<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                       ----------------------------------

                                    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
           March 31, 2004                              0-15045


                            BHA Group Holdings, 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              |X|                No
               --------                         --------

Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act).

Yes                                 No            |X|
               --------                         --------

As of April 16, 2004, the number of shares outstanding of the Registrant's
Common Stock was 6,192,896.



<PAGE>



                          PART I. FINANCIAL INFORMATION

                    BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                           (IN THOUSANDS)                                     MARCH 31            SEPTEMBER 30,
                               ASSETS                                           2004                  2003
                               ------                                     ------------------    -------------------
                                                                             (UNAUDITED)
<S>                                                                              <C>                 <C>
Current assets:
     Cash and cash equivalents                                                  $ 17,033            $ 18,805
     Accounts receivable, less allowance for doubtful receivables
         of $2,082 and $2,026, respectively                                       35,183              28,823
     Inventories (note 6)                                                         26,407              23,480
     Prepaid expenses                                                              2,165               1,342
     Deferred income taxes                                                         3,804               3,804
                                                                          ------------------    -------------------
              Total current assets                                                84,592              76,254
                                                                          ------------------    -------------------
Property, plant and equipment, at cost                                            69,330              67,802
     Less accumulated depreciation and amortization                               44,464              42,037
                                                                          ------------------    -------------------
              Net property, plant and equipment                                   24,866              25,765
                                                                          ------------------    -------------------
Property held under capital leases                                                 4,769               4,967
Other assets                                                                       7,796               9,702
                                                                          ------------------    -------------------
                                                                                $122,023            $116,688
                                                                          ==================    ===================

                LIABILITIES AND SHAREHOLDERS' EQUITY
                ------------------------------------
Current liabilities:
     Current installments of long-term debt and lease obligations               $  2,275            $  2,494
     Accounts payable                                                             10,038               8,393
     Accrued expenses and other current liabilities                               15,307              13,753
     Income taxes payable                                                             94               1,345
                                                                          ------------------    -------------------
         Total current liabilities                                                27,714              25,985
                                                                          ------------------    -------------------
Long-term deferred income taxes                                                    2,588               2,588
Long-term debt, excluding current installments                                     5,468               6,508
Long-term lease obligations, excluding current installments                        5,400               5,730
Other liabilities                                                                    478                 441
Shareholders' equity:
     Common stock $0.01 par value.  Authorized 20,000,000 shares:
         Issued 8,982,744 and 8,931,411 shares, respectively                          90                  89
     Additional paid-in capital                                                   64,370              63,627
     Retained earnings                                                            55,274              50,578
     Accumulated - other comprehensive income (loss)                                (118)               (411)
     Less cost of 2,789,848 and 2,837,633 shares, respectively, of
         common stock in treasury                                                (39,241)            (38,447)
                                                                          ------------------    -------------------
              Total shareholders' equity                                          80,375              75,436
                                                                          ------------------    -------------------
                                                                                $122,023            $116,688
                                                                          ==================    ===================
</TABLE>


See accompanying notes to condensed consolidated financial statements.

                                      -2-

<PAGE>


                    BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
               FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003

                                   (UNAUDITED)

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)                                        2004                   2003
                                                                             ----                   ----
<S>                                                                        <C>                     <C>
Net sales                                                                  $56,493                 $48,744
Cost of sales                                                               36,836                  32,951
                                                                      -----------------    --------------------
         Gross margin                                                       19,657                  15,793
                                                                      -----------------    --------------------

Operating expenses
     Selling and advertising expense                                         6,129                   5,383
     General and administrative expense                                      6,461                   5,273
                                                                      -----------------    --------------------
         Total operating expenses                                           12,590                  10,656
                                                                      -----------------    --------------------
         Operating income                                                    7,067                   5,137

Interest expense, net                                                           76                     138
                                                                      -----------------    --------------------
         Earnings before income taxes                                        6,991                   4,999
                                                                      -----------------    --------------------

     Income taxes                                                            2,341                   1,651
                                                                      -----------------    --------------------
         Net earnings                                                      $ 4,650                 $ 3,348
                                                                      =================    ====================

Basic earnings per common share                                            $  0.75                 $  0.55
Diluted earnings per common share                                          $  0.70                 $  0.52

Basic weighted average number of common shares outstanding
                                                                             6,167                   6,111
Diluted weighted average number of common shares outstanding
                                                                             6,639                   6,471
</TABLE>


See accompanying notes to condensed consolidated financial statements.



