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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15[d] OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15[d] OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-3821
GENCOR INDUSTRIES, INC.
Incorporated in the State I.R.S. Employer Identification
of Delaware No. 59-0933147
5201 North Orange Blossom Trail
Orlando, Florida 32810
Registrant's Telephone Number, Including Area Code:
(407) 290-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock ($.10 Par Value)
-----------------------------
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 filing requirements
for the past 90 days.
[X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[X]
State the aggregate market value of the voting stock, $.10 per share value
Common Stock, held by nonaffiliates of the Registrant as of November 27, 1996:
$23,339,732.
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock, as of the latest practicable date: 1,353,832 shares of Common
Stock ($.10 par value) and 441,532 shares of Class B Stock ($.10 par value) as
of November 27, 1996.
List hereunder the following documents if incorporated by reference and the part
of the Form 10-K into which the document is incorporated.
Part III - 1997 Proxy Statement which will be filed with the Securities and
Exchange Commission.
PART I
ITEM 1. BUSINESS
- -------
(a) General:
--------
The Company has seven domestic subsidiaries and seven foreign-based
subsidiaries. The seven domestic subsidiaries are General Combustion
Corporation ("Genco"), Thermotech Systems Corporation ("Thermotech"), Equipment
Services Group, Inc. ("ESGI"), Bituma-Stor, Inc. ("Bituma-Stor"), Bituma
Corporation ("Bituma"), The Davis Line, Inc. and California Pellet Mill Company.
The Company's foreign subsidiaries are General Combustion Ltd. ("Genco Ltd."),
CPM/Europe Limited, CPM/Europe SA, CPM Europe BV, CPM/Pacific (Private) Limited,
Gigantissimo 2046 AB, and California Pellet Mill Europe Limited. Additionally,
the Company has one operating division - Hy-Way Heat Systems ("Hy-Way"). Except
where the context indicates otherwise, the terms "Gencor" and "Company" include
its subsidiaries, predecessors and divisions. The Company operates in Orlando,
Florida; Marquette, Iowa; Youngstown, Ohio; Aurora, Colorado; Crawfordsville,
Indiana; Waterloo, Iowa; N. Kansas City, Missouri; Billingshurst, West Sussex,
England; Hasselholm, Sweden; Amsterdam, Netherlands; Wexford, Ireland; Rueil
Malmaison, France; and Singapore, Republic of Singapore.
Historical Development
- ----------------------
Gencor was incorporated in Florida in 1960, as Mechtron Corporation and changed
its name to Mechtron-Genco Corporation in 1969 following its merger with General
Combustion, Inc. and Genco Manufacturing, Inc. It reincorporated in Delaware in
1969 and adopted the name Mechtron International Corporation in 1970. On June
26, 1987, the Company and its shareholders approved a name change to Gencor
Industries, Inc.
The Company and its subsidiaries have made a number of acquisitions over the
past several years. The following table summarizes the Company's and its
subsidiaries' acquisitions from 1985 to date:
Acquiring Entity Business Acquired Date Type of Business
- ---------------- ----------------- ---- ----------------
Genco, Ltd. Beverley Group 1985 Thermal fluid heaters and
industrial incinerators
Genco Hy-Way Heat Company, Inc. 1986 Manufacturer of fluid heat
transfer systems and specialty
tanks.
Gencor Bituma-Stor, Inc. and 1986 Asphalt plants and hot mix
its wholly owned asphalt storage silos.
subsidiary Bituma
Corporation
Gencor The Davis Line and its 1988 Batch mix asphalt plants,
wholly owned subsidiary specialty tanks, compact
Midwest Tank and rollers and other products.
Construction Holding
Corporation
Gencor Process Equipment 1996 Pelleting, grinding, flaking,
Division of Ingersoll- sugar processing and
Rand Company filtration equipment
-2-
Prior to Gencor's acquisition of the Process Equipment Division ("CPM") of
Ingersoll-Rand Company effective as of September 30, 1996, Gencor had engaged in
the business of the design, manufacture and marketing of industrial combustion
systems, fluid heat transfer systems, asphalt production plants and components
primarily utilized in the production of asphalt and other materials used in the
highway construction industry.
The acquisition of CPM brings to Gencor one new domestic subsidiary and six new
foreign subsidiaries. The Company is engaged in the business of the design,
manufacture and marketing of pelleting, grinding, flaking, sugar processing and
filtration equipment. Gencor intends to continue operating CPM in a similar
manner.
(b) Financial Information About Industry Segments:
---------------------------------------------
During 1996, the Company operated in one business segment, by manufacturing heat
generation, heat transfer equipment, asphalt production plants, aggregate and
other material handling equipment and combustion systems primarily utilized in
the production of materials for the construction and repair of roads and
highways, and related industries. With the acquisition of CPM, Gencor continues
the manufacture of process machinery equipment, however, the industry base of
customers has been expanded to include agricultural and food companies.
(c) Narrative Description of Business:
---------------------------------
Gencor designs, manufactures, and sells industrial combustion systems,
electronic process control systems, fluid heat transfer systems, asphalt
production plants and components, primarily utilized in the production of
asphalt and other materials used in the highway construction industry, as well
as pelleting, grinding, flaking, sugar processing and filtration equipment used
by commercial agricultural companies, integrated food producers, feed mills and
food processing companies. To a lesser extent, the Company's products are also
used in soil remediation processes, chemical and petroleum processing and
production, processing of minerals and in energy generation facilities. The
Company is engaged in continuing product engineering and development efforts to
expand its product lines and to further develop systems which are more energy
efficient and environmentally compatible than equipment presently used
throughout its principal markets.
The Company offers its products and services through its domestic and foreign
subsidiaries. The significant activities of the Company's domestic and foreign
subsidiaries and division are described below.
Genco has been manufacturing and selling combustion systems fueled by oil, gas,
and non-fossil fuels to paving contractors since the 1940's. Genco also
manufactures combustion systems for boilers, fume and liquid incinerators,
dryers and tank heaters.
Hy-Way Systems, a division of Genco, manufactures and sells fluid heat transfer
systems that are generally used by the hot mix asphalt industry and other
process industries. Hy-Way Heat Systems combined the manufacturing operations
of Genco-Sellers, Inc. and Hy-Way Heat Company, Inc. The Hy-Way heat name is
known throughout the world and is often used generically to refer to fluid heat
transfer systems.
Bituma-Stor, Inc. and its wholly owned subsidiary, Bituma Construction Equipment
Corporation, manufacture asphalt plants, hot mix storage silos, fabric
filtration systems and other asphalt plant components. Bituma-Stor had
manufactured hot mix asphalt storage silos, and Bituma Corporation had
manufactured asphalt plants and related components since 1970 as Boeing
Construction Equipment Company. Boeing Construction Equipment Company first
introduced the then-radical concept of drum-mix continuous asphalt production,
since then adopted world-wide as the standard technology. As a result of a 1982
acquisition, the name Boeing Construction Equipment Company was changed to
Bituma Construction Equipment Company. The Bituma Group's products are
recognized for high quality and excellent workmanship and are known for
providing the "heaviest construction" in the asphalt industry.
-3-
The largest portion of Gencor's revenues are derived through the manufacture and
design of asphalt plants and hot mix storage silos used principally to produce
and store asphalt.
The Company's asphalt production equipment operations are subject to seasonal
fluctuation, resulting in lower sales and possible losses in the third and
fourth calendar quarter of each year. Traditionally, asphalt producers do not
purchase new equipment for shipment during the summer and fall months to avoid
disruption of their activities during peak periods of highway construction and
repair.
Thermotech develops, markets and produces equipment to clean soil contaminated
with petroleum products. Thermotech has developed a design which thermally
desorbs the contaminants from the soil and, after filtering out all the solid
matter from the exhaust gasses of the process, subjects the off-gasses to
elevated temperatures as to oxidize all the polluting contaminants in the
exhaust and release clean and odorless carbon dioxide and water.
Genco Ltd. has directed its efforts toward engineering sales and services used
by the hot mix asphalt industry and other process industries. Genco Ltd. also
designs and sells fluid heat transfer systems that are generally in the larger
sizes as used by the refineries and other heavy industries.
As a result of the Company's acquisition of the CPM Division, the Company has
acquired one new domestic subsidiary, California Pellet Mill Company, a
California corporation (CPM) and its six new foreign subsidiaries, CPM/Europe
Limited, CPM/Europe SA, CPM Europe BV, CPM Pacific (Private) Limited,
Gigantissimo 2046 AB and California Pellet Mill/Europe Limited. Except where
the context indicates otherwise, the term "CPM" includes CPM and its six foreign
subsidiaries. These companies manufacture a range of particle reduction and
separation products for various agricultural and related companies. CPM's
products can generally be classified into four distinct product lines:
pelleting equipment, grinding and flaking equipment, sugar processing equipment,
and filtration equipment. CPM's pelleting, grinding and flaking products are
sold to a common customer base, often for use in an integrated system for animal
feed production. This common market focus has allowed CPM to realize certain
synergies from the combination of these businesses, particularly in the areas of
marketing and manufacturing.
Pelleting is primarily used in the production of animal feed and involves a
particle size upgrading process in which loose, often bulky material with
physical characteristics ranging from a fine powder to small granules are
compressed and formed into pellets of increased bulk density. Pellets are
durable and stable, and thus highly resistant to disintegration and breakage.
