Form 10-Q

Large accelerated filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD: From

Commission File Number:

001-11703

GENCOR INDUSTRIES, INC.


Delaware		59-0933147
(State or other jurisdiction of incorporation or organization)		(IRS Employer 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)

Securities registered or to be registered pursuant to Section 12(b) of the Act


Title of Each Class	Trading Symbol(s)	Name of Exchange on which registered
Common Stock ($.10 Par Value)	GENC	NYSE American LLC

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 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class	Outstanding at August 5, 2022
Common Stock , $.10 par value		12,338,845 shares
Class B Stock , $.10 par value		2,318,857 shares


Index			Page
Part I. Financial Information

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets – June 30, 2022 (Unaudited) and September 30, 2021		4

		Condensed Consolidated Statements of Operations – Quarters and Nine Months Ended June 30, 2022 and 2021 (Unaudited)		5

		Condensed Consolidated Statements of Shareholders’ Equity – Nine Months Ended June 30, 2022 and 2021 (Unaudited)		6

		Condensed Consolidated Statements of Cash Flows – Nine Months Ended June 30, 2022 and 2021 (Unaudited)		7

		Notes to Condensed Consolidated Financial Statements (Unaudited)		8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		21

	Item 4.	Controls and Procedures		21

Part II. Other Information

	Item 1.	Legal Proceedings		22

	Item 1A.	Risk Factors		22

	Item 6.	Exhibits		23

Signatures				24


	June 30, 2022 (Unaudited)		September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	19,474,000	$	23,232,000
Marketable securities at fair value (cost of $95,216,000 at June 30, 2022 and $93,690,000 at September 30, 2021)		91,116,000		94,976,000
Accounts receivable, less allowance for doubtful accounts of $353,000 at June 30, 2022 and $321,000 at September 30, 2021		4,198,000		2,622,000
Costs and estimated earnings in excess of billings		1,366,000		1,903,000
Inventories, net		48,244,000		41,888,000
Prepaid expenses and other current assets		3,720,000		2,202,000

Total current assets		168,118,000		166,823,000

Property and equipment, net		11,919,000		11,801,000
Deferred and other income taxes		783,000		—
Other long-term assets		550,000		838,000

Total Assets	$	181,370,000	$	179,462,000

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,001,000	$	3,105,000
Customer deposits		7,436,000		5,244,000
Accrued expenses		1,997,000		2,645,000
Current operating lease liabilities		413,000		393,000

Total current liabilities		14,847,000		11,387,000

Deferred and other income taxes		—		394,000
Non-current operating lease liabilities		84,000		392,000

Total liabilities		14,931,000		12,173,000

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; 12,338,845 shares issued and outstanding at June 30, 2022 and September 30, 2021		1,234,000		1,234,000
Class B Stock, par value $.10 per share; 6,000,000 shares authorized; 2,318,857 shares issued and outstanding at June 30, 2022 and September 30, 2021		232,000		232,000
Capital in excess of par value		12,590,000		12,590,000
Retained earnings		152,383,000		153,233,000

Total shareholders’ equity		166,439,000		167,289,000

Total Liabilities and Shareholders’ Equity	$	181,370,000	$	179,462,000


	For the Quarters Ended June 30,					For the Nine Months Ended June 30,
	2022			2021		2022			2021
Net revenue	$	29,647,000		$	24,919,000	$	80,407,000		$	65,235,000
Cost of goods sold		23,968,000			19,314,000		64,831,000			50,504,000

Gross profit		5,679,000			5,605,000		15,576,000			14,731,000
Operating expenses:
Product engineering and development		951,000			1,176,000		3,219,000			3,089,000
Selling, general and administrative		2,577,000			3,202,000		9,340,000			10,235,000

Total operating expenses		3,528,000			4,378,000		12,559,000			13,324,000

Operating income		2,151,000			1,227,000		3,017,000			1,407,000

Other income (expense), net:
Interest and dividend income, net of fees		304,000			306,000		877,000			1,437,000
Net realized and unrealized gains (losses) on marketable securities, net		(3,693,000	)		1,386,000		(4,758,000	)		4,873,000
Other		(1,000	)		—		(139,000	)		—

