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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File Number
September 30, 1995 0-15045
BHA Group, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 43-1416730
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8800 East 63rd Street, Kansas City, Missouri 64133
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 356-8400
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of each class on Which Registered
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None - - - - -
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value per share
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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As of December 15, 1995, the number of shares outstanding of the Registrant's
Class A Common Stock was 5,463,416 shares, and the number of shares outstanding
of the Registrant's Class B Common Stock was 0 shares.
The aggregate market value of the voting stock held by non-affiliates* of the
Registrant's Class A Common Stock was $69,266,918, computed by reference to the
closing price of $14.00 as reported to Registrant at which such stock was quoted
by the NASDAQ National Market on November 30, 1995.
The Registrant's definitive proxy statement for the annual meeting of
stockholders to be held on February 20, 1996 (which will be filed within 120
days after the end of the fiscal year covered by the Form 10-K) is incorporated
to Part III, items 10, 11, 12 and 13, by reference.
*Excludes value of shares held by present officers, directors and principal
stockholders of the Registrant. The determination of "affiliate" status for
purposes of this Annual Report on Form 10-K shall not be deemed a determination
as to whether a person is an affiliate of the Registrant for any other purpose.
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Part I
Item 1 - Business
BHA Group, Inc. (together with its domestic and international subsidiaries, the
"Company" or "BHA") is an industrial service company that designs, manufactures
and sells replacement parts and accessories and provides rehabilitation and
conversion services for the types of industrial air pollution control equipment
known as "baghouses", "cartridge collectors" and "electrostatic precipitators".
This equipment is used to eliminate particulate from the air by passing
particulate laden gases through fabric filters or filter bags, in the case of
baghouses, pleated media filter elements, in the case of cartridge collectors or
between electrically charged collector plates, in the case of electrostatic
precipitators. An important part of the Company's business is the maintenance,
conversion and rebuilding of this equipment through a network of employees and
independent contractors. The Company's products and services are marketed
throughout North America, South America, Europe, the Near East and the Pacific
Rim. While definitive industry statistics are not available, based upon Dun &
Bradstreet reports and other financial information available to it, the Company
believes it is a leader in worldwide sales of air pollution control replacement
parts and services.
The Company was organized as an unincorporated division of Standard Havens, Inc.
("Standard Havens") in 1975 and was incorporated in Delaware as a wholly-owned
subsidiary of Standard Havens in 1986. The Company became publicly-owned when it
completed its initial public offering of common stock in November 1986. The
Company's outstanding common stock was reclassified into Class A Common Stock
and Class B Common Stock in April 1988, after which all of the Company's Class B
Common Stock held by Standard Havens was distributed to the shareholders. Since
1988, all Company Class B Common Stock has been converted to Class A Common
Stock, and no Class B Common Stock is outstanding. The Company completed its
second public offering of common stock in February 1989. Net proceeds from that
public offering (approximately $8.3 million) were used for working capital
purposes and to finance several acquisitions.
On December 13, 1995, the Board of Directors recommended for shareholder
approval an increase in the Class A Common Stock authorized from 10 million to
20 million shares, the elimination of the Class B Common Stock, and
reclassifying the Class A Common Stock of the company to Common Stock.
In June 1989, the Company acquired the business of developing and manufacturing
acoustic horns for use in both baghouses and electrostatic precipitators of
Saracco Acoustic Sciences Corporation. Other acquisitions during 1989 relating
to products and services for electrostatic precipitators are discussed below.
In April 1989, the Company formed PrecipTech, Inc. ("PrecipTech"), a Delaware
corporation, as a wholly-owned subsidiary. PrecipTech, which had previously been
a division of BHA, was formed for the purpose of conducting and expanding the
Company's business as it relates to replacement parts, accessories and services
for electrostatic precipitators.
PrecipTech completed three acquisitions of privately held companies or their
operating assets during the calendar year 1989 as follows: ESP Specialties,
Inc., a company that manufactures
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and sells replacement parts for electrostatic precipitators was acquired in
April 1989; Kinetic Controls, Inc., a company specializing in the manufacture
and sale of automatic voltage controllers for electrostatic precipitators was
acquired in July 1989; and Midwest Power Corporation, a company engaged in the
manufacture and sale of replacement parts, accessories and services for
electrostatic precipitators was acquired in October 1989.
During 1992, the Company acquired the Fabric Filters Division of Joy
Environmental Technologies which manufactures fabric filter bags. In August
1994, the Company acquired SF Air Filtration AG, which is based outside of
Zurich, Switzerland. SF Air Filtration AG designs and produces high efficiency
replacement cartridge filter elements which the Company believes will be in
demand as markets continue to move to tighten particulate control. In two
separate transactions during 1995, the Company purchased certain product rights
relating to evaporative gas cooling technology and a dust monitor product line.
Business Segment Data
The Company sells products and services in several geographical areas.
Operations of the domestic business segment are based in the U.S. The Company's
domestic operations provide products and services to the U.S. markets and
exports to Canada, Latin America, the Near East and Pacific Rim. The Company's
foreign operations manufacture and sell products in Europe. Set forth below is
information regarding the Company's business segments for each of the years in
the three-year period ended September 30, 1995 (in thousands of dollars):
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Domestic Sales 81,368 91,055 101,392
Foreign Sales (European Operations) 7,537 9,860 13,331
---------- ----------- ------------
88,905 100,915 114,723
========== =========== ============
Domestic Assets 55,433 55,575 64,300
Foreign Assets (Europe) 4,900 7,175 7,489
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60,333 62,750 71,789
========== =========== ============
Domestic Operating Income 6,304 6,966 9,281
Foreign Operating Income (Europe) 441 561 690
---------- ----------- ------------
6,745 7,527 9,971
========== =========== ============
</TABLE>
U.S. export sales to Canada, Latin America, the Near East, and Pacific Rim were
$7,667,000, $10,606,000 and $13,653,000 for the years ended September 30, 1993,
1994 and 1995, respectively. These revenues are included in "Domestic Sales" in
the table above.
Products and Services
The Company believes it has the broadest product line in the air pollution
control equipment aftermarket. This, combined with its proprietary telemarketing
system, enables it to respond promptly to customer requests, thus providing it
with a competitive advantage.
The Company manufactures and sells a wide variety of filter bags, replacement
parts and accessories for the air pollution control equipment aftermarket.
Filter bags are manufactured by the Company from fabric purchased in bulk from
fabric manufacturers. The Company
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manufactures industry standard bags, as well as bags for customer specific
applications. Most filter bags are produced from fiberglass, polyester, aramid
and polypropylene fabrics. A market shift towards higher efficiency filtration
has led to an increase in production of filters that have PTFE membrane applied
to the fabric and other more specialized materials. Baghouse replacement parts
include support cages for the filter bags, clamps, spring tensioning systems,
continuous particulate monitoring systems and gaskets. Electrostatic
precipitator replacement parts include collecting plates, wires, discharge
electrodes, transformer/rectifiers, rappers and electronic controls.
In addition to standard replacement parts, the Company continues to aggressively
introduce new products and accessories which enhance the performance of a dust
collection system. These new products include continued enhancements to the
Company's electrical products for both baghouses and precipitators and the
introduction of a pleated media filter element and evaporative gas cooling
product lines. Product profitability varies considerably over different product
groups, with filter bags typically providing a lower profit margin than
replacement parts and accessories.
The Company's business also includes the maintenance, conversion and rebuilding
of industrial air pollution control equipment through a network of independent
contractors and its own service crews. A comprehensive safety program enables
both the Company and customer to control costs from a risk management
perspective. Conversion and rebuilding services involve the retrofitting of an
entire baghouse or electrostatic precipitator to restore it to original
operating parameters or improve overall performance. BHA is capable of supplying
a variety of other services specifically fitted to its customers' requirements,
including preventive maintenance, system/equipment analysis, inspections,
supervision of customer personnel and training. Information gathered during
preventive maintenance, analysis and inspections is stored in the Company's
database for future reference, and thus is a valuable source of important
customer information. In addition, knowledge gained in solving one customer's
problems is stored in the Company's database and made available on-line to the
Company's salespeople to permit them to respond promptly to similar problems
encountered by other customers. BHA believes it is the leader in providing these
services on a worldwide basis.
Customer Base
The Company's customer base is diverse both industrially and geographically, and
includes customers in virtually all sectors of the industrial economy.
International markets include Canada, Europe, Latin America, the Near East and
the Pacific Rim. The Company's products and services are used in major
industrial environments such as cement kilns, asphalt plants, steel and iron
foundries, aluminum and copper smelters, rock and gypsum dryers, chemical
plants, grain and food processing plants, refuse to energy plants, waste and
hazardous waste incinerators and electric utilities, as well as many other
areas.
The vast majority of the Company's baghouse sales represent small transactions
with numerous customers. Precipitator replacement parts sales frequently
accompany conversion or rebuild services. No customer accounted for more than
10% of the Company's annual sales during any of its last three fiscal years. The
Company does not believe that it is dependent upon any single customer or group
of customers and has no unusual geographical or industry concentrations of
business or credit risk.
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Marketing
One of the Company's principal competitive advantages is its proprietary
telemarketing system, the core of which is a computer database containing
detailed information on over 100,000 pieces of pollution control equipment
(baghouses and electrostatic precipitators) at over 45,000 plant locations. The
growth of the telemarketing database has recently increased due to the focus on
international markets. Because of the large number of different original
equipment manufacturers and varying maintenance procedures, many pieces of
customer equipment have unique features. Included in the Company's database is
information on the location of the equipment; a phone contact for the
individuals responsible for maintaining the equipment; the type of equipment (by
manufacturer, design and unique attributes); when it was installed; what fabric,
size and design filter bags are used; when the bags were last serviced;
additional accessories that were installed; application and temperature
requirements; as well as other detailed pieces of useful information about the
equipment and the customer. This information has been gathered over the past 20
years of the Company's existence, and is continually updated following customer
calls, site inspections and maintenance jobs.
The Company keeps information in a central computer database which is accessed
on-line by its telemarketing representatives. The computer tracks customer calls
and pending orders, which helps make efficient use of the representative's time.
Each day, a list of the most important customer calls is provided to the
representative. This list includes contracts and orders in negotiation, as well
as reminders for calls to customers which have not been serviced for some time.
Once an order is taken, the information is automatically routed to the
operations area which uses the computer to generate invoices and contracts.
Invoice and technical data about the filter bags, cages, precipitator
replacement parts and accessories is sent via computer connection to the
Company's manufacturing facilities. There the bags are sewn, the support cages
and precipitator replacement parts are manufactured, and the accessories are
consolidated for shipment. The order is packaged and sent to the customer
according to a priority schedule.
Each telemarketer is furnished with data to evaluate their performance and
enable them to focus on high opportunity sales calls. Historical sales data is
made available to each telemarketer showing (i) performance by the month and
year toward targeted goals (broken down by product category) sales volume and
profit margin, (ii) the sales history for each customer, as well as the sales
potential for such customer, and (iii) a summary of each contact with each
customer and its results, including notes of any useful information for further
contacts. The Company believes that the system provides effective feedback to
telemarketing personnel to meet their sales goals.
In addition to its use on a customer-by-customer basis, the Company's
telemarketing system and database is used to develop industry statistics and
analyze market trends. Information is also extracted for marketing and
advertising campaigns and new product evaluations.
Government Regulation
The Company is not subject to direct environmental protection regulation with
respect to the manufacture or sale of its products other than regulations
applicable to manufacturers generally. The Company's customers are required to
meet national primary and secondary ambient air quality standards for specific
pollutants, including particulate matter, which have been promulgated under the
Clean Air Act, as amended (the "Act"). Title V, the cornerstone of the Act,
which has 1996 compliance deadlines, establishes a national operating permit
program. Title V will require an increase in the record keeping, monitoring and
reporting
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requirements to ensure compliance with the standards established by the
permitting authorities. The states have primary responsibility for implementing
these standards, and in some cases, have adopted standards which are more
stringent than those adopted by the Environmental Protection Agency ("EPA")
under the Act. Revisions to the Act have expanded the type of emissions
monitored and provided the EPA more power to revoke permits and issue fines. As
provisions in the Act are implemented, the regulations and enforcement practices
will force industry to take a more proactive approach toward the operation and
maintenance practices of their facilities which may have a positive impact on
the Company.
In April 1995, the enhanced monitoring provision originally required by Title V
was revised by the EPA to a proposed Compliance Assurance Monitoring ("CAM")
program. This program is scheduled for proposal in December 1995, with a final
promulgation date of July 1996. The CAM program will focus responsibility on
source operators for the monitoring of air pollution control equipment
parameters that would indicate compliance with emission requirements. In June
1995, the EPA issued the secondary lead smelter National Emissions Standards for
Hazardous Air Pollutants ("NESHAP") to require compliance and installation of a
continuous operation bag leak detection system by June 1997. Final promulgation
of additional proposed NESHAP's requiring industry to continuously monitor
emission points could have a favorable impact on the Company's particulate
monitor product line. The Company is not aware of any likely statutory changes
which may have a significant negative impact on its business.
