GENCOR INDUSTRIES INC - Quarter Report: 2021 March (Form 10-Q)

Large accelerated filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD: From

Commission File Number:

001-11703

GENCOR INDUSTRIES, INC.


Delaware		59-0933147
(State or other jurisdiction of incorporation or organization)		(IRS Employer 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)

Securities registered or to be registered pursuant to Section 12(b) of the Act


Title of Each Class	Trading Symbol(s)	Name of Exchange on which registered
Common Stock ($.10 Par Value)	GENC	NASDAQ Global Marke t

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 every Interactive Data File required to be submitted 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 such files). Yes

☑

No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at May 10 , 2021
Common stock, $.10 par value		12,298,337 shares
Class B stock, $.10 par value		2,318,857 shares

GENCOR INDUSTRIES, INC.


Index			Page

Part I.	Financial Information

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets – March 31, 2021 (Unaudited) and September 30, 2020	4

		Condensed Consolidated Statements of Operations – Quarters and Six Months Ended March 31, 2021 and 2020 (Unaudited)	5

		Condensed Consolidated Statements of Shareholders’ Equity – Six Months Ended March 31, 2021 and 2020 (Unaudited)	6

		Condensed Consolidated Statements of Cash Flows – Six Months Ended March 31, 2021 and 2020 (Unaudited)	7

		Notes to Condensed Consolidated Financial Statements (Unaudited)	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21

	Item 4.	Controls and Procedures	21

Part II.	Other Information

	Item 1.	Legal Proceedings	22

	Item 1A.	Risk Factors	22

	Item 6.	Exhibits	22

Signatures			23

Caution Concerning Forward-Looking Statements

This Quarterly Report on Form

10-Q

(this “Quarterly Report”) and the Company’s other communications and statements may contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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. 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, demand for the Company’s products, the duration and scope of the novel coronavirus

(“COVID-19”)

pandemic, actions governments, and businesses take in response to the

COVID-19

pandemic, including mandatory business closures; the impact of the pandemic and actions taken on regional economies; the pace of recovery when the

COVID-19

pandemic subsides. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements.

For information concerning these factors and related matters, see the following sections of the Company’s Annual Report on Form

10-K

for the year ended September 30, 2020: (a) Part I, Item 1A, “Risk Factors” and (b) Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. 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 Quarterly Report. The Company does not undertake to update any forward-looking statements, except as required by law.

Unless the context otherwise indicates, all references in this Quarterly Report to the “Company,” “Gencor,” “we,” “us,” or “our,” or similar words are to Gencor Industries, Inc. and its subsidiaries.

Part I. Financial Information

Item 1.

Financial Statements

GENCOR INDUSTRIES, INC.

Condensed Consolidated Balance Sheets

	March 31, 2021 (Unaudited)		September 30, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	29,417,000	$	35,584,000
Marketable securities at fair value (cost of $91,159,000 at March 31, 2021 and $89,514,000 at September 30, 2020)		93,646,000		89,498,000
Accounts receivable, less allowance for doubtful accounts of $373,000 at March 31, 2021 and $442,000 at September 30, 2020		3,543,000		1,992,000
Costs and estimated earnings in excess of billings		—		6,405,000
Inventories, net		38,104,000		27,090,000
Prepaid expenses		1,204,000		1,189,000

Total current assets		165,914,000		161,758,000

Property and equipment, net		12,252,000		8,341,000
Other long-term assets		1,054,000		995,000

Total Assets	$	179,220,000	$	171,094,000

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,697,000	$	1,728,000
Customer deposits		6,026,000		3,853,000
Accrued expenses		3,134,000		2,605,000
Current operating lease liabilities		412,000		328,000

Total current liabilities		12,269,000		8,514,000
Deferred and other income taxes		1,247,000		746,000
Non-current operating lease liabilities		589,000		614,000

Total liabilities		14,105,000		9,874,000

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; 12,298,337 shares and 12,287,337 shares issued and outstanding at March 31, 2021 and September 30, 2020, respectively		1,230,000		1,229,000
Class B Stock, par value $.10 per share; 6,000,000 shares authorized; 2,318,857 shares issued and outstanding at March 31, 2021 and September 30, 2020		232,000		232,000
Capital in excess of par value		12,386,000		12,331,000
Retained earnings		151,267,000		147,428,000

Total shareholders’ equity		165,115,000		161,220,000

Total Liabilities and Shareholders’ Equity	$	179,220,000	$	171,094,000

See accompanying Notes to Condensed Consolidated Financial Statements

GENCOR INDUSTRIES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)


	For the Quarters Ended March 31,					For the Six Months Ended March 31,
	2021		2020			2021		2020
Net revenue	$	21,352,000	$	25,993,000		$	40,316,000	$	44,023,000
Cost of goods sold		15,206,000		18,655,000			31,189,000		32,365,000

Gross profit		6,146,000		7,338,000			9,127,000		11,658,000
Operating expenses:
Product engineering and development		1,069,000		689,000			1,914,000		1,455,000
Selling, general and administrative		3,838,000		2,561,000			7,032,000		4,943,000

