Burnham Holdings, Inc. Announces Third Quarter and Nine Months Results
LANCASTER, Pa., Oct. 8 /PRNewswire-FirstCall/ -- Burnham Holdings, Inc., (Pink Sheets: BURCA), the parent company of fourteen subsidiaries that together form a leading domestic manufacturer of boilers, and related HVAC products and accessories (including furnaces, radiators, and air conditioning systems) for residential, commercial and industrial applications, today reported its financial results for the period ended September 26, 2010.
Third quarter and year-to-date sales were $50.2 million and $121.3 million, respectively. This reflects increased sales compared to the prior year third quarter and year-to-date, which were $48.9 million and $120.5 million, respectively. Adjusting the quarter and nine months sales for both years to remove the revenue of Wendland Manufacturing Corp., sold on February 22, 2010, quarter to quarter sales are 4% higher and sales year-to-date are 3% higher than 2009. This compares to our various markets that are generally flat to moderately down from last year. We expect market conditions to be challenging until the economy eventually recovers, and credit availability, housing, real estate activity, and consumer confidence return to a more normal level. Although current business conditions remain difficult, we are optimistic about longer-term prospects for the business. With a firm foundation based on our core principles and philosophy, Burnham is financially and operationally strong. Existing boilers will continue to be replaced over time due to age or operating costs, and the powerful lineup of high-efficiency residential and commercial products sold through our subsidiary companies, position them well in the market. These products are top-quality, high-value equipment for virtually any application.
The income for the third quarter and year-to-date was $1.6 million or $0.36 per share, and $677 thousand or $0.15 per share, respectively. This compares favorably to 2009 third quarter and year-to-date income of $1.4 million or $0.31 per share, and $65 thousand or $0.01 per share, respectively. We have been continually and systematically evaluating our cost structure during this economic recession to remain cost competitive in the market. Cost of goods sold as a percentage of sales for 2010, for both the quarter and year-to-date, were better than the same periods of 2009 (2010 at 76.5% and 78.1%, respectively, versus 2009 at 77.2% and 78.5%, respectively). This reflects the results of product pricing actions matched effectively with changes in raw material costs and from strict control of manufacturing overhead expenses. Selling, administrative, and general expenses were lower for the nine months compared to the prior year, $24.3 million versus $24.9 million in 2009, and were lower as a percentage of sales. The resulting favorable impact from the above-mentioned cost drivers is that operating dollars and profit margins, for both the quarter and nine months, are better than last year. Other income (expense) was slightly higher for the quarter and nine months, compared to the same periods of last year, as a result of fluctuations in the mark-to-market of interest rate agreements and increased interest expense from changes in borrowing rates.
The Company and one of its subsidiaries have been served with a class action lawsuit relating generally to boiler products manufactured and sold by a predecessor to one of the Company's subsidiaries more than ten years ago. Substantial warranty reserves for that predecessor were disclosed in the 2000, 2001 and 2002 annual reports. Generally, class action lawsuits are complex and take many months or years to resolve. The Company intends to vigorously defend the lawsuit, and while we believe there are viable defenses to Plaintiffs' claims, the ultimate resolution of this matter, as with any litigation, entails significant risks and uncertainties. Accordingly, there can be no assurance that the ultimate cost of resolving this matter will not be material.
The Company's balance sheet remains strong with working capital at a level consistent with the business activity and adequately positioned for the heating season. Total debt was $39.0 million at September 26, 2010, down substantially from $47.5 million at the same point in 2009. Our spending for capital equipment of $2.8 million (an increase of $1.1 million over the 2009 spending level) was paid for partially by the cash proceeds from selling the assets of Wendland Manufacturing Corp., previously mentioned in the 2009 Annual Report. The net cash used in operations for the nine months was $12.7 million, which was better than the $13.9 million used in 2009 (see Consolidated Statements of Cash Flows for details).
As a reminder, the Board of Directors evaluates the Company's financial performance at its regular scheduled December meeting for consideration of December dividends. Also, it should be noted that the Company's Annual Meeting, normally the fourth Monday of April, will be moved to the fourth Tuesday in April 2011, the 26th, in light of the Easter Holiday weekend.
Consolidated Statements of Operations |
|||||
(In thousands, except |
Three months ended |
Nine months ended |
|||
per share data) |
September 26, |
September 27, |
September 26, |
September 27, |
|
(Data is unaudited (see Notes)) |
2010 |
2009 |
2010 |
2009 |
|
Net sales |
$50,168 |
$48,854 |
$121,316 |
$120,510 |
|
Cost of goods sold |
38,379 |
37,722 |
94,799 |
94,630 |
|
Gross profit |
11,789 |
11,132 |
26,517 |
25,880 |
|
Selling, administrative |
|||||
and general expense |
8,786 |
8,504 |
24,282 |
24,882 |
|
Operating income |
3,003 |
2,628 |
2,235 |
998 |
|
Other income (expense) |
|||||
Mark-to-market gain (4) |
32 |
26 |
103 |
264 |
|
Interest income |
-- |
1 |
1 |
3 |
|
Interest expense |
(538) |
(477) |
(1,314) |
(1,163) |
|
Other income (expense) |
(506) |
(450) |
(1,210) |
(896) |
|
Income before taxes |
2,497 |
2,178 |
1,025 |
102 |
|
Income tax expense |
878 |
784 |
348 |
37 |
|
Net income |
$1,619 |
$1,394 |
$677 |
$65 |
|
Per Share Data: |
|||||
Basic & Diluted income |
$0.36 |
$0.31 |
$0.15 |
$0.01 |
|
Dividends paid |
$0.17 |
$0.17 |
$0.51 |
$0.51 |
|
Notes:
1) The accompanying unaudited financial statements contain adjustments that are necessary for a fair presentation of the interim results, and these adjustments are applied consistently for the periods presented. The results for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the Annual Report for the period ended December 31, 2009. Statements other than historical facts included or referenced in this Report are forward-looking statements subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. We undertake no duty to update or revise these forward-looking statements.
