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, 1997
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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
incorporation 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 of common
stock as of the latest practicable date.
Class Outstanding at August 8, 1997
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Common stock, $.10 par value 3,272,370 shares
Class B stock, $.10 par value 883,064 shares
Gencor Industries, Inc.
Form 10-Q for the Quarter Ended June 30, 1997
Index Page
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Part I. Financial Information - Unaudited
Item 1. Financial Statements
a) Consolidated Balance Sheet -
June 30, 1997 and
September 30, 1996 3
b) Consolidated Income Statement -
Three and Nine Months Ended
June 30, 1997 and 1996 4
c) Consolidated Statement of Cash Flows -
Nine Months Ended
June 30, 1997 and 1996 5
d) Notes to Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Position and Results of Operations 8
Part II. Other Information 9
Exhibit 11 10
2
PART 1. FINANCIAL INFORMATION
ITEM 1.
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GENCOR INDUSTRIES, INC.
Consolidated Balance Sheet
(Dollars in Thousands)
June 30, September 30,
1997 1996
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(Unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents $ 8,823 $ 1,502
Accounts and notes receivable, less allowance
for doubtful accounts of $3,223 and $2,859 40,821 24,646
Inventories:
Raw materials 14,576 14,390
Work-in-process 11,315 10,339
Finished goods 17,758 16,807
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43,649 41,536
Prepaid expenses, including deferred income taxes
of $4,505 and $612 5,290 2,129
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Total current assets 98,583 69,813
Property and equipment, net 31,019 36,796
Other assets 5,673 3,345
Goodwill 12,149 9,107
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$147,424 $119,061
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Liabilities and Shareholders' Equity
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Current liabilities:
Notes payable $ 1,628 $ 1,699
Current portion of long-term debt 2,818 2,528
Accounts payable 14,123 13,368
Customer deposits 8,834 3,242
Accrued expenses 14,342 8,830
Income taxes payable 1,502 285
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Total current liabilities 43,247 29,952
Post-retirement benefits 1,859 1,526
Long-term debt 78,267 73,746
Other long-term liabilities (including deferred income
taxes of $4,691 and $1,438) 5,522 1,438
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Total liabilities 128,895 106,662
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
15,000,000 shares; 3,272,370 and 3,240,534 shares issued,
respectively 327 324
Class B stock, par value $0.10 per share; authorized
6,000,000 shares; 883,064 shares issued 88 88
Capital in excess of par value 9,771 7,630
Retained earnings 9,381 4,999
Cumulative translation adjustment (943) 309
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18,624 13,350
Subscription receivable from officer (95) (95)
Less common stock in treasury, at cost - (856)
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18,529 12,399
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$147,424 $119,061
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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 Nine Months Ended
June 30, June 30,
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1997 1996 1997 1996
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Net revenue $51,079 $21,722 $135,015 $47,416
Costs and expenses:
Production costs 37,442 15,922 99,854 34,576
Product engineering and development 943 531 2,111 1,697
Selling, general and administrative 7,188 2,350 21,376 6,706
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45,573 18,803 123,341 42,979
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Operating income 5,506 2,919 11,674 4,437
Other income (expense):
Interest income 125 - 130 -
Interest expense (1,787) (319) (4,964) (1,030)
Miscellaneous (7) 4 338 62
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Income before income taxes 3,837 2,604 7,178 3,469
Provision for income taxes 1,501 1,025 2,699 1,313
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Net income $ 2,336 $ 1,579 $ 4,479 $ 2,156
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Income per share:
Primary $ 0.49 $ 0.44 $ 0.98 $ 0.60
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Fully diluted $ 0.48 $ 0.44 $ 0.95 $ 0.60
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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,
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1997 1996
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Net income $ 4,479 $ 2,156
Adjustments to reconcile net income to cash
used for operations:
Depreciation and amortization 3,770 532
Gain on equipment disposal (78) (53)
Loss (gain) on foreign exchange (225) 1
Purchase price adjustments 669 -
Change in assets and liabilities:
Increase in receivables (15,317) (2,116)
Decrease (increase) in inventories 37 (2,826)
Decrease in prepaid expenses 1,159 386
Increase in deferred income taxes 70 118
Increase in accounts payable and customer deposits 5,491 220
Increase in accrued expenses 815 221
Increase in income taxes payable 1,003 112
Decrease in other assets 617 -
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Total adjustments (1,989) (3,405)
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Cash provided by (used for) operations 2,490 (1,249)
Cash flows from investing activities:
Capital expenditures (1,229) (1,089)
Other, net (288) 403
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Cash used for investing activities (1,517) (686)
Cash flows from financing activities:
Net increase (reduction) under lines of credit and notes payable 15,036 (430)
Net borrowings of debt 54,879 2,470
Payments to Ingersoll-Rand (60,869) -
Dividends paid (89) (87)
Closing costs (3,959) -
Issuance of common stock 1,611 -
Other - net - 56
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Cash provided by financing activities 6,609 2,009
Effect of exchange rate changes on cash (261) -
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Net increase in cash 7,321 74
Cash and cash equivalents at:
beginning of period 1,502 416
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end of period $ 8,823 $ 490
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Supplemental cash flow information:
Cash paid during the period for:
Interest $ 3,333 $ 910
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Income taxes $ 779 $ 1,571
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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 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 1996 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, 1997, are not necessarily indicative
of the results that may be expected for the year ending September 30, 1997.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings Per Share, which becomes effective for fiscal years ending after
December 31, 1997. Proforma earnings per share under the new pronouncement are
as follows:
Three Months Ended Nine Months Ended
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1997 1996 1997 1996
Basic $.56 $.44 $1.12 $.61
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Diluted $.49 $.44 $ .98 $.60
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NOTE 2 - ACQUISITION
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Effective September 30, 1996, the Company purchased the stock of Process
Equipment Division of Ingersoll-Rand Company ("CPM") for $60,868,697. CPM, a
multi-national entity, is also engaged in the design and manufacture of process
equipment. The acquisition was financed under a new $95 million credit
facility. Additionally, subsequent to September 30, 1996, an equity infusion of
approximately $3,000,000 was provided by certain key members of operating
management.
