10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE PERIOD ENDED June 30, 2005

OR

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

FOR THE TRANSITION PERIOD From              to             

Commission file number 0-3821

GENCOR INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	59-0933147
(State or other jurisdiction of incorporated or organization)	(I.R.S. 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)

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 and 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  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange

Act.)    Yes  ¨    No  x

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

Class	Outstanding at July 15, 2005
Common stock, $.10 par value	7,189,470 shares
Class B stock, $.10 par value	1,642,998 shares

GENCOR INDUSTRIES, INC.

Index

			Page
Part I. Financial Information
	Item 1.	Financial Statements
		Condensed consolidated balance sheets – June 30, 2005 (Unaudited) and September 30, 2004	3
		Unaudited condensed consolidated statements of operations – Three – and Nine-months ended June 30, 2005 and 2004	4
		Unaudited condensed consolidated statements of cash flows – Nine-months ended June 30, 2005 and 2004	5
		Notes to unaudited condensed consolidated financial statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
	Item 3.	Quantitative and Qualitative Disclosure of Market Risk	11
	Item 4.	Controls and Procedures	12
Part II. Other Information
	Item 5.	Other Information	13
	Item 6.	Exhibits and Reports on Form 8-K	13
Signatures			14

2

Part I. Financial Information

Item 1. Financial Statements

GENCOR INDUSTRIES, INC.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

	June 30 2005			September 30, 2004
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	923		$	550
Marketable securities at market value (Cost $25,000)		25,323			—
Accounts receivable, less allowance for doubtful accounts of $959 ($1,214 at September 30, 2004)		3,648			2,401
Other receivables		170			120
Inventories, net		18,486			16,944
Deferred income taxes		602			602
Prepaid expenses		1,100			1,578
Total current assets		50,252			22,195
Property and equipment, net		8,413			11,317
Assets held for sale		5,401			5,449
Other assets		552			3,851
Total assets	$	64,618		$	42,812
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,776		$	3,477
Customer deposits		455			1,099
Income and other taxes payable		756			4,372
Accrued expenses		2,962			9,489
Total current liabilities		7,949			18,437
Long-term debt		—			5,701
Deferred income taxes		10,501			71
Other liabilities		—			3,309
Total liabilities		18,450			27,518
Commitments and contingencies
Shareholders’ equity:
Preferred stock, par value $.10 per share; authorized 300,000 shares; none issued		—			—
Common stock, par value $.10 per share; 15,000,000 shares authorized; 7,276,870 shares and 7,093,470 shares issued at June 30, 2005 and September 30, 2004, respectively		728			709
Class B stock, par value $.10 per share; 6,000,000 shares authorized; 1,734,998 shares and 1,878,398 shares issued at June 30, 2005 and September 30, 2004, respectively		173			188
Capital in excess of par value		11,765			11,467
Retained earnings		36,892			10,747
Accumulated other comprehensive income (loss)		(1,591	)		(6,018	)
Subscription receivable from officer		(95	)		(95	)
Common stock in treasury, 179,400 shares at cost		(1,704	)		(1,704	)
Total shareholders’ equity		46,168			15,294
	$	64,618		$	42,812

See notes to condensed consolidated financial statements.

3

GENCOR INDUSTRIES, INC.

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share data)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2005			2004			2005			2004
Net revenue	$	14,846		$	12,407		$	39,902		$	42,816
Costs and expenses:
Production costs		11,478			8,573			30,162			29,764
Product engineering and development		452			454			1,465			1,411
Selling, general and administrative		2,485			2,419			6,964			7,490
		14,415			11,446			38,591			38,665
Operating income		431			961			1,311			4,151
Other income (expense):
Interest income		25			3			81			14
Interest expense		(19	)		(29	)		(142	)		(131	)
Income from Investees		6,964			—			34,346			—
Increase in value of marketable securities		446			—			323			—
Miscellaneous		19			11			56			129
		7,435			(15	)		34,664			12
Income before income taxes		7,866			946			35,975			4,163
Income taxes		210			302			9,830			1,530
Net income	$	7,656		$	644		$	26,145		$	2,633
Basic and diluted earnings per common share:
Basic earnings per share	$	.87		$	.07		$	2.97		$	.30
Diluted earnings per share	$	.77		$	.07		$	2.73		$	.28

See notes to condensed consolidated financial statements.

