Message to Our Shareholders
Rebuilding of Americas infrastructure, and primarily our deteriorating highways and decaying
bridges, must still await to see if relief is to come from the political shift of power in the recent
elections. In the meantime, our industry has gone through another year of virtually no change in
funding of the Highway Trust Fund while the needs of our highway system have continued to
increase. The twenty-seven month bill that expired on September 20, 2014 was replaced with
another short-term bill that will expire on May 31, 2015.
While purchases of large capital goods such as we manufacture have declined due to the
uncertainty of the under-funded Highway Trust Fund, we remain overall profitable. We are also
managing to maintain steady our workforce of highly skilled employees, and investing in new
designs of equipment so as to broaden our product lines and retain our technological leadership
in the industry.
Meanwhile, we feel that our industry has likely bottomed out and are optimistic that the highway
trust funding process will be resolved at least in part this coming year to address the much
needed repairs to our nation’s infrastructure. Our continued efforts to operate more efficiently
and reduce our cost structure should positively impact future profits when business improves. In
the meantime, we are focused on continued overall profitability while we expand our efforts to
increase export sales, broaden our product lines, and pursue suitable acquisitions. Notwithstanding
all these challenges, we ended the fiscal year with the strongest balance sheet in the company’s
history.
We thank our employees and management for all their efforts and contributions, and our
shareholders for their loyalty and support.
Marc G. Elliott
President
E.J. Elliott
Chairman
UNITED STATES
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, 2014
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Incorporated in the
State of Delaware
Commission File No. 001-11703
GENCOR INDUSTRIES, INC.
5201 North Orange Blossom Trail
Orlando, Florida 32810
I.R.S. Employer Identification
No. 59-0933147
Registrant’s Telephone Number, Including Area Code: (407) 290-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Common Stock ($.10 Par Value)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
[ ] Yes [√] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act
[ ] Yes [√] No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
[√] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).
[√] Yes [ ] No
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.
[√ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See definitions of “large accelerated filer” and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act (check one):
Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [ ]
(Do not check if a smaller reporting Company) Smaller Reporting Company [√ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [√ ] No
The aggregate market value of the common equity held by non-affiliates computed by reference to the price at which the common equity
was last sold as of the last business day of the most recently completed second fiscal quarter was $69,389,200.
Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock, as of the latest practicable date: 8,010,132
shares of Common Stock ($.10 par value) and 1,509,238 shares of Class B Stock ($.10 par value) as of December 2, 2014.
1
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K is incorporated by reference from the Registrant’s 2015 Proxy Statement for
the Annual Meeting of the Stockholders.
Introductory Note: Caution Concerning Forward-Looking Statements
This annual report on Form 10-K (“Report”) and the Company’s other communications and statements may
contain “forward-looking statements,” including statements about the Company’s beliefs, plans, objectives, goals,
expectations, estimates, projections and intentions. These statements are subject to significant risks and
uncertainties and are subject to change based on various factors, many of which are beyond the Company’s
control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,”
“plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements. All
forward-looking statements, by their nature, are subject to risks and uncertainties. The Company’s actual future
results may differ materially from those set forth in the Company’s forward-looking statements. For information
concerning these factors and related matters, see “Risk Factors” in Part I, Item 1A in this Report, and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in
this Report. However, other factors besides those referenced could adversely affect the Company’s results, and
you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any
forward-looking statements made by the Company herein speak as of the date of this Report. The Company does
not undertake to update any forward-looking statement, except as required by law.
PART I
ITEM 1.
BUSINESS
General
Gencor Industries, Inc. and its subsidiaries (the “Company”, “Gencor”, “we”, “us” or “our”) is a leading
manufacturer of heavy machinery used in the production of highway construction materials, synthetic fuels, and
environmental control equipment. The Company’s products are manufactured in two facilities in the United
States. The Company’s products are sold through a combination of Company sales representatives and
independent dealers and agents located throughout the world.
The Company designs, manufactures and sells machinery and related equipment used primarily for the production
of asphalt and highway construction materials. The Company’s principal core products include asphalt plants,
combustion systems and fluid heat transfer systems. The Company believes that its technical and design
capabilities, environmentally friendly process technology, and wide range of products have enabled it to become a
leading producer of highway construction materials, synthetic fuels and environmental control equipment
worldwide. The Company believes it has the largest installed base of asphalt production plants in the United
States.
Because the Company’s products are sold primarily to the highway construction industry, the business is seasonal
in nature. Traditionally, the Company’s customers do not purchase new equipment for shipment during the
summer and fall months to avoid disrupting their peak season for highway construction and repair work. The
majority of orders for the Company’s products are typically received between October and February, with a
significant volume of shipments occurring prior to June. The principal factors driving demand for the Company’s
products are the level of government funding for domestic highway construction and repair, infrastructure
development in emerging economies, the need for spare parts, and a trend towards larger plants resulting from
industry consolidation.
In 1968, the Company was formed by the merger of Mechtron Corporation with General Combustion, Inc. and
Genco Manufacturing, Inc. The new entity reincorporated in Delaware in 1969 and adopted the name Mechtron
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International Corporation in 1970. In 1985, the Company began a series of acquisitions into related fields starting
with the Beverley Group Ltd. in the United Kingdom (the “UK”). Hy-Way Heat Company, Inc. and the Bituma
Group were acquired in 1986. In 1987, the Company changed its name to Gencor Industries, Inc. and acquired
Davis Line Inc. and its subsidiaries in 1988.
In 1998, the Company entered into agreements with Carbontronics, LLC (“CLLC”) pursuant to which the
Company designed, manufactured, sold and installed four synthetic fuel production plants. In addition to payment
for the plants, the Company received membership interests in two synthetic fuel entities (“Synfuelcos”). The
Synfuelcos derived significant cash flow from the sale of synthetic fuel and tax credits (Internal Revenue Code,
Section 29) and consequently distributed significant cash to the Company beginning in 2001 and through 2010.
The tax credit legislation expired at the end of calendar year 2007. Consequently, the four synthetic fuel plants
were decommissioned. The plants were sold or transferred to site owners in exchange for a release of all
contracted liabilities related to the removal of plants from the sites. Gencor no longer has any position in the
Synfuelcos and to the best of our knowledge those entities have been dissolved.
Products
Asphalt Plants. The Company manufactures and produces hot-mix asphalt plants used in the production of asphalt
paving materials. The Company also manufactures related asphalt plant equipment, including hot mix storage
silos, fabric filtration systems, cold feed bins and other plant components. The Company’s H&B (Hetherington
and Berner) product line is the world’s oldest asphalt plant line, first manufactured in 1894. The Company’s
subsidiary, Bituma Corporation, formerly known as Boeing Construction Company, developed the first
continuous process for asphalt production. Gencor developed and patented the first counter flow drum mix
technology, several adaptations of which have become the industry standard, which recaptures and burns
emissions and vapors, resulting in a cleaner and more efficient process. The Company also manufactures a very
comprehensive range of fully mobile batch plants.
Combustion Systems and Industrial Incinerators. The Company manufactures combustion systems, which are
large burners that can transform most solid, liquid or gaseous fuels into usable energy, or burn multiple fuels,
alternately or simultaneously. Through its subsidiary General Combustion, the Company has been a significant
source of combustion systems for the asphalt and aggregate drying industries since the 1950’s. The Company also
manufactures soil remediation machinery, as well as combustion systems for rotary dryers, kilns, fume and liquid
incinerators and fuel heaters. The Company believes maintenance and fuel costs are lower for its burners because
of their superior design.
Fluid Heat Transfer Systems. The Company’s General Combustion subsidiary also manufactures the Hy-Way
heat and Beverley lines of thermal fluid heat transfer systems and specialty storage tanks for a wide array of
industry uses. Thermal fluid heat transfer systems are similar to boilers, but use high temperature oil instead of
water. Thermal fluid heaters have been replacing steam pressure boilers as the best method of heat transfer for
storage, heating and pumping viscous materials (i.e., asphalt, chemicals, heavy oils, etc.) in many industrial and
petrochemical applications worldwide. The Company believes the high efficiency design of its thermal fluid
heaters can outperform competitive units in many types of process applications.
Product Engineering and Development
The Company is engaged in product engineering and development efforts to expand its product lines and to
further develop more energy-efficient and environmentally compatible systems.
Significant developments include the use of cost-effective, non-fossil fuels, biomass (bagasse, municipal solid
waste, sludge and wood waste), refuse-derived fuel, coal and coal mixtures, the economical recycling of old
asphalt and new designs of environmentally compatible asphalt plants. Product engineering and development
activities are directed toward more efficient methods of producing asphalt and lower cost fluid heat transfer
systems. In addition, efforts are also focused on developing combustion systems that operate at higher efficiency
and offer a higher level of environmental compatibility. The Company also continues to evaluate opportunities in
the energy field.
3
Sources of Supply and Manufacturing
Substantially all products and components sold by the Company and its subsidiaries are manufactured and
assembled by the Company, except for procured raw materials and hardware. The Company purchases a large
quantity of steel, raw materials and hardware used to manufacture its products from hundreds of suppliers and is
not dependent on any single supplier. Periodically, the Company reviews the cost effectiveness of internal
manufacturing versus outsourcing its product lines to independent third parties and currently believes it has the
internal capability to produce the highest quality product at the lowest cost. This, however, may change from time
to time.
Seasonality
The Company is concentrated in the asphalt-related business and subject to a seasonal slow-down during the third
and fourth quarters of the calendar year. Traditionally, the Company’s customers do not purchase new equipment
for shipment during the summer and fall months to avoid disrupting their peak season for highway construction
and repair work. This slow-down often results in lower reported sales and earnings and/or losses during the first
and fourth quarters of the Company’s fiscal year.
Competition
The markets for the Company’s products are highly competitive. Within a given product line, the industry
remains fairly concentrated, with typically a small number of companies competing for the majority of a product
line’s industry sales. The principal competitive factors include technology and overall product design. The
Company believes it manufactures the heaviest equipment in the industry. In addition, dependability and
reliability of performance, brand recognition, pricing and after-the-sale customer support are significant factors.
Management believes its ability to compete depends upon its continual efforts to maintain and improve product
performance, availability and dependability, competitively price its products, and provide the best customer
support and service in the industry.
Sales and Marketing
The Company’s products and services are marketed internationally through a combination of Company employed
sales representatives and independent dealers and agents.
Sales Backlog
The Company’s manufacturing processes allow for a relatively short turnaround from the order date to shipment
date of usually less than ninety days. Therefore, the size of the Company’s backlog should not be viewed as an
indicator of the Company’s annualized revenues or future financial results. The Company’s backlog was
approximately $5.5 million and $10.0 million as of December 1, 2014 and December 1, 2013, respectively.
Financial Information about Geographic Areas Reporting Segments
The Company sold its operations in the United Kingdom in June 2009. For a geographic breakdown of revenues
and long-term assets see the table captioned Reporting Segments in Note 1 to the Consolidated Financial
Statements.
Licenses, Patents and Trademarks
The Company holds numerous patents covering technology and applications related to various products,
equipment and systems, and numerous trademarks and trade names registered with the U.S. Patent and Trademark
Office and in various foreign countries. In general, the Company depends upon technological capabilities,
manufacturing quality control and application know-how, rather than patents or other proprietary rights in the
conduct of its business. The Company believes the expiration of any one of these patents, or a group of related
patents, would not have a material adverse effect on the overall operations of the Company.
4
Government Regulations
The Company believes its design and manufacturing processes meet all industry and governmental agency
standards that may apply to its entire line of products, including all domestic and foreign environmental,
structural, electrical and safety codes. The Company’s products are designed and manufactured to comply with
U.S. Environmental Protection Agency regulations. Certain state and local regulatory authorities have strong
environmental impact regulations. While the Company believes that such regulations have helped, rather than
restricted its marketing efforts and sales results, there is no assurance that changes to federal, state, local, or
foreign laws and regulations will not have a material adverse effect on the Company’s products and earnings in
the future.
