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

Rhea-AI Summary

Burnham Holdings, trading as BURCA, reported its third quarter financial results for 2020, revealing net sales of $48.7 million, down from $52.1 million in the same period last year. However, quarterly sales showed a recovery, rising 3% year-over-year. YTD sales declined 15%, largely due to a 17% drop in residential product sales. Notably, the company achieved a pre-tax profit of $1.9 million, 85% higher than last year. Debt decreased to $33.3 million, while earnings per share rose to $0.33 from $0.18.

Positive

• Third quarter pre-tax profit increased by $879,000 to $1.9 million.
• Earnings per share rose by 83% to $0.33.
• Total debt reduced by $3 million to $33.3 million.
• Third quarter residential product sales increased by 3% year-over-year.

Negative

• Year-to-date net sales decreased by 15% to $118 million.
• Residential product sales down 17% year-to-date.
• Commercial product sales fell by 27% in the third quarter.

LANCASTER, Pa., Oct. 14, 2020 /PRNewswire/ -- Burnham Holdings, Inc. (Pink Sheets: BURCA), the parent company of multiple 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 third quarter and nine months ended September 27, 2020.

Highlights of our third quarter and year-to-date (YTD) operating performance include the following:

• Net sales were $48.7 million and $118.0 million in the third quarter and YTD, compared to $52.1 million and $139.5 million in the same periods last year.
• Although residential product sales were down YTD by 17.0%, sales in the third quarter of 2020 were 3% higher compared to last year, as product demand began to recover from COVID-19 pandemic impacts.
• Year to date sales of commercial high efficiency products were higher in 2020 by over 20% compared to last year.
• Total debt at the end of the third quarter was $33.3 million, $3.0 million lower compared to last year.
• Third quarter pre-tax profit of $1,913 thousand was $879 thousand higher than last year.
• Earnings per share in the third quarter of $0.33 per share were 83% higher than last year.

Net sales in the third quarter and YTD were $48.7 million and $118.0 million, respectively, compared to $52.1 million and $139.5 million last year.  Sales of residential products on a YTD basis were lower by 17.0%, but did show improvement of 3% compared to last year in the third quarter.  The residential market sector started to recover in the third quarter from the negative impacts experienced in the first half due to mild winter weather and COVID-19 pandemic related business closures.  Commercial product sales were lower by 27% in the third quarter and 12% YTD, as new project activity continued to be depressed due to COVID-19 related shutdowns of construction sites along with schools, hotels and other users of large commercial boilers.

Cost of goods sold ("COGS") as a percentage of sales YTD in 2020 was 81.5% compared to 80.4% in 2019.  The COGS percentage did decrease in the third quarter at 80.9% of sales compared to 81.9% in the third quarter of 2019.  The increase in COGS (as a percentage of sales) on a YTD basis in 2020 was the result of lower operating volumes in most business units and the mix of commercial products sold compared to last year.  Selling, general and administrative expenses were lower YTD by 9.6% in terms of total dollars spent, but were higher as a percentage of sales (18.5% vs. 17.3%) compared to last year due to the lower sales volume in 2020.

Net profit in the third quarter was $1,474 thousand compared to $797 thousand in the third quarter of 2019, up 85%.  Profit results in the third quarter were favorably impacted by higher residential product sales, lower group medical expenses and cost controls implemented to deal with the impacts of the COVID-19 pandemic.  On a YTD basis, 2020 net profit was $32 thousand compared to $2,225 thousand in 2019.  Earnings per share results for 2020 YTD were $0.01 per share compared to $0.49 per share in 2019.

The Company's balance sheet has appropriate levels of working capital to adequately support the expected level of business activity in the fourth quarter.  Long-term debt (including current portions) was lower at the end of the third quarter compared to last year ($33.3 million vs. $36.3 million).  The lower borrowing level was the result of our tight control of receivables, inventory levels and non-critical capital expenditures during this period of uncertain business conditions related to COVID-19.

