0001021408-01-508742.txt : 20011030
0001021408-01-508742.hdr.sgml : 20011030
ACCESSION NUMBER: 0001021408-01-508742
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010630
FILED AS OF DATE: 20011025
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: GENCOR INDUSTRIES INC
CENTRAL INDEX KEY: 0000064472
STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531]
IRS NUMBER: 590933147
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-11703
FILM NUMBER: 1766204
BUSINESS ADDRESS:
STREET 1: 5201 N ORANGE BLOSSOM TRAIL
CITY: ORLANDO
STATE: FL
ZIP: 32810
BUSINESS PHONE: 4072906000
MAIL ADDRESS:
STREET 1: 5201 N ORANGE BLOSSOM
CITY: ORANLANDO
STATE: FL
ZIP: 32810
FORMER COMPANY:
FORMER CONFORMED NAME: MECHTRON CORP
DATE OF NAME CHANGE: 19690909
FORMER COMPANY:
FORMER CONFORMED NAME: MECHTRON GENCO CORP
DATE OF NAME CHANGE: 19720411
FORMER COMPANY:
FORMER CONFORMED NAME: MECHTRON INTERNATIONAL CORP
DATE OF NAME CHANGE: 19880128
10-Q
1
d10q.txt
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE PERIOD ENDED June 30, 2001
-------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD From ____________________to ______________________
Commission file number 0-3821
---------
GENCOR INDUSTRIES, INC.
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 59-0933147
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporated or organization) Identification No.)
5201 North Orange Blossom Trail, Orlando, Florida 32810
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(407) 290-6000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes_____ No X
-----
Indicate number of shares outstanding of each of the issuer's classes of common
stock as of the latest practicable date.
Class Outstanding at July 31, 2001
----- ----------------------------
Common stock, $.10 par value 6,884,070 shares
Class B stock, $.10 par value 1,798,398 shares
GENCOR INDUSTRIES, INC.
Index
Page
Part I. Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets - June 30, 2001 (Unaudited)
and September 30, 2000 3
Unaudited condensed consolidated income statements - Three and
nine months ended June 30, 2001 and 2000 4
Unaudited condensed consolidated statements of cash flows - Nine months
ended June 30, 2001 and 2000 5
Notes to condensed consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial Position and Results
of Operations 9
Item 3. Quantitative and Qualitative Disclosure of Market Risk 11
Part II. Other Information
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
Part I. Financial Information
Item 1. Financial Statement
GENCOR INDUSTRIES, INC.
Condensed Consolidated Balance Sheets
In thousands, except share amounts
June 30 September 30
2001 2000
---- ----
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 12,329 $ 17,971
Accounts receivable, less allowance for doubtful
accounts of $1,439 ($3,146 at September 30, 2000) 12,343 24,130
Inventories 28,889 41,394
Prepaid expenses 1,057 2,374
-------- ---------
Total current assets 54,618 85,869
-------- ---------
Property and equipment, net of accumulated depreciation
of $16,970 and $30,368, respectively 20,075 33,567
Goodwill, net of accumulated amortization of $2,498
at September 30, 2000 - 12,018
Other assets 4,757 8,492
-------- ---------
Total assets $ 79,450 $ 139,946
======== =========
Liabilities and shareholders' equity (deficit)
Current liabilities:
Notes payable $ 196 $ 1,124
Current portion of long-term debt 41,837 104,743
Accounts payable 11,259 17,079
Customer deposits 1,290 1,735
Income and other taxes payable 3,995 1,362
Accrued expenses 16,827 14,629
-------- ---------
Total current liabilities 75,404 140,672
Post-retirement benefits - 2,950
Other liabilities 3,309 3,747
Shareholders' equity (deficit):
Preferred stock, par value $.10 per share; authorized
300,000 shares; none issued - -
Common stock, par value $.10 per share; 15,000,000 shares authorized;
6,971,470 shares issued 697 697
Class B stock, par value $.10 per share; 6,000,000 shares authorized:
1,890,398 shares issued 189 189
Capital in excess of par value 11,343 11,343
Accumulated deficit (2,772) (10,110)
Accumulated other comprehensive loss (6,921) (7,743)
Subscription receivable from officer (95) (95)
Common stock in treasury, 179,400 shares at cost (1,704) (1,704)
-------- ---------
737 (7,423)
-------- ---------
Total liabilities and shareholders' equity (deficit) $ 79,450 $ 139,946
======== =========
See notes to condensed consolidated financial statements.
