BHA Group Holdings, Inc. Announces Third Quarter 2003 Earnings.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)--July 22, 2003 For the quarter ended June June: see month. 30, 2003 ("fiscal 2003"), 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 NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :BHAG BHAG Big Hairy Audacious Goal BHAG Bad Honnef Aktiengesellschaft (Bad Honnef, Germany) ) consolidated net income was $1.8 million or $.27 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. This compares to $2.1 million or $.32 per diluted share during the same period in the prior year. For the nine months ended June 30, 2003, BHA's consolidated net income was $8.0 million or $1.23 per diluted share. Net income, including 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, was $5.2 million or $.82 per diluted share for the nine months ended June 30, 2002. Excluding the impact of the one-time charge, net income for the first nine months of the prior year was $6.4 million or $1.00 per diluted share. Commenting on the results, James E. Lund, President and Chief Executive Officer, said, "We are pleased to report that BHA's year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. earnings per diluted share have increased 23% over the prior year. These results have been achieved despite challenging business conditions in many of the markets we serve. Through product innovation and unmatched customer service, our 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. business segments continue to position themselves as the premier suppliers of replacement parts and service. In BHA Technologies, we are seeing the profit gains that make this business segment an integral part of BHA's overall growth strategies. BHA's cash flows from operations have enabled us to further improve the balance sheet. During the year, we have also made changes to the cost structure of the business which will benefit fiscal 2004." The following table summarizes BHA's revenues and pre-tax income by segment (dollars in millions):
Quarter Nine Months
Ended Ended
June 30, June 30,
2003 2002 2003 2002
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Revenues
Domestic Air Pollution Control (APC) Segment
U.S. Fabric Filter 17.7 18.2 54.5 57.5
U.S. Electrostatic Precipitator (ESP) 6.3 9.8 43.1 33.5
U.S. Exports to Latin America and Asia 4.6 4.0 11.5 13.3
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Total Domestic APC Segment 28.6 32.0 109.1 104.3
Europe APC Segment 6.8 5.4 18.1 16.3
BHA Technologies Segment 3.6 3.6 10.6 9.9
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Total Revenues 39.0 41.0 137.8 130.5
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Pre-Tax Earnings
Domestic APC Segment 1.8 2.4 9.9 8.5
Europe APC Segment 0.2 0.2 0.1 0.4
BHA Technologies Segment 0.6 0.3 1.9 0.8
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Total Pre-Tax Earnings 2.6 2.9 11.9 9.7
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Revenues Consolidated revenues for the nine months increased 6% over the prior year. Revenues for the Domestic Air Pollution Control (APC) segment increased 5% led by higher sales of 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. 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 during the first nine months of the Company's fiscal year. This period corresponds with the timeframe for the spring outages scheduled by coal-fired electric utilities. The increase in sales for the ESP portion of the Domestic APC segment was offset in part by a decline in sales of fabric filter replacement parts in the U.S. and export markets which corresponds to the continued weakness in the manufacturing sector of those economies. On a U.S. dollar basis, Europe APC segment sales for the nine-month period rose 11% over the prior year. On a local currency basis, sales in Europe declined 8% due to challenging business conditions and the timing of execution of major project work. BHA Technologies' sales to third parties increased by 7% for the nine-month period over the prior year due in large part to continued success in selling 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 products for use in non-consumer apparel applications and other industrial products. Consolidated revenues for the quarter declined 5% as compared to the prior year. For the quarter, overall sales in the Domestic Air Pollution Control (APC) segment decreased by 11%. Within this segment, sales of fabric filter parts and services declined by 3% and sales of ESP parts and services decreased by 36% as compared to the same period in the prior year. The significant year-over-year decline in ESP parts and service is attributable to timing with respect to major project work. Export sales of APC parts and services within the Domestic APC segment increased by 14% due to higher sales to customers in Asia. Quarterly sales for Europe APC increased 26% on a U.S. dollar basis. On a local currency basis, Europe APC segment sales for the three months in the current year were essentially unchanged. BHA Technologies' sales of ePTFE membrane products to third parties for the current quarter were unchanged as compared to the same period in the prior year. Pre-Tax Earnings For the first nine months of the current fiscal year, earnings before taxes and the one-time charge increased $2.2 million or 23% as compared to the prior year. The strong results were attributable to the combination of revenues increasing by 6% and operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: as a percentage of sales increasing from 7.8% in fiscal 2002 to 8.9% in fiscal 2003. The improvement in operating margins was due to higher gross margins as a percentage of sales. Pre-tax earnings for the third quarter decreased 10% to $2.6 million from $2.9 million for the same period of the prior year. The decrease was attributable to a 5% decrease in sales combined with a higher effective income tax rate for the third quarter of the current year. Income Taxes The Company's consolidated effective income tax rate was 33.0% for the nine months ended June 30, 2003, compared to 33.5% for the same period in the prior year. The consolidated effective income tax rates for the three months ended June 30, 2003, and 2002 were 32.7% and 28.7%, respectively. The effective tax rate recognized during the first nine months of fiscal 2003 is generally consistent with the 33.4% rate incurred for all of fiscal 2002. Cash Flows For the first nine months of fiscal 2003, the Company generated $10.8 million in cash flows from operations compared to $12.6 million generated during the same period in the prior year. During the current year, cash flows from operations were partially used to fund capital expenditures of $2.5 million, pay a cash dividend of $0.7 million and 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. treasury shares for $1.8 million. 