,000 or 74.9% of net revenue in the same period in
fiscal 1994. The decrease in production cost dollars is a direct result of the
decreased sales volume and lower insurance costs, partially offset by higher
repairs, maintenance, and service costs. The higher production cost percentage
is a result of increased sales of lower margin services and lower sales volume
in general in the 1995 quarter.
Product engineering and development costs increased $78,000 or 17.7% primarily
as a result of increased personnel costs.
Selling, general and administrative expenses increased slightly in the third
quarter of fiscal 1995 to $2,636,000 from $2,566,000 in the same period of
fiscal 1994. The increase is due primarily to the increase in legal and
marketing costs, partially offset by lower insurance and bad debt costs.
The increase in interest expense for the reporting period reflects higher
interest rates in the U.S., partially offset by lower average borrowings.
Net income decreased 70.5% in the third quarter of fiscal 1995 to $296,000, from
$1,005,000 in the third quarter of fiscal 1994 as a result of the above factors.
Results of operations for the nine months ended June 30, 1995, as compared to
-----------------------------------------------------------------------------
the nine months ended June 30, 1994:
------------------------------------
Total net revenue for the nine months ended June 30, 1995 was $46,694,000 versus
$48,542,000 for the same period of 1994, a decrease of $1,848,000 or 3.8% due to
a decrease in sales of asphalt production equipment.
Production costs were $33,937,000 or 72.7% of net revenue in the first nine
months of fiscal 1995, versus $36,479,000 or 75.1% of net revenue in the same
period in fiscal 1994. The decrease in production cost dollars is a direct
result of the decreased sales volume, lower service costs incurred as a result
of decreased sales volume in fiscal 1995, and increased production efficiencies
as a result of the increased production to build inventory levels. The lower
production costs percentage is a result of the increased production
efficiencies.
Product engineering and development costs declined $18,000 or 1.2%.
Selling, general and administrative expenses increased in the first nine months
of fiscal 1995 to $7,693,000 from $7,058,000 in the same period of fiscal 1994,
due primarily to increased commissions, marketing costs, legal costs, and higher
personnel costs partially offset by lower insurance costs.
7
The increase in interest expense for the reporting period reflects higher
interest rates in the U.S., partially offset by lower average borrowings.
Net income increased 8.2% in the first nine months of fiscal 1995 to $1,947,000,
from $1,799,000 in the first nine months of fiscal 1994 as a result of the above
factors.
Liquidity and Capital Resources
-------------------------------
The Company has working capital at June 30, 1995 of $9,186,000 as compared with
working capital of $8,266,000 as of September 30, 1994. The increase in working
capital resulted from an increase in inventories, partially offset by an
increase in accounts payable.
The Company's asphalt production equipment operations are subject to seasonal
fluctuation, often resulting in lower sales in the first and fourth fiscal
quarters of each year and much lower earnings or losses during such quarters.
Traditionally, asphalt producers do not purchase new equipment or replace old
equipment during the summer and fall months, thereby avoiding disruption of
their activities during such peak periods of highway construction.
During the nine months ended June 30, 1995, the Company's total debt decreased
primarily as a result of repayments due upon the sale of certain surplus real
estate.
The Company owns several real estate properties which are regarded as excess and
are unused as a result of having built more efficient, modern facilities and
consolidation. The proceeds of these sales will be used primarily to reduce
bank debt. The Company cannot predict when it will sell these parcels of
property.
As discussed in Note 3 to the consolidated financial statements, the Company
satisfied the second mortgage on its Orlando property in July 1995.
The Company believes that, assuming a continuation of all present conditions and
banking arrangements, it will be able to meet its working capital needs during
fiscal 1995 through operations.
B. Financial Condition as of June 30, 1995
---------------------------------------
There are no material changes in the Company's financial condition from that
reported as of September 30, 1994.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 2-Litigation in Notes to Consolidated Financial Statements.
ITEM 3. DEFAULTS
See Item 2-Liquidity and Capital Resources.
8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
4.25 Agreements and documents related to the Loan and Security Agreement
between the Company and SouthTrust Bank of Alabama, National Association,
dated August 3, 1995.
4.26 Specimen copies of the Term Loan Promissory Note and the Revolving Credit
Promissory Note dated August 3, 1995, between the Company and SouthTrust
Bank of Alabama, National Association.
A. Exhibits:
(11) Statement regarding computation of earnings per share.
B. Reports on Form 8-K:
August 3, 1995
9
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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.
GENCOR INDUSTRIES, INC.
Date: 8/10/95 /s/ R. Robert O. Sollman, Jr.
--------------- -----------------------------
Robert O. Sollman, Jr.
Vice President/Treasurer
11