Backlog
On September 30, 1995, the backlog of orders for replacement parts and
industrial services was $33,310,000 compared to $33,192,000 at September 30,
1994 and $32,668,000 at September 30, 1993. The company believes the majority of
the backlog is shippable by September 30, 1996.
Foreign Operations
The Company entered the European market in 1982 when it acquired, as a wholly
owned subsidiary of the Company, a German corporation, Filtra GmbH, an air
pollution control replacement parts manufacturer and marketer. The name of this
organization was changed to BHA International GmbH effective October 1, 1994 for
continuity in the Company's marketing approach with other segments of the
business. BHA International GmbH manufactures replacement parts in Ahlen, German
and sells products throughout Europe.
In August 1994, the Company acquired, as a wholly owned subsidiary of the
Company, a Swiss corporation, SF Air Filtration AG, which designs and produces
high efficiency replacement cartridge filter elements. SF Air Filtration AG
manufactures pleated media filter elements in Klus/Balsthal, Switzerland and
sells these products throughout Europe.
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Set forth below, is information regarding European sales and assets employed (in
thousands of dollars):
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
1993 1994 1995
<S> <C> <C> <C>
Sales 7,537 9,860 13,331
Identifiable Assets 4,900 7,175 7,489
Operating Profit 441 561 690
</TABLE>
Below is a schedule outlining the contribution of the Company's European Group
as a percentage of the consolidated amounts.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
1993 1994 1995
<S> <C> <C> <C>
Sales 8% 10% 12%
Identifiable Assets 8% 11% 10%
Operating Profit 7% 7% 7%
</TABLE>
BHA International GmbH's operating profits have increased steadily over the past
few years. The improvements are the result of a more narrow marketing focus
directed toward the countries of Western Europe. In previous years, its
marketing efforts were directed toward all of Europe, the Near East and Pacific
Rim. The establishment of sales and service offices in the Pacific Rim and Near
East, which provide support for export sales from the manufacturing units in the
United States, has enabled BHA International GmbH to concentrate on the European
markets and improve its ratio of accessory product sales to filter bags. This
shift in focus has had a favorable impact on its overall operating profits.
SF Air Filtration AG, which was acquired in the latter part of 1994, has
incorporated the Company's marketing strategy to its product line and achieved
positive operating profits in its first full year of operation as a wholly-owned
subsidiary of the Company.
U.S. Export Sales
The Company's domestic operations exports products from the U.S. and provides
services to customers in Canada, Latin America, the Near East and Pacific Rim.
Information regarding the Company's U.S. exports sales is included in the
Company's "Business Segment Data."
In June 1994, the Company established a liaison office in Bombay, India, with
the intention of providing sales and service assistance to customers in the Near
East. This office has provided regional support for exported product sales from
the Company's manufacturing units located in the United States. In July 1995,
approval was received from the government of India for the establishment of a
100% owned subsidiary, BHA Group International Pvt. Ltd., to replace the
Company's liaison office.
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In September 1995, the Company received approval from the government of Taiwan
for the establishment of a branch office in Taipei, Taiwan. BHA Group
International, Inc., Taiwan Branch provides sales and service assistance to
customers in the Pacific Rim including regional telemarketing for exported
product sales from the Company's manufacturing units in the United States.
Competition
Based upon Dun & Bradstreet reports and other publicly available financial
information, the Company believes that it is a global leader in the air
pollution control equipment aftermarket. The Company has seen an increase in
Latin American replacement parts sales over the last three years showing growth
in Mexico, the Caribbean and South America. Sales offices have been established
in India and Taiwan, as the Near East and the Pacific Rim markets have been
targeted for growth. As a result of this movement into the international market,
the Company is facing increased competition from competitors in those specific
markets, as well as existing competitors from the U.S. and Europe. Several of
the Company's competitors are, or are part of, large integrated companies, which
have much greater resources than the Company. The competition also includes
several dozen small filter bag manufacturers which compete in local and regional
geographic markets. Generally, original equipment manufacturers in the U.S. have
not effectively competed in the aftermarket for baghouses, but have been a
significant factor in the aftermarket for electrostatic precipitators. The
domestic utility markets for precipitators have been competitive, as this
industry is restructuring in response to deregulation. Competition has had a
negative impact on the profitability of orders executed within this industry
group. The Company is having success in other precipitator industrial markets
domestically and internationally and has positioned itself anticipating strong
competition for utility orders for the next several years.
The Company believes that important competitive factors are timely and
dependable service, effective marketing, price and quality. The Company believes
it has the broadest product line in the air pollution control equipment
aftermarket. This, combined with its proprietary telemarketing system (see
"Marketing" above), enables it to respond promptly to customer requests, thus
providing it with a competitive advantage.
Employees
As of September 30, 1995, the Company's domestic operations employed 673 persons
of whom 89 were engaged in sales and marketing, 80 were engaged in management
and administration, and 504 were engaged in production. The Company's foreign
operations in Germany and Switzerland employed 71 persons, of whom 20 were
engaged in sales and marketing, 12 were engaged in management and
administration, and 39 were engaged in production. The Company's foreign sales
and services offices employed 18 persons, 13 of which were engaged in sales and
marketing and 5 were engaged in management and administration. The production
personnel in Germany were covered by a textile union contract which is
negotiable annually. The Company restricts access to its database and
customarily requires its employees having access to proprietary systems and
information to execute confidentiality agreements and, when appropriate,
covenants not to compete. The Company believes that its relations with its
employees are good.
Patents and Trademarks
The Company owns patents and trademarks, and has pending patent and trademark
applications relating to replacement parts and accessories for industrial air
pollution control equipment. The Company considers such patents and trademarks,
and the granting of the
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patent and trademark applications filed, to be important. However, the business
of the Company is not dependent upon such patents and trademarks, and such
patents and trademarks and patent and trademark applications do not preclude the
marketing of generally similar items by competitors. Patents owned by the
Company expire during the period from 1997 to 2006.
Item 2 - Properties
Corporate Headquarters, Sales & Service Offices
The Company purchased the facility in Kansas City, Missouri, which serves as its
Corporate Headquarters (approximately 66,000 square feet) in 1994. The Company
leases office facilities in Bombay, India and Taipei, Taiwan (less than 2,000
square feet per location) for the sales organizations located in these
countries.
Manufacturing and Services Facilities
The Company owns (i) plants in Slater and Salisbury, Missouri (approximately
228,000 square feet), (ii) a plant in Folkston, Georgia (approximately 105,000
square feet), and (iii) a plant in Ahlen, Germany (approximately 30,000 square
feet). The Company leases (i) a facility in Newport News, Virginia
(approximately 17,000 square feet), (ii) a facility in Slater, Missouri
(approximately 28,000 square feet) and (iii) a facility in Klus/Balsthal,
Switzerland (approximately 20,000 square feet), (iv) a facility in Baltimore,
Maryland (approximately 3,500 square feet), (v) a facility in Covington,
Kentucky (approximately 5,000 square feet) and (vi) a facility in St. Louis,
Missouri (approximately 4,300 square feet). Operations performed at Slater and
Salisbury, Missouri and Ahlen, Germany include cutting and sewing filtration
fabrics, spot welding of metal cages and warehouse and assembly operations. The
operation in Folkston, Georgia is engaged in the manufacture of parts and
accessories for electrostatic precipitators. The operation in Newport News,
Virginia is engaged in the manufacture and assembly of computer based voltage
control systems for electrostatic precipitators. Operations in Klus/Balsthal,
Switzerland and Salisbury, Missouri are engaged in the manufacture of pleated
media filter elements for cartridge collectors. The facilities in Baltimore,
Covington and St. Louis serve as warehouse and office space for the Company's
field service crews.
The Company owns a secondary facility in Slater, Missouri (approximately 54,000
square feet) which is leased to a raw material supplier of the Company.
The buildings owned and office space leased by the Company are considered
adequate for the Company's present needs and suitable for any presently
foreseeable expansion.
Item 3 - Legal Proceedings
The Company is involved in no material legal proceedings other than ordinary
litigation incidental to the Company's business.
Item 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of the fiscal year ended
September 30, 1995 to a vote of security holders through the solicitation of
proxies or otherwise.
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Part II
Item 5 - Market for the Registrant's Common Stock
and Related Security Holder Matters
Market Information
The Class A Common Stock is traded in the over-the-counter market and quoted on
the NASDAQ National Market.
The following table sets for the range of per share bid prices for the Class A
Common Stock on the NASDAQ National Market for the past two fiscal years.
NASDAQ National Market System
<TABLE>
<CAPTION>
Per Share Class A Common
Stock Bid Price
High Low
<S> <C> <C>
Fiscal Year 1995
Fourth Quarter 15.00 12.50
Third Quarter 14.50 11.38
Second Quarter 14.25 11.50
First Quarter 13.50 11.50
Fiscal Year 1994
Fourth Quarter 13.00 9.25
Third Quarter 10.75 8.25
Second Quarter 13.25 9.50
First Quarter 14.50 9.50
</TABLE>
These market quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not necessarily represent actual transactions.
Holders
As of December 15, 1995, there were 6,435,016 shares issued and 971,600 shares
in treasury. The Company had 5,463,416 shares outstanding and owned by
approximately 618 holders of record as of this date.
Dividends
During the year ended September 30, 1994 ("fiscal 1994") and 1995 ("fiscal
1995"), the Company declared and paid quarterly dividends aggregating $.12 per
share to shareholders. The Company's Board of Directors ("Board of Directors")
has since declared a dividend of $.03 per share, payable on December 1, 1995, to
shareholders of record on November 20, 1995.
The Company does not have a formal policy for paying cash dividends on its
stock. Future determinations concerning dividends will be made, at the
discretion of the Board of Directors, based upon the Company's earnings, its
capital requirements, its financial condition, restrictions placed against
payment of dividends under any financing agreements and such other factors as
the Board of Directors, at its discretion, may from time to time deem relevant.
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Treasury Stock
During June 1994, the Board of Directors approved the purchase of up to 500,000
shares of the Company's Class A Common Stock. During November 1994, the Board of
Directors approved the repurchase of an additional 500,000, raising the total
number of shares authorized for repurchase to 1,000,000 shares. On November 7,
1995, an additional 500,000 shares were authorized for repurchase by the Board
of Directors, raising the total authorized for repurchase to 1,500,000 shares.
As of September 30, 1995 and December 15, 1995, a total of 971,600 shares of
Class A Common Stock had been repurchased by the Company.
Item 6 - Selected Financial Data
The following selected consolidated financial data should be read in conjunction
with Consolidated Financial Statements and notes thereto contained elsewhere in
the Annual Report on Form 10-K. The selected consolidated data for each of the
periods shown have been derived from such financial statements which have been
audited by KPMG Peat Marwick LLP. The consolidated financial statements, as of
September 30, 1995 and 1994 and for each of the years in the three-year period
then ended, and independent auditors report thereon are included herein.
<TABLE>
<CAPTION>
Years Ended September 30,
1991 1992 1993 1994 1995
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Selected Income Statement Data
Net Sales 69,687 81,847 88,905 100,915 114,723
Gross Margin 19,133 22,479 22,668 25,270 31,206
Operating Expense 11,972 14,622 15,923 17,743 21,235
Interest Expense/(Income)-Net 146 (24) 5 (47) 367
Earnings Before Income Taxes 7,015 7,881 6,740 7,574 9,604
Net Earnings 3,958 4,911 4,380 4,809 5,954
Net Earnings Per Share .61 .75 .67 .75 1.03
Weighted Average Shares Outstanding 6,470 6,512 6,528 6,386 5,794
Selected Balance Sheet Data
Working Capital 19,782 24,348 25,414 24,721 24,887
Total Assets 45,760 54,363 60,333 62,751 71,789
Short-Term Debt Including Current Portion of Long-Term Debt 797 490 49 56 757
Long-Term Debt (Less Current Portion) 1,403 963 398 351 9,899
Shareholders' Equity 38,428 44,030 48,036 48,863 46,440
Cash Dividends Declared Per Common Share -0- -0- .08 .12 .12
</TABLE>
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Operating results for the three fiscal years ended September 30, 1995:
Sales
Consolidated sales during fiscal 1995 were $114.7 million, which represented a
13.7% increase over fiscal 1994. BHA Company, Inc. ("BHA Company") sales of
$58.4 million, increased 21.0% over fiscal 1994. The increase was attributable
to higher sales of fabric filters, cages and pleated products. Sales of
maintenance services and major projects also increased during the period. BHA
Group International, Inc. ("BGI") sales were $24.2 million, representing a 39.8%
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increase over fiscal 1994. The improvement was attributable to an increase in
sales of fabric filter and electrostatic precipitator products and services to
the Latin American, Pacific Rim and Near East markets. Sales to Europe also
increased as BGI's German fabric filter company was able to significantly
increase its business within Europe and a full year of SF Air Filtration AG's
results, which was acquired in August of 1994, were included in fiscal 1995. BGI
sales, exclusive of SF Air Filtration AG sales, increased 19.6% during fiscal
1995 as compared to fiscal 1994. PrecipTech sales decreased by 9.1% to $32.1
million during fiscal 1995. The decrease was attributable to a general weakness
in the utility based market as the number of large rebuild orders executed
decreased versus the number in prior years. The decrease in sales of engineered
rebuilds was offset in part by higher sales to the industrial markets.
