<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
------------------------ -------------------------
June 30, 1996 0-15045
BHA Group, Inc.
------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 43-1416730
- ---------------------------------- -------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
8800 East 63rd Street, Kansas City, Missouri 64133
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (816) 356-8400
------------------
Indicate by checkmark 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 twelve 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 'ch' No
-------- --------
As of July 31, 1996, the number of shares outstanding of the Registrant's Common
Stock was 6,029,524.
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<PAGE>
PART I. FINANCIAL INFORMATION
BHA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
1996 SEPTEMBER 30,
ASSETS (UNAUDITED) 1995
------------------ -------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,299,130 $2,316,677
Accounts receivable, less allowance for doubtful receivables
of $990,000 and $830,000, respectively 20,003,133 19,074,975
Inventories (note 3) 14,960,491 14,864,490
Prepaid expenses 1,419,558 856,488
Deferred income taxes 860,000 860,000
------------ ------------
Total current assets 38,542,312 37,972,630
------------ ------------
Property, plant and equipment, at cost:
Land and improvements 955,255 955,255
Buildings and improvements 15,581,930 14,479,697
Machinery and equipment 25,529,578 23,885,716
Office furniture, fixtures and equipment 2,763,109 2,569,224
------------ ------------
Total 44,829,872 41,889,892
Less accumulated depreciation and amortization 19,705,660 17,127,848
------------ ------------
Net property, plant and equipment 25,124,212 24,762,044
------------ ------------
Other assets 8,723,342 9,054,166
------------ ------------
Total $ 72,389,866 $ 71,788,840
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 564,954 $ 756,696
Accounts payable 3,512,261 6,299,344
Accrued compensation and employee benefit costs 3,674,516 4,059,919
Accrued expenses and other current liabilities 1,573,722 1,245,657
Income taxes payable 470,809 724,379
------------ ------------
Total current liabilities 9,796,262 13,085,995
------------ ------------
Long-term deferred income taxes 2,390,000 2,364,000
Long-term debt, excluding current installments 9,330,214 9,898,683
Shareholders' equity:
Common stock $0.01 par value.
Authorized 20,000,000 shares; issued 7,081,903 and
6,426,302, respectively 70,819 64,263
Additional paid-in capital 33,506,140 24,923,428
Retained earnings 30,465,549 33,194,128
Foreign currency translation adjustment (12,198) 280,441
Unearned compensation (340,686) (418,312)
Less cost of 1,052,379 and 971,600 shares of common stock
in treasury (12,816,234) (11,603,786)
------------ ------------
Total shareholders' equity 50,873,390 46,440,162
------------ ------------
$ 72,389,866 $ 71,788,840
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
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BHA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales $30,927,990 $28,936,466
Cost of sales 22,307,121 21,159,135
----------- -----------
Gross margin 8,620,869 7,777,331
----------- -----------
Operating expenses
Selling and advertising expense 3,158,311 2,652,313
General and administrative expense 2,846,821 2,627,127
----------- -----------
Total operating expenses 6,005,132 5,279,440
----------- -----------
Operating income 2,615,737 2,497,891
----------- -----------
Interest income (4,575) (6,677)
Interest expense 210,192 110,230
----------- -----------
Earnings before income taxes 2,410,120 2,394,338
----------- -----------
Income taxes 630,000 910,000
----------- -----------
Net earnings $ 1,780,120 $ 1,484,338
=========== ===========
Weighted average number of common shares
outstanding 6,166,024 6,278,127
Earnings per share of common stock $ .29 $ .24
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales $89,829,250 $86,458,957
Cost of sales 64,175,284 63,347,796
----------- -----------
Gross margin 25,653,966 23,111,161
----------- -----------
Operating expenses
Selling and advertising expense 9,299,090 7,897,259
General and administrative expense 8,267,620 7,805,579
----------- -----------
Total operating expenses 17,566,710 15,702,838
----------- -----------
Operating income 8,087,256 7,408,323
Interest income (15,502) (36,045)
Interest expense 586,472 228,379
----------- -----------
Earnings before income taxes 7,516,286 7,215,989
----------- -----------
Income taxes 2,490,000 2,740,000
----------- -----------
Net earnings $ 5,026,286 $ 4,475,989
----------- -----------
Weighted average number of common shares
outstanding 6,138,730 6,443,300
Earnings per share of common stock $ .82 $ .69