3
GENCOR INDUSTRIES, INC.
Unaudited Condensed Consolidated Income Statements
In thousands, except per share amounts
Three Months Ended Nine Months Ended
June 30 June 30
2001 2000 2001 2000
---- ---- ---- ----
Net sales $ 20,841 $ 32,241 $ 54,240 $ 82,962
Costs and expenses:
Costs of products sold 14,210 22,721 38,606 59,339
Product engineering and development 601 671 1,731 2,149
Selling, general and administrative 3,877 4,533 10,981 13,246
Restructuring costs 75 1,330 3,060 2,026
-------- -------- -------- --------
18,763 29,255 54,378 76,760
-------- -------- -------- --------
Operating income (loss) 2,078 2,986 (138) 6,202
Other income (expense):
Interest income 90 52 225 143
Interest expense (93) (1,531) (192) (4,286)
Miscellaneous 72 214 82 310
-------- -------- -------- --------
69 (1,265) 115 (3,833)
-------- -------- -------- --------
Income (loss) from continuing operations
before income taxes 2,147 1,721 (23) 2,369
Income taxes - 239 - 633
-------- -------- -------- --------
Income (loss) from continuing operations 2,147 1,482 (23) 1,736
-------- -------- -------- --------
Discontinued operations
Income (loss) from discontinued operations, net
of income taxes 1,676 510 3,815 (1,118)
Gain on sale of business unit, net of income taxes 3,546 - 3,546 -
-------- -------- -------- --------
Net income $ 7,369 $ 1,992 $ 7,338 $ 618
======== ======== ======== ========
Basic and diluted net income (loss) per common share:
Income from continuing operations $ 0.25 $ 0.17 $ - $ 0.20
Discontinued operations $ 0.19 $ 0.06 $ 0.44 $ (0.13)
Gain on sale of business unit $ 0.41 $ - $ 0.41 $ -
-------- -------- -------- --------
Net income $ 0.85 $ 0.23 $ 0.85 $ 0.07
======== ======== ======== ========
See notes to condensed consolidated financial statements.
4
GENCOR INDUSTRIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
In thousands
Nine Months Ended
June 30
2001 2000
---- ----
Cash flows from operations:
Net income $ 7,338 $ 618
Adjustments to reconcile net income (loss)
to cash provided by (used for) operations:
Gain on sale of business unit (4,646) -
Depreciation and amortization 3,004 3,215
(Gain) loss on disposition of property and equipment 893 (243)
Postretirement benefits - 288
Change in assets and liabilities net of disposed business unit amounts
Accounts receivable 2,526 6,176
Inventories (3,979) (406)
Prepaid expenses 869 427
Other assets (1,558) (81)
Accounts payable 2,023 (8,316)
Customer deposits (445) (746)
Income and other taxes payable 3,271 6,808
Accrued expenses 361 5,901
Other liabilities (438) (108)
--------- --------
Total adjustments 1,881 12,915
--------- --------
Cash provided by operations 9,219 13,533
--------- --------
Cash flows from investing activities:
Net proceeds from sale of business unit 48,778 -
Capital expenditures - (1,225)
Proceeds from sale of property and equipment 27 442
--------- --------
Cash provided by (used for) investing activities 48,805 (783)
--------- --------
Cash flows from financing activities:
Net reduction in notes payable (616) (3,933)
Repayment of debt (62,906) (458)
Borrowings - 5,415
--------- --------
Cash provided by (used for) financing activities (63,522) 1,024
--------- --------
Effect of exchange rate changes on cash and cash equivalents (144) (419)
--------- --------
Increase (decrease) in cash and cash equivalents (5,642) 13,355
Cash and cash equivalents at beginning of period 17,971 9,581
--------- --------
Cash and cash equivalents at end of period $ 12,329 $ 22,936
========= ========
See notes to condensed consolidated financial statements.