For fiscal 1994, consolidated sales were $100.9 million, which represented a
13.5% increase over fiscal 1993. PrecipTech sales increased 33.5% to $35.4
million during fiscal 1994 due to the execution of several large utility and
industrial rebuild orders and an increase in sales of electronic control
products. BHA Company sales of $48.5 million were consistent with sales in
fiscal 1993, as higher sales of fabric filters were offset by lower major
project and engineered systems sales. BGI sales were $17.0 million, which
represented a 28.7% increase over fiscal 1993 due to higher sales of
precipitator products and services to the Latin American market and increased
sales of baghouse products to Europe.
Gross Margin
Consolidated gross margin as a percentage of sales was 27.2%, 25.0% and 25.5%
for fiscal years 1995, 1994 and 1993, respectively. The improvement in overall
gross margin during fiscal 1995 was attributable to an improved mix of products
and markets. BHA Company gross margin percentages increased over the same period
a year ago, due to higher sales of accessory product lines and to favorable
plant absorption associated with higher sales of manufactured parts.
Consolidated gross margin percentages also improved as the growth rate in BGI
sales, which carry higher gross margin percentages than BHA Company and
PrecipTech, exceeded the domestic business sales growth rate. PrecipTech gross
margin percentages were consistent with those of the prior year.
During fiscal 1994, PrecipTech gross margin percentages were lower than fiscal
1993 due to a sales mix weighted towards utility engineered rebuild orders which
carry lower gross margin percentages than stand alone replacement parts orders.
Lower PrecipTech gross margins were offset in part by higher BHA Company gross
margin percentages which improved as compared to the previous year, due in part
to higher plant absorption associated with the increased sales of manufactured
products. Gross margins associated with the BHA Company service business also
improved due to a change in marketing focus and business methods. BGI gross
margin percentages, which are higher than domestic margins, were consistent with
the previous year.
Operating Expense
Selling and advertising expense as a percentage of sales was 9.4%, 8.8% and 8.5%
for fiscal years 1995, 1994 and 1993, respectively. The increase in fiscal 1995
and 1994 selling and advertising expense as a percentage of sales over fiscal
1993 is attributable to higher selling expenses associated with the increase in
international business, which requires higher selling overheads and the
establishment and expansion of several international sales and services offices.
-13-
<PAGE>
<PAGE>
General and administrative expense as a percentage of sales was 9.1%, 8.7% and
9.4% for fiscal years 1995, 1994 and 1993, respectively. The fiscal 1995
increase in general and administrative expenses as a percentage of sales was due
to higher payroll and administrative expenses associated with an increase in
international and domestic business. The fiscal 1994 decrease in general and
administrative expense as a percentage of sales was the result of higher sales
volume yielding greater administrative efficiency.
Net Interest Income/Expense
Interest income was $42,000, $79,000 and $62,000 for fiscal years 1995, 1994 and
1993, respectively. Interest expense for fiscal years 1995, 1994 and 1993 was
$409,000, $32,000 and $67,000, respectively. The increase in interest expense in
1995 was attributable to borrowings under the Company's credit facilities for
the purchase of the building, which serves as the Company's headquarters, other
additions to property, plant and equipment and the acquisition of the Company's
shares as treasury stock.
Income Taxes
The effective tax rates were 38.0%, 36.5% and 35.0% in fiscal years 1995, 1994
and 1993. The higher tax rate during fiscal 1995 was attributable to higher
state taxes related to U.S. domestic earnings and the mix between domestic and
foreign operations. The lower percentage in fiscal 1993 was attributable to the
increased contribution of foreign operations to consolidated earnings.
Net Earnings
Net earnings were $6.0 million, $4.8 million and $4.4 million for fiscal years
1995, 1994 and 1993, respectively. The improvement in fiscal 1995 net earnings
reflects the higher sales volume and gross margin percentages in both the
domestic and international markets. The fiscal 1994 increase in net earnings was
attributable to higher sales volume.
Liquidity and Capital Resources
Net working capital was $24.9 million, $24.7 million and $25.4 million as of
September 30, 1995, 1994 and 1993, respectively. The current ratios at September
30, 1995, 1994 and 1993 were 2.90 to 1, 3.2 to 1 and 3.2 to 1.
Cash decreased $4.5 million from $6.8 million at September 30, 1994 to $2.3
million at September 30, 1995. Net cash provided by operating activities in
fiscal 1995 was $5.1 million. Fiscal 1994 cash provided by operating activities
was unusually high as a result of higher than normal collections due to several
large receivable balances from customers as of the end of fiscal 1993. The
Company's investing activities of $11.3 million, which included the purchase of
the building which serves as the Company's corporate headquarters, capital
improvements at its manufacturing facilities, and the acquisition of certain
product rights, were a primary reason for the overall decrease in cash. The
Company's net financing activities included the acquisition of 625,100 shares of
treasury stock for $8.0 million. The Company's investing and financing
activities were funded by net borrowings of $8.2 million under the Company's
revolving lines of credit and $2.5 million under a bank term note.
During fiscal 1995, the Company expanded its borrowing capacity through the
establishment of revolving lines of credit and increases to the limits under
existing lines of credit. At September 30, 1995, the Company had unused lines of
credit of approximately $9.2 million. The Company had unused short-term foreign
exchange borrowing arrangements of approximately $8.7 million at September 30,
1995. The Company believes that cash flow from
-14-
<PAGE>
<PAGE>
operations and available credit facilities will be sufficient to meet its
capital needs for the foreseeable future.
New Accounting Pronouncement
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
(Statement 121) was issued by the Financial Accounting Standards Board in March
1995 and is effective for fiscal years beginning after December 15, 1995 (the
Company's 1997 fiscal year). Management expects the adoption of Statement 121
will not have a significant impact on the Company's consolidated financial
statements.
Item 8 - Financial Statements and Supplementary Data
Incorporated by reference to the consolidated financial statements attached
herewith. See Index to Consolidated Financial Statements and Schedules.
Item 9 - Disagreements on Accounting and Financial Disclosure
There were no disagreements with the Company's principal accountants which
require disclosure pursuant to this item.
-15-
<PAGE>
<PAGE>
Part III
Part III (Items 10, 11, 12 and 13) is omitted by the Company in accordance with
General Instruction G to Form 10-K. The Company intends to file with the
Commission a definitive proxy statement pursuant to Regulation 14A not later
than 120 days following the close of its fiscal year ending September 30, 1995.
-16-
<PAGE>
<PAGE>
Part IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements: See accompanying Index to Consolidated Financial
Statements and Schedules.
(a) (2) Financial Statement Schedules: See accompanying Index to Consolidated
Financial Statements and Schedules. All schedules not listed have been
omitted because they are not applicable or the information has been
otherwise supplied in the Registrant's Financial Statements and
Schedules.
(a) (3) Exhibits:
(3a) Certificate of Incorporation, as amended (1) (2).
(3b) By-Laws, as amended (8).
(10a) BHA Group, Inc. 1986 Stock Option Plan as amended, including
form of Option Agreement (3).
(10b) Second Amendment to the BHA Group, Inc. 1986 Stock Option Plan
(5).
(10c) Lease Agreement dated September 30, 1991, with SH Properties,
Inc. (4).
(10d) Loan Agreement between Standard Havens, Inc. and certain
insurance companies (1), and assumption agreement pursuant to
which the company became the sole obligor under the loan (2).
(10e) Employee Stock Ownership Plan of BHA (1).
(10f) 401(K) Plan of BHA (1).
(10g) Loan Agreement between BHA Group, Inc. and Boatmen's First
National Bank of Kansas City, N.A. (2).
(10h) Directors and Officers Insurance and Company Reimbursement
Policy issued by National Union Fire Insurance Company of
Pittsburgh, Pennsylvania (2).
(10i) Employment Agreement dated September 1, 1993 between BHA Group,
Inc. and Lamson Rheinfrank, Jr. (6).
(10j) Employment Agreement dated September 1, 1993 between BHA Group,
Inc. and Michael T. Zak (6).
(10k) Employment Agreement dated September 1, 1993 between BHA Group,
Inc. and James E. Lund (6).
-17-
<PAGE>
<PAGE>
(10l) Employment Agreement dated September 1, 1993 between BHA Group,
Inc. and James J. Thome (6).
(10m) Employment Agreement dated September 1, 1993 between BHA Group,
Inc. and James C. King (6).
(10n) Employment Agreement dated January 1, 1995 between BHA Group,
Inc. and James C. Shay (8).
(10o) Rights Agreement dated as of December 13, 1995, between BHA
Group, Inc., and Boatmen's Trust Company, including Form of
Rights Certificate (Exhibit A) and Summary of Rights to
Purchase Common Stock (Exhibit B) (7).
(11) Computation of earnings per common share (8).
(21) Subsidiaries of the Registrant (8).
(23) Independent Auditors' Consent (8).
(b) Reports on Form 8-K: Filed on December 22, 1995 reporting an Item 5
event (the approval by the Board of Directors of a Rights Agreement).
(c) Exhibits: See (a) (3) above.
(d) Financial Statement Schedules: See (a) (2) above.
Notes to Index
(1) Filed as an exhibit to the Company's Registration Statement on Form
S-1, as amended (Registration No. 33-8644) which is incorporated herein
by reference.
(2) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1988 which is incorporated herein by
reference.
(3) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1990 which is incorporated herein by
reference.
(4) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1991 which is incorporated herein by
reference.
(5) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1992 which is incorporated herein by
reference.
(6) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1993 which is incorporated herein by
reference.
-18-
<PAGE>
<PAGE>
(7) Filed as an exhibit to the Company Current Report on Form 8-K filed
with the Securities and Exchange Commission on December 15, 1995, which
is incorporated herein by reference.
(8) Filed as an exhibit hereto.
-19-
<PAGE>
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BHA Group, Inc.
Dated: December 15, 1995 By: /s/ James E. Lund
---------------------- --------------------------------
James E. Lund, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the Registrant and in
the capacities and on the dates indicated.
Dated: December 15, 1995 By: /s/ James E. Lund
---------------------- --------------------------------
James E. Lund, President
Principal Executive Officer and Director
Dated: December 15, 1995 By: /s/ Lamson Rheinfrank, Jr.
---------------------- --------------------------------
Lamson Rheinfrank, Jr.
Chairman of the Board
Dated: December 15, 1995 By: /s/ Michael T. Zak
---------------------- --------------------------------
Michael T. Zak
Vice Chairman and Director
Dated: December 15, 1995 By: /s/ Don H. Alexander
---------------------- --------------------------------
Don H. Alexander
Director
Dated: December 15, 1995 By: /s/ Robert Freeland
---------------------- --------------------------------
Robert Freeland
Director
Dated: December 15, 1995 By: /s/ Thomas A. McDonnell
---------------------- --------------------------------
Thomas A. McDonnell
Director
Dated: December 15, 1995 By: /s/ James J. Thome
---------------------- --------------------------------
James J. Thome
Executive Vice President and Director
Dated: December 15, 1995 By: /s/ James C. King
---------------------- --------------------------------
James C. King
Senior Vice President, Secretary and
Director
Dated: December 15, 1995 By: /s/ Richard C. Green, Jr.
---------------------- --------------------------------
Richard C. Green, Jr.
Director
Dated: December 15, 1995 By: /s/ James C. Shay
---------------------- --------------------------------
James C. Shay
Principal Financial & Accounting Officer
-20-
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedules
Independent Auditors' Report
Financial Statements:
Consolidated Balance Sheets - September 30, 1995 and 1994
Consolidated Statements of Earnings -
Years ended September 30, 1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity -
Years ended September 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows -
Years ended September 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Schedule
--------
Schedule - Years ended September 30, 1995, 1994 and 1993 as required:
Valuation and Qualifying Accounts II
All other schedules are omitted because they are not applicable or the
information is contained in the consolidated financial statements or notes
thereto.