4

GENCOR INDUSTRIES, INC.

Unaudited Condensed Consolidated Statements of Cash Flows

In Thousands

	Nine Months Ended June 30,
	2005			2004
Cash flows from operations:
Net income	$	26,145		$	2,633
Adjustments to reconcile net income to cash provided (used) by operations:
Marketable securities		(25,323	)		—
Deferred income taxes		10,430			(2,300	)
Depreciation and amortization		610			619
Income from investees		(34,346	)		—
Provision for allowance for doubtful accounts		(255	)		260
Change in assets and liabilities:
Accounts receivable		(992	)		(221	)
Other receivables		(50	)		(190	)
Inventories		(1,542	)		1,104
Prepaid expenses		478			620
Other assets		—			27
Accounts payable		928			21
Customer deposits		(644	)		138
Income and other taxes payable		(2,262	)		623
Accrued expenses		(816	)		1,029
Total adjustments		(53,784	)		1,730
Cash provided by (used for) operations		(27,639	)		4,363
Cash flows from (used for) investing activities:
Stock options exercised		301			17
Distributions from unconsolidated investees		34,346			—
Capital expenditures		(1,063	)		(348	)
Proceeds from assets held for sale		48			—
Cash from (used for) investing activities		33,632			(331	)
Cash flows used for financing activities:
Net repayment of debt		(5,701	)		(4,515	)
Cash provided (used) for financing activities		(5,701	)		(4,515	)
Effect of exchange rate changes on cash		81			59
Net increase (decrease) in cash		373			(424	)
Cash and cash equivalents at:
Beginning of period		550			734
End of period	$	923		$	310

See notes to condensed consolidated financial statements.

5

GENCOR INDUSTRIES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

All amounts in thousands, except per share amounts

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 footnotes 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 three- and nine-month periods ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending September 30, 2005.

The balance sheet at September 30, 2004 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Gencor Industries, Inc. Annual Report on Form 10-K for the year ended September 30, 2004.

Note 2 – Marketable Securities

Marketable securities are categorized as trading securities and stated at market value. Market value is determined using the quoted closing or latest bid prices. Realized gains and losses on investment transactions are determined by specific identification and are recognized as incurred in the statements of operations. Net unrealized gains and losses are reported in the statements of operations and represent the change in the market value of investment holdings during the reporting period.

Note 3 – Inventories

The components of inventory consist of the following:

	June 30, 2005		September 30, 2004
Raw materials	$	7,640	$	7,294
Work in process		5,037		4,574
Finished goods		4,565		4,083
Used equipment		1,244		993
	$	18,486	$	16,944

6

Note 4 – Earnings Per Share Data

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended June 30,				Nine Months Ended June 30,
(in thousands)	2005		2004		2005		2004
Net income	$	7,656	$	644	$	26,145	$	2,633
Denominator:
Weighted average shares outstanding	$	8,832	$	8,684	$	8,817	$	8,683
Effect of dilutive stock options		1,089		991		749		738
Denominator for diluted EPS computation	$	9,921	$	9,675	$	9,566	$	9,421
Per common share:
Basic:
Net income	$	0.87	$	0.07	$	2.97	$	0.30
Diluted:
Net income	$	0.77	$	0.07	$	2.73	$	0.28

Note 5 – Comprehensive Income (Loss)

Total comprehensive income for the three-and nine-months ended June 30, 2005 was $7,623 and $26,226 respectively, which compares to the total comprehensive income for the three- and nine- months ended June 30, 2004 of $634 and $2,680, respectively. Total comprehensive income differs from net income due to unrealized gains and losses resulting from foreign currency translation, which are reflected separately in the shareholders’ equity section of the balance sheet under the caption “Accumulated other comprehensive loss.” Realized gains and losses resulting from foreign currency transactions are included in income.