                                      -3-
<PAGE>


                    BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                FOR THE SIX MONTHS ENDED MARCH 31, 2004 AND 2003

                                   (UNAUDITED)

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)                                      2004               2003
                                                                           ----               ----
<S>                                                                      <C>                 <C>
Net sales                                                                $99,160             $98,809
Cost of sales                                                             64,019              67,790
                                                                     ----------------    ----------------
         Gross margin                                                     35,141              31,019
                                                                     ----------------    ----------------

Operating expenses
     Selling and advertising expense                                      11,509              10,785
     General and administrative expense                                   11,779              10,676
                                                                     ----------------    ----------------
         Total operating expenses                                         23,288              21,461
                                                                     ----------------    ----------------
         Operating income                                                 11,853               9,558

Interest expense, net                                                        174                 267
                                                                     ----------------    ----------------
         Earnings before income taxes                                     11,679               9,291

Income taxes                                                               3,913               3,069
                                                                     ----------------    ----------------
         Net earnings                                                      7,766             $ 6,222
                                                                     ================    ================

Basic earnings per common share                                          $  1.26             $  1.02
Diluted earnings per common share                                        $  1.18             $  0.97

Basic weighted average number of common
     shares outstanding                                                    6,146               6,118
Diluted weighted average number of common
     shares outstanding                                                    6,587               6,447
</TABLE>


See accompanying notes to condensed consolidated financial statements.


                                      -4-
<PAGE>


                    BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
           FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2004 AND 2003

                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                   THREE MONTHS ENDED
(IN THOUSANDS)                                                                 2004                  2003
                                                                               ----                  ----
<S>                                                                           <C>                   <C>
Net earnings                                                                  $ 4,650               $ 3,348

Other comprehensive income:
     Foreign currency translation adjustments                                      12                  (152)
     Net change in fair value of foreign exchange
         contracts deferred in accordance with
         SFAS No. 133                                                             292                    27
                                                                         -----------------     -----------------

Comprehensive income                                                          $ 4,954               $ 3,223
                                                                         =================     =================


                                                                                    SIX MONTHS ENDED
                                                                               2004                  2003
                                                                               ----                  ----

Net earnings                                                                  $ 7,766               $ 6,222

Other comprehensive income:
     Foreign currency translation adjustments                                     388                   112
     Net change in fair value of foreign exchange
         contracts deferred in accordance with
         SFAS No. 133                                                             (95)                  (36)
                                                                         -----------------     -----------------

Comprehensive income                                                          $ 8,059               $ 6,298
                                                                         =================     =================
</TABLE>


See accompanying notes to condensed consolidated financial statements.



                                      -5-
<PAGE>


                    BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                FOR THE SIX MONTHS ENDED MARCH 31, 2004 AND 2003

                                   (UNAUDITED)

<TABLE>
<CAPTION>
(In thousands, except share and per share data)                                    2004                2003
                                                                                   ----                ----
<S>                                                                             <C>                 <C>
Common stock:
     Balance at beginning of period                                             $     89            $     89
     Issuance of 51,333 and 25,234 shares of common
         stock in 2004 and 2003, respectively                                          1                  --
                                                                           ------------------    ---------------
     Balance at end of period                                                         90                  89
                                                                           ------------------    ---------------
Additional paid-in capital:
     Balance at beginning of period                                               63,627              63,169
     Excess over par value of common stock issued                                    567                 241
     Stock issued from treasury for stock option exercises                          (936)                (36)
     Income tax benefit from stock option exercises                                1,112                  --
                                                                           ------------------    ---------------
     Balance at end of period                                                     64,370              63,374
                                                                           ------------------    ---------------
Retained earnings:
     Balance at beginning of period                                               50,578              41,360
     Net earnings for the period                                                   7,766               6,222
     Cash dividends of $0.50 and $0.12 per share paid on
         common stock during 2004 and 2003, respectively                          (3,070)               (732)
                                                                           ------------------    ---------------
     Balance at end of period                                                     55,274              46,850
                                                                           ------------------    ---------------
Accumulated - other comprehensive income:
     Balance at beginning of period                                                 (411)               (625)
     Equity adjustment from foreign currency translation and
         derivative instruments                                                      293                  76
                                                                           ------------------    ---------------
     Balance at end of period                                                       (118)               (549)
                                                                           ------------------    ---------------
Treasury stock:
     Balance at beginning of period                                              (38,447)            (36,552)
     Acquisition of 18,000 and 40,422 shares of common
         stock, at cost, during 2004 and 2003, respectively                         (441)               (691)
     Issuance of 65,785 and 2,428 treasury shares pursuant to
         stock option exercises, net, during 2004 and 2003,
              respectively                                                          (353)                 (2)
                                                                           ------------------    ---------------
     Balance at end of period                                                    (39,241)            (37,245)
                                                                           ------------------    ---------------