Total operating expenses		4,907,000		3,250,000			8,946,000		6,398,000

Operating income (loss)		1,239,000		4,088,000			181,000		5,260,000
Other income (expense), net:
Interest and dividend income, net of fees		327,000		763,000			1,130,000		1,395,000
Net realized and unrealized gains (losses) on marketable securities, net		1,294,000		(5,670,000	)		3,488,000		(4,353,000	)
Other		—		—			—		(10,000	)

		1,621,000		(4,907,000	)		4,618,000		(2,968,000	)

Income (loss) before income tax expense (benefit)		2,860,000		(819,000	)		4,799,000		2,292,000
Income tax expense (benefit)		572,000		(164,000	)		960,000		458,000

Net income (loss)	$	2,288,000	$	(655,000	)	$	3,839,000	$	1,834,000

Basic Income (Loss) per Common Share	$	0.16	$	(0.04	)	$	0.26	$	0.13

Diluted Income (Loss) per Common Share	$	0.16	$	(0.04	)	$	0.26	$	0.12

See accompanying Notes to Condensed Consolidated Financial Statements

GENCOR INDUSTRIES, INC.

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)


For the Six Months Ended March 31, 2021
	Common Stock				Class B Stock				Capital in Excess of Par Value		Retained Earnings			Total Shareholders’ Equity
	Shares		Amount		Shares		Amount		Capital in Excess of Par Value		Retained Earnings			Total Shareholders’ Equity
September 30, 2020		12,287,337	$	1,229,000		2,318,857	$	232,000	$	12,331,000	$	147,428,000		$	161,220,000
Net income		—		—		—		—		—		1,551,000			1,551,000

December 31, 2020		12,287,337	$	1,229,000		2,318,857	$	232,000	$	12,331,000	$	148,979,000		$	162,771,000
Net income		—		—		—		—		—		2,288,000			2,288,000
Stock options exercised		11,000		1,000		—		—		55,000		—			56,000

March 31, 2021		12,298,337	$	1,230,000		2,318,857	$	232,000	$	12,386,000	$	151,267,000		$	165,115,000


For the Six Months Ended March 31, 2020
	Common Stock				Class B Stock				Capital in Excess of Par Value		Retained Earnings			Total Shareholders’ Equity
	Shares		Amount		Shares		Amount		Capital in Excess of Par Value		Retained Earnings			Total Shareholders’ Equity
September 30, 2019		12,277,337	$	1,228,000		2,308,857	$	231,000	$	12,159,000	$	141,897,000		$	155,515,000
Net income		—		—		—		—		—		2,489,000			2,489,000
Stock-based compensation		—		—		—		—		18,000		—			18,000

December 31, 2019		12,277,337	$	1,228,000		2,308,857	$	231,000	$	12,177,000	$	144,386,000		$	158,022,000
Net loss		—		—		—		—		—		(655,000	)		(655,000	)
Stock-based compensation		—		—		—		—		17,000		—			17,000

March 31, 2020		12,277,337	$	1,228,000		2,308,857	$	231,000	$	12,194,000	$	143,731,000		$	157,384,000

See accompanying Notes to Condensed Consolidated Financial Statements

GENCOR INDUSTRIES, INC.

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended March 31, 2021 and 2020

(Unaudited)

	2021			2020
Cash flows from operating activities:
Net income	$	3,839,000		$	1,834,000
Adjustments to reconcile net income to cash provided by operating activities:
Purchase of marketable securities		(54,048,000	)		(73,393,000	)
Proceeds from sale and maturity of marketable securities		53,067,000			72,181,000
Change in value of marketable securities		(3,167,000	)		4,259,000
Deferred and other income taxes		501,000			(2,863,000	)
Depreciation and amortization		1,210,000			831,000
Provision for doubtful accounts		25,000			25,000
Stock-based compensation		—			35,000
Changes in assets and liabilities:
Accounts receivable		(1,576,000	)		(788,000	)
Costs and estimated earnings in excess of billings		6,405,000			5,046,000
Inventories (excluding the effect of the Blaw-Knox acquisition)		(629,000	)		(1,697,000	)
Prepaid expenses		(15,000	)		(1,645,000	)
Accounts payable		969,000			2,473,000
Customer deposits		2,173,000			2,795,000
Accrued expenses		529,000			61,000

Total adjustments		5,444,000			7,320,000

Cash flows provided by operating activities		9,283,000			9,154,000

Cash flows from investing activities:
Acquisition of Blaw- Knox assets		(13,777,000	)		—
Capital expenditures		(1,729,000	)		(718,000	)

Cash flows used in investing activities		(15,506,000	)		(718,000	)

Cash flows from financing activities:
Proceeds from stock option exercises		56,000			—

Cash flows provided by financing activities		56,000			—

Net increase (decrease) in cash and cash equivalents		(6,167,000	)		8,436,000
Cash and cash equivalents at:
Beginning of year		35,584,000			10,302,000

End of year	$	29,417,000		$	18,738,000

Non-cash investing and financing activities:
Operating lease right-of-use assets	$	254,000		$	—
Operating lease liabilities	$	254,000		$	—

See accompanying Notes to Condensed Consolidated Financial Statements

GENCOR INDUSTRIES, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 notes 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 quarter and six months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending September 30, 2021.

The accompanying Condensed Consolidated Balance Sheet at September 30, 2020 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements.