7

Note 6 – Income From Investees

The Company owns a 45% interest in Carbontronics LLC and a 25% interest in Carbontronics Fuels LLC and Carbontronics II LLC. These interests were earned as part of the value of risk on contracts to build four synthetic fuel production plants during 1998. The Company has no basis in these equity investments or requirement to provide future funding. Any income arising from these investments is dependent upon tax credits (adjusted for operating losses at the fuel plants) being generated as a result of synthetic fuel production, which will be recorded as received. The Company received no distributions in fiscal 2004, and did receive distributions of $13,428 and $1,526, during 2003 and 2002 respectively.

In 2003, the Company was notified by its investee General Partner that the income tax returns for its synthetic fuel producing partnership were being audited. As previously reported, the Limited Partners may declare a “Tax Event” and suspend further distributions indefinitely. The Company was informed that the Limited Partners had declared a “Tax Event” and therefore future distributions had ceased.

On January 5, 2005, the Company was informed that the IRS had concluded its examination of the investees with no material adverse findings. As a result, distributions suspended since August of 2003 resumed and the Company received distributions of $6,964 and $34,346, respectively, for the three- and nine- months ended June 30, 2005. These distributions are subject to state and Federal income taxes.

Future benefits from our synthetic fuel investments depend on whether the production from these plants will continue to qualify for tax credits under Section 29 of the Internal Revenue Code; the ability to economically produce and market the synthetic fuel produced by these plants; future IRS reviews, and the world price of crude oil (as per the provisions of Section 29 of the IRS Code, if the average price of crude oil reaches a certain level the tax credits will terminate). The recent escalation in oil prices raise serious doubt on the continued availability of tax credits under Section 29 for the future. If oil prices remain at the current levels or increase, the tax credits could phase-out or terminate. The existing tax credit legislation is scheduled to expire at the end of the calendar year 2007. Any one of the above eventualities may interrupt, reduce, or terminate further distributions.

Note 7 – Discontinued Operations

On June 23, 2005, the assets of our discontinued operation in Brazil were disposed of with all proceeds used to pay liens and claims against the property. The net assets were fully reserved in 2001 when the other assets of the discontinued operation were sold. Other Assets of $3.2 million, Property and Equipment of $3.5 million, Accounts Payable, Income and Other Taxes Payable and Accruals of $2.9 million, Other Liabilities of $3.3 million, and Accumulated Translation Loss of $4.3 million were charged to the impairment reserve with no resulting gain or loss on the disposition.

8

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

Results of Operations

Net sales for the quarters ended June 30, 2005 and 2004 were $14.8 million and $12.4 million, respectively. Domestic sales during the third quarter of fiscal 2005 were $14.5 million reflecting an increase of $2.3 million from year ago levels. Net sales for the nine-months ended June 30, 2005 and 2004 were $39.9 million and $42.8 million, respectively. Domestic sales during the nine- months of fiscal 2005 were $38.9 million reflecting a decrease of $3.0 million from year ago levels. Domestic sales for the nine-months were lower than the prior year’s due to the timing of finalizing certain orders and delays in customers obtaining required permits. The Company’s revenues are concentrated in the asphalt-related business and subject to a seasonal slow-down during the third and fourth quarters of the calendar year. Foreign sales for the three- and nine- months ended June 30, 2005 increased by $.1 million from the prior year.

Gross margins as a percent of net sales decreased by 8.2% during the quarter from year ago levels due to higher raw material cost, lower margins on several sales and a LIFO adjustment of $.2 million in the quarter. Gross margins as a percent of net sales decreased by 6.1% during the nine-months from year ago levels due to lower sales volumes, higher raw material costs, lower margins on several sales and a LIFO adjustment of $.3 million in the nine-months.