Total other income (expense), net		(3,390,000	)		1,692,000		(4,020,000	)		6,310,000

Income (loss) before income tax expense (benefit)		(1,239,000	)		2,919,000		(1,003,000	)		7,717,000
Income tax expense (benefit)		(224,000	)		584,000		(153,000	)		1,543,000

Net income (loss)	$	(1,015,000	)	$	2,335,000	$	(850,000	)	$	6,174,000

Basic Income (Loss) per Common Share:
Net income (loss) per share	$	(0.07	)	$	0.16	$	(0.06	)	$	0.42

Diluted Income (Loss) per Common Share:
Net income (loss) per share	$	(0.07	)	$	0.16	$	(0.06	)	$	0.42


For the Nine Months Ended June 30, 2022
	Common Stock				Class B Stock				Capital in Excess of		Retained			Total Shareholders’
	Shares		Amount		Shares		Amount		Par Value		Earnings			Equity
September 30, 2021		12,338,845	$	1,234,000		2,318,857	$	232,000	$	12,590,000	$	153,233,000		$	167,289,000
Net loss		—		—		—		—		—		(274,000	)		(274,000	)

December 31, 2021		12,338,845	$	1,234,000		2,318,857	$	232,000	$	12,590,000	$	152,959,000		$	167,015,000
Net income		—		—		—		—		—		439,000			439,000

March 31, 2022		12,338,845	$	1,234,000		2,318,857	$	232,000	$	12,590,000	$	153,398,000		$	167,454,000
Net loss		—		—		—		—		—		(1,015,000	)		(1,015,000	)

June 30, 2022		12,338,845	$	1,234,000		2,318,857	$	232,000	$	12,590,000	$	152,383,000		$	166,439,000


For the Nine Months Ended June 30, 2021
	Common Stock				Class B Stock				Capital in Excess of		Retained		Total Shareholders’
	Shares		Amount		Shares		Amount		Par Value		Earnings		Equity
September 30, 2020		12,287,337	$	1,229,000		2,318,857	$	232,000	$	12,331,000	$	147,428,000	$	161,220,000
Net income		—		—		—		—		—		1,551,000		1,551,000

December 31, 2020		12,287,337	$	1,229,000		2,318,857	$	232,000	$	12,331,000	$	148,979,000	$	162,771,000
Net income		—		—		—		—		—		2,288,000		2,288,000
Stock options exercised		11,000		1,000		—		—		55,000		—		56,000

March 31, 2021		12,298,337	$	1,230,000		2,318,857	$	232,000	$	12,386,000	$	151,267,000	$	165,115,000
Net income		—		—		—		—		—		2,335,000		2,335,000

June 30, 2021		12,298,337	$	1,230,000		2,318,857	$	232,000	$	12,386,000	$	153,602,000	$	167,450,000


	2022			2021
Cash flows from operating activities:

Net income (loss)	$	(850,000	)	$	6,174,000
Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities:
Purchase of marketable securities		(101,913,000	)		(101,040,000	)
Proceeds from sale and maturity of marketable securities		100,705,000			99,638,000
Change in value of marketable securities		5,068,000			(4,445,000	)
Deferred and other income taxes		(1,177,000	)		457,000
Depreciation and amortization		2,063,000			1,931,000
Provision for doubtful accounts		140,000			125,000

Changes in assets and liabilities, excluding the initial effects of business acquisitions:
Accounts receivable		(1,716,000	)		(1,253,000	)
Costs and estimated earnings in excess of billings		537,000			7,090,000
Inventories		(6,356,000	)		(3,357,000	)
Prepaid expenses and other current assets		(1,518,000	)		(44,000	)
Accounts payable		1,896,000			2,678,000
Customer deposits		2,192,000			(92,000	)
Accrued expenses and other current liabilities		(645,000	)		268,000

Total adjustments		(724,000	)		1,956,000

Cash flows (used in) provided by operating activities		(1,574,000	)		8,130,000

Cash flows from investing activities:
Acquisition of Blaw-Knox assets		—			(13,777,000	)
Capital expenditures		(2,184,000	)		(2,449,000	)

Cash flows used in investing activities		(2,184,000	)		(16,226,000	)

Cash flows from financing activities:
Proceeds from stock option exercises		—			56,000