On October 1, 2020, the Company acquired the Blaw-Knox paver line and associated assets, including inventory, fixed assets and related intellectual property, from Volvo Construction Equipment North America, LLC (“Volvo CE”). The acquisition provides the Company entry into the asphalt paver sector of the asphalt industry. The acquisition was accounted for as a business combination under ASC 805, “Business Combinations.” The initial purchase price of approximately $14.4 million, which was subject to post-closing adjustments, was funded by cash on hand. After post-closing adjustments transacted during quarter ended March 31, 2021, the final purchase price was $13.8 million, including $10.4 million in inventory and $3.4 million in fixed assets. There were no liabilities assumed. The accompanying condensed consolidated financial statements as of March 31, 2021, include the assets, liabilities and

operating results of the paver line for the quarter and six months then ended. There were no paver equipment revenues during the quarter ended December 31, 2020, as the facility was being readied for production which began in the quarter ended March 31, 2021.

For further information, refer to the consolidated financial statements and notes thereto included in the Gencor Industries, Inc. Annual Report on Form

10-K

for the year ended September 30, 2020.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No.

2016-02,

Leases

(Topic 842) (“ASU

2016-02”).

With adoption of this standard, lessees are required to recognize most leases as a

right-of-use

asset and a lease liability on their balance sheet. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. ASU

2016-02

must be applied on a modified retrospective basis and was effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. The Company adopted ASU

2016-02

in the first quarter of fiscal 2020. The initial adoption of ASU

2016-02

did not have a significant impact on its consolidated financial statements. During the fourth quarter of fiscal 2020, the Company entered into a three-year operating lease for property related to the manufacturing and warehousing of the paver line which resulted in reporting a

right-of-use

(“ROU”) asset and related lease liabilities of approximately $970,000. On October 9, 2020, the Company entered into a second operating lease for additional warehousing space for the

ver

inventory. The lease term is for one year beginning November 2020 with automatic

one-year

renewals. In accordance with ASU

2016-02,

the Company recorded a ROU asset totaling $254,000 and related lease liabilities at inception (see Note 9 – Leases).

In August 2018, the FASB issued ASU

2018-13,

Fair Value Measurement - Disclosure Framework (Topic 820) (ASU

2018-13).

The updated guidance improves the disclosure requirements on fair value measurements, including, among other things, addition of certain disclosures related to level 3 fair value measurements, and removal of disclosure requirements for (i) the amount and reasons for transfers between level 1 and level 2 of the fair value hierarchy, and (ii) policy and timing of transfers between fair value hierarchy levels. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted ASU

2018-13

during the quarter ended December 31, 2020. The application of this guidance did not have a material effect on our disclosures.

No other accounting pronouncements recently issued or newly effective have had, or are expected to have, a material impact on the Company’s consolidated financial statements.

COVID-19

Pandemic

The Company continues to monitor and evaluate the risks related to the

COVID-19

pandemic, including impacts on its employees, customers, suppliers and financial results. As of the date of issuance of these Condensed Consolidated Financial Statements, the Company’s operations have not been significantly impacted. However, the full impact of the

COVID-19

pandemic continues to evolve subsequent to the quarter ended March 31, 2021 and as of the date these Condensed Consolidated Financial Statements are issued. As such, the full magnitude that the

COVID-19

pandemic will have on the Company’s financial condition and future results of operations is uncertain. Management is actively monitoring the Company’s financial condition, operations, suppliers, industry, customers, and workforce. As the

COVID-19

pandemic continues, the Company’s ability to meet customer demands for products may be impacted or its customers may experience adverse business consequences due to

COVID-19.

Reduced demand for products or ability to meet customer demand (including as a result of disruptions from the Company’s suppliers) could have a material adverse effect on its business operations and financial performance.

Note 2 - Marketable Securities and Fair Value Measurements

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 income statements. Net changes in unrealized gains and losses are reported in the consolidated income statements in the current 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 (stocks), mutual funds, exchange-traded funds, government securities, and cash and money funds, are substantially based on quoted market prices (Level 1). Corporate 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 firms. From time to time the Company may transfer cash between its marketable securities portfolio and operating cash and cash equivalents.

The following table sets forth, by level, within the fair value hierarchy, the Company’s marketable securities measured at fair value as of March 31, 2021:



	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Equities	$	20,423,000	$	—	$	—	$	20,423,000
Mutual Funds		13,238,000		—		—		13,238,000
Exchange-Traded Funds		16,552,000		—		—		16,552,000
Corporate Bonds		—		25,169,000		—		25,169,000
Government Securities		16,000,000		—		—		16,000,000
Cash and Money Funds		2,264,000		—		—		2,264,000

Total	$	68,477,000	$	25,169,000	$	—	$	93,646,000

Net unrealized gains and (losses) included in the Condensed Consolidated Statements of Operations for the quarter and six months ended March 31, 2021, were $596,000 and $2,503,000, respectively.

