1 unchanged sentence
“Forward-Looking” Information
−Removed: This Annual 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.
+Added: This Annual 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, 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.
13 unchanged sentences
The IIJ Act provides $110 billion for the nation’s highways, bridges and roads.
+Added: The IIJ Act is scheduled to expire on September 30, 2026.
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.
−Removed: 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.
+Added: 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 results of operations and financial condition may be adversely affected.
+Added: The Company monitors the prices it charges for its products and services on an ongoing basis and has historically been able to adjust its prices to take into account changes in the rate of inflation.
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.
1 unchanged sentence
Where possible, the Company will pass increased freight costs on to its customers.
−Removed: 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.
+Added: However, the Company may not be able to recapture all of the higher costs which 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.
1 unchanged sentence
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.
−Removed: On July 19, 2022, the Company announced that it was transferring the listing of its common stock, $0.10 per share par value (“Common Stock”), to the NYSE American LLC (“NYSE American”) from the NASDAQ Global Market (“NASDAQ”).
−Removed: Listing and trading of the Company’s Common Stock on NASDAQ ended at market close on July 29, 2022 and listing and trading of its Common Stock on the NYSE American commenced at market open on August 1, 2022 under its current ticker symbol ‘GENC’.
Results of Operations
Year ended September 30, 2024 compared with the year ended September 30, 2023
−Removed: Net revenue for the year ended September 30, 2023 increased slightly to $105,075,000 from $103,479,000 for the year ended September 30, 2022.
−Removed: Net revenue for the fourth quarter of fiscal 2023 decreased 9.5% to $20,871,000 compared to $23,072,000 for the quarter ended September 30, 2022.
−Removed: As a percent of sales, gross profit margins increased to 27.6% in fiscal 2023 from 19.9% in fiscal 2022 on increased parts sales at higher margins, and improved efficiency, absorption and favorable price realization.
−Removed: Product engineering and development (“PED”) expense in fiscal 2023 decreased $867,000 to $3,458,000 from $4,325,000 in fiscal 2022 due to reduced headcount and improved efficiency.
+Added: Net revenue for the year ended September 30, 2024 increased 7.7% to $113,166,000 from $105,075,000 for the year ended September 30, 2023.
+Added: The net revenue increase was primarily driven by increased equipment sales recognized over time and increased parts and component sales, partially offset by a decrease in equipment sales recognized at a point in time.
+Added: Net revenue for the fourth quarter of fiscal 2024 increased slightly to $20,921,000 compared to $20,871,000 for the quarter ended September 30, 2023.
+Added: As a percent of sales, gross profit margins increased slightly to 27.7% in fiscal 2024 as compared to 27.6% in fiscal 2023.
+Added: In the fourth quarter of fiscal 2023, gross profit margin of 31.7% was positively impacted by closing out of certain projects recognized over time where actual results improved over initial estimates.
+Added: In the fourth quarter of fiscal 2024 gross profit margin was 25.6%.
+Added: Product engineering and development expense in fiscal 2024 decreased $145,000 to $3,313,000 from $3,458,000 in fiscal 2023 due to reduced headcount.
Selling, general and administrative (“SG&A”) expenses in fiscal 2024 increased $2,173,000 to $14,327,000 from $12,154,000 in fiscal 2023.
−Removed: Fiscal 2023 had operating income of $13,425,000 versus $4,167,000 in fiscal 2022.
−Removed: The increase in operating income was due to improved gross profit margins and reduced operating expenses.
−Removed: As of September 30, 2023 and 2022, the cost basis of the investment portfolio was $85,514,000 and $94,879,000, respectively.
−Removed: $10,000,000 was transferred from the investment portfolio to cash to fund operating needs of the business during fiscal 2023.
−Removed: For the year ended September 30, 2023, interest and dividend income, net of fees, was $2,108,000, as compared to $1,305,000 for year ended September 30, 2022.
−Removed: Interest income for the year ended September 30, 2023 as compared to the prior year increased due to higher rates earned on fixed income investments coupled with the Company reallocating a majority of its holdings in equities to fixed income in January 2023.
−Removed: Net realized and unrealized gains on marketable securities were $3,243,000 for the year ended September 30, 2023 versus net realized and unrealized losses of $(7,009,000) for the year ended September 30, 2022.
−Removed: The higher gains in fiscal 2023 were due to a stronger domestic stock market.
−Removed: The fiscal 2022 investment losses reflect the general decline in global equity and bond markets in the prior year.
−Removed: The total cash, cash equivalents and investments balance at September 30, 2023 was $101,283,000, compared to $98,881,000 at September 30, 2022, an increase of $2,402,000.
+Added: The increase in SG&A expenses was primarily due to increased trade show expenses, professional fees and commissions on higher net revenue.
+Added: In fiscal 2024, the Company had operating income of $13,687,000 versus $13,425,000 in fiscal 2023.
