Gencor Industries Inc. Reports Operating Results (10-Q)
Gencor Industries Inc. has a market cap of $60 million; its shares were traded at around $7.4301 with a P/E ratio of 123.8 and P/S ratio of 1.1. GENC is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations: In August 2005, the federal government passed the Safe, Accountable, Flexible and Efficient Transportation Equity Act - A Legacy for Users (SAFETEA-LU). This bill appropriated a multi-year guaranteed funding of $286.5 billion for federal highway, transit and safety programs that expired on September 30, 2009. On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA), which included approximately $27.5 billion for highway and bridge construction activities. The ARRA and any future legislation approved by Congress could reduce infrastructure funding levels. In addition, funding restrictions can be imposed on states that do not comply with certain federal policies. On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment (HIRE) Act. This law extends authorization of the surface transportation programs previously funded under SAFETEA-LU through December 31, 2010 at 2009 levels. In addition, the HIRE Act authorizes a one-time transfer of $19.5 billion from the general fund to the highway trust fund related to previously foregone interest payments. Although the HIRE Act should help stabilize the federal highway program, the Company believes a new multi-year highway program would have the greatest positive impact on the road construction industry and allow its customers to plan and execute longer term projects. The Company believes that its customers are waiting on the states to move forward with potential projects as their purchasing decisions are significantly influenced by the federal governments legislation on federal road building funding. The Company believes any new funding will have a positive impact on the Companys financial performance, although the magnitude of that improvement cannot be determined.
Net sales for the quarter ended June 30, 2010 and 2009 were $12,684 and $11,674, respectively. Sales in this third quarter of fiscal 2010 dropped significantly from the $24,042 in the second quarter of 2010 as the majority of the plant sales that were booked earlier in the year shipped prior to the end of March 2010 to meet the start of the asphalt-paving season. Although we continue to quote our customers on new plant proposals, actual bookings are slow to materialize as the road-building industry continues to languish under the current economic conditions. The Companys operations are concentrated in the asphalt-related business and subject to a seasonal slow-down during the third and fourth quarters of the calendar year.
For the quarter ended June 30, 2010, net investment interest and dividend income from the investment portfolio was $695 as compared to $473 in the quarter ended June 30, 2009. The net realized and unrealized losses on marketable securities were $2,058 for the quarter ended June 30, 2010 versus losses of $289 for the quarter ended June 30, 2009. The net investment losses included in the current quarter reflect the overall dip in the market at the end of June 2010. Through August 4, 2010 the investment returns had recovered the losses experienced during the third quarter, however, we cannot guaranty that we will not experience losses during future periods.
Net sales for the nine months ended June 30, 2010 and 2009 were $47,796 and $46,350, respectively. The sales shortfall in the first quarter of fiscal 2010 from the impact of the recessionary economy and tightening of credit availability was offset in the second fiscal quarter from increased foreign plant sales. Sales related to the Companys former United Kingdom operations included in the nine months ended March 31, 2009 were $1,118. The Company divested its operations in the United Kingdom in June 2009.
For the nine months ended June 30, 2010, net investment interest and dividend income from the investment portfolio was $1,912 as compared to $1,525 in the nine months ended June 30, 2009. The net realized and unrealized losses on marketable securities were $1,873 for the nine months ended June 30, 2010 versus losses of $2,781 for the nine months ended June 30, 2009.
The Company amended the Credit Agreement on July 23, 2009 (the Third Amendment). The Credit Agreement was set to expire on July 31, 2009, and rather than let it expire, the Company elected to amend the agreement and reduce the amount of the Credit Facility from $20 million to $1.5 million. The Credit Facility also included a $1.285 million limit on letters of credit, which was reduced from the original $2 million limit. The Company elected to reduce its Credit Facility because it believed the higher amount associated with the original line was not needed and was an unnecessary cost. Pursuant to the Third Amendment, the Companys Credit Facility was extended through April 30, 2010. Under the Third Amendment, substantially all representations, warranties, covenants, rights, duties and obligations set forth in the original agreement continued to apply.
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