The following table sets forth by level, within the fair value hierarchy, the Company’s assets measured at fair value as of September 30, 2020:


	Fair Value Measurements
	Level 1		Level 2		Level 3		Total

Equities	$	11,949,000	$	—	$	—	$	11,949,000
Mutual Funds		9,595,000		—		—		9,595,000
Exchange-Traded Funds		10,344,000		—		—		10,344,000
Corporate Bonds		—		27,877,000		—		27,877,000
Government Securities		16,147,000		—		—		16,147,000
Cash and Money Funds		13,586,000		—		—		13,586,000

Total	$	61,621,000	$	27,877,000	$	—	$	89,498,000

Net unrealized gains and (losses) included in the Condensed Consolidated Statements of Operations for the quarter and six months ended March 31, 2020, were $(6,029,000) and $(4,839,000), respectively.

In the fourth quarter of fiscal 2020, the Company liquidated approximately $17.0 million of its investments.

The cash was used to fund the acquisition of the Blaw-Knox paver line and associated assets, including inventory, fixed assets and related intellectual property, from Volvo CE, as well as pay for capital expenditures and other startup costs to get the paver line’s manufacturing facility ready for production.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, customer deposits and accrued expenses approximate fair value because of the short-term nature of these items.

Note 3 – Inventories

Inventories are valued at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling price of goods less reasonable costs of completion and delivery. 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, an allowance is established to reduce the cost basis of inventories three to four years old by 50%, the cost basis of inventories four to five years old by 75%, and the cost basis of inventories greater than five years old 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.

Net inventories at March 31, 2021 and September 30, 2020 consist of the following:


	March 31, 2021		September 30, 2020
Raw materials	$	24,884,000	$	14,607,000
Work in process		5,942,000		3,633,000
Finished goods		7,238,000		8,810,000
Used equipment		40,000		40,000

	$	38,104,000	$	27,090,000

Included in raw materials at March 31, 2021 was approximately $10.4 million of inventory acquired in the Blaw-Know acquisition. Slow-moving and obsolete inventory allowances were $5,049,000 and $4,617,000 at March 31, 2021 and September 30, 2020, respectively.

Note 4 – Costs and Estimated Earnings in Excess of Billings

Costs and estimated earnings in excess of billings on uncompleted contracts as of March 31, 2021 and September 30, 2020 consist of the following:


	March 31, 2021		September 30, 2020

Costs incurred on uncompleted contracts	$	7,192,000	$	10,390,000
Estimated earnings		2,631,000		4,680,000

		9,823,000		15,070,000
Billings to date		9,823,000		8,665,000

Costs and estimated earnings in excess of billings	$	—	$	6,405,000

Note 5 – Earnings per Share Data

The Condensed Consolidated Financial Statements include basic and diluted earnings per share information. The following table sets forth the computation of basic and diluted earnings per share for the quarters and six months ended March 31, 202

and 20


	Quarter Ended March 31,					Six Months Ended March 31,
	2021		2020			2021		2020
Net Income (Loss)		2,288,000	$	(655,000	)	$	3,839,000	$	1,834,000

Common Shares:
Weighted average common shares outstanding		14,614,000		14,586,000			14,611,000		14,586,000
Effect of dilutive stock options		133,000		—			129,000		128,000

Diluted shares outstanding		14,747,000		14,586,000			14,740,000		14,714,000

Basic:
Net income (loss) per share	$	0.16	$	(0.04	)	$	0.26	$	0.13

Diluted:
Net income (loss) per share	$	0.16	$	(0.04	)	$	0.26	$	0.12

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.

The weighted-average shares issuable upon the exercise of stock options included in the diluted earnings per share calculation for the quarter ended March 31, 2021 were 252,000, which equates to 133,000 dilutive common stock equivalents. For the quarter ended March 31, 2020, there were no common stock equivalents included in the diluted earnings per share calculation

as their impact would be anti-dilutive.

The weighted-average shares issuable upon the exercise of stock options included in the diluted earnings per share calculation for the six months ended March 31, 2021

were 252,000,

which equat

s to

129,000 dilutive common stock equivalents. The weighted-average shares issuable upon the exercise of stock options included in the diluted earnings per share calculation for the six months ended March 31, 2020 were 260,000, which equates to 128,000 dilutive common stock equivalents. There were 30,000 weighted-average shares issuable upon the exercise of stock options, which were not included in the diluted earnings per share calculation for the six months ended March 31, 2020 becaus

they were anti-dilutive. There were no anti-dilutive shares for the quarter and six months ended March 31, 2021.

Note 6 – Customers with 10% (or greater) of Net Revenues

During the quarter ended March 31, 2021, one customer accounted for 12.0% of net revenues. During the six months ended March 31, 2021, no customer accounted for 10% or greater of net revenues.

Three other customers accounted for 12.3%, 11.2% and 10.7% of net revenues, respectively, for the quarter ended March 31, 2020. During the six months ended March 31, 2020, one of these three customers accounted for 10.4% of net revenues.

Note 7 – Income Taxes

Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and primarily consist of taxes currently due, plus deferred taxes.

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, the Company is more likely than not to realize the benefit of a deferred tax asset and whether a valuation allowance is needed for some portion or all of a deferred tax asset. No such valuation allowances were recorded as of March 31, 2021 and September 30, 2020.

The Company’s income tax provision is based on management’s estimate of the effective tax rate for the full year. The tax provision in any period will be affected by, among other things, permanent, as well as temporary differences in the deductibility of certain items, in addition to changes in tax legislation. As a result, the Company may experience significant fluctuations in the effective book tax rate (that is, its tax expense divided by

pre-tax

book income) from period to period. The Company’s effective tax rates for the quarters and six months ended March 31, 2021 and March 31, 2020 reflect the impact of the reduced rates under the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act) which was signed into law on December 22, 2017.