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings: $ 5,026,286 $ 4,475,989
Adjustment to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 3,236,262 3,304,748
Provision for deferred income taxes 26,000 (303,000)
Changes in assets and liabilities:
Accounts receivable (928,158) (2,256,096)
Inventories (96,001) (1,268,381)
Prepaid expenses (563,070) 128,772
Accounts payable (2,787,083) (3,430,056)
Accrued expenses and other liabilities 70,162 1,878,592
Income taxes payable (58,570) 11,656
------------ ------------
Net cash provided by operating activities 3,925,828 2,542,224
------------ ------------
Cash flows from investing activities:
Acquisition of property, plant and equipment (2,939,980) (7,743,258)
Acquisition of product rights and other intangible assets (250,000) (200,000)
------------ ------------
Net cash used in investing transactions (3,189,980) (7,943,258)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock 6,298 --
Payment of cash dividend on common stock (491,771) (520,494)
Purchase of treasury stock (215,072) (7,486,948)
Proceeds from borrowings under bank term note -- 2,500,000
Net proceeds from (repayments of) borrowings under
revolving bank lines of credit (336,000) 6,000,000
Repayments of long-term debt and other long-term liabilities (424,211) (316,796)
------------ ------------
Net cash provided by (used in) financing activities (1,460,756) 175,762
------------ ------------
Effect of exchange rate changes (292,639) 162,263
------------ ------------
Net decrease in cash and cash equivalents (1,017,547) (5,063,009)
Cash and cash equivalents at beginning of period 2,316,677 6,796,976
------------ ------------
Cash and cash equivalents at end of period $ 1,299,130 $ 1,733,967
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Common stock:
Balance at beginning period $ 64,263 $ 63,800
Issuance of 11,792 and 45,000 shares of common
stock in 1996 and 1995 118 450
Issuance of 643,809 shares in 1996 pursuant to a
10% stock dividend 6,438 --
------------ ------------
Balance at end of period 70,819 64,250
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Additional paid-in capital:
Balance at beginning of period 24,923,428 24,402,261
Excess over par value of common stock issued 8,582,712 517,050
------------ ------------
Balance at end of period 33,506,140 24,919,311
------------ ------------
Retained earnings:
Balance at beginning of period 33,194,128 27,925,706
Net earnings for the period 5,026,286 4,475,989
Cash dividends of $.09 per share paid on common
stock during 1996 and 1995 (491,771) (520,494)
Distribution of 10% stock dividend in 1996 (7,263,094) --
------------ ------------
Balance at end of period 30,465,549 31,881,201
------------ ------------
Foreign currency translation adjustment: --
Balance at beginning of period 280,441 37,986
Equity adjustment from foreign currency translation (292,639) 162,263
------------ ------------
Balance at end of period (12,198) 200,249
------------ ------------
Unearned compensation:
Balance at beginning of period (418,312) --
Issuance of 45,000 shares of restricted stock in 1995 -- (517,500)
Compensation expense 77,626 73,313
------------ ------------
Balance at end of period (340,686) (444,187)
------------ ------------
Treasury stock:
Balance at beginning of period (11,603,786) (3,566,462)
Sales of 15,088 treasury shares pursuant to stock
option exercises, net 54,928 --
Acquisition of 587,300 shares of common stock,
at cost during 1995 -- (7,486,948)
Issuance of 95,867 treasury shares pursuant to 10%
stock dividend during 1996 (1,267,376) --
------------ ------------
Balance at end of period (12,816,234) (11,053,410)
------------ ------------
Total shareholders' equity $ 50,873,390 $ 45,567,414
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
These condensed consolidated financial statements reflect all adjustments
(consisting of normal recurring adjustments) which, in the opinion of
management, are necessary to present fairly the financial position, results of
operations and cash flows for the periods presented in conformity with generally
accepted accounting principles applied on a consistent basis.
These statements should be read in conjunction with the Notes to Consolidated
Financial Statements contained in BHA Group, Inc.'s Annual Report to
Shareholders for the fiscal year ended September 30, 1995, and with Management's
Discussion and Analysis of Results of Operations and Financial Condition
appearing within this quarterly report.
(2) EARNINGS PER COMMON SHARE
Earnings per common share is computed based on the average number of common
shares and common share equivalents outstanding. All per share data in this
report has been restated to reflect the 10% stock dividend announced in June of
1996.
