
Part I. Financial Information This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Gencor Industries, Inc Financial Statements This section presents Gencor Industries' unaudited condensed consolidated financial statements, including balance sheets, income statements, equity, and cash flows, with detailed accounting policy notes Condensed Consolidated Balance Sheets Total assets increased to $171.8 million driven by cash and marketable securities, with liabilities and shareholders' equity also rising Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2019 (Unaudited) | Sep 30, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $14,343 | $10,302 | | Marketable securities | $107,232 | $105,322 | | Total Current Assets | $163,765 | $156,930 | | Total Assets | $171,795 | $165,372 | | Liabilities & Equity | | | | Total Current Liabilities | $12,058 | $6,485 | | Total Liabilities | $13,773 | $9,857 | | Total Shareholders' Equity | $158,022 | $155,515 | | Total Liabilities and Shareholders' Equity | $171,795 | $165,372 | Condensed Consolidated Statements of Income Net revenue decreased to $18.0 million, but net income surged to $2.5 million due to a $1.3 million gain on marketable securities Quarterly Income Statement Comparison (in thousands, except per share data) | Metric | Q1 2020 (ended Dec 31, 2019) | Q1 2019 (ended Dec 31, 2018) | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $18,030 | $21,327 | -15.5% | | Operating Income | $1,172 | $2,004 | -41.5% | | Net Income | $2,489 | $313 | +695.2% | | Diluted EPS | $0.17 | $0.02 | +750.0% | - The significant increase in net income was driven by a positive swing in marketable securities, recording a gain of $1.3 million in Q1 2020 versus a loss of $2.1 million in Q1 201913 Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $158.0 million, primarily driven by $2.5 million in net income for the quarter - Total Shareholders' Equity grew by $2.5 million during the quarter ended December 31, 2019, driven by net income of $2,489,000 and stock-based compensation of $18,00015 Condensed Consolidated Statements of Cash Flows Operating activities generated $4.0 million in cash, a significant improvement, leading to a $4.0 million increase in cash and equivalents to $14.3 million Quarterly Cash Flow Comparison (in thousands) | Cash Flow Activity | Q1 2020 (ended Dec 31, 2019) | Q1 2019 (ended Dec 31, 2018) | | :--- | :--- | :--- | | Cash from Operating Activities | $4,047 | $(3,082) | | Cash from Investing Activities | $(6) | $(661) | | Net Increase/(Decrease) in Cash | $4,041 | $(3,743) | | Cash at End of Period | $14,343 | $4,269 | Notes to Condensed Consolidated Financial Statements Notes detail financial statement presentation, significant accounting policies, including adoption of new standards, inventory method change from LIFO to FIFO, and revenue breakdowns - The company adopted new accounting standards ASU 2014-09 (Revenue) and ASU 2016-02 (Leases), with neither having a significant impact on the consolidated financial statements2425 - During the fourth quarter of fiscal 2019, the Company changed its inventory accounting method from LIFO to FIFO, applied retrospectively, to better reflect current inventory value and improve revenue and expense matching35 - For the quarter ended December 31, 2019, two customers accounted for 13.4% and 13.2% of net revenues, indicating significant customer concentration44 Disaggregated Net Revenue by Source (in thousands) | Revenue Source | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Equipment sales recognized over time | $12,090 | $16,353 | | Equipment sales recognized at a point in time | $1,907 | $1,514 | | Parts and component sales | $3,146 | $3,051 | | Freight revenue | $903 | $402 | | Total Net Revenue | $18,030 | $21,327 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2020 performance, highlighting decreased revenue but increased net income due to marketable securities gains, and details the company's strong liquidity and key business drivers Overview Gencor manufactures heavy machinery for highway construction, with seasonal business driven by economic conditions, government infrastructure funding, and crude oil prices - The company's business is seasonal, with the majority of orders received between October and February to align with the highway construction season59 - Key demand drivers include government funding like the five-year, $305 billion FAST Act, state-level initiatives like California's SB1, and fluctuations in crude oil and carbon steel prices606162 Results of Operations Net revenues decreased by 15.5% to $18.0 million, but net income surged to $2.5 million due to a positive swing in marketable securities gains Q1 2020 vs Q1 2019 Performance | Metric | Q1 2020 | Q1 2019 | Reason for Change | | :--- | :--- | :--- | :--- | | Net Revenues | $18.0M | $21.3M | Slowdown in equipment orders after recent growth | | Gross Profit Margin | 24.0% | 23.1% | Increased percentage of higher-margin parts sales | | Operating Income | $1.2M | $2.0M | Lower revenues and increased SG&A expenses | | Net Income | $2.5M | $0.3M | $1.3M gain on securities in Q1 2020 vs. a $2.1M loss in Q1 2019 | Liquidity and Capital Resources The company maintains a strong liquidity position with no long-term debt, holding $14.3 million in cash and $107.2 million in marketable securities - The company has no long-term debt and does not currently require a credit facility72 Liquidity Position as of Dec 31, 2019 | Metric | Value (in millions) | | :--- | :--- | | Cash and cash equivalents | $14.3 | | Marketable securities | $107.2 | | Working capital | $151.7 | | Backlog | $30.9 | - Cash provided by operations was $4.0 million for the quarter, primarily driven by a $3.0 million increase in customer deposits7475 Critical Accounting Policies, Estimates and Assumptions This section outlines critical accounting policies, including revenue recognition over time, inventory valuation using FIFO, and marketable securities classified as trading and marked to market - Revenue from custom equipment contracts is recognized over time, proportional to actual labor costs incurred versus total estimated labor costs83 - The company changed its inventory costing method from LIFO to FIFO in fiscal 2019 to better reflect current inventory value and improve matching of revenues and expenses92 - Marketable securities are categorized as trading securities and are stated at fair value, with unrealized gains and losses reported in the income statement95 Quantitative and Qualitative Disclosures about Market Risk This section is not applicable for the current filing period - Not Applicable98 Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period98 - No changes were made during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting100 Part II. Other Information This section provides information on legal proceedings, risk factors, and exhibits filed with the report Legal Proceedings The company does not believe any current legal proceedings are material to its business operations - The company does not believe any current legal proceedings are material to its business102 Risk Factors No material changes to risk factors have occurred since the Annual Report on Form 10-K filing for fiscal year ended September 30, 2019 - No material changes to risk factors have occurred since the filing of the Annual Report on Form 10-K for the period ended September 30, 2019103 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Filed exhibits include CEO and CFO certifications pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350, as well as XBRL instance and taxonomy documents104105