Note 8 – Revenue Recognition and Related Costs

The Company recognizes revenue under ASU

No. 2014-09,

Revenue from Contracts with Customers

(Topic 606). The following table disaggregates the Company’s net revenue by major source for the quarters and six months ended March 31, 2021 and 2020:


	Quarter Ended March 31,					Six Months Ended March 31,
	2021			2020		2021			2020

Equipment sales recognized over time	$	3,870,000		$	9,829,000	$	8,002,000		$	21,919,000
Equipment sales recognized at a point in time		9,565,000			10,044,000		19,701,000			11,951,000
Parts and component sales		6,830,000			4,675,000		10,761,000			7,821,000
Freight revenue		1,147,000			1,201,000		1,892,000			2,104,000
Other		(60,000	)		244,000		(40,000	)		228,000

Net revenue	$	21,352,000		$	25,993,000	$	40,316,000		$	44,023,000

Revenues from contracts with customers for the design, manufacture and sale of custom equipment are recognized over time when the performance obligation is satisfied by transferring control of the equipment. Control of the equipment transfers over time, as the equipment is unique to the specific contract and thus does not create an asset with an alternative use to the Company. Revenues and costs are recognized in proportion to actual labor costs incurred, as compared with total estimated labor costs expected to be incurred, during the entire contract. All incremental costs related to obtaining a contract are expensed as incurred, as the amortization period is less than one year. Changes to total estimated contract costs or losses, if any, are recognized in the period in which they are determined.

Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales recognized over time.

There were no contract assets at March 31, 2021 and

6,405,000

in contract assets at September 30, 2020. These contract assets are included in current assets as costs and estimated earnings in excess of billings on the Company’s condensed consolidated balance sheets.

Revenues from all other contracts for the design and manufacture of equipment, for service and for parts sales, net of any discounts and return allowances, are recorded at a point in time when control of the goods or services has been transferred. Control of the goods or service typically transfers at time of shipment or upon completion of the service.

Payment for equipment under contract with customers is typically due prior to shipment. Payment for services under contract with customers is due as services are completed. Accounts receivable related to contracts with customers for equipment sales were $298,000 and $223,000 at March 31, 2021 and September 30, 2020, respectively.

Product warranty costs are estimated using historical experience and known issues and are charged to production costs as revenue is recognized. Provisions for estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded. Returns and allowances, which reduce product revenue, are estimated using historical experience.

Under certain contracts with customers, recognition of a portion of the consideration received may be deferred and recorded as a contract liability if the Company has to satisfy a future obligation, such as to provide installation assistance. There were no contract liabilities other than customer deposits at March 31, 2021 and September 30, 2020. Customer deposits related to contracts with customers were $6,026,000 and $3,853,000 at March 31, 2021 and September 30, 2020, respectively, and are included in current liabilities on the Company’s condensed consolidated balance sheets.

The Company records revenues earned for shipping and handling as freight revenue at the time of shipment, regardless of whether or not it is identified as a separate performance obligation. The cost of shipping and handling is classified as cost of goods sold concurrently with the revenue recognition.

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 uncollectible. Any recoveries of account balances previously considered in the allowance for doubtful accounts reduce future additions to the allowance for doubtful accounts. The allowance for doubtful accounts also includes an estimate for returns and allowances. Provisions for estimated returns and allowances and other adjustments, are provided for in the same period the related sales are recorded. Returns and allowances, which reduce product revenue, are estimated using known issues and historical experience.

Note 9 – Leases

The Company leases certain equipment under

non-cancelable

operating leases. Future minimum rental payments under these leases at March 31, 2021 were immaterial.

On August 28, 2020, the Company entered into a three-year operating lease for property related to the manufacturing and warehousing of the paver line which was acquired on October 1, 2020. The lease term is for the period beginning on September 1, 2020 through August 31, 2023. In accordance with ASU

2016-02,

the Company recorded a ROU asset totaling $970,000 and related lease liabilities at inception. On October 9, 2020, the Company entered into an operating lease for additional warehousing space for

ver

inventory. The lease term is for one year beginning November 2020 with automatic

one-year

renewals. In accordance with ASU

2016-02,

the Company recorded a ROU asset totaling $254,000 and related lease liabilities at inception.

For the quarter and six months ended March 31, 2021, operating lease costs were $105,000 and $194,000, respectively, and cash payments related to these operating leases were $116,000 and $232,000, respectively.