(3) INVENTORY VALUATION
BHA Group, Inc. 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 June 30, 1996 and September 30, 1995 were as
follows:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1995
<S> <C> <C>
Raw materials $ 9,835,810 $ 9,223,825
Work-in-process 726,965 1,580,177
Finished goods 4,397,716 4,060,488
----------- -----------
Total $14,960,491 $14,864,490
=========== ===========
</TABLE>
<PAGE>
<PAGE>
BHA GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NET SALES
Net sales for the nine months ended June 30, 1996, for BHA Group, Inc. ("BHA" or
the "Company") increased 4% compared to the same period a year ago. The increase
was attributable to higher BHA Group International, Inc. ("BGI") and BHA
Company, Inc. ("BHA Company") sales offset by lower PrecipTech, Inc.
("PrecipTech") sales. BGI sales increased 57% over the same period in the prior
year due to higher sales to the Latin American, Near East, Pacific Rim, and
European markets. Sales to the Latin American markets were strong, due in part
to increased activity in engineered rebuilds of electrostatic precipitators
within industrial accounts. Sales to the Near East and Pacific Rim have been
strong in the first nine months of fiscal 1996 due to BGI's continued focus on
developing these areas and the success of its sales and service offices located
in India and Taiwan. European sales increased by 17% as sales of fabric filters,
pleated products and accessories all showed improvement. BHA Company sales
increased 3% compared to the same period in the last fiscal year due to higher
sales of pleated products and major projects. PrecipTech sales decreased 29% as
the labor portion of project revenues have decreased as customers elected to
execute this work using internal resources.
Net sales for the three months ended June 30, 1996 increased 7% compared to the
same period one year ago. The results reflect higher BGI and BHA Company sales
offset by lower PrecipTech sales.
GROSS MARGIN
Gross margin as a percentage of sales was 28.6% for the nine months ended June
30, 1996, compared to 26.7% for the same period last year. This compares
favorably with the consolidated gross margin as a percentage of sales for the
year ended September 30, 1995 of 27.2%. The improvement in the consolidated
gross margin percentage is primarily attributable to the continued increase in
international sales through BGI, which has been running higher gross margin
percentages than the Company's domestic businesses. The Company's domestic
operations, BHA Company and PrecipTech, also showed increases in gross margin
percentages over the same period in the prior year. BHA Company's gross margin
percentage improved due to a favorable sales mix of replacement parts and
services which included higher sales of newer products. PrecipTech gross margins
increased over the same period a year ago due to a sales mix which favored
replacement parts with higher gross margin percentages than the engineered
rebuild orders executed in the prior year.
Gross margin as a percentage of sales was 27.9% for the three months ended June
30, 1996 compared to 26.9% for the same period one year ago. The three month
period results reflect an increase in higher margin BGI business and improved
gross margin results for BHA and PrecipTech.
OPERATING EXPENSES
Selling and advertising expense as a percentage of sales for the nine months
ended June 30, 1996 and 1995 was 10.4% and 9.1%, respectively. The corresponding
percentages for the 1996 and 1995 three month periods were 10.2% and 9.2%.
Selling and advertising expense, expressed in dollars for the nine and three
month periods, increased $1,402,000 and $506,000, respectively, over the same
period in the prior year. These increases were attributable to higher selling
<PAGE>
<PAGE>
expenses associated with the increase in international business and other costs
to develop new markets and products.
General and administrative expense as a percentage of sales for the nine months
ended June 30, 1996 and 1995 was 9.2% and 9.0%, respectively. The corresponding
percentages for the 1996 and 1995 three month periods were 9.2% and 9.1%.
General and administrative expense, expressed in dollars for the nine and three
month periods, increased $462,000 and $220,000, respectively, over the same
period in the prior year. The increases were attributable to higher personnel
costs.
INTEREST INCOME/EXPENSE
Interest income for the nine months ended June 30, 1996 and 1995 was $16,000 and
$36,000, respectively. Interest expense for the nine months ended June 30, 1996
was $586,000, compared to $228,000 for the same period one year ago. Interest
income for the three months ended June 30, 1996 and 1995 was $5,000 and $7,000,
respectively. Interest expense for the three months ended June 30, 1996 was
$210,000, compared to $110,000 for the same period a year ago. The increases in
interest expense for the 1996 periods presented were attributable to higher
borrowings under the Company's credit facilities which were used to fund its
capital and stock repurchase programs.
INCOME TAXES
The Company's effective tax rate for the nine months ended June 30, 1996 was
33.1% compared to 38.0% for the same period last year. The effective tax rates
for the 1996 and 1995 three month periods were 26.1% and 38.0%, respectively.