This eliminates many of the processing problems normally encountered with fine
substances, permitting particle size control, reclamation of undersize
particles, and the elimination of dust. Although pelleting equipment is
typically used in the production of animal feed, pelleting technology is
increasingly being used by other industries, including waste processing and
chemical and plastics manufacturing.
CPM's grinding and flaking equipment includes machinery designed to grind and
process various grains, including wheat, soybeans, and corn. This equipment is
often used by customers for the preparation of ingredients for use in pelletized
animal feed or for the grinding of mash feed and is also used for the processing
of grains for oil separation.
Under the name Silver-Weibull, CPM manufactures sugar processing equipment,
including extraction centrifuges and crystallizers for cane and beet sugar
processors. The manufacture of sugar involves a number of phases which vary
depending on whether the sugar is sourced from cane or beet. However, both
processes lead to a crystallization process in which the sugar is crystallized
and separated from a raw juice known as "standard liquor." CPM manufactures
products specifically for this crystallization phase of sugar processing.
CPM also manufactures a small line of filtration products, including two roll
presses, and a continuous pressure filter. These products are sold to a range
of industrial users, including mineral processing and corn wet milling
companies.
-4-
International Operations:
- ------------------------
The Company has seven foreign subsidiaries. See "Narrative Description of
Business" above for information concerning the foreign subsidiaries.
Sources of Supply and Manufacturing:
- -----------------------------------
Virtually all products sold by the Company and its subsidiaries are manufactured
by the Company, except for procured raw materials and hardware. The Company
does purchase a large quantity of steel with which to manufacture all of its
products. The Company regularly purchases from over 500 manufacturers and
suppliers of basic raw materials and a broad variety of hardware utilized in the
manufacture of the products of the Company. No one manufacturer or supplier
accounted for more than 10% of the Company's total purchases during the year
ended September 30, 1996. The Company constantly reviews the cost effectiveness
of internal manufacturing versus subcontracting/assembly of its product line.
Currently, CPM does purchase large quantities of steel, forging and machined
components from several sources worldwide. No one manufacturer or supplier
accounted for more than 10% of CPM total purchases.
Inventories:
- -----------
As of September 30, 1996, inventories constituted approximately 59% of the
Company's current assets and 35% of the Company's total assets. Most of the
inventory is utilized in manufacturing operations.
Product Engineering and Development:
- -----------------------------------
The Company's product engineering and development activities are directed and
conducted at its offices in Orlando, Florida; Marquette, Iowa; Youngstown, Ohio
and Billingshurst, West Sussex, England. Work has been accomplished on the uses
of cost effective, nonfossil fuels, bio-mass, refuse-derived fuel, coal and coal
mixtures, the economical recycling of old asphalt, new designs of
environmentally compatible asphalt plants and development of advanced designs of
machinery for the remediation of contaminated soil. In addition, product
engineering and development activities are directed toward more efficient
methods of producing asphalt by constantly seeking to upgrade the quality of the
asphalt plants manufactured and the methods by which asphalt is produced by the
plants. Product engineering and development has also been directed toward the
development of combustion systems that operate at higher temperatures and with
higher levels of environmental compatibility, as well as more efficient and
lower cost fluid heat transfer systems. Product engineering and development
continues on a daily basis into other applications beneficial to the Company.
Product engineering and development expenses were approximately $2,207,000,
$1,920,000, and $1,939,000 in the twelve months ended September 30, 1996, 1995,
and 1994, respectively.
Competition:
- -----------
Gencor is subject to competition from a number of sources, some of which have
greater resources than the Company. Gencor believes that its superior product
performance in terms of advanced technological design, fuel efficiency, product
reliability, environmental compatibility and after-sale service are key factors
in maintaining a competitive advantage in the industry. Thus, the Company has
attempted to design and produce technically superior products and to provide
extensive servicing capability as a means of overcoming competitors. Failure to
maintain technical leadership in the industry or adequate servicing capability
could result in decreased sales and adverse earnings consequences to the Company
in the future.
CPM is also subject to competition from a number of sources on its product lines
as well. Its domestic competition for pellet mills consists primarily of small
manufacturers who lack both the capital resources and the breadth of product
line possessed by CPM. The competitive environment for CPM's sugar processing
equipment is characterized by a few large manufacturers and a number of
relatively small manufacturers which focus on specific geographic markets.
-5-
Sales Backlog:
- -------------
The nature of Gencor's business is such as to require a relatively short
turnaround from order to shipment; usually less than ninety (90) days. Demand
for Company asphalt production equipment exhibits seasonality, particularly in
the first and fourth fiscal quarter whereas the Company's agricultural products
exhibit slightly less seasonality, primarily in the second and third fiscal
quarters. As a result of the foregoing, the size of the Company's backlog
should not be viewed as an indicator of future Company financial results. The
Company's backlog was approximately $41,165,000 at November 27, 1996. The
Company believes that all of the backlog at November 27, 1996 will be delivered
in fiscal 1997.
Customers and Marketing:
- -----------------------
The principal users of Gencor products are large highway construction companies,
producers of materials used in highway construction, commercial agricultural
companies, integrated food producers, feed mills and food processing companies.
Gencor believes that 4,000 to 5,000 asphalt production plants operate in the
United States, and a similar number in the United Kingdom and Europe. Asphalt
paving contractors participate in the highway construction industry, which is
equipment and capital intensive. Gencor's focus over recent years has been on
developing products which are fuel efficient, environmentally compatible, and
technologically ahead of the competition. It utilizes technologies involving
advanced concepts and disciplines in environmental compliance, heat release,
energy conservation, heat recovery and noise attenuation in manufacturing
machinery and plants used in the production of highway construction materials.
The Gencor sales are handled by Gencor employed sales representatives,
independent dealers and agents located throughout the world. The Company has
established marketing and manufacturing programs to enable Hy-Way Heat and Genco
Ltd. to sell one another's product lines since the product lines are
complementary. In addition, Genco Ltd. is marketing the general Combustion
Systems in the United Kingdom and Europe as well as marketing the Bituma and H&B
lines of asphalt plants and related components in the same area.
Through many years of supplying its products and services to customers in the
U.S. and around the world, Gencor's management believes that CPM has the largest
installed base of pelleting equipment in the world and also one of the largest
bases of grinding equipment. Many of CPM's products are perceived by customers
as being the most reliable and technologically advanced equipment available.
This large installed base has provided CPM with a strong reputation and customer
base which generates a regular and recurring level of orders for its products
and services. CPM's position in its targeted markets continues to be well
protected by its reputation, new process innovations, applications expertise and
customer loyalty.
Because of the common end-markets and customers for the CPM products, a common
sales and marketing team is used to market CPM's products throughout the world.
Furthermore, because CPM is one of the largest producers in all of its products,
and due to the benefits of consolidating these products into a common marketing
effort, CPM believes that it has developed the largest and most comprehensive
marketing and sales team in the industry.
Internationally, CPM's sales and marketing efforts vary from region to region.
In Europe, the majority of sales representatives are direct employees of Gencor.
In Japan, CPM's products are marketed through Sanyo Trading Company. In
addition, CPM uses marketing agreements with companies in Europe to market
Silver-Weibull Sugar processing equipment.
-6-
Regulations:
- -----------
The Company believes it has the design and manufacturing capability to meet all
industry or governmental agency standards that may apply to its entire line of
products, including all domestic and foreign structural, electrical and safety
codes. Also the Company's products can be designed and manufactured to meet
Environmental Protection Agency regulations. Certain state and local regulatory
authorities have strong environmental impact regulations. While the Company
believes such regulations have helped rather than restricted its marketing
efforts and sales results, there is no assurance that future federal, state or
local restrictions will not adversely affect the Company's products and earnings
in the future.
Employees:
- ---------
As of September 30, 1996, the Company employed approximately 1,050 persons in
manufacturing, sales and marketing, and engineering positions relating to
product manufacturing and development, and administration. The Company has
negotiated a collective bargaining agreement as of June 25, 1996 effective
through June 27, 1998, covering the production and maintenance employees at its
Marquette, Iowa facility. In addition, the Company has a collective bargaining
agreement in place covering the production employees at its Crawfordsville,
Indiana facility until April 1, 2000.
(d) Financial Information About Foreign and Domestic Operations and Export
----------------------------------------------------------------------
Sales:
-----
Geographic information at September 30, 1996, 1995, and 1994 and for the years
ended September 30, 1996, 1995, and 1994 is as follows:
1996 1995 1994
--------------- -------------- ---------------
Net Sales to Unaffiliated Customers
United States $ 57,395,923.00 $56,427,367.00 $55,395,036.00
Europe 2,811,999.00 2,517,065.00 2,336,871.00
--------------- -------------- --------------
Total Consolidated $ 60,207,922.00 $58,944,432.00 $57,731,907.00
=============== ============== ==============
Net Sales or Transfers Between
Geographic Areas
United States $ - $ - $ -
Europe 109,172.00 143,861.00 224,365.00
--------------- -------------- --------------
Total $ 109,172.00 $ 143,861.00 $ 224,365.00
=============== ============== ==============
Operating Income
United States $ 5,067,238.00 $ 3,657,019.00 $ 3,466,893.00
Europe 173,204.00 213,900.00 93,451.00
--------------- -------------- --------------
Total $ 5,240,442.00 $ 3,870,919.00 $ 3,560,344.00
=============== ============== ==============
Identifiable Assets
United States $ 98,169,867.00 $32,984,053.00 $32,595,135.00
Europe 13,915,674.00 1,835,425.00 1,943,301.00
Other 6,975,854.00 - -
--------------- -------------- ---------------
Total $119,061,395.00 $34,819,478.00 $34,538,436.00
=============== ============== ==============
Export Sales from the U.S. $ 1,846,000.00 $ 4,828,000.00 $ 7,548,000.00
=============== ============== ==============
-7-
(e) Executive Officers of the Registrant:
------------------------------------
The executive officers of the Registrant are:
NAME POSITION
---- ---------
E.J. Elliott Chairman of the Board and President
John E. Elliott Executive Vice President
Russell R. Lee III Treasurer
Alan B. Dawes Managing Director, General Combustion Ltd.