Environmental Matters
The Company is subject to various federal, state, local and foreign laws and regulations relating to the protection
of the environment. The Company believes it is in material compliance with all applicable environmental laws
and regulations. The Company does not expect any material impact on future operating costs as a result of
compliance with currently enacted environmental regulations.
Employees
As of September 30, 2014, the Company employed a total of 222 employees. The Company has a collective
bargaining agreement covering production and maintenance employees at its Marquette, Iowa facility. The
remaining employees are not represented by a labor union or collective bargaining agreement.
Available Information
For further discussion concerning the Company’s business, see the information included in Item 7 (Management’s
Discussion and Analysis of Financial Condition and Results of Operations) and Item 8 (Financial Statements and
Supplementary Data) of this Report.
The Company makes available free of charge through its web site at www.gencor.com the Company’s Annual
Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those
reports, if applicable, filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of
1934, as amended, as soon as reasonably practicable after the material is electronically filed with or furnished to
the Securities and Exchange Commission (“SEC”). The information posted on the web site is not incorporated
into this Annual Report on Form 10-K.
5
ITEM 1A.
RISK FACTORS
The following risk factors and other information included in this Annual Report on Form 10-K should be
carefully considered. The risks and uncertainties described below are not the only ones the Company faces.
Additional risks and uncertainties not presently known to the Company, or that the Company presently deems less
significant, may also impair the Company’s operations. If any of the following risks actually occur, the
Company’s business operating results and financial condition could be materially adversely affected. The order of
these risk factors does not reflect their relative importance or likelihood of occurrence.
The business may be adversely affected by the current economic downturn.
The domestic and international economies have experienced a significant downturn. This downturn has been
magnified by the tightening of the credit markets. The domestic and international markets may remain depressed
for an undeterminable period of time. The Company’s sales to contractors are dependent on construction and
infrastructure spending and availability of credit to its customers. Changes in construction and governmental
spending have had and could continue to have a material adverse effect on the Company’s results of operations.
The business is affected by the seasonal and cyclical nature of the markets it serves.
The demand for the Company’s products and service is dependent on general economic conditions and more
specifically, the commercial construction industry. Adverse economic conditions may cause customers to forego
or delay new purchases and rely more on repairing existing equipment thus negatively impacting the Company’s
sales and profits. Rising gas and oil prices, increasing steel prices and shortage of qualified workers can have
adverse effects on the Company. Market conditions could limit the Company’s ability to raise selling prices to
offset increases in inventory costs.
The business is affected by the level of government funding for highway construction in the United States
and Canada.
Many contractors depend on funding by federal and state agencies for highway, transit and infrastructure
programs. Future legislation may increase or decrease government spending, which, if decreased, could have a
negative effect on the Company’s financial condition or results of operations. Federal funding allocated to
infrastructure may be decreased in the future.
In fiscal years 2014 and 2013 the Company depended on one customer for a significant portion of its
revenue. The loss of this relationship could have adverse consequences on the Company’s future business.
The percentage of the Company’s net revenue that was derived from sales to one customer was 16% in fiscal
2014 and 11% in fiscal 2013.
If the Company fails to comply with requirements relating to internal control over financial reporting
under Section 404 of the Sarbanes-Oxley Act, the business could be harmed and its stock price could
decline.
Rules adopted by the Securities and Exchange Commission pursuant to Section 404 of the Sarbanes-Oxley Act of
2002 require the Company to assess its internal control over financial reporting annually. The rules governing the
standards that must be met for management to assess its internal control over financial reporting are complex.
They require significant documentation, testing, and possible remediation of any significant deficiencies in and/or
material weaknesses of internal controls in order to meet the detailed standards under these rules. The Company
has evaluated its internal control over financial reporting as effective as of September 30, 2014. See Item 9A –
Controls and Procedures – Management’s Annual Report on Internal Control over Financial Reporting. Although
the Company has evaluated its internal control over financial reporting as effective as of September 30, 2014, in
future fiscal years, the Company may encounter unanticipated delays or problems in assessing its internal control
over financial reporting as effective or in completing its assessments by the required dates. In addition, the
Company cannot assure you that its independent registered public accountants will attest that internal control over
financial reporting are effective in future fiscal years. If the Company cannot assess its internal control over
financial reporting as effective, investor confidence and share value may be negatively impacted.
6
The Company may be required to reduce its profit margins on contracts on which it uses the percentage-of-
completion accounting method.
The Company records revenues and profits on many of its contracts using the percentage-of-completion method
of accounting. As a result, revisions made to the estimates of revenues and profits are recorded in the period in
which the conditions that require such revisions become known and can be estimated. Although the Company
believes that its profit margins are fairly stated and that adequate provisions for losses for its fixed-price contracts
are recorded in the financial statements, as required under U.S. generally accepted accounting principles (GAAP),
the Company cannot assure you that its contract profit margins will not decrease or its loss provisions will not
increase materially in the future.
The Company may encounter difficulties with future acquisitions.
As part of its growth strategy, the Company intends to evaluate the acquisitions of other companies, assets or
product lines that would complement or expand the Company’s existing businesses or broaden its customer
relationships. Although the Company conducts due diligence reviews of potential acquisition candidates, it may
not be able to identify all material liabilities or risks related to potential acquisition candidates. There can be no
assurance that the Company will be able to locate and acquire any business, retain key personnel and customers of
an acquired business or integrate any acquired business successfully. Additionally, there can be no assurance that
financing for any acquisition, if necessary, will be available on acceptable terms, if at all, or that the Company
will be able to accomplish its strategic objectives in connection with any acquisition. Although the Company
periodically considers possible acquisitions, no specific acquisitions are probable as of the date of this Report on
Form 10-K.
Demand for the Company’s products is seasonal and cyclical in nature.
Orders for the Company’s products slow down during the summer and fall months since its customers generally
do not purchase new equipment for shipment in their peak season for highway construction and repair work. In
addition, demand for the Company’s products depends in part upon the level of capital and maintenance
expenditures by the highway construction industry. The highway construction industry historically has been
cyclical in nature and vulnerable to general downturns in the economy. Decreases in industry spending could have
a material adverse effect upon demand for the Company’s products and negatively impact its business, financial
condition, results of operations and the market price of its common stock.
The Company’s marketable securities are comprised of cash and cash equivalents, stocks, mutual funds,
bonds, and other similar securities invested through a professional investment management firm and are
subject to various risks such as interest rates, markets, and credit.
Due to the level of risk associated with certain investment securities and the level of uncertainty related to
changes in the value of securities, changes in these risk factors could have a material adverse impact on the
Company’s results of operations.
There are and will continue to be quarterly fluctuations of the Company’s operating results.
The Company’s operating results historically have fluctuated from quarter to quarter as a result of a number of
factors, including the value, timing and shipment of individual orders and the mix of products sold. Revenues
from certain large contracts are recognized using the percentage-of-completion method of accounting. The
Company recognizes product revenues upon shipment for the rest of its products. The Company’s asphalt
production equipment operations are subject to seasonal fluctuation, which may lower revenues and result in
possible losses in the first and fourth fiscal quarters 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.
If the Company is unable to attract and retain key personnel, its business could be adversely affected.
The success of the Company will continue to depend substantially upon the efforts, abilities and services of its
management team and certain other key employees. The loss of one or more key employees could adversely affect
the Company’s operations. The Company’s ability to attract and retain qualified personnel, either through direct
7
hiring, or acquisition of other businesses employing such persons, will also be an important factor in determining
its future success.
The Company may be required to defend its intellectual property against infringement or against
infringement claims of others.
The Company holds numerous patents covering technology and applications related to various products,
equipment and systems, and numerous trademarks and trade names registered with the U.S. Patent and Trademark
Office and in various foreign countries. There can be no assurance as to the breadth or degree of protection that
existing or future patents or trademarks may afford the Company, or that any pending patent or trademark
applications will result in issued patents or trademarks, or that the Company’s patents, registered trademarks or
patent applications, if any, will be upheld if challenged, or that competitors will not develop similar or superior
methods or products outside the protection of any patents issued, licensed or sublicensed to the Company.
Although the Company believes that none of its patents, technologies, products or trademarks infringe upon the
patents, technologies, products or trademarks of others, it is possible that the Company’s existing patents,
trademarks or other rights may not be valid or that infringement of existing or future patents, trademarks or
proprietary rights may occur. In the event that the Company’s products are deemed to infringe upon the patent or
proprietary rights of others, the Company could be required to modify the design of its products, change the name
of its products or obtain a license for the use of certain technologies incorporated into its products. There can be
no assurance that the Company would be able to do any of the foregoing in a timely manner, upon acceptable
terms and conditions, or at all, and the failure to do so could have a material adverse effect on the Company. In
addition, there can be no assurance that the Company will have the financial or other resources necessary to
enforce or defend a patent, registered trademark or other proprietary right, and, if the Company’s products are
deemed to infringe upon the patents, trademarks or other proprietary rights of others, the Company could become
liable for damages, which could also have a material adverse effect on the Company.
The Company may be subject to substantial liability for the products it produces.
The Company is engaged in a business that could expose it to possible liability claims for personal injury or
property damage due to alleged design or manufacturing defects in its products. The Company believes that it
meets existing professional specification standards recognized or required in the industries in which it operates,
and there are no material product liability claims pending against the Company as of the date hereof. Although the
Company currently maintains product liability coverage which it believes is adequate for the continued operation
of its business, such insurance may prove inadequate or become difficult to obtain or unobtainable in the future on
terms acceptable to the Company.
The Company is subject to extensive environmental laws and regulations, and the costs related to
compliance with, or the Company’s failure to comply with, existing or future laws and regulations, could
adversely affect the business and results of operations.
The Company’s operations are subject to federal, state, local and foreign laws and regulations relating to the
protection of the environment. Sanctions for noncompliance may include revocation of permits, corrective action
orders, significant administrative or civil penalties and criminal prosecution. The Company’s business involves
environmental management and issues typically associated with historical manufacturing operations. To date, the
Company’s cost of complying with environmental laws and regulations has not been material, but the fact that
such laws or regulations are changed frequently makes predicting the cost or impact of such laws and regulations
on the Company’s future operations uncertain.
The loss of one or more of the Company’s raw materials suppliers, or increase in prices, could cause
production delays, a reduction of revenues or an increase in costs.
The principal raw materials the Company uses are steel and related products. The Company has no long-term
supply agreements with any of its major suppliers. However, the Company has generally been able to obtain
sufficient supplies of raw materials for its operations. Although the Company believes that such raw materials are
readily available from alternate sources, an interruption in the supply of steel and related products or a substantial
increase in the price of any of these raw materials could have a material adverse effect on the Company’s
business, financial condition and results of operations.
8
The Company is subject to significant government regulations.
The Company is subject to a variety of governmental regulations relating to the manufacturing of its products.
Any failure by the Company to comply with present or future regulations could subject it to future liabilities, or
the suspension of production that could have a material adverse effect on the Company’s results of operations.
Such regulations could also restrict the Company’s ability to expand its facilities, or could require the Company to
acquire costly equipment or to incur other expenses to comply with such regulations. Although the Company
believes it has the design and manufacturing capability to meet all industry or governmental agency standards that
may apply to its product lines, including all domestic and foreign environmental, structural, electrical and safety
codes, there can be no assurance that governmental laws and regulations will not become more stringent over
time, imposing greater compliance costs and increasing risks and penalties associated with a violation. The cost to
the Company of such compliance to date has not materially affected its business, financial condition or results of
operations. There can be no assurance, however, that violations will not occur in the future as a result of human
error, equipment failure or other causes. The Company’s customers are also subject to extensive regulations,
including those related to the workplace. The Company cannot predict the nature, scope or effect of governmental
legislation, or regulatory requirements that could be imposed or how existing or future laws or regulations will be
administered, or interpreted. Compliance with more stringent laws or regulations, as well as more vigorous
enforcement policies of regulatory agencies, could require substantial expenditures by the Company and could
adversely affect its business, financial condition and results of operations.
The Company’s management has effective voting control.
