Burnham Holdings, Inc. Announces First Half Results And Declares
Dividend
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LANCASTER, Pa., July 18, 2013 /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 June
30, 2013, and announced a common stock dividend.
As announced in our June 19, 2013
press release, second quarter and year-to-date ("YTD") results
include a non-recurring charge of $5.0
million ($0.71 per share)
relating to a new union agreement at the Bryan Steam, LLC
subsidiary ("Pension Charge"). The Pension Charge is included
in the "Other income (expense)" section of the Statement of
Operations, and is explained further in the Notes to the Financial
Statements (Note 3 and Note 7). This one-time,
non-operational charge, while material to the current year results,
is not material to the balance sheet. The Pension Charge will
eliminate all future contributions to the underfunded,
multi-employer Boilermaker-Blacksmith National Pension Trust and
should position Bryan Steam, LLC to be more cost competitive in the
aggressive commercial market, while also lowering future risk to
the Burnham Holdings shareholders through the elimination of this
unknown, uncontrollable liability.
Second quarter and YTD sales were $36.1
million and $77.2 million,
respectively; as compared to 2012 second quarter and YTD sales of
$41.4 million and $78.0 million, respectively. We are
reporting a second quarter loss of $(3.8)
million or $(0.84) per share,
and a YTD loss of $(3.1) million or
$(0.70) per share. This is
compared to the 2012 second quarter gain of $181 thousand or $0.04 per share and a YTD loss of $(766) thousand or $(0.17) per share. The 2013 reported
results include the $5 million
adverse impact of the Pension Charge discussed above.
Excluding the impacts of the Pension Charge, YTD results would be a
gain of $71 thousand or $0.01 per share despite lower YTD sales versus a
loss for the same period in 2012. YTD cost of goods sold
("COGS") as a percentage of sales for 2013 was 78.7%, better than
last year's first half of 79.7%. This COGS percentage decline
reflects our efforts to continually and systematically match our
product pricing and our cost structure to remain competitive in the
market, while maintaining our gross profit margins, as well as a
favorable product mix. Selling, administrative, and general
expenses were favorably lower in both dollars and as a percentage
of sales from the prior year, 20.6% versus the prior year's
21.0%. Our interest expense for the quarter and YTD was lower
because of the lower borrowing levels.
Our residential businesses performed well during the first-half
as compared to 2012. As discussed in our 2012 Annual Report
and the first quarter release, first-half sales of residential
boilers were favorably influenced by carry-over demand resulting
from the October, 2012 Super Storm Sandy. While we believe this
recovery effort will continue throughout 2013, the level of demand
in the second quarter was lower than that experienced in late 2012
and early 2013. The commercial portion of our business has
been challenged in 2013 as certain sectors of this market have yet
to show signs of rebounding from their prior lows. With a firm
foundation based on our core principles and philosophy, Burnham
Holdings is financially and operationally strong. Existing
boilers will continue to be replaced over time due to age or
operating costs, and our powerful lineup of high-efficiency
residential and commercial products positions us well in the
market. We produce top-quality, high-value equipment for
virtually any application. As we approach the upcoming
heating season, we are scheduling our manufacturing facilities for
the normal pattern of higher demand in the second half.
The Company's balance sheet has appropriate levels of working
capital consistent with current business activity. Our
long-term debt of $27.5 million was
$4.2 million lower than last
year. The Statement of Cash Flows presents net cash used in
operations of $17.3 million compared
to prior year's cash use of $12.7
million. This increase in the use of funds for the half
results from the payment of higher income taxes (from the strong
2012 results) and other normal changes in working capital levels.
Inventory levels have increased from the prior year as we optimize
manufacturing schedules in light of the current market estimates,
which are regularly evaluated and adjusted as needed.
At its meeting on July 18, 2013,
Burnham Holdings, Inc.'s Board of Directors declared a quarterly
common stock dividend of $0.20 per
share payable August 27, 2013, with a
record date of August 20,
2013.