Other information concerning the Company’s operating lease accounted for under ASC 842 guidelines as of March 31, 2021 and September 30, 2020, is as follows:


	March 31, 2021			September 30, 2020
Operating lease ROU asset included in other long-term assets	$	1,001,000		$	942,000
Current operating lease liability		412,000			328,000
Non-current operating lease liability		589,000			614,000
Weighted average remaining lease term (in years)		2.50			2.92
Weighted average discount rate used in calculating ROU asset		4.0	%		4.0	%

Future annual minimum lease payments as of March 31, 2021 are as follows:


Fiscal Year	Annual Lease Payments
2021 (remaining 6 months)	$	233,000
2022		419,000
2023		400,000

Total		1,052,000
Less interest		(51,000	)

Present value of lease liabilities	$	1,001,000

Note 10 – Segment Information

The Company has one

reporting segment, equipment for the highway construction industry. Based on evaluation of the criteria of ASC 280 – Segment Reporting, including the nature of products and services, the nature of the production processes, the type of customers and the methods used to distribute products and services, the Company determined that its operating segments meet the requirements for aggregation. The Company designs, manufactures and sells asphalt plants and pavers, combustion systems and fluid heat transfer systems, for the highway construction industry and environmental and petrochemical markets. The Company’s products are manufactured at three facilities in the United States. The Company also services and sells spare parts for its equipment.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

This Quarterly Report contains certain “forward-looking statements” within the meaning of 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 the following sections of the Company’s Annual Report on Form

10-K

Overview

Gencor is a leading manufacturer of heavy machinery used in the production and application of highway construction materials and environmental control equipment. The Company’s core products include asphalt plants, combustion systems, fluid heat transfer systems and asphalt pavers. The Company’s products are manufactured at three 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 reduce their purchases of new equipment for shipment during the summer and fall months to avoid disrupting their peak season for highway construction and related 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 in the late winter and spring. 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, Canadian infrastructure spending, the need for spare parts, fluctuations in the price of liquid asphalt, and a trend towards larger more efficient asphalt plants.

On December 4, 2015, President Obama signed into law a five-year, $305 billion transportation bill, Fixing America’s Surface Transportation Act (the “FAST Act”). The FAST Act reauthorized the collection of the 18.4 cents per gallon gas tax that is typically used to pay for transportation projects. It also included $70 billion from other areas of the federal budget to close a $16 billion annual funding deficit. The bill included spending of more than $205 billion on roads and highways over five years. The 2016 funding levels were approximately 5% above 2015 projected funding, with annual increases between 2.0% and 2.5% from 2016 through September 2020. On the eve of its expiration, a

one-year

extension to the FAST Act was passed and signed into law. The

one-year

extension maintains current funding levels under the FAST Act through September 2021.

California’s Senate Bill 1 (“SB1”), the Road Repair and Accountability Act of 2017, was signed into law on April 28, 2017. The legislative package invests $54 billion over the next decade to fix roads, freeways and bridges in communities across California and puts more dollars towards transit and safety. These funds will be allocated to state and local projects. Additionally, numerous other states have taken steps to increase their gas tax revenues in recent years.

Fluctuations in the price of carbon steel, which is a significant cost and material used in the manufacturing of the Company’s equipment, may affect the Company’s financial performance. The Company is subject to fluctuations in market prices for raw materials, such as steel. If the Company is unable to purchase materials it requires or is unable to pass on price increases to its customers or otherwise reduce its cost of goods sold, its business results of operations and financial condition may be adversely affected.

Also, a significant increase in the price of liquid asphalt could decrease demand for hot mix asphalt paving materials and certain of the Company’s products. Increases in oil prices also drive up the cost of gasoline and diesel, 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 higher costs and thus could have a negative impact on the Company’s financial performance.

The Company believes its strategy of continuing to invest in product engineering and development and its focus on delivering the highest quality products and superior service will strengthen the Company’s market position. The Company continues to review its internal processes to identify inefficiencies and cost-reduction opportunities. The Company will continue to scrutinize its relationships with suppliers to ensure it is achieving the highest quality materials and services at the most competitive cost.

Impact of

COVID-19

The Company continues to monitor and evaluate the risks related to the

COVID-19

pandemic continues to evolve subsequent to the quarter ended March 31, 2021 and as of the date these Condensed Consolidated Financial Statements are issued. As such, the full magnitude that the

COVID-19

pandemic continues, the Company’s ability to meet customer demands for products may be impacted or its customers may experience adverse business consequences due to

COVID-19.

Results of Operations

Quarter Ended March 31, 2021 versus March 31, 2020

Net revenues for the quarters ended March 31, 2021 and March 31, 2020 were $21,352,000 and $25,993,000, respectively, a decrease of $4,641,000. The reduced revenues reflect a decrease in equipment sales recognized over time over the comparative quarter in the prior year. During the quarter ended March 31, 2021, the Company generated approximately $1.6 million in paver parts sales.

As a percent of sales, gross profit margins were 28.8% in the quarter ended March 31, 2021, compared to 28.2% in the quarter ended March 31, 2020. During the quarter ended March 31, 2021, the Company continued to experience higher manufacturing costs associated with steel and OEM parts pricing, as well as unabsorbed manufacturing labor and overhead expenses related to the paver line. The negative effect of these higher manufacturing costs on the quarter ended March 31, 2021, was offset by improved margins on certain equipment sales recognized over time and increased parts sales, in dollars and as a percentage of total net revenues, at higher margins.

Product engineering and development expenses increased $380,000 to $1,069,000 for the quarter ended March 31, 2021, as compared to $689,000 for the quarter ended March 31, 2020, due primarily to engineering wages related to the paver line. Selling, general and administrative (“SG&A”) expenses increased by $1,277,000 to $3,838,000 for the quarter ended March 31, 2021, compared to the quarter ended March 31, 2020. The increase in SG&A expenses was primarily due to expenses related to the paver line and professional fees to support business development efforts.

