GENCOR INDUSTRIES INC

Previous wording

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, 2024: (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 statement, except as required by law.

Current wording

For information concerning these factors and related matters, see the following sections of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025: (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 statement, except as required by law.

Previous wording

Gencor is a leading manufacturer of heavy machinery used in the production of highway construction equipment and materials and environmental control equipment. The Company’s core products include asphalt pavers, hot mix asphalt plants, combustion systems, and fluid heat transfer systems. The Company’s products are manufactured at three facilities in the United States.

Current wording

Gencor is a leading manufacturer of heavy machinery used in the production of highway construction equipment and materials and environmental control equipment. The Company’s core products include asphalt pavers, hot mix asphalt plants, combustion systems, fluid heat transfer systems, and asphalt pavers. The Company’s products are manufactured at three facilities in the United States.

Previous wording

On November 15, 2021, President Biden signed into law a five-year, $1.2 trillion infrastructure bill, the Infrastructure Investment and Jobs Act (the “IIJ Act”), including $550 billion in new spending and reauthorization of $650 billion in previously allocated funds. The IIJ Act provides funding of $110 billion for the nation’s highways, bridges and roads through September 2026.

Current wording

On November 15, 2021, President Biden signed into law a five-year, $1.2 trillion infrastructure bill, the Infrastructure Investment and Jobs Act (the “IIJ Act”), including $550 billion in new spending and reauthorization of $650 billion in previously allocated funds. The IIJ Act provides $110 billion for the nation’s highways, bridges and roads. The IIJ Act is scheduled to expire on September 30, 2026.

Previous wording

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.

Current wording

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 copper and 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 results of operations and financial condition may be adversely affected.

Previous wording

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.

Current wording

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, which could have a negative impact on the Company’s financial performance.

Previous wording

Concerns over inflation, geopolitical issues and global financial markets have led to increased economic instability and expectations of slower global economic growth. Our business may be adversely affected by any such economic instability or unpredictability. Russia’s invasion of Ukraine and related sanctions as well as the conflict between Israel and Iran have led to increased energy prices. Such sanctions and disruptions to the global economy may lead to additional inflation and may disrupt the global supply chain and could have a material adverse effect on our ability to secure supplies. The increased cost of oil, along with increased or prolonged periods of inflation, would likely increase our costs in the form of higher inflation on supplies necessary to operate our business. Additionally, the armed conflict involving Hamas and Israel, as well as further escalation of tensions among Israel, the U.S., and various countries in the Middle East, including hostilities involving Iran, and North Africa, may cause increased inflation in energy and logistics costs and could further cause general economic conditions in the U.S. or abroad to deteriorate. There is a risk that one or more of our suppliers could be negatively affected by global economic instability, which could adversely affect our ability to operate efficiently and timely complete our operational goals. As of the date of this Quarterly Report, the Company’s operations have not been significantly impacted.

Current wording

Concerns over inflation, geopolitical issues and global financial markets have led to increased economic instability and expectations of slower economic growth. Our business may be adversely affected by any such economic instability or unpredictability. Sanctions and disruptions to the global economy may lead to additional inflation and may disrupt the global supply chain and could have a material adverse effect on our ability to secure supplies. Prolonged periods of inflation would likely increase our costs in the form of higher wages, and increased cost of supplies and equipment necessary to operate our business. Additionally, conflicts and/or tensions involving Russia, Ukraine, Israel, the U.S., Greenland, and various countries in South America, Europe and the Middle East, may cause increased inflation in energy and logistics costs and could further cause general economic conditions in the U.S. or abroad to deteriorate. There is a risk that one or more of our suppliers could be negatively affected by global economic instability, which could adversely affect our ability to operate efficiently and timely complete our operational goals. As of the date of this Quarterly Report, the Company’s operations have not been significantly impacted.

Previous wording

As a percent of sales, gross profit margins increased to 26.5% in the quarter ended June 30, 2025, compared to 23.9% in the quarter ended June 30, 2024, from improved profitability on certain contract sales and increased parts sales which have a higher margin compared to other sources of revenue.