Consolidated Statements of
Operations
|
|
|
|
|
|
|
(In thousands, except per share
data)
|
Three Months Ended
|
|
Six Months Ended
|
(Data is unaudited (see
Notes))
|
June 30,
|
|
July 1,
|
|
June 30,
|
|
July 1,
|
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Net sales
|
$ 36,087
|
|
$ 41,386
|
|
$ 77,220
|
|
$ 77,983
|
Cost of goods sold
|
29,306
|
|
32,608
|
|
60,749
|
|
62,139
|
|
|
Gross profit
|
6,781
|
|
8,778
|
|
16,471
|
|
15,844
|
|
|
|
|
|
|
|
|
|
|
Selling, administrative and general
expenses
|
7,350
|
|
8,149
|
|
15,881
|
|
16,392
|
|
|
Operating income (loss)
|
(569)
|
|
629
|
|
590
|
|
(548)
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Non-recurring expense (3)
|
(5,000)
|
|
-
|
|
(5,000)
|
|
-
|
|
Mark-to-market (4)
|
17
|
|
35
|
|
38
|
|
63
|
|
Interest income
|
12
|
|
7
|
|
62
|
|
22
|
|
Interest expense
|
(322)
|
|
(388)
|
|
(579)
|
|
(733)
|
|
|
Other income (expense)
|
(5,293)
|
|
(346)
|
|
(5,479)
|
|
(648)
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income
taxes
|
(5,862)
|
|
283
|
|
(4,889)
|
|
(1,196)
|
Income tax (benefit)
expense
|
(2,110)
|
|
102
|
|
(1,760)
|
|
(430)
|
|
NET (LOSS) INCOME
|
$ (3,752)
|
|
$ 181
|
|
$ (3,129)
|
|
$ (766)
|
|
BASIC & DILUTED (LOSS) INCOME PER
SHARE
|
$
(0.84)
|
|
$ 0.04
|
|
$ (0.70)
|
|
$ (0.17)
|
|
DIVIDENDS PAID
|
$
0.20
|
|
$ 0.18
|
|
$
0.40
|
|
$ 0.36
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance
Sheets
|
|
|
|
|
|
|
|
(in thousands and data is unaudited (see
Notes))
|
|
|
|
|
June 30,
|
|
July 1,
|
|
|
ASSETS
|
|
|
|
|
2013
|
|
2012
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
$ 4,799
|
|
$ 5,084
|
|
Trade accounts receivable, less
allowances
|
|
|
|
|
20,008
|
|
20,600
|
|
Inventories
|
|
|
|
|
54,370
|
|
52,266
|
|
Prepaid expenses and other current
assets
|
|
|
|
|
4,225
|
|
3,416
|
|
|
TOTAL CURRENT ASSETS
|
|
|
|
|
83,402
|
|
81,366
|
PROPERTY, PLANT AND EQUIPMENT,
net
|
|
|
|
|
47,028
|
|
48,541
|
DEFERRED INCOME TAXES (5)
|
|
|
|
|
3,497
|
|
3,300
|
OTHER ASSETS, net
|
|
|
|
|
21,688
|
|
22,353
|
|
|
TOTAL ASSETS
|
|
|
|
|
$155,615
|
|
$155,560
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
2013
|
|
2012
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts and taxes payable & accrued
expenses
|
|
|
|
$ 27,679
|
|
$ 24,521
|
|
Current portion of long-term
liabilities
|
|
|
|
|
287
|
|
357
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
|
|
27,966
|
|
24,878
|
LONG-TERM DEBT
|
|
|
|
|
27,547
|
|
31,681
|
OTHER POSTRETIREMENT LIABILITIES
(5)(6)
|
|
|
|
|
35,631
|
|
36,826
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
|
|
530
|
|
530
|
|
Class A Common Stock
|
|
|
|
|
3,451
|
|
3,418
|
|
Class B Convertible Common
Stock
|
|
|
|
|
1,493
|
|
1,523
|
|
Additional paid-in capital
|
|
|
|
|
14,941
|
|
14,722
|
|
Retained earnings
|
|
|
|
|
96,350
|
|
93,917
|
|
Accumulated other comprehensive income
(loss) (5)
|
|
|
|
(34,345)
|
|
(33,977)
|
|
Treasury stock, at
cost
|
|
|
|
|
(17,949)
|
|
(17,958)
|
|
|
TOTAL STOCKHOLDERS' EQUITY
|
|
|
|
|
64,471
|
|
62,175
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
$155,615
|
|
$155,560
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Cash
Flows
|
Six months ended
|
(in thousands and data is unaudited (see
Notes))
|
2013
|
|
2012
|
Net
loss
|
$
(3,129)
|
|
$
(766)
|
Non-recurring expense (3)
|
5,000
|
|
-
|
Depreciation and amortization
|
2,343
|
|
2,338
|
Pension
and postretirement liabilities expense
|
828
|
|
611
|
Contributions to pension trust (6)
|
(2,513)
|
|
(2,513)
|
Other net
adjustments
|
(61)
|
|
(784)
|
Changes in
operating assets and liabilities
|
(19,743)
|
|
(11,609)
|
NET CASH USED IN OPERATING
ACTIVITIES
|
(17,275)
|
|
(12,723)
|
Net
cash used in the purchase of assets
|
(1,574)
|
|
(734)
|
Proceeds
from borrowings
|
20,500
|
|
15,500
|
Proceeds
from stock option exercise and (purchase) of Treasury
stock
|
227
|
|
229
|
Principal
payments on debt and lease obligations
|
(12)
|
|
(57)
|
Dividends
paid
|
(1,807)
|
|
(1,620)
|
INCREASE IN CASH AND
CASH EQUIVALENTS
|
59