     Total shareholders' equity                                                 $ 80,375            $ 72,519
                                                                           ==================    ===============
</TABLE>


See accompanying notes to condensed consolidated financial statements.


                                      -6-
<PAGE>


                    BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTHS ENDED MARCH 31, 2004 AND 2003

                                   (UNAUDITED)

<TABLE>
<CAPTION>
(IN THOUSANDS)                                                                  2004                2003
                                                                                ----                ----
<S>                                                                           <C>                  <C>
Cash flows from operating activities:
     Net earnings                                                             $ 7,766              $ 6,222
     Adjustment to reconcile net earnings to net cash
       provided by operating activities:
         Depreciation and amortization                                          2,818                3,021

     Changes in assets and liabilities:
         Accounts receivable                                                   (5,975)                (336)
         Inventories                                                           (2,602)                 (15)
         Prepaid expenses                                                        (797)                (487)
         Accounts payable                                                       1,534                  256
         Accrued expenses and other liabilities                                 1,474               (2,601)
         Income taxes payable or receivable                                      (128)                 840
                                                                         -----------------    ------------------
              Net cash provided by operating activities                         4,090                6,900
                                                                         -----------------    ------------------

Cash flows from investing activities:
     Acquisition of property, plant and equipment                              (1,536)              (1,998)
     Net assets of product lines acquired (Note 3)                               (662)                  --
     Refund of cash deposits securing bank guarantees                           2,169                   --
     Change in other assets and liabilities                                       213                  (64)
                                                                         -----------------    ------------------
         Net cash provided (used) in investing activities                         184               (2,062)
                                                                         -----------------    ------------------

Cash flows from financing activities:
     Payment of cash dividend on common stock                                  (3,070)                (732)
     Purchase of treasury stock                                                  (441)                (691)
     Proceeds from issuance of common stock                                       568                  241
     Net stock options exercised                                               (1,289)                 (38)
     Net proceeds (repayments) of borrowings under
         revolving bank lines of credit                                           (21)                 738
     Repayments of long-term debt and lease obligations                        (1,650)              (1,650)
                                                                         -----------------    ------------------
         Net cash used in financing activities                                 (5,903)              (2,132)
                                                                         -----------------    ------------------

         Effect of exchange rate changes on cash                                 (143)                (414)
                                                                         -----------------    ------------------

     Net increase (decrease) in cash and cash equivalents                      (1,772)               2,292
Cash and cash equivalents at beginning of period                               18,805               13,778
                                                                         -----------------    ------------------
Cash and cash equivalents at end of period                                    $17,033              $16,070
                                                                         =================    ==================
</TABLE>


See accompanying notes to condensed consolidated financial statements.



                                      -7-
<PAGE>


                    BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(1) BASIS OF PRESENTATION AND REVENUE RECOGNITION

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
accounting principles generally accepted in the United States of America applied
on a consistent basis. In order to present the financial statements on a
consistent basis, certain reclassification entries were made relative to the
previously reported condensed consolidated statement of cash flows for the
six-month period ended March 31, 2003.

These statements should be read in conjunction with the Notes to Consolidated
Financial Statements contained in BHA Group Holdings, Inc.'s (the "Company" or
"BHA") Annual Report to Shareholders for the fiscal year ended September 30,
2003, and with Management's Discussion and Analysis of Results of Operations and
Financial Condition appearing within this quarterly report.