Operating income decreased from $4,088,000 for the quarter ended March 31, 2020 to $1,239,000 for the quarter ended March 31, 2021, due primarily to the operational and

start-up

costs related to the Blaw-Knox acquisition and professional fees to support business development efforts.

For the quarter ended March 31, 2021, interest and dividend income, net of fees, was $327,000 as compared to $763,000 in the quarter ended March 31, 2020. The higher income in fiscal 2020 reflects the impact from a larger investment in corporate bonds and a higher average yield to maturity. The fiscal 2021 corporate investment bonds were reduced as the related investments were partially liquidated to fund the Blaw-Knox acquisition. The net realized and unrealized gains on marketable securities were $1,294,000 for the quarter ended March 31, 2021 versus net realized and unrealized losses of $(5,670,000) for the quarter ended March 31, 2020. The fiscal 2020 investment losses reflect the decline in the domestic equity markets from the impact of the

COVID-19

pandemic.

The effective income tax rate for the quarter ended March 31, 2021, and benefit for the quarter ended March 31, 2020, was 20.0% based on the expected annual effective income tax rate.

Net income for the quarter ended March 31, 2021 was $2,288,000 or $0.16 basic and diluted earnings per share versus a net loss of $(655,000) or $(0.04) basic and diluted loss per share for the quarter ended March 31, 2020.

Six Months Ended March 31, 2021 versus March 31, 2020

Net sales for the six months ended March 31, 2021 and 2020 were $40,316,000 and $44,023,000, respectively, a decrease of $3,707,000. The reduced revenues reflect a decrease in equipment sales recognized over time over the comparative period in the prior year partially offset by improved parts and component sales, including $1.6 million in paver parts sales.

Gross profit margins decreased to 22.6% in the six months ended March 31, 2021 from 26.5% in the six months ended March 31, 2020. The gross profit margins for the six months ended March 31, 2021 were negatively impacted by approximately $2.6 million of unabsorbed manufacturing labor and overhead expenses related to the paver line. In addition, increases in steel and OEM parts prices contributed to the lower overall gross margins during the six months ended March 31, 2021.

Product engineering and development expenses increased $459,000 in the six months ended March 31, 2021, compared to the six months ended March 31, 2020 due primarily to engineering wages related to the paver line. SG&A expenses increased $2,089,000 in the six months ended March 31, 2021, compared to the six months ended March 31, 2020. The increase in SG&A expenses was primarily due to expenses related to the paver line and professional fees to support business development efforts.

The Company had operating income of $181,000 for the six months ended March 31, 2021 versus $5,260,000 for the six months ended March 31, 2020, due primarily to the operational and

start-up

costs related to the Blaw-Knox acquisition and professional fees to support business development efforts.

For the six months ended March 31, 2021, interest and dividend income, net of fees, from the investment portfolio was $641,000, as compared to $1,395,000 for the six months ended March 31, 2020. Interest income for the six months ended March 31, 2021, also included $456,000 of interest collected from a customer. The higher income from the investment portfolio in fiscal 2020 reflects the impact from a larger investment in corporate bonds and a higher average yield to maturity. The fiscal 2021 corporate bonds were reduced as the related investments were partially liquidated to fund the Blaw-Knox acquisition. Net realized and unrealized income on marketable securities was $3,488,000 for the six months ended March 31, 2021 versus net realized and unrealized losses of $(4,353,000) for the six months ended March 31, 2020. The fiscal 2020 investment losses reflect the decline in the domestic equity markets from the impact of the

COVID-19

pandemic.

The effective income tax rate for the six months ended March 31, 2021 and March 31, 2020 was 20.0%. Net income for the six months ended March 31, 2021 was $3,839,000, or $0.26 per diluted share, versus $1,834,000, or $0.12 per diluted share for the six months ended March 31, 2020.

Liquidity and Capital Resources

The Company generates capital resources through operations and returns on its investments.

The Company had no long-term or short-term debt outstanding at March 31, 2021 or September 30, 2020. As of March 31, 2021, the Company has funded $85,000 in cash deposits at insurance companies to cover related collateral needs. In April 2020, a financial institution issued an irrevocable standby letter of credit (“letter of credit”) on behalf of the Company for the benefit of one of the Company’s insurance carriers. The maximum amount that can be drawn by the beneficiary under the letter of credit is $150,000. The letter of credit expires in April 2022, unless terminated earlier, and can be extended, as provided by the agreement. The Company intends to renew the letter of credit for as long as the Company does business with the beneficiary insurance carrier. The letter is collateralized by restricted cash of the same amount on any outstanding drawings. To date, no amounts have been drawn under the letter of credit.

As of March 31, 2021, the Company had $29,417,000 in cash and cash equivalents, and $93,646,000 in marketable securities, including $25,169,000 in corporate bonds, $20,423,000 in equities, $13,238,000 in mutual funds, $16,552,000 in exchange-traded funds, $16,000,000 in government securities, and $2,264,000 in cash and money funds. The marketable securities are invested through a professional investment management firm. These securities may be liquidated at any time into cash and cash equivalents.