The Company’s officers and directors beneficially own an aggregate of approximately 96.8% of the outstanding
shares of the Company’s $.10 par value Class B stock. The Class B stock is entitled to elect 75% (calculated to
the nearest whole number, rounding five-tenths to next highest whole number) of the members of its Board of
Directors. Further, approval of a majority of the Class B stock is generally required to effect a sale of the
Company and certain other corporate transactions. As a result, these shareholders can elect more than a majority
of the Board of Directors and exercise significant influence over most matters requiring approval by the
Company’s shareholders. This concentration of control may also have the effect of delaying or preventing a
change in control.
The issuance of preferred stock may impede a change of control or may be dilutive to existing
shareholders.
The Company’s Certificate of Incorporation, as amended, authorizes the Company’s Board of Directors, without
shareholder vote, to issue up to 300,000 shares of preferred stock in one or more series and to determine for any
series the dividend, liquidation, conversion, voting or other preferences, rights and terms that are senior, and not
available, to the holders of the Company’s common stock. Thus, issuances of series of preferred stock could
adversely affect the relative voting power, distributions and other rights of the common stock. The issuance of
preferred stock could deter or impede a merger, tender offer or other transaction that some, or a majority of the
Company’s common shareholders might believe to be in their best interest or in which the Company’s common
shareholders might receive a premium for their shares over the then current market price of such shares.
The Company may be required to indemnify its directors and executive officers.
The Company has authority under Section 145 of the Delaware General Corporation Law to indemnify its
directors and officers to the extent provided in that statute. The Company’s Certificate of Incorporation, as
amended, provides that a director shall not be personally liable to the Company for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation thereof is not permitted under the
Delaware General Corporation Law. The Company’s Bylaws provide in part that it indemnify each of its directors
and officers against liabilities imposed upon them (including reasonable amounts paid in settlement) and expenses
incurred by them in connection with any claim made against them or any action, suit or proceeding to which they
may be a party by reason of their being or having been a director or officer. The Company maintains officer’s and
director’s liability insurance coverage. There can be no assurance that such insurance will be available in the
future, or that if available, it will be available on terms that are acceptable to the Company. Furthermore, there can
be no assurance that the insurance coverage provided will be sufficient to cover the amount of any judgment
9
awarded against an officer or director (either individually or in the aggregate). Consequently, if such judgment
exceeds the coverage under the policy, the Company may be forced to pay such difference.
The Company enters into indemnification agreements with each of its executive officers and directors containing
provisions that may require the Company, among other things, to indemnify them against certain liabilities that
may arise by reason of their status or service as officers or directors (other than liabilities arising from willful
misconduct of a culpable nature) and to advance their expenses incurred as a result of any proceeding against
them as to which they could be indemnified. Management believes that such indemnification provisions and
agreements are necessary to attract and retain qualified persons as directors and executive officers.
The Company does not expect to pay dividends for the foreseeable future.
For the foreseeable future, the Company intends to retain any earnings to finance its business requirements, and it
does not anticipate paying any cash dividends on its common stock or Class B stock. Any future determination to
pay dividends will be at the discretion of the Company’s Board of Directors and will be dependent upon then
existing conditions, including the financial condition and results of operations, capital requirements, contractual
restrictions, business prospects, and other factors that the Board of Directors considers relevant.
Competition could reduce revenue from the Company’s products and services and cause it to lose market
share.
The Company currently faces strong competition in product performance, price and service. Some of the
Company’s national competitors have greater financial, product development and marketing resources than the
Company. If competition in the Company’s industry intensifies or if the current competitors enhance their
products or lower their prices for competing products, the Company may lose sales or be required to lower the
prices it charges for its products. This may reduce revenues from the Company’s products and services, lower its
gross margins or cause it to lose market share.
The Company’s quarterly operating results are likely to fluctuate, which may decrease its stock price.
The Company’s quarterly operating results have varied significantly in the past and are likely to vary significantly
from quarter to quarter in the future. As a result, the Company’s operating results may fall below the expectations
of securities analysts and investors in some quarters, which could result in a decrease in the market price of its
common stock. The reasons the Company’s quarterly results may fluctuate include:
• General competitive and economic conditions
• Delays in, or uneven timing in, delivery of customer orders
• The seasonal nature of the industry
• The fluctuations in market value of its securities portfolio
• The introduction of new products by the Company or its competitors
• Product supply shortages
• Reduced demand due to adverse weather conditions
• Expiration or renewal of Federal highway programs, and
• Changes to state or Canadian provincial programs.
Period-to-period comparisons of such items should not be relied on as indications of future performance.
10
The Company’s stock has been, and likely will continue to be, subject to substantial price and volume
fluctuations due to a number of factors, many of which will be beyond the Company’s control.
The market price of the Company’s common stock may be significantly affected by various factors such as:
• Quarterly variations in operating results
• Changes in revenue growth rates as a whole or for specific geographic areas or products
• Changes in earnings estimates by market analysts
• The announcement of new products or product enhancements by the Company or its competitors
• Speculation in the press or analyst community, and
• General market conditions or market conditions specific to particular industries.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2.
PROPERTIES
The following table lists the operating properties owned by the Company as of September 30, 2014:
Location
Marquette, Iowa
Orlando, Florida
Owned
Acreage
Building
Square
Footage
Principal Function
72.0
137,000 Offices and manufacturing
27.0
215,000 Corporate offices and manufacturing
ITEM 3.
LEGAL PROCEEDINGS
The Company has various litigation and claims, either as a plaintiff or defendant, pending as of the date of this
Form 10-K which have occurred in the ordinary course of business, and which may be covered in whole or in part
by insurance. Management has reviewed all litigation matters arising in the ordinary course of business and, upon
advice of legal counsel, has made provisions, not deemed material, for any estimable losses and expenses of
litigation.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of this fiscal year to a vote of security holders.
11
PART II
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER’S PURCHASES OF EQUITY SECURITIES
The Company’s stock has been traded on the NASDAQ Global Market under the symbol “GENC” since
December 20, 2007.
Following are the high and low closing prices for the Company’s common stock for the periods indicated:
2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
HIGH
$9.72
$11.62
$11.19
$11.58
HIGH
$7.86
$7.69
$7.30
$8.85
LOW
$8.35
$8.96
$9.47
$9.80
LOW
$7.09
$7.04
$6.90
$7.09
As of September 30, 2014, there were 260 holders of common stock of record and 5 holders of Class B stock of
record. The Company has not paid any dividends during the last two fiscal years and there is no intention to pay
cash dividends in the foreseeable future.
EQUITY COMPENSATION PLANS
The following table includes information about the Company’s common stock that may be issued upon exercise
of options, warrants and rights under all of the existing equity compensation plans and arrangements previously
approved by security holders as of September 30, 2014:
Number of Securities to
be Issued upon
Exercise of
Outstanding Options,
Warrants and Rights
Weighted-average
Exercise Price of
Outstanding
Options, Warrants
and Rights
Number of Securities Remaining
Available for Future Issuance
under Equity Compensation
Plans
Plan
1997 Stock Option Plan
2009 Incentive
Compensation Plan
27,500
316,500
$9.320
$7.655
--
642,000 (a)
(a) Includes 160,000 of Class B securities
12
COMPARATIVE 5-YEAR CUMULATIVE RETURN GRAPH
The following graph sets forth the cumulative total shareholder return (assuming reinvestment of dividends) to the
Company’s shareholders during the five-year period ended September 30, 2014, as well as the Wilshire Small
Capitalization Index and the Dow Jones Heavy Construction Index. The stock performance assumes $100 was
invested on October 1, 2008.
Comparison of Cumulative Total Return among Gencor Industries, Inc., the
Wilshire Small Capitalization Index and the Dow Jones Heavy Construction Index
With Base Year of 2009:
9/30/2009
9/30/2010
9/30/2011
9/30/2012
9/30/2013
9/30/2014
Gencor Industries, Inc.
100.00
83.02
84.30
86.05
99.77
114.19
DJ Heavy Construction Index
100.00
94.15
82.07
107.70
135.04
128.31
Wilshire Small Cap Index
100.00
109.75
111.95
146.45
181.20
197.15
On December 13, 2014, the Company’s stock was available for trading on the NASDAQ Global Market under the
symbol “GENC”.
13
ITEM 6.
SELECTED FINANCIAL DATA
Net Revenue
Operating Income (Loss)
Net Income
Per Share Data:
Basic – Net Income
Diluted – Net Income
Selected Balance Sheet Data:
Current Assets
Current Liabilities
Total Assets
Long Term Debt
Shareholders’ Equity
2014
$ 40,017,000
(26,000)
3,473,000
Years Ended September 30
2012
$ 63,182,000
393,000
4,472,000
2013
$ 48,943,000
2,578,000
6,725,000
2011
$ 59,692,000
(1,743,000)
224,000
2010
$ 55,587,000
(3,049,000)
2,969,000
$ 0.36
$ 0.36
$ 0.71
$ 0.71
$ 0.47
$ 0.47
$ 0.02
$ 0.02
$ 0.31
$ 0.31
September 30
2012
2014
2013
$ 110,619,000 $ 108,791,000 $ 102,090,000
5,878,000
110,312,000
-
103,460,000
2,960,000
117,828,000
-
114,175,000
6,036,000
116,948,000
-
110,428,000
2011
$ 95,424,000
5,576,000
104,375,000
-
98,799,000
2010
$ 99,096,000
6,174,000
107,227,000
-
98,528,000
14
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
“Forward-Looking” Information
This Form 10-K contains certain “forward-looking statements” within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), which represent the Company’s expectations
and beliefs, including, but not limited to, statements concerning gross margins, sales of the Company’s products
and future financing plans, income from investees and litigation. These statements by their nature involve
substantial risks and uncertainties, certain of which are beyond the Company’s control. Actual results may differ
materially depending on a variety of important factors, including the financial condition of the Company’s
customers, changes in the economic and competitive environments, the performance of the investment portfolio
and the demand for the Company’s products.
For information concerning these factors and related matters, see “Risk Factors” in Part I, Item 1A in this Report.
However, other factors besides those referenced could adversely affect the Company’s results, and you should not
consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking
statements made by the Company herein speak as of the date of this Report. The Company does not undertake to
update any forward-looking statement, except as required by law.
Overview
Gencor Industries, Inc. (the “Company”), is a leading manufacturer of heavy machinery used in the production of
highway construction materials, synthetic fuels, and environmental control equipment. The Company’s core
products include asphalt plants, combustion systems and fluid heat transfer systems. The Company’s products are
manufactured in two facilities in the United States.
Because the Company’s products are sold primarily to the highway construction industry, the business is seasonal
in nature. Traditionally, the Company’s customers do not purchase new equipment for shipment during the
summer and fall months to avoid disrupting their peak season for highway construction and repair work. The
majority of orders for the Company’s products are thus received between October and February, with a significant
volume of shipments occurring prior to June. The principal factors driving demand for the Company’s products
are the overall economic conditions, the level of government funding for domestic highway construction and
repair, infrastructure development in emerging economies, the need for spare parts, fluctuations in the price of
crude oil (liquid asphalt as well as fuel costs), and a trend towards larger plants resulting from industry
consolidation.
On July 6, 2012, President Obama signed a $118 billion transportation bill, Moving Ahead for Progress in the
21st Century Act (“MAP-21”). MAP-21 included a final three-month extension of the previous SAFETEA-LU
bill at then current spending levels combined with a new two-year, $105 billion authorization of the federal
highway, transit, and safety programs effective October 1, 2012. The bill provided states with two years of
funding to build roads, bridges, and transit systems. On August 8, 2014, President Obama signed a $10.8 billion
short-term bill to fund Federal highway and mass-transit programs through May 31, 2015. The level of future
domestic highway construction funding is uncertain.
The Canadian government enacted major infrastructure stimulus programs, which benefitted the Company in
prior years. In 2007, the Building Canada Plan provided $33 billion in infrastructure funding through 2014. As
part of the Building Canada Plan, the Gas Tax Fund was approved in 2009, providing $2 billion in annual
infrastructure spending.
Nominal domestic economic growth and the lack of a fully funded, multi-year federal highway bill have resulted
in reduced capital equipment purchases within the Company’s served markets. This continues to have an adverse
impact on sales and pricing pressures on the Company’s products, resulting in lower revenues and margins.
