Burnham Holdings, Inc. Announces Third Quarter and Nine Months Results

Oct 08, 2010, 09:10 ET from Burnham Holdings, Inc.

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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http://www.burnham.com