2) Basic earnings per share are based upon weighted average shares outstanding for the period. Diluted earnings per share assume the conversion of outstanding rights into common stock.
3) Common stock outstanding as of September 26, 2010 includes 2,864,849 of Class A shares and 1,590,789 of Class B shares.
4) Mark-to-market adjustments are a result of changes (non-cash) in the fair value of interest rate agreements. These agreements are used to exchange the interest rate stream on variable rate debt for payments indexed to a fixed interest rate. These non-operational, non-cash charges reverse themselves over the term of the agreements.
5) Accounting rules require that the funded status of pension and other postretirement benefits be recognized as a non-cash asset or liability, as the case may be, on the balance sheet of the Company. For December 31, 2009 and 2008, projected benefit obligations exceeded plan assets, although the 2009 unfunded position was lower than the 2008 unfunded position. The resulting non-cash presentation on the balance sheet is reflected in "Deferred income taxes", "Other postretirement liabilities", and "Accumulated other comprehensive income (loss)", a non-cash sub-section of "Stockholders' Equity" (see Note 9 of the 2009 Annual Report for more details).
6) In the first nine months of 2010 and 2009, the Company made voluntary pre-tax contributions of $2.5 million and $4.2 million, respectively, to its defined pension plan. These payments increased the trust assets available for benefit payments (reducing "Other postretirement liabilities") and did not impact the Statement of Operations.
7) On February 22, 2010, the Company sold the assets of Wendland Manufacturing Corp. in Texas. The sale was recorded in the 2009 financial statements, while the transfer of cash occurred on the date of sale.
Consolidated Balance Sheets |
September 26, |
September 27, |
|
(In thousands and data is unaudited (see Notes)) |
2010 |
2009 |
|
ASSETS |
|||
Current Assets |
|||
Cash, cash equivalents, and marketable securities |
$4,634 |
$3,895 |
|
Trade and other accounts receivable, net |
29,436 |
29,644 |
|
Inventories |
51,104 |
53,541 |
|
Prepayments and other current assets |
3,121 |
3,400 |
|
Total current assets |
88,295 |
90,480 |
|
Property, plant and equipment, net |
44,538 |
46,539 |
|
Deferred income taxes (5) |
1,385 |
2,718 |
|
Other assets, net |
21,780 |
21,674 |
|
Total Assets |
$155,998 |
$161,411 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||
Current Liabilities |
|||
Accounts and taxes payable & accrued expenses |
$26,370 |
$23,789 |
|
Current portion of long-term liabilities |
270 |
400 |
|
Total current liabilities |
26,640 |
24,189 |
|
Long-term debt |
38,962 |
47,354 |
|
Other postretirement liabilities (5)(6) |
19,468 |
20,167 |
|
Stockholders' equity |
|||
Preferred stock |
530 |
530 |
|
Class A common stock |
3,323 |
3,267 |
|
Class B convertible common stock |
1,591 |
1,643 |
|
Additional paid-in capital |
14,359 |
14,308 |
|
Retained earnings |
89,510 |
86,605 |
|
Accumulated other comprehensive income (loss) (5) |
(20,427) |
(18,694) |
|
Treasury stock, at cost |
(17,958) |
(17,958) |
|
Total stockholders' equity |
70,928 |
69,701 |
|
Total Liabilities and Stockholders' Equity |
$155,998 |
$161,411 |
|
Consolidated Statements of Cash Flows |
September 26, |
September 27, |
|
(In thousands and data is unaudited) |
2010 |
2009 |
|
Net income |
$677 |
$65 |
|
Depreciation and amortization |
3,347 |
3,467 |
|
Other net adjustments |
(128) |
(1,556) |
|
Pension and postretirement liabilities expense |
570 |
891 |
|
Contributions to pension trust (6) |
(2,450) |
(4,200) |
|
Changes in operating assets and liabilities |
(14,694) |
(12,549) |
|
Net cash used in operating activities |
(12,678) |
(13,882) |
|
Net cash used in the purchase of assets |
(2,805) |
(1,705) |
|
Proceeds from sale of assets |
871 |
--- |
|
Proceeds from borrowings |
18,000 |
18,235 |
|
Principal payments on debt and lease obligations |
(352) |
(75) |
|
Proceeds from exercise of stock options |
51 |
--- |
|
Purchase of treasury stock |
--- |
(6) |
|
Dividends paid |
(2,280) |
(2,280) |
|
Cash, cash equivalents, and marketable securities |
|||
Increase for period |
807 |
287 |
|
Beginning of year |
3,827 |
3,608 |
|
End of period |
$4,634 |
$3,895 |
|
SOURCE Burnham Holdings, Inc.
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