Current wording

As a percent of sales, gross profit margins increased to 28.7% in the quarter ended December 31, 2025, compared to 27.6% in the quarter ended December 31, 2024. The slightly improved margins were driven by the increased parts and components sales which have a higher margin percentage compared to contract equipment sales.

Previous wording

Product engineering and development expenses decreased by $83,000 to $741,000 for the quarter ended June 30, 2025, as compared to $824,000 for the quarter ended June 30, 2024 due to lower headcount. Selling, general and administrative (“SG&A”) expenses decreased by $25,000 to $3,265,000 for the quarter ended June 30, 2025, compared to $3,290,000 for the quarter ended June 30, 2024.

Current wording

Product engineering and development expenses increased $81,000 to $758,000 for the quarter ended December 31, 2025, as compared to $677,000 for the quarter ended December 31, 2024. Selling, general and administrative (“SG&A”) expenses decreased $471,000 to $2,896,000 for the quarter ended December 31, 2025, compared to $3,367,000 for the quarter ended December 31, 2024. The decrease in SG&A expenses was due to reduced salesmen commissions on lower net revenues and a decrease in professional fees.

Previous wording

The Company had operating income of $14,241,000 for the nine months ended June 30, 2025 compared to $12,448,000 for the nine months ended June 30, 2024. The increase in operating income was due primarily to the increased net revenue and reduced product engineering and development expenses.

Current wording

The Company had operating income of $3,101,000 for the quarter ended December 31, 2025 as compared to $4,624,000 for the quarter ended December 31, 2024. The decrease in operating income was due primarily to lower net revenues for the quarter ended December 31, 2025.

Previous wording

For the nine months ended June 30, 2025, the Company had net other income of $4,326,000 compared to $4,572,000 for the nine months ended June 30, 2024. Interest and dividend income, net of fees, was $3,289,000 for the nine months ended June 30, 2025 as compared to $2,485,000 for the nine months ended June 30, 2024. The increase in interest and dividend income, net of fees, for the nine months ended June 30, 2025, was primarily due to increased cash balances and fixed income investments. Net realized and unrealized gains on marketable securities were $1,037,000 for the nine months ended June 30, 2025 compared to $2,087,000 for the nine months ended June 30, 2024. During the first nine months of fiscal 2025, bond yields rose due to stronger economic data and higher than anticipated inflation. The higher yields negatively impacted the value of our bond holdings.

Current wording

For the quarter ended December 31, 2025, the Company had net other income of $1,550,000 compared to $534,000 for the quarter ended December 31, 2024. Net interest and dividend income for the quarter ended December 31, 2025 was $1,177,000 compared to $989,000 for the quarter ended December 31, 2024. The increase was primarily due to higher rates earned on fixed income investments and on higher operating cash balances. Net realized and unrealized gains (losses) on marketable securities for the quarter ended December 31, 2025 were $373,000 compared to $(455,000) for the quarter ended December 31, 2024. Bond yields rose during the quarter ended December 31, 2024, due to better economic data and higher inflation. The higher yields negatively impacted the value of our bond holdings for the quarter ended December 31, 2024.

Previous wording

Net income for the quarter ended June 30, 2025 was $3,828,000, or $0.26 per basic and diluted common share, compared to net income of $2,558,000, or $0.17 per basic and diluted common share, for the quarter ended June 30, 2024.

Current wording

The effective income tax rate for both the quarters ended December 31, 2025 and December 31, 2024 was 26.0%. Net income for the quarter ended December 31, 2025 was $3,442,000, or $0.23 per basic and diluted common share, compared to net income of $3,817,000, or $0.26 per basic and diluted common share, for the quarter ended December 31, 2024.

Previous wording

The Company had no long-term or short-term debt outstanding at June 30, 2025 or September 30, 2024. 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 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. 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.

Current wording

The Company had no long-term or short-term debt outstanding as of December 31, 2025 or September 30, 2025. 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 on February 25, 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. 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.

Previous wording

As of June 30, 2025, the Company had $27,874,000 in cash and cash equivalents, and $108,097,000 in marketable securities, including $3,018,000 in equities, $30,871,000 in corporate bonds, $7,856,000 in exchange-traded funds, $4,010,000 in mutual funds, $62,134,000 in government securities, and $208,000 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.