Product engineering and development costs combined with selling and administrative expenses for the nine- months have decreased from year ago levels. Selling and administrative expense decreased due to lower sales commission on lower volume.

The Company received no distributions in fiscal 2004 from its interest in Carbontronics LLC, Carbontronics Fuels LLC and Carbontronics II LLC. Distributions suspended since August 2003 resumed and the Company received distributions totaling $6,964 and $34,346, respectively, for the three- and nine-months ended June 30, 2005. Future distributions from these partnerships depend upon the production of these operations continuing to qualify for tax credits under Section 29 of the Internal Revenue Code and the ability to economically produce and market synthetic fuel produced by the plants.

Interest expense for the three- months ended June 30, 2005 decreased by $10, respectively from the prior year. Interest expense for the nine- months ended June 30, 2005 increased by $11, respectively from the previous year, reflecting an increase in interest rates, an increase in debt balance as of December 31, 2004 and a lower balance during the second and third fiscal quarters.

Income tax expense decreased by $.1 million and increased by $8.3 million for the three- and nine- month period, respectively from the previous year, reflecting the increase in pre-tax income. The tax provision for the quarter and nine- months ended June 30, 2005, includes a reduction of $2.5 million in the tax contingency reserve as a result of resolution of prior year filings and expiration of the statute of limitations. Deferred taxes are a result of Income from Investees which is deferred for income tax purposes until the next fiscal year

In June 2005, the assets of our discontinued operation in Brazil were disposed of with all proceeds used to pay liens and claims against the property. The net assets were fully reserved in 2001 when the other assets of the discontinued operation were sold. Other Assets of $3.2 million, Property and Equipment of $3.5 million, Accounts Payable, Income and Other Taxes Payable and Accruals of $2.9 million, Other Liabilities of $3.3 million, and Accumulated Translation Loss of $4.3 million were charged to the impairment reserve with no resulting gain or loss on the disposition.

9

Liquidity and Capital Resources

On August 1, 2003, the Company entered into a Revolving Credit and Security Agreement with PNC Bank, N.A. The Agreement established a three year revolving $20 million credit facility. The facility provides for advances based on accounts receivable, inventory and real estate. As of June 30, 2005, the Company had no monies borrowed on the facility. The facility includes a $2 million limit on letters of credit. At June 30, 2005, the Company had $.3 million of letters of credit outstanding. The interest rate at June 30, 2005, is at prime less .25% (6.00%) and subject to change based upon the Fixed Charge Coverage Ratio. The Company is required to maintain a Fixed Charge Coverage Ratio of 1.1:1. There are no required repayments as long as there are no defaults and there is adequate eligible collateral. Substantially all of the Company’s assets are pledged as security under the Agreement.

Long term bank debt was paid in full and the Company invested $25 million in marketable securities as a result of the positive cash flow for the nine-months ended June 30, 2005.

Seasonality

The Company is concentrated in the asphalt-related business and is subject to a seasonal slow-down during the third and fourth quarters of the calendar year. Traditionally, the Company’s customers do not purchase new equipment for shipment during the summer and fall months to avoid disrupting their peak season for highway construction and repair work. This slow-down often results in lower reported sales and earnings and or losses during the first and fourth quarters of the Company’s fiscal year ended September 30.

Forward-Looking Information

This Form 10-Q contains certain “forward-looking statements” within the meaning of Section 21-E of the Securities Exchange Act of 1934, as amended (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. 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 and demand for the Company’s products.

10

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company operates manufacturing facilities and sales offices principally located in the United States and the United Kingdom. The Company is subject to business risks inherent in non-U.S. activities, including political and economic uncertainty, import and export limitations, and market risk related to changes in interest rates and foreign currency exchange rates. The Company’s principal currency exposure against the U.S. dollar is the British pound. Periodically, the Company has used derivative financial instruments consisting primarily of interest rate hedge agreements to manage exposures to interest rate changes. The Company’s objective in managing its exposure to changes in interest rates on its variable rate debt is to limit the impact of such changes on earnings and cash flow and to reduce its overall borrowing costs.