In addition to government funding and the overall economic conditions, fluctuations in the price of oil, which is a
major component of asphalt mix, may affect the Company’s financial performance. An increase in the price of oil
15
increases the cost of liquid asphalt and could, therefore, decrease demand for asphalt and certain of the
Company’s products. Increases in oil prices also drive up the cost of gasoline, which results in increased freight
costs. Where possible, the Company will pass increased freight costs on to its customers. However, the Company
may not be able to recapture all of the increased costs and thus could have a negative impact on the Company’s
financial performance.
Steel is a major component used in manufacturing the Company’s equipment. Fluctuations in the price of steel
can have a significant impact on the Company’s financial results. Where possible, the Company will pass on
increased steel costs to its customers. However, the Company may not be able to recapture all of the increased
steel costs and thus its financial results could be negatively affected.
For the long term, the Company believes the strategy of continuing to invest in product engineering and
development and its focus on delivering a high-quality product and superior service will strengthen the
Company’s market position when demand for its products rebound. In response to the short-term outlook, the
Company has taken aggressive actions to conserve cash, right-size its operations and cost structure, and will
continue to do so based on its forecast. These actions included adjustments to workforce, reduced purchases of
raw materials and reductions in selling, general, and administrative expenses. The Company continues to review
its internal processes to identify inefficiencies and cost reduction opportunities. The Company will continue to
scrutinize its relationships with external suppliers to ensure it is achieving the highest quality materials and
services at the most competitive cost.
Results of Operations
Year ended September 30, 2014 compared with the year ended September 30, 2013
Net revenues for the year ended September 30, 2014 were $40.0 million, a decrease of 18.2% or $8.9 million
from $48.9 million for the year ended September 30, 2013. Net revenues declined from prior year as the domestic
highway construction industry continues to remain cautious due to the shortfall in Federal funding of the Highway
Trust Fund and the lack of an approved multi-year highway bill after September 30, 2014.
Gross margins for fiscal 2014 were $7.8 million, or 19.5% of net revenues, versus $11.0 million or 22.5% of net
revenues in 2013. The gross margin decrease in 2013 was due to overall lower production volumes.
Product engineering and development expenses decreased $291,000 or 17.0% to $1,422,000 in 2014 on reduced
headcount and related expenses in line with the lower revenues. Selling, general and administrative expenses
decreased $285,000 or 4.2% to $6,427,000 from $6,712,000 in fiscal 2013. The decrease was primarily due to a
$393,000 second fiscal quarter recovery of a previously reserved receivable, reduced commission on reduced
sales and the timing of professional fees, partially offset by a $750,000 reduction to fiscal 2013 estimated
advertising expenses. The Company has historically participated in the construction industry’s triennial
CONEXPO-CON/AGG Show (“ConExpo”). The costs associated with the Company’s full-scale ConExpo
exhibits have historically been significant. During fiscal 2013, the Company reduced its estimated advertising
expenses for the 2014 ConExpo show by $750,000 as management deemed it prudent to curtail such expenditures
due to the current condition of the highway construction industry.
Fiscal 2014 had an operating loss of $(26,000) versus operating income of $2,578,000 in fiscal 2013. The
reduced operating results in 2014 were due to lower revenues.
As of September 30, 2014 and 2013, the cost basis of the investment portfolio was $85.0 million and $81.2
million, respectively. $2.0 million in cash was transferred from the investment portfolio back into operating cash
in fiscal 2013. For the years ended September 30, 2014 and 2013, net investment interest and dividend income
(“Investment Income”) was $1.8 million and $2.3 million, respectively. The net realized and unrealized gains on
marketable securities were $2.2 million in 2014 versus $1.5 million in 2013. Total cash and investment balance at
September 30, 2014 was $94.3 million compared to the September 30, 2013 cash and investment balance of $92.7
million. During the year ended September 30, 2014, the Company recognized in other income a gain of $442,000
on the disposal property in the United Kingdom which was previously used as an operating facility.
16
The effective income tax rate for fiscal 2014 was 21.3% versus a benefit of (6.2%) in fiscal 2013. The Company
received favorable IRS rulings on its research and development tax credits (“R&D Credits”) on amended returns
filed for tax years 2006 through 2010 (fiscal years 2007 through 2011). In total, the Company received tax
refunds of $827,000 related to R&D Credits for tax years 2006 through 2008 and recorded additional R&D
Credits of $1,302,000 related to tax years 2009 through 2012 (fiscal years 2010 through 2013). R&D Credits of
$2,129,000 are included in the Company’s income tax benefit of $392,000 in the consolidated statement of
operations for the year ended September 30, 2013. Of the $1,302,000 in R&D Credits, $497,000 reduced the
Company’s current federal income taxes payable for the year ended September 30, 2013 and $805,000 is included
as R&D Credits carry-forwards in the net deferred income and other tax liabilities of $484,000 in the consolidated
balance sheet as of September 30, 2013. An additional $313,000 of the remaining $805,000 reduced the
Company’s current federal income taxes payable for the year ended September 30, 2014, leaving $492,000 in
R&D Credits carry-forwards in the net deferred income and other tax liabilities of $693,000 in the consolidated
balance sheet as of September 30, 2014.
During fiscal 2014, the Company also received $244,000 of Florida state research and development credits.
$65,000 of these credits reduced the Company’s state income taxes payable in fiscal 2014 and $179,000 is
included in the net deferred income and other tax liabilities of $693,000 in the consolidated balance sheet as of
September 30, 2014. The change in the effective income tax rate between years is primarily due to the R&D
Credits recorded in fiscal 2013 (see Note 6 to Consolidated Financial Statements). In addition, the tax rate for
fiscal 2014 was negatively impacted by the exclusion of R&D Credits given that Congress has not extended the
R&D Credits to 2014 as of September 30, 2014.
Net income for the year ended September 30, 2014 was $3,473,000 or $.36 per diluted share versus $6,725,000 or
$.71 per diluted share for the year ended September 30, 2013.
Liquidity and Capital Resources
The Company generates capital resources through operations and returns on its investments.
The Company had no long-term debt outstanding at September 30, 2014 or 2013. The Company does not
currently require a credit facility but continues to review and evaluate its needs and options for such a facility.
As of September 30, 2014, the Company has funded $135,000 in cash deposits at insurance companies to cover
collateral needs.
As of September 30, 2014, the Company had $7.2 million in cash and cash equivalents, and $87.1 million in
marketable securities. The marketable securities are invested through a professional investment management firm.
The securities may be liquidated at any time into cash and cash equivalents.
The Company’s backlog was $4.8 million at September 30, 2014 versus $5.4 million at September 30, 2013. The
Company’s working capital (defined as current assets less current liabilities) was $107.7 million at September 30,
2014 versus $102.8 million at September 30, 2013. The significant purchases, sales and maturities of marketable
securities shown on the consolidated statement of cash flows for the year ended September 30, 2014, reflects the
sale of all corporate and municipal bonds in March 2014 and subsequent recurring purchase and sale of United
States treasury bills. Costs and estimated earnings in excess of billings increased reflecting the open percentage-
of-completion jobs as of September 30, 2014 whereas there were no percentage-of-completion jobs qualifying for
revenue recognition as of September 30, 2013. Customer deposits decreased as down payments were applied to
completed jobs. Accrued expenses and other decreased $1,121,000, due primarily to the payment of estimated
income taxes related to fiscal 2013.
Cash used by operations during the year ended September 30, 2014 was $2,364,000. The cash used for investing
activities during the year ended September 30, 2014 of $11,000 included $696,000 related to capital expenditures,
primarily manufacturing equipment, net of $685,000 of proceeds related to the sale of the property in the United
Kingdom. Cash provided by financing activities of $11,000 related to proceeds from the exercise of stock options.
There were no cash disbursements or receipts during the year ended September 30, 2013 related to financing
activities.
Critical Accounting Policies, Estimates and Assumptions
17
The Company believes the following discussion addresses it’s most critical accounting policies, which are those
that are most important to the portrayal of the Company’s financial condition and results of operations and require
management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain. Accounting policies, in addition to the critical accounting
policies referenced below, are presented in Note 1 to the Consolidated Financial Statements, “Accounting
Policies.”
Estimates and Assumptions
In preparing the Consolidated Financial Statements, the Company uses certain estimates and assumptions that
may affect reported amounts and disclosures. Estimates and assumptions are used, among other places, when
accounting for certain revenue (e.g. contract accounting), expense, and asset and liability valuations. The
Company believes that the estimates and assumptions made in preparing the Consolidated Financial Statements
are reasonable, but are inherently uncertain. Assumptions may be incomplete or inaccurate and unanticipated
events may occur. The Company is subject to risks and uncertainties that may cause actual results to differ from
estimated results.
Revenues & Expenses
Revenues from contracts for the design, manufacture and sale of asphalt plants are recognized under the
percentage-of-completion method. The percentage-of-completion method of accounting for these contracts
recognizes revenue, net of any promotional discounts, and costs in proportion to actual labor costs incurred as
compared with total estimated labor costs expected to be incurred during the entire contract. Pre-contract costs are
expensed as incurred. Changes to total estimated contract costs or losses, if any, are recognized in the period in
which they are determined. Revenue recognized in excess of amounts billed is classified as current assets under
“costs and estimated earnings in excess of billings.” The Company anticipates that all incurred costs associated
with these contracts at September 30, 2014, will be billed and collected within one year.
Revenues from all other contracts for the design and manufacture of custom equipment, for service and for parts
sales, net of any discounts and return allowances, are recorded when the following four revenue recognition
criteria are met: product is delivered/ownership is transferred or service is performed, persuasive evidence of an
arrangement exists, the selling price is fixed or determinable, and collectability is reasonably assured.
Returns and allowances, which reduce product revenue, are estimated using historical experience. Provisions for
estimated returns and allowances and other adjustments are provided for in the same period the related sales are
recorded.
Product warranty costs are estimated using historical experience and known issues and are charged to production
costs as revenue is recognized.
All product engineering and development costs, and selling, general and administrative expenses are charged to
operations as incurred. Provision is made for any anticipated contract losses in the period that the loss becomes
evident.
The allowance for doubtful accounts is determined by performing a specific review of all account balances greater
than 90 days past due and other higher risk amounts to determine collectability and also adjusting for any known
customer payment issues with account balances in the less-than-90-day past due aging buckets. Account balances
are charged off against the allowance for doubtful accounts when they are determined to be uncollectable. Any
recoveries of account balances previously considered in the allowance for doubtful accounts reduce future
additions to the allowance for doubtful accounts.
Inventories
Inventories are valued at the lower of cost or market, with cost being determined principally by using the last-in,
first-out (“LIFO”) method and market defined as replacement cost for raw materials and net realizable value for
work in process and finished goods (see Note 2 to Consolidated Financial Statements). Appropriate consideration
is given to obsolescence, excessive levels, deterioration, possible alternative uses and other factors in determining
18
net realizable value. The cost of work in process and finished goods includes materials, direct labor, variable costs
and overhead. The Company evaluates the need to record inventory adjustments on all inventories, including raw
material, work in process, finished goods, spare parts and used equipment. Used equipment acquired by the
Company on trade-in from customers is carried at estimated net realizable value. Unless specific circumstances
warrant different treatment regarding inventory obsolescence, the cost basis of inventories three to four years old
are reduced by 50%, while the cost basis of inventories four to five years old are reduced by 75%, and the cost
basis of inventories greater than five years old are reduced to zero. Inventory is typically reviewed for
obsolescence on an annual basis computed as of September 30th, the Company’s fiscal year end. If significant
known changes in trends, technology or other specific circumstances that warrant consideration occur during the
year, then the impact on obsolescence is considered at that time.
Investments
Marketable debt and equity securities are categorized as trading securities and are thus marked to market and
stated at fair value. Fair value is determined using the quoted closing or latest bid prices for Level 1 investments
and market standard valuation methodologies for Level 2 investments. Realized gains and losses on investment
transactions are determined by specific identification and are recognized as incurred in the consolidated
statements of operations. Net unrealized gains and losses are reported in the consolidated statements of
operations in the current period and represent the change in the fair value of investment holdings during the
period.
