BHA Group Holdings, Inc. Announces Record First-Quarter 2003 Operating Results.Business Editors 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)--Jan. 21, 2003 For the quarter ended December December: see month. 31, 2002 ("fiscal 2002"), 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.'s (Nasdaq: BHAG BHAG Big Hairy Audacious Goal BHAG Bad Honnef Aktiengesellschaft (Bad Honnef, Germany) ) consolidated net income was $2.9 million or $.45 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Excluding the effect of a $1.2 million one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc a change in accounting for goodwill, net income for the same period in the prior year was $1.7 million or $.26 per diluted share. Including the impact of the one-time charge, net income for the first quarter of the prior year was $0.5 million or $.07 per diluted share. Commenting on the results, James E. Lund, President and Chief Executive Officer, said: "We are pleased to report record sales and earnings per share for our first quarter. Going into the quarter, we believed the results would be strong based on the Company's substantial 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. ) backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. for large projects in the electric utility industry. The results surpassed our expectations as actual ESP project work executed during the period was higher than initial estimates. The strength in this area was complemented by the continued success of our ePTFE membrane membrane, structure composed mostly of lipid and protein that forms the external boundary of cells and of major structures within cells. Membrane organization is based on a sheet two molecules thick—a double layer of lipids aligned with their long hydrocarbon business. The positive results in these areas were offset partially by the ongoing weakness in U.S. and international sales of fabric filter replacement parts and service." The following table provides a breakdown of consolidated revenues and pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. by segment (dollars in millions):
Quarter Ended
December 31,
2002 2001
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Revenues
Domestic Air Pollution Control (APC) Segment
U.S. Fabric Filter 17.0 18.9
U.S. Electrostatic Precipitator (ESP) 20.5 8.9
U.S. Exports to Latin America and Asia 3.3 4.6
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Total Domestic APC Segment 40.8 32.4
Europe APC Segment 5.4 5.3
BHA Technologies Segment 3.9 3.2
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Total Revenues 50.1 40.9
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Pretax Earnings
Domestic APC Segment 4.0 2.5
Europe APC Segment (0.2) (0.1)
BHA Technologies Segment 0.5 0.2
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Total Pretax Earnings 4.3 2.6
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Revenues Consolidated revenues for the quarter increased $9.2 million or 22% as compared to the same period in the prior year. Revenues for the Domestic 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. ) Segment increased 26% led by higher sales of ESP replacement parts and services to customers in the electric utility industry. Sales of ESP parts and services tend to be seasonal with the majority of revenues being generated in advance of spring outages scheduled by coal-fired electric utilities. The results for any interim period are not necessarily indicative of results to be expected for a full year. The increase in sales for the ESP portion of the Domestic APC segment was offset in part by a decline in fabric filter replacement parts sales in the U.S. and export markets which corresponds to continued weakness in the manufacturing sector of those economies. On a U.S. dollar basis, sales for the Europe APC Segment increased 3% over the prior year. On a local currency basis, sales in Europe declined 8% due to challenging business conditions. BHA Technologies' sales to third parties increased by 19% due in large part to continued success in selling membrane products for use in non-consumer apparel applications. Pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern Earnings Earnings before taxes and one-time charges increased $1.7 million or 66% as compared to the prior year. The strong results were primarily attributable to the sharp increase in overall sales volume. Gross margin as a percentage of sales was 30.4% and 30.3% for the first quarter of fiscal 2003 and 2002, respectively. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. as a percentage of sales was 21.6% in the current year compared to 23.5% in the prior year. The improvement in operating expenses as a percentage of sales is attributable to the overall increase in sales volume. Interest expense declined in the current year as compared to the prior year due to the combination of a reduction in bank borrowings and lower interest rates on the Company's variable rate debt. Accounting for Goodwill and Other Intangibles During the first quarter of the prior fiscal year, the Company adopted Statement of Financial Accounting Standard (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 142, "Accounting for Goodwill and Other Intangibles." Upon adoption, the Company recognized a $1.2 million non-cash charge as a cumulative change in accounting principle to write off the goodwill of its European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. operations. The impact of adopting this standard was to reduce first quarter earnings in the prior year by $.19 per diluted share. Cash Flows During the first quarter of fiscal 2003, the Company's cash flows from operations resulted in a net use of cash of $.7 million. This compares to $2.8 million of cash generated from operating activities during the same prior year period. The decline in cash flows, despite the increase in net earnings, is attributable to a temporary increase in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying associated with the overall increase in sales. Additions to fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → were $0.8 million for the quarter and treasury 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. were $0.5 million. Backlog BHA's backlog was $47.5 million at December 31, 2002. This compares with order backlogs of $57.8 million at September 30, 2002, and $50.9 million at December 31, 2001. Outlook The Company continues to see success in the implementation of its business plan. The solid financial condition of BHA