At June 30, 2005, the Company had no debt outstanding. Under the Credit Agreement, the Company’s borrowings will bear interest at variable rates based upon the prime rate.

11

Item 4. Controls and Procedures

The Company’s Chairman and Chief Financial Officer evaluated the Company’s disclosure controls and procedures within 90 days of the filing date of this quarterly report. Based upon this evaluation, the Company’s President and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that material information required to be disclosed is included in the reports that it files with the Securities and Exchange Commission.

There were no significant changes in the Company’s internal controls or, to the knowledge of the management of the Company, in other factors that could significantly affect internal controls during our most recently completed fiscal quarter.

12

Part II. Other Information

Item 5. Other Information

The Company’s next Annual Meeting of Shareholders will be held on September 12, 2005 at 9:00 a.m. local time, at the Company’s Corporate Offices, 5201 North Orange Blossom Trail, Orlando, Florida. The record date for the meeting has been set for August 22, 2005.

On August 11, 2005, the Compensation Committee approved a bonus for the Chairman of the Company. The bonus will be ¾ of 1% of the income received by the Company from its synthetic fuels investees during and for the fiscal year ending September 30, 2005.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

10.12	First Amendment to the Stock Option Plan Agreement.
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K.

May 20, 2005- Gencor Receives Cash Distribution from Investees.

13

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.
August 15, 2005	By:	/s/ E.J. Elliott
		E.J. Elliott, Chairman and Chief Executive Officer
August 15, 2005	By:	/s/ Scott W. Runkel
		Scott W. Runkel, Chief Financial Officer

14

EX-10.12

Exhibit 10.12

FIRST AMENDMENT TO THE

STOCK OPTION PLAN AGREEMENT

THIS FIRST AMENDMENT, made this 12^th day of August, 2005, by Gencor Industries, Inc. (the “Company”) and                      (the “Optionee”)

W I T N E S S E T H:

WHEREAS, the Company established the Gencor Industries, Inc. 1997 Stock Option Plan (the “Plan”); and

WHEREAS, in accordance with the Plan, the Company and Optionee entered into a Stock Option Agreement effective as of March 30, 2001 (the “Stock Option Agreement”); and

WHEREAS, the Company and Optionee desire to amend the Stock Option Agreement;

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto have agreed, and do hereby agree, to amend the Stock Option Agreement effective as of August 15, 2005 as follows:

1. Section 7 of the Agreement is hereby amended to read as follows:

“7. Medium of Payment. The purchase price for those Shares with respect to which this Option, and any withholding or employment taxes required to be paid by the Optionee in connection with the exercise of the Option (and/or receipt and/or vesting of any Shares received upon exercise of the Option) shall be payable in any of the following manners: (a) cash, (b) certified or official bank check, (c) money order, (d) Shares that have been held by the Optionee for at least six (6) months (or such other Shares as the Committee determines will not cause the Company to recognize for financial accounting purposes a charge for compensation expense), (e) pursuant to a “cashless exercise” procedure, by delivery of a properly executed exercise notice together with such other documentation, and subject to such guidelines, as the Committee shall require to effect an exercise of the Option and delivery to the Company by a licensed broker acceptable to the Company of proceeds from the sale of Shares sufficient to pay the exercise price and

any applicable income or employment taxes, (f) the withholding of Shares otherwise deliverable upon exercise of the Option (to the extent that the Committee determines that the withholding will not cause the Company to recognize for financial accounting purposes a charge for compensation expense), or (g) in such other consideration as the Committee deems appropriate, or by a combination of the above.”

