UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED December 31, 2003 |
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 incorporated or organization) |
(I.R.S. 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)
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)
Yes No X
Indicate number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
| Class |
Outstanding at January 31, 2004 | |||||
| Common stock, $.10 par value |
6,884,070 shares | |||||
| Class B stock, $.10 par value |
1,798,398 shares |
1
GENCOR INDUSTRIES, INC.
| Page | ||||||
| Part I. |
Financial Information | |||||
| Item 1. | ||||||
| Condensed consolidated balance sheets – December 31, 2003 (Unaudited) and September 30, 2003 |
3 | |||||
| Unaudited condensed consolidated income statements—Three months ended December 31, 2003 and 2002 |
4 | |||||
| 5 | ||||||
| 6 | ||||||
| Item 2. | Management’s Discussion and Analysis of Financial Position and Results of Operations |
8 | ||||
| Item 3. | 10 | |||||
| Item 4. | 11 | |||||
| Part II. |
Other Information | |||||
| Item 6. | 12 | |||||
| 13 | ||||||
2
Part I. Financial Information
Condensed Consolidated Balance Sheets
In thousands, except share amounts
| December 31 2003 |
September 30 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 378 | $ | 734 | ||||
| Accounts receivable, less allowance for doubtful accounts of $2,425 ($2,428 at September 30, 2003) |
2,843 | 3,344 | ||||||
| Inventories |
14,828 | 12,560 | ||||||
| Deferred income taxes |
1,066 | 1,066 | ||||||
| Prepaid expenses |
1,622 | 1,627 | ||||||
| Total current assets |
20,737 | 19,331 | ||||||
| Property and equipment, net |
11,446 | 11,585 | ||||||
| Assets held for sale |
5,672 | 5,672 | ||||||
| Other assets |
3,976 | 4,046 | ||||||
| Total assets |
$ | 41,831 | $ | 40,634 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 4,256 | 3,448 | |||||
| Customer deposits |
2,820 | 1,106 | ||||||
| Income and other taxes payable |
3,753 | 3,639 | ||||||
| Accrued expenses |
8,462 | 8,325 | ||||||
| Total current liabilities |
19,291 | 16,518 | ||||||
| Long-term debt |
3,485 | 5,321 | ||||||
| Deferred income taxes |
2,877 | 2,877 | ||||||
| Other liabilities |
3,309 | 3,309 | ||||||
| Total liabilities |
28,962 | 28,025 | ||||||
| Shareholders’ equity: |
||||||||
| Preferred stock, par value $.10 per share; authorized 300,000 shares; none issued |
— | — | ||||||
| Common stock, par value $.10 per share; 15,000,000 shares authorized; 6,971,470 shares issued |
697 | 697 | ||||||
| Class B stock, par value $.10 per share; 6,000,000 shares authorized: 1,890,398 shares issued |
189 | 189 | ||||||
| Capital in excess of par value |
11,343 | 11,343 | ||||||
| Retained Earnings |
8,391 | 8,143 | ||||||
| Accumulated other comprehensive loss |
(5,952 | ) | (5,964 | ) | ||||
| Subscription receivable from officer |
(95 | ) | (95 | ) | ||||
| Common stock in treasury, 179,400 shares at cost |
(1,704 | ) | (1,704 | ) | ||||
| 12,869 | 12,609 | |||||||
| Total liabilities and shareholders’ equity |
$ | 41,831 | $ | 40,634 | ||||
See notes to condensed consolidated financial statements.
3
Unaudited Condensed Consolidated Income Statements
In thousands, except per share amounts
| Three Months Ended December 31 |
||||||||
| 2003 |
2002 |
|||||||
| Net sales |
$ | 11,920 | $ | 13,274 | ||||
| Costs and expenses: |
||||||||
| Costs of products sold |
8,507 | 10,424 | ||||||
| Product engineering and development |
491 | 410 | ||||||
| Selling, general and administrative |
2,513 | 3,111 | ||||||
| 11,511 | 13,945 | |||||||
| Operating income (loss) |
409 | (671 | ) | |||||
| Other income (expense): |
||||||||
| Interest income |
7 | 28 | ||||||
| Interest expense |
(56 | ) | (492 | ) | ||||
| Income from investees |
— | 4,239 | ||||||
| Miscellaneous |
85 | (55 | ) | |||||
| 36 | 3,720 | |||||||
| Income before income taxes |
445 | 3,049 | ||||||
| Income tax expense |
197 | 1,478 | ||||||
| Net income |
$ | 248 | $ | 1,571 | ||||
| Basic and diluted net income per common share: |
||||||||
| Basic earnings per share |
$ | 0.03 | $ | 0.18 | ||||
| Diluted earnings per share |
$ | 0.03 | $ | 0.18 | ||||
See notes to condensed consolidated financial statements.