David F. Brashears Senior Vice President, Technology
D. William Garrett Vice President, Sales
Marc G. Elliott Vice President, Marketing
Jeanne Lyons Secretary
Mr. E.J. Elliott has served as Chairman of the Board since 1973 and President
since 1969. Mr. Elliott has over 40 years experience in the design, manufacture
and operation of construction machinery and asphalt manufacturing plants. In
the 1960's, Mr. Elliott owned and served as President and Chairman of General
Combustion, Inc. and Genco Manufacturing Corporation. Mr. Elliott has been a
director of the Company since 1968.
Mr. John Elliott was elected Assistant Vice President and a Director of the
Company in 1985. In 1986, he was elected a Vice President and promoted to
Executive Vice president in 1989. Mr. John Elliott has been with the Company
since 1982.
Mr. Lee was elected Treasurer in 1995. He had previously been Corporate
Controller since he joined the Company in 1990.
Mr. Dawes was elected Managing Director of General Combustion Ltd. in the U.K.,
in July 1992. He had previously directed the Company's technical efforts in the
U.K. and Europe since the 1985 acquisition of certain assets of the Beverley
Group.
Mr. Brashears was named Senior Vice President, Technology, in July 1993. He had
previously been Vice President, Engineering, since he joined the Company in
1978.
Mr. Garrett joined the Company in 1985 with the acquisition of Sellers
Corporation and has held numerous management positions in sales and marketing
for various Company subsidiaries. In 1991, he was elected to the position of
Vice President, Sales.
Mr. Marc Elliott was elected Vice President, Marketing, in July 1993. He had
previously served in various marketing positions since he joined the Company in
1988.
Ms. Jeanne Lyons was elected Secretary in 1996 and has been with the Company
since 1995.
-8-
ITEM 2. PROPERTIES
- -------
LOCATION ACREAGE SQ. FEET PRINCIPAL FUNCTION
- -------- ------- -------- ------------------
Orange County, Florida 27 171,000 Principal Company offices and
manufacturing of General Combustion
and H&B products
Billinghurst, West Sussex,
England 1.2 5,000 General Combustion Ltd. offices
Youngstown, Ohio 5.5 45,000 Hy-Way offices and manufacturing
Marquette, Iowa 72 137,000 Bituma Group offices and manufacturing
Indianapolis, Indiana 11.3 79,000 Property for sale (former H&B offices
and manufacturing facilities)
Aurora, Colorado 16.8 117,000 CPM offices and manufacturing
Hasselholm, Sweden N/A 10,000 CPM offices and manufacturing
Crawfordsville, Indiana 2.7 62,000 CPM offices and manufacturing
Waterloo, Iowa 11.5 55,000 CPM offices and manufacturing
North Kansas City, Missouri .7 6,000 CPM offices and warehouse
Amsterdam, Netherlands 1.2 75,000 CPM offices and manufacturing
Wexford, Ireland 5.6 60,000 CPM offices and manufacturing
Rueil Malmaison, France .2 4,000 CPM offices
Singapore, Republic of
Singapore N/A 40,000 CPM offices and manufacturing
See Note 5 to the accompanying consolidated financial statements (Item 14) for a
description of existing encumbrances.
ITEM 3. LEGAL PROCEEDINGS
- -------
In the normal course of business, the Company has various lawsuits and claims
pending, which may be covered in whole or in party by insurance, and which, in
any event, if found against the Company, will not have a material effect.
Management has reviewed all litigation matters and, upon advice of counsel, has
made provisions for any estimable losses and expenses of litigation.
-9-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------
(a) Annual meeting held August 14, 1996
(b) Not applicable
(c) There were 1,338,832 shares of Common Stock and 441,532 of Class B Stock
outstanding as of July 1, 1996, the record date for the 1996 annual meeting
of shareholders. A total of 1,218,943 shares were voted. The following
matters were voted upon at the meeting:
The five nominees for the Board of Directors were elected by the
shareholders with the following vote:
Votes Votes Broker
Nominee For Withheld Non-Votes
------- ----- -------- ---------
E. J. Elliott 407,344 (1) - N/A
Constantine L. Corpas - (1) - N/A
John E. Elliott - (1) - N/A
Peter Kourmolis - (1) - N/A
David A. Air 645,262 576,591 N/A
(1) Class B shareholders elected these directors.
The amendment to the Company's Certificate of Incorporation to increase the
number of authorized Common Stock from 5,000,000 to 15,000,000 and the
number of authorized Class B Stock from 3,000,000 to 6,000,000 was not
passed by the shareholders with the following vote:
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------- ----------- ----------------
Common stock 570,059 649,439 4,521 N/A
Class B stock 407,344 - - N/A
The Selection of Deloitte & Touche LLP, independent certified public
accountants, as auditors for the Company for the year ending September 30,
1996 was ratified by the shareholders with the following vote:
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------- ----------- ----------------
1,213,206 4,827 910 N/A
(d) Not applicable
-10-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
- ------- MATTERS
Stock price information is as follows:
SALES PRICES
------------
HIGH LOW
---- ---
1996
- ----
First Quarter 11 7 1/2
Second Quarter 9 1/2 7 1/2
Third Quarter 9 13/16 8 1/2
Fourth Quarter 17 7 1/2
1995
- ----
First Quarter 15 9 1/2
Second Quarter 13 9
Third Quarter 11 1/4 8 7/8
Fourth Quarter 14 1/4 8 1/4
As of November 27, 1996, there were 456 holders of Common Stock of record and
12 holders of Class B Stock of record.
Gencor's stock is traded on the American Stock Exchange under the symbol (GX).
On November 21, 1996, the Board of Directors declared a cash dividend of $.05
per share, payable January 4, 1997 to shareholders of record as of December 18,
1996. The Company previously paid a cash dividend of $.05 per share on January
5, 1996 to shareholders of record as of December 18, 1995.
On November 16, 1994, the Company's Board of Directors declared a ten percent
stock dividend. Prior to this, the Company had not paid any dividends in cash
or otherwise on any shares of its capital stock since 1971.
Any dividends which may be paid in the future will be dependent upon conditions
then existing and will be at the discretion of the Board of Directors of the
Company.
-11-
ITEM 6. SELECTED FINANCIAL DATA
- -------
Nine Months
Years Ended Ended Year Ended
September 30, September 30, December 31,
1996 1995 1994 1993 1992 (1)
Net revenue $ 60,207,922 $58,944,432 $57,731,907 $43,642,125 $44,852,548
Operating income 5,240,442 3,870,919 3,560,344 2,072,150 1,188,810
Income before extraordinary gain 2,756,564 2,038,722 1,630,516 955,486 34,741
Extraordinary gain - 497,701 - - -
------------ ----------- ----------- ----------- -----------
Net income $ 2,756,564 $ 2,536,423 $ 1,630,516 $ 955,486 $ 34,741
============ =========== =========== =========== ===========
Net income per common share (2):
Income before extraordinary gain $ 1.55 $ 1.18 $ 1.01 $ 0.59 $ 0.02
Extraordinary gain - 0.28 - - -
------------ ----------- ---------- ----------- -----------
Net income $ 1.55 $ 1.46 $ 1.01 $ 0.59 $ 0.02
============ =========== =========== =========== ===========
Selected balance sheet data:
September 30, September 30, December 31,
1996(3) 1995 1994 1993 1992(1)
------- ---- ---- ---- -------
Current assets $ 69,812,647 $24,005,167 $23,437,160 $21,199,692 $19,409,613
Current liabilities $ 29,952,263 $12,957,780 $15,171,583 $16,046,375 $13,888,648
Total assets $119,061,395 $34,819,478 $34,538,436 $35,138,357 $32,635,554
Long-term debt $ 73,746,253 $11,708,403 $11,623,075 $12,387,854 $13,389,751
Shareholders' equity $ 12,399,238 $ 9,642,295 $ 7,099,778 $ 5,417,128 $ 4,454,155
(1) In January 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (FAS 109). The selected
financial data presented for the year ended December 31, 1992 has been
adjusted to reflect the effect of retroactively applying FAS 109.
(2) Income per share has been computed based on the weighted average number of
common and common equivalent shares outstanding during each fiscal year.
1996 1,780,159
1995 1,732,725
1994 1,610,608
1993 1,606,740
1992 1,602,092
(3) Includes the Company's acquisition of CPM, effective as of September 30,
1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- OF OPERATIONS
The consolidated statements of income, shareholders' equity, and cash flows are
presented for the years ended September 30, 1996, 1995, and 1994.
