Burnham Holdings, Inc. Announces Year 2010 Financial Results

LANCASTER, Pa., Feb. 24, 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 for residential, commercial and industrial applications, today reported its financial results for the year ended December 31, 2010.

We are pleased to report a year of solid financial performance and accomplishments, despite the prevailing difficult economic conditions.  Results for 2010 are improved from 2009 with increased revenue, increased net income, and a higher earnings per share.  Our balance sheet is very strong with the lowest debt level in over 13 years.  We paid common stock dividends for the 70th consecutive year at the rate of $0.68 per share, the same rate as 2009, 2008 and 2007 (despite the recessionary economy).  Details of results mentioned in this release are discussed fully in the Company's audited Annual Report, which will be available about March 18, 2011.

Net sales for 2010 were $189.7 million, $6.0 million or 3.3% higher than last year's $183.7 million.  The residential portion of the business experienced a more than 13% improvement over corresponding 2009 levels, the first improvement we have seen since the cyclical downturn in market demand that began back in 2005. This decline was the result of the economic cycle that not only has impacted Burnham Holdings but also the entire industry. This downturn was a result of a number of factors, including the sharp decline in the real estate market and its impact on home construction, consumer confidence and spending behaviors, the deep recession in the general economy, and reduced credit availability. As the 2010 market for residential boilers was up only 2% in units from 2009, we are very encouraged by the 13% improvement in this portion of our business. We feel this has been accomplished by satisfying the needs of the consumer through the introduction of more new equipment and controls than any of our competitors.  The commercial portion of our business provides heating applications for large commercial, institutional and industrial facilities such as hospitals, factories, hotels, and schools. Modest growth was experienced in commercial related products from 2004 through 2007, which mitigated the downturn in the residential portion of the business. However, in mid-2008, we began to feel the impact of constraints on spending in the commercial sector, which continued into 2010 and resulted in lower sales for this portion of our business. Although current business conditions remain difficult, we are optimistic about longer-term prospects for the Company.  Existing boilers will continue to be replaced over time due to age or operating costs.  Our powerful lineup of high-efficiency residential and commercial products sold by our subsidiary companies position them well in the market.  These products are top-quality, high-value equipment for virtually any application.  

Net income for 2010 was $6.2 million, or $1.39 per share, improved from the $5.3 million, or $1.20 per share, reported for 2009. With net sales relatively flat and the need to remain competitive in the market, increased emphasis has been placed on cost control and resource optimization, both facility and manpower, in order to maintain operating margins. Through strict spending policies and flexibility with manufacturing capabilities, our subsidiaries were highly successful in the effort of balancing the building of inventory and covering fixed overhead, while having the stock necessary to meet expectations. As a result, manufacturing overhead expenses and production variances over the last two years have declined by nearly $12 million. This lowering of expenses positions us with gross profit margins similar to those when the downturn began back in 2005. Actual cost of goods sold as a percentage of sales was 77.4% in 2010 versus 76.6% in 2009 (77.0% in 2010 versus 77.6% in 2009 on a FIFO, replacement cost basis). Selling, general and administrative expenses for 2010 were 19.2% as a percentage of sales compared to 18.3% in 2009 and were negatively impacted by litigation defense costs for ongoing matters.  In addition, the "Other income (expense)" section of the Statement of Income is reflecting total income of $3.3 million compared to the prior year's expense of $1.0 million. You will note the line item "Gain on sale of property" for $4.7 million in 2010, which relates to investment property sold in Lancaster, PA (Note 5).  Otherwise, "Other income (expense)" was similar to prior year.

The balance sheet is sound with appropriate levels of working capital and a conservative ratio of debt to equity.  Cash flow from operations provides the ability to fund operating expenses while also providing the funds to develop new products, make necessary investments in capital assets, make principal repayments, and pay dividends to our stockholders.

At its meeting on February 24, 2011, the Burnham Holdings, Inc. Board of Directors declared a regular quarterly common stock dividend of $0.17 per share payable March 15, 2011 with a record date of March 8, 2011.  The annual dividend rate for preferred stock is $3.00 per share.

The Company's directors have scheduled the 2011 Annual Meeting for Tuesday, April 26th.  The meeting will be held at the Eden Resort and Conference Center in Lancaster beginning at 11:30 a.m.

Notes:

1)  The accompanying unaudited financial statements contain all adjustments that are necessary for a fair presentation of results for such periods and are consistent with policies and procedures employed in the audited year-end financial statements.  These consolidated financial statements should be read in conjunction with the Annual Report for the period December 31, 2010, which will be available about March 18, 2011.  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.  

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 December 31, 2010 includes 2,865,049 of Class A shares and 1,590,589 of Class B shares.

4)  In 2010 and 2009, the Company made pre-tax contributions of $2.8 million and $4.2 million, respectively, to its defined benefit pension plan.  These payments increased the plan assets available for benefit payments and did not impact the Statement of Income.

5)  In 2010, two investment properties in Lancaster were sold for total net proceeds of $11.8 million, resulting in a net book gain on these properties of $4.7 million.  These proceeds, along with additional cash, were reinvested into the Centerville, Lancaster, PA properties at a net acquisition price of $12.7 million.  These actions were handled as a 1031 Like Kind Exchange transaction for Federal and State tax matters, which enables the gains to be tax deferred into the future.  In addition to these transactions, and as previously announced in last year's Annual Report, on February 22, 2010, assets of Wendland Manufacturing Corp. in Texas were sold for net proceeds of $871 thousand.  The sale was recorded in the 2009 financial statements, while the transfer of cash occurred on the date of sale.

6)  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.

7)  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.  For 2010, the pension non-cash impact was an increase in Other Postretirement Liability of $1.0 million (projected benefit obligations exceeded plan assets by slightly more than the previous year) and an increase of $2.2 million to Accumulated Other Comprehensive Income (Loss)("AOCI"), a non-cash sub-section of Stockholders' Equity. For 2009, the pension impact was a decrease in Other Postretirement Liability of $2.5 million (projected benefit obligations exceeded plan assets by less than the previous year) and an increase of $1.0 million to AOCI.

8)  Book value per common share is presented excluding AOCI, a non-cash subsection of Stockholders' Equity, which has been dramatically impacted in both years by the pension and postretirement benefit adjustments described in Note 7.

SOURCE Burnham Holdings, Inc.