21
<PAGE>
<PAGE>
[KPMG LOGO]
The Global Leader
[BHA LOGO]
BHA GROUP, INC. AND SUBSIDIARIES
Consolidated Financial Statements
September 30, 1995, 1994 and 1993
(With Independent Auditors' Report Thereon)
22
<PAGE>
<PAGE>
[LOGO] Peat Marwick LLP
1000 Walnut, Suite 1600
P.O. Box 13127
Kansas City, MO 64199
INDEPENDENT AUDITORS' REPORT
The Board of Directors
BHA Group, Inc.:
We have audited the accompanying consolidated balance sheets of BHA Group, Inc.
and subsidiaries as of September 30, 1995 and 1994 and the related consolidated
statements of earnings, shareholders' equity and cash flows for each of the
years in the three-year period ended September 30, 1995. These consolidated
financial statements are the responsibility of BHA's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of BHA Group, Inc. and
subsidiaries at September 30, 1995 and 1994 and the results of their operations
and their cash flows for each of the years in the three-year period ended
September 30, 1995 in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
November 7, 1995
23
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,316,677 6,796,976
Accounts receivable, less allowance for doubtful
receivables of $830,496 in
1995 and $756,928 in 1994 19,074,975 14,957,812
Inventories (note 1) 14,864,490 12,452,044
Prepaid expenses 856,488 1,223,122
Deferred income taxes (note 5) 860,000 635,000
------------ ----------
Total current assets 37,972,630 36,064,954
------------ ----------
Property, plant and equipment, at cost:
Land and improvements 955,255 670,241
Buildings and improvements 14,479,697 10,384,234
Machinery and equipment 23,885,716 18,711,729
Office furniture, fixtures and equipment 2,569,224 2,266,738
------------ ----------
41,889,892 32,032,942
Less accumulated depreciation and amortization 17,127,848 13,654,884
------------ ----------
Net property, plant and equipment 24,762,044 18,378,058
------------ ----------
Intangible and other assets, less accumulated
amortization (note 3) 3,814,504 2,919,428
Excess of cost over net assets of businesses acquired,
less accumulated amortization (note 3) 5,239,662 5,388,352
------------ ----------
$ 71,788,840 62,750,792
============ ==========
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt (note 4) $ 756,696 56,016
Accounts payable 6,299,344 7,177,851
Accrued compensation and employee benefit costs 4,059,919 2,550,358
Accrued expenses and other current liabilities 397,123 383,376
Reserve for warranty and product service 848,534 795,463
Income taxes payable 724,379 380,720
------------ ----------
Total current liabilities 13,085,995 11,343,784
------------ ----------
Deferred income taxes (note 5) 2,364,000 2,193,000
Long-term debt, excluding current installments (note 4) 9,898,683 350,717
Shareholders' equity (note 2 and 4):
Class A common stock $.01 par vaiue. Authorized 10,000 000 shares;
issued 6,426,302 and 6,380,002 shares, respectively 64,263 63,800
Additional paid-in capital 24,923,428 24,402,261
Retained earnings 33,194,128 27,925,706
Foreign currency translation adjustment 280,441 37,986
Unearned compensation (note 6) (418,312) --
Less cost of 971,600 and 346,500 shares of common stock in treasury (11,603,786) (3,566,462)
------------ ----------
Total shareholders' equity 46,440,162 48,863,291
------------ ----------
Commitments and contingent liabilities (note 7) $ 71,788,840 62,750,792
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
<PAGE>
BHA GROUP, INC, AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales $ 114,722,893 100,914,568 88,904,928
Cost of sales 83,516,735 75,644,885 66,237,077
------------- ----------- ----------
Gross margin 31,206,158 25,269,683 22,667,851
------------- ----------- ----------
Operating expenses:
Selling and advertising expense 10,778,323 8,927,722 7,546,421
General and administrative expense 10,456,564 8,814,812 8,376,750
------------- ----------- ----------
Total operating expenses 21,234,887 17,742,534 15,923,171
------------- ----------- ----------
Operating income 9,971,271 7,527,149 6,744,680
Interest expense (409,436) (32,220) (67,018)
Interest income 41,952 79,499 62,490
------------- ----------- ----------
Earnings before income taxes 9,603,787 7,574,428 6,740,152
------------- ----------- ----------
Income taxes (note 5):
Current 3,704,000 2,531,000 2,380,000
Deferred (54,000) 234,000 (20,000)
------------- ----------- ----------
Total income taxes 3,650,000 2,765,000 2,360,000
------------- ----------- ----------
Net earnings $ 5,953,787 4,809,428 4,380,152
============= =========== ==========
Earnings per common share $ 1.03 0.75 0.67
==== ==== ====
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Class A common stock (note 2):
Balance at beginning of year $ 63,800 63,660 45,587
Issuance of 46,300 shares of common stock in 1995, 14,000 shares
in 1994, and 66,651 shares in 1993 463 140 667
Conversion from Class B common stock -- -- 17,406
---------- ---------- ----------
Balance at end of year 64,263 63,800 63,660
---------- ---------- ----------
Class B common stock (note 2):
Balance at beginning of year -- -- 17,406
Conversion of 1,740,614 shares to Class A common stock -- -- (17,406)
---------- ---------- ----------
Balance at end of year -- -- --
---------- ---------- ----------
Additional paid-in capital:
Balance at beginning of year 24,402,261 24,219,654 23,651,937
Excess of proceeds over par value of common stock issued 521,167 182,607 567,717
---------- ---------- ----------
Balance at end of year 24,923,428 24,402,261 24,219,654
---------- ---------- ----------
Retained earnings:
Balance at beginning of year 27,925,706 23,877,816 20,006,564
Net earnings 5,953,787 4,809,428 4,380,152
Payment of cash dividends on Class A common stock ($.12 per share in 1995
and 1994 and $.08 per share in 1993) (685,365) (761,538) (508,900)
---------- ---------- ----------
Balance at end of year 33,194,128 27,925,706 23,877,816
---------- ---------- ----------
Foreign currency translation adjustment:
Balance at beginning of year 37,986 (124,769) 308,679
Equity adjustment from foreign currency translation 242,455 162,755 (433,448)
---------- ---------- ----------
Balance at end of year 280,441 37,986 (124,769)
---------- ---------- ----------
Unearned compensation (note 6):
Balance at beginning of year -- -- --
Issuance of 45,000 share of restricted Class A common stock (517,500) -- --
Recognition of compensation expense 99,188 -- --
---------- ---------- ----------
Balance at end of year (418,312) -- --
---------- ---------- ----------
Treasury stock:
Balance at beginning of year (3,566,462) -- --
Acquisition of 625,100 and 346,500 shares of common
stock at cost in 1995 and 1994, respectively (8,037,324) (3,566,462) --
---------- ---------- ----------
Balance at end of year (11,603,786) (3,566,462) --
---------- ---------- ----------
Total shareholders' equity $46,440,162 48,863,291 48,036,361
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 5,953,787 4,809,428 4,380,152
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 4,285,692 3,628,857 3,100,200
Provision for deferred income taxes (54,000) 234,000 (20,000)
Changes in assets and liabilities, net of amounts in business acquired:
Accounts receivable (4,117,163) 6,561,027 (6,044,331)
Inventories (2,412,446) (839,877) (595,133)
Prepaid expenses 366,634 42,068 85,569
Accounts payable (878,507) (1,875,358) 3,093,075
Accrued expenses and other liabilities 1,576,379 765,101 230,118
Income taxes payable 343,659 143,005 165,334
----------- --------- ----------
Net cash provided by operating activities 5,064,035 13,468,251 4,394,984
----------- --------- ----------
Cash flows from investing activities:
Additions to property, plant and equipment (9,856,950) (3,696,371) (5,449,628)
Additions to excess cost over net assets of businesses acquired -- -- (42,617)
Net assets of businesses acquired, excluding cash -- (2,257,423) --
Acquisition of product rights and other intangible assets (1,459,886) (410,000) --
Proceeds from sale of fixed assets -- 58,114 16,968
----------- --------- ----------
Net cash used in investing transactions (11,316,836) (6,305,680) (5,475,277)
----------- --------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 4,130 -- 269,358
Payment of cash dividends on common stock (685,365) (761,538) (508,900)
Purchase of treasury stock (8,037,324) (3,566,462) --
Repayments of long-term debt (457,514) (41,002) (1,005,787)
Borrowing on lines of credit, net 8,206,120 -- --
Proceeds from long-term debt 2,500,000 -- --
Payment on other long-term liabilities -- -- (200,000)
----------- --------- ----------
Net cash provided (used) by financing activities (1,530,047) (4,369,002) (1,445,329)
----------- --------- ----------
Effect of exchange rate changes 242,455 162,755 (213,886)
----------- --------- ----------
Net increase (decrease) in cash and cash equivalents (4,480,299) 2,956,324 (2,739,508)
Cash and cash equivalents at beginning of year 6,796,976 3,840,652 6,580,160
----------- --------- ----------
Cash and cash equivalents at end of year $ 2,316,677 6,796,976 3,840,652
=========== ========= ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 402,000 32,000 108,000
=========== ========= ==========
Income taxes $ 3,306,000 2,420,000 2,215,000
=========== ========= ==========
Supplemental disclosure of noncash investing and financing activities:
Issuance of common stock to officers and employees $ 517,500 140,000 --
=========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies
Presentation
The consolidated financial statements include the accounts of BHA Group,
Inc. (BHA) and its wholly-owned foreign and domestic subsidiaries. All
significant intercompany balances and transactions have been
eliminated in consolidation.
Revenue Recognition
BHA recognizes revenues at the time products are shipped or services are
performed.
Inventories
BHA values its inventory at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
Components of inventories at September 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw materials $ 9,223,825 8,625,316
Work-in-process 1,580,177 1,159,831
Finished goods 4,060,488 2,666,897
----------- ----------
Total $14,864,490 12,452,044
=========== ==========
</TABLE>
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Major renewals and
betterments are charged to the property accounts, while replacements
and maintenance and repairs which do not improve or extend the life of
the respective assets are charged to expense as incurred.
Depreciation and Amortization
Depreciation and amortization of property, plant and equipment are computed
on the straight-line method using estimated useful lives by major
asset class as follows:
<TABLE>
<S> <C>
Buildings and improvements 30 years
Machinery and equipment 4 - 8 years
Office furniture, fixtures and equipment 3 - 10 years
</TABLE>
(Continued)
28
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income Taxes
BHA adopted Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes," (Statement No. 109) in the first
quarter of fiscal 1994. Prior year financial statements were not
restated. Under Statement No. 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in earnings in the period that includes the enactment
date. The adoption of Statement No. 109 did not have a significant
impact on the consolidated financial statements of BHA.
No provision is made for income taxes on undistributed earnings of the
foreign subsidiaries because such earnings have been indefinitely
invested in the foreign subsidiaries.
Warranty and Product Service
BHA provides a reserve for estimated warranty and product service claims
based on historical experience and consideration of changes in
products and technology.
Foreign Currency Translation
Financial statements of BHA's foreign subsidiaries located in Germany and
Switzerland are translated into U. S. dollars at current and average
exchange rates. Translation gains and losses are included in
shareholders' equity.
Transaction gains and losses resulting from fluctuations in exchange rates
between the functional currency (U. S. dollars) and the currency in
which a foreign currency transaction is denominated are included in
net earnings. Transaction gains included in the consolidated
statements of earnings for 1995, 1994 and 1993 amounted to $14,700,
$14,617 and $75,231, respectively.
Forward Exchange Contracts
BHA has entered into forward exchange contracts in order to fix the
currency exchange rate related to intercompany transactions with its
foreign subsidiaries. Changes in the value of these instruments due to
currency movements offset the foreign exchange gains and losses of the
corresponding intercompany transactions. At September 30, 1995 and
1994, the aggregate amount of such forward exchange contracts was
approximately $1,450,000 and $750,000, respectively. The fair value of
the outstanding forward exchange contracts approximates the aggregate
amount outstanding at September 30, 1995.
(Continued)
29
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Earnings Per Common Share
Earnings per common share is computed based on the average number of common
shares and common share equivalents outstanding (5,793,929, 6,385,902
and 6,528,053 for 1995, 1994 and 1993, respectively). The common share
equivalents which had a dilutive effect on earnings per share and were
included in the computation of earnings per share amounted to 123,934,
71,145 and 179,942 for 1995, 1994 and 1993, respectively. The stock
options which result in common share equivalents are described in note
6.
Cost in Excess of Net Assets Acquired and Intangible Assets
Cost in excess of net assets acquired is being amortized over periods
ranging from thirty to forty years, and is presented in the
accompanying consolidated balance sheets net of accumulated
amortization of $675,000 and $526,000 at September 30, 1995 and 1994,
respectively.
Intangible assets are being amortized over periods ranging from five to
seventeen years and are presented in the accompanying consolidated
balance sheets net of accumulated amortization of $3,973,000 and
$3,425,000 at September 30, 1995 and 1994, respectively
BHA assesses the recoverability of cost in excess of net assets acquired
and intangible assets by determining whether the amortization of such
balances over the remaining life can be recovered through undiscounted
future operating cash flows.
Business Risk
BHA has no significant or unusual geographical or industry concentrations
of business or credit risk.
Statements of Cash Flows
For purposes of the consolidated statements of cash flows, BHA considers
overnight invested cash and investments in market securities, with
maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable and accounts payable
approximate fair value because of the short maturities of these
instruments. The carrying amount of long-term debt approximates fair
value at September 30, 1995, as substantially all such debt accrues
interest at variable rates.
(Continued)
30
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Common Stock
On March 14, 1988, shareholders approved a recapitalization providing for
the redesignation or reclassification of each of BHA's then
outstanding common stock into one share of Class A common stock, the
creation of a Class B common stock and the increase of the total
number of authorized shares. During 1993, shareholders elected to
convert 33,859 Class B common shares into shares of Class A common
stock. BHA elected to convert the remaining 1,706,755 outstanding
shares of Class B common stock into shares of Class A common stock on
April 21, 1993.