Year ended September 30, 1996 compared with the year ended September 30, 1995
- -----------------------------------------------------------------------------
Net sales and revenue increased to $60,208,000 in the twelve months ended
September 30, 1996 as compared to $58,944,000 in the twelve months ended
September 30, 1995. Income before the extraordinary gain increased 35.2% from
$2,039,000 in the twelve months ended September 30, 1995 to $2,757,000 in the
1996 period.
-12-
Sales in the U.S. increased slightly from $56,427,000 in 1995's twelve months to
$57,396,000 in the 1996 period. Production costs as a percentage of sales also
increased slightly between the two periods. Operating expenses in the U.S.
decreased $1,926,000 in the twelve months ended September 30, 1996 from 20.9% of
sales to 17.3% of sales. This increase resulted from a decrease in bad debt
expense and outside service costs.
Operating income in the U.S. increased from $3,657,000 in the twelve months
ended September 30, 1995 to $5,067,000 in 1996, as a result of the higher sales
volume and lower operating expenses.
The Company's U.K. subsidiary's sales increased from $2,517,000 in the twelve
months ended September 30, 1995 to $2,812,000 in fiscal 1996. Operating income
in the U.K. decreased 19.2% from $214,000 in 1995 to $173,000 in 1996, as a
result of sales of lower margin products.
Consolidated nonoperating income and expense increased from a net expense of
$746,000 in the twelve months ended September 30, 1995 to $1,289,000 in fiscal
1996, as the result of higher interest expense due to higher average outstanding
debt balances combined with the loss of nonrecurring equipment rental income in
fiscal 1995.
Year ended September 30, 1995 compared with the year ended September 30, 1994
- -----------------------------------------------------------------------------
Net sales and revenue increased to $58,944,000 in the twelve months ended
September 30, 1995 as compared to $57,732,000 in the twelve months ended
September 30,1994. Income before the extraordinary gain increased 25.0% from
$1,630,000 in the twelve months ended September 30, 1994 to $2,039,000 in the
1995 period. Net income, which includes an extraordinary gain of $498,000
related to a real estate transaction, increased to $2,536,000 for the twelve
months ended September 30, 1995 as compared to $1,630,000 in the 1994 period.
Sales in the U.S. increased slightly from $55,395,000 in 1994's twelve months to
$56,427,000 in the 1995 period. Production costs as a percentage of sales
remained stable between the two periods. Operating expenses in the U.S.
increased $1,277,000 in the twelve months ended September 30, 1995 from 19.0% of
sales to 20.9% of sales. This increase resulted from increase in outside
service costs, commissions, and bad debt expense partially offset by lower
insurance costs.
Operating income in the U.S. increased from $3,467,000 in the twelve months
ended September 30, 1994 to $3,657,000 in 1995, as a result of the higher sales
volume partially offset by higher operating expenses.
The Company's U.K. subsidiary's sales increased from $2,337,000 in the twelve
months ended September 30, 1994 to $2,517,000 in fiscal 1995. Operating income
in the U.K. increased 230% from $93,000 in 1994 to $214,000 in 1995, as the
result of the increase in sales volume, particularly in the higher margin
product lines.
Consolidated nonoperating income and expense decreased from a net expense of
$1,106,000 in the twelve months ended September 30, 1994 to $746,000 in fiscal
1995, as the result of nonrecurring litigation settlement costs which were
partially offset by the gain on the sale of certain real estate in fiscal 1994.
Liquidity and Capital Resources
- -------------------------------
The Company has working capital at September 30, 1996 of $39,860,000 as compared
with working capital of $11,047,000 as of September 30, 1995. The increase in
working capital resulted from an increase in inventories and accounts receivable
primarily due to assets received in conjunction with the acquisition of CPM.
-13-
The Company's asphalt production equipment operations are subject to seasonal
fluctuation, often resulting in lower sales in the third and fourth calendar
quarters of each period and much lower earnings or losses during such quarters.
Traditionally, asphalt producers do not purchase new equipment or replace old
equipment during the summer and fall months, thereby avoiding disruption of
their activities during such peak periods of highway construction. The
Company's soil remediation equipment business does not show such seasonality.
During fiscal 1996, the Company's total debt increased $3,783,000, as a result
of borrowings needed to meet working capital requirements, partially offset by
scheduled principal repayments, and $60,869,000 as a result of the acquisition
of CPM.
The Company owned two real estate properties which are regarded as excess and
are unused as a result of consolidation and having built more efficient, modern
facilities. During fiscal 1996, one of these properties was sold and the
proceeds of these sales were used to reduce bank debt. The Company cannot
predict when it will sell the remaining parcel of property.
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.
Capital expenditures were approximately $1,345,000 in the year ended September
30, 1996 compared to $463,000 in the year ended September 30, 1995.
The effect of inflationary adjustments have been substantially offset by pricing
adjustments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -------
An index to the consolidated financial statements of the Company and its
subsidiaries is set forth following Part IV hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- -------
AND FINANCIAL DISCLOSURE
None
-14-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
- --------
The information regarding the Company's Directors required by this Item 10 is
incorporated herein by reference to the Company's definitive Proxy statement,
which will be filed with the Securities and Exchange Commission.
Information regarding the Company's Executive Officers required by this Item 10
is furnished in a separate item captioned "Executive Officers of Registrant,"
included in Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
- --------
The information required by this Item 11 is incorporated herein by reference to
the Company's definitive Proxy Statement which will be filed with the Securities
and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------
The information required by this Item 12 is incorporated herein by reference to
the Company's definitive Proxy Statement which will be filed with the Securities
and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------
The information required by this Item 13 is incorporated herein by reference to
the Company's definitive Proxy Statement which will be filed with the Securities
and Exchange Commission.
-15-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------
(a) A listing of financial statements and financial statement schedules filed
as part of this report is set forth in the "Index to Financial Statements"
following Part IV hereof.
(b) Reports on Form 8-K: Form 8-K filed on August 19, 1996.
(c) Exhibit Index - 1996 Annual Report on Form 10-K.
EXHIBIT
NUMBER DESCRIPTION FILED HEREWITH
- ------- ----------- --------------
3.1 Restated Certificate of Incorporation of Company,
incorporated by reference to Exhibit 3.1 to
Registration No. 33-627
3.2 Composite of Bylaws of Company, incorporated by
reference to Exhibit 3.2 to Registration No. 33-627
3.3 Certificate of Amendment, changing name of Mechtron
International Corporation to Gencor Industries, Inc.
and adding a "twelfth" article regarding director
liability limitation, incorporated by reference to
the Company's annual report on Form 10-K for the
year ended December 31, 1987.
4.1 Form of Common Stock certificate, incorporated by
reference to Exhibit 4.1 to Registration No. 33-627.
4.2 Loan Agreement between the Orange County Industrial
Development Authority and the Company dated as of
December 1, 1984, incorporated by reference to
Exhibit 4.2 to Registration No. 33-627.
4.3 Specimen copy of Promissory Note dated December 1,
1984, from the Company to the Orange County Industrial
Development Authority in the principal sum of
$5 million, incorporated by reference to Exhibit 4.3
to Registration No. 33-627
4.4 Mortgage Deed and Security Agreement dated as of
December 1, 1984, from the Company to the Orange County
Industrial Development Authority, incorporated by
reference to Exhibit 4.4 to Registration No. 33-627.
-17-
EXHIBIT
NUMBER DESCRIPTION FILED HEREWITH
- ------- ----------- --------------
4.5 Trust Indenture between Orange County Industrial
Development Authority and Barnett Banks Trust Company
dated as of December 1, 1984, incorporated by
reference to Exhibit 4.5 to Registration No. 33-627.
4.6 Guaranty Agreement between General Combustion
Corporation, Mechtron International DISC Corporation,
Control Delta Corporation, Thermotech Systems
Corporation of Florida, General Combustion Limited,
and the Orange County Industrial Development
Authority dated as of December 1, 1984, incorporated
by reference to Exhibit 4.6 to Registration
No. 33-627.
4.11 Specimen copy of note from Company to David Eugene
Davis, dated January 8, 1988, incorporated by
reference to an exhibit to the Company's Report on
Form 8-K filed on February 17, 1988.
4.27 $95 million Senior Secured Credit Agreement, by
and among Gencor, the Lenders and Credit Lyonnais,
New York Bank as Agent to the Lenders and the
Issuing Bank with respect to the Letters of
Credit, incorporated by reference to Exhibit 10.4
to the Company's Report on Form 8-K filed on
December 26, 1996.
4.28 Borrower Security Agreement, dated as of December 10,
1996, made by Registrant in favor of Credit Lyonnais
New York Branch, as Agent, incorporated by reference
to Exhibit 10.5 to the Company's Report on Form 8-K
filed on December 26, 1996.
4.29 Borrower Copyright Security Agreement, dated as of
December 10, 1996, made by Registrant in favor of
Credit Lyonnais New York Branch, as Agent,
incorporated by reference to Exhibit 10.6 to the
Company's Report on Form 8-K filed on
December 26, 1996.
4.30 Borrower Pledge Agreement, dated as of December 10,
1996, made by Registrant in favor of Credit Lyonnais
New York Branch, as Agent, incorporated by reference
to Exhibit 10.7 to the Company's Report on Form 8-K
filed on December 26, 1996.
