Gencor Industries, Inc., (NASDAQ: GENC) announced today net revenue
for the quarter ended September 30, 2019 decreased 29.5% to $14.5
million compared to $20.5 million for the quarter ended September
30, 2018. Gross profit as a percentage of net revenue
decreased to 19.6% for the quarter ended September 30, 2019 from
31.8% for the quarter ended September 30, 2018. Gross profit in the
fourth quarter of fiscal 2019 was negatively impacted due to the
lower net revenues and reduced overhead absorption.
Operating loss for the quarter ended September
30, 2019 was ($0.5) million compared to operating income of $3.5
million for the quarter ended September 30, 2018. The Company had
non-operating income of $0.6 million for the quarter ended
September 30, 2019 compared to $1.2 million for the quarter ended
September 30, 2018. The Company’s tax expense was $0.1 million for
the quarter ended September 30, 2019 compared to $0.9 million for
the quarter ended September 30, 2018. Net income for the
quarter ended September 30, 2019 was breakeven compared to $3.9
million ($0.27 per basic and diluted share) for the quarter ended
September 30, 2018.
Net revenue for the year ended September 30,
2019 decreased 17.5% to $81.3 million compared to $98.6 million for
the year ended September 30, 2018. Gross profit as a percentage of
net revenue increased to 27.6% for the year ended September 30,
2019 from 27.2% for the year ended September 30, 2018. The Company
had operating income for the year ended September 30, 2019 of $9.5
million compared to $13.9 million for the year ended September 30,
2018. The Company had non-operating income of $3.4 million for the
year ended September 30, 2019 compared to $1.2 million for the year
ended September 30, 2018.
On December 22, 2017, the U.S. Tax Cuts and Jobs
Act (the “Tax Reform Act”) was signed into law by President Donald
Trump. The Tax Reform Act significantly lowered the U.S. corporate
federal income tax rate from 35% to 21% effective January 1, 2018,
while also implementing a territorial tax system and imposing
repatriation tax on deemed repatriated earnings of foreign
subsidiaries. Accounting principles generally accepted in the
United States of America (“GAAP”) require that the impact of tax
legislation be recognized in the period in which the law was
enacted. The effective income tax rate for fiscal 2019 was 20.5%
versus 15.7% in fiscal 2018.
The Company’s net income was $10.2 million
($0.70 per basic share and $0.69 per diluted share) for the year
ended September 30, 2019, compared to $12.7 million ($0.88 per
basic share and $0.86 per diluted share) for the year ended
September 30, 2018.
At September 30, 2019, the Company had $115.6
million in cash and marketable securities, an increase of $3.5
million over the September 30, 2018 balance of $112.1 million. Net
working capital was $150.4 million at September 30, 2019. The
Company has no short- or long-term debt.
The Company’s backlog was $27.3 million at December 1, 2019
compared to $28.0 million at December 1, 2018.
During the fourth quarter of fiscal 2019, the
Company changed its method for accounting for cost of inventories
from the last-in, first-out (“LIFO”) method to the first-in,
first-out (“FIFO”) method. The Company believes the FIFO method
will improve financial reporting by better reflecting the current
value of inventory on the condensed consolidated balance
sheets, by more closely aligning the flow of
physical inventory with the accounting for
the inventory, and by providing better matching of revenues
and expenses. As required by GAAP, the Company has reflected this
change in accounting principle on a retrospective basis, resulting
in changes to the historical periods presented. The retrospective
application of the change resulted in an increase in the Company’s
September 30, 2018 retained earnings of $2.8 million (net of $0.8
million in taxes) and an increase to the Company’s net income of
$130,000 (net of $45,000 in taxes) for the year ended September 30,
2018. This change did not affect our previously reported cash flows
from operating, investing or financing activities nor did it have a
material impact on the previously reported quarterly operating
results for fiscal 2019.
John E. Elliott, Gencor’s CEO, commented,
“Gencor’s fourth quarter results reflect a more typical level of
production, as the increase orders we enjoyed in recent years as a
result of the FAST Act have tempered. The FAST Act is
scheduled to expire in 2020. Currently, there is no approved
Federal infrastructure bill to replace the FAST Act although the
recently passed resolutions did include continued funding of the
FAST Act through 2020.
In the second half of fiscal 2019 we experienced
a normal ordering pattern where customers place large equipment and
plant orders in the latter part of the year, with the expectation
of delivery in the late winter and early spring months. We have
been able to respond to changes in the market place by ramping up
production when demand increased from 2016 to 2018 and reducing
production levels as demand has normalized. We plan to
continue cost improvements and to adjust production based on
demand, to maximize productivity and profitability.
Fourth quarter revenues of $14.5 million were
below fourth quarter fiscal 2018 record revenues of $20.5
million. Gross margin of 20% were also lower, due to the
lower net revenues and reduced overhead absorption.
After the fiscal year ended, we are benefitting
from an increase in orders for production and delivery in fiscal
2020. As we prudently increased stocking inventory in the
summer months, we have converted this inventory to revenue more
quickly which has allowed us to accelerate our typical lead time on
equipment.
We believe we are well-positioned to capitalize
on demand for asphalt plants and related components as we continue
to strategically invest in our business. We continue to take
action to reduce the impact of U.S. tariff policies, raw material
volatility and a continued tight labor market.”
Gencor Industries is a diversified heavy
machinery manufacturer for the production of highway construction
materials, synthetic fuels and environmental control machinery and
equipment used in a variety of applications.