2. The following new Section 23 is hereby added to the Stock Option Agreement to read as follows:

“23. Issuance of Non-Vested Shares. In the event that the Optionee exercises all or any portion of this Option, a portion of the Shares received by the Optionee upon exercise of the Option (the “Non-Vested Portion”) shall be subject to the provisions of this Section 23. For purposes of this Agreement, the number of Shares (the “Non-Vested Shares”) that shall constitute the Non-Vested Portion shall be that number of Shares (rounded down to the nearest whole share) that have a Fair Market Value on the date on which the Option is exercised (the “Exercise Date”) equal to the product of (i) the number of Shares with respect to which the Option is being exercised multiplied by (ii) the amount by which the Fair Market Value of a Share on the Exercise Date exceeds the purchase price of the Shares.

(a) Vesting of Non-Vested Shares. The Non-Vested Shares acquired upon exercise of the Option shall become vested in accordance with the following provisions:

(i) All of the Non-Vested Shares shall become fully vested on December 31, 2007 if the Optionee’s Continuous Service has not terminated prior to December 31, 2007.

(ii) The Non-Vested Shares shall become fully vested in the event that on or before December 31, 2007, either of the following occurs: (1) termination of the Optionee’s Continuous Service (x) by reason of the Optionee’s death, or in the event the Optionee is determined by a medical doctor satisfactory to the Committee to have suffered a Disability, (y) by the Company without Cause, or (z) by the Optionee for Good Reason, or (2) a Change in Control of the Company during the Optionee’s Continuous Service.

(b) Forfeiture of Non-Vested Shares. If the Optionee’s Continuous Service is terminated or ceases, any Non-Vested Shares that have not previously vested pursuant to Section 23(a) and that do not vest on account of such termination or cessation shall automatically and without notice be forfeited immediately upon such event or occurrence and revert back to the Company, without any payment or other consideration to the Optionee. The Compensation Committee of the Company’s Board of Directors shall have the power and authority to enforce on behalf of the Company any and all rights of the Company under this Agreement in the event of the Optionee’s forfeiture of Non-Vested Shares pursuant to this Section 23(b).

(c) Delivery of Non-Vested Shares.

(i) One or more stock certificates evidencing the Non-Vested Shares shall be issued in the name of the Optionee but shall be held and retained by the Records Administrator of the Company until the date (the “Applicable Date”) on which the Non-Vested Shares become vested pursuant to Section 23(a). All such stock certificates shall bear the following legends, along with such other legends that the Company’s Board of Directors of the Company shall deem necessary and appropriate or which are otherwise required or indicated pursuant to any applicable stockholders agreement:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO SUBSTANTIAL VESTING AND OTHER RESTRICTIONS AS SET FORTH IN THE STOCK OPTION AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES, AND INCLUDE VESTING CONDITIONS WHICH MAY RESULT IN THE COMPLETE FORFEITURE OF THE SHARES.

(ii) The Optionee shall deposit with the Company stock powers or other instruments of transfer or assignment, duly endorsed in blank with signature(s) guaranteed, corresponding to each certificate representing the Non-Vested Shares until such shares become vested. If the Optionee shall fail to provide the Company with any such stock power or other instrument of transfer or assignment, the Optionee hereby irrevocably appoints the Secretary of the Company as his attorney-in-fact, with full power of appointment and substitution, to execute and deliver any such power or other instrument which may be necessary to effectuate the transfer of the Non-Vested Shares (or assignment of distributions thereon) on the books and records of the Company.

(iii) On or after Applicable Date, upon written request to the Company by the Optionee, the Company shall promptly cause a new certificate or certificates to be issued for and with respect to all shares that become vested on that Applicable Date, which certificate(s) shall be delivered to the Optionee as soon as administratively practicable after the date of receipt by the Company and the Optionee’s written request. The new certificate or certificates shall continue to bear those legends and endorsements that the Company shall deem necessary or appropriate (including those relating to restrictions on transferability and/or obligations and restrictions under the Securities Laws).