-18-
EXHIBIT
NUMBER DESCRIPTION FILED HEREWITH
- ------- ----------- --------------
4.31 California Pellet Mill Company Security Agreement,
dated as of December 10, 1996, made by California
Pellet Mill Company in favor of Credit Lyonnais
New York Branch, as Agent, incorporated by reference
to Exhibit 10.8 to the Company's Report on Form 8-K
filed on December 26, 1996.
4.32 California Pellet Mill Company Pledge Agreement,
dated as of December 10, 1996, made by California
Pellet Mill Company in favor of Credit Lyonnais
New York Branch, as Agent, incorporated by reference
to Exhibit 10.9 to the Company's Report on Form 8-K
filed on December 26, 1996.
4.33 General Combustion Corporation Security Agreement,
dated as of December 10, 1996, made by General
Combustion Corporation in favor of Credit Lyonnais
New York Branch, as Agent, incorporated by reference
to Exhibit 10.10 to the Company's Report on Form 8-K
filed on December 26, 1996.
4.34 Equipment Services Group, Inc. Security Agreement,
dated as of December 10, 1996, made by Equipment
Services Group, Inc. in favor of Credit Lyonnais
New York Branch, as Agent, incorporated by reference
to Exhibit 10.11 to the Company's Report on Form 8-K
filed on December 26, 1996.
4.35 Thermotech Systems Corporation Security Agreement,
dated as of December 10, 1996, made by Thermotech
Systems Corporation in favor of Credit Lyonnais
New York Branch, as Agent, incorporated by reference
to Exhibit 10.12 to the Company's Report on Form 8-K
filed on December 26, 1996.
4.36 Bituma-Stor, Inc. Security Agreement, dated as of
December 10, 1996, made by Bituma-Stor, Inc. in
favor of Credit Lyonnais New York Branch, as
Agent, incorporated by reference to Exhibit 10.13
to the Company's Report on Form 8-K filed on
December 26, 1996.
4.37 Bituma Corporation Security Agreement, dated as of
December 10, 1996, made by Bituma Corporation in
favor of Credit Lyonnais New York Branch, as
Agent incorporated by reference to Exhibit 10.14
to the Company's Report on Form 8-K filed on
December 26, 1996.
-19-
EXHIBIT
NUMBER DESCRIPTION FILED HEREWITH
- ------- ----------- --------------
4.38 Mortgage made by Gencor, Industries, Inc. in
favor of Credit Lyonnais New York Branch, as
Agent, for certain real property located in
Orlando, Florida, incorporated by reference to
Exhibit 10.15 to the Company's Report on
Form 8-K filed on December 26, 1996.
4.39 Mortgage made by General Combustion Corporation
in favor of Credit Lyonnais New York Branch, as
Agent, for certain real property located in
Youngstown, Ohio, incorporated by reference to
Exhibit 10.16 to the Company's Report on Form 8-K
filed on December 26, 1996.
4.40 Mortgage made by Gencor Industries, Inc. in
favor of Credit Lyonnais New York Branch, as
Agent, for certain real property located in
Marquette, Iowa, incorporated by reference to
Exhibit 10.17 to the Company's Report on Form 8-K
filed on December 26, 1996.
4.41 Mortgage made by California Pellet Mill Company
in favor of Credit Lyonnais New York Branch,
as Agent, for certain real property located in
Waterloo, Iowa, incorporated by reference to
Exhibit 10.18 to the Company's Report on Form 8-K
filed on December 26, 1996.
4.42 Mortgage made by California Pellet Mill Company
in favor of Credit Lyonnais New York Branch,
as Agent, for certain real property located in
Crawfordsville, Indiana, incorporated by
reference to Exhibit 10.19 to the Company's
Report on Form 8-K filed on December 26, 1996.
4.43 Tranche A Term Note, incorporated by reference to
Exhibit 10.20 to the Company's Report on Form 8-K
filed on December 26, 1996.
4.44 Tranche B Term Note, incorporated by reference to
Exhibit 10.21 to the Company's Report on Form 8-K
filed on December 26, 1996.
4.45 Revolving Credit Notes, incorporated by reference to
Exhibit 10.22 to the Company's Report on Form 8-K
filed on December 26, 1996.
10.1 1982 Incentive Stock Option Plan and form of Stock
Option Agreement, incorporated by reference to
Exhibit 10.1(a) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1984.
-20-
EXHIBIT
NUMBER DESCRIPTION FILED HEREWITH
- ------- ----------- --------------
10.2 Form of Agreement for Nonqualified Stock Options
granted in 1982, 1983, 1984, and 1985, incorporated
by reference to Exhibit 10.2(b) to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1984.
10.5 Form of Agreement for Nonqualified Stock Options
granted in 1986, incorporated by reference to the
Annual Report on Form 10-K for the year ended
December 31, 1986.
10.6 1992 Stock Option Plan and Form of Agreement,
incorporated by reference to Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1992.
10.7 Purchase Agreement between Ingersoll-Rand Company and
Registrant, dated August 12, 1996 incorporated by
reference to Exhibit 10.1 to the Company's Report on
Form 8-K filed on August 19, 1996.
10.8 First Amendment, dated as of November 22, 1996, to
the Purchase Agreement between Ingersoll-Rand
Company and Registrant, dated August 12, 1996
incorporated by reference to Exhibit 10.2 to
the Company's Report on Form 8-K filed on
December 26, 1996.
10.9 Second Amendment, dated as of December 10, 1996,
to the Purchase Agreement between Ingersoll-Rand
Company and Registrant, dated August 12, 1996
incorporated by reference to Exhibit 10.3 to
the Company's Report on Form 8-K filed on
December 26, 1996.
11.0 Statement regarding Computation of Earnings per Share. X
21.0 Subsidiaries of the Registrant. X
-21-
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.
Dated: December 30, 1996 GENCOR INDUSTRIES, INC.
(Registrant)
By: /s/ E.J. Elliott
--------------------
E.J. Elliott
President and Chairman
of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated. The signatures of Directors
constitute a majority of Directors.
/s/ E.J. Elliott /s/ Russell R. Lee III
- ---------------- ----------------------
E.J. Elliott Russell R. Lee III
President and Chairman of the Board Treasurer
/s/ C.L. Corpas /s/ Peter Kourmolis
- --------------- -------------------
C.L. Corpas Peter Kourmolis
Director Director
/s/ John E. Elliott /s/ David A. Air
- ------------------- ----------------
John E. Elliott David A. Air
Director Director
-24-
GENCOR INDUSTRIES, INC.
-----------------------
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
---------------------------------------------------------------
PAGE
------
Report of Independent Certified Public Accountants............. 26
Consolidated Balance Sheets at September 30, 1996 and 1995..... 27
Consolidated Statements of Income for the years ended
September 30, 1996, 1995, and 1994........................... 28
Consolidated Statements of Shareholders' Equity for the years
ended September 30, 1996, 1995, and 1994..................... 29
Consolidated Statements of Cash Flows for the years ended
September 30, 1996, 1995, and 1994........................... 30
Notes to Consolidated Financial Statements..................... 31
Financial Statement Schedule:
VIII Valuation and Qualifying Accounts...................... 40
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
-25-
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Gencor Industries, Inc.
Orlando, Florida
We have audited the accompanying consolidated balance sheets of Gencor
Industries, Inc. and subsidiaries (the "Company") as of September 30, 1996 and
1995, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended September 30,
1996. Our audits also included the financial statement schedule listed in the
accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Gencor Industries, Inc. and
subsidiaries at September 30, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1996, in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
December 10, 1996
Orlando, Florida
-26-
GENCOR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
1996 1995
------------ -----------
ASSETS
Current assets:
Cash and cash equivalents $ 1,501,546 $ 415,668
Accounts receivable, less allowance for doubtful accounts
of $2,859,000 ($2,555,000 in 1995) 24,645,679 7,184,733
Inventories 41,536,558 14,714,777
Prepaid expenses, including deferred income taxes of
$612,000 ($1,150,000 in 1995) 2,128,864 1,689,989
------------ -----------
Total current assets 69,812,647 24,005,167
Property and equipment, net 36,795,774 10,453,405
Other assets 3,345,791 360,906
Goodwill 9,107,183
------------ -----------
$119,061,395 $34,819,478
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,699,151 $ 913,337
Current portion of long-term debt 2,528,367 632,254
Accounts payable 13,368,333 7,167,886
Customer deposits 3,242,271 448,166
Income taxes payable 284,699 428,237
Accrued expenses 8,829,442 3,367,900
------------ -----------
Total current liabilites 29,952,263 12,957,780
Post-retirement benefits 1,525,800
Deferred income taxes 1,437,841 511,000
Long-term debt 73,746,253 11,708,403
Contingencies and commitments
Shareholders' equity:
Preferred stock, par value $.10 per share; authorized
300,000 shares; none issued
Common stock, par value $.10 per share; 5,000,000
shares authorized;1,620,267 shares issued
(1,605,267 shares in 1995) 162,027 160,527
Class B stock, par value $.10 per share; 3,000,000
shares authorized; 441,532 shares issued and outstanding
(434,032 shares in 1995) 44,153 43,403
Capital in excess of par value 7,836,158 7,740,908
Retained earnings 4,998,558 2,328,655
Cumulative translation adjustment 308,671 319,131
------------ -----------
13,349,567 10,592,624
Less: Subscription receivable from officer (94,992) (94,992)
Common stock in treasury, 266,435 shares at cost (855,337) (855,337)
------------ -----------
12,399,238 9,642,295
------------ -----------
$119,061,395 $34,819,478
============ ===========
See accompanying notes to consolidated financial statements.
