What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-12-16 compared with 2021-12-17 · 90 added, 103 removed, 455 unchanged (30% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets as of September 30, 2022 and 2021

Consolidated Income Statements for the years ended September 30, 2021 and 2020

Consolidated Statements of Operations for the years ended September 30, 2022 and 2021

Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2022 and 2021

6 unchanged sentences

We have audited the accompanying consolidated balance sheets of Gencor Industries, Inc.

(the “Company”) as of September 30, 2021 and 2020, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years ended September 30, 2021 and 2020, and the related notes (collectively referred to as the consolidated financial statements).

(the “Company”) as of September 30, 2022 and 2021, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years ended September 30, 2022 and 2021, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2022 and 2021, and the results of its operations and its cash flows for each of the years ended September 30, 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America.

21 unchanged sentences

As a result of management’s assessment, the Company recorded an allowance for slow-moving and obsolete inventories of approximately $8,192,000 as of September 30, 2022.

Auditing management’s estimate of the allowance for slow-moving and obsolete inventories, including those acquired in a business combination, involved subjective evaluation and high degree of auditor judgement due to significant assumptions involved in estimating future inventory turnover and sales.

Auditing management’s estimate of the allowance for slow-moving and obsolete inventories involved subjective evaluation and high degree of auditor judgement due to significant assumptions involved in estimating future inventory turnover and sales.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

3 unchanged sentences

Furthermore, we reviewed management’s business plan and forecasts of future sales.

evenue from Contracts with Customers where Revenue is Recognized over Time

Revenue from Contracts with Customers where Revenue is Recognized over Time

As disclosed in Note 1 of the notes to the Company’s consolidated financial statements, the Company recognizes revenues from contracts with customers for the design, manufacture and sale of custom equipment over time when the performance obligation is satisfied by transferring control of the equipment.

8 unchanged sentences

We also evaluated the Company’s ability to accurately estimate the assumptions used to develop the estimate by comparing historical cost estimates to actual costs on completed contracts.

We have served as the Company’s auditor since 2001.

/s/ MSL, P.A.

Certified Public Accountants

e have served as the Company’s auditor since 2001.

PCAOB ID Number:

Orlando, Florida

13 unchanged sentences

Property and equipment, net

Deferred and other income taxes

Other long-term assets

11 unchanged sentences

Shareholders’ equity:

Preferred stock, par value $ .10 per share;

Preferred stock, par value $.

10 per share;

300,000 shares authorized;

Common stock, par value $ .10 per share;

Common stock, par value $.

10 per share;

15,000,000 shares authorized;

12,338,845 shares and 12,287,337 shares issued and outstanding at September 30, 2021 and 2020, respectively

Class B Stock, par value $ .10 per share;

12,338,845 shares issued and outstanding at September 30, 2022 and 2021

Class B Stock, par value $.

10 per share;

6,000,000 shares authorized;

6 unchanged sentences

GENCOR INDUSTRIES, INC.

Consolidated Income Statements

Consolidated Statements of Operations

For the Years Ended September 30, 2022 and 2021

8 unchanged sentences

Realized and unrealized gains (losses) on marketable securities, net

Income before income tax expense

Income tax expense

Basic earnings per common share

Diluted earnings per common share

Income (loss) before income tax expense (benefit)

Income tax expense (benefit)

Net income (loss)

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

See accompanying Notes to Consolidated Financial Statements

5 unchanged sentences

September 30, 2020

Stock-based compensation

Stock options exercised

September 30, 2021

Stock options exercised

September 30, 2022

4 unchanged sentences

Cash flows from operating activities:

Adjustments to reconcile net income to cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities:

Purchase of marketable securities

6 unchanged sentences

Provision for doubtful accounts

Stock-based compensation

Changes in assets and liabilities:

Changes in assets and liabilities, excluding the initial effects of business combinations:

Accounts receivable

3 unchanged sentences

Customer deposits

Accrued expenses

Accrued expenses and other

Total adjustments

Cash flows provided by operating activities

Cash flows used in

investing activities:

Cash flows (used in) provided by operating activities

Cash flows used in investing activities:

Acquisition of Blaw-Knox assets

4 unchanged sentences

Cash flows provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at:

9 unchanged sentences

Gencor Industries, Inc.

and its subsidiaries (collectively, the “Company”) is a diversified,

heavy machinery manufacturer for the produc t

ion of highway construction materials and environmental control machinery and equipment.

and its subsidiaries (collectively, the “Company”) is a diversified, heavy machinery manufacturer for the production of highway construction materials and environmental control machinery and equipment.

