BHA Group Holdings, Inc. Announces Fourth Quarter 1999 Operating Results.KANSAS CITY Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). , Mo.--(BUSINESS WIRE)--Nov. 10, 1999-- BHA BHA butylated hydroxyanisole, an antioxidant used in foods, cosmetics, and pharmaceuticals that contain fats or oils. BHA n. A white, waxy phenolic antioxidant used to preserve fats and oils, especially in foods. Group Holdings, Inc. (Nasdaq: BHAG BHAG Big Hairy Audacious Goal BHAG Bad Honnef Aktiengesellschaft (Bad Honnef, Germany) ) today announced operating results for the fourth quarter and twelve months ended September 30, 1999. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the twelve months ended September 30, 1999, increased 9% to $155.7 million from $142.4 million for the same period in fiscal 1998. Net earnings for fiscal 1999 were $1.1 million, or $.15 per share on a diluted basis. The fiscal 1999 results include $4.2 million of Unusual Charges ($2.7 million after tax) in cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold and $2.2 million in Restructuring Expense ($1.4 million after tax), or a combined $.59 per diluted share. These items are discussed in more detail below. On a comparable basis, excluding Unusual Charges and Restructuring Expense, net income was $5.2 million, or $.74 per diluted share compared to net income of $7.3 million, or $.97 per diluted share in the prior year. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. before the Unusual Charges and Restructuring Expense was $10.0 million, or 6.4% of sales in fiscal 1999 compared to $12.2 million, or 8.6% of sales in fiscal 1998. Net sales for the three months ended September 30, 1999, increased 10% to $41.2 million from $37.6 million the prior year. For the fourth quarter, including the Unusual Charges and Restructuring Expense, results were a net loss of $0.7 million, or ($.10) per diluted share. The fiscal 1999 fourth quarter results include $0.5 million of Unusual Charges ($0.3 million after tax) included in cost of goods sold and $2.2 million in Restructuring Expense ($1.4 million after tax), or a combined $.25 per diluted share. On a comparable basis, excluding Unusual Charges and Restructuring Expense, net income for the quarter was $1.1 million, or $.15 per diluted share, as compared to $1.9 million, or $.26 per share for the same period in the prior fiscal year. Operating income before Unusual Charges and Restructuring Expense for the three month period just ended was $2.2 million, or 5.4% of sales compared to $3.3 million, or 8.8% of sales for the same period in the prior fiscal year. The Company's backlog was $47.2 million at September 30, 1999. This compares with order backlogs of $46.9 million at June 30, 1999 and $51.5 million at September 30, 1998. Commenting on the results, James E. Lund, President and Chief Executive Officer, said: "In April of this year, we announced that we expected a number of factors to negatively impact our financial performance in fiscal 1999 and we believed our net earnings per share would be in the $.10 to $.25 range. Our actual net earnings of $.15 per share is in line with our April expectation. We also discussed at that time our plans to perform a comprehensive review of all of our businesses with the purpose of taking appropriate action to improve future results. The current year financial results include substantial charges relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the actions taken to improve future operations. Although the year was clearly a disappointment, we believe BHA is positioned to returinancial goals remain a 15% compounded earnings per share growth rate over time and a 20% return on equity. "BHA's traditional air pollution control businesses performed extremely well during fiscal 1999. Excluding the losses associated with BHA Technologies, the air pollution control business in Europe and cost overruns Noun 1. cost overrun - excess of cost over budget; "the cost overrun necessitated an additional allocation of funds in the budget" cost - the total spent for goods or services including money and time and labor on a large electrostatic precipitator Noun 1. electrostatic precipitator - removes dust particles from gases by electrostatic precipitation Cottrell precipitator, precipitator electrical device - a device that produces or is powered by electricity (ESP (1) (Enhanced Service Provider) An organization that adds value to basic telephone service by offering such features as call-forwarding, call-detailing and protocol conversion. ) project, operating income in our core air pollution control businesses rose 21% over the prior year. These strong results produced $9 million in cash flows from operations during the last six months of the current fiscal year enabling us to fund $2 million in capital expenditures, repay $5 million