Long Lived Asset Impairment
Property and equipment and intangible assets subject to amortization are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be
recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated
undiscounted cash flows expected to result from the use of the asset and its eventual disposition. The amount of
the impairment loss to be recorded is calculated by the excess over its fair value of the asset’s carrying value. Fair
value is generally determined using a discounted cash flow analysis.
Inflation
The overall effects of inflation on the Company’s business during the periods discussed have not been significant.
The Company monitors the prices it charges for its products and services on an ongoing basis and believes that it
will be able to adjust those prices to take into account future changes in the rate of inflation.
Contractual Obligations
The following table summarizes the outstanding borrowings and long-term contractual obligations at September
30, 2014:
Operating leases
Total
$ 39,000
Less than 1 Year
$ 24,000
1 – 3 Years
$ 15,000
The Company had no long-term or short-term debt as of September 30, 2014. There was no long-term debt
facility in place and there were no outstanding letters of credit at September 30, 2014.
Off-Balance Sheet Arrangements
None
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company operates manufacturing facilities and sales offices at two locations in the United States. The
Company is subject to business risks inherent in non-U.S. activities, including political and economic uncertainty,
import and export limitations, and market risk related to changes in interest rates and foreign currency exchange
rates. Periodically, the Company may use derivative financial instruments consisting primarily of interest rate
19
hedge agreements to manage exposures to interest rate changes. The Company’s objective in managing its
exposure to changes in interest rates on any future variable rate debt is to limit the impact on earnings and cash
flow and reduce overall borrowing costs.
At September 30, 2014 and 2013, the Company had no debt outstanding. At September 30, 2014, there was no
credit facility in place. The Company does not currently require a credit facility but continues to evaluate its needs
and options for such a facility.
The Company’s marketable securities are invested in stocks, mutual funds, exchange traded funds, government
securities and corporate and municipal bonds through a professional investment advisor. Investment securities are
exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with
certain investment securities and the level of uncertainty related to changes in the value of securities, it is possible
that changes in these risk factors could have an adverse material impact on the Company’s results of operations or
equity.
20
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
GENCOR INDUSTRIES, INC.
Page
Management Assessment Report…………………………………………………………………
22
Report of Independent Registered Public Accounting Firm ..........................................................
23
Consolidated Balance Sheets as of September 30, 2014 and 2013 .................................................
24
Consolidated Statements of Operations for the years ended
September 30, 2014 and 2013 .......................................................................................................
Consolidated Statements of Shareholders’ Equity for the years ended
September 30, 2014 and 2013 .......................................................................................................
Consolidated Statements of Cash Flows for the years ended
September 30, 2014 and 2013 .......................................................................................................
25
26
27
Notes to Consolidated Financial Statements ...................................................................................
28
Quarterly Financial Information (Unaudited) ..................................................................................
39
All other schedules are omitted because they are not applicable or the required information is shown in the
consolidated financial statements or notes thereto.
21
GENCOR INDUSTRIES, INC.
MANAGEMENT ASSESSMENT REPORT
The management of Gencor Industries, Inc. (the “Company”) is responsible for establishing and
maintaining adequate internal control over financial reporting for the Company. The Company’s
internal control system is designed to provide reasonable assurance to the Company’s management and
board of directors regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. There are
inherent limitations in the effectiveness of all internal control systems no matter how well designed.
Therefore, even those systems determined to be effective can provide only reasonable assurance with
respect to the preparation and presentation of financial statements. Furthermore, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of a change in circumstances or conditions.
In order to ensure that the Company’s internal control over financial reporting is effective, management
regularly assesses such controls and did so most recently as of September 30, 2014. This assessment
was based on criteria for effective internal control over financial reporting described in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management believes the Company maintained effective
internal control over financial reporting as of September 30, 2014.
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Gencor Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Gencor Industries, Inc. as of
September 30, 2014 and 2013, and the related consolidated statements of operations, shareholders’
equity, and cash flows for each of the years in the two-year period ended September 30, 2014. Gencor’s
management is responsible for these financial statements. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, 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, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Gencor Industries, Inc. as of September 30, 2014 and 2013, and the
consolidated results of its operations, changes in shareholders’ equity, and its cash flows for each of the
years in the two-year period ended September 30, 2014 in conformity with accounting principles
generally accepted in the United States of America.
/s/ MOORE STEPHENS LOVELACE, P.A.
MOORE STEPHENS LOVELACE, P.A.
Certified Public Accountants
Orlando, Florida
December 9, 2014
23
Part I. Financial Information
GENCOR INDUSTRIES, INC.
Consolidated Balance Sheets
As of September 30, 2014 and 2013
ASSETS
Current assets:
Cash and cash equivalents
Marketable securities at fair value (cost of $84,997,000 at September 30, 2014
2014
2013
$ 7,193,000
$ 9,557,000
and $81,165,000 at September 30, 2013)
87,112,000
83,113,000
Accounts receivable, less allowance for doubtful accounts of $244,000 at
September 30, 2014 and $309,000 at September 30, 2013
Costs and estimated earnings in excess of billings
Inventories, net
Prepaid expenses
Total current assets
Property and equipment, net
Other assets
Total Assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Customer deposits
Accrued expenses
Total current liabilities
Deferred and other income taxes
Total liabilities
Commitments and contingencies
Shareholders’ equity:
Preferred stock, par value $.10 per share; 300,000 shares authorized;
none issued
Common stock, par value $.10 per share; 15,000,000 shares authorized;
8,010,132 shares and 8,008,632 shares issued and outstanding at
September 30, 2014 and 2013, respectively
Class B Stock, par value $.10 per share; 6,000,000 shares authorized;
1,509,238 shares issued and outstanding at September 30, 2014 and 2013
Capital in excess of par value
Retained earnings
Total shareholders’ equity
Total Liabilities and Shareholders’ Equity
1,448,000
344,000
13,673,000
849,000
110,619,000
7,141,000
68,000
$ 117,828,000
1,200,000
-
14,126,000
795,000
108,791,000
8,079,000
78,000
$ 116,948,000
$ 947,000
324,000
1,689,000
2,960,000
693,000
3,653,000
$ 1,283,000
1,943,000
2,810,000
6,036,000
484,000
6,520,000
-
-
801,000
801,000
151,000
10,566,000
102,657,000
114,175,000
$ 117,828,000
151,000
10,292,000
99,184,000
110,428,000
$ 116,948,000
See accompanying Notes to Consolidated Financial Statements
24
GENCOR INDUSTRIES, INC.
Consolidated Statements of Operations
For the Years Ended September 30, 2014 and 2013
Net revenue
Costs and expenses:
Production costs
Product engineering and development
Selling, general and administrative
Operating income (loss)
Other income (expense), net:
Interest and dividend income, net of fees
Realized and unrealized gains on marketable securities, net
Other
Income before income taxes
Income tax expense (benefit)
Net income
Basic earnings per common share:
Net income
Diluted earnings per common share:
Net income
2014
2013
$40,017,000
$48,943,000
32,194,000
1,422,000
6,427,000
40,043,000
37,940,000
1,713,000
6,712,000
46,365,000
(26,000)
2,578,000
1,787,000
2,212,000
440,000
4,439,000
4,413,000
940,000
$3,473,000
2,281,000
1,456,000
18,000
3,755,000
6,333,000
(392,000)
$6,725,000
$ 0.36
$ 0.71
$ 0.36
$ 0.71
See accompanying Notes to Consolidated Financial Statements
25
GENCOR INDUSTRIES, INC.
Consolidated Statements of Shareholders’ Equity
For the Years Ended September 30, 2014 and 2013
September 30, 2012
Common Stock
Class B Stock
Shares
Amount
8,008,632 $801,000
Shares
Amount
1,509,238 $151,000
Capital in
Excess of
Par Value
$10,049,000
Retained
Earnings
$92,459,000
Total
Shareholders’
Equity
$103,460,000
Net income
Stock-based compensation
-
-
-
-
-
-
-
-
-
243,000
6,725,000
-
6,725,000
243,000
September 30, 2013
8,008,632
801,000
1,509,238
151,000
10,292,000
99,184,000
110,428,000
Net income
Stock-based compensation
Stock options exercised
-
-
1,500
-
-
-
-
-
-
-
-
-
-
263,000
11,000
3,473,000
-
-
3,473,000
263,000
11,000
September 30, 2014
8,010,132 $801,000
1,509,238 $151,000
$10,566,000
$102,657,000
$114,175,000
See accompanying Notes to Consolidated Financial Statements
26
GENCOR INDUSTRIES, INC.
Consolidated Statements of Cash Flows
For the Years Ended September 30, 2014 and 2013
Cash flows from operations:
Net income
Adjustments to reconcile net income
to cash provided by (used in) operations:
Purchase of marketable securities
Proceeds from sale and maturity of marketable securities
Change in value of marketable securities
Deferred income taxes
Depreciation and amortization
Provision for doubtful accounts
(Gain) loss on disposal of assets
Stock-based compensation
Changes in assets and liabilities:
Accounts receivable
Costs and estimated earnings in excess of billings
Inventories
Prepaid expenses
Accounts payable
Customer deposits
Accrued expenses and other
Total adjustments
Cash flows provided by (used in) operations
Cash flows from investing activities:
Capital expenditures
Proceeds from sale of property and equipment
Cash flows used in investing activities
Cash flows from financing activities:
Proceeds from stock option exercises
Cash flows provided by financing activities
Net increase (decrease) in cash
Cash and cash equivalents at:
Beginning of year
End of year
2014
2013
$3,473,000
$6,725,000
(351,062,000)
348,845,000
(1,782,000)
209,000
1,372,000
60,000
(413,000)
263,000
(308,000)
(344,000)
453,000
(54,000)
(336,000)
(1,619,000)
(1,121,000)
(5,837,000)
(2,364,000)
(696,000)
685,000
(11,000)
11,000
11,000
(64,516,000)
64,068,000
(1,290,000)
(490,000)
1,232,000
65,000
25,000
243,000
(59,000)
3,448,000
(2,208,000)
(13,000)
(598,000)
1,463,000
(701,000)
669,000
7,394,000
(1,198,000)
-
(1,198,000)
-
-
(2,364,000)
6,196,000
9,557,000
$7,193,000
3,361,000
$9,557,000
See accompanying Notes to Consolidated Financial Statements
27
GENCOR INDUSTRIES, INC.
Notes to Consolidated Financial Statements
For the Years Ended September 30, 2014 and 2013
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Gencor Industries, Inc. and its subsidiaries (collectively, the “Company”) is a diversified, heavy machinery
manufacturer for the production of highway construction materials, synthetic fuels and environmental control
machinery and equipment.
These consolidated financial statements include the accounts of Gencor Industries, Inc. and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated in consolidation.
New Accounting Pronouncements and Policies
No new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a
material impact on the Company’s consolidated financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
Earnings per Share (“EPS”)
The consolidated financial statements include basic and diluted earnings per share information. Basic earnings per
share are based on the weighted average number of shares outstanding. Diluted earnings per share are based on the
sum of the weighted average number of shares outstanding plus common stock equivalents. Weighted-average shares
issuable upon the exercise of stock options included in the diluted earnings per share calculation as of September 30,
2014 were 337,000 which equates to 72,000 dilutive common stock equivalents. Weighted-average shares issuable
upon the exercise of stock options included in the diluted earnings per share calculation as of September 30, 2013 were
84,000 which equates to 2,000 dilutive common stock equivalents. Weighted-average shares issuable upon the exercise
of stock options, which were not included in the diluted earnings per share calculation because they were anti-dilutive,
were 8,000 in 2014 and 261,000 in 2013.
The following presents the calculation of the basic and diluted earnings per share for the years ended September 30,
2014 and 2013:
Net Income
$ 3,473,000
2014
Shares
9,518,000
72,000
EPS
$ 0.36
Net Income
$ 6,725,000
2013
Shares
9,518,000
2,000
EPS
$ 0.71
$ 3,473,000
9,590,000
$ 0.36
$ 6,725,000
9,520,000
$ 0.71
Basic EPS
Common stock equivalents
Diluted EPS
Cash Equivalents
Cash equivalents consist of short-term certificates of deposit and deposits in money market accounts with original
maturities of three months or less.