The Company’s core products include asphalt plants, combustion systems, fluid heat transfer systems and asphalt pavers.

8 unchanged sentences

There were no liabilities assumed.

The accompanying consolidated financial statements as of September 30, 2021, include the assets, liabilities and operating results of the paver line for the year then ended.

The accompanying consolidated financial statements as of September 30, 2022 and September 30, 2021, and for the years then ended, include the assets, liabilities and operating results of the paver line.

Accounting Pronouncements and Policies

In February 2016, the FASB issued ASU No.

(Topic 842) (“ASU 2016-02”).

With adoption of this standard, lessees will have 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.

Classification will be based on criteria that are similar to those applied in current lease accounting.

must be applied on a modified retrospective basis and is 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.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820) (ASU 2018-13).

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 for the quarter ended December 31, 2020.

The Company adopted ASU 2018-13

in the first quarter of fiscal 2021.

The application of this guidance did not have a material effect on our disclosures.

4 unchanged sentences

Earnings per Share

The consolidated financial statements include basic and diluted earnings per share (“EPS”) information.

The consolidated financial statements include basic and diluted earnings (loss) per share (“EPS”) information.

Basic EPS is based on the weighted-average number of shares outstanding.

Diluted EPS is 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 EPS calculation at September 30, 2021 were 236,000 , which equates to 116,000 dilutive common stock equivalents.

There were no weighted-average shares issuable upon the exercise of stock options included in the diluted EPS calculation at September 30, 2022.

For the year ended September 30, 2021, the weighted-average shares issuable upon the exercise of stock options included in the diluted EPS calculation were 236,000 , which equates to 116,000 dilutive common stock equivalents.

Weighted-average shares issuable upon the exercise of stock options, which were not included in the diluted EPS calculation because they were anti-dilutive, were zero in 2021 and 7,000 in 2020.

Weighted-average shares issuable upon the exercise of stock options, which were not included in the diluted EPS calculation because they were anti-dilutive, were zero in 2022 and 2021.

The following presents the calculation of the basic and diluted EPS for the years ended September 30, 2022 and 2021:

5 unchanged sentences

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.

Realized gains and losses on investment transactions are determined by specific identification and are recognized as incurred in the consolidated statements of operations.

Net changes in unrealized gains and losses are reported in the consolidated statements of operations in the current period.

Fair Value Measurements

11 unchanged sentences

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 assets measured at fair value as of Sept e

mber 30, 2021:

The following table sets forth by level, within the fair value hierarchy, the Company’s assets measured at fair value as of September 30, 2022:

Fair Value Measurements

3 unchanged sentences

Cash and Money Funds

Net unrealized gains reported during

fiscal 2021 on trading securities still held as of September 30, 2021, were $ 1,302,000 .

Net unrealized losses reported during fiscal 2022 on trading securities still held as of September 30, 2022, were $( 6,864,000 ).

There were no transfers of investments between Level 1 and Level 2 during the year ended September 30, 2022.

5 unchanged sentences

Cash and Money Funds

Net unrealized losses reported during fiscal 2020 on trading securities still held as of September 30, 2020, were $( 1,091,000 ).

Net unrealized gains reported during fiscal 2021 on trading securities still held as of September 30, 2021, were $ 1,302,000 .

There were no transfers of investments between Level 1 and Level 2 during the year ended September 30, 2021.

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

The cash was primarily used to fund the acquisition of the Blaw-Knox assets, including inventory, fixed assets and related intellectual property, from Volvo CE.

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.

11 unchanged sentences

deposit before beginning manufacturing on complete asphalt plant and component orders, and requires full payment subject to hold-back provisions prior to shipment.

The Company establishes an allowance for doubtful accounts based upon the credit risk of specific customers, historical

trends and other pertinent information.

The Company establishes an allowance for doubtful accounts based upon the credit risk of specific customers, historical trends and other pertinent information.

Inventories are valued at the lower of cost or net realizable value, with cost being determined under the FIFO method and net realizable value defined as the estimated selling price of goods less reasonable costs of completion and delivery.

4 unchanged sentences

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 .

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.

22 unchanged sentences

Freight revenue

Revenues from contracts with customers for the design, manufacture and sale of custom equipment are recognized over time when the per f

ormance obligation is satisfied by transferring control of the equipment.

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

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.

29 unchanged sentences

Returns and allowances, which reduce product revenue, are estimated using known issues and historical experience.