-27-
GENCOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended September 30,
1996 1995 1994
----------- ----------- -----------
Net revenue $60,207,922 $58,944,432 $57,731,907
Costs and expenses:
Production costs 44,533,966 42,763,506 43,139,659
Product engineering and development 2,207,379 1,919,851 1,939,038
Selling, general and administration expenses 8,226,135 10,390,156 9,092,866
----------- ----------- -----------
54,967,480 55,073,513 54,171,563
----------- ----------- -----------
Operating income 5,240,442 3,870,919 3,560,344
Other income (expense):
Interest income 136 17,160 103,434
Interest expense (1,357,166) (1,055,043) (985,845)
Miscellaneous 68,152 291,686 (223,417)
----------- ----------- -----------
(1,288,878) (746,197) (1,105,828)
----------- ----------- -----------
Income before income taxes and
extraordinary gain 3,951,564 3,124,722 2,454,516
Income tax expense (benefit)
Current:
Federal 872,000 1,301,000 1,427,000
State (33,000) 170,000 52,000
----------- ----------- -----------
839,000 1,471,000 1,479,000
Deferred 356,000 (385,000) (655,000)
----------- ----------- -----------
1,195,000 1,086,000 824,000
----------- ----------- -----------
Income before extraordinary gain 2,756,564 2,038,722 1,630,516
Extraordinary gain from the retirement of debt,
net of income taxes of $312,000 - 497,701 -
----------- ----------- -----------
Net income $ 2,756,564 $ 2,536,423 $ 1,630,516
=========== =========== ===========
Income per share:
Income before extraordinary gain $ 1.55 $ 1.18 $ 1.01
Extraordinary gain - 0.28 -
----------- ----------- -----------
Net income per common share $ 1.55 $ 1.46 $ 1.01
=========== =========== ===========
Shares used in computing net income
per common share 1,780,159 1,732,725 1,610,608
=========== =========== ===========
See accompanying notes to consolidated financial statements.
-28-
GENCOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
Retained
Common Stock Class B Stock Capital in Earnings Cumulative
-------------------- ----------------- Excess of (Accumulated Translation
Shares Amount Shares Amount Par Value Deficit) Adjustment Subtotal
--------- -------- ------- ------- ---------- ------------ ----------- -----------
September 30, 1993 1,445,613 $144,561 403,469 $40,346 $6,794,020 $ (886,209) $277,563 $ 6,370,281
Stock options exercised 5,000 500 - - 13,250 - - 13,750
Conversion of Class B
shares to Common shares 8,894 889 (8,894) (889) - - - -
Net income - - - - - 1,630,516 - 1,630,516
Translation adjustment - - - - - - 38,384 38,384
--------- -------- ------- ------- ---------- ---------- -------- -----------
September 30, 1994 1,459,507 145,950 394,575 39,457 6,807,270 744,307 315,947 8,052,931
10% stock dividend 145,760 14,577 39,457 3,946 933,638 (952,075) - 86
Net income - - - - - 2,536,423 - 2,536,423
Translation adjustment - - - - - - 3,184 3,184
Reductions in
subscription receivable - - - - - - - -
--------- -------- ------- ------- ---------- ---------- -------- -----------
September 30, 1995 1,605,267 160,527 434,032 43,403 7,740,908 2,328,655 319,131 10,592,624
Cash dividend (86,661) (86,661)
Net income 2,756,564 2,756,564
Translation adjustment (10,460) (10,460)
Stock options exercised 15,000 1,500 7,500 750 95,250 97,500
--------- -------- ------- ------- ---------- ---------- -------- -----------
September 30, 1996 1,620,267 $162,027 441,532 $44,153 $7,836,158 $4,998,558 $308,671 $13,349,567
========= ======== ======= ======= ========== ========== ======== ===========
Treasury Stock Total
Subscription ------------------------- Shareholders'
Receivable Shares Cost Equity
------------ ----------- ----------- ------------
September 30, 1993 $(100,238) 242,214 $(852,915) $ 5,417,128
Stock options exercised - - - 13,750
Conversion of Class B
shares to Common shares - - - -
Net income - - - 1,630,516
Translation adjustment - - - 38,384
--------- ------- --------- -----------
September 30, 1994 (100,238) 242,214 (852,915) 7,099,778
10% stock dividend - 24,221 (2,422) (2,336)
Net income - - - 2,536,423
Translation adjustment - - - 3,184
Reductions in
subscription receivable 5,246 - - 5,246
--------- ------- --------- -----------
September 30, 1995 (94,992) 266,435 (855,337) 9,642,295
Cash dividend (86,661)
Net income 2,756,564
Translation adjustment (10,460)
Stock options exercised 97,500
--------- ------- --------- -----------
September 30, 1996 $ (94,992) 266,435 $(855,337) $12,399,238
========= ======= ========= ===========
See accompanying notes to consolidated financial statements.
-29-
GENCOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended September 30,
1996 1995 1994
----------- ----------- -----------
Net income $ 2,756,564 $ 2,536,423 $ 1,630,516
Adjustments to reconcile net income
to cash provided by (used for) operations:
Extraordinary gain - (497,701) -
Loss (gain) on disposal of property and equipment (51,967) 6,329 (382,372)
Loss (gain) on foreign exchange 923 1,086 (311)
Depreciation and amortization 694,818 757,568 862,058
Escrow account releases - - 2,250,000
Change in assets and liabilities - net of
business acquired:
Decrease (increase) in accounts receivable (361,924) (1,649,989) 221,144
Decrease (increase) in inventories (5,913,090) (2,603,986) 912,832
Decrease (increase) in prepaid expenses 766,765 (131,065) 195,151
Decrease in deferred income taxes (182,000) (133,000) (655,000)
Increase (decrease) in accounts payable
and customer deposits (41,500) 2,399,668 (2,768,777)
Increase (decrease) in income tax liabilities (455,538) (879,193) 847,427
Increase (decrease) in accrued expenses (156,870) (1,719,632) 835,686
----------- ----------- -----------
Total adjustments (5,700,383) (4,449,915) 2,317,838
----------- ----------- -----------
Cash provided by (used for) operations (2,943,819) (1,913,492) 3,948,354
Cash flows from investing activities:
Cash acquired from CPM 1,219,108 - -
Capital expenditures (1,344,991) (462,513) (500,970)
Proceeds from sale of property and equipment 433,847 1,770 821,048
Insurance proceeds from property theft 400,000 - -
Prepaid acquisition costs (312,167) - -
Other, net (160,246) 19,076 (201,963)
----------- ----------- -----------
Cash provided by (used for) investing activities 235,551 (441,667) 118,115
Cash flows from financing activities:
Net (reduction) increase under line of credit 2,292,075 599,470 (207,570)
Repayment of existing debt (1,375,369) (4,210,743) (413,289)
Borrowings 2,867,074 2,484,000 -
Cash dividends paid (86,661) - -
Other, net 97,500 (27,160) 53,134
----------- ----------- -----------
Cash provided by (used for) financing activities 3,794,619 (1,154,433) (567,725)
Effect of exchange rate changes on cash (473) 532 (3,245)
----------- ----------- -----------
Net increase (decrease) in cash 1,085,878 (3,509,060) 3,495,499
Cash and cash equivalents at:
Beginning of period 415,668 3,924,728 429,229
----------- ----------- -----------
End of period $ 1,501,546 $ 415,668 $ 3,924,728
=========== =========== ===========
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 1,381,000 $ 1,288,000 $ 837,000
=========== =========== ===========
Income taxes $ 1,571,000 $ 2,179,000 $ 634,000
=========== =========== ===========
See accompanying notes to consolidated financial statements.
-30-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
Business
- --------
The Company designs and manufactures material handling equipment primarily
utilized in the asphalt, agricultural and food industries.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Gencor Industries,
Inc. and its subsidiaries (the "Company"). All material intercompany accounts
and transactions are eliminated in consolidation.
In conformity with generally accepted accounting principles, management has used
estimates in preparing its consolidated financial statements. Actual results
could differ from these estimates.
The carrying amounts of cash, accounts receivable, accounts payable, and notes
payable to banks approximate fair value because of the short-term nature of
these items. The carrying amount of substantially all of the Company's long-
term debt approximates fair value due to the variable nature of the interest
rates on the debt.
Foreign Currency Translation
- ----------------------------
Assets and liabilities of the Company's foreign subsidiaries are translated into
U.S. dollars at the applicable rate of exchange in effect at the end of the
fiscal year. Revenue and expense accounts are translated at the average rate of
exchange during the period and equity accounts are translated at the rate in
effect when the transactions giving rise to the balances took place. Gains and
losses resulting from translation are accumulated in a separate component of
shareholders' equity. Gains and losses resulting from foreign currency
transactions are included in income.
Cash Equivalents
- ----------------
Cash equivalents, which consist of short-term certificates of deposit and
deposits in money market accounts with original maturities of three months or
less, are carried at cost, which approximates their market value.