+Added: The benefit of increased sales in fiscal 2024 was partially offset by increased SG&A expenses as compared to fiscal 2023.
+Added: For the year ended September 30, 2024, the Company had net other income of $7,043,000 compared to $5,351,000 for the year ended September 30, 2023.
+Added: Interest and dividend income, net of fees, was $3,435,000 for the year ended September 30, 2024 as compared to $2,108,000 for year ended September 30, 2023.
+Added: Interest income for the year ended September 30, 2024 as compared to the prior year increased due to higher interest rates earned on increased cash balances and fixed income investments coupled with the Company reallocating a majority of its holdings in equities to fixed income in January 2023.
+Added: Net realized and unrealized gains on marketable securities were $3,621,000 for the year ended September 30, 2024 versus $3,243,000 for the year ended September 30, 2023.
+Added: Net realized and unrealized gains in the portfolio were primarily the result of fluctuations in the market value of fixed income securities due to interest rate changes.
The effective income tax rate for fiscal 2024 was 29.8% versus 21.9% in fiscal 2023.
−Removed: The income tax benefit for fiscal 2022 reflects the impact of book to tax timing differences in the deductibility of certain items, the benefit from research and development tax refunds and credits, and other adjustments.
−Removed: 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.
−Removed: There were no R&D Credits generated in fiscal 2023 and there were no carryforwards of R&D Credits as of September 30, 2023 or September 30, 2022.
−Removed: Net income for the year ended September 30, 2023 was $14,666,000 or $1.00 per diluted share versus net loss of $(372,000) or $(0.03) per diluted share for the year ended September 30, 2022.
+Added: The higher income tax rate in fiscal 2024 was driven by increased reserves of $1.2 million for unrecognized tax benefits.
+Added: Net income for the year ended September 30, 2024 was $14,558,000, or $0.99 per diluted and basic share, versus $14,666,000, or $1.00 per diluted and basic share, for the year ended September 30, 2023.
Liquidity and Capital Resources
The Company generates capital resources through operations and returns from its investments.
+Added: We believe these sources of capital will satisfy our liquidity needs in both the short and long term.
The Company had no long-term debt outstanding at September 30, 2024 or 2023.
1 unchanged sentence
The maximum amount that can be drawn by the beneficiary under the letter of credit is $150,000.
−Removed: The letter of credit expires in April 2024, unless terminated earlier, and can be extended, as provided by the agreement.
+Added: The letter of credit expires in February 2026, 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.
4 unchanged sentences
The securities may be liquidated at any time into cash and cash equivalents.
−Removed: The Company’s backlog, which includes orders received through the filing date of this Annual Report, was $75.8 million at September 30, 2023 versus $60.2 million at September 30, 2022.
+Added: The Company’s backlog was $72.2 million at September 30, 2024 versus $75.8 million at September 30, 2023.
The Company’s working capital was $182.2 million at September 30, 2024 versus $164.8 million at September 30, 2023.
1 unchanged sentence
Year ended September 30, 2024 compared with the year ended September 30, 2023
+Added: Cash flows provided by operations in fiscal 2024 were $9,291,000 primarily resulting from net income and reduced inventories, and partially offset by increased contract assets on contract sales where revenue is recognized over time.
+Added: Contract assets increased $7,831,000 with the timing of inventory build and percentage of completion recognition on sales where revenue is recognized over time.
+Added: Inventories decreased by $7,765,000 primarily due to completion and shipment on several large contract orders where revenue is recognized at a point in time as well as increased parts sales coupled with reduced purchases as supplier lead times have come down, and increased allowances.
Cash flows provided by operations in fiscal 2023 were $10,196,000 primarily resulting from net income and sale of marketable securities, and partially offset by increased inventory.
−Removed: The significant purchases, sales and maturities of marketable securities shown on the consolidated statements of cash flows reflect purchases and sales of United States treasury bills and notes.
Inventories increased by $15,712,000 primarily due to progress on several large contract orders where revenue is recognized at a point in time, the impact of the inflationary environment on raw material and wage price increases, and stock build to adjust for the increasing lead times from suppliers.
−Removed: Cash flows used in operations in fiscal 2022 was $9,135,000 primarily resulting from increased inventory.
−Removed: The significant purchases, sales and maturities of marketable securities shown on the consolidated statements of cash flows reflect purchases and sales of United States treasury bills and notes.
−Removed: Inventories increased by $13,927,000 primarily due to progress on several large contract orders where revenue is recognized at a point in time, the impact of the inflationary environment on raw material and wage price increases, and some stock build to adjust for the increasing lead times from suppliers.
−Removed: Accounts payable increased by $1,146,000 due primarily to the additional payables related to the increase in inventory.