Changes in the allowance for doubtful accounts are composed of the following:

Changes in the allowance for doubtful acc o u

nts are composed of the following:

Balance, beginning of year

5 unchanged sentences

Shipping and Handling Costs

Shipping and handling costs are included in production costs in the consolidated income statements.

Shipping and handling costs are included in production costs in the consolidated statements of operations.

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 (see Note 6 – Income Taxes).

15 unchanged sentences

The Company has one reporting segment, equipment for the highway construction industry.

Based on evaluation of the criteria of ASC 280 – Se g

ment 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.

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.

1 unchanged sentence

The Company also services and sells spare parts for its equipment.

For fiscal 2021 and 2020, total revenues of

$ 85,278,000 and $ 77,420,000 , and total long-term assets of $ 12,639,000 and $ 9,336,000 , respectively, were attributed to the United States.

For fiscal 2022 and 2021, total revenues of $ 103,479,000 and $ 85,278,000 , and total long-term assets of $ 16,834,000 and $ 12,639,000 , respectively, were attributed to the United States.

Revenues are attributed to geographic areas based on the location of the assets producing the revenues.

3 unchanged sentences

Management has evaluated events occurring from September 30, 2022 through the date these consolidated financial statements were filed with the Securities and Exchange Commission for proper recording and disclosure herein.

On November 1, 2021, by unanimous vote of the Board of Directors of the Company and pursuant to the Company’s By-Laws, John

Elliott was removed as CEO of the Company.

As a result, the 30,000 fully vested, outstanding Class B stock options issued under the 2009 Plan (see Note 11 – Shareholders’ Equity and Stock-Based Compensation) were cancelled.

The impact of the exclusion of these outstanding stock options on the earnings per share calculation for the year ended September 30, 2021, would have been immaterial.

NOTE 2 - INVENTORIES

22 unchanged sentences

Property and equipment, net

Property and equipment includes approximately $ 19,374,000 and $ 14,300,000 of fully depreciated assets, which remained in service during fiscal 2021 and 2020, respectively.

Property and equipment includes approximately $ 20,467,000 and $ 19,374,000

of fully depreciated assets, which remained in service during fiscal 2022 and 2021, respectively.

Included in equipment as of September 30, 2022 and 2021 is approximately $ 1,702,000 and $ 458,000 , respectively, of assets not yet placed in operation and, therefore, not subject to depreciation during the years ended September 30, 2022 and 2021, respectively.

NOTE 5 - ACCRUED EXPENSES

8 unchanged sentences

NOTE 6 - INCOME TAXES

The provision for income tax expense consists of :

The provision for income tax expense (benefit) consists of:

Year Ended September 30,

2 unchanged sentences

Income tax expense

A reconciliation of the

federal statutory tax rate to the total tax provision is as follows:

A reconciliation of the federal statutory tax rate to the total tax provision (benefit) is as follows:

Year Ended September 30,

10 unchanged sentences

Stock-based compensation

Unrealized loss on investments

Net operating losses carryforwards

8 unchanged sentences

Total income taxes paid in fiscal 2022 and 2021 were $ 2,839,000 and $ 1,963,000 , respectively.

The fiscal 2020 income taxes p a

id includes $ 2,050,000 of tax payments due on the filing of the Company’s Form 3115 with the Internal Revenue Service to reflect the revenue recognition method change to the percentage of completion method for tax purposes pursuant to Internal Revenue Code Sections 460 and 451(b) .

GAAP prescribes a comprehensive model for the financial recognition, measurement, classification, and disclosure of

8 unchanged sentences

As of September 30, 2022 and 2021, the Company had UTB’s of $

There were no additional accruals of UTB’s during fiscal years ended September 30, 2021 and 2020.

131,000 and $

150,000 , respectively.

In the fiscal year ended September 30, 2022, the Company used all $ 150,000 of accrued UTB’s and accrued an additional $ 131,000 of UTB’s.

There were no

additional accruals of UTB’s during the fiscal year ended September 30, 2021.

The Company recognizes interest and penalties accrued related to UTB’s as a component of income tax expense.

2 unchanged sentences

The Company does not expect the change to have a material effect on its results of operations or its financial position.

The only expected potential r e

ason for change would be the ultimate results stemming from any examinations by taxing authorities.

The only expected potential reason for change would be the ultimate results stemming from any examinations by taxing authorities.

If recognized, the entire amount of UTB’s would have an impact on the Company’s effective income tax rate.

The effective income tax rate for fiscal 2021 was 12.5 % versus 17.2 % in fiscal 2020.

The effective income tax rate for fiscal 2022 was a benefit of (

versus expense of 12.5 % in fiscal 2021.