Marketable Securities
Marketable debt and equity securities are categorized as trading securities and are thus marked to market and stated at
fair value. Fair value is determined using the quoted closing or latest bid prices for Level 1 investments and market
standard valuation methodologies for Level 2 investments. Realized gains and losses on investment transactions are
28
determined by specific identification and are recognized as incurred in the consolidated statements of operations. Net
unrealized gains and losses are reported in the consolidated statements of operations in the current period and represent
the change in the fair value of investment holdings during the period.
Fair Value Measurements
The fair value of financial instruments is presented based upon a hierarchy of levels that prioritizes the inputs of
valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs
(Level 3 measurements). A financial instrument’s level within the fair value hierarchy is based on the lowest level of
any input that is significant to the fair value measurement.
The fair value of marketable equity securities, mutual funds, exchange-traded funds and government securities are
substantially based on quoted market prices (Level 1). Corporate and municipal bonds are valued using market
standard valuation methodologies, including: discounted cash flow methodologies, and matrix pricing or other similar
techniques. The inputs to these market standard valuation methodologies include, but are not limited to: interest rates,
credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, maturity,
estimated duration and assumptions regarding liquidity and estimated future cash flows. In addition to bond
characteristics, the valuation methodologies incorporate market data, such as actual trades completed, bids and actual
dealer quotes, where such information is available. Accordingly, the estimated fair values are based on available
market information and judgments about financial instruments (Level 2). Fair values of the Level 2 investments are
provided by the Company’s professional investment management firm.
The following table sets forth by level, within the fair value hierarchy, the Company’s assets measured at fair value as
of September 30, 2014:
Equities
Mutual Funds
Exchange-Traded Funds
Government Securities
Cash and Money Funds
Total
Level 1
$17,102,000
19,088,000
1,764,000
43,999,000
5,159,000
$87,112,000
Fair Value Measurements
Level 3
Level 2
$ -
-
-
-
-
$ -
$ -
-
-
-
-
$ -
Total
$17,102,000
19,088,000
1,764,000
43,999,000
5,159,000
$87,112,000
Net unrealized gains and losses recognized during fiscal 2014 on trading securities still held as of September 30, 2014,
were $167,000. There were no transfers of investments between Level 1 and Level 2 during the year ended September
30, 2014.
29
The following table sets forth by level, within the fair value hierarchy, the Company’s assets measured at fair value as
of September 30, 2013:
Equities
Mutual Funds
Exchange-Traded Funds
Corporate Bonds
Municipal Bonds
Government Securities
Cash and Money Funds
Total
Level 1
$12,634,000
28,264,000
5,162,000
-
-
2,000,000
2,122,000
$50,182,000
Level 2
Fair Value Measurements
Level 3
$ -
-
-
-
-
-
-
$ -
$ -
-
-
17,376,000
15,555,000
-
-
$32,931,000
Total
$12,634,000
28,264,000
5,162,000
17,376,000
15,555,000
2,000,000
2,122,000
$83,113,000
Net unrealized gains and losses recognized during fiscal 2013 on trading securities still held as of September 30, 2013,
were $1,141,000. Estimated interest accrued on the corporate and municipal bond portfolio was $399,000 at September
30, 2013. There were no transfers of investments between Level 1 and Level 2 during the year ended September 30,
2013.
The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value
because of the short-term nature of these items.
Foreign Currency Transactions
Gains and losses resulting from foreign currency transactions are included in income and were not significant during
the years ended September 30, 2014 and 2013.
Risk Management
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash
and cash equivalents, marketable securities, and accounts receivable. The Company maintains its cash accounts in
various domestic financial institutions which may from time to time exceed federally insured limits. Operating cash is
retained overnight in non-interest-bearing accounts which allow for offsets to treasury service charges. The marketable
securities are invested in money funds, mutual funds, exchange-traded funds (ETF’s), government securities, stocks
and corporate and municipal bonds through a professional investment advisor. Investment securities are exposed to
various risks, such as interest rate, market and credit risks.
The Company’s customers are not concentrated in any specific geographic region, but are concentrated in the road and
highway construction industry. The Company extends limited credit to its customers based upon their credit-
worthiness and generally requires a significant up-front deposit before beginning construction and full payment subject
to hold-back provisions prior to shipment on complete asphalt plant and component orders. The Company establishes
an allowance for doubtful accounts based upon the credit risk of specific customers, historical trends and other
pertinent information.
Inventories
Inventories are valued at the lower of cost or market, with cost being determined principally by using the last-in, first-
out (“LIFO”) method and market defined as replacement cost for raw materials and net realizable value for work in
process and finished goods (see Note 2). Appropriate consideration is given to obsolescence, excessive levels,
deterioration, possible alternative uses and other factors in determining net realizable value. The cost of work in
process and finished goods includes materials, direct labor, variable costs and overhead. The Company evaluates the
need to record inventory adjustments on all inventories, including raw material, work in process, finished goods, spare
parts and used equipment. Used equipment acquired by the Company on trade-in from customers is carried at
estimated net realizable value. Unless specific circumstances warrant different treatment regarding inventory
obsolescence, the cost basis of inventories three to four years old are reduced by 50%, while the cost basis of
inventories four to five years old are reduced by 75%, and the cost basis of inventories greater than five years old are
30
reduced to zero. Inventory is typically reviewed for obsolescence on an annual basis computed as of September 30, the
Company’s fiscal year end. If significant known changes in trends, technology or other specific circumstances that
warrant consideration occur during the year, then the impact on obsolescence is considered at that time.
Property and Equipment
Property and equipment are stated at cost (see Note 4). Depreciation of property and equipment is computed using the
straight-line method over the estimated useful lives of the related assets, as follows:
Land improvements
Buildings and improvements
Equipment
Years
5
6-40
2-10
Impairments
Property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. An
impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted cash
flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be
recorded is calculated by the excess over its fair value of the asset’s carrying value. Fair value is generally determined
using a discounted cash flow analysis. No such impairment loss was recorded during the years ended September 30,
2014 and 2013.
Revenues and Expenses
Revenues from contracts for the design, manufacture and sale of asphalt plants are recognized under the percentage-of-
completion method. The percentage-of-completion method of accounting for these contracts recognizes revenue, net of
any promotional discounts, and costs in proportion to actual labor costs incurred, as compared with total estimated
labor costs expected to be incurred during the entire contract. Pre-contract costs are expensed as incurred. Changes to
total estimated contract costs or losses, if any, are recognized in the period in which they are determined. Revenue
recognized in excess of amounts billed is classified as current assets under “costs and estimated earnings in excess of
billings.” The Company anticipates that all incurred costs associated with these contracts at September 30, 2014, will
be billed and collected within one year.
Revenues from all other contracts for the design and manufacture of custom equipment, for service and for parts sales,
net of any discounts and return allowances, are recorded when the following four revenue recognition criteria are met:
product is delivered or service is performed, persuasive evidence of an arrangement exists, the selling price is fixed or
determinable, and collectability is reasonably assured.
The Company’s customers may qualify for certain cash rebates generally based on the level of sales attained during a
twelve-month period. Provisions for these rebates, as well as estimated returns and allowances and other adjustments,
are provided for in the same period the related sales are recorded. Return allowances, which reduce product revenue,
are estimated using historical experience.
Product warranty costs are estimated using historical experience and known issues and are charged to production costs
as revenue is recognized.
All product engineering and development costs, and selling, general and administrative expenses are charged to
operations as incurred. Provision is made for any anticipated contract losses in the period that the loss becomes
evident.
The allowance for doubtful accounts is determined by performing a specific review of all account balances greater than
90 days past due and other higher risk amounts to determine collectability and also adjusting for any known customer
payment issues with account balances in the less-than-90-day past due aging category. Account balances are charged
off against the allowance for doubtful accounts when they are determined to be uncollectable. Any recoveries of
31
account balances previously considered in the allowance for doubtful accounts reduce future additions to the allowance
for doubtful accounts.
Shipping and Handling Costs
Shipping and handling costs are included in production costs in the consolidated statements of operations.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and
consist primarily of taxes currently due, plus deferred taxes (see Note 6).
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have
been included in the consolidated financial statements or tax returns using current tax rates. The Company and its
domestic subsidiaries file a consolidated federal income tax return.
Deferred tax assets and liabilities are measured using the rates expected to apply to taxable income in the years in
which the temporary differences are expected to reverse and the credits are expected to be used. The effect on deferred
tax assets and liabilities of the change in tax rates is recognized in income in the period that includes the enactment
date. All available evidence, both positive and negative, is considered to determine whether, based on the weight of
that evidence, a valuation allowance is needed for some portion or all of a deferred tax asset. No such valuation
allowances were recorded as of September 30, 2014 and 2013.
Comprehensive Income
For the years ended September 30, 2014 and 2013, other comprehensive income is equal to net income.
Reporting Segments
Information concerning principal geographic areas is as follows:
2014
2013
United States
United Kingdom
Revenues
$40,017,000
-
Total $40,017,000
Long-Term
Assets
$7,209,000
-
$7,209,000
Revenues
$48,943,000
-
$48,943,000
Long-Term
Assets
$7,913,000
244,000
$8,157,000
Revenues are attributed to geographic areas based on the location of the assets producing the revenues. Assets
associated with the United Kingdom were disposed of during fiscal 2014.
Customers with 10% (or greater) of Net Revenues
As a result of timing and production schedules of a very large contract and resultant revenue recognition,
approximately 5% of total net revenue in the quarter ended September 30, 2014 and 4% of total net revenue for the
quarter ended September 30, 2013 was from one or more separate U.S. corporate entities ultimately affiliated with a
foreign-based global company. For the years ended September 30, 2014 and 2013, this company represented 16% and
11% of total net revenue, respectively.
32
NOTE 2 - INVENTORIES, NET
Net inventories consist of the following:
Raw materials
Work in process
Finished goods
Used equipment
September 30,
2014
$ 6,097,000
2,414,000
4,988,000
174,000
$ 13,673,000
2013
$ 6,238,000
3,307,000
4,054,000
527,000
$ 14,126,000
At September 30, 2014 and 2013, cost is determined by the last-in, first-out (“LIFO”) method for inventories. The
estimated current cost of inventories exceeded their LIFO basis by approximately $5,472,000 and $5,141,000 at
September 30, 2014 and 2013, respectively.
NOTE 3 - COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS
Costs and estimated earnings in excess of billings on uncompleted contracts as of September 30, 2014 consisted of the
following:
Costs incurred on uncompleted contracts
Estimated earnings
Billings to date
Costs and estimated earnings in excess of billings
September 30, 2014
$ 846,000
279,000
1,125,000
781,000
$ 344,000
There were no costs and estimated earnings in excess of billings on uncompleted contracts as of September 30, 2013.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Land and improvements
Buildings and improvements
Equipment
Less: Accumulated depreciation and
amortization
Property and equipment, net
September 30,
2014
$ 3,296,000
12,875,000
8,716,000
24,887,000
2013
$ 3,540,000
13,184,000
8,845,000
25,569,000
(17,746,000)
$ 7,141,000
(17,490,000)
$ 8,079,000
Property and equipment includes approximately $6,190,000 and $6,772,000 of fully depreciated assets, which
remained in service during fiscal 2014 and 2013, respectively.
33
NOTE 5 - ACCRUED EXPENSES
Accrued expenses consist of the following:
Payroll and related accruals
Warranty and related accruals
Professional fees
Accrued income taxes payable
Other
Accrued expenses
September 30,
2014
$ 974,000
368,000
84,000
-
263,000
$ 1,689,000
2013
$ 1,061,000
373,000
280,000
760,000
336,000
$ 2,810,000
Other accrued expenses in fiscal 2013 included the estimated advertising costs associated with ConExpo. During fiscal
2013, the Company reduced its estimated advertising expenses for the 2014 ConExpo show by $750,000, as
management deemed it prudent to curtail such expenditures due to the current condition of the highway construction
industry.
