BURNHAM HOLDINGS, INC. REPORTS FIRST QUARTER RESULTS

Burnham Holdings, Inc.

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

April 3,

March 28,

2022

2021

Net sales 

$       52,438

$       44,003

Cost of goods sold

44,078

37,008

Gross profit

8,360

6,995

Selling, general and administrative expenses

9,038

7,647

Operating loss

(678)

(652)

Other expense:

Non-service related pension credit

106

131

Investment loss net of interest income

(133)

(49)

Interest expense

(275)

(185)

Other expense

(302)

(103)

Loss before income taxes

(980)

(755)

Income tax benefit

(225)

(174)

Net loss

$           (755)

$           (581)

Loss per share (Note 1)

Basic

$          (0.16)

$          (0.13)

Diluted

$          (0.16)

$          (0.13)

Cash dividends per share

$           0.22

$           0.22

The accompanying notes are integral to the consolidated financial statements.

Burnham Holdings, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

(Unaudited)

April 3,

December 31,

March 28,

ASSETS

2022

2021

2021

Current Assets

Cash and cash equivalents

$         5,711

$         5,654

$         5,771

Trade accounts receivable, less allowances

19,342

24,920

18,156

Inventories

56,951

51,066

49,872

Prepaid expenses and other current assets

5,204

4,717

2,074

Total Current Assets

87,208

86,357

75,873

Property, plant and equipment, net

57,739

57,496

56,327

Operating lease assets

2,203

2,065

2,466

Other assets, net (Note 4)

22,466

21,551

12,240

Total Assets

$     169,616

$     167,469

$     146,906

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Accounts payable & accrued expenses

$       27,145

$       33,429

$       22,148

Current portion of long-term liabilities

152

152

147

Current portion of operating lease liabilities

827

765

721

Total Current Liabilities

28,124

34,346

23,016

Long-term debt

30,940

21,843

19,762

Operating lease liabilities

1,376

1,300

1,745

Other postretirement liabilities (Notes 4 and 5)

6,052

6,062

5,474

Deferred income taxes (Note 4)

8,934

8,753

6,723

Stockholders' Equity

Preferred Stock

530

530

530

Class A Common Stock 

3,615

3,615

3,565

Class B Convertible Common Stock

1,329

1,329

1,379

Additional paid-in capital

16,354

16,317

16,115

Retained earnings

111,816

113,582

115,048

Accumulated other comprehensive loss (Note 4)

(21,509)

(22,260)

(28,487)

Treasury stock, at cost 

(17,945)

(17,948)

(17,964)

Total Stockholders' Equity

94,190

95,165

90,186

Total Liabilities and Stockholders' Equity

$     169,616

$     167,469

$     146,906

The accompanying notes are integral to the consolidated financial statements.

Burnham Holdings, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

April 3,

March 28,

2022

2021

Net loss

$       (755)

$       (581)

Depreciation and amortization

1,182

1,116

Pension and postretirement liabilities expense

43

43

Contributions to pension trust (Note 5)

-

(188)

Other net adjustments

(937)

(990)

Changes in operating assets and liabilities

(6,184)

5,626

Net cash (used) / provided by operating activities

(6,651)

5,026

Purchase of property, plant and equipment

(1,431)

(5,202)

Proceeds from borrowings

9,110

1,192

Proceeds from stock option exercise and treasury activity, net

40

-

Dividends paid

(1,011)

(1,004)

Net increase in cash, cash equivalents and restricted cash

$          57

$           12

Cash, cash equivalents and restricted cash, beginning of period

$     5,654

$      5,759

Net increase in cash, cash equivalents and restricted cash

57

12

Cash, cash equivalents and restricted cash, end of period

$     5,711

$      5,771

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

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

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

The accompanying notes are integral to the consolidated financial statements.

Notes To Financial Statements:

(2)

Common stock outstanding at April 3, 2022 includes 3,262,626 of Class A shares and 1,327,496 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 quarter of 2021, the Company made voluntary pre-tax contributions of $0.19 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 quarter 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 providedfor 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 purchasingmedical and/or prescription drug coverage from providers. Additionally, certain employees electing early retirement receive afixed dollar amount based on years of employee service to assist them in covering medical costs.  These obligations areaccounted 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 theinsurance carriers, handle claims and attempt to resolve them to the benefit of both the Company and its insurance carriers. TheCompany 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 relatedgenerally to boiler products manufactured and sold by a predecessor to one of the Company's subsidiaries more than 10 yearsago. 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 beennamed, and may in the future be named, as defendants in various legal actions including claims related to property damageand/or personal injury allegedly arising from products of the Company's subsidiaries or their predecessors. A number of theseclaims allege personal injury arising from exposure to asbestos-containing material allegedly contained in certain boilersmanufactured many years ago, or through the installation or removal of heating systems. The Company's subsidiaries, directlyand/or through insurance providers, are vigorously defending all open asbestos cases, many of which involve multiple claimantsand many defendants, which may not be resolved for several years. Asbestos litigation is a national issue with thousands ofcompanies 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 theCompany.  Any such verdict would be subject to a potential reduction or reversal of verdict on appeal, any set-off rights, and/or areduction 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 verdictsamounted to $42 million and $6 million, respectively, before offsets, filed post-trial motions and appeals seeking to reduce and/oroverturn 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 thesubsidiary's liability in the 2014 verdict to less than $2 million.  On October 30, 2015, the subsidiary settled these verdicts forsignificantly less than the trial courts' reduced verdicts, with all such settled amounts being covered by applicable insurance.  TheCompany believes, based upon its understanding of its available insurance policies and discussions with legal counsel, that allpending 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 ofoperations. However, the resolution of litigation generally entails significant uncertainties, and no assurance can be given as to theultimate outcome of litigation or its impact on the Company and its subsidiaries. Furthermore, the Company cannot predictthe extent to which new claims will be filed in the future, although the Company currently believes that the great preponderanceof future asbestos claims will be covered by existing insurance. There can be no assurance that insurers will be financially ableto satisfy all pending and future claims in accordance with the applicable insurance policies, or that any disputes regardingpolicy provisions will be resolved in favor of the Company.

Litigation Expense, Settlements, and Defense: The 2022 first quarter charges for all uninsured litigation of every kind, were$115,000.  Expenses for legal counsel, consultants, etc., in defending these various actions and claims for the quarter wereapproximately $5,000.  Prior year's settlements and expenses, including amounts for self-insured asbestos cases, aredisclosed in the 2021 Annual Report.

Permitting Activities (excluding environmental): The Company's subsidiaries are engaged in various matters with respectto obtaining, amending or renewing permits required under various laws and associated regulations in order to operate each ofits manufacturing facilities. Based on the information presently available, management believes it has all necessary permits andexpects 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 localenvironmental laws. Among other things, these laws require the Company's subsidiaries to obtain and comply with the terms ofa 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 renewor amend existing permits in connection with ongoing or modified operations. In addition, the Company generally tracks and triesto anticipate any changes in environmental laws that might relate to its ongoing operations. The Company believes itssubsidiaries 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 forresponse actions at disposal areas containing waste materials from their operations. In the past five years, the Company hasnot received any notice that it or its subsidiaries might be responsible for remedial clean-up actions under governmentsupervision. However, one issue covered by insurance policies remains open as of this date and is fully disclosed in the 2021Annual Report. While it is not possible to be certain whether or how any new or old matters will proceed, the Company does notpresently have reason to anticipate incurring material costs in connection with any matters.