During the third quarter of 1996, the Company's year-to-date effective income
tax rate was lowered to reflect research and development tax credits earned,
other benefits derived from the sharp increase in the Company's international
business and a lower effective state income tax rate.
NET EARNINGS
Net earnings for the nine and three month periods ended June 30, 1996 increased
by 12.3% and 19.9%, respectively, compared to the same periods in the prior
year. These increases are attributable to higher sales volumes and gross margin
percentages combined with lower effective income tax rates.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital was $28.7 million at June 30, 1996, compared to $24.9
million at September 30, 1995. Cash was $1.3 million at June 30, 1996 and $2.3
million at September 30, 1995. Cash flows for the nine months ended June 30,
1996 included $3.9 million in cash provided from operating activities, a $3.2
million decrease in cash from investing activities and $1.5 million used in
financing activities. Investing activities included various fixed asset
additions under the Company's capital program and a final payment relating to a
product line acquisition which was initiated in the prior year. Financing
activities consisted primarily of cash dividends paid on common stock and
repayments of bank borrowings.
At June 30, 1996 and September 30, 1995, the Company had unused bank lines of
credit of approximately $10.1 million and $9.2 million, respectively. The
Company had unused short-term foreign exchange borrowing arrangements of
approximately $9.0 million and $8.7 million, respectively, at June 30, 1996 and
September 30, 1995. The Company believes that cash flow from operations and
available credit lines will be sufficient to meet its capital needs in the
foreseeable future.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 6 - Exhibits
(a) Exhibit 11: Computation of earnings per common share
(b) Exhibit 27: Financial Data Schedule
Reports on Form 8-K:
During the quarter ended June 30, 1996, there were no reports on Form
8-K filed by the Company.
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<PAGE>
SIGNATURES
Pursuant to the requirements 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.
(Registrant)
Date: August 12, 1996
------------------------------------
By: /s/ James C. Shay
------------------------------------
(Signature)
James C. Shay
Treasurer, Principal Financial and
Accounting Officer
By: /s/ James E. Lund
------------------------------------
(Signature)
James E. Lund
President and
Chief Executive Officer
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
11 Computation of Earnings Per Common Share
27 Financial Data Schedule
STATEMENT OF DIFFERENCES
The checkmark symbol shall be expressed as 'ch'
<PAGE>
<PAGE>
Exhibit 11
BHA GROUP, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings $1,780,120 $1,484,338 $5,026,286 $4,475,989
Weighted average number of common
and common stock equivalent
shares:
Weighted average number of
outstanding common shares 6,016,649 6,137,190 6,011,217 6,309,927
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) 149,375 140,937 127,513 133,373
---------- ---------- ---------- ----------
6,166,024 6,278,127 6,138,730 6,443,300
Earnings per common and common
stock equivalent shares: $ .29 $ .24 $ .82 $ .69
---------- ---------- ---------- ----------
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) -- -- 14,052 --
---------- ---------- ---------- ----------
6,166,024 6,278,127 6,152,782 6,443,300
---------- ---------- ---------- ----------
Earnings per common and common
stock equivalent shares assuming
full dilution: $ .29 $ .24 $ .82 $ .69
---------- ---------- ---------- ----------
</TABLE>
Note: The weighted average number of shares outstanding for all periods
presented have been adjusted to reflect the 10% stock dividend announced in June
of 1996.
<PAGE>
Exhibit 27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from unaudited condensed consolidated
financial statements for the three months ended June
30, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAR-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,299
<SECURITIES> 0
<RECEIVABLES> 20,740
<ALLOWANCES> 990
<INVENTORY> 14,960
<CURRENT-ASSETS> 38,542
<PP&E> 44,830
<DEPRECIATION> 19,706
<TOTAL-ASSETS> 72,390
<CURRENT-LIABILITIES> 9,796
<BONDS> 9,330
<COMMON> 71
0
0
<OTHER-SE> 50,803
<TOTAL-LIABILITY-AND-EQUITY> 72,390
<SALES> 26,022
<TOTAL-REVENUES> 30,928
<CGS> 18,486
<TOTAL-COSTS> 22,307
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 80
<INTEREST-EXPENSE> 210
<INCOME-PRETAX> 2,410
<INCOME-TAX> 630
<INCOME-CONTINUING> 1,780
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,780
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