NOTE 6 - INCOME TAXES
The provision for income tax expense consists of:
Current:
Federal
State
Deferred
Federal
State
Years Ended September 30,
2013
2014
$ 667,000
65,000
732,000
190,000
18,000
208,000
$ (48,000)
146,000
98,000
(447,000)
(43,000)
(490,000)
Total current
Total deferred
Income tax expense (benefit)
$ 940,000
$ (392,000)
A reconciliation of the federal statutory tax rate to the total tax provision is as follows:
Years Ended September 30,
2014
2013
Federal income taxes computed at the statutory rate
State income taxes, net of federal benefit
Research & development tax refunds & credits
Dividend received deduction
Domestic international sales corporation benefits
Tax-exempt interest income
Other, net
Effective income tax rate
34.0%
3.3%
(5.6%)
(6.1%)
(4.2%)
(1.8%)
1.7%
21.3%
34.0%
3.3%
(33.6%)
(3.0%)
(1.8%)
(1.4%)
(3.7%)
(6.2%)
34
Deferred tax assets and liabilities consist of the following:
Deferred Tax Assets:
Accrued liabilities and reserves
Allowance for doubtful accounts
Inventory
R&D tax credits carryforwards
Non-deductible stock compensation
Net operating losses carryforwards
Other
Gross Deferred Tax Assets
Deferred and Other Tax Liabilities:
Unrealized gain on investments
Percentage of completion
Property, plant and equipment
Unrecognized tax benefits
Other
Gross Deferred and Other Tax Liabilities
Net Deferred Income and Other Tax Liabilities
September 30,
2014
2013
$ 288,000
91,000
186,000
671,000
194,000
58,000
24,000
1,512,000
(798,000)
(104,000)
(964,000)
(300,000)
(39,000)
(2,205,000)
$ (693,000)
$ 338,000
115,000
202,000
805,000
178,000
59,000
57,000
1,754,000
(736,000)
-
(1,179,000)
(300,000)
(23,000)
(2,238,000)
$ (484,000)
Total income taxes paid in fiscal 2014 and 2013 were $1,981,000 and $202,000, respectively.
Generally Accepted Accounting Principles (“GAAP”) prescribes a comprehensive model for the financial recognition,
measurement, classification, and disclosure of uncertain tax positions. GAAP contains a two-step approach to
recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates that it is more likely than not that the position will be
sustained on audit, based on the technical merits of the position. The second step is to measure the tax benefit as the
largest amount that is more than 50% likely of being realized upon settlement.
Significant judgment is required in evaluating the Company’s uncertain tax position and determining the Company’s
provision for taxes. Although the Company believes the reserves of unrecognized tax benefits (“UTB’s”) are
reasonable, no assurance can be given that the final outcome of these matters will not be different from that which is
reflected in the Company’s historical income tax provision and accruals. The Company adjusts these reserves in light
of changing facts and circumstances. As of September 30, 2014 and 2013, the Company had UTB’s of $300,000. There
were no additional accruals of UTB’s during fiscal years ended September 30, 2014 and 2013.
The Company recognizes interest and penalties accrued related to UTB’s as a component of income tax expense.
There were no additional accruals of interest expense nor penalties during fiscal years ended September 30, 2014 and
2013. It is reasonably possible that the amount of the UTB’s with respect to certain unrecognized tax positions will
increase or decrease during the next 12 months. The Company does not expect the change to have a material effect on
its results of operations or its financial position. The only expected potential reason for change would be the normal
expiration of the statute of limitations or the ultimate results stemming from any examinations by taxing authorities. If
recognized, the entire amount of UTB’s would have an impact on the Company’s effective tax rate.
The Company received favorable IRS rulings on its research and development tax credits (“R&D Credits”) on
amended returns filed for tax years 2006 through 2010 (fiscal years 2007 through 2011). In total, the Company
received tax refunds of $827,000 related to R&D Credits for tax years 2006 through 2008 and recorded additional
R&D Credits of $1,302,000 related to tax years 2009 through 2012 (fiscal years 2010 through 2013). R&D Credits of
$2,129,000 are included in the Company’s income tax benefit of $392,000 in the consolidated statement of operations
for the year ended September 30, 2013. Of the $1,302,000 in R&D Credits, $497,000 reduced the Company’s current
federal income taxes payable for the year ended September 30, 2013 and $805,000 is included as R&D Credits carry-
35
forwards in the net deferred income and other tax liabilities of $484,000 in the consolidated balance sheet as of
September 30, 2013. An additional $313,000 of the remaining $805,000 reduced the Company’s current federal
income taxes payable for the year ended September 30, 2014, leaving $492,000 in R&D Credits carryforwards in the
net deferred income and other tax liabilities of $693,000 in the consolidated balance sheet as of September 30, 2014.
The $492,000 of R&D Credits carryforwards expire in fiscal years 2031 through 2033. The tax rate for fiscal 2014 was
negatively impacted by the exclusion of R&D Credits given that Congress has not extended the R&D Credits to 2014
as of September 30, 2014.
During fiscal 2014, the Company also received $244,000 of Florida state research and development credits. $65,000 of
these credits reduced the Company’s state income taxes payable in fiscal 2014 and $179,000 is included in the net
deferred income and other tax liabilities of $693,000 in the consolidated balance sheet as of September 30, 2014. The
$179,000 of Florida state research and development credits carry-forwards expire in fiscal 2019.
The Company files U.S. federal income tax returns, as well as income tax returns in various states. The Company’s
U.S. federal income tax returns and most state returns, filed for tax years prior to fiscal year ended September 30, 2010
are no longer subject to examination by taxing authorities due to the expiration of the statute of limitations. The statute
of limitations for the Company’s U.S. federal income tax return for the fiscal year ended September 30, 2010 has been
extended and will remain open to examination through December 31, 2014.
NOTE 7 - RETIREMENT BENEFITS
The Company has a voluntary 401(k) employee benefit plan, which covers all eligible, domestic employees. The
Company makes discretionary matching contributions subject to a maximum level, in accordance with the terms of the
plan. The Company charged approximately $156,000 and $148,000 to expense under the provisions of the plan during
the fiscal years 2014 and 2013, respectively.
The Company has a collective bargaining agreement covering production and maintenance employees at its Marquette,
Iowa facility. Under this agreement, the Company contributed approximately $7,000 in fiscal 2013 to an employee
pension fund. The amount contributed by the Company was based on an hourly rate per hours worked up to a
maximum of 40 hours per week per employee. The Company’s obligation to contribute to this pension fund ended
effective November 1, 2012. The Company has no remaining obligations with respect to this fund. All eligible
employees can participate in the voluntary 401(k) employee benefit plan.
NOTE 8 - LONG-TERM DEBT
The Company had no long-term debt outstanding at September 30, 2014 or 2013. The Company does not currently
require a credit facility, but continues to evaluate its needs and options for such a facility.
As of September 30, 2014, total cash deposits with insurance companies covering collateral needs were $135,000.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Leases
The Company leases certain equipment under non-cancelable operating leases. Future minimum rental commitments
under these leases at September 30, 2014 totaled $39,000 and are due over the next three years.
Total rental expense for the fiscal years ended September 30, 2014 and 2013 was $193,000 and $276,000, respectively.
Litigation
36
The Company has various pending litigation and other claims. Those claims which are made in the ordinary course of
business may be covered in whole or in part by insurance, and if found against the Company, management does not
believe these matters will have a material effect on the Company’s financial position, results of operations or cash
flows. Management has reviewed all litigation matters arising in the ordinary course of business and has made
provisions, not deemed material, for any estimable losses and expenses of litigation.
NOTE 10 - SHAREHOLDERS’ EQUITY
Under the Company’s amended certificate of incorporation, certain rights of the holders of the Company’s common
stock are modified by shares of Class B stock for as long as such shares shall remain outstanding. During that period,
holders of common stock will have the right to elect approximately 25% of the Company’s Board of Directors, and
conversely, Class B stock will be entitled to elect approximately 75% of the Company’s Board of Directors. During
the 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.
Common stock and Class B shareholders have equal rights with respect to dividends, preferences, and rights, including
rights in liquidation.
NOTE 11 – STOCK-BASED COMPENSATION
The Company maintains stock-based compensation plans, which provide for the issuance of Company stock to certain
directors, officers, key employees and affiliates.
On March 17, 2009, the shareholders of the Company approved the 2009 Incentive Compensation Plan (the “2009
Plan”). The 2009 Plan provides that the total number of shares of Company stock that may be subject to the granting of
awards under the 2009 Plan (“Awards”) at any time during the term of the 2009 Plan shall be equal to 800,000 shares
of common stock and 160,000 shares of Class B stock. The foregoing limit shall be increased, as provided for in the
2009 Plan. Persons eligible to receive Awards under the 2009 Plan include employees, directors, consultants and other
persons who provide services to the Company. The 2009 Plan imposes individual limitations on the amount of certain
Awards, in part, to comply with Internal Revenue Code, Section 162(m). The Awards can be in the form of stock
options, restricted and deferred stock, performance awards and other stock-based awards, as provided for in the 2009
Plan.
On July 1, 2011, 298,000 common stock options were issued to employees under the 2009 Plan. These options vest at
25% per year starting on October 1, 2012 and each year thereafter through October 1, 2015. As long as the employee
remains employed by the Company, these options will be exercisable upon vesting and remain exercisable through
October 1, 2021. The Company used the Black-Scholes pricing model to estimate the fair value of the options of
$941,000 at time of grant. At September 30, 2014, $237,000 of compensation expense remained to be expensed over
the next two years. The following assumptions were used to determine the fair value of the stock options at time of
grant:
Risk-free interest rate
Expected life of options
Dividend yield
Volatility
2.0%
10.0 years
0.0%
34.2%
On May 28, 2012, 20,000 common stock options were issued to an employee under the 2009 Plan. These options vest
at 25% per year starting on May 28, 2013 and each year thereafter through May 28, 2016. As long as the employee
remains employed by the Company, these options will be exercisable upon vesting and remain exercisable through
October 1, 2021. The Company used the Black-Scholes pricing model to estimate the fair value of the options of
$63,000 at time of grant. At September 30, 2014, $27,000 of compensation expense remained to be expensed through
May 28, 2016. The following assumptions were used to determine the fair value of the stock options at time of grant:
Risk-free interest rate
Expected life of options
2.0%
9.4 years
37
Dividend yield
Volatility
0.0%
32.7%
As of September 30, 2014, 482,000 shares of Company common stock and 160,000 shares of Class B stock are
available for granting of Awards under the 2009 Plan.
The following table summarizes option activity under the 2009 Plan:
Options outstanding at September 30, 2013 and 2012
Options exercised during fiscal 2014
Options outstanding at September 30, 2014
Number of
Shares
318,000
(1,500)
316,500
Average
Exercise
Price Per
Share
$7.655
$7.689
$7.655
No options were granted, forfeited or cancelled during the year ended September 30, 2014. The weighted average
remaining contractual life on the options outstanding as of September 30, 2014 is 7 years under the 2009 Plan.
The 1997 Stock Option Plan (the “1997 Plan”) provided for the issuance of incentive stock options and nonqualified
stock options to purchase up to 1,200,000 shares of the Company’s common stock, 1,200,000 shares of the Company’s
Class B stock and up to 15% of the authorized common stock of any subsidiary. Under the terms of the 1997 Plan,
option holders may tender previously owned shares with a market value equal to the exercise price of the options at
exercise date, subject to compensation committee approval. Additionally, option holders may, upon compensation
committee approval, surrender shares of stock to satisfy federal withholding tax requirements. Options become
exercisable in a manner and on such dates and times, as determined by a committee of the Board of Directors. Options
expire not more than ten years from the date of grant. The option holders have no shareholder rights until the date of
issuance of a stock certificate for such shares.
As of September 30, 2014, there were no options available for future grants under the 1997 Plan.
The following table summarizes option activity under the 1997 Plan:
Outstanding at September 30, 2014, 2013 and
2012
Number of
Shares
Exercise
Price Per
Share
27,500
$ 9.32
The weighted average remaining contractual life on the options outstanding as of September 30, 2014 is 2 years under
the 1997 Plan.