Inventories
- -----------
Inventories are stated at the lower of cost or market. Cost is determined
principally by the last-in, first-out (LIFO) method.
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Depreciation of property and
equipment, including depreciation on assets acquired under capital leases, is
computed using straight-line and accelerated methods over the estimated useful
lives of the related assets. Maintenance and repairs are expensed as incurred.
Expenditures which significantly increase asset values or extend useful lives
are capitalized.
Assets held for resale are stated at lower of depreciated cost or net realizable
value and are no longer depreciated.
-31-
Goodwill
- --------
Goodwill, the excess of the purchase price over the fair value of net assets of
businesses acquired, is being amortized over 25 years using the straight-line
method. Management evaluates the recoverability of goodwill and other
intangible assets periodically based on current operating trends.
Revenues
- --------
Sales, other than revenues from contracts for the production of custom
equipment, are recorded generally as the products are shipped. Revenues from
contracts for the design and manufacture of certain custom equipment are
recognized under the percentage-of-completion method.
Percentage-of-completion accounting is applied to all contracts where (i) the
equipment ordered by a customer is designed and manufactured to the customer's
specific application, (ii) design, production and installation, if applicable,
takes more than three months, and (iii) the aggregate contract sales price
exceeds $500,000. In applying the percentage-of-completion method, revenue is
recognized in proportion to actual labor costs incurred as compared with total
estimated labor costs expected to be incurred during the entire contract. All
selling, general and administrative expenses are charged to income as incurred.
When the contract estimates indicate a loss, provision is made for the total
anticipated loss in the period that the loss becomes evident.
The estimated costs of product warranties are charged to production costs as
revenue is recognized.
Income Taxes
- ------------
The Company and its domestic subsidiaries file a consolidated federal income tax
return. The foreign subsidiaries provides income taxes based on the tax
regulations of the countries in which it operates.
Net Income Per Share
- --------------------
Net income per share is based on the weighted average number of common shares
and common stock equivalents outstanding during each period.
New Accounting Standards
- ------------------------
In 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 123,
Accounting for Stock-Based Compensation, which requires companies to measure
employee stock compensation plans based on the fair value method of accounting
or to continue to apply APB No. 25, Accounting for Stock Issued to Employees,
and provide pro forma footnote disclosures under the fair value method in SFAS
No. 123. The Company will continue to apply the principles of APB No. 25 and
provide pro forma fair value disclosures starting in the 1997 Annual Report.
NOTE 2 - ACQUISITION
- --------------------
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
(see Note 5). Additionally, subsequent to September 30, 1996, an equity
infusion of approximately $2,853,000 was provided by certain key members of
operating management who purchased 268,559 shares at $10.625/share.
-32-
The transaction was accounted for as a purchase and the assets have been
included in the accompanying balance sheet at their fair value. Total assets
acquired approximated $69,141,000, liabilities assumed approximated $17,380,000,
and the excess of the amount paid over the fair value of the assets acquired was
approximately $9,107,000. Further adjustments may be made retroactively to the
accompanying balance sheet as a result of finalization of acquisition costs and
fair value adjustments.
The results of operations of CPM will be 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 $168,350,000, $5,267,000, and $2.68, respectively, for
the year ended September 30, 1996.
NOTE 3 - INVENTORIES
- --------------------
Inventories at September 30, 1996 and 1995 consist of the following:
1996 1995
---- ----
Raw materials $14,389,882 $ 7,583,079
Work in process 10,339,358 3,275,335
Finished goods 16,807,318 3,856,363
----------- -----------
$41,536,558 $14,714,777
=========== ===========
At September 30, 1996, accumulated costs of approximately $4,102,000 on major
contracts, net of progress payments of approximately $1,068,000, and estimated
earnings of approximately $2,437,000 amount to approximately $5,471,000, and are
included in work-in-process inventory.
At September 30, 1995, accumulated costs of approximately $1,754,000 on major
contracts, net of progress payments of approximately $230,000, and estimated
earnings of approximately $609,000 amount to approximately $2,133,000, and are
included in work-in-process inventory.
At September 30, 1996 and 1995, cost is determined by the last-in, first-out
(LIFO) method for 67% and 88%, respectively, of total inventories, exclusive of
progress payments, and the first-in, first-out (FIFO) method for all other
inventories. At September 30, 1996 and 1995, the estimated current cost of
inventories exceeded their LIFO basis by approximately $4,579,000 and
$1,996,000, respectively.
NOTE 4 - PROPERTY AND EQUIPMENT
- -------------------------------
Property and equipment at September 30, 1996 and 1995, consist of the following:
1996 1995
---- ----
Land and improvements $ 6,071,760 $ 3,324,756
Building and improvements 17,825,054 10,387,677
Machinery and equipment 17,969,000 2,721,518
Tools, jigs and dies 119,100 119,100
Furniture and equipment 2,986,295 507,419
Automobiles 361,859
Construction in progress 369,308 1,733,436
------------ -----------
45,702,376 18,793,906
Less: Accumulated depreciation (8,906,602) (8,340,501)
------------ -----------
$ 36,795,774 $10,453,405
============ ===========
Substantially all of the Company's property and equipment is pledged as
collateral for the Company's debt.
-33-
The Company has for sale assets with a net book value of approximately $200,000
at September 30, 1996. These assets include land and buildings previously used
for manufacturing and administrative offices.
Depreciation expense for the years ended September 30, 1996, 1995, and 1994 was
approximately $641,000, $675,000, and $765,000, respectively. There was no
interest capitalized during 1996, 1995, or 1994.
NOTE 5 - NOTES PAYABLE AND LONG-TERM DEBT
- -----------------------------------------
The Company had short-term notes of $1,699,000 and $913,000 at September 30,
1996 and 1995, respectively. One of the short-term notes, totaling $1,325,000,
was converted to equity subsequent to September 30, 1996 in connection with the
acquisition of CPM. The weighted average interest note on short-term borrowing
during the year ended September 30, 1996 was 9.01%.
Long-term debt at September 30, 1996 and 1995 consists of the following:
1996 1995
---- ----
Line of credit facility (including foreign line
of credit at September 30, 1996) $ 9,071,844 $6,652,067
Term loan payable to bank 3,364,827 2,484,000
Industrial revenue bonds payable to bank 2,969,252 3,204,590
Acquisition payable (see below) 60,868,697 -
----------- ----------
76,274,620 12,340,657
Less current maturities (2,528,367) (632,254)
----------- ----------
$73,746,253 $11,708,403
=========== ===========
The industrial revenue bonds are payable in monthly installments of principal
and interest (6.756% at September 30, 1996) at a varying percentage (82% at
September 30, 1996) of the bank's prime rate through December 2004. Under the
terms of the industrial revenue bond indenture agreement, the Company is
required to maintain compliance with certain financial and other covenants. The
Company was in compliance with the covenants at September 30, 1996.
In conjunction with the acquisition of CPM, the Company entered into a Senior
Secured Credit Agreement with a bank whereby the Company retired its existing,
credit facilities, including its foreign line of credit and term loan payable to
another bank. Under the terms of the agreement, the Company borrowed $60 million
under two term loans and $35 million under a revolving credit facility to
facilitate the acquisition. Interest rates on these loans vary, at the Company's
option, based upon a factor applied to the prime rate or LIBOR. The revolving
credit facility and one of the $30 million term notes are payable through
December 2001 with the remaining term note payable through December 2003.
In July 1995, the Company satisfied the second mortgage on its Orlando property
at a discount. The retirement of the note, which had been in default, resulted
in an extraordinary taxable gain of approximately $810,000.
Substantially all of the Company's assets are pledged as security under the
various credit agreements.
-34-
Aggregate maturities under the new credit agreement and the industrial revenue
bonds subsequent to September 30, 1996, in accordance with the terms of the
agreements, are as follows:
1997 $ 2,528,367
1998 4,047,767
1999 6,568,519
2000 8,840,717
2001 11,614,462
2002 and thereafter 42,674,788
-----------
$76,274,620
===========
NOTE 6 - ACCRUED EXPENSES
- -------------------------
Accrued expenses consist of the following at September 30, 1996 and 1995:
1996 1995
---- ----
Payroll and related accruals $ 5,004,225 $1,445,388
Warranty and related accruals 2,048,687 565,356
Other 1,776,530 1,357,156
----------- -----------
Total $ 8,829,442 $ 3,367,900
=========== ===========
NOTE 7 - INCOME TAXES
- ---------------------
The difference between the U.S. federal income tax rate and the Company's
effective income tax rate is as follows:
1996 1995 1994
---- ---- ----
Federal income tax rate 34.0 % 34.0 % 34.0 %
State income taxes, net of federal income tax benefit (0.5) 2.9 1.4
Internal revenue service examination and other prior
period adjustments and refunds (2.0) - -
Difference arising from transactions with, and profit
and loss of, foreign subsidiary not deductible or
includable for U.S. federal income tax purposes (2.3) (1.3) (1.2)
Other, net 1.0 (0.9) (0.6)
---- ---- ----
30.2 % 34.7 % 33.6 %
==== ==== ====
Deferred tax liabilities (assets) were comprised of the following:
Differences in basis of acquired assets $ 1,109,000
Depreciation and amortization 329,000 $ 511,000
Inventory cost adjustments 720,000 247,000
Gross deferred tax liability 2,158,000 758,000
Allowance for doubtful accounts (480,000) (894,000)
Accrued expenses (852,000) (503,000)
Gross deferred tax asset (1,332,000) (1,397,000)
----------- -----------
$ 826,000 $ (639,000)
=========== ===========
-35-
Losses related to the Company's United Kingdom subsidiary totaling approximately
$832,000 at September 30, 1996 are available to offset future income generated
from the same trade or business historically carried out by the UK subsidiary.
