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

LANCASTER, Pa., Oct. 6, 2011 /PRNewswire/ -- Burnham Holdings, Inc., (Pink Sheets: BURCA), the parent company of fourteen subsidiaries that are leading domestic manufacturers 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 25, 2011.

Third quarter and year-to-date sales were $51.1 million and $127.4 million, respectively.  This reflects increased sales compared to the prior year third quarter and year-to-date, which were $50.2 million and $121.3 million, respectively.  Overall this is encouraging in light of the challenging economic and political conditions, which continue to thwart signs of recovery.  The residential portion of the business (on a yearly basis about 70% of the sales revenue) continued to record increased sales for the quarter versus the prior year and built upon the upward sales trend experienced through the first half of the year.  The commercial portion of the business provides heating applications for large commercial, institutional and industrial facilities such as hospitals, factories, hotels, and schools.  Strong growth was experienced in commercial through the first half of this year. However during the past quarter this portion of the business has begun to see the impact of constraints on spending in the commercial market sector.  The Burnham Holdings strategy of industry diversification through independent subsidiaries with different products and markets served have served us well during these challenging business conditions.  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 $1.8 million or $0.41 per share, and $794 thousand or $0.18 per share, respectively.  This compares favorably to 2010 third quarter and year-to-date income of $1.6 million or $0.36 per share, and $677 thousand or $0.15 per share, respectively.  Cost of goods sold ("COGS") as a percentage of sales for 2011, for both the quarter and year-to-date, have increased only marginally compared to the same periods of the prior year (2011 at 76.7% and 78.7%, respectively, versus 2010 at 76.5% and 78.1%, respectively). The COGS has been negatively affected by an increase in global commodity prices. Through the nine months, we have incurred material price variances of approximately 1.9% of sales, more than triple the year-to-date difference in the COGS percentage.  We have been able to offset a portion of these increases through the continual and systematic improvement of our production processes and from strict control of manufacturing overhead expenses.  Selling, administrative, and general expenses were lower as a percentage of sales for the quarter and nine months compared to the prior year (2011 at 17.0% and 19.6%, respectively, versus 2010 at 17.5% and 20.0%, respectively).  In addition to the favorable impact from the above-mentioned cost drivers, we have also taken appropriate product pricing actions to maintain margins, as reflected by the stronger operating margins reported for the third quarter (2011 at 6.3% versus 6.0% for 2010). In addition, interest expense was lower for the quarter and nine months as a result of lower borrowing rates.  

The Company's balance sheet remains strong with working capital at a level consistent with the business activity.  Total debt was $40.0 million at September 25, 2011, only $1.0 million higher than the $39.0 million at the same point in 2010. This change is mainly the result of higher inventory levels and increased capital spending (in the prior year we recognized proceeds from the sale of assets discussed in Note 7).  While the Statement of Cash Flows presents negative net cash used in operations for the nine months, the higher inventory levels at the end of this period explain the majority of this usage. The inventory levels are based on historical monthly patterns and optimized manufacturing schedules combined with market estimates, and are considered appropriate based on current business conditions.  

As a reminder, the Board of Directors evaluates the Company's financial performance at its regular scheduled December 1st meeting for consideration of December dividends.  

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, 2010.  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 25, 2011 includes 2,882,750 of Class A shares and 1,585,160 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, 2010 and 2009, projected benefit obligations exceeded plan assets.  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 10 of the 2010 Annual Report for more details).
6. In the first nine months of 2011 and 2010, the Company made voluntary pre-tax contributions of $2.5 million in each year 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.

SOURCE Burnham Holdings, Inc.