(d) Non-Transferability of Non-Vested Shares. The Non-Vested Shares are not transferable unless and until they become vested in accordance with Section 23(a) of this Agreement. The terms of this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. Any attempt to effect a Transfer of any Non-Vested Shares prior to the date on which the shares become

vested pursuant to this Agreement shall be void ab initio. For purposes of this Agreement, “Transfer” shall mean any sale, transfer, encumbrance, gift, donation, assignment, pledge, hypothecation, or other disposition, whether similar or dissimilar to those previously enumerated, whether voluntary or involuntary, and including, but not limited to, any disposition by operation of law, by court order, by judicial process, or by foreclosure, levy or attachment.

(e) Tax Matters; Section 83(b) Election.

(i) If the Optionee properly elects, within thirty (30) days of the date on which the Option is exercised, to include in gross income for federal income tax purposes an amount equal to the fair market value (as of the date on which the Option is exercised) of the Non-Vested Shares pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), the Optionee shall make arrangements satisfactory to the Company to pay to the Company any federal, state or local income taxes required to be withheld with respect to the Non-Vested Shares. If the Optionee shall fail to make such tax payments as are required, the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind (including without limitation, the withholding of any Shares that otherwise would be issued to the Optionee under this Agreement) otherwise due to the Optionee any federal, state or local taxes of any kind required by law to be withheld with respect to the Non-Vested Shares.

(ii) If the Optionee does not properly make the election described in Subsection 23(e)(i) above, the Optionee shall, no later than the date as of which any Non-Vested Shares become vested pursuant to section 23(a) hereof, pay to the Company, or make arrangements satisfactory to the Board for payment of, any federal, state or local taxes of any kind required by law to be withheld with respect to the Non-Vested Shares that become vested, and the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind (including without limitation, the withholding of any Shares that otherwise would be issued to the Optionee under this Agreement) otherwise due to Optionee any federal, state, or local taxes of any kind required by law to be withheld with respect to the Non-Vested Shares.

(iii) Tax consequences to the Optionee (including without limitation federal, state, local and foreign income tax consequences) with respect to the Non-Vested Shares (including without limitation the grant, vesting and/or forfeiture thereof) are the sole responsibility of the Optionee. The Optionee shall consult with his or her own personal accountant(s) and/or tax advisor(s) regarding these matters, the making of a Section 83(b) election, and the Optionee’s filing, withholding and payment (or tax liability) obligations.

(f) For purposes of this Section 23, the following terms shall have the following meanings:

(i) “Cause” shall have the equivalent meaning (or the same meaning as “cause” or “for cause”) set forth in any employment agreement, consulting, or other agreement for the performance of services between the Optionee, and the

Company or a Related Entity or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) an action or omission of the Optionee which constitutes a willful and material breach of, or willful and material failure or refusal (other than by reason of his disability or incapacity) to perform his duties and responsibilities to the Company which is not cured within fifteen (15) days after receipt by the Optionee of written notice of same, (ii) fraud, embezzlement, misappropriation of funds or breach of trust in connection with his services to the Company, or (iii) a conviction of any crime which involves dishonesty or a breach of trust. Any termination for Cause shall be made by notice in writing to the Optionee, which notice shall set forth in reasonable detail all acts or omissions upon which the Company is relying for such termination. The Optionee shall have the right to address the Company’s Board of Directors regarding the acts set forth in the notice of termination and may be represented by counsel at that meeting of the Board.