In June 1994, the Board of Directors of BHA approved the purchase of up
to 500,000 shares of the Company's Class A common stock. As of
September 30, 1994, the Company had acquired 346,500 shares of Class A
common stock. In November 1994, the Board of Directors approved the
purchase of an additional 500,000 shares, raising the total number of
shares authorized for repurchase to 1,000,000 shares. As of September
30, 1995, the Company had acquired a total of 971,600 shares of Class
A common stock at a cost of $11,603,786.
(3) Acquisition of Businesses and Product Rights
In two separate transactions during 1995, BHA acquired certain product
rights and other information relating to evaporative gas cooling
technology and a dust monitoring product line for a total of
$1,450,000. Of this amount, a total of $1,200,000 was paid prior to
September 30, 1995. The evaporative gas cooling agreement provides for
royalty payments to the former owner for product sales subsequent to
the purchase date. The costs associated with the technology and
product right acquisitions are being amortized on a straight-line
basis over periods ranging from six to ten years.
In August 1994, BHA acquired SF Air Filtration, AG, located in
Switzerland, for $2,540,000. The acquisition was accounted for as a
purchase, with the purchase price allocated to the assets acquired
based upon the estimated fair values as of the date of acquisition.
The excess of the purchase price over the net assets acquired
amounting to $1,497,000 is being amortized on a straight-line basis
over thirty years.
In October 1993, BHA acquired certain product rights, which includes a
trademark, relating to an accessory product line for $410,000. The
cost of the product rights is being amortized on a straight-line basis
over ten years.
(4) Notes Payable to Banks and Long-term Debt
In 1995, BHA entered into a $2,500,000 unsecured term loan, the proceeds
of which were used to purchase the building which serves as BHA's
corporate headquarters. The unsecured term loan has variable interest
rates tied to the bank's prime interest rate. Principal payments are
due in quarterly installments over a five year period through 2000.
The outstanding balance under this term loan was $2,125,000 at
September 30, 1995.
(Continued)
31
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
BHA has unsecured bank lines of credit amounting to $16,000,000 for
working capital purposes and other corporate matters. These lines bear
interest at variable rates which are based on the prime rate and/or
LIBOR. The facilities included revolving credit agreements of
$3,000,000 and $5,000,000 which expire in 1998 and 2000, respectively,
in which BHA pays 0.25% as commitment fees on the unused portion.
Lines of credit of $3,000,000 and $5,000,000, for which BHA pays no
commitment fee, are also available. These lines expire during 1996. At
September 30, 1995, $8,015,000 was outstanding under all bank lines of
credit at a weighted average interest rate of 7.06%.
BHA's foreign subsidiary located in Germany maintains a line of credit with
a foreign bank in the amount of DM1,800,000 (approximately $1,261,000
(U.S.)). As of September 30, 1995, there were no amounts outstanding
under this line of credit. BHA's foreign subsidiary located in
Switzerland also maintains a line of credit with a foreign bank in the
amount of SFR200,000 (approximately $164,000 (U.S.)). As of September
30, 1995, $191,000 was outstanding under these lines of credit.
The term loan and domestic bank lines of credit require BHA, among other
things, to maintain minimum levels of net worth, minimum fixed charge
coverage, minimum current ratio and maximum leverage ratio. BHA was in
compliance with all covenants at September 30, 1995. At September 30,
1995, $6,440,000 of retained earnings were available for dividends.
A summary of long-term debt at September 30, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Unsecured lines of credit with variable interest rates $8,206,120 -
Notes payable to banks, bearing interest at 6.5% to
7.5%, with annual principal payments of $56,000 to
$500,000 from 1995 to 2000 2,449,259 406,733
Less current installments 756,696 56,016
---------- -------
Long-term debt, excluding current
installments $9,898,683 350,717
========== =======
</TABLE>
Annual payments on long-term debt for the next five fiscal years are as
follows:
<TABLE>
<S> <C>
1996 $ 756,696
1997 1,711,790
1998 2,431,556
1999 571,690
2000 5,183,647
------------
$ 10,655,379
============
</TABLE>
(Continued)
32
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Income Taxes
The components of total income tax expense for the years ended September
30, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current income tax expense:
Federal $3,271,000 2,235,000 2,166,000
State and local 433,000 296,000 214,000
Deferred income tax expense (benefit):
Federal (48,000) 205,000 (18,000)
State (6,000) 29,000 (2,000)
---------- --------- ---------
$3,650,000 2,765,000 2,360,000
========== ========= =========
</TABLE>
The effective tax rate differs from the expected tax rate for the
respective years as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Expected income tax expense 34.0% 34.0 34.0
Difference in tax rates of foreign subsidiaries (.7) (2.7) (2.0)
State income taxes, net 2.9 2.8 2.4
Other, net 1.8 2.4 .6
---- ---- ----
Effective income tax rate 38.0% 36.5 35.0
==== ==== ====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
September 30, 1995 and 1994 are presented below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Reserves not currently deductible $ 795,000 445,000
Inventories 319,000 256,000
Other, net 217,000 170,000
---------- ----------
Total gross deferred tax assets 1,331,000 871,000
---------- ----------
Deferred tax liabilities:
Intangible and other assets 778,000 840,000
Property, plant and equipment 1,172,000 1,132,000
Prepaid expenses 161,000 172,000
Deferred compensation 235,000 --
Other, net 489,000 285,000
---------- ----------
Total gross deferred tax liabilities 2,835,000 2,429,000
---------- ----------
Net deferred tax liability $1,504,000 1,558,000
========== ==========
</TABLE>
(Continued)
33
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At September 30, 1995 and 1994, deferred tax assets and liabilities are
classified in the accompanying consolidated balance sheets as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current deferred income tax asset $ 860,000 635,000
Noncurrent deferred income tax liability (2,364,000) (2,193,000)
----------- -----------
Net deferred income tax liability $(1,504,000) (1,558,000)
=========== ===========
</TABLE>
BHA has not recorded a valuation allowance relating to deferred tax
assets, as taxable temporary differences are expected to be offset by
deductible temporary differences.
The components of deferred income tax benefit for the year ended September
30, 1993 are as follows:
<TABLE>
<S> <C>
Prepaid commissions $ 36,000
Depreciation and amortization (30,000)
Experience method on bad debts 1,000
Inventory capitalization (15,000)
Other, net (12,000)
--------
Deferred income tax benefit $(20,000)
========
</TABLE>
BHA has not provided deferred taxes on the cumulative undistributed
earnings/(losses) of its foreign subsidiaries, which approximate
$285,000, $(183,000) and $(712,000) at September 30, 1995, 1994 and
1993, respectively, as management considers these earnings to be
permanently invested. Net earnings of the foreign subsidiaries were
approximately $468,000, $529,000 and $374,000 for the years ended
September 30, 1995, 1994 and 1993, respectively.
(6) Incentive Stock Plan
BHA has an incentive stock plan for key employees, officers and directors.
On February 21, 1995, the shareholders approved an amendment to the
plan. The amendment increased the total number of shares of Class A
common stock available for issuance from 970,000 to 1,280,000
including allocation of an additional 200,000 shares for issuance as
stock options, 90,000 shares for issuance as restricted stock and
20,000 shares for issuance to outside directors in lieu of cash
payment of director fees. The expiration date of the Plan was extended
to August 9, 2004. The plan provides that the options must be
exercised within ten years from the date of grant and the option price
may not be less than 100% of the fair market value of the shares on
the date of grant. In addition, certain options are not exercisable
unless the fair market value of the shares is at least $20 per share.
During fiscal 1995, the Company awarded 45,000 shares of restricted stock,
under the incentive stock plan, to certain employees. The fair value
of the awards at the date of issuance is being recognized as
compensation expense ratably over the five-year vesting period.
(Continued)
34
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A summary of transactions in the stock option plan is as follows:
<TABLE>
<CAPTION>
1995
-------------------------------
Number Exercise
of shares prices
--------- ------
<S> <C> <C>
Outstanding at beginning of year 759,655 $ 3.11/17.00
Granted 210,000 12.75
Canceled (3,000) 12.00
Exercised (1,300) 3.11
-------
Outstanding at end of year 965,355 3.11/17.00
=======
Exercisable at end of year 483,573 3.11/17.00
=======
<CAPTION>
1994
-------------------------------
Number Exercise
of shares prices
--------- ------
<S> <C> <C>
Outstanding at beginning of year 525,842 $ 3.11/17.00
Granted 246,625 8.25/ 9.50
Canceled (12,812) 11.50/17.00
-------
Outstanding at end of year 759,655 3.11/17.00
=======
Exercisable at end of year 439,155 3.11/17.00
=======
<CAPTION>
1993
-------------------------------
Number Exercise
of shares prices
--------- ------
<S> <C> <C>
Outstanding at beginning of year 592,493 $ 3.11/17.00
Exercised (66,651) 3.11/11.50
-------
Outstanding at end of year 525,842 3.11/17.00
=======
Exercisable at end of year 406,905 3.11/17.00
=======
</TABLE>
(7) Commitments and Contingent Liabilities
Employee Benefit Plans
BHA has a noncontributory Employee Stock Ownership Plan (ESOP) which
includes substantially all domestic employees who are not covered by
collective bargaining agreements. BHA, with approval of its Board of
Directors, makes discretionary contributions to the ESOP. Benefits
become vested according to age and years of service. Contributions
charged to operating expenses were $865,000, $537,000 and $428,000 for
the years ended September 30, 1995, 1994 and 1993, respectively.
(Continued)
35
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
BHA's eligible domestic employees participate in a voluntary 401(k)
employee benefit plan (401(k) Plan). The 401(k) Plan covers eligible
employees not covered by a collective bargaining agreement. The 401(k)
Plan provides that 50% of a participant's contribution will be matched
by BHA subject to a maximum contribution which is determined annually
at the discretion of the Board of Directors. Benefits become vested
according to age and years of service. BHA made matching contributions
of $110,000, $103,000 and $93,000 for the years ended September 30,
1995, 1994 and 1993, respectively.
Leases
A summary of noncancelable, long-term operating lease commitments on
office facilities and equipment follows:
<TABLE>
<CAPTION>
Years ending
September 30,
-------------
<S> <C>
1996 $ 653,587
1997 401,693
1998 271,169
1999 90,582
2000 42,840
</TABLE>
It is expected that in the normal course of business, expiring leases
will be renewed or replaced by similar leases on other properties.
Total rental expense on noncancelable, long-term operating leases
amounted to approximately $640,000, $683,000 and $670,000 for the
years ended September 30, 1995, 1994 and 1993, respectively.
Letters of Credit
Under the bank lines of credit described in note 4, standby letters of
credit are issued to assure BHA's performance under certain contracts.
In addition to those bank lines of credit, BHA has another line of
credit agreement totaling $5,000,000 for the issuance of letters of
credit. Open standby letters of credit amounted to $29,000 and $22,000
at September 30, 1995 and 1994, respectively.
(Continued)
36
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Supplemental Financial Information
The Company sells products and services in several geographic areas.
Operations of the domestic business segment are based in the United
States (U. S.). The domestic business segment provides products and
services to the U. S. markets and exports to Canada, Latin America,
the Near East and Pacific Rim. The foreign business segment
manufactures and sells in Europe. Set forth below is information
regarding the Company's business segments for each of the years in the
three-year period ended September 30, 1995:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Domestic assets $ 64,299,341 55,575,714 55,433,307
Foreign assets - "Europe" 7,489,499 7,175,078 4,900,040
------------- ------------- -------------
Total $ 71,788,840 62,750,792 60,333,347
============= ============= =============
Domestic sales $ 101,391,446 91,055,057 81,367,975
Foreign sales - "Europe" 13,331,447 9,859,511 7,536,953
------------- ------------- -------------
Total $ 114,722,893 100,914,568 88,904,928
============= ============= =============
Domestic operating income $ 9,280,775 6,965,665 6,303,260
Foreign operating income -
"Europe" 690,496 561,484 441,420
------------- ------------- -------------
Total $ 9,971,271 7,527,149 6,744,680
============= ============= =============
</TABLE>
U.S. export sales to unaffiliated customers in Canada, Latin America, the
Near East and Pacific Rim were $13,653,000, $10,606,000 and $7,667,000
for the years ended September 30, 1995, 1994 and 1993, respectively.
These revenues are included in "Domestic Sales" in the table above.