Current wording

As of December 31, 2025, the Company had $36,731,000 in cash and cash equivalents, and $111,003,000 in marketable securities, including $5,292,000 in equities, $30,791,000 in corporate bonds, $11,448,000 in exchange-traded funds, $59,972,000 in government securities, $3,087,000 in mutual funds and $413,000 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.

Previous wording

Cash flows used in investing activities for the nine months ended June 30, 2025 of $951,000 were related to capital expenditures, primarily for land and building improvements and handling equipment.

Current wording

Cash flows used in investing activities for the quarter ended December 31, 2025 of $973,000 were related to capital expenditures, primarily for building additions and improvements, and handling equipment.

Previous wording

The Company’s primary business is the manufacture of asphalt pavers, asphalt plants and related components. 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.

Current wording

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.

Previous wording

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, 2024, “Nature of Operations and Summary of Significant Accounting Policies.” There were no changes in the Company’s accounting policies during the nine months ended June 30, 2025.

Current wording

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 fiscal year ended September 30, 2025, “Nature of Operations and Summary of Significant Accounting Policies.” There were no material changes to the accounting policies during the quarter ended December 31, 2025.

Previous wording

The Company recognizes revenue under ASUNo. 2014-09, Revenue from Contracts with Customers (Topic 606). 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.

Current wording

The Company recognizes revenue under ASU 2014-09, Revenue from Contracts with Customers (Topic 606). 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.

Previous wording

Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales recognized over time. These contract assets were $12,226,000 at June 30, 2025 and $9,339,000 at September 30, 2024, and are included in current assets on the Company’s condensed consolidated balance sheets at June 30, 2025 and September 30, 2024. The Company anticipates that all of the contract assets at June 30, 2025, will be billed and collected within one year.

Current wording

Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales recognized over time. These contract assets were $5,091,000 and $12,208,000 at December 31, 2025 and September 30, 2025, respectively, and are included in current assets on the Company’s condensed consolidated balance sheets. The Company anticipates that all of the contract assets at December 31, 2025 will be billed and collected within one year.

Previous wording

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 recognized at a point in time were $426,000 and $163,000 at June 30, 2025 and September 30, 2024, respectively.

Current wording

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 $101,000 and $80,000 at December 31, 2025 and September 30, 2025, respectively.

Previous wording

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 June 30, 2025 and September 30, 2024. Customer deposits related to contracts with customers were $2,427,000 and $5,018,000 at June 30, 2025 and September 30, 2024, respectively, and are included in current liabilities on the Company’s condensed consolidated balance sheets.

Current wording

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 December 31, 2025 and September 30, 2025. Customer deposits related to contracts with customers were $6,022,000 and $3,889,000 at December 31, 2025 and September 30, 2025, respectively, and are included in current liabilities on the Company’s condensed consolidated balance sheets.

Previous wording

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.

Current wording

The Company records revenues earned for shipping and handling as freight revenue at the time of shipment. The cost of shipping and handling is recorded as cost of goods sold concurrently with the revenue recognition.

Previous wording

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 theless-than-90-day past due aging category. 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. Account balances are charged off against the allowance for credit losses when they are determined to be uncollectible. Any recoveries of account balances previously considered in the allowance for credit losses reduce future additions to the allowance for credit losses. The allowance for credit losses 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.

Current wording

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 theless-than-90-day past due aging category. Account balances are charged off against the allowance for credit losses when they are determined to be uncollectible. Any recoveries of account balances previously considered in the allowance for credit losses reduce future additions to the allowance for credit losses. The allowance for credit losses 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.

Previous wording

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.

Current wording

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 income statements. Net unrealized gains and (losses) are reported in the condensed consolidated income statements in the current period and represent the change in the fair value of investment holdings during the period.

Previous wording

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. There were no impairment losses in the quarters and nine month periods ended June 30, 2025 and June 30, 2024.

Current wording

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. There were no impairment losses in the quarters ended December 31, 2025 and December 31, 2024.