(ii) “Change in Control” shall mean the occurrence of any of the following:

(1) The acquisition by any Person of Beneficial Ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act of more than fifty percent (50%) of either (A) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities) (the foregoing Beneficial Ownership hereinafter being referred to as a “Controlling Interest”); provided, however, that for purposes of this Section 23(f)(ii)(1), the following acquisitions shall not constitute or result in a Change of Control: (x) any acquisition by any Person that as of the date on which the Option is exercised owns Beneficial Ownership of a Controlling Interest; (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Entity; or (z) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (3) below; or

(2) During any period of two (2) consecutive years (not including any period prior to the date on which the Option is exercised) individuals who constitute the Board on the date on which the Option is exercised (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date on which the Option is exercised whose election, or nomination for election, by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(3) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the

Company or any of its Subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its Subsidiaries (each a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) or any Person that as of the date on which the Option is exercised owns Beneficial Ownership of a Controlling Interest) beneficially owns, directly or indirectly, fifty percent (50%) or more of the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the Board of Directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

(iii) “Continuous Service” shall mean the continuous service to the Company or any Related Entity, without interruption or termination, in any capacity of an employee, director or consultant. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of an employee, director or consultant, or (iii) any change in status as long as the individual remains in the service of the Company or any Related Entity in any capacity of an employee, director or consultant. An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.

(iv) “Disability” shall mean a permanent and total disability (within the meaning of Section 22(e) of the Code), as determined by a medical doctor satisfactory to the Committee.

(v) “Good Reason” shall have the equivalent meaning (or the same meaning as “good reason” or “for good reason”) set forth in any employment agreement, consulting, or other agreement for the performance of services between the

Optionee, and the Company or a Related Entity or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) the assignment to the Optionee of any duties inconsistent in any respect with the Optionee’s position (including status, titles and reporting requirements), authority, duties or responsibilities, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Optionee; (ii) any failure by the Company to comply with any of its obligations to the Optionee, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Optionee; or (iii) the Company’s requiring the Optionee to be based at any office or location outside of Orlando, Florida except for travel reasonably required in the performance of the Optionee’s responsibilities.

(vi) “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Securities Exchange Act of 1934 and used in Sections 13(d) and 14(d) thereof, and shall include a “group” as defined in Section 13(d) thereof.

(vii) “Related Entity” shall mean any Subsidiary, and any business, corporation, partnership, limited liability company or other entity in which the Company or a Subsidiary holds a substantial ownership interest, directly or indirectly.

(viii) “Subsidiary” shall mean any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors or in which the Company has the right to receive 50% or more of the distribution of profits or 50% or more of the assets on liquidation or dissolution.

3. The following new Section 24 is hereby added to the Stock Option Agreement to read as follows:

“24. Attestation. If and to the extent that the Optionee satisfies the purchase price upon exercise of the Option, and/or the Optionee’s obligation to pay any withholding or employment taxes resulting from the exercise of the Option and/or receipt or vesting of Shares received as a result of the Optionee’s exercise of the Option, by the delivery of Shares, he may instead, subject to procedures satisfactory to the Committee, satisfy such delivery requirement by presenting proof of beneficial ownership of such Shares, in which case the Company shall treat the Option as exercised (and the withholding and employment taxes paid) without further payment and shall withhold such number of Shares from the Shares acquired by the exercise of the Option.”

4. In all other respects, the Stock Option Agreement shall remain unchanged by this Amendment.

IN WITNESS WHEREOF, the parties have caused this instrument to be executed the day and year first above written.

GENCOR INDUSTRIES, INC.

By:

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Mr. E.J. Elliott, certify that:

1. I have reviewed this quarterly report on Form on 10-Q of Gencor Industries, Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I, are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting, and;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date: August 15, 2005	/s/ E.J. Elliott
	E.J. Elliott
	Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Mr. Scott W. Runkel, certify that:

1. I have reviewed this quarterly report on Form on 10-Q of Gencor Industries, Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I, are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting, and;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date: August 15, 2005	/s/ Scott W. Runkel
	Scott W. Runkel
	Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Gencor Industries, Inc. (the “Company”) on Form 10-Q for the quarter ending June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ E.J. Elliott

E.J. Elliott

Chairman and Chief Executive Officer

August 15, 2005

/s/ Scott W. Runkel

Scott W. Runkel

Chief Financial Officer

August 15, 2005