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Gencor Industries, Inc. has a market cap of $73.8 million; its shares were traded at around $7.53 with a P/E ratio of 178.6 and P/S ratio of 1.2.
Highlight of Business Operations: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.
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 $7.8 million and $18.6 million as of December 1, 2012 and December 1, 2011, respectively.
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.
Product engineering and development expenses increased $128,000 to $2,339,000 in 2012 consistent with the increased revenues. Selling, general and administrative expenses increased $352,000 to $9,298,000 in 2012 compared to 2011 primarily due to higher legal expenses.
The Company’s backlog was $3.4 million at September 30, 2012 versus $6.5 million at September 30, 2011. The Company’s working capital (defined as current assets less current liabilities) was $96.2 million at September 30, 2012 versus $89.8 million at September 30, 2011. Deferred taxes went from a net deferred tax asset of $1,187,000 as of September 30, 2011 to a net deferred tax liability of $974,000 as of September 30, 2012. The primary reason for the change was related to unrealized returns on marketable equity securities which went from net unrealized losses of $3,789,000 (a deferred tax asset of $1,413,000) at September 30, 2011 to net unrealized gains of $807,000 (a deferred tax liability of $310,000) at September 30, 2012 (refer to Note 6 to consolidated Financial Statements). Costs and estimated earnings in excess of billings decreased $1.0 million primarily due to the reduced level of activity on percentage of completion jobs at the end of fiscal 2012 as compared to fiscal 2011. Inventories were reduced $960,000 as the Company continued its effort to drive down its investment in inventory to match the lower level of operations and produce cash. Prepaid expenses decreased $850,000 primarily from the return of cash deposits used as collateral at insurance companies that were no longer required.
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