(9) Quarterly Financial Data (Unaudited)
Summarized quarterly financial data are as follows:
<TABLE>
<CAPTION>
Three months ended
------------------------------------------------------------
December 31 March 31 June 30 September 30
----------- -------- ------- ------------
<S> <C> <C> <C> <C>
1995:
Net sales $27,258,354 30,264,138 28,936,466 28,263,935
Gross margin 7,252,538 8,081,293 7,777,331 8,094,996
Net earnings 1,410,957 1,580,697 1,484,338 1,477,795
Earnings per share .23 .27 .26 .26
1994:
Net sales $24,874,501 28,095,309 21,873,159 26,071,599
Gross margin 5,928,623 6,496,926 6,041,208 6,802,926
Net earnings 1,054,747 1,170,260 1,225,315 1,359,106
Earnings per share .16 .18 .19 .22
</TABLE>
37
<PAGE>
<PAGE>
[KPMG LOGO]
38
<PAGE>
<PAGE>
Schedule II
BHA GROUP, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Charged to
Beginning costs and Ending
balance expenses Deductions balance
------- -------- ---------- -------
<S> <C> <C> <C> <C>
Allowance for doubtful receivables:
Year ended September 30, 1995 $ 756,928 451,837 378,269 830,496
========= ========= ========= =========
Year ended September 30, 1994 $ 684,497 274,288 201,857 756,928
========= ========= ========= =========
Year ended September 30, 1993 $ 654,430 227,382 197,315 684,497
========= ========= ========= =========
Reserve for warranty and product service:
Year ended September 30, 1995 $ 795,463 1,168,820 1,115,749 848,534
========= ========= ========= =========
Year ended September 30, 1994 $ 350,449 1,149,586 704,572 795,463
========= ========= ========= =========
Year ended September 30, 1993 $ 307,226 918,671 875,448 350,449
========= ========= ========= =========
</TABLE>
See accompanying independent auditors' report.
39
<PAGE>
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
3b By Laws, As Amended 41-67
10n Employment Agreement Dated January 1, 1995 68-79
Between BHA Group, Inc. and James C. Shay
11 Computation of Earnings Per Common Share 80
21 Subsidiaries of BHA Group, Inc. 81
23 Independent Auditors' Consent 82
</TABLE>
40
<PAGE>
<PAGE>
Exhibit 3b
Amendments to the By-Laws
RESOLVED, that Article II, Section 3 of the Corporation's By-laws be,
and it hereby is, amended and restated to read in its entirety as follows:
"Section 3. Special Meetings. Unless otherwise prescribed by law or by
the Certificate of Incorporation, special meetings of the stockholders, for
any purpose or purposes, may be called at any time by the Board of
Directors, the Chairman of the Board of Directors, the Chief Executive
Officer, the President, or by a committee of the Board of Directors which
has been duly designated by the Board of Directors and whose powers and
authority, as provided in a resolution of the Board of Directors, include
the power to call such meetings, but such special meetings may not be
called by any other person or persons; provided, however, that if and to
the extent that any special meeting of stockholders may be called by any
other person or persons specified in any provisions of the Certificate of
Incorporation or any amendment thereto, or any certificate filed under
Section 151(g) of the Delaware General Corporation Law designating the
number of shares of Preferred Stock to be issued and the rights,
preferences, privileges and restrictions granted to and imposed on the
holders of such designated Preferred Stock, as permitted by the Certificate
of Incorporation, then such special meeting may also be called by the
person or persons in the manner, at the times and for the purposes so
specified. Written notice of a Special Meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is
called shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder to vote at such meeting."
RESOLVED, that Article II, Section 6 of the Corporation's By-laws be,
and it hereby is, amended and restated, subject to stockholder approval of the
Amended and Restated Certificate of Incorporation, to read in its entirety as
follows:
"Section 6. Action by Stockholders. Any action required or permitted
to be taken by the holders of capital stock of the Corporation must be
effected at a duly called annual or special meeting of holders of capital
stock of the Corporation and no such action may be effected by any consent
in writing by such holders."
41
<PAGE>
<PAGE>
RESOLVED, that Article III, Section 1 of the Corporation's By-laws be,
and it hereby is amended and restated, subject to stockholder approval of the
Amended and Restated Certificate of Incorporation, to read in its entirety as
follows:
"Section 1. Number of Directors. The Board of Directors shall consist
of not less than three nor more than fifteen members, the exact number of
which shall initially be fixed by the Incorporator and thereafter from time
to time by the Board of Directors."
RESOLVED, that a new Section 2 of Article III be, and it hereby is,
added to the Corporation's By-laws, subject to stockholder approval of the
Amended and Restated Certificate of Incorporation, and such Article III, Section
2 shall read in its entirety as follows:
"Section 2. ELECTION AND TERM OF OFFICE.
(a) Except as provided in the Certificate of Incorporation and in
paragraph (b) hereof, the Board of Directors shall be and is divided
into three classes, Class I, Class II and Class III, as nearly equal
in number of directors as possible, with the term of office of the
directors of one class expiring each year. Each director shall serve
for a term ending on the date of the third annual meeting following
the annual meeting at which such director was elected; provided,
however, that the directors first elected to Class I shall serve for
the term ending on the date of the first annual meeting next following
the end of the calendar year 1996, the directors first elected to
Class II shall serve for a term ending on the date of the second
annual meeting following the end of the calendar year 1996, and the
directors first elected to Class III shall serve for a term ending on
the date of the third annual meeting next following the end of the
calendar year 1996. In the event of any change in the authorized
number of directors, the Board of Directors shall apportion any newly
created directorships to, or reduce the number of directorships in,
such class or classes as shall, so far as possible, equalize the
number of directors in each class. If, consistent with the rule that
the three directorships in, such class or classes shall, so far as
possible, equalize the number of directors in each class. If,
consistent with the rule that the three classes shall be as nearly
equal in number of directors as possible, any newly created
directorship is to be allocated to one or more classes, the Board of
Directors shall allocate such directors to the available class whose
term of office is due to expire at the latest date following such
allocation. Notwithstanding any of the foregoing, each director shall
serve for a term continuing until the
42
<PAGE>
<PAGE>
annual meeting of the stockholders at which the term of the class to
which he was elected expires and until his successor is elected and
qualified or until his earlier death, resignation or removal.
(b) Notwithstanding any of the provisions of the foregoing
paragraph (a) or any provision of the Certificate of Incorporation,
whenever the holders of any one or more classes or series of the
Preferred Stock issued by the Corporation shall have the right, voting
separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling
of vacancies, removal and other features of such directorships
shall be governed by the terms of the Certificate of
Incorporation applicable thereto, and by the terms of any certificate
filed pursuant to Section 151(g) of the General Corporation Law of
Delaware designating the number of shares of the Preferred Stock to be
issued and the powers, rights, preferences, privileges,
qualifications, limitations and restrictions granted to an imposed on
the holders of such designated Preferred Stock, and such directors so
elected shall not be divided into classes pursuant to paragraph (a)
unless expressly provided by such terms."
RESOLVED, that Article III, Section 2 of the Corporation's By-laws be,
and it hereby is, renumbered to be Section 3 and amended and restated, to read
in its entirety as follows:
"Section 3. Vacancies. Except as provided in the Certificate of
Incorporation and in Article III, Section 2(b) hereof, any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the number of directors, shall be filled by
the Board of Directors, acting by a majority of the directors then in
office, even if less than a quorum; and any directors so chosen shall hold
office until the next election of the class for which such directors shall
have been chosen, and until their successors shall be elected and
qualified."
RESOLVED, that a new Section 4 to Article III be, and it hereby is,
added to the Corporation's By-laws, subject to stockholder approval of the
Amended and Restricted Certificate of Incorporation, and such Article III,
Section 4 shall read in its entirety as follows:
43
<PAGE>
<PAGE>
"Section 4. Removal. Except as provided in the Certificate of
Incorporation and in Article III, Section 2(b) hereof, a director may be
removed from office at any time, but only for cause, and only by the
affirmative vote of the holders of a majority of the shares entitled to
vote at an election of directors. No reduction in the number of directors
shall have the effect of removing any director prior to the expiration of
this term."
RESOLVED, that Article III, Sections 3 through 10 of the Corporation's
By-laws are hereby renumbered to be Sections 5 through 12, respectively.
RESOLVED, that the following sentence be added to the end of Article
IX, Section 1 of the Corporation's By-laws:
"Notwithstanding the foregoing, the provisions set forth in Article
II, Section 3, Article III, Section 3, and this Article IX, Section 1,
shall not be amended or repealed, nor shall any other
By-Law be adopted, amended or repealed which will have the effect of
modifying or permitting the circumvention of such By-Laws, unless such
adoption, amendment or repeal is approved by the affirmative vote of not
less than 80% of the voting power of the Corporation or a majority of the
Board of Directors."
44
<PAGE>
<PAGE>
BY-LAWS
OF
BHA GROUP, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders shall
be held on such date and at such time as shall be designated from time to time
by the board of Directors
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and stated in the notice of the meeting, at which meetings the stockholders
shall elect by a plurality vote a Board of Directors, and transact such other
business as may properly be brought before the meeting. Written notice of the
Annual Meeting stating the place, date and hour of the meeting shall be given to
each stockholder entitled to vote at such meeting not less than ten nor more
than sixty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by
the Certificate of Incorporation, Special Meetings of Stockholders, for any
purpose or purposes, may be called by either (i) the Chairman, if there be one,
or (ii) the President, (iii) any Vice President, if there be one, (iv) the
Secretary, or (v) any Assistant Secretary, if there be one, and shall be called
by any such officer at the request in writing of a majority of the Board of
Directors or at the request in writing of stockholders owning a majority of the
capital stock of the Corporation issued and outstanding and entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
Written notice of a Special Meeting stating the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a
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majority of the capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum at
all meetings of the stockholders for the transaction of business. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
presented or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder entitled to vote at the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented at
a meeting of shareholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such stockholder. Such votes
may be cast in person or by proxy, but no proxy shall be voted on or after
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three years from its date, unless such proxy provides for a longer period. The
Board of Directors, in its discretion, or the officer of the Corporation
presiding at a meeting of stockholders, in his discretion, may require that any
votes cast at such meeting shall be cast by written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stock-
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holder. Such list shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder of the
Corporation who is present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors
shall consist of not less than three nor more than eight members, the exact
number of which shall initially be fixed by the Incorporator and thereafter from
time to time by the Board of Directors. Except as provided in Section 2 of this
Article, directors shall be elected by a plurality of the votes cast at Annual
Meetings of Stockholders, and each
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director so elected shall hold office until the next Annual Meeting and until
his successor is duly elected and qualified, or until his earlier resignation or
removal. Any director may resign at any time upon notice to the Corporation.
Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified, or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors
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may be called by the Chairman, if there be one, the President, or any one (1)
director. Notice thereof stating the place, date and hour of the meetings shall
be given to each director either by mail not less than forty-eight (48) hours
before the date of the meeting, by telephone or telegram on twenty-four (24)
hours' notice, or on such shorter notice as the person or persons calling such
meeting may deem necessary or appropriate in the circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing,
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and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 7 shall constitute
presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
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any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like reimbursement of expenses
for attending committee meetings.
Section 10. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes
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are counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or their committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (ii) the material facts as
to his or their relationship or interest and as to the contract or transaction
are disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the shareholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, may also choose a Chairman of the
Board of Directors (who must be a director) and one or more Vice-
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Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any
number of offices may be held by the same person, unless otherwise prohibited by
law, the Certificate of Incorporation or these By-Laws. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors, need such officers be directors of
the Corporation.
Section 2. Election. The board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice-
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President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. Except where by law the signature of
the President is required, the Chairman of the board of Directors shall possess
the same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the control of
the board of Directors and, if there be one,
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the Chairman of the Board of Directors, have general supervision of the business
of the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall execute all bonds, mortgages,
contracts and other instruments of the Corporation requiring a seal, under the
seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except that the other officers of the
Corporation may sign and execute documents when so authorized by these By-Laws,
the Board of Directors or the President. In the absence or disability of the
Chairman of the Board of Directors, or if there be none, the President shall
preside at all meetings of the stockholders and the Board of Directors. The
President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
Section 6. Vice-Presidents. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice-President or the Vice-Presidents
if there is more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. Each
Vice-President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there
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be no Chairman of the Board of Directors and no Vice-President, the Board of
Directors shall designate the officer of the Corporation who, in the absence of
the President or in the event of the inability or refusal of the President to
act, shall perform the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. If the Secretary shall be unable
or shall refuse to cause to be given notice of all meetings of the stockholders
and special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors or the president may choose
another officer to cause such notice to be given. The Secretary shall have
custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or
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by the signature of any such Assistant Secretary. The Board of Directors may
give general authority to any other officer to affix the seal of the Corporation
and to attest the affixing by his signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case may
be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, and account of
all his transactions as Treasurer and of the financial condition of the
corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and
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other property of whatever kind in his possession or under his control belonging
to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise provided
in these By-Laws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them by the
Board of Directors, the President, any Vice-President, if there be one, or the
Secretary, and in the absence of the Secretary or in the event of his disability
or refusal to act, shall perform the duties of the Secretary, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice-President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal
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from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 11. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice-President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed
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upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent or registrar at
the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-Laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
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surrender of the certificate therefor, which shall be canceled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to express consent to corporate action
in writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty (60) days nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days prior
to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares of the part
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of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given
personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the
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Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting,
and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
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ARTICLE VIII
INDEMNIFICATION AND DIRECTORS' LIABILITY
Section 1. Indemnification of Directors and Officers. The Corporation
shall be required, to the fullest extent authorized by Section 145 of the
General Corporation Law of the State of Delaware (the "GCL"), as the same may be
amended and supplemented, to indemnify any and all directors and officers of the
Corporation.