NOTE 12 - RELATED PARTY TRANSACTIONS
Marcar Leasing Corporation (“Marcar”) is engaged in leasing machinery and vehicles to the public and the Company.
Marcar is owned by family members of the Company’s chairman. New leases between the Company and Marcar
generally provide for equal monthly payments over 48 months. During fiscal 2014 and 2013, the Company made lease
payments to Marcar totaling $125,000 and $138,000, respectively.
38
Quarterly Financial Information (Unaudited)
2014
Net revenue
Production costs
Gross profit
Production engineering and development
Selling, general and administrative
Income (loss) from operations
Other income (expense), net
Income (loss) before income tax expense
Income tax expense (benefit)
Net income (loss)
December 31
March 31
June 30
September 30
Quarter Ended
$ 10,019,000
8,487,000
1,532,000
380,000
1,734,000
(582,000)
1,463,000
881,000
435,000
$ 446,000
$ 14,541,000 $ 10,547,000
8,266,000
2,281,000
352,000
1,557,000
372,000
2,268,000
2,640,000
977,000
$ 1,663,000
10,851,000
3,690,000
351,000
1,519,000
1,820,000
1,181,000
3,001,000
1,100,000
$ 1,901,000
$ 4,910,000
4,590,000
320,000
339,000
1,617,000
(1,636,000)
(473,000)
(2,109,000)
(1,572,000)
$ (537,000)
Net income (loss) – basic earnings (loss) per share
Net income (loss) – diluted earnings (loss) per share
$ 0.05
$ 0.05
$ 0.20
$ 0.20
$ 0.17
$ 0.17
$ (0.06)
$ (0.06)
2013
Net revenue
Production costs
Gross profit
Production engineering and development
Selling, general and administrative
Income (loss) from operations
Other income (expense), net
Income (loss) before income tax expense
Income tax expense (benefit)
Net income (loss)
$ 4,948,000
4,531,000
417,000
448,000
1,959,000
(1,990,000)
179,000
(1,811,000)
(835,000)
$ (976,000)
$ 17,737,000 $ 18,690,000
13,720,000
4,970,000
420,000
1,867,000
2,683,000
679,000
3,362,000
873,000
$ 2,489,000
13,411,000
4,326,000
454,000
1,984,000
1,888,000
1,822,000
3,710,000
733,000
$ 2,977,000
$ 7,568,000
6,278,000
1,290,000
391,000
902,000
(3,000)
1,075,000
1,072,000
(1,163,000)
$ 2,235,000
Net income (loss) – basic earnings (loss) per share
Net income (loss) – diluted earnings (loss) per share
$ (0.10)
$ (0.10)
$ 0.31
$ 0.31
$ 0.26
$ 0.26
$ 0.24
$ 0.24
The net income (loss) per share on a year-to-date calculation may not equal the total of the quarterly calculations due to
rounding.
ITEM 9.
None
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
39
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and
operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Report. Based
upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of the end of the
period covered by this Report, the Company’s disclosure controls and procedures are effective.
Because of inherent limitations, the Company’s disclosure controls and procedures, no matter how well designed and
operated, can provide only reasonable, and not absolute, assurance that the objectives of such disclosure controls and
procedures are met and no evaluation can provide absolute assurance that all control issues and instances of fraud, if
any, within the Company has been detected.
As of the end of the period covered by this Report the Company conducted an evaluation, under the supervision and
with the participation of the Company’s management, including the Company’s principal executive officer and
principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and
procedures pursuant to Exchange Act Rules 13a-15(b). Based on this evaluation, the Company’s principal executive
officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective
as of September 30, 2014.
Management’s Annual Report on Internal Control over Financial Reporting
This Annual Report does not include an attestation report of the Company’s registered public accounting firm
regarding internal control over financial reporting. Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit
the Company to provide only management’s report in this Annual Report.
The management of the Company is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) for the Company. The Company’s internal
control system is designed to provide reasonable assurance to the Company’s management and board of directors
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. There are inherent limitations in the effectiveness of all
internal control systems no matter how well designed. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to the preparation and presentation of financial statements.
Furthermore, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of a change in circumstances or conditions.
In order to ensure that the Company’s internal control over financial reporting is effective, management regularly
assesses such controls and did so most recently as of September 30, 2014. This assessment was based on criteria for
effective internal control over financial reporting described in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management
believes the Company maintained effective internal control over financial reporting as of September 30, 2014.
Changes in Internal Control over Financial Reporting
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, has reviewed the
Company’s internal control over financial reporting. There were no changes in the Company’s internal control over
financial reporting during the year ended September 30, 2014 that materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
None
40
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item 10 is incorporated herein by reference to the Company’s Definitive 2015 Proxy
Statement for the Annual Meeting of Stockholders.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated herein by reference to the Company’s Definitive 2015 Proxy
Statement for the Annual Meeting of Stockholders.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this Item 12 is incorporated herein by reference to the Company’s Definitive 2015 Proxy
Statement for the Annual Meeting of Stockholders.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this Item 13 is incorporated herein by reference to the Company’s Definitive 2015 Proxy
Statement for the Annual Meeting of Stockholders.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item 14 is incorporated herein by reference to the Company’s Definitive 2015 Proxy
Statement for the Annual Meeting of Stockholders.
41
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
A listing of financial statements and financial statement schedules filed as part of this Report and which
financial statements and schedules are incorporated into this report by reference, is set forth in the “Index to
Financial Statements” in Item 8 hereof.
(b)
Exhibit Index
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
3.3
Amended and Restated By-Laws of Gencor Industries, Inc., incorporated by
reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for
the year ended September 30, 2007
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.
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.
10.11
1997 Stock Option Plan incorporated by reference to Exhibit A to the
Company’s Proxy Statement on 14A, filed March 3, 1997.
10.12
First Amendment to the Stock Option Plan Agreement incorporated by
reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2006.
10.1
The Company’s 2009 Incentive Compensation Plan, as incorporated by
reference to the Company’s 2009 Proxy Statement filed with the Securities
and Exchange Commission on Schedule 14A on January 28, 2009
21.1
Subsidiaries of the Registrant
23.1
Consent of Independent Registered Public Accountants
31.1
Certification of Chief Executive Officer Pursuant to Rule 13a – 14(a) of the
Securities Exchange Act of 1934, as amended
31.2
Certification of Chief Financial Officer Pursuant to Rule 13a – 14(a) of the
Securities Exchange Act of 1934, as amended
32.1
Certifications of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U. S. C. Section 1350.
42
X
X
X
X
X
EXHIBIT
NUMBER
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
DESCRIPTION
FILED HEREWITH
XBRL Instance Document
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation Linkbase
XBRL Taxonomy Extension Definition Linkbase
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
43
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 9, 2014
GENCOR INDUSTRIES, INC.
(Registrant)
/s/ E. J. Elliott
E. J. Elliott
Chairman and Chief Executive Officer
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
E. J. Elliott
Chairman and Chief Executive Officer
(Principal Executive Officer)
December 9, 2014
/s/ Eric E. Mellen
Eric E. Mellen
Chief Financial Officer
(Principal Financial and Accounting Officer)
December 9, 2014
/s/ James P. Sharp
James P. Sharp
Director
December 9, 2014
/s/ Randolph H. Fields
Randolph H. Fields
Director
December 9, 2014
/s/ Marc G. Elliott
Marc G. Elliott
President
December 9, 2014
/s/ Cort J. Dondero
Cort J. Dondero
Director
/s/ David A. Air
David A. Air
Director
December 9, 2014
December 9, 2014
44
GENCOR INDUSTRIES, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
EXHIBIT 21.1
All of the operating subsidiaries of Gencor Industries, Inc., a Delaware corporation, listed below are included in the
Consolidated Financial Statements:
General Combustion Corporation
Bituma-Stor, Inc.
Bituma Corporation
Equipment Services Group, Inc.
Gencor Energy Corp.
Gencor Holdings International Corp.
State in Which
Incorporated
Country in Which
Incorporated
Florida
Iowa
Washington
Florida
-
Florida
USA
USA
USA
USA
USA
USA
45
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT 23.1
We consent to the incorporation by reference in the Post-Effective Amendment No. 1 to the Registration Statement of
Gencor Industries, Inc. on Form S-8 for the registration of 3,556,000 ($.10 par value) shares of its common stock
issuable pursuant to its 1992 Stock Option Plan, 1996 Stock Option Agreements and 1997 Stock Option Plan (SEC File
Number 333-61769) and in the related prospectus of our report dated December 9, 2014 with respect to the
consolidated financial statements of Gencor Industries, Inc. and subsidiaries included in this Annual Report on Form
10-K for the year ended September 30, 2014.
/s/ MOORE STEPHENS LOVELACE, P.A.
MOORE STEPHENS LOVELACE, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
Orlando, Florida
December 9, 2014
46
EXHIBIT 31.1
I, Mr. E.J. Elliott, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Gencor Industries, Inc.;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;
Based on my knowledge, the financial statements, and other financial information included in this annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
The registrant’s other certifying officers and I, are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting, and;
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal controls.
Date: December 9, 2014
/s/ E. J. Elliott
E. J. Elliott
Chairman and Chief Executive Officer
47
I, Mr. Eric E. Mellen, certify that:
CERTIFICATION
EXHIBIT 31.2
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Gencor Industries, Inc.;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;
Based on my knowledge, the financial statements, and other financial information included in this annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
The registrant’s other certifying officers and I, are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting, and;
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal controls.
Date: December 9, 2014
/s/ Eric E. Mellen
Eric E. Mellen
Chief Financial Officer
48
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report of Gencor Industries, Inc. (the “Company”) on Form 10-K for the fiscal year
ending September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”),
each of the undersigned officers of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the
Sarbanes-Oxley Act of 2002, that:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
The information contained in the Report fairly presents, in all materials respects, the financial
condition and results of operations of the Company.
/s/ E. J. Elliott
E. J. Elliott
Chairman and Chief Executive Officer
December 9, 2014
/s/ Eric E. Mellen
Eric E. Mellen
Chief Financial Officer
December 9, 2014
49
General Information
Form 10-K Annual Report
Additional copies of the Form 10-K
Annual Report filed with the Securities
and Exchange Commission for the fiscal
year ended September 30, 2014 are
available at no charge to shareholders
who submit a request in writing to:
Gencor Industries, Inc.
5201 N. Orange Blossom Trail
Orlando, Florida 32810
Attention: Corporate Secretary
Annual Meeting of Shareholders
The 2015 Annual Meeting of Shareholders
of Gencor Industries, Inc. will be held at
the corporate office on March 6, 2015
at 10:00 a.m. Eastern standard time.
Executive Offices
Corporate Offices
Gencor Industries, Inc.
5201 N. Orange Blossom Trail
Orlando, Florida 32810
(407) 290-6000
Fax (407) 578-0577
Independent Accountants
Moore Stephens Lovelace, P.A.
1201 South Orlando Avenue, Suite 400
Winter Park, Florida 32789-7192
Registrar and Transfer Agent
Continental Stock Transfer & Trust Company
17 Battery Place South (8th Floor)
New York, New York 10004
Directors
E.J. Elliott
Chairman of the Board and
Chief Executive Officer
Marc G. Elliott
President
Randolph H. Fields
Attorney, Gray Robinson, P.A.
David A. Air
Business Consultant
Cort J. Dondero
Former COO of Bluegrass Materials
Founder of Dondero and Associates
James P. Sharp
Management Consultant
Officers
E.J. Elliott
Chairman of the Board and
Chief Executive Officer
Marc G. Elliott
President
Eric E. Mellen
Chief Financial Officer
Dennis B. Hunt
Senior Vice President, Global Sales and Marketing
Lawrence C. Maingot
Vice President and Controller
Lawrence K. Miles
Vice President, Global Product Support
Jeanne Lyons
Corporate Secretary
5201 N. Orange Blossom Trail • Orlando, Florida 32810
T (407) 290-6000 • F (407) 578-0577
www.gencor.com