|
|
595
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR
|
4,740
|
|
4,489
|
CASH AND CASH EQUIVALENTS AT END OF
YEAR
|
$
4,799
|
|
$
5,084
|
|
|
|
|
Notes To Financial Statements:
(1) 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.
(2) Common stock outstanding at June 30,
2013 includes 3,005,895 of Class A shares and 1,493,415 of
Class B shares.
(3) On June 18, 2013 the Company
incurred a non-recurring expense of $5
million as a result of a new union agreement at its
subsidiary, Bryan Steam LLC in Peru,
Indiana (previously announced on June 19th). This
one-time, non-operational charge is a result of an agreement to
withdraw from a multi-employer pension plan which had provided a
defined benefit for these union employees. This decision
results in what's called a "withdrawal liability expense" that
accounting rules require to be expensed immediately regardless of
benefit period covered or period over which the liability is
actually paid.
(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. For
December 31, 2012 and 2011, 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 2012
Annual Report for more details).
(6) In both 2013 and 2012, the Company made voluntary pre-tax
contributions of $2.5 million to its
defined benefit 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) Interim periods, forward looking statements, and certain
significant estimates and risks. This note has been expanded
to include items discussed in detail within the Annual Report.
Interim Periods and Forward Looking Statements. The
accompanying unaudited financial statements contain all adjustments
that are necessary for a fair presentation of the interim results,
and these adjustments are applied consistently for the periods
covered. 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, 2012. 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.
Certain Significant Estimates and Risks. Certain
estimates are determined using historical information along with
assumptions about future events. Changes in assumptions for
such items as warranties, pension assumptions, medical cost trends,
employment demographics and legal actions, as well as changes in
actual experience, could cause these estimates to change.
Specific risks, such as those included below, are discussed in the
Company's Quarterly and Annual Reports to provide regular knowledge
of relevant matters. Estimates and related reserves are more
fully explained in the 2012 Annual Report.
Retirement Plans: The Company maintains a
non-contributory defined benefit pension plan covering
substantially all employees. Steps have been taken over the
past years to protect benefits for retirees and eligible
employees. Lancaster Metal Manufacturing, a Company
subsidiary, also contributes to a separate union-sponsored
multiemployer-defined benefit pension plan that covers its
collective bargaining employees (Bryan Steam, LLC had a similar
plan but has withdrawn from the plan as noted in Note 3).
Variables such as future market conditions, investment returns, and
employee experience could affect results.
Medical Health Coverage: The Company and its
subsidiaries are self-insured for most of the medical health
insurance provided for its employees, limiting maximum exposure per
occurrence by purchasing third-party stop-loss coverage.
Retiree Health Benefits: The Company pays a fixed
annual amount that assists a specific group of retirees in
purchasing medical and/or prescription drug coverage from
providers. Additionally, certain employees electing early
retirement have the option of receiving access to an insured
defined benefit plan at a yearly stipulated cost or receiving a
fixed dollar amount to assist them in covering medical costs.
Insurance: The Company and its subsidiaries maintain
insurance to cover product liability, general liability, workers'
compensation, and property damage. Well-known and reputable
insurance carriers provide current coverage. All policies and
corresponding deductible levels are reviewed on an annual basis.