NOTE 8 - POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
- -----------------------------------------------------
In addition to providing pension benefits, the Company, per the purchase
agreement relating to CPM, is obligated to sponsor a post-retirement plan (the
"Plan") that covers most domestic employees of CPM. The Plan will provide for
healthcare benefits and, in some instances, life insurance benefits and will be
contributory with amounts adjusted annually. When full-time employees retire
from CPM between age 55 and age 65 with 15 years of service, most will be
eligible to receive, at a cost to the retiree, certain healthcare benefits
identical to those available to active employees. After attaining age 65, an
eligible retiree's healthcare benefit coverage will become coordinated with
Medicare.
At September 30, 1996, the Company accumulated a post-retirement benefit
obligation liability under the Plan of $1,525,800 for active employees. The
Plan had no assets and, therefore, at September 30, 1996, the unfunded
accumulated benefit obligation in excess of Plan assets was $1,525,800.
The discount rate used in determining the APBO was 7.25% at September 30, 1996.
The assumed healthcare cost trend rates used in measuring the accumulated post-
retirement benefit obligation was 10.35% in 1996, declining each year to an
ultimate rate by 2003 of 4.65% in 1996.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
The Company leases certain equipment under noncancelable operating leases.
Future minimum rental commitments under noncancelable leases in effect at
September 30, 1996 are as follows:
1997 $ 613,000
1998 388,000
1999 297,000
2000 166,000
----------
$1,464,000
==========
Total rental expense for the years ended September 30, 1996, 1995, and 1994 was
$374,000, $415,000, and $378,000, respectively.
The Company is involved in various litigation matters arising in the ordinary
course of business. Management has reviewed all claims and lawsuits and, upon
the advice of counsel, has made provision for estimable losses and expenses of
litigation relating to claims against the Company.
-36-
NOTE 10 - QUARTERLY FINANCIAL DATA (UNAUDITED)
- ----------------------------------------------
The following is a summary of the quarterly results of operations for the years
ended September 30, 1996 and 1995:
September 30, 1996
(Dollars in Thousands)
----------------------------------------
First Second Third Fourth
----- ------ ----- ------
Net revenue $ 8,261 $17,433 $21,722 $12,792
Cost and expenses 9,384 15,445 19,118 12,309
Income tax expense (450) 738 1,025 (118)
------- ------- ------- -------
Net income $ (673) $ 1,250 $ 1,579 $ 601
======= ======= ======= =======
EPS
Primary $ (0.38) $ 0.70 $ 0.89 $ 0.34
Fully diluted $ (0.38) $ 0.70 $ 0.88 $ 0.35
September 30, 1995
(Dollars in Thousands)
----------------------------------------
First Second Third Fourth
----- ------ ----- ------
Net revenue $11,458 $18,686 $16,550 $12,250
Cost and expenses 11,090 16,318 16,165 11,749
Income tax expense 160 925 89 (88)
------- ------- ------- -------
Net income $ 208 $ 1,443 $ 296 $ 589
======= ======= ======= =======
EPS
Primary $ 0.13 $ 0.81 $ 0.17 $ 0.35
Fully diluted $ 0.13 $ 0.80 $ 0.17 $ 0.34
NOTE 11 - SEGMENT AND GEOGRAPHIC INFORMATION
- --------------------------------------------
The Company operates in one industry segment (process machinery equipment) and
is engaged in the design and manufacture of combustion systems, thermal fluid
heat systems, soil remediation equipment, asphalt plants, components and
controls, pelleting, grinding, flaking, sugar processing and filtration
equipment. The Company conducts separate operations in the United States,
Europe and Asia.
-37-
Information about the Company's identifiable assets as of September 30, 1996,
1995, and 1994 and operations for the years ended September 30, 1996, 1995, and
1994, in these geographic areas is as follows:
1996 1995 1994
---- ---- ----
Net sales to unaffiliated customers
United States $ 57,395,923 $56,427,367 $55,395,036
Europe 2,811,999 2,517,065 2,336,871
------------ ----------- -----------
Total consolidated $ 60,207,922 $58,944,432 $57,731,907
============ =========== ===========
Net sales or transfers between
geographic areas
United States $ - $ - $ -
Europe 109,172 143,861 224,365
------------ ----------- -----------
Total $ 109,172 $ 143,861 $ 224,365
============ =========== ===========
Operating profit (loss)
United States $ 5,067,238 $ 3,657,019 $ 3,466,893
Europe 173,204 213,900 93,451
------------ ----------- -----------
Total $ 5,240,442 $ 3,870,919 $ 3,560,344
============ =========== ===========
Identifiable assets at year-end
United States $ 98,169,867 $32,984,053 $32,595,135
Europe 13,915,674 1,835,425 1,943,301
Other 6,975,854 - -
------------ ----------- -----------
Total $119,061,395 $34,819,478 $34,538,436
============ =========== ===========
The Company's intercompany policy is to transfer product at estimated market
prices. Identifiable assets are those assets of the Company that are
identifiable with the operations in each geographic area. Export sales for the
years ended September 30, 1996, 1995, and 1994, were approximately $1,846,000,
$4,828,000, and $7,548,000, respectively.
NOTE 12 - STOCK OPTIONS
- -----------------------
Qualified Stock Options
- -----------------------
During the year ended September 30, 1996, stock options for 15,000 shares of
common stock, under the Company's 1982 qualified option plan, which were
outstanding at December 31, 1995 and 1994, were exercised at $2.75 per share.
No stock options remain outstanding under this plan.
Nonqualified Stock Options
- --------------------------
As of September 30, 1995, the Company had a nonqualified stock option plan for
7,500 shares of Common Stock or Class B Stock to a member of its Board of
Directors which were exercised during fiscal 1996 for $7.50 per share.
In December 1994, the Company issued options for 100,000 shares of Common Stock
and 100,000 shares of Class B Stock to certain key employees. These options are
outstanding and exercisable at $9.50 per share at September 30, 1996.
During 1996, the Company adopted a non qualified stock option plan whereby
89,000 shares of Class B Stock have been issued to certain key employees. These
options are outstanding and exercisable at $8.00 per share at September 30,
1996.
-38-
NOTE 13 - SHAREHOLDERS' EQUITY
- ------------------------------
Under the Company's amended Certificate of Incorporation, certain of the rights
of the holders of the Company's Common Stock are modified during any period when
shares of Class B Stock are outstanding. During such periods, holders of Common
Stock will have the right to elect approximately 25% of the Company's Board of
Directors, and will be entitled until December 31, 1995, to receive per share
cash dividends when, as, and if declared by the Board of Directors, equal to
110% of those paid on shares of Class B Stock, and conversely, Class B Stock
will be entitled to elect approximately 75% of the Company's Board of Directors
and, until December 31, 1995, will be limited to receiving, to the extent that
cash dividends, if any, are paid, 10% less in dividends than would be payable on
shares of Common Stock. During any period when Common Stock and Class B Stock
are outstanding, certain matters submitted to a vote of shareholders will also
require approval of the holders of Common Stock and Class B Stock, each voting
separately as a class.
On November 21, 1996 the Company declared a cash dividend of $0.05 per share
payable on January 4, 1997, to shareholders of record as of December 18, 1996.
NOTE 14 - EMPLOYEE BENEFIT PLANS
- --------------------------------
The Company has a voluntary 401(K) employee benefit plan ("401(K) Plan") which
covers all eligible employees. The 401(K) Plan provides that 50% of a
participant's contribution will be matched by the Company subject to a maximum
contribution amount. The matching contribution becomes fully vested after seven
years of credited service with the Company. The Company charged approximately
$127,000, $113,000, and $117,000 to operating expense under the provisions of
the 401(K) Plan in the years ended September 30, 1996, 1995, and 1994,
respectively.
-39-
SCHEDULE VIII
GENCOR INDUSTRIES, INC.
Valuation and Qualifying Accounts
Balance at Additions Balance at
Beginning Charged to Adjustments End of
Description of Period Income (Deductions) Period
- -----------------------------------------------------------------------------------------------
Valuation accounts deducted
from assets to which they apply:
For doubtful accounts receivable:
September 30, 1996 $2,555,000 $(729,131) $1,033,131 (1) $2,859,000
September 30, 1995 $2,532,958 $ 811,957 $ (789,915) (1) $2,555,000
September 30, 1994 $2,305,320 $ 397,740 $ (170,102) (1) $2,532,958
(1) Accounts written off during the year, collection of accounts previously
written off and additional
reserve transferred in association with the purchase of PED.
For inventory obsolescence:
September 30, 1996 $1,511,320 $ 19,600 $4,481,386 (2) $6,012,306
September 30, 1995 $1,708,695 $(197,375) $ - $1,511,320
September 30, 1994 $1,508,044 $ 200,651 $ - $1,708,695
September 30, 1993 $1,216,160 $ 291,884 - $1,508,044
(2) Additional reserve transferred in association with the purchase of PED.
-40-