 

Consolidated Statements of Operations			Three Months Ended				Nine Months Ended
(In thousands, except per share data)			Sep 27,		Sep 29,		Sep 27,		Sep 29,
(Data is unaudited (see Notes))			2020		2019		2020		2019
Net sales			$  48,651		$  52,097		$117,990		$139,480
Cost of goods sold			39,374		42,665		96,128		112,173
		Gross profit	9,277		9,432		21,862		27,307
Selling, general and administrative expenses			7,308		8,283		21,850		24,163
		Operating income	1,969		1,149		12		3,144
Other income (expense):
	Interest and investment income		47		32		235		92
	Non-service related pension credit		162		201		484		491
	Interest expense		(265)		(348)		(690)		(838)
		Other income (expense)	(56)		(115)		29		(255)
Income before income taxes			1,913		1,034		41		2,889
Income tax expense (benefit)			439		237		9		664
	NET INCOME		$    1,474		$       797		$         32		$    2,225
	BASIC & DILUTED INCOME PER SHARE (Note 1)		$      0.33		$      0.18		$      0.01		$      0.49
	COMMON STOCK DIVIDENDS PAID (Note 1)		$      0.22		$      0.22		$      0.66		$      0.66
Consolidated Balance Sheets
(in thousands and data is unaudited (see Notes))							Sep 27,		Sep 29,
		ASSETS					2020		2019
CURRENT ASSETS
	Cash and cash equivalents						$    5,848		$    5,776
	Trade accounts receivable, less allowances						22,943		25,836
	Inventories						57,905		58,259
	Prepaid expenses and other current assets						1,444		1,619
		TOTAL CURRENT ASSETS					88,140		91,490
PROPERTY, PLANT AND EQUIPMENT, net							52,934		52,151
OPERATING LEASE RIGHT OF USE ASSETS (Note 6)							4,229		3,981
OTHER ASSETS, net							11,272		9,760
		TOTAL ASSETS					$156,575		$157,382
		LIABILITIES AND STOCKHOLDERS' EQUITY					2020		2019
CURRENT LIABILITIES
	Accounts and taxes payable & accrued expenses						$  21,527		$  22,644
	Current portion of long-term liabilities						152		$       136
	Current portion of operating lease liabilities (Note 6)						1,016		$    1,006
	Current portion of long-term debt						-		4,000
		TOTAL CURRENT LIABILITIES					22,695		27,786
LONG-TERM DEBT							33,268		32,311
LONG-TERM OPERATING LEASE LIABILITIES (Note 6)							3,214		2,975
OTHER POSTRETIREMENT LIABILITIES (Notes 4 and 5)							7,656		11,517
DEFERRED INCOME TAXES (Note 4)							5,984		4,133
STOCKHOLDERS' EQUITY
	Preferred Stock						530		530
	Class A Common Stock						3,540		3,521
	Class B Convertible Common Stock						1,405		1,422
	Additional paid-in capital						16,115		16,034
	Retained earnings						111,133		108,800
	Accumulated other comprehensive income (loss) (Note 4)						(31,001)		(33,674)
	Treasury stock, at cost						(17,964)		(17,973)
		TOTAL STOCKHOLDERS' EQUITY					83,758		78,660
		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY					$156,575		$157,382

 