4
Unaudited Condensed Consolidated Statements of Cash Flows
In thousands
| Three Months Ended December 31 |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operations: |
||||||||
| Net income |
$ | 248 | $ | 1,571 | ||||
| Adjustments to reconcile net income to cash provided by (used for) operations: |
||||||||
| Depreciation and amortization |
235 | 237 | ||||||
| Bad debt expense |
90 | 108 | ||||||
| Change in assets and liabilities net of disposed business |
||||||||
| Accounts receivable |
411 | (655 | ) | |||||
| Inventories |
(2,268 | ) | (89 | ) | ||||
| Prepaid expenses |
5 | 257 | ||||||
| Other assets |
70 | 74 | ||||||
| Accounts payable |
808 | 257 | ||||||
| Customer deposits |
1,714 | 1,458 | ||||||
| Income and other taxes payable |
114 | 1,569 | ||||||
| Accrued expenses |
137 | 416 | ||||||
| Total adjustments |
1,316 | 3,632 | ||||||
| Cash provided by operations |
1,564 | 5,203 | ||||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(96 | ) | (7 | ) | ||||
| Cash used for investing activities |
(96 | ) | (7 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Repayment of debt |
(1,836 | ) | (2,644 | ) | ||||
| Cash used for financing activities |
(1,836 | ) | (2,644 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
12 | 100 | ||||||
| Increase (decrease) in cash and cash equivalents |
(356 | ) | 2,652 | |||||
| Cash and cash equivalents at beginning of quarter |
734 | 12,305 | ||||||
| Cash and cash equivalents at end of quarter |
$ | 378 | $ | 14,957 | ||||
See notes to condensed consolidated financial statements.
5
Notes to Condensed Consolidated Financial Statements
All amounts in thousands, except per share amounts
Note 1 – Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all material adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended December 31, 2003 are not necessarily indicative of the results that may be expected for the year ended September 30, 2004.
The balance sheet at September 30, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
For further information, refer to the consolidated financial statements and footnotes thereto included in the Gencor Industries, Inc. Annual Report on Form 10-K for the year ended September 30, 2003.
Note 2 – Inventories
The components of inventory consist of the following:
| December 31 2003 |
September 30 2003 | |||||
| Raw materials |
$ | 6,229 | $ | 5,437 | ||
| Work in process |
3,724 | 2,898 | ||||
| Finished goods |
3,994 | 3,274 | ||||
| Used equipment |
881 | 951 | ||||
| $ | 14,828 | $ | 12,560 | |||
6
Note 3 – Earnings Per Share Data
The following table sets forth the computation of basic and diluted earnings per share for the periods indicated.
| Three Months Ended December 31 | ||||||
| 2003 |
2002 | |||||
| Net income |
$ | 248 | $ | 1,571 | ||
| Denominator (shares in thousands): |
||||||
| Weighted average shares outstanding |
8,682 | 8,682 | ||||
| Effect of dilutive stock options |
499 | 26 | ||||
| Denominator for diluted EPS computation |
9,181 | 8,708 | ||||
| Per common share: |
||||||
| Basic: |
||||||
| Net income |
$ | 0.03 | $ | 0.18 | ||
| Diluted: |
||||||
| Net income |
$ | 0.03 | $ | 0.18 | ||
Note 4 – Comprehensive Income (Loss)
The total comprehensive income (loss) for the three-months ended December 31, 2003 and 2002 was $260 and $1,656, respectively. Total comprehensive income (loss) differs from net income (loss) due to gains and losses resulting from foreign currency translation, which are reflected separately in the shareholders’ equity section of the balance sheet under the caption “Accumulated other comprehensive loss.” Gains and losses resulting from foreign currency transactions are included in income.
Note 5 – Income From Investees
During the first quarter of fiscal 2003, the Company received cash distributions of $4,239 from its 45% interest in Carbontronics LLC and 25% interest in Carbontronics II LLC and Carbontronics Fuels LLC. These interests were obtained as part of contracts to build four synthetic fuel production plants during 1998. During the first quarter of fiscal 2004, no distributions were received. Any distribution by the investments has been suspended pending the results of the current IRS examination of the partnerships. The Company has no basis in these investments nor requirement to provide future funding. Any income arising from these investments is dependent upon tax credits (adjusted for operating losses at the fuel plants) being generated as a result of synthetic fuel production, which will be recorded as received.
7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Net sales for the quarters ended December 31, 2003 and 2002 were $11.9 million and $13.3 million, respectively. Domestic sales during the first quarter of fiscal 2004 were $11.2 million reflecting an increase of $2.4 million from year ago levels. Foreign sales were $3.8 million below the prior year as a portion of the UK operations were consolidated in the US to better control costs and margins.
Gross margins as a percent of net sales increased by 7.1% during the quarter ended December 31, 2003 from year ago levels. Gross margins improved on the lower consolidated sales as a result of the consolidation of the UK operations and higher domestic volume.
Product engineering and development costs combined with selling and administrative expenses have decreased from year ago levels, reflecting the consolidation of certain UK operations and the Company’s efforts to maintain the cost savings initiatives instituted during the first quarter of fiscal 2002. Selling and administrative expense includes $270 of costs related to the tender offer withdrawn in December 2003.
Other Income (Expense)
Interest expense for the first quarter of fiscal 2004 decreased by $436 from the fi