The results of operations of CPM have been included in the results of the
Company from October 1, 1996. Assuming the acquisition had occurred on October
1, 1995, the Company's (unaudited) net sales, net income, and earnings per share
would have been approximately $120,184,000, $3,738,000, and $0.77, respectively,
for the nine months ended June 30, 1996 and approximately $46,085,000,
$2,298,000, and $0.47, respectively, for the three months ended June 30, 1996.
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NOTE 3 - STOCK SPLIT
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On May 7, 1997, the Board of Directors authorized a 2 for 1 stock split to
shareholders of record as of May 19, 1997, effective May 30, 1997. As a result
of the split, 1,636,185 additional common shares and 441,532 additional Class B
shares were issued, and paid-in capital was reduced by $207,000. Shareholders'
equity has been restated for all periods presented to give retroactive
recognition to the stock split. In addition, for all periods presented, all
references in the consolidated financial statements and footnotes thereto to
number of shares, per share amounts, weighted average shares outstanding, as
well as stock option and related price information have been restated to give
retroactive effect to the split.
NOTE 4 - CASH DIVIDEND
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On November 21, 1996, the Company declared a cash dividend of $0.05 per share,
payable January 4, 1997, to shareholders of record as of December 18, 1996.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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A. Consolidated Results of Operations
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Results of operations for the quarter ended June 30, 1997, as compared to the
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quarter ended June 30, 1996:
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Total net revenue for the quarter ended June 30, 1997 was $51,079,000 versus
$21,722,000 for the same period of 1996, an increase of $29,537,000 or 135.15%.
The increase resulted primarily from the inclusion of sales from the newly
acquired subsidiary, CPM.
Production costs were $37,442,000 or 73.3% of net revenue in the third quarter
of fiscal 1997, versus $15,922,000 or 73.3% of net revenue in the same period in
fiscal 1996. The increase in production cost dollars is a direct result of the
CPM acquisition.
Product engineering and development costs increased $412,000 or 77.6% primarily
as a result of higher personnel costs.
Selling, general and administrative expenses increased in the third quarter of
fiscal 1997 to $7,188,000 from $2,350,000 in the same period of fiscal 1996 due
primarily to the CPM acquisition. Additionally, the amortization of goodwill and
deferred costs arising from the acquisition also contributed to the increase.
The change in interest expense reflects higher average borrowings, primarily as
a result of financing the CPM acquisition.
Net income in the third quarter of fiscal 1997 was $2,336,000, a $757,000
increase over the third quarter of fiscal 1996 net income of $1,579,000 as a
result of the above factors.
Results of operations for the nine months ended June 30, 1997, as compared to
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the nine months ended June 30, 1996:
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Total net revenue for the nine months ended June 30, 1997 was $135,015,000
versus $47,416,000 for the same period of 1996, an increase of $87,599,000 or
184.7%. The increase resulted primarily from the inclusion of sales from the
newly acquired subsidiary, CPM.
Production costs were $99,854,000 or 73.96% of net revenue in the first nine
months of fiscal 1997 versus $34,576,000 or 72.92% of net revenue in the same
period in fiscal 1996. The increase in production cost dollars is a direct
result of the CPM acquisition.
Selling, general, and administrative expenses increased in the first nine months
of fiscal 1997 to $21,376,000 from $6,706,000 in the same period of fiscal 1996,
due primarily to the CPM acquisition. Additionally, the amortization expense of
goodwill and deferred costs arising from the acquisition also contributed to the
increase in costs.
The change in interest expense reflects higher average borrowings, primarily as
a result of financing the CPM acquisition.
Net income increased in the first nine months of fiscal 1997 to $4,479,000 from
$2,156,000 in the first nine months of fiscal 1996 as a result of the above
factors.
8
Liquidity and Capital Resources
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The Company had working capital at June 30, 1997 of $55,336,000 as compared with
working capital of $39,861,000 as of September 30, 1996. The increase in
working capital resulted from an increase in cash, accounts receivable, and
inventory, partially offset by increases in accounts payable, accrued expenses,
and customer deposits.
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.
CPM's operations are subject to less seasonality.
During the nine months ended June 30, 1997, the Company's total debt increased
$4,740,000 as a result of increased borrowings, partially offset by scheduled
principal repayments.
The Company believes that, based on the present conditions and banking
arrangements, it will be able to meet its working capital needs during fiscal
1997 through operations.
B. Financial Condition as of June 30, 1997
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There are no material changes in the Company's financial condition from that
reported as of September 30, 1996.
PART II. OTHER INFORMATION
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
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: /s/ Russell R. Lee III
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Russell R. Lee III
Treasurer
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