Consolidated Statements of Stockholders' Equity
(in thousands and data is unaudited (see Notes))
Three Months Ended September 27, 2020
				Class B			Accumulated
			Class A	Convertible	Additional		Other	Treasury
		Preferred	Common	Common	Paid-in	Retained	Comprehensive	Stock,	Stockholders'
		Stock	Stock	Stock	Capital	Earnings	Income (Loss)	at Cost	Equity
Balance at June 28, 2020		$       530	$     3,537	$     1,408	$   16,115	$ 110,664	$          (31,083)	$ (17,964)	$        83,207
Exercise of stock options		-	-	-	-	-	-	-	-
Conversion of common stock		-	3	(3)	-	-	-	-	-
Cash dividends declared:
Preferred stock - 6%		-	-	-	-	-	-	-	-
Common stock - ($0.22 per share)						(1,005)			(1,005)
Net income for the period		-	-	-	-	1,474	-	-	1,474
Other comprehensive income (loss),
net of $ (24) of tax		-	-	-	-	-	82	-	82
Balance at September 27, 2020		$       530	$     3,540	$     1,405	$   16,115	$ 111,133	$          (31,001)	$ (17,964)	$        83,758
Nine Months Ended September 27, 2020
				Class B			Accumulated
			Class A	Convertible	Additional		Other	Treasury
		Preferred	Common	Common	Paid-in	Retained	Comprehensive	Stock,	Stockholders'
		Stock	Stock	Stock	Capital	Earnings	Income (Loss)	at Cost	Equity
Balance at January 1, 2020		$       530	$     3,537	$     1,408	$   16,034	$ 114,139	$          (30,739)	$ (17,973)	$        86,936
Exercise of stock options		-	-	-	81	-	-	9	90
Conversion of common stock		-	3	(3)	-	-	-	-	-
Cash dividends declared:
Preferred stock - 6%		-	-	-	-	(9)	-	-	(9)
Common stock - ($0.66 per share)		-	-	-	-	(3,029)	-	-	(3,029)
Net income for the period		-	-	-	-	32	-	-	32
Other comprehensive income (loss),
net of $ 78 of tax		-	-	-	-	-	(262)	-	(262)
Balance at September 27, 2020		$       530	$     3,540	$     1,405	$   16,115	$ 111,133	$          (31,001)	$ (17,964)	$        83,758
Three Months Ended September 29, 2019
				Class B			Accumulated
			Class A	Convertible	Additional		Other	Treasury
		Preferred	Common	Common	Paid-in	Retained	Comprehensive	Stock,	Stockholders'
		Stock	Stock	Stock	Capital	Earnings	Income (Loss)	at Cost	Equity
Balance at June 30, 2019		$       530	$     3,518	$     1,425	$   16,034	$ 109,005	$          (33,660)	$ (17,973)	$        78,879
Exercise of stock options		-	-	-	-	-	-	-	-
Conversion of common stock		-	3	(3)	-	-	-	-	-
Cash dividends declared:
Preferred stock - 6%		-	-	-	-	-	-	-	-
Common stock - ($0.22 per share)						(1,002)			(1,002)
Net income for the period		-	-	-	-	797	-	-	797
Other comprehensive income (loss),
net of $ 4 of tax		-	-	-	-	-	(14)	-	(14)
Balance at September 29, 2019		$       530	$     3,521	$     1,422	$   16,034	$ 108,800	$          (33,674)	$ (17,973)	$        78,660
Nine Months Ended September 29, 2019
				Class B			Accumulated
			Class A	Convertible	Additional		Other	Treasury
		Preferred	Common	Common	Paid-in	Retained	Comprehensive	Stock,	Stockholders'
		Stock	Stock	Stock	Capital	Earnings	Income (Loss)	at Cost	Equity
Balance at January 1, 2019		$       530	$     3,518	$     1,425	$   15,912	$ 109,610	$          (33,481)	$ (17,982)	$        79,532
Exercise of stock options		-	-	-	122	-	-	9	131
Conversion of common stock		-	3	(3)	-	-	-	-	-
Cash dividends declared:
Preferred stock - 6%		-	-	-	-	(9)	-	-	(9)
Common stock - ($0.66 per share)		-	-	-	-	(3,026)	-	-	(3,026)
Net income for the period		-	-	-	-	2,225	-	-	2,225
Other comprehensive income (loss),
net of $ 58 of tax		-	-	-	-	-	(193)	-	(193)
Balance at September 29, 2019		$       530	$     3,521	$     1,422	$   16,034	$ 108,800	$          (33,674)	$ (17,973)	$        78,660

 

Consolidated Statements of Cash Flows			Nine Months ended
(in thousands and data is unaudited (see Notes))			Sep 27, 2020		Sep 29, 2019
Net (loss) income			$          32		$      2,225
Depreciation and amortization			3,248		3,077
Pension and postretirement liabilities expense			176		196
Contributions to pension trust (Note 5)			(960)		-
Other net adjustments			(1,249)		10
Changes in operating assets and liabilities			(12,096)		(17,444)
NET CASH USED IN OPERATING ACTIVITIES			(10,849)		(11,936)
Net cash used in the purchase of assets			(3,964)		(5,222)
Proceeds from borrowings			17,859		17,439
Proceeds from stock option exercise and Treasury activity, net			91		131
Principal payments on debt and lease obligations			-		-
Dividends paid			(3,038)		(3,035)
DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			99		(2,623)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD			5,749		8,399
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD			$     5,848		$      5,776

 

