LANCASTER, Pa., July 17 /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 June 29, 2008, and announced a common stock dividend.
Second quarter and year-to-date sales were $44.8 million and $86.9 million, respectively. Prior year second quarter and year-to-date sales were $47.9 million and $94.5 million, respectively. First half sales have declined $7.6 million, or 8%, compared to a year ago. The decline has been experienced in both our residential and commercial products. With the economic conditions that continue to dominate the national news, namely declining housing and real estate markets, rising fuel prices, and tightening of credit, the residential industry is seeing a reluctance by both the end-consumer and distributors to over-extend themselves beyond immediate needs. Broad measures of the residential market such as the cast iron boiler industry and the gas warm air furnace industry are down 15% and 18%, respectively, on a unit basis. While economic concerns have not impacted our commercial business as dramatically, that portion of our business is down moderately from the strong first half it experienced in 2007. Although current conditions remain challenging, we are optimistic about longer-term prospects for the business. Existing boilers will continue to be replaced over time due to age or operating costs, and our new powerful lineup of high-efficiency residential and commercial products position us well in the market. 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 loss for the second quarter and year-to-date was $(1.0) million or $(0.22) per share, and $(2.2) million or $(0.50) per share, respectively. The 2007 second quarter gain was $197 thousand or $0.05 per share, while the year- to-date loss was $(508) thousand or $(0.11) per share. The lower sales levels discussed above have negatively impacted the 2008 first half results through both the loss of the gross profits on this volume, and through lower production requirements which lowers coverage of fixed costs. Additionally, as we discussed in our first quarter Report, the Burnham group of companies, like most users of steel products in the United States, is experiencing cost increases for raw steel and steel related products reminiscent of year 2004. In the first half, raw material price increases on new material purchases were over $2 million, or approximately 2.5% of net sales, higher than the last prices paid at the end of 2007. We have announced product price increases within all of our businesses to mitigate these cost impacts, while at the same time being cognizant of our need to remain cost competitive in this difficult market. Selling, administrative, and general expense was lower in dollars, and as a percentage of sales, compared to the prior year (both for the quarter and year-to-date) and is indicative of actions taken by Burnham to lower its cost structure. To further highlight this cost structure change, it may be useful to compare the current first half results with the first half results of 2005. In 2005, a year of normal price inflation, Burnham experienced first half sales of $94.0 million (similar to 2007 but $7 million higher than 2008) with a net loss of $(2.7) million (a greater loss than this year on substantially higher sales).
The Company's balance sheet remains strong with high liquidity and working capital at a level consistent with the business activity. Inventory levels are only slightly higher than last year at this time despite the sharp increase in raw material costs, increases resulting from our new product introductions, and increases within our commercial businesses that have experienced growth. We are able to maintain steady inventory levels, with a resulting stronger cash flow, because of the increased production flexibility provided by the facility expansions and equipment improvements made over the last several years. Total debt at June 29, 2008 is $42.3 million, or $2.2 million lower than at this point last year, and as a percentage of total capital (debt and equity) is 32.7% versus 35.9% last year.
At its meeting on July 17, 2008, the Burnham Holdings, Inc.'s Board of Directors declared a quarterly common stock dividend of $0.17 per share payable August 29, 2008, with a record date of August 8, 2008.
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. Careful consideration should be given to cautionary statements made in our 2007 Annual Report. We undertake no duty to update or revise these forward-looking statements.
Consolidated Statements of Operations (In thousands, except Three months ended Six months ended per share data) June 29, July 1, June 29, July 1, (Data is unaudited (see Notes)) 2008 2007 2008 2007 Net sales $44,754 $47,924 $86,898 $94,484 Cost of goods sold 37,062 36,917 71,362 74,312 Gross profit 7,692 11,007 15,536 20,172 Selling, administrative and general expense 9,202 10,308 18,260 19,889 Operating (loss) gain (1,510) 699 (2,724) 283 Other income (expense) Mark-to-market gain (loss) (4) 389 203 21 (46) Interest income 18 25 44 47 Interest expense (458) (622) (817) (1,070) Other income (expense) (51) (394) (752) (1,069) (Loss) gain before taxes (1,561) 305 (3,476) (786) Income tax expense (benefit) (562) 108 (1,251) (278) Net (loss) gain $(999) $197 $(2,225) $(508) Per Share Data: Basic & Diluted (loss) gain $(0.22) $0.05 $(0.50) $(0.11) Dividends paid $0.17 $0.17 $0.34 $0.34 Notes:
1) The accompanying unaudited financial statements contain adjustments that are necessary for a fair presentation of the interim results, and these adjustments are applied consistently for the periods presented. 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, 2007.
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 June 29, 2008 includes 2,795,378 of Class A shares and 1,656,511 of Class B shares.
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 a portion of the variable rate debt for payments indexed to a fixed interest rate. These non-operational, non-cash charges are recorded on a quarterly basis but reverse themselves over the term of the agreements.
5) In 2006, accounting rule changes required recognition of the funded status of pensions and postretirement benefits as a net liability or asset on the Company's balance sheet. On an annual basis, changes in the funded position of these obligations are recorded as an adjustment to the liability or asset with an offsetting change (net of deferred taxes) in Other Comprehensive Income (Loss), a sub-section of Stockholders' Equity. The primary 2007 year-end, non-cash change for Burnham was a net increase in Other Assets of $9.7 million and a net increase to Stockholders' Equity of $7.3 million (after tax) (see Note 9 of the 2007 Annual Report).
Consolidated Balance Sheets (In thousands) June 29, July 1, (Data is unaudited (see Notes)) 2008 2007 ASSETS Current Assets Cash and cash equivalents $3,432 $1,268 Marketable securities --- 751 Trade and other accounts receivable, net 26,500 29,920 Inventories 55,647 54,181 Prepayments and other current assets 4,873 4,499 Total current assets 90,452 90,619 Property, plant and equipment, net 48,148 50,179 Other assets, net (5) 31,834 22,053 Total Assets $170,434 $162,851 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts and taxes payable & accrued expenses $28,227 $28,880 Current portion of long-term liabilities 403 366 Total current liabilities 28,630 29,246 Long-term debt 42,152 44,360 Other postretirement liabilities 3,385 3,400 Deferred income taxes (5) 9,362 6,554 Stockholders' equity Preferred stock 530 530 Class A common stock 3,253 3,225 Class B convertible common stock 1,657 1,685 Additional paid-in capital 14,308 14,308 Retained earnings 82,323 81,807 Accumulated other comprehensive loss (5) 2,786 (4,312) Treasury stock, at cost (17,952) (17,952) Total stockholders' equity 86,905 79,291 Total Liabilities and Stockholders' Equity $170,434 $162,851