on our bank lines and repurchase nearly $1 million worth of BHA stock under the authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: program. BHA's October 31, 1999 order backlog exceeds $50 million, reflecting continued strength in our core businesses. "It was an extremely challenging year for BHA Technologies and our air pollution control business in Europe. These segments of our company incurred substantial operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. during 1999. The actions taken with respect to Europe and BHA Technologies resulted in charges during the current year which are expected to result in future savings exceeding $2 million pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern on an annual basis. We believe that the steps taken will improve future results without significantly limiting the upside potential Upside potential The amount by which analysts or investors expect the price of a security may increase. upside potential The potential price or gain that may be expected in a security or in a security average, generally stated as the dollar for these businesses." Restructuring Expense The Company undertook a plan of action during fiscal 1999 to reduce future operating costs operating costs npl → gastos mpl operacionales by $2 million (pretax) on an annual basis. To achieve this end, the Company recognized Restructuring Expenses in the amount of $2.2 million on a pretax basis during the fourth quarter of fiscal 1999. A charge of $1.7 million was taken as a result of the decision by BHA Technologies to discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: its adhesive lamination lamination a laminar structure or arrangement. efforts. The charge primarily related to the write-down of lamination equipment to its net realizable value Net realizable value (NRV) is a commonly used method of evaluating an asset's worth in the field of inventory accounting. NRV is part of GAAP rules that apply to valuing inventory, so as to not overstate or understate the value of inventory goods. . Future efforts to sell PTFE PTFE polytetrafluoroethylene. membrane for apparel and other uses involving adhesive lamination will either be outsourced or will be in the form of unlaminated film. BHA will continue to perform, in-house, all of the thermal lamination necessary to supply quality PTFE membrane for its BHA-TEX(R) filter bags, as well as other air pollution control (APC (1) (American Power Conversion Corporation, West Kingston, RI, www.apcc.com) The leading manufacturer of UPS systems and surge suppressors, founded in 1981 by Rodger Dowdell, Neil Rasmussen and Emanual Landsman, three electronic power engineers who had worked at MIT. ) and non-APC applications. Additionally, severance cost of $0.5 million was expensed and paid during the Company's fourth quarter relative to the consolidation of manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. in Europe. In June, the Company announced a decision to combine its European fabric filter manufacturing into one facility located outside of Barcelona, Spain. As part of this consolidation, the manufacturing facility in Germany was closed effective September 30, 1999. Consolidation of these operations into one location is expected to produce operating efficiencies and financial benefits including lower operating costs and improved management of working capital. The financial performance of BHA's European operations has been disappointing. However, with improved manufacturing efficiencies and additional management focus on sales and marketing efforts, management believes that this business is capable of generating solid profits. Unusual Charges Included in Cost of Goods Sold Consolidated gross margin was 26.9% of sales in fiscal 1999 compared to 30.9% of sales in 1998. The margins in fiscal 1999 were adversely impacted by the following pretax charges totaling $4.2 million: (1) a cost overrun on a large fixed-price ESP rebuild project on which a loss of $2.4 million was recognized during the second quarter of fiscal 1999, (2) substantial experimentation and testing performed by BHA Technologies totaling $1.4 million ($0.5 million was incurred during the fourth quarter) related to adhesive lamination to develop products for non-APC markets and (3) inventory write-downs of $0.4 million during the third quarter attributable to the Company's consolidation of manufacturing operations in Europe. Excluding these three factors, gross margins were 29.6% of sales in fiscal 1999. The balance of the decline in the gross margin percentage is largely the result of a decline in gross margins as a percentage of sales in Europe due to a combination of excess capacity and competition. BHA Technologies produces PTFE membrane that is supplied to the Company's air pollution control businesses, and has done so at good