Cash flows provided by financing activities		—			56,000

Net decrease in cash and cash equivalents		(3,758,000	)		(8,040,000	)
Cash and cash equivalents at:
Beginning of period		23,232,000			35,584,000

End of period	$	19,474,000		$	27,544,000

Non-cash investing and financing activities:
Operating lease right-of-use assets	$	—		$	254,000
Operating lease liabilities	$	—		$	254,000


	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Equities	$	15,457,000	$	—	$	—	$	15,457,000
Mutual Funds		10,767,000		—		—		10,767,000
Exchange-Traded Funds		5,450,000		—		—		5,450,000
Corporate Bonds		—		28,669,000		—		28,669,000
Government Securities		27,949,000		—		—		27,949,000
Cash and Money Funds		2,824,000		—		—		2,824,000

Total	$	62,447,000	$	28,669,000	$	—	$	91,116,000


	June 30, 2022		September 30, 2021
Raw materials	$	30,796,000	$	25,858,000
Work in process		7,881,000		6,280,000
Finished goods		9,567,000		9,730,000
Used equipment		—		20,000

	$	48,244,000	$	41,888,000


	June 30, 2022		September 30, 2021
Costs incurred on uncompleted contracts	$	20,074,000	$	11,483,000
Estimated earnings		6,279,000		4,395,000

		26,353,000		15,878,000
Billings to date		24,987,000		13,975,000

Costs and estimated earnings in excess of billings	$	1,366,000	$	1,903,000


	Quarter Ended June 30,					Nine Months Ended June 30,
	2022			2021		2022			2021
Net Income (loss)	$	(1,015,000	)	$	2,335,000	$	(850,000	)	$	6,174,000

Common Shares:
Weighted average common shares outstanding		14,658,000			14,617,000		14,658,000			14,613,000
Effect of dilutive stock options		—			132,000		—			129,000

Diluted shares outstanding		14,658,000			14,749,000		14,658,000			14,742,000

Basic:
Net income (loss) per share	$	(0.07	)	$	0.16	$	(0.06	)	$	0.42

Diluted:
Net income (loss) per share	$	(0.07	)	$	0.16	$	(0.06	)	$	0.42


	Quarter Ended June 30,					Nine Months Ended June 30,
	2022		2021			2022		2021
Equipment sales recognized over time	$	9,248,000	$	6,507,000		$	30,020,000	$	14,509,000
Equipment sales recognized at a point in time		13,729,000		12,258,000			28,402,000		31,959,000
Parts and component sales		5,419,000		5,240,000			18,243,000		16,001,000
Freight revenue		972,000		996,000			3,050,000		2,888,000
Other		279,000		(82,000	)		692,000		(122,000	)

Net revenue	$	29,647,000	$	24,919,000		$	80,407,000	$	65,235,000


Fiscal Year	Annual Lease Payments
2022 (remaining 3 months)	$	105,000
2023		398,000
2024		7,000

Total		510,000
Less interest		(13,000	)

Present value of lease liabilities	$	497,000


Exhibit 31.1		Certification of Principal Executive Officer Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as amended

Exhibit 31.2		Certification of Chief Financial Officer Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as amended

Exhibit 32		Certifications of Principal Executive Officer and Chief Financial Officer Pursuant to 18 U. S. C. Section 1350

Exhibit 101.1		Inline Interactive Data File

Exhibit 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

Exhibit 101.SCH		Inline XBRL Schema Document

Exhibit 101.CAL		Inline XBRL Calculation Linkbase Document

Exhibit 101.DEF		Inline XBRL Definition Linkbase Document

Exhibit 101.LAB		Inline XBRL Label Linkbase Document

Exhibit 101.PRE		Inline XBRL Presentation Linkbase Document

Exhibit 104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL (included in Exhibit 101)


	June 30, 2022			September 30, 2021
Operating lease ROU asset included in other long-term assets	$	497,000		$	785,000
Current operating lease liability	$	413,000		$	393,000
Non-current operating lease liability	$	84,000		$	392,000
Weighted average remaining lease term (in years)		1.25			2.00
Weighted average discount rate used in calculating ROU asset		4.0	%		4.0	%

SEC Form 10-Q filed by Gencor Industries Inc.