LANCASTER, Pa., July 19 /PRNewswire-FirstCall/ -- Burnham Holdings, Inc. (Pink Sheets: BURCA), a leading manufacturer of boilers, furnaces, radiators, air conditioning systems, and related accessories for residential, commercial and industrial applications, today reported its financial results for the period ended July 2, 2006.
Second quarter and year-to-date sales were $42.7 million and $86.0 million, respectively. Actual 2005 second quarter and year-to-date sales were $47.2 million and $94.0 million, respectively. As previously discussed in both our 2005 Annual Report and the 2006 first quarter report, industry demand for residential heating products has fallen substantially during the first half of 2006. The industry-wide decline in demand is the result of a very mild winter in the Northeast with record warm temperatures in the first six months of 2006, slowing new construction, rising fuel prices, and growing consumer concerns about fuel availability. These factors are exaggerated during the first half of the year, the industry's off-season. 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 commercial portion of our business is reporting second quarter sales similar to last year. The backlog of orders is substantially higher however, which is encouraging for the second half. The release of our new high-efficiency products for both the residential and commercial markets is expected to have a positive impact as the year progresses.
The net loss for the second quarter was $(2.4) million or $(0.53) per share, and for the year-to-date was $(5.0) million or $(1.12) per share. The second quarter and year-to-date net losses for 2005 were $(1.0) million or $(0.21) per share, and $(2.7) million or $(0.61) per share, respectively. All per share information is on an undiluted basis. The lower sales levels of the residential portion of the business have generated lower gross profits to offset normal fixed period costs. In addition, the larger loss over the prior year is partially a result of the Company's long-term strategic decisions to invest in new facilities and products coincident with the substantial decline in industry demand. Other factors impacting current results include continued raw material commodity price inflation and high post-retirement benefit costs. Much of the cost increase in post-retirement benefits has been caused by low or fluctuating interest rates and lackluster performance of equity markets during recent years.
In light of the reduced industry demand, numerous actions are being taken by the Company to reduce operating costs commensurate with the lower business levels. Although production improvements have been achieved since the beginning of the year in our new facilities, we are experiencing certain ongoing start-up costs. We expect production efficiency gains, due to more optimized product flow and new machinery, will improve our cost structure and our responsiveness to customer orders. An added cost thus far for 2006 has been the lost revenue caused by the inability to lease our last vacated location in Lancaster. We are optimistic that this facility will be leased in 2006. Additionally, we continue to invest in product development, with several new products to be introduced for the upcoming season and others in the planning phase. In regard to post-retirement benefits, significant changes have been implemented that will reduce future costs.
The Company's balance sheet remains strong with working capital at a level consistent with the business activity. While inventory levels are higher than at this time last year, a portion of this increase is a result of the new products we are introducing. The short-term borrowings for the half reflect the normal seasonal cash flow needs of the Company.
At its meeting on July 19, 2006, the Burnham Holdings, Inc.'s Board of Directors declared a quarterly common stock dividend of $0.17 per share payable September 1, 2006 with a record date of August 11, 2006. This is down from $0.29 per share paid in each of the first two quarters of 2006.
This is an unusual time for the Company in terms of cash requirements. Significant investments are being made in plant facilities and machinery to streamline our manufacturing operations so that we have the cost structure, quality, and delivery capacity to ensure our growth and profitability for the long-term. Significant investments are also being made to bring new products to market to meet customer requirements for high-efficiency equipment. In addition, it has been necessary to make cash contributions to our defined benefit pension trust to keep the trust fully funded for current retirees and those employees with accrued benefits. These cash requirements are essential to the future of the business and come at a time when our industry is experiencing a downturn in the market and unusual inflation in commodity materials. In light of all these matters, the Board is unanimous in its view that this is the appropriate dividend action at this time. The Board and Management are striving to take the actions necessary to return the Company's profitability to its historical levels.
Consolidated Statements of Income
(In thousands, except Three months ended Six months ended
per share data) July 2, July 3, July 2, July 3,
(Data is unaudited 2006 2005 2006 2005
(see Notes))
Net sales $42,706 $47,214 $85,979 $94,031
Cost of goods sold 35,339 37,691 71,203 75,915
Gross profit 7,367 9,523 14,776 18,116
Selling, administrative
and general expense 10,373 10,416 21,164 21,243
Operating loss (3,006) (893) (6,388) (3,127)
Other income (expense)
Interest income 8 27 27 84
Interest expense (729) (642) (1,441) (1,201)
Other income (expense) (721) (615) (1,414) (1,117)
Income loss before taxes (3,727) (1,508) (7,802) (4,244)
Income tax benefit (1,361) (543) (2,848) (1,528)
Net loss $(2,366) $(965) $(4,954) $(2,716)
Basic loss per share $(0.53) $(0.21) $(1.12) $(0.61)
Diluted loss per share $(0.53) $(0.21) $(1.12) $(0.61)
Dividends paid per share $0.29 $0.29 $0.58 $0.58
Notes:
(1) The accompanying unaudited financial statements contain all
adjustments that are necessary for a fair presentation of results for
such periods and are consistent with policies and procedures employed
in the audited year-end financial statements. 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 December 31, 2005.
Certain reclassifications and revisions have been made to the prior
period quarterly financial statements to be consistent with the 2005
year-end reporting format.
(2) Basic earnings per share are based upon weighted average shares
outstanding for the period. Diluted earnings per share assume the
conversion of outstanding rights into common stock.
(3) Common stock outstanding as of July 2, 2006 includes 2,701,711 of
Class A shares and 1,750,178 of Class B shares.
(4) In the first half of 2006 the Company made contributions of $0.6
million into its defined pension plan, $0.4 million cash impact after
considering the income tax benefit. This compares to $1.5 million,
pre-tax, contributed in the first half of 2005. These payments
increased the plan assets available for covered employees and did not
impact the Statement of Income but are reflected as increases to the
plan's prepaid benefit cost shown on the Balance Sheet as part of
other assets.
Consolidated Balance Sheets
(In thousands) July 2, July 3,
(Data is unaudited (see Notes)) 2006 2005
ASSETS
Current Assets
Cash and cash equivalents $2,423 $2,790
Trade and other accounts receivable, net 25,337 29,312
Inventories 63,743 57,734
Prepayments and other current assets 6,653 5,108
Total current assets 98,156 94,944
Property, plant and equipment, net 52,613 54,245
Other assets, net 29,761 30,836
Total Assets $180,530 $180,025
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts and taxes payable &
accrued expenses $30,226 $25,620
Short term borrowings 28,071 23,275
Current portion of long-term liabilities 3,498 3,480
Total current liabilities 61,795 52,375
Long-term liabilities 22,422 26,213
Other postretirement liabilities 1,398 1,499
Deferred income taxes 10,655 11,757
Stockholders' equity
Preferred stock 530 530
Class A common stock 3,160 3,129
Class B convertible common stock 1,750 1,779
Additional paid-in capital 14,309 14,304
Retained earnings 82,734 86,812
Accumulated other comprehensive loss (271) (519)
Treasury stock, at cost (17,952) (17,854)
Total stockholders' equity 84,260 88,181
Total Liabilities and
Stockholders' Equity $180,530 $180,025