5
GENCOR INDUSTRIES, INC.
Notes to Condensed Consolidated Financial Statements
Note 1 - Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all material adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three- and nine-month
periods ended June 30, 2001 are not necessarily indicative of the results that
may be expected for the year ended September 30, 2001.
The balance sheet at September 30, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Gencor Industries, Inc. annual report on Form
10-K for the year ended September 30, 2000.
Note 2 - Bankruptcy Proceedings
As of September 1999, the Company was in default of the terms and conditions of
its Senior Secured Credit Facility and Industrial Revenue Bond Indenture. In
November 1999, the Senior Secured Lenders accelerated their demand for payment
in full. During April 2000, certain of the Company's lenders filed an
Involuntary Petition under Chapter 11 of the U.S. Bankruptcy Code. On September
13, 2000 (the "petition date"), the Company and certain of its subsidiaries
("the Debtors") filed voluntary petitions commencing cases under Chapter 11 of
the U. S. Bankruptcy Code. The Company and certain of its subsidiaries began
operating its businesses as debtors-in-possession under Chapter 11 of the U. S.
Bankruptcy Code.
On April 13, 2001, the Debtors filed the Amended Plan of Reorganization of
Gencor Industries, Inc. (the "Amended Plan"), dated April 9, 2001 with the
Bankruptcy Court providing essentially for 100% payment of all secured and
unsecured creditors and no dilution or diminution to the equity holders. The
Amended Plan was confirmed on July 11, 2001.
The Amended Plan will become effective on or before October 30, 2001, unless
extended (the "Effective Date"). Pursuant to the Amended Plan, as of the
Effective Date, the approved sale of Consolidated Process Machinery's (CPM)
domestic and foreign pellet operations was to be consummated (see Note 3 -
Discontinued Operations). The sale was in fact consummated on May 29, 2001 for
$52 million. The net proceeds from the sale were used to reduce the outstanding
balance of the Senior Secured Lenders. Under the Amended Plan, all of the
Company's debts will be satisfied in full. Also by the Effective Date, the
Senior Secured Lenders and the Debtor are to have closed an Amended and Restated
Senior Secured Credit Agreement, which would specify that the remaining claims
of the Senior Secured Lenders of approximately $33 million are to be paid over a
four-year period with the balance due in 2005. Any remaining debt balance at the
end of the four-year period is expected to be refinanced. The Company intends to
emerge from bankruptcy on the Effective Date.
These condensed consolidated financial statements do not include any
adjustments, which may arise as a result of the Company's bankruptcy
proceedings.
6
Note 3 - Discontinued Operations
As part of its planned reorganization in September 2000, the Company announced
its intent to dispose of its food segment. Accordingly, the Company reported the
results of the operations of the food processing equipment manufacturing
business as discontinued operations.
Certain information with respect to discontinued operations is summarized as
follows:
Three-months Ended Nine-months Ended
June 30 June 30
2001 2000 2001 2000
---- ---- ---- ----
Net sales $ 8,731 $ 16,950 $42,740 $62,899
Costs and expenses 5,870 16,325 36,225 63,605
------- -------- ------- -------
Income (loss) from discontinued operations before income taxes 2,861 625 6,515 (706)
Income taxes 1,185 115 2,700 412
------- -------- ------- -------
Income (loss) from discontinued operations, net of income taxes $ 1,676 $ 510 $ 3,815 $(1,118)
======= ========= ======= =======
On May 29, 2001, the Company sold the stock of Consolidated Process Machinery's
foreign pellet subsidiaries and the assets and certain liabilities of the
domestic pellet subsidiaries for approximately $52 million in cash. The net sale
proceeds were used to pay-down the outstanding loan balance of the Senior
Secured Lenders. The Company's domestic and foreign food processing machinery
operations located in Colorado, Sweden and Brazil were not included in the
aforementioned sale. The Company intends to dispose of these operations. In
September 2001, the Swedish operation was placed into receivership. The Company
anticipates that it will realize a net gain on the disposal of its discontinued
operations.
Note 4 - Restructuring Costs
Restructuring costs consist of nonrecurring legal and professional fees relating
to the bankruptcy filing and amending the Company's credit agreements.