−Removed: Cash flows used in investing activities for the years ended September 30, 2023 and September 30, 2022, were $2,746,000 and $4,516,000, respectively, and were primarily related to the capital expenditures for manufacturing processing and finishing equipment.
+Added: Marketable securities decreased $9,364,000 due primarily to the transfer of $10,000,000 from the investment portfolio to cash to fund operating needs of the business during fiscal 2023.
+Added: Cash flows used in investing activities for the years ended September 30, 2024 and September 30, 2023, were $840,000 and $2,746,000, respectively, and were primarily related to the capital expenditures for building improvements, and manufacturing processing equipment.
Critical Accounting Policies, Estimates and Assumptions
16 unchanged sentences
Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales recognized over time.
−Removed: These contract assets were $1,508,000 and $2,118,000 at September 30, 2023 and 2022, respectively, and are included in current assets as costs and estimated earnings in excess of billings on the Company’s consolidated balance sheets.
+Added: These contract assets were $9,339,000 and $1,508,000 at September 30, 2024 and 2023, respectively, and are included in current assets on the Company’s consolidated balance sheets.
The Company anticipates that all of the contract assets at September 30, 2024, will be billed and collected within one year.
6 unchanged sentences
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.
−Removed: There were no contract liabilities other than customer deposits at September 30, 2023 and September 30, 2022.
+Added: There were no significant contract liabilities other than customer deposits at September 30, 2024 and September 30, 2023.
Customer deposits related to contracts with customers were $5,018,000 and $6,815,000 at September 30, 2024 and 2023, respectively, and are included in current liabilities on the Company’s 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.
−Removed: The cost of shipping and handling is classified as cost of goods sold concurrently.
−Removed: Provisions for estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded.
−Removed: Returns and allowances, which reduce product revenue, are estimated using historical experience.
+Added: 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.
−Removed: 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 buckets.
−Removed: Account balances are charged off against the allowance for doubtful accounts when they are determined to be uncollectable.
−Removed: Any recoveries of account balances previously considered in the allowance for doubtful accounts reduce future additions to the allowance for doubtful accounts.
+Added: The allowance for credit losses 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.
+Added: The measurement and recognition of credit losses involves judgment and represents the Company’s estimate of expected credit losses based on a number of considerations, including historical credit loss experience, the aging of account balances, customer credit worthiness, and current and expected economic, market and industry factors impacting the Company’s customers, including their financial condition.
+Added: Account balances are charged off against the allowance for credit losses when they are determined to be uncollectible.
+Added: Any recoveries of account balances previously considered in the allowance for credit losses reduce future additions to the allowance for credit losses.
+Added: The allowance for credit losses also includes an estimate for returns and allowances.
+Added: Provisions for estimated returns and allowances and other adjustments, are provided for in the same period the related sales are recorded.
+Added: Returns and allowances, which reduce product revenue, are estimated using known issues and historical experience.
Inventories are valued at the lower of cost or net realizable value, with cost being determined under the first-in, first-out (“FIFO”) method and net realizable value defined as the estimated selling price of goods less reasonable costs of completion and delivery (see Note 2 to Consolidated Financial Statements).
6 unchanged sentences
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.
+Added: 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.
−Removed: Realized gains and losses on investment transactions are determined by specific identification and are recognized as incurred in the consolidated statements of operations.
−Removed: Net unrealized gains and losses are reported in the consolidated statements of operations and represent the change in the fair value of investment holdings during the period.
−Removed: Long Lived Asset Impairment
−Removed: 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.
−Removed: 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.
−Removed: The amount of the impairment loss to be recorded is calculated by the excess over its fair value of the asset’s carrying value.
−Removed: Fair value is generally determined using a discounted cash flow analysis.
−Removed: The overall effects of inflation on the Company’s business during fiscal 2023 and 2022 have been significant relative to prior years.
−Removed: The Company monitors the prices it charges for its products and services on an ongoing basis and has been able to adjust its prices to take into account future changes in the rate of inflation.
+Added: Realized gains and losses on investment transactions are determined by specific identification and are recognized as incurred in the consolidated income statements.
+Added: Net unrealized gains and losses are reported in the consolidated income statements and represent the change in the fair value of investment holdings during the period.
Contractual Obligations
2 unchanged sentences
The maximum amount that can be drawn by the beneficiary under the letter of credit is $150,000.
−Removed: The letter of credit expires in April 2024, unless terminated earlier, and can be extended, as provided by the agreement.
+Added: The letter of credit expires in February 2026, 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.
4 unchanged sentences
In March 2023, the Company extended the lease term through August 31, 2024.
−Removed: On October 9, 2020, the Company entered into an operating lease for additional warehousing space for paver inventory.
−Removed: The lease term is for one year beginning November 2020 with automatic one-year renewals.
+Added: In March 2024, the Company extended the lease term through August 31, 2025.
Off-Balance Sheet Arrangements
2 unchanged sentences
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.