In fiscal 2022, the Company generated $ 475,000 of federal research and development tax credits (“R&D Credits”), all of which were used in fiscal 2022.

In fiscal 2020, the Company generated

R&D Credits, all of which were used in fiscal 2020.

There were no R&D Credits carryforwards as of September 30, 2021 or September 30, 2020.

In fiscal 2021, the Company generated $ 335,000 of R&D Credits, all of which were used in fiscal 2021.

There were no R&D Credits carryforwards as of September

30, 2022 or September

The Company files U.S.

19 unchanged sentences

operating leases.

Future minimum rental payments under these leases at Sep t

ember 30, 2021 are immaterial.

Future minimum rental payments under these leases at September 30, 2022 are immaterial.

Total rental expense for the fiscal years ended September 30, 2022 and 2021 was $ 57,000 and $ 78,000 , respectively.

On August 28, 2020, the Company entered

into a three-year operating lease for property related to the manufacturing and warehousing of the Blaw-Knox assets.

The lease term is for the period beginning on September 1, 2020 through

August 31, 2023 .

On August 28, 2020, the Company entered into a three-year operating lease for property related to the manufacturing and warehousing of the Blaw-Knox assets.

The lease term is for the period beginning on September 1, 2020 through August 31, 2023 .

In accordance with ASU 2016-02,

5 unchanged sentences

For the year ended September 30, 2022, operating lease costs were $ 425,000 and cash payments related to these operating leases were $ 396,000 .

For the year ended September 30, 2020, operating lease cost was $ 28,000 which was accrued at September 30, 2020 and paid in October 2020.

There were no cash payments related to this operating lease in fiscal 2020 .

For the year ended September 30, 2021, operating lease costs were $ 440,000 and cash payments related to these operating leases were $ 468,000 .

Other information concerning the Company’s operating lease accounted for under ASC 842 guidelines as of September 30, 2022 and September 30, 2021, is as follows:

32 unchanged sentences

On March 17, 2009, the shareholders of the Company approved the 2009 Incentive Compensation Plan (the “2009 Plan”).

As of September 30, 2021 and 2020, all outstanding common stock options issued under the 2009 Plan were fully vested.

All remaining unexercised, outstanding common stock options issued under the 2009 Plan expired as of September 30, 2021.

As of September 30, 2021 and 2020, 45,000 outstanding Class B stock options issued under the 2009 Plan were fully vested.

These options expired as of September 30, 2021 .

In addition, 30,000 outstanding Class B stock options issued under the 2009 Plan were fully vested at September 30, 2021, and remain exercisable through September 26, 2026 as long as the employee remains employed by the Company (however, refer to Subsequent Events

under Note 1 – Nature of Operations and Summary of Significant Accounting Policies).

As of September 30, 2021, no

options were available for granting of Awards under the 2009 Plan.

On September 30, 2021, 125,984

vested common stock options issued under the 2009 Plan expired.

On September 30, 2021 ,

45,000 fully vested Class B stock options issued under the 2009 Plan also expired.

An additional 30,000

vested Class B stock options issued under the 2009 Plan expire on

September 26, 2026 .

As of September 30, 2022 and 2021, no option s

were available for granting of Awards under the 2009 Plan.

The Company’s 2009 Incentive Compensation Plan expired on October 1, 2021 .

There are no other existing equity compensation plans and arrangements previously approved by security holders as of September 30, 2022.

The following table summarizes option activity under the 2009 Plan:

2 unchanged sentences

Options exercised during fiscal 2021

Options outstanding at September 30, 2020

Options exercised during fiscal 2021

Options expired on September 30, 2021

Options outstanding at September 30, 2021

No options were granted, forfeited or cancelled during the years ended September 30, 2021 or September 30, 2020.

The weighted average remaining contractual life on the options outstanding as of September 30, 2021 is 5.0 years under the 2009 Plan (however, refer to Subsequent Events

under Note 1 – Nature of Operations and Summary of Significant Accounting Policies).

Options cancelled on November 1, 2021

Options outstanding at September 30, 2022

No options were granted or forfeited during the year ended September 30, 2022.

On November 1, 2021, by unanimous vote of the Board of Directors of the Company and pursuant to the Company’s By-Laws, John

Elliott was removed as CEO of the Company.

As a result, the 30,000 fully vested, outstanding Class B stock options issued under the 2009 Plan were cancelled.

No options were granted, forfeited or cancelled during the year ended September 30, 2021.

The weighted average remaining contractual life on the options outstanding as of September 30, 2021 was 5.0 years under the 2009 Plan.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data