Note 5 - Inventories
The components of inventory consist of the following:
June 30 September 30
2001 2000
---- ----
Raw materials $ 13,891 $ 17,532
Work in process 7,591 7,705
Finished goods 5,993 15,034
Used equipment 1,414 1,123
-------- --------
$ 28,889 $ 41,394
======== ========
7
Note 6 - Earnings Per Share Data
The following table sets forth the computation of basic and diluted earnings per
share for the periods indicated.
Three Months Ended Nine Months Ended
June 30 June 30
2001 2000 2001 2000
---- ---- ---- ----
Basic and diluted:
Income (loss) from continuing operations $ 2,147 $ 1,482 $ (23) $ 1,736
Income (loss) from discontinued operations 1,676 510 3,815 (1,118)
Gain on sale of business unit 3,546 - 3,546 -
------- ------- ------- -------
Net income $ 7,369 $ 1,992 $ 7,338 $ 618
======= ======= ======= =======
Average outstanding shares 8,682 8,682 8,682 8,682
======= ======= ======= =======
Basic and diluted EPS:
Continuing operations $ 0.25 $ 0.17 $ - $ 0.20
Discontinued operations 0.19 0.06 0.44 (0.13)
Gain on sale of business unit 0.41 - 0.41 -
------- ------- ------- -------
Net income $ 0.85 $ 0.23 $ 0.85 $ 0.07
======= ======= ======= =======
Approximately 1,500,000 options to purchase common stock have not been included
as common stock equivalents in the per share calculations since the effect would
not be dilutive or would be antidilutive.
Note 7 - Comprehensive Income (Loss)
The total comprehensive income (loss) for the three-months ended June 30, 2001
and 2000 was $10,435 and $2,219, respectively. For the nine-months ended June
30, 2001 and 2000, total comprehensive income (loss) was $8,160 and ($2,247),
respectively. Total comprehensive income (loss) differs from net income (loss)
due to gains and losses resulting from foreign currency translation, which are
reflected separately in the shareholders' equity (deficit) section of the
balance sheet under the caption "Accumulated other comprehensive loss." Gains
and losses resulting from foreign currency transactions are included in income.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations - Continuing Operations
Net sales for the quarter ended June 30, 2001 were $20.8 million reflecting a
decline of $11.4 million, or 35.4%, from net sales of $32.2 million for the same
quarter of 2000. Net sales for the first nine-months of fiscal 2001 were $54.2
million, reflecting a decline of $28.7 million or 34.6% from $82.9 million
during the same period of 2000. Domestic sales for the three- and nine-month
periods ended June 30, 2001 were $17.8 million and $42 million, respectively.
Domestic sales for the same periods of fiscal 2000 were $22.7 million and $60.8
million, respectively. Foreign sales for the three- and nine-month periods
ended June 30, 2001 were $3.0 million and $12.2 million, respectively. Foreign
sales for the same periods of fiscal 2000 were $9.5 million and $22.2 million,
respectively. The significant decline in sales is attributable to the Company's
filing for bankruptcy protection during September 2000 and the reluctance by
several of the Company's customers to commit to new plant projects after the
bankruptcy filing.
Gross margins as a percent of net sales improved by 2.3% during the three-month
period ended June 30, 2001 as compared to the same period of fiscal 2000. The
improvement reflects the Company's efforts to streamline operations and garner
operating efficiencies. For the nine-month period of 2001, gross margins as a
percent of sales improved 0.3% from the gross margins realized during 2000.
Gross margins for the domestic operations improved 2.4% as a percent of net
sales. However, higher production costs experienced by the Company's U.K.
operations caused margins to deteriorate on foreign sales by 8.8% during the
three- and nine-month periods.
Selling and administrative expenses were $3.9 million and $11 million for the
three- and nine-month periods of fiscal 2001, compared to $4.5 million and $13.2
million for the same periods of fiscal 2000. The improvement reflects the
Company's effort to contain costs during 2001.
Legal and professional fees related to the reorganization were approximately
$3.1 million for the nine-months ended June 30, 2001 and $2 million for the same
period of fiscal 2000.
