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 March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-3821
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GENCOR INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 59-0933147
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(State or other jurisdiction of (I.R.S.Employer
incorporated or organization) Identification No.)
5201 North Orange Blossom Trail, Orlando, Florida 32810
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(Address of principal executive offices) (Zip Code)
(407) 290-6000
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(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
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Indicate number of shares outstanding of each of the issuer's classes
ofcommon stock as of the latest practicable date.
Class Outstanding at April 24, 1996
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Common stock, $.10 par value 1,338,832 shares
Class B stock, $.10 par value 441,532 shares
Gencor Industries, Inc.
Form 10-Q for the Quarter Ended March 31, 1996
Index Page
Part I. Financial Information - Unaudited
Item 1. Financial Statements
a) Consolidated Balance Sheet -
March 31, 1996 and
September 30, 1995 3
b) Consolidated Income Statement -
Three and Six Months Ended
March 31, 1996 and 1995 4
c) Consolidated Statement of Cash Flows -
Six Months Ended
March 31, 1996 and 1995 5
d) Notes to Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Position and Results of Operations 7
Part II. Other Information 9
Exhibit 11 11
2
PART I. FINANCIAL INFORMATION
ITEM 1.
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GENCOR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
March 31, September 30,
1996 1995
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(Unaudited) (Audited)
Assets
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Current assets:
Cash and cash equivalents $ 293 $ 416
Income taxes receivable 541 -
Accounts and notes receivable, less allowance
for doubtful accounts of $1,941 and $2,555 4,641 7,185
Inventories:
Raw materials 8,830 7,583
Work-in-process 5,437 3,275
Finished goods 7,904 3,856
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22,171 14,714
Prepaid expenses, including deferred income taxes
of $1,332 and $1,462 1,782 2,002
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Total current assets 29,428 24,317
Property and equipment, net 10,409 10,453
Other assets 322 361
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$40,159 $35,131
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Liabilities and Shareholders' Equity
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Current liabilities:
Notes payable $ 482 $ 913
Current portion of long-term debt 669 632
Accounts payable 7,790 7,169
Customer deposits 3,893 448
Accrued expenses 3,461 3,368
Income taxes payable 430 740
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Total current liabilities 16,725 13,270
Long-term debt 12,703 11,708
Deferred income taxes 579 511
Shareholders equity:
Preferred stock, par value $0.10 per share; authorized
300,000 shares, non issued - -
Common stock, par value $0.10 per share; authorized
5,000,000 shares; 1,605,267 shares issued 161 161
Class B stock, par value $0.10 per share; authorized
3,000,000 shares; 441,532 and 434,032 shares issued,
respectively 100 43
Capital in excess of par value 7,741 7,741
Retained earnings 2,818 2,329
Cumulative translation adjustment 283 319
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11,103 10,593
Subscription receivable from officer (95) (95)
Less common stock in treasury, at cost 266,435 shares (856) (856)
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10,152 9,642
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$40,159 $35,131
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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 Six Months Ended
March 31, March 31,
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1996 1995 1996 1995
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Net revenue $17,433 $18,686 $25,694 $30,144
Costs and expenses:
Production costs 12,165 12,566 18,654 21,158
Product engineering and development 626 524 1,166 942
Selling, general and administrative 2,274 3,023 4,356 5,057
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15,065 16,113 24,176 27,157
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Operating income 2,368 2,573 1,518 2,987
Other income (expense):
Interest income - 8 - 10
Interest expense (383) (262) (711) (507)
Miscellaneous 3 49 58 246
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Income before income taxes 1,988 2,368 865 2,736
Provision for income taxes 738 925 288 1,085
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Net income $ 1,250 $ 1,443 $ 577 $ 1,651
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Income per common share $ 0.70 $ 0.81 $ 0.32 $ 0.98
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See accompanying notes to consolidated financial statements.
4
GENCOR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Six Months Ended
March 31,
1996 1995
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Net income
Adjustments to reconcile net income to cash $ 577 $ 1,651
provided by operations:
Depreciation and amortization 344 392
Loss (gain) on equipment disposal (53) 3
Gain on foreign exchange (2) (2)
Change in assets and liabilities:
Increase in income tax receivable (541) _
Increase (decrease) n receivables 2,520 (1,985)
Increase in inventories (7,467) (4,463)
Decrease in prepaid expenses 219 289
Increase (decrease) in deferred income taxes 68 (63)
Increase in accounts payable and customer deposits 4,098 4,304
Increase (decrease) in accrued expenses 96 (525)
Decrease in income taxes payable (309) (570)
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Total adjustments (1,027) (2,620)
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Cash used for operations (450) (969)
Cash flows from investing activities:
Capital expenditures (691) (227)
Other, net 444 28
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(247) (199)
Cash used for investing activities
Cash flows from financing activities:
Net reduction under lines of credit and notes payable (427) (548)
Net borrowings (repayments) of debt 1,032 (966)
Dividends paid (87) _
Other, net 56 (2)
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Cash used for financing activities 574 (1,516)
Effect of exchange rate changes on cash _ (1)
Net increase (decrease) in cash (123) (2,685)
Cash and cash equivalents at:
beginning of period 416 3,925
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end of period $ 293 $ 1,240
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Supplemental cash flow information:
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Cash paid during the period for:
Interest $ 591 $ 426
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Income taxes $ 989 $ 1,683
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See accompanying notes to consolidated financial statements.
