Burnham Holdings, Inc. reports third quarter and nine month results

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.