Third-party administrators, approved by the Company and the
insurance carriers, handle claims and attempt to resolve them to
the benefit of both the Company and its insurance carriers. The
Company reviews claims periodically in conjunction with
administrators and adjusts recorded reserves as required.
Warranty Litigation, Class Action: In 2010, two of the
Company's subsidiaries were served with a class action lawsuit
related generally to boiler products manufactured and sold by a
predecessor to one of the Company's subsidiaries more than 10 years
ago. This matter has now been discontinued as a class action and
the litigation has been resolved.
General Litigation, including Asbestos: In the normal
course of business, certain subsidiaries of the Company have been
named, and may in the future be named, as defendants in various
legal actions including claims related to property damage and/or
personal injury allegedly arising from products of the Company's
subsidiaries or their predecessors. A number of these claims allege
personal injury arising from exposure to asbestos-containing
material allegedly contained in certain boilers manufactured many
years ago, or through the installation of heating systems. The
Company's subsidiaries, directly or through insurance providers,
are vigorously defending all open asbestos cases, many of which
involve multiple claimants and many defendants, which may not be
resolved for several years. Asbestos litigation is a national issue
with thousands of companies defending claims. While the large
majority of claims have historically been resolved prior to the
completion of trial, from time to time some claims may be expected
to proceed to a potentially substantial verdict against
subsidiaries of the Company. Any such verdict would be
subject to appeal, any set-off rights and/or issues involving
allocation of liability among various defendants. The Company
believes, based upon its understanding of the insurance policies
available and discussions with legal counsel, that all pending
legal actions and claims, including asbestos, should ultimately be
resolved (whether through settlements or verdicts) within existing
insurance limits and reserves, or for amounts not material to the
Company's financial position or results of operations. However, the
resolution of litigation generally entails significant
uncertainties, and no assurance can be given as to the ultimate
outcome of litigation or its impact on the Company and its
subsidiaries. Furthermore, the Company cannot predict the extent to
which new claims will be filed in the future, although the Company
currently believes that the great preponderance of future asbestos
claims will be covered by existing insurance. There can be no
assurance that insurers will be financially able to satisfy all
pending and future claims in accordance with the applicable
insurance policies, or that any disputes regarding policy
provisions will be resolved in favor of the Company.
Litigation Expense, Settlements, and Defense: The 2013
six-month charges for all uninsured litigation of every kind, was
$103 thousand. That amount
included two asbestos claims, while it is rare for an
asbestos suit not to be covered by insurance, a few such claims
exist, depending on the alleged time period of asbestos
exposure. Expenses for legal counsel, consultants, etc., in
defending these various actions and claims for the current six
months were $117 thousand.
Prior year's settlements and expenses are disclosed in the 2012
Annual Report.
Permitting Activities (excluding environmental): The
Company's subsidiaries are engaged in various matters with respect
to obtaining, amending or renewing permits required under various
laws and associated regulations in order to operate each of its
manufacturing facilities. Based on the information presently
available, management believes it has all necessary permits and
expects that all permit applications currently pending will be
routinely handled and approved.
Environmental Matters: The operations of the Company's
subsidiaries are subject to a variety of Federal, State, and local
environmental laws. Among other things, these laws require the
Company's subsidiaries to obtain and comply with the terms of a
number of Federal, State and local environmental regulations and
permits, including permits governing air emissions, wastewater
discharges, and waste disposal. The Company's subsidiaries
periodically need to apply for new permits or to renew or amend
existing permits in connection with ongoing or modified operations.
In addition, the Company generally tracks and tries to anticipate
any changes in environmental laws that might relate to its ongoing
operations. The Company believes its subsidiaries are in material
compliance with all environmental laws and permits.
As with all manufacturing operations in the United States, the Company's subsidiaries
can potentially be responsible for response actions at disposal
areas containing waste materials from their operations. In the past
five years, the Company has not received any notice that it or its
subsidiaries might be responsible for remedial clean-up actions
under government supervision. However, two pre-2008 issues covered
by insurance policies remain open as of this date and are fully
disclosed in the year-end 2012 Annual Report. While it is not
possible to be certain whether or how any new or old matters will
proceed, the Company does not presently have reason to anticipate
incurring material costs in connection with any matters.
SOURCE Burnham Holdings, Inc.