5
Gencor Industries, Inc.
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 - BASIS OF PRESENTATION
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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 beenomitted pursuant to such rules and regulations.
The accompanying unaudited interim consolidated financial statements and related
notes should beread in conjunction with the financial statements and related
notes included in the Company's 1995 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 six months ended March 31, 1996, are not necessarily indicative
of the results that may be expected for the year ending September 30, 1996.
NOTE 2 - CASH DIVIDEND
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On December 1, 1995, the Company declared a cash dividend of $0.05 per
share, paid on January 5, 1996, to shareholders of record as of
December 18, 1995.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS
A. Consolidated Results of Operations
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Results of operations for the quarter ended March 31, 1996, as compared to the
quarter ended March 31, 1995:
Total net revenue for the quarter ended March 31, 1996 was $17,433,000 versus
$18,686,000 for the same period of 1995, a decrease of $1,253,000 or 6.7%. The
decrease in net revenue reflects lower parts and used equipment revenues
relative to the same period of fiscal 1995, while revenues from all other
sources were relatively unchanged.
Production costs were $12,165,000 or 69.8% of net revenue in the second quarter
of fiscal 1996 versus $12,566,000 or 67.2% of net revenue in the same period in
fiscal 1995. The decrease in production cost dollars is a direct result of the
decrease in net revenue. The higher production costs percentage is due to fixed
indirect production costs being spread over lower revenues, combined with a
decline in net revenues from higher margin products.
Product engineering and development costs increased $102,000 or 19.5% primarily
as a result of higher personnel costs to handle increasing volume and new
product development.
Selling, general and administrative expenses decreased in the second quarter of
fiscal 1996 to $2,274,000 from $3,023,000 in the same period of fiscal 1996 due
primarily to lower bad debt expense, commissions expense and personnel costs.
The change in interest expense reflects higher average borrowings at lower
average interest rates.
Net income in the second quarter of fiscal 1996 amounted to $1,250,000, a
$193,000 decline over the second quarter of fiscal 1995 net income of $1,443,000
as a result of the above factors.
Results of operations for the six months ended March 31, 1996, as compared to
the six months ended March 31, 1995:
Total net revenue for the six months ended March 31, 1996 was $25,694,000 versus
$30,144,000 for the same period of 1995, a decrease of $4,450,000 or 14.8%.
Approximately $1,550,000 of this decline is attributable to a decrease in both
replacement part sales and used equipment sales. New equipment business has
increased, however scheduled delivery of the equipment has been scattered over a
longer period of time. The level of bookings for the first six months of 1996
and the backlog at March 31, 1996, suggest that new equipment deliveries in the
second half of 1996 should exceed the 1995 delivery levels.
Production costs were $18,654,000 or 72.6% of net revenue in the first six
months of fiscal 1996 versus $21,158,000 or 70.2% of net revenue in the same
period in fiscal 1995. The decrease in production cost dollars is a direct
result of the decrease in net revenue. The higher production costs percentage is
due to fixed indirect production costs being spread over lower revenues,
combined with a decline in net revenues from higher margin products.
7
Product engineering and development costs increased $224,000 or 23.8%
primarily as a result of higher personnel costs to handle increasing
volume and new product development.
Selling, general, and administrative expenses decreased in the first six months
of fiscal 1996 to $4,356,000 from $5,057,000 in the same period of fiscal 1995,
due primarily to lower bad debt expense, commissions expense, and personnel
costs, partially offset by higher trade show costs.
The change in interest expense reflects higher average borrowings at
slightly lower average interest rates.
Net income decreased in the first six months of fiscal 1996 to $577,000, from
$1,651,000 in the first six months of fiscal 1995 as a result of the above
factors.
Liquidity and Capital Resources
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The Company had working capital at March 31, 1996 of $12,703,000 as compared
with working capital of $11,047,000 as of September 30, 1995. The increase in
working capital resulted from an increase in inventory and income taxes
receivable, and a reduction in notes payable and income taxes payable, partially
offset by a decrease in accounts receivable, cash, and prepaid expenses and an
increase in customer deposits, accounts payable, and accrued expenses.
The Company's asphalt production equipment operations are subject to seasonal
fluctuations, 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 six months ended March 31, 1996, the Company's total debt increased
$601,000 as a result of increased borrowings, partially offset by scheduled
principal repayments.
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.
The Company believes that, based on the present conditions and banking
arrangements, it will be able to meet its working capital needs during
fiscal 1996 through operations.
B. Financial Condition as of March 31, 1996
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There are no material changes in the Company's financial condition from
that reported as of September 30, 1995.
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PART II. OTHER INFORMATION
ITEM 3. DEFAULTS
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None
ITEM 5. OTHER INFORMATION
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On April 26, 1996, the Company's shares commenced trading on the American Stock
Exchange under the symbol "GX" and, as of the same date, are no longer traded on
the NASDAQ stock market.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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A. Exhibits:
(11) Statement regarding computation of earnings per share.
B. Reports on Form 8-K:
None
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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: May 10, 1996 /s/ Russell R. Lee III
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Russell R. Lee III
Treasurer
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