Burnham Holdings, Inc. Reports First Quarter Results

Rhea-AI Summary

Burnham Holdings, Inc. (OTC-Pink: BURCA) reported a net sales increase of 18.9% to $44.0 million for Q1 2021, driven by improved demand for residential heating equipment. However, gross profit margin fell to 15.9% due to rising material costs. The company experienced a net loss of $(0.58) million, an improvement from $(1.07) million in Q1 2020. Total debt decreased to $19.8 million. While residential sales rose by 30.3%, commercial product sales dropped 9.9% due to COVID-19 impacts. Despite challenges, incoming orders for commercial products have surged recently.

Positive

• Net sales increased by 18.9% to $44.0 million.
• Residential product sales rose by 30.3%.
• Net loss improved to $(0.58) million from $(1.07) million year-over-year.
• Total debt decreased by $1.1 million.

Negative

• Gross profit margin declined to 15.9% due to higher material costs.
• Commercial product sales fell by 9.9% due to COVID-19-related slowdowns.

LANCASTER, Pa., April 26, 2021 /PRNewswire/ -- Burnham Holdings, Inc. (OTC-Pink: 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 quarter ended March 28, 2021.

Burnham Holdings, Inc.'s financial performance in the first quarter of 2021 included the following:

• Net sales were $44.0 million, up $7.0 million, or 18.9%, versus 2020, as demand for residential heating equipment was improved by more favorable seasonable winter weather patterns compared to first quarter last year.    
• Gross profit as a percentage of sales was lower at 15.9% in the first quarter of 2021 versus 17.6% last year, mainly due to higher material costs and lower commercial product sales resulting from Covid related slowdowns.
• Net loss of $(0.58) million in the first quarter of 2021 was an improvement of $0.49 million when compared to the first quarter of 2020 net loss of $(1.07) million.
• Total debt of $19.8 million was $1.1 million lower versus the 2020 first quarter total.
• Capital expenditures in the first quarter included the $4.4 million purchase of a previously leased facility at our Crown Boiler subsidiary in Philadelphia.

First quarter sales revenue for 2021 was $44.0 million, an increase of $7.0 million (18.9%) compared to the first quarter of 2020.  Sales of residential products increased by 30.3% compared to last year, as seasonal winter temperatures in our key market areas positively impacted demand for replacements of residential boilers.  Sales of commercial products were lower by 9.9% as the COVID-19 pandemic halted numerous projects in key markets for commercial products (schools, hospitality, industrial).  Although not yet back to pre-pandemic levels, incoming orders for commercial products have increased significantly over the past 60-90 days, as many projects are restarting as the Covid-19 impact wanes.  The net overall increase in sales revenue resulted in a net loss of $(0.58) million, which was an improvement of $0.49 million compared to the first quarter of 2020.  On an earnings per share basis, the first quarter of 2021 had a loss of $(0.13) per share compared to the $(0.24) loss recorded in the first quarter of 2020. Overall profitability was impacted by rising material costs primarily in packaging, electronic components and metals. All subsidiaries have taken appropriate pricing actions and are prepared to take additional increases throughout the year as necessary.  Since our subsidiary company sales are seasonal in nature and the first quarter typically provides the lowest sales of the year, we advise caution when using our first quarter sales to project full year performance.

As we have now passed the one year mark of the start of the COVID-19 pandemic, our subsidiaries continue to deal with the impacts of the outbreak on a daily basis.  All of our business units have been able to maintain operations with specific emphasis on employee safety using a combination of proper social distancing measures, increased facility cleaning, personal protective equipment and work at home opportunities, where appropriate.  Although the negative impacts from the pandemic on our residential businesses have mostly subsided, our commercial businesses continue to be faced with lower immediate sales backlogs due to lower demand from some of their key market segments.  . 

The Burnham Holdings, Inc. 2021 Annual Meeting of Stockholders is being held today as a virtual webcast from Lancaster, PA beginning at 11:30 a.m.  A press release regarding today's stockholder voting and the Board of Directors determination regarding declaration of a quarterly dividend will be released later this afternoon.

Consolidated Statements of Income				Three Months Ended
(In thousands, except per share data)				March 28,		March 29,
(Data is unaudited (see Notes))				2021		2020
Net sales				$         44,003		$         36,999
Cost of goods sold				37,008		30,491
		Gross profit		6,995		6,508
Selling, general and administrative expenses				7,647		7,931
		Operating loss		(652)		(1,423)
Other income (expense):
	Interest and investment (expense) income			(49)		54
	Non-service related pension credit			131		161
	Interest expense			(185)		(187)
		Other income (expense)		(103)		28
Loss before income taxes				(755)		(1,395)
Income tax benefit				(174)		(321)
	NET LOSS			$            (581)		$         (1,074)
	BASIC LOSS PER SHARE (Note 1)			$           (0.13)		$           (0.24)
	DILUTED LOSS PER SHARE (Note 1)			$           (0.13)		$           (0.24)
	COMMON STOCK DIVIDENDS PAID			$             0.22		$             0.22
Consolidated Balance Sheets
(in thousands and data is unaudited (see Notes))				March 28,		March 29,
		ASSETS		2021		2020
CURRENT ASSETS
	Cash and cash equivalents			$           5,771		$           5,844
	Trade accounts receivable, less allowances			18,156		13,496
	Inventories			49,872		54,815
	Prepaid expenses and other current assets			2,074		1,549
		TOTAL CURRENT ASSETS		75,873		75,704
PROPERTY, PLANT AND EQUIPMENT, net				56,327		52,722
OPERATING LEASE RIGHT OF USE ASSETS				2,466		4,092
OTHER ASSETS, net				12,240		11,059
		TOTAL ASSETS		$       146,906		$       143,577
		LIABILITIES AND STOCKHOLDERS' EQUITY		2021		2020
CURRENT LIABILITIES
	Accounts and taxes payable & accrued expenses			$         22,148		$         20,250
	Current portion of long-term liabilities			147		152
	Current portion of operating lease liabilities			721		919
	Current portion of long-term debt			-		-
		TOTAL CURRENT LIABILITIES		23,016		21,321
LONG-TERM DEBT				19,762		20,854
LONG-TERM OPERATING LEASE LIABILITIES				1,745		3,174
OTHER POSTRETIREMENT LIABILITIES (Notes 4 and 5)				5,474		7,815
DEFERRED INCOME TAXES (Note 4)				6,723		5,917
STOCKHOLDERS' EQUITY
	Preferred Stock			530		530
	Class A Common Stock			3,565		3,536
	Class B Convertible Common Stock			1,379		1,407
	Additional paid-in capital			16,115		16,034
	Retained earnings			115,048		112,063
	Accumulated other comprehensive income (loss) (Note 4)			(28,487)		(31,101)
	Treasury stock, at cost			(17,964)		(17,973)
		TOTAL STOCKHOLDERS' EQUITY		90,186		84,496
		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$       146,906		$       143,577

 

Consolidated Statements of Cash Flows				Three Months ended
(in thousands and data is unaudited (see Notes))				Mar 28, 2021		Mar 29, 2020
Net loss				$        (581)		$      (1,074)
Depreciation and amortization				1,116		1,057
Pension and postretirement liabilities expense				43		59
Contributions to pension trust (Note 5)				(188)		(720)
Other net adjustments				(990)		(1,058)
Changes in operating assets and liabilities				5,626		(1,159)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES				5,026		(2,895)
Net cash used in the purchase of assets				(5,202)		(1,321)
Proceeds from borrowings				1,192		5,313
Proceeds from stock option exercise and Treasury activity, net				-		-
Principal payments on debt and lease obligations				-		-
Dividends paid				(1,004)		(1,002)
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH				12		95
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD				5,759		5,749
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD				$      5,771		$       5,844