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 September 27, 2020 includes 3,166,658 of Class A shares and 1,404,522 of Class B shares.
	(3)	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.
	(4)	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, 2019 and 2018, 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 2019 Annual Report for more details).
	(5)	In the first nine months of 2020, the Company made a voluntary pre-tax contribution of $0.96 million to its defined benefit
		pension plan.  This payment increased the trust assets available for benefit payments (reducing "Other postretirement
		liabilities"), and did not impact the Statement of Income.  There were no voluntary contributions made in the first nine
		months of 2019.
	(6)	Unaudited results, forward looking statements, and certain significant estimates and risks.  This note has been
		expanded to include items discussed in detail within the 2019 Annual Report.
		Unaudited Results and Forward Looking Statements. 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 ended December 31, 2019.  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 items such as warranties, pensions, 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
		in order to provide regular knowledge of relevant matters.  Estimates and related reserves are more fully explained in the
		2019 Annual Report.
		Retirement Plans:  The Company maintains a non-contributory defined benefit pension plan, covering both union and
		non-union employees, that has been closed to new hires for a number of years.  Benefit accrual ceased in 2009, or earlier
		depending on the employee group, with the exception of a limited, closed group of union production employees.  While not
		100% frozen, these actions were taken to protect benefits for retirees and eligible employees, and have materially reduced
		the growth of the pension liability.  Lancaster Metal Manufacturing, a Company subsidiary, also contributes to a separate
		union-sponsored multiemployer defined benefit pension plan that covers its collective bargaining employees.  Variables
		such as future market conditions, investment returns, and employee experience could affect results.
		New Accounting Standard:
		During February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (ASC 842).  ASC 842 requires lessees to recognize the assets and liabilities that arise from all leases that exceed twelve months in duration on the balance sheet, regardless if they are operating or financing type leases.  A lessee shall recognize on the balance sheet a liability to make future lease payments (the lease liability) and a right-of-use asset representing the value of the right to use the asset for the remaining term of the lease agreement.  ASC 842 is effective for annual periods beginning after December 15, 2018, including interim periods.  The Company adopted ASC 842 effective January 1, 2019 using the optional transition method described in ASU No. 2018-11, 'Leases - Targeted Improvements', which was issued in July, 2018.  Under the optional transition method, the Company recognized any cumulative impact of initially applying ASC 842 as an adjustment to the opening balance of retained earnings as of January 1, 2019.
		The Company balance sheets at September 27, 2020 and September 29, 2019 include total right-of-use asset values of $4,229 and $3,981, respectively; current liabilities of $(1,016) and $(1,006), respectively; and long-term liabilities of $(3,214) and $(2,975), respectively, related to future lease payments.  Leases at all of the Company's subsidiaries have been classified as operating leases.  Therefore, all lease payments made with respect to outstanding leases are reported as lease expense.  For the first nine months ended September 27, 2020 and September 29, 2019, total lease expenses of $898 and $897, respectively, were included in the calculation of operating income.  Lease accounting details are explained in greater detail in the 2019 Annual Report.
		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.
		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 or removal of heating systems. The Company's subsidiaries, directly and/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 a potential reduction or reversal of verdict on appeal, any set-off rights, and/or a reduction of liability following allocation of liability among various defendants.  For example, on July 23, 2013 and December 12, 2014, New York City State Court juries found numerous defendant companies, including a subsidiary of the Company, responsible for asbestos-related damages in cases involving multiple plaintiffs. The subsidiary, whose share of the verdicts amounted to $42 million and $6 million, respectively, before offsets, filed post-trial motions and appeals seeking to reduce and/or overturn the verdicts, and granting of new trials.  On February 9, 2015, the trial court significantly reduced the 2013 verdicts, reducing the subsidiary's liability from $42 million to less than $7 million.  Additionally, on May 15, 2015, the trial court reduced the subsidiary's liability in the 2014 verdict to less than $2 million.  On October 30, 2015, the subsidiary settled these verdicts for significantly less than the trial courts' reduced verdicts, with all such settled amounts being covered by applicable insurance.  The Company believes, based upon its understanding of its available insurance policies 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 2020 first nine months charges for all uninsured litigation of every kind, were $161 thousand.  Expenses for legal counsel, consultants, etc., in defending these various actions and claims for the first nine months were approximately $47 thousand.  Prior year's settlements and expenses, including amounts for self-insured asbestos cases, are disclosed in the 2019 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, one issue covered by insurance policies remains open as of this date and is fully disclosed in the 2019 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.

 

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SOURCE Burnham Holdings, Inc.