Section 2. Limitation on Liability of Directors. The personal
liability of each of the directors of the Corporation shall be limited to the
fullest extent permitted by paragraph 7 of subsection (b) of Section 102 of the
GCL, as the same may be amended and supplemented.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, or new By-Laws may be adopted by the stockholders or by the Board of
Directors, provided, however, that notice of such alteration, amendment, repeal
or adoption of new By-Laws be contained in the notice of such meeting of
stockholders or Board of Directors, as the case may be. All such amendments must
be approved by either the holders of a majority of the outstanding capital stock
entitled to vote thereon or by a majority of the entire Board of Directors then
in office.
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Section 2. Entire Board of Directors. As used in this Article IX and
in these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
STEPHEN E. KORPI
SECRETARY
9-10-86
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Exhibit 10n
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 1995 (the "Effective
Date"), between JAMES C. SHAY ("Executive") and BHA GROUP, INC., a Delaware
corporation ("Employer").
In consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto hereby agree as follows:
1. Employment of Executive
Employer hereby agrees to Employ Executive and Executive hereby
agrees to be employed by Employer upon the terms and conditions hereinafter set
forth.
2. Employment Period
The term of Executive's employment under this Agreement (the
"Employment Period") shall commence as of the Effective Date and shall, subject
to earlier termination as provided in Section 5, continue until September 30,
1997. The expiration date of the Employment Period shall be automatically
extended for an additional one year period (each thereof, a "Renewal Period") on
each October 1, commencing October 1, 1995, unless at least 30 days prior to any
such October 1 either Executive or Employer delivers written notice to the other
of his or its election to have such automatic extensions cease, in which event
the then current expiration date of the Employment Period shall continue in
effect for the balance of the Employment Period.
3. Duties and Responsibilities
During the Employment Period, Executive (i) shall be the
Treasurer and Chief Financial Officer of Employer and (ii) shall devote his full
attention and expend his best efforts, energies and skills on a full-time basis
to the business of the Company (as hereinafter defined). Executive shall have
such authority, discretion, power and responsibility, and shall be entitled to
office, secretarial and other facilities and conditions of employment, as are
customary or appropriate to his position and as are currently exercised by or
afforded to him. During the Employment Period, Executive will be subject to all
of the policies, rules and regulations applicable to Employer's senior executive
employees. Executive shall report directly to Employer's Senior Vice-President.
For all purposes of this Agreement, the term "Company" means Employer and all
corporations, associations, companies, partnerships, firms and other enterprises
controlled by or under common control with Employer.
4. Compensation and Related Matters
4.1 Compensation, Generally. For all services rendered and
required to be rendered by, covenants of, and restrictions imposed on, Executive
under this
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Agreement, Employer shall pay to Executive during and with respect to the
Employment Period, and Executive agrees to accept, such base salary ("Base
Salary") and bonuses as are set forth on Exhibit 4.1. Executive's compensation
shall be reviewed by the Board of Directors prior to commencement of each
Renewal Period and may be adjusted upward only for such Renewal Period to take
into account Executive's prior performance and increases in the cost of living
not previously taken into account in setting Executive's compensation level.
4.2 Automobile. To facilitate the performance of Executive's
responsibilities hereunder, during the Employment Period, Employer shall, at
Employer's expense, continuously make available to Executive for Executive's
personal use the automobile currently made available to Executive, or an
automobile selected by Executive substantially comparable thereto, and shall pay
the costs of operating, maintaining, insuring, garaging and otherwise using such
automobile, subject to such policies as may be in effect from time to time
applicable to Employer's senior executive employees.
4.3 Other Benefits. (a) Employer shall maintain in effect at all
times during the Employment Period, at Employer's expense, a policy of insurance
on the life of Executive in the amount of $500,000 naming such person as
Executive shall designate from time to time as the owner and beneficiary
thereof. Executive agrees to aid, and cooperate in all reasonable respects with,
Employer in procuring such insurance, including, without limitation, by
submitting to the usual and customary medical examinations and filling out,
executing and delivering such applications and other instruments in writing as
may be reasonably required by an insurance company or companies to which any
application or applications for such insurance may be made by or for Employer.
(b) Employer shall reimburse Executive for all out-of-pocket
medical and related expenses incurred by Executive and his immediate family and
not otherwise covered by the Company's insurance plans or programs referred to
in Section 4.3(c), up to but not exceeding an aggregate of $8,000 per Year (as
defined in Paragraph 2 of Exhibit 4.1), upon his presentation to Employer of
signed, itemized accounts of such expenditures, all in accordance with
Employer's procedures and policies as adopted and in effect from time to time
and applicable to its senior executive employees.
(c) During the Employment Period, subject to, and to the extent
Executive is eligible under their respective terms, Executive shall be entitled
to receive such fringe benefits as are, or are from time to time hereafter,
generally provided by Employer to its senior executive employees (other than
those provided under or pursuant to separately negotiated individual employment
agreements or arrangements) under any pension or retirement plan, disability
plan or insurance, group life insurance, medical insurance, travel accident
insurance, or other similar plan or program of Employer. Executive's Base Salary
shall (where applicable) constitute the compensation on the basis of which
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the amount of Executive's benefits under any such plan or program shall be
fixed and determined.
4.4 Business Expense Reimbursement. Employer shall reimburse
Executive for all business expenses reasonably incurred by him in the
performance of his duties under this Agreement upon his presentation, not less
frequently than monthly, of signed, itemized accounts of such expenditures, all
in accordance with Employer's procedures and policies as adopted and in effect
from time to time and applicable to its senior executive employees.
4.5 Vacations. Executive shall be entitled to vacations
consistent with those currently provided to Executive, which vacations shall be
taken at such time or times as shall not unreasonably interfere with Executive's
performance of his duties under this Agreement.
5. Termination of Employment Period
5.1 Termination Without Cause. Employer or Executive may, by
notice to the other at any time during the Employment Period, terminate the
Employment Period without cause. The effective date of termination shall be 30
days after the date on which such notice is given.
5.2 By Employer: Cause. Employer may, at any time during the
Employment Period by action of its Board of Directors and upon notice to
Executive, terminate the Employment Period "for cause" effective immediately.
Such notice shall specify the cause for termination. For the purposes hereof,
"for cause" means:
(a) Executive's continued failure or refusal to perform his
duties and responsibilities hereunder after written warning of any such failure
or refusal and reasonable opportunity to appear before Employer's Board of
Directors to explain the reasons for such failure or refusal;
(b) Executive's dishonesty that directly or indirectly materially
affects, or has the likelihood of materially affecting, Employer;
(c) Executive's continued use of illegal drugs or excessive use
of alcohol, which has the effect of interfering materially with the performance
of his obligations under this Agreement, after written warning thereof;
(d) Conviction of Executive for a felony or any crime involving
in either case an act of moral turpitude, dishonesty, fraud, or unethical or
unlawful business conduct; or
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(e) Conduct by Executive that could reasonably be expected to
materially injure the reputation, business or business relationships of the
Company.
5.3 By Executive: Good Reason. Executive may, at any time during
the Employment Period by notice to Employer, terminate the Employment Period
under this Agreement "for good reason" effective immediately. For the purposes
hereof, "for good reason" means (a) any significant reduction in the duties,
responsibilities or prerequisites of Executive or any reduction in the
compensation provided for in Exhibit 4.1 that, in either case, Employer fails to
remedy within 30 days after notice thereof to Employer; or (b) a material breach
by Employer of any provision of this Agreement including, without limitation,
the provisions of Section 7 hereof, that Employer fails to remedy or cease
within 30 days after notice thereof to Employer.
5.4 Disability. During the Employment Period, if, solely as a
result of physical or mental incapacity or infirmity (other than alcoholism or
drug addiction), Executive shall be unable to perform his duties under this
Agreement for (i) a continuous period of at least 180 days, or (ii) periods
aggregating at least 180 days during any period of 12 consecutive months (each a
"Disability Period"), and at the end of the Disability Period there is no
reasonable probability that Executive can promptly resume his duties hereunder
pursuant hereto, Executive shall be deemed disabled (the "Disability") and
Employer, by notice to Executive, shall have the right to terminate the
Employment Period for Disability at, as of or after the end of the Disability
Period. The existence of the Disability shall be determined by a reputable,
licensed physician mutually selected by Employer and Executive, whose
determination shall be final and binding on the parties, provided, that if
Employer and Executive cannot agree upon such physician, such physician shall be
designated by the then acting President of the Kansas City Medical Society, and
if for any reason such President shall fail or refuse to designate such
physician, such physician shall, at the request of either party, be designated
by the American Arbitration Association. Executive shall cooperate in all
reasonable respects to enable an examination to be made by such physician.
5.5 Death. The Employment Period shall end on the date of
Executive's death.
6. Termination Compensation
6.1 Termination Without Cause By Employer or By Executive For
Good Reason. If the Employment Period is terminated by Employer without cause
pursuant to Section 5.1, or by Executive for good reason pursuant to Section
5.3, then Executive shall be entitled to be paid by Employer, as liquidated
damages and not as a penalty, (a) all Base Salary that he would have been
entitled to receive pursuant to this Agreement if the Employment Period had
continued through the then current expiration date of the Employment Period as
determined in accordance with Section 2 hereof (the "Relevant Period"), and (b)
the pro rata portion of any bonuses that Executive would have been
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entitled to receive pursuant to Paragraph 2 of Exhibit 4.1, in respect of the
Year in which the Employment Period is terminated, if the Employment Period had
continued through the end of such Year. Any payments required to be made
pursuant to the preceding sentence shall be made on the same dates such payments
would have been made had Executive continued to be employed by Employer during
the Relevant Period. Executive shall not be required to mitigate the amount of
any payments provided for hereunder upon termination of the Employment Period by
seeking employment with any other person, or otherwise; provided, however, that
if, at any time during the Relevant Period Executive shall commence employment
or engagements for the rendition of services to any other business, then, the
aggregate Base Salary thereafter payable to Executive pursuant to this Section
6.1 shall be reduced by 50% of all amounts received by him from such employment
or engagements in respect of the Relevant Period.
6.2 Termination Upon Death or Disability. If the Employment
Period is terminated by reason of Disability or the death of Executive, then
Executive shall be entitled to be paid by Employer (in addition to any amounts
payable under the insurance, plans or programs referred to in Section 4.3) the
pro rata portion of any bonuses that Executive would have been entitled to
receive pursuant to Paragraph 2 of Exhibit 4.1, in respect of the Year in which
the Employment Period is terminated, if the Employment Period had continued
through the end of such Year. Any payment required to be made pursuant to the
preceding sentence shall be made on the same date such payment would have been
made had the Employment Period continued through such date.
6.3 Determination of Pro Rata Portion. For the purposes hereof,
the pro rata portion of any bonus in respect of any Year means the total amount
of such bonus (as if the Employment Period had not terminated prior to the end
of such Year), multiplied by a fraction, the numerator of which is the number of
days within such Year on or prior to the termination of the Employment Period
and the denominator of which is 365.
6.4 No Other Termination Compensation. Executive shall not,
except as set forth in this Section 6, be entitled to compensation in respect of
any period following termination of the Employment Period.
7. Location of Executive's Activities
Executive's principal place of business in the performance of his
duties and obligations under this Agreement shall be in Kansas City, Missouri.
Notwithstanding the preceding sentence, Executive will engage in such travel and
spend such time in other places as may be necessary and appropriate in
furtherance of his duties hereunder.
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8. Exclusivity of Services, Confidential Information and Restrictive Covenants
8.1 Exclusivity of Services and Restrictions. During the
Employment Period and the three-year period thereafter (the "Post-Employment
Period"), Executive shall not, directly or indirectly, (a) be or become
interested in or associated with (as an officer, director, stockholder, partner,
consultant, owner, employee, agent, creditor or otherwise) any business that is
then, or which then proposes to become, a competitor of the Company, provided,
that the foregoing shall not restrict Executive from the ownership, solely as an
investment, of securities of any business if such ownership is not as
controlling person of such business, not as a member of a group that controls
such business, and not as a direct or indirect beneficial owner of 5% or more of
any class of securities of such business, (b) induce or seek to influence any
employee of (or consultant to) the Company to leave its employ (or terminate
such consultancy), (c) aid a competitor or supplier of the Company in any
attempt to hire a person who shall have been employed by, or who was a
consultant to, the Company within the one-year period preceding the date of any
such aid, or (d) induce or attempt to influence any person who was a supplier to
the Company during such period to transact business with a competitor of the
Company; provided, however, that, unless the Employment Period has been
terminated by Employer for cause pursuant to Section 5.2, the provisions of this
Section 8.1 shall continue in effect during the Post-Employment Period only so
long as Employer continues to pay Executive all amounts to which Executive is
entitled pursuant to Section 6.1 and all other Base Salary that he would have
been entitled to receive pursuant to this Agreement (and at such times as such
Base Salary would have been payable) if the Employment Period had continued
through the end of the Post-Employment Period.