profits since 1995. However, this business remains in a startup phase with respect to the development and supply of products to customers for use outside of air pollution control. The original business plan for BHA Technologies was to develop and manufacture expanded PTFE membrane films which, depending on the customer application, would be laminated laminated /lam·i·nat·ed/ (-nat?ed) having, composed of, or arranged in layers or laminae. laminated made up of laminae or thin layers. to base fabrics. A significant investment in equipment and technology was made relating to the adhesive lamination process. BHA Technologies incurred $1.4 million of expense in fiscal 1999 in its efforts to commercialize the lamination process with the goal of being able to cost-effectively produce laminated product. The current target customer base for laminated product and the challenges associated with the lamination process have led management to conclude that using third-party laminators will be a more cost-effective method for approaching the market for these products. BHA Technologies will continue its efforts relating to the development and sale of high-quality expanded PTFE membrane films for sale to customers in applications outside of air pollution control. In other news, the Company announced that the Board of Directors has declared a cash dividend of $.03 per share payable on December 1, 1999, to shareholders of record at the close of business on November 22, 1999. The Company also announced that its Board of Directors has authorized an additional 500,000 shares in the Company's stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program, increasing the total number of shares approved for repurchase under that program to 2.5 million. The Company reports that through September 30, 1999, it had accumulated 1.6 million shares of BHA common stock through share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. . BHA Group Holdings, Inc., is a world leader in innovative filtration technology. Through its principal operating subsidiary An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. , BHA Group, Inc., it manufactures and markets industrial air pollution control parts and services worldwide. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that reflect the Company's current views with respect to future events and financial performance. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. The words "should," "believe," "anticipate," "expect," and other expressions that indicate future events and trends identify forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the performance of newly established domestic and international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , demand and price for the Company's products and services and other factors. You should also consult the sections entitled "Factors Affecting Earnings and Stock Price" and "Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial ," which are included in the Company's report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. . The Company assumes no obligation to update the information contained in this press release.
BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
Three and Twelve Months Ended September 30, 1999
(With Comparative Figures for 1998)
Three Months Ended
September 30
1999 1999 (a) 1998
---- -------- ----
Net Sales $41,223,000 $41,223,000 $37,613,000
Operating Income (Loss) $ (437,000) $ 2,230,000 $ 3,309,000
Earnings (Loss) Before
Income Taxes $ (983,000) $ 1,684,000 $ 2,846,000
Net Earnings (Loss) $ (674,000) $ 1,069,000 $ 1,946,000
Earnings (Loss) Per Share (c) $(.10) $.15 $.26
Weighted Average
Shares Outstanding (c) 7,023,000 7,023,000 7,486,000
Year Ended
September 30
1999 1999 (b) 1998
---- -------- ----
Net Sales $155,725,000 $155,725,000 $142,432,000
Operating Income $ 3,643,000 $ 10,010,000 $ 12,180,000
Earnings Before Income Taxes $ 1,659,000 $ 8,026,000 $ 10,757,000
Net Earnings $ 1,084,000 $ 5,244,000 $ 7,332,000
Earnings Per Share (c) $.15 $.74 $.97
Weighted Average
Shares Outstanding (c) 7,134,000 7,134,000 7,552,000
(a) Amounts presented have been adjusted to exclude Restructuring
Expense of $2.2 million ($1.4 million after tax) and Unusual
Charges of $0.5 million ($0.3 million after tax).
(b) Amounts presented have been adjusted to exclude Restructuring
Expense of $2.2 million ($1.4 million after tax) and Unusual
Charges of $4.2 million ($2.7 million after tax).
(c) The weighted average number of shares outstanding for all periods
presented have been adjusted to reflect the 10% stock dividend
distributed in June of 1998. The earnings per share figures in
this press release are computed on a "diluted" basis as defined
under Statement of Financial Accounting Standards No. 128,
"Earnings per Share."
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