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. BHA's backlog was $59.1 million at June 30, 2003. This compares with order backlogs of $51.3 million at March 31, 2003, and $39.9 million at June 30, 2002. Outlook The Company continues to see success in the implementation of its business plan. The 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. During this period, the Company has invested in those areas that it believes will provide the greatest advantage in the long term. The Company believes that its businesses are diversified diversified (di·verˑ·s and that it is positioned well to achieve its long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. financial goals. The earnings performance for the first nine months of the current fiscal year have been driven by sales increases of both ESP replacement parts and service work for electric utility customers and ePTFE membranes membranes Obstetrics A popular term for the amniotic sac, see there to customers outside of air pollution control. The strength in these areas has been partially offset by the decline in the Company's worldwide fabric filter business. The weakness in fabric filter aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. sales is expected to continue and, based on historical trending, a profit recovery in this area will likely trail an overall improvement in manufacturing conditions by several months. The Company believes it is well positioned to have long-term success in all of its businesses. Near-term quarterly results are expected to be heavily influenced by the timing of the receipt and execution of ESP rebuild orders and ePTFE membrane sales to customers in applications outside of air pollution control. One of the Company's goals is to deliver consistent annual earnings growth over time. The Company expects, however, that quarterly earnings will continue to vary based on the timing of larger orders. The results for the first nine months of the current year have positioned the Company to achieve its financial goals for the year. With respect to the upcoming quarter, the following is specific guidance being provided: -- For the fourth quarter of fiscal 2003, the Company anticipates that consolidated 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 will be higher than the same period in the prior year by as much as 5%. -- Earnings for the fourth quarter of fiscal 2003 are expected to be in the range of $.23 to $.28 per diluted share as compared to $.22 reported for the same period in the prior year. -- If the Company meets the earnings targets included in the stated range, its full year fiscal 2003 earnings per diluted share will be a record in the range of $1.46 to $1.51. Other Actions The Company 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. The Company also announces that Robert J. Druten has been appointed by the Board to serve as an independent director. This appointment fills the current vacancy VACANCY. A place which is empty. The term is principally applied to cases where an office is not filled. 2. By the constitution of the United States, the president has the power to fill up vacancies that may happen during the recess of the senate. on the Board. Mr. Druten is the Executive Vice President and Chief Financial Officer of Hallmark Cards Hallmark Cards, a privately owned American company based in Kansas City, Missouri, is the largest manufacturer of greeting cards in the United States. Approximately 50% of greeting cards sent in the United States every year are manufactured by Hallmark. , Incorporated. 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 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: "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 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. 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 Nine Months Ended
June 30, June 30,
2003 2002 2003 2002
--------- -------- -------- --------
Net sales $39.0 $41.0 $137.8 $130.5
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Gross margin 12.8 12.9 43.8 40.2
Operating expense 10.1 9.9 31.5 30.0
Interest expense, net .1 .1 .4 .5
--------- -------- -------- --------
Earnings before income taxes 2.6 2.9 11.9 9.7
Income tax expense .8 .8 3.9 3.3
Cumulative effect of accounting
change -- -- -- (1.2)
--------- -------- -------- --------
Net income $1.8 $2.1 $8.0 $5.2
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Diluted shares outstanding 6.6 6.5 6.5 6.4
========= ======== ======== ========
Diluted earnings per share $0.27 $0.32 $1.23 $0.82
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Diluted earnings per share
excluding effect of accounting
change (a) $0.27 $0.32 $1.23 $1.00
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Depreciation and amortization $1.4 $1.3 $4.4 $3.9
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(a) During fiscal 2002, the Company adopted Statement of Accounting Standards No. 142, "Accounting for Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ." As a result, the Company no longer recognizes amortization expense on intangible assets with indefinite INDEFINITE. That which is undefined; uncertain. INDEFINITE, NUMBER. A number which may be increased or diminished at pleasure. 2. When a corporation is composed of an indefinite number of persons, any number of them consisting of a majority of those lives. 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."
June 30, September 30,
2003 2002
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Cash and equivalents $19.1 $13.8
Accounts receivable 26.5 28.6
Inventories 25.0 24.2
Other current assets 5.2 5.5
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Total current assets 75.8 72.1
PP&E and other assets 39.4 41.4
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Total assets $115.2 $113.5
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Current debt and lease payments $2.5 $2.5
Accounts payable and accruals 19.9 23.1
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Total current liabilities 22.4 25.6
Long-term debt and capital leases 17.2 17.8
Other liabilities 2.5 2.7
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Total liabilities 42.1 46.1
Equity 73.1 67.4
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Total liabilities and equity $115.2 $113.5
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