The Company’s backlog was $42.6 million at March 31, 2021 compared to $24.5 million at March 31, 2020 due to an increase in equipment orders in the most recent quarter. The Company’s working capital (defined as current assets less current liabilities) was $153.6 million at March 31, 2021 and $153.2 million at September 30, 2020. Cash provided by operations during the six months ended March 31, 2021 was $9,283,000. The significant purchases, sales and maturities of marketable securities shown on the condensed consolidated statements of cash flows typically reflect the recurring purchases and sales of United States treasury bills. Costs and estimated earnings in excess of billings decreased by $6.5 million reflecting the completion and shipment of several large contract jobs during the six months ended March 31, 2021. Customer deposits increased by $2.2 million from down payments on

point-in-time

contract jobs booked but not shipped during the six months ended March 31, 2021.

Cash flows used in investing activities for the six months ended March 31, 2021 of $15,506,000 were related to the acquisition of Blaw-Know assets and subsequent capital expenditures, primarily for systems software and leasehold improvements for the paver line’s manufacturing facility. Cash provided by financing activities of $56,000 for the six months ended March 31, 2021, related to proceeds from the exercise of stock options.

Seasonality

The Company’s primary business is the manufacture of asphalt plants and related components and asphalt pavers. These products typically experience a seasonal slowdown during the third and fourth quarters of the calendar year. This slowdown often results in lower reported sales and operating results during the first and fourth quarters of the fiscal year ended September 30.

Critical Accounting Policies, Estimates and Assumptions

The Company believes the following discussion addresses its most critical accounting policies, which are those that are most important to the portrayal of the 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 Company’s consolidated financial statements included in the Company’s Annual Report on Form

10-K

for the year ended September 30, 2020, “Nature of Operations and Summary of Significant Accounting Policies.”

Estimates and Assumptions

In preparing the condensed 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 condensed 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

The Company recognizes revenue under ASU

No. 2014-09,

Revenue from Contracts with Customers

(Topic 606).

Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales recognized over time. There were no contract assets at March 31, 2021 and $6,405,000 in contract assets at September 30, 2020. These contract assets are included in current assets as costs and estimated earnings in excess of billings on the Company’s condensed consolidated balance sheets.

Payment for equipment under contract with customers is typically due prior to shipment. Payment for services under contract with customers is due as services are completed. Accounts receivable related to contracts with customers for equipment sales were $298,000 at March 31, 2021 and $223,000 at September 30, 2020.

Product warranty costs are estimated using historical experience and known issues and are charged to production costs as revenue is recognized.

Under certain contracts with customers, recognition of a portion of the consideration received may be deferred and recorded as a contract liability if the Company has to satisfy a future obligation, such as to provide installation assistance. There were no contract liabilities other than customer deposits at March 31, 2021 and September 30, 2020. Customer deposits related to contracts with customers were $6,026,000 at March 31, 2021 and $3,853,000 at September 30, 2020 and are included in current liabilities on the Company’s condensed consolidated balance sheets.

less-than-90-day

Inventories

trade-in

Marketable Securities and Fair Value Measurements

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 condensed consolidated statements of income. Net unrealized gains and (losses) are reported in the condensed consolidated statements of income 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.

Off-Balance

Sheet Arrangements

None

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Principal Financial and Accounting 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 Exchange Act) as of the end of the period covered by this Quarterly Report. Based upon that evaluation, the Chief Executive Officer and the Principal Financial and Accounting Officer concluded that, as of the end of the period covered by this Quarterly 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 have been detected.

Changes in Internal Control over Financial Reporting

The Company’s management, including the Chief Executive Officer and Principal Financial and Accounting 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 quarter ended March 31, 2021 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Other Information

Item 1.

Legal Proceedings

From time to time the Company is engaged in legal proceedings in the ordinary course of business. We do not believe any current legal proceedings are material to our business.

Item 1A.

Risk Factors

Our business, operations, and financial condition are subject to various risks and uncertainties. The risk factors described in Part I, Item 1A, “Risk Factors” contained in our Annual Report on Form 10K for the year ended September 30, 2020, as filed with the SEC on December 18, 2020, should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form

10-Q

and in our other filings filed with the SEC in connection with evaluating us, our business, and the forward-looking statements contained in this Quarterly Report on Form

10-Q.

During the six months ended March 31, 2021, there have been no material changes from the risk factors previously disclosed under Part I, Item 1A, “Risk Factors” in our Annual Report on Form

10-K,

for the year ended September 30, 2020.

Item 6.

Exhibits


Exhibit 31.1		Certification of Chief Executive Officer Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as amended

Exhibit 31.2		Certification of Chief Financial Officer Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as amended

Exhibit 32		Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U. S. C. Section 1350

Exhibit 101.1		Interactive Data File

101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		XBRL Schema Document

101.CAL		XBRL Calculation Linkbase Document

101.DEF		XBRL Definition Linkbase Document

101.LAB		XBRL Label Linkbase Document

101.PRE		XBRL Presentation Linkbase Document

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL (included in Exhibit 101)

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.

/s/ John E. Elliott

John E. Elliott

Chief Executive Officer

May 14, 2021

/s/ Eric E. Mellen

Eric E. Mellen

Chief Financial Officer

(Principal Financial and Accounting Officer)

May 14, 2021