8.2 Confidential Information. Executive shall not at any time,
whether during the Employment Period or thereafter, disclose or use (except in
the course of his employment hereunder and in furtherance of the business of the
Company, or as required by applicable law) any confidential information, trade
secrets or proprietary data (including, without limitation, customer lists and
the identity of and any information relating to any customer) of the Company.
8.3 Disclosure of Restrictions. If Executive shall accept or
commence employment with, or agree to provide services to, any person (except a
person who is then affiliated with Employer) during the period from the date
hereof through the end of the Post-Employment Period then, and in such event, on
or before the date of such acceptance or agreement (and before commencement of
employment or the provision of services) Executive shall deliver a copy of this
Section 8 to his proposed employer.
8.4 Injunction. Notwithstanding any other provisions of this
Agreement, Executive acknowledges and agrees that in the event of a violation or
threatened violation of any of the provisions of this Section 8, Employer shall
have no adequate remedy at law and shall therefore be entitled to enforce each
such provision by temporary or permanent injunctive or mandatory relief obtained
in any court of
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competent jurisdiction without the necessity of proving damage or posting
any bond or other security, and without prejudice to any other remedies that
may be available at law or in equity.
9. Intellectual Property
During the Employment Period, Executive shall disclose to
Employer all ideas, inventions and business plans developed by him during the
Employment Period that relate directly or indirectly to the Company's business,
including, without limitation, any process, operation, product or improvement
that may be patentable or copyrightable. Executive agrees that such shall be the
property of the Company and that he shall at the Company's request and cost do
whatever is necessary to secure the rights thereto by patent, copyright or
otherwise to the Company.
10. Miscellaneous
10.1 Notices. Any notice, consent or authorization required or
permitted to be given pursuant to this Agreement shall be in writing and sent to
the party for or to whom intended, at the address of such party set forth below,
by registered or certified mail (if available), postage paid, or at such other
address as either party shall designate by notice given to the other in the
manner provided herein.
If to Employer, to it at:
8800 East 63rd Street
Kansas City, Missouri 64133
Attention: Board of Directors
If to Executive, to him at:
1028 West 72nd Street
Kansas City, MO 64114
10.2 Taxes. Employer is authorized to withhold, from any
compensation or benefits payable hereunder to Executive, such amounts for income
tax, social security, unemployment compensation and other taxes as shall be
necessary or appropriate in the reasonable judgment of Employer to comply with
applicable laws and regulations.
10.3 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of Missouri applicable to
agreements made and to be performed therein.
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10.4 Headings. All descriptive headings in this Agreement are
inserted for convenience only and shall be disregarded in construing or applying
any provision of this Agreement.
10.5 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.6 Severability. If any provision of this Agreement, or part
thereof, is held to be unenforceable, the remainder of such provision and this
Agreement, as the case may be, shall nevertheless remain in full force and
effect.
10.7 Entire Agreement. This Agreement contains the entire
agreement and understanding between Employer and Executive with respect to the
subject matter hereof. This Agreement supersedes any prior agreement between the
parties relating to the subject matter hereof.
10.8 Arbitration. Any controversy or claim arising out of, under
or relating to this Agreement or the performance or breach hereof, shall be
resolved by arbitration in Kansas City, Missouri, before the American
Arbitration Association, in accordance with the rules then in effect of such
Association; and judgment upon the award or decision rendered may be entered and
enforced in any court of competent jurisdiction; provided, however, that suit
for equitable relief may be brought in any court of competent jurisdiction in
the State of Missouri. The award of the arbitrator in any arbitration shall
include provision for payment of legal fees and expenses incurred by the
prevailing party. The parties hereto hereby submit to the personal jurisdiction
of the state courts of the State of Missouri and the rules and regulations of
said courts applicable to actions to be finally determined therein.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the Effective Date.
BHA GROUP, INC.
By: JAMES E. LUND
-----------------------
Name: JAMES E. LUND
------------------
Title: President
-----------------
JAMES C. SHAY
---------------------------
JAMES C. SHAY
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Exhibit 4.1
Compensation
1. Base Salary. During the Employment Period, Employer shall pay
to Executive Base Salary, payable in equal monthly installments at such times
during each month as is customary with Employer with respect to its senior
executive employees, at a rate of $79,700 per annum through September 30, 1995.
2. Bonuses.
(a) For the purposes hereof, the following terms shall have the
respective meanings ascribed thereto below:
(i) "Actual Ratio" for any Year means a fraction, the
numerator of which is the Earnings Per Share for such Year and the denominator
of which is the Earnings Per Share for the immediately preceding Year.
(ii) "Average Earnings Growth" for any Year means one-third
of the sum of the Yearly Earnings Growth for such Year and for each of the two
Years immediately preceding such Year; provided, however, that, for the Year
ending September 30, 1990, "Average Earnings Growth" means one-half of the sum
of the Yearly Earnings Growth for such Year and the immediately preceding Year,
but calculated before giving effect to any bonuses payable pursuant to the
provisions of this Paragraph 2 and any bonus provisions of other employment
arrangements of Employer.
(iii) "Earnings Per Share" for any Year means the earnings
per share (after taxes) of Employer for such Year on a consolidated basis, as
determined in accordance with generally accepted accounting principles
consistently applied with prior periods, and shown on Employer's income
statement for such Year.
(iv) "Target Earnings Per Share" for any Year means the
target established prior to such Year pursuant to this Paragraph 2 for the
Earnings Per Share for such Year.
(v) "Target Ratio" for any Year means a fraction, the
numerator of which is the Target Earnings Per Share for such Year and the
denominator of which is the Earnings Per Share for such Year.
(vi) "Year" means the fiscal year of Employer ending on the
September 30 of each calendar year.
(vii) "Yearly Earnings Growth" for any Year means a
fraction, the numerator of which is the Earnings Per Share for such Year and the
denominator of which is the Earnings Per Share for the immediately preceding
Year.
(b) Prior to commencement of each Year during the Employment
Period, Employer's Board of Directors shall determine the Target Earnings Per
Share. The
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parties acknowledge that Employer's Board of Directors has heretofore determined
the Target Earnings Per Share for the Year ending September 30, 1995.
(c) Within 75 days following the end of each Year during the
Employment Period, Employer shall pay to Executive a bonus in respect of such
Year in the applicable amount set forth below:
If the Actual Ratio for such Year is: Then the amount of such bonus shall be:
- - ------------------------------------- ---------------------------------------
.85 or less zero
Greater than .85 and less than 1.0 the product of (i) $12,000 , times (i) a
fraction, the numerator of which is the
excess of the Actual Ratio over .85 and
the denominator of which is .15
1.0 $12,000
Greater than 1.0 and less than the the sum of (i) $12,000, plus (ii) the
Target Ratio product of (A) $18,000, times (B) a
fraction, the numerator of which is the
excess of the Actual Ratio over 1.0 and
the denominator of which is the excess
of the Target Ratio over 1.0
Greater than or equal to the Target $30,000
Ratio
(d) Within 75 days following the end of each Year during the
Employment Period, Employer shall pay to Executive a bonus in respect of such
Year (in addition to the bonus, if any, to be paid pursuant to Paragraph 2(c))
in the applicable amount set forth below, except, that the maximum amount of
such bonus in respect of the Year ending September 30, 1995, which shall be
based on the formula set forth below, shall be equal to $25,000.
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If the Average Earnings Growth for such Then the amount of such bonus shall be:
Year is:
- - --------------------------------------- ---------------------------------------
Less than 1.15 zero
1.15 $10,000
Greater than 1.15 and less than 1.35 the sum of (i) $10,000, plus (ii) the
product of (A) $15,000, times (B) a
fraction, the numerator of which is the
excess of the Average Earnings Growth
for such Year over 1.15 and the
denominator of which is 0.20
Greater than or equal to 1.35 $25,000
At the option of Employer, the bonus provided for in this paragraph (d) may be
paid to Executive by delivery of shares of Class A Common Stock having a fair
market value (equal for this purpose to the average of the closing prices of
such shares on the principal national securities exchange or over-the-counter
market on which such shares are traded for each of the last 30 days on which
such shares were traded prior to the payment date); provided, however, that upon
request of Executive at least one-third of the bonus shall be paid in cash.
Executive agrees to acquire such shares for investment and to take such other
actions as shall be reasonably required by Employer to insure compliance with
the Securities Act of 1933, as amended.
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Exhibit 11
BHA Group, Inc.
Computation of Earnings Per Common Share
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1994 1995
<S> <C> <C> <C>
Net Earnings $ 4,380,152 $ 4,809,428 $ 5,953,787
Weighted average number of common and common stock
equivalent shares:
Weighted average number of outstanding common shares 6,348,111 6,314,757 5,669,995
Dilutive effect (excess of number of shares issuable over
number of shares assumed to be repurchased with the
proceeds of exercised options based on the average market
price during the period) 179,942 71,145 123,934
----------- ----------- -----------
6,528,053 6,385,902 5,793,929
Earnings per common and common stock equivalent shares: $ .67 $ .75 $ 1.03
----------- ----------- -----------
Weighted average number of common and common stock
equivalent shares, assuming full dilution:
Additional dilutive effect (reduction in number of shares
assumed to be repurchased with the proceeds of exercised
stock options based on the end of the period market price
of the stock, if higher than the average price) -- 52,088 12,714
----------- ----------- -----------
6,528,053 6,437,990 5,806,643
----------- ----------- -----------
Earnings per common and common stock equivalent shares
assuming full dilution: $ .67 $ .75 $ 1.03
----------- ----------- -----------
</TABLE>
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Exhibit 21
Subsidiaries of BHA Group, Inc.
BHA International GmbH, a German corporation; PrecipTech, Inc., a Delaware
corporation; PrecipTech, Ltd., a Canadian corporation; BHA Group International,
Inc., a Delaware corporation; BHA Company, Inc., a Missouri corporation; BHA
Group, Ltd., a Canadian corporation; BHA International, Inc., a U.S. Virgin
Islands corporation; BHA-TEX, Inc., a Delaware corporation; and SF Air
Filtration, Inc., a Delaware corporation are the only subsidiaries of the
Company and are wholly-owned. Midwest Precipitator Corporation, an Illinois
corporation; and Tool Rental and Supply Company, Inc., a Delaware corporation,
are wholly-owned subsidiaries of PrecipTech, Inc. BHA Group International Pvt.
Ltd., an India corporation, is a wholly-owned subsidiary of BHA Group
International, Inc. BHA Services, Inc., a Delaware corporation, is a
wholly-owned subsidiary of BHA Company, Inc. SF Air Filtration AG, a Swiss
corporation, is a wholly-owned subsidiary of SF Air Filtration, Inc.
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[LETTERHEAD OF KPMG PEAT MARWICK LLP]
Exhibit 23
INDEPENDENT AUDITORS' REPORT ON FINANCIAL
STATEMENT SCHEDULES AND CONSENT
The Board of Directors
BHA Group, Inc.:
The audits referred to in our report dated November 7, 1995 included the related
financial statement schedule as of September 30, 1995 and for each of the years
in the three-year period ended September 30, 1995, included in the 1995 annual
report on Form 10-K. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits. In our opinion, such a
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
We consent to incorporation by reference in the registration statement on Form
S-8 of BHA Group, Inc. of our report dated November 7, 1995 relating to the
consolidated balance sheets of BHA Group, Inc. and subsidiaries as of September
30, 1995 and 1994, and the related consolidated statements of earnings,
shareholders' equity and cash flows for each of the years in the three-year
period ended September 30, 1995, and the related schedule, which report is
incorporated by reference in the September 30, 1995 annual report on Form 10-K
of BHA Group, Inc. We also consent to the reference to our firm under the
heading "Selected Financial Data," in Form 10-K. Our report refers to a change
in the method of accounting for income taxes.
KPMG PEAT MARWICK LLP
Kansas City, Missouri
December 15, 1995
82
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from audited
condensed consolidated financial statements for the twelve months ended
September 30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Sep-30-1995
<PERIOD-START> Oct-01-1994
<PERIOD-END> Sep-30-1995
<CASH> 2,317
<SECURITIES> 0
<RECEIVABLES> 18,799
<ALLOWANCES> 830
<INVENTORY> 14,864
<CURRENT-ASSETS> 37,973
<PP&E> 41,890
<DEPRECIATION> 17,128
<TOTAL-ASSETS> 71,789
<CURRENT-LIABILITIES> 13,086
<BONDS> 9,899
<COMMON> 64
0
0
<OTHER-SE> 46,376
<TOTAL-LIABILITY-AND-EQUITY> 71,789
<SALES> 87,711
<TOTAL-REVENUES> 114,723
<CGS> 62,427
<TOTAL-COSTS> 83,517
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 452
<INTEREST-EXPENSE> 409
<INCOME-PRETAX> 9,604
<INCOME-TAX> 3,650
<INCOME-CONTINUING> 5,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,954
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