Sales of electrostatic precipitator ("ESP") parts and services tend to be
seasonal, with the majority of the revenues being generated in advance of spring
outages scheduled by operators of coal-fired utilities. The results of
operations for interim periods are not indicative of results to be expected for
a full year.

Sales of products are recognized when goods are shipped "free on board" (FOB)
from their shipping point and when all obligations of the Company have been met.

The Company recognizes sales and gross profits on its services using the
percentage of completion method based on total costs incurred as compared to the
total estimated cost of the service contract. Substantially, all projects are
completed in less than 60 days from the date of commencement and the Company
does not engage in any long-term contracts.

The Company's service revenues generally result in gross margins as a percentage
of sales that are lower than the consolidated gross margins by approximately 4%
to 7%. Such revenues often represent the installation of the products that are
also sold by the Company. Revenues generated by products and services were as
follows (in thousands):

                                          THREE MONTHS ENDED
                               MARCH 31, 2004           MARCH 31, 2003
                               --------------           --------------
          Products                 $46,283                  $40,127
          Services                  10,210                    8,617
                              ----------------         ----------------
            Total                  $56,493                  $48,744
                              ================         ================


                                           SIX MONTHS ENDED
                               MARCH 31, 2004           MARCH 31, 2003
                               --------------           --------------
          Products                 $83,226                  $83,028
          Services                  15,934                   15,781
                              ----------------         ----------------
            Total                  $99,160                  $98,809
                              ================         ================


                                      -8-
<PAGE>

In some instances, arrangements with customers involve multiple elements which
are delivered at different points in time. These situations typically arise when
the Company has delivered parts, but is also obligated to perform installation
services or parts are delivered over time, rather than on a single delivery
date. In determining the appropriate amount of revenue to be recognized, the
Company evaluates whether the delivered elements have standalone value to the
customer, whether the fair value of the undelivered elements is reliably
determinable, and whether delivery of the remaining elements is probable and
within the Company's control. In instances where all of these conditions are
satisfied, the Company recognizes revenue for the elements that have been
delivered to the customer. In instances where one or more of these conditions
have not been satisfied, the Company defers the recognition of revenue until all
these conditions are satisfied or all elements have been delivered.

The Company provides a reserve for estimated warranty and product service claims
based on historical loss experience and consideration of changes in products,
technology and warranty terms. A summary of the activity related to the warranty
reserve is as follows (in thousands):

                                                 SIX MONTHS ENDED
                                        MARCH 31, 2004      MARCH 31, 2003
                                        --------------      --------------
     Balance at beginning of period          $2,663             $2,888
     Provisions for warranty                    862                603
     Claims paid                              (742)              (710)
     Adjustments                                 --              (149)
                                       ----------------    ----------------
     Balance at end of period                $2,783             $2,632
                                       ================    ================


(2) INCENTIVE STOCK PLAN

The Company has an incentive stock plan for key employees, officers, and
directors. The Company accounts for this plan under the recognition and
measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. No stock-based employee compensation
cost is reflected in net income, as all options granted under the plan had an
exercise price equal to the market value of the underlying common stock on the
date of grant.

The following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition provisions of FASB
Statement No. 123, "Accounting for Stock-Based Compensation," to its stock-based
employee compensation (in thousands, except per share data).



                                      -9-
<PAGE>


<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED
                                                                                 ------------------
                                                                       MARCH 31, 2004          MARCH 31, 2003
                                                                       --------------          --------------
<S>                                                                         <C>                    <C>
Net earnings, as reported                                                   $4,650                 $3,348
Deduct:  Total stock-based compensation expense determined
     under the fair value based method for all awards, net of
     related tax effects                                                      (134)                  (162)
                                                                     --------------------    -------------------
Pro forma net earnings                                                      $4,516                 $3,186
                                                                     ====================    ===================

Earnings per share:
     Basic - as reported                                                     $0.75                  $0.55
     Basic - pro forma                                                       $0.73                  $0.52

     Diluted - as reported                                                   $0.70                  $0.52
     Diluted - