BURNHAM HOLDINGS, INC. REPORTS THIRD QUARTER AND NINE MONTH RESULTS

Rhea-AI Summary

Burnham Holdings, Inc. (BURCA) reported its financial results for Q3 and the first nine months of 2022, showing a 12.0% increase in net sales for Q3 and 16.9% year-to-date compared to 2021. Gross profit rose to 18.1% for Q3 and 16.3% year-to-date. The company achieved a net income of $0.8 million in Q3, a turnaround from a $1.3 million loss in 2021. Residential and commercial product sales grew by 15.0% and 22.6%, respectively. Challenges remain due to material inflation and staffing issues, impacting profitability.

Positive

• Net sales increased by 12.0% in Q3 and 16.9% year-to-date compared to 2021.
• Gross profit improved to 18.1% for Q3 and 16.3% year-to-date in 2022.
• Net income for Q3 2022 was $0.8 million, recovering from a net loss of $1.3 million in Q3 2021.
• Sales of residential products grew by 15.0% and commercial products by 22.6% year-to-date.
• Backlogs increased by $13.1 million for residential and $7.0 million for commercial.

Negative

• Year-to-date net loss was $1.1 million, although improved from a loss of $4.4 million in 2021.
• Profitability pressured by material inflation and staffing challenges.
• Long-term debt rose by $9.8 million to $46.0 million due to inflationary pressures.

LANCASTER, Pa., Oct. 13, 2022 /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 third quarter and nine months ended October 2, 2022. 

Burnham Holdings, Inc.'s financial performance for the first nine months of 2022 included the following:

• Net sales increased by 12.0% and 16.9% for the third quarter and first nine months of 2022 versus 2021, respectively, as demand remained strong across both the residential and commercial businesses.
• Gross profit was 18.1% and 11.9% for the third quarters of 2022 and 2021, respectively, primarily as the result of pricing actions to offset inflation. Year to date gross profit was 16.3% and 12.6% for 2022 and 2021, respectively.
• Selling, general and administrative expenses were up year over year but remained flat as a percentage of sales at approximately 16% for the third quarter and first nine months of 2022 versus 2021.
• Net income for the third quarter of 2022 was $0.8 million compared to net loss of $1.3 million in the third quarter of 2021. Through nine months of 2022, net loss was $1.1 million versus nine months 2021 net loss of $4.4 million. Material inflation and staffing challenges continue to impact profitability. Rising interest rates and higher debt levels resulted in higher interest expense versus the same period last year.

For the first nine months of 2022, sales of residential products increased by 15.0% while sales of commercial products increased by 22.6% compared to the first nine months of 2021.  We continue to see strong momentum from incoming orders as both the residential and commercial backlogs have increased by $13.1 million and $7.0 million versus the prior year, respectively. 

While we are seeing signs of improvement, continuing with trends we've noted in our financial results for 2022, profitability continues to be pressured by significant challenges in hiring and retaining qualified employees as well as multiple supply chain issues.  Production capacity and efficiencies continue to be pressured by parts availability.  Appropriate pricing actions have been taken across all subsidiaries in response to continuing inflationary pressures.  We continue to remain diligent and ready to respond to continued instability and uncertainty in the greater macro-economic environment.

The Company's balance sheet continues to be strong, with adequate levels of working capital to support current and future business opportunities.  Long-term debt of $46.0 million was $9.8 million higher than last year, with the increase mostly attributable to inflationary pressures impacting working capital needs.  Excluding the impact of inflationary pressures, the increase versus December 31, 2021 is consistent with past years due to the seasonality and operating cycle of our business.

Burnham Holdings, Inc.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
				Three Months Ended				Nine Months Ended
				October 2,		September 26,		October 2,		September 26,
				2022		2021		2022		2021
Net sales				$           59,656		$           53,257		$         164,594		$         140,813
Cost of goods sold				48,844		46,904		137,828		123,097
		Gross profit		10,812		6,353		26,766		17,716
Selling, general and administrative expenses				9,299		7,948		27,017		23,114
		Operating income (loss)		1,513		(1,595)		(251)		(5,398)
Other expense:
	Non-service related pension credit			106		132		319		394
	Investment loss net of interest income			(129)		30		(347)		26
	Interest expense			(512)		(311)		(1,117)		(742)
		Other expense		(535)		(149)		(1,145)		(322)
Income (loss) before income taxes				978		(1,744)		(1,396)		(5,720)
Income tax expense (benefit)				225		(401)		(321)		(1,315)
	Net income (loss)			$                753		$            (1,343)		$            (1,075)		$            (4,405)
	Earnings (loss) per share (Note 1)
		Basic		$               0.16		$              (0.29)		$              (0.23)		$              (0.96)
		Diluted		$               0.16		$              (0.29)		$              (0.23)		$              (0.96)
	Cash dividends per share			$               0.22		$               0.22		$               0.66		$               0.66
The accompanying notes are integral to the consolidated financial statements.

 

Burnham Holdings, Inc.
Consolidated Balance Sheets
(In thousands)
				(Unaudited)				(Unaudited)
				October 2,		December 31,		September 26,
ASSETS				2022		2021		2021
Current Assets
	Cash and cash equivalents			$             6,151		$             5,654		$             6,319
	Trade accounts receivable, less allowances			24,569		24,920		22,749
	Inventories			65,384		51,066		55,313
	Prepaid expenses and other current assets			4,717		4,717		5,549
		Total Current Assets		100,821		86,357		89,930
Property, plant and equipment, net				58,866		57,496		56,819
Operating lease assets				1,928		2,065		2,256
Other assets, net (Note 4)				23,828		21,551		12,173
		Total Assets		$         185,443		$         167,469		$         161,178
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
	Accounts payable & accrued expenses			$           29,374		$           33,429		$           26,024
	Current portion of long-term liabilities			152		152		147
	Current portion of operating lease liabilities			837		765		764
		Total Current Liabilities		30,363		34,346		26,935
Long-term debt				46,034		21,843		36,268
Operating lease liabilities				1,091		1,300		1,492
Other postretirement liabilities (Notes 4 and 5)				6,015		6,062		5,209
Deferred income taxes (Note 4)				9,110		8,753		6,741
Stockholders' Equity
	Preferred Stock			530		530		530
	Class A Common Stock			3,623		3,615		3,606
	Class B Convertible Common Stock			1,321		1,329		1,338
	Additional paid-in capital			16,564		16,317		16,286
	Retained earnings			109,410		113,582		109,171
	Accumulated other comprehensive loss (Note 4)			(20,690)		(22,260)		(28,448)
	Treasury stock, at cost			(17,928)		(17,948)		(17,950)
		Total Stockholders' Equity		92,830		95,165		84,533
		Total Liabilities and Stockholders' Equity		$         185,443		$         167,469		$         161,178
The accompanying notes are integral to the consolidated financial statements.

 

Burnham Holdings, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
			Nine Months Ended
			October 2,		September 26,
			2022		2021
	Net loss		$            (1,075)		$            (4,405)
	Depreciation and amortization		3,546		3,303
	Pension and postretirement liabilities expense		(28)		130
	Contributions to pension trust (Note 5)		-		(500)
	Other net adjustments		305		72
	Changes in operating assets and liabilities		(18,510)		(5,038)
Net cash used by operating activities			(15,762)		(6,438)
	Purchase of property, plant and equipment		(5,114)		(7,877)
	Proceeds from borrowings		24,203		17,747
	Proceeds from stock option exercise and treasury activity, net		267		185
	Dividends paid		(3,097)		(3,057)
Net increase in cash, cash equivalents and restricted cash			$                497		$                560
Cash, cash equivalents and restricted cash, beginning of period			$             5,654		$             5,759
Net increase in cash, cash equivalents and restricted cash			497		560
Cash, cash equivalents and restricted cash, end of period			$             6,151		$             6,319
The accompanying notes are integral to the consolidated financial statements.

 

Burnham Holdings, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands)
(Unaudited)
							Class B						Accumulated
					Class A		Convertible		Additional				Other		Treasury
			Preferred		Common		Common		Paid-in		Retained		Comprehensive		Stock,		Stockholders'
			Stock		Stock		Stock		Capital		Earnings		Loss		at Cost		Equity
Balance at December 31, 2021			$       530		$      3,615		$      1,329		$   16,317		$  113,582		$           (22,260)		$  (17,948)		$        95,165
Exercise of stock options			-		-		-		37		-		-		3		40
Cash dividends declared:
	Common stock - ($0.22 per share)		-		-		-		-		(1,011)		-		-		(1,011)
Net loss for the period			-		-		-		-		(755)		-		-		(755)
Other comprehensive income,
net of tax ($211)			-		-		-		-		-		751		-		751
Balance at April 3, 2022			$       530		$      3,615		$      1,329		$   16,354		$  111,816		$           (21,509)		$  (17,945)		$        94,190
Exercise of stock options			-		-		-		210		-		-		17		227
Conversion of common stock			-		8		(8)		-		-		-		-		-
Cash dividends declared:
	Preferred stock - 6%		-		-		-		-		(9)		-		-		(9)
	Common stock - ($0.22 per share)		-		-		-		-		(1,066)		-		-		(1,066)
Net loss for the period			-		-		-		-		(1,073)		-		-		(1,073)
Other comprehensive income,
net of tax ($65)			-		-		-		-		-		218		-		218
Balance at July 3, 2022			$       530		$      3,623		$      1,321		$   16,564		$  109,668		$           (21,291)		$  (17,928)		$        92,487
Exercise of stock options			-		-		-		-		-		-		-		-
Conversion of common stock			-		-		-		-		-		-		-		-
Cash dividends declared:
	Common stock - ($0.22 per share)		-		-		-		-		(1,011)		-		-		(1,011)
Net income for the period			-		-		-		-		753		-		-		753
Other comprehensive income,
net of tax ($65)			-		-		-		-		-		601		-		601
Balance at October 2, 2022			$       530		$      3,623		$      1,321		$   16,564		$  109,410		$           (20,690)		$  (17,928)		$        92,830
							Class B						Accumulated
					Class A		Convertible		Additional				Other		Treasury
			Preferred		Common		Common		Paid-in		Retained		Comprehensive		Stock,		Stockholders'
			Stock		Stock		Stock		Capital		Earnings		Loss		at Cost		Equity
Balance at December 31, 2020			$       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:
	Common stock - ($0.22 per share)		-		-		-		-		(1,004)		-		-		(1,004)
Net loss for the period			-		-		-		-		(581)		-		-		(581)
Other comprehensive income,
net of tax ($166)			-		-		-		-		-		556		-		556
Balance at March 28, 2021			$       530		$      3,565		$      1,379		$   16,115		$  115,048		$           (28,487)		$  (17,964)		$        90,186
Exercise of stock options			-		-		-		171		-		-		15		186
Conversion of common stock			-		41		(41)		-		-		-		-		-
Cash dividends declared:
	Preferred stock - 6%		-		-		-		-		(9)		-		-		(9)
	Common stock - ($0.22 per share)		-		-		-		-		(1,038)		-		-		(1,038)
Net loss for the period			-		-		-		-		(2,481)		-		-		(2,481)
Other comprehensive income,
net of tax ($7)			-		-		-		-		-		(23)		-		(23)
Balance at June 27, 2021			$       530		$      3,606		$      1,338		$   16,286		$  111,520		$           (28,510)		$  (17,949)		$        86,821
Exercise of stock options			-		-		-		-		-		-		(1)		(1)
Conversion of common stock			-		-		-		-		-		-		-		-
Cash dividends declared:
	Common stock - ($0.22 per share)		-		-		-		-		(1,006)		-		-		(1,006)
Net loss for the period			-		-		-		-		(1,343)		-		-		(1,343)
Other comprehensive income,
net of tax ($19)			-		-		-		-		-		62		-		62
Balance at September 26, 2021			$       530		$      3,606		$      1,338		$   16,286		$  109,171		$           (28,448)		$  (17,950)		$        84,533
The accompanying notes are integral to the consolidated financial statements.

 

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 October 2, 2022 includes 3,285,477 of Class A shares and 1,320,904 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.  As of December 31, 2021, plan assets exceeded projected
	benefit obligations (asset) while as of December 31, 2020, projected benefit obligations exceeded plan assets (liability).
	The resulting non-cash presentation on the balance sheet is reflected in "Other assets, net" or "Other postretirement
	liabilities", "Deferred income taxes", and "Accumulated other comprehensive loss", a non-cash subsection of
	"Stockholders' Equity" (See Note 10 of the 2021 Annual Report for more details).
(5)	For the first nine months of 2021, the Company made voluntary pre-tax contributions of $0.5 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.  No contribution was needed in the first nine months of 2022 due
	to the funded status of the plan.
(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 2021 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, 2021.  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 2021 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.
	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.
	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 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 2022 first nine months charges for all uninsured litigation of every kind, were $160,000.  Expenses for legal counsel, consultants, etc., in defending these various actions and claims for the first nine months were approximately $50,000.  Prior year's settlements and expenses, including amounts for self-insured asbestos cases, are disclosed in the 2021 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 2021 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' financial results for Q3 2022?

Burnham Holdings reported a net income of $0.8 million for Q3 2022, with net sales up 12.0% compared to Q3 2021.

How did Burnham Holdings perform in the first nine months of 2022?

For the first nine months of 2022, Burnham Holdings saw a net sales increase of 16.9% year-on-year, along with improved gross profit.

What challenges did Burnham Holdings face in 2022?

Burnham Holdings faced challenges including material inflation, staffing issues, and rising long-term debt, which increased by $9.8 million.

What is the stock symbol for Burnham Holdings?

The stock symbol for Burnham Holdings is BURCA.