GENCOR INDUSTRIES, INC.Consolidated Income
StatementsFor the Years Ended September 30, 2019
and 2018 |
|
2019 |
2018 * |
|
|
|
Net revenue |
$ |
81,329,000 |
$ |
98,614,000 |
|
Cost of goods sold |
|
58,917,000 |
|
71,818,000 |
|
Gross profit |
|
22,412,000 |
|
26,796,000 |
|
Operating expenses: |
|
|
Product engineering and development |
|
3,295,000 |
|
2,915,000 |
|
Selling, general and administrative |
|
9,647,000 |
|
9,991,000 |
|
Total operating expenses |
|
12,942,000 |
|
12,906,000 |
|
|
|
|
Operating income |
|
9,470,000 |
|
13,890,000 |
|
|
|
|
Other income (expense), net: |
|
|
Interest and dividend income, net of fees |
|
2,307,000 |
|
1,535,000 |
|
Realized and unrealized gains (losses) on marketable securities,
net |
|
1,047,000 |
|
(363,000 |
) |
Other |
|
- |
|
2,000 |
|
|
|
3,354,000 |
|
1,174,000 |
|
|
|
|
Income before income tax
expense |
|
12,824,000 |
|
15,064,000 |
|
Income tax expense |
|
2,628,000 |
|
2,370,000 |
|
Net income |
$ |
10,196,000 |
$ |
12,694,000 |
|
|
|
|
|
|
|
Basic earnings per common
share |
$ |
0.70 |
$ |
0.88 |
|
|
|
|
Diluted earnings per common
share |
$ |
0.69 |
$ |
0.86 |
|
* The amounts for the year
ended September 30, 2018 have been adjusted to reflect the change
in inventory accounting method as described above.
GENCOR INDUSTRIES, INC.Consolidated
Balance SheetsAs of September 30, 2019 and
2018 |
ASSETS |
2019 |
|
2018 * |
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
10,302,000 |
|
$ |
8,012,000 |
Marketable securities at fair value (cost of $104,176,000 at
September 30, 2019 and $103,751,000 at September 30,
2018) |
|
105,322,000 |
|
|
104,058,000 |
Accounts receivable, less allowance for doubtful accounts of
$459,000 at September 30, 2019 and $313,000 at September 30,
2018 |
|
1,603,000 |
|
|
993,000 |
Costs and estimated earnings in excess of billings |
|
13,838,000 |
|
|
11,900,000 |
Inventories, net |
|
25,366,000 |
|
|
21,890,000 |
Prepaid expenses |
|
499,000 |
|
|
1,348,000 |
Total current assets |
|
156,930,000 |
|
|
148,201,000 |
Property and equipment, net |
|
8,389,000 |
|
|
7,889,000 |
Other assets |
|
53,000 |
|
|
53,000 |
Total Assets |
$ |
165,372,000 |
|
$ |
156,143,000 |
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
1,907,000 |
|
$ |
1,838,000 |
Customer deposits |
|
1,918,000 |
|
|
4,563,000 |
Accrued expenses |
|
2,660,000 |
|
|
2,085,000 |
Total current liabilities |
|
6,485,000 |
|
|
8,486,000 |
Deferred and other income
taxes |
|
3,372,000 |
|
|
2,640,000 |
Total liabilities |
|
9,857,000 |
|
|
11,126,000 |
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; |
|
|
|
12,277,337 shares and 12,252,337 shares issued and outstanding at
September 30, 2019 and 2018, respectively |
|
1,228,000 |
|
|
1,225,000 |
Class B Stock, par value $.10 per share; 6,000,000 shares
authorized; |
|
|
|
2,308,857 shares and 2,288,857 shares issued and outstanding at
September 30, 2019 and 2018, respectively |
|
231,000 |
|
|
229,000 |
Capital in excess of par value |
|
12,159,000 |
|
|
11,862,000 |
Retained earnings |
|
141,897,000 |
|
|
131,701,000 |
Total shareholders’ equity |
|
155,515,000 |
|
|
145,017,000 |
Total Liabilities and
Shareholders’ Equity |
$ |
165,372,000 |
|
$ |
156,143,000 |
* The amounts as of September 30, 2018 have
been adjusted to reflect the change in inventory accounting method
as described above.
Caution Concerning Forward Looking Statements -
This press release and our other communications and statements may
contain “forward-looking statement,” including statement about our
beliefs, plans, objectives, goals, expectations, estimates,
projections and intentions. These statements are subject to
significant risks and uncertainties and are subject to change based
on various factors, many of which are beyond our control. The
words “may,” “could,” “should,” “would,” “believe,” “anticipate,”
“estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and
similar expressions are intended to identify forward-looking
statements. All forward-looking statements, by their nature,
are subject to risks and uncertainties. Our actual future
results may differ materially from those set forth in our forward
looking statements. For information concerning these factors
and related matters, see our Annual Report on Form 10-K for the
year ended September 30, 2019: (a) “Risk Factors” in Part I, Item
1A and (b) “Management’s Discussion and Analysis of Financial
Position and Results of Operations” in Part II, Item 7.
However, other factors besides those referenced could
adversely affect our results, and you should not consider any such
list of factors to be a complete set of all potential risks or
uncertainties. Any forward-looking statements made by us
herein speak as of the date of the press release. We do not
undertake to update any forward-looking statement, except as
required by law.
Contact:
Eric Mellen
Chief Financial Officer
407-290-6000
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