 

Consolidated Statements of Stockholders' Equity
(in thousands and data is unaudited (see Notes))
Three Months Ended March 28, 2021
				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, 2021		$        530	$      3,560	$      1,384	$    16,115	$  116,633	$           (29,043)	$   (17,964)	$         91,215
Exercise of stock options		-	-	-	-	-	-	-	-
Conversion of common stock		-	5	(5)	-	-	-	-	-
Cash dividends declared:
	Preferred stock - 6%	-	-	-	-	-	-	-	-
	Common stock - ($0.88 per share)					(1,004)			(1,004)
Net loss for the period		-	-	-	-	(581)	-	-	(581)
Other comprehensive income (loss),
net of $ (166) of tax		-	-	-	-	-	556	-	556
Balance at March 28, 2021		$        530	$      3,565	$      1,379	$    16,115	$  115,048	$           (28,487)	$   (17,964)	$         90,186
Three Months Ended March 29, 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	$      3,536	$      1,407	$    16,034	$  114,139	$           (30,737)	$   (17,973)	$         86,936
Exercise of stock options		-	-	-	-	-	-	-	-
Conversion of common stock		-	-	-	-	-	-	-	-
Cash dividends declared:
	Preferred stock - 6%	-	-	-	-	-	-	-	-
	Common stock - ($0.88 per share)	-	-	-	-	(1,002)	-	-	(1,002)
Net income for the period		-	-	-	-	(1,074)	-	-	(1,074)
Other comprehensive income (loss),
net of $ 109 of tax		-	-	-	-	-	(364)	-	(364)
Balance at March 29, 2020		$        530	$      3,536	$      1,407	$    16,034	$  112,063	$           (31,101)	$   (17,973)	$         84,496

 

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 March 28, 2021 includes 3,191,962 of Class A shares and 1,379,218 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, 2020 and 2019, 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 2020 Annual Report for more details).
	(5)	For the first quarters of 2021 and 2020, the Company made voluntary pre-tax contributions of $0.19 million and $0.72 million, respectively, 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 Income.
	(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 2020 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, 2020.  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 2020 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 sheet at March 28, 2021 and March 29, 2020 includes total right-of-use asset values of $2,466 and $4,092, respectively; current liabilities of $(721) and $(919), respectively; and long-term liabilities of $(1,745) and $(3,174), 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 quarters ended March 28, 2021 and March 29, 2020, total lease expenses of $254 and $302, respectively, were included in the calculation of operating income.  Lease accounting details are explained in greater detail in the 2020 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 receive a fixed dollar amount based on years of employee service to assist them in covering medical costs.  These obligations are accounted for within the financial statements.
		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 2021 first quarter charges for all uninsured litigation of every kind, were $59 thousand.  Expenses for legal counsel, consultants, etc., in defending these various actions and claims for the quarter were approximately $10 thousand.  Prior year's settlements and expenses, including amounts for self-insured asbestos cases, are disclosed in the 2020 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 2020 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.

FAQ

What were Burnham Holdings' Q1 2021 net sales results?

Net sales for Q1 2021 were $44.0 million, an increase of 18.9% compared to Q1 2020.

How did Burnham Holdings' gross profit change in Q1 2021?

Gross profit margin decreased to 15.9% in Q1 2021 from 17.6% in Q1 2020.

What was the net loss for Burnham Holdings in Q1 2021?

The net loss for Q1 2021 was $(0.58) million, an improvement from $(1.07) million in Q1 2020.

How did the COVID-19 pandemic affect Burnham Holdings' commercial sales?

Commercial product sales fell by 9.9% due to COVID-19-related slowdowns.

What is the current debt level for Burnham Holdings?

As of Q1 2021, Burnham Holdings reported total debt of $19.8 million, down by $1.1 million from the previous year.