The Company recorded lower interest expense in fiscal 2001, due to the
bankruptcy filing in September 2000. Interest expense would have been
approximately $2.3 million and $7.6 million for the three- and nine-month
periods ended June 30, 2001 had interest expense been incurred at the original
contracted rates in the loan agreements.
Liquidity and Capital Resources
Cash flows from operations were $9.2 million for the nine-month period ended
June 30, 2001 as compared to $13.5 million during the same period of 2000. The
decline reflects the reduction in operating results since the Company filed for
bankruptcy protection in September 2000. Cash flows from investing activities
include net cash proceeds of approximately $48.8 million from the sale of the
Company's discontinued operations (CPM) on May 29, 2001 for approximately $52
million. The Company did not incur any capital expenditures during the
nine-month period. In addition to applying the entire net cash proceeds of $48.8
million, the Company paid an additional $15.1 million from cash provided by
operations and working capital to further reduce its debt during the period. As
a result, the Company successfully reduced its total outstanding debt balance by
$63.9 million during the nine-month period, from $105.9 million at September 30,
2000 to $42 million at June 30, 2001.
As of the Effective Date, the new credit agreement will go into effect (see Note
2 - Bankruptcy Proceedings). The new credit agreement will provide for full
payment of the outstanding balance over a four-year period and will contain
certain financial and other restrictive covenants.
9
Any remaining debt balance in 2005 is expected to be refinanced.
The Company's management anticipates that after emerging from bankruptcy, its
existing working capital, credit resources and future cash flows will adequately
meet its liquidity needs for the foreseeable future.
Seasonality
The asphalt-related operations of Construction Equipment Group (CEG) are subject
to a seasonal slow-down during the third and fourth quarters of the calendar
year. Traditionally, CEG'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 ended September 30.
Forward-Looking Information
Certain statements in this Section and elsewhere in this report are
forward-looking in nature and relate to trends and events that may affect the
Company's future financial position and operating results. Such statements are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The terms "expect," "anticipate," "believe," "intend," and
"project" and similar words or expressions are intended to identify
forward-looking statements. These statements speak only as of the date of this
report. The statements are based on current expectations, are inherently
uncertain, are subject to risks, and should be viewed with caution. Actual
results and experience may differ materially from the forward-looking statements
as a result of many factors, including changes in economic conditions in the
markets served by the Company, increasing competition, fluctuations in raw
materials and energy prices, and other unanticipated events and conditions. It
is not possible to foresee or identify all such factors. The Company makes no
commitment to update any forward-looking statement or to disclose any facts,
events, or circumstances after the date hereof that may affect the accuracy of
any forward-looking statement.
10
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company operates manufacturing facilities and sales offices principally
located in the United States and the United Kingdom. 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. The Company's principal
currency exposure against the U.S. dollar is the British pound. The Company has
used foreign currency forward exchange contracts to mitigate fluctuations in
currency. The Company does not hold derivatives for trading purposes.
Periodically, the Company has used derivative financial instruments consisting
primarily of interest rate hedge agreements to manage exposures to interest rate
changes. The company's objective in managing its exposure to changes in interest
rates (on its variable rate debt) is to limit the impact of such changes on
earnings and cash flow and to reduce its overall borrowing costs. A 100 basis
point adverse movement (increase) in interest rates along the entire yield curve
would increase the pre-tax loss for the nine-months ended June 30, 2001 and 2000
by approximately $679 and $766, respectively. Actual changes in rates may differ
from the hypothetical assumptions used in computing this exposure.
11
Part II. Other Information
Item 1. Legal Proceedings
As indicated in the Company's Form 10-K for the fiscal year ended September 30,
2000, a class action lawsuit was settled with no material adverse impact on the
Company.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits:
None.
B. Reports on Form 8-K:
Pursuant to Item 4 of Form 8-K, the Company filed a Form 8-K on May 3,
2001 advising of a change in certifying accountants.
12
Signatures
Pursuant to the requirements 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.
GENCOR INDUSTRIES, INC.
Date: October 25th, 2001 /s/ Scott W. Runkel
----------------------------------------
Scott W. Runkel, Chief Financial Officer
13