has been further strengthened over the last 24 months providing the Company with substantial capital to invest in growth areas and improve its overall position in the key markets it serves. The Company will continue to focus on managing costs while investing in those areas that it believes will provide the greatest advantage in the long term. The Company intends to maximize opportunities to service the ESP side of the APC business and pursue opportunities to expand its business in the sale of ePTFE membranes membranes Obstetrics A popular term for the amniotic sac, see there to customers for use in applications outside of air pollution control. Although pleased with its first quarter results, the Company continues to remain cautious about the near-term results of its U.S. and international fabric filter businesses. Of specific concern is continued weakness in the worldwide manufacturing and industrial sector. Based on historical trending, the Company continues to believe that improvement in its markets for the sale of fabric filter replacement parts and services will likely trail an improvement in overall manufacturing conditions by as much as six months. The Company has not seen any improvement in business conditions and expects that competition will remain intense and pricing will continue to come under pressure. The Company is committed to maintaining and expanding its position as the premier supplier of APC replacement parts and service during this challenging economic period. During the current period of economic weakness, the Company's results have largely been driven by success in the area of ESP rebuild project work for electric utility customers and the sale of ePTFE membranes to customers outside of air pollution control. This is expected to be the case while the fabric filter replacement parts and service business remains weak due to current economic conditions. Although the Company believes it is well positioned to have success in the electric utility markets for ESP project work and the ePTFE membrane business, consolidated quarterly results moving forward are likely to vary depending on the timing of order receipt and execution in these areas. Visibility with respect to future results beyond 90 days remains a challenge. For more information you should refer to the sections entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "Outlook" and "Factors Affecting Earnings and Share Price" included in the Company's Annual 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. filed with the Securities and Exchange Commission on November 6, 2002. With respect to the upcoming quarter, the following is specific guidance being provided: -- For the second quarter of fiscal 2003, the Company anticipates that consolidated net sales will be lower than the same period in the prior year by as much as 10%. -- Earnings for the second quarter of fiscal 2003 are expected to be in the range of $.35 to $.40 per diluted share as compared to $.42 reported for the same period in the prior year. Other Actions BHA announced that the Board of Directors has approved an annual cash dividend of $.12 per share payable on February 11, 2003 to shareholders of record on February 3, 2003. The Company also reports that it has accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. 2.6 million shares of the 4.0 million shares of BHA common stock 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: by its Board of Directors for repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. . BHA Group Holdings, Inc. is a world leader in innovative filtration filtration: see sewerage; water supply. Filtration The separation of solid particles from a fluidsolids suspension of which they are a part by passage of most of the fluid through a septum or membrane that retains most of the solids technology. Its two principal operating subsidiaries 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. are BHA Group, Inc., the world's largest supplier of replacement parts and services for industrial air pollution control systems, and BHA Technologies, Inc., which manufactures and markets expanded polytetrafluoroethylene expanded polytetrafluoroethylene (ePTFE) (ekspan´did pol´ētet´r  -fl (ePTFE) membrane products for use in a variety
of industrial and consumer products.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 " included in the Company's report on Form 10-K which was filed with the Securities & Exchange Commission on November 6, 2002.
BHA GROUP HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
& BALANCE SHEETS
(In millions except per share amounts)
Quarter Ended
December 31,
2002 2001
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Net sales $ 50.1 $ 40.9
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Gross margin 15.2 12.4
Operating expense 10.8 9.6
Interest expense, net .1 .2
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Earnings before income taxes 4.3 2.6
Income tax expense 1.4 .9
Cumulative effect of accounting change -- (1.2)
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Net income $ 2.9 $ .5
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Diluted shares outstanding 6.4 6.4
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Diluted earnings per share $ 0.45 $ 0.07
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Diluted earnings per share excluding
effect of accounting change $ 0.45 $ 0.26
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Depreciation and amortization $ 1.5 $ 1.3
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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."
Dec. 31, Sept. 30,
2002 2002
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Cash and equivalents $ 12.1 $ 13.8
Accounts receivable 33.4 28.6
Inventories 22.4 24.2
Other current assets 5.8 5.5
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Total current assets 73.7 72.1
PP&E and other assets 40.7 41.4
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Total assets $ 114.4 $ 113.5
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Current debt and lease payments $ 2.4 $ 2.5
Accounts payable and accruals 21.3 23.1
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Total current liabilities 23.7 25.6
Long-term debt and capital leases 18.0 17.8
Other liabilities 2.6 2.7
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Total liabilities 44.3 46.1
Equity 70.1 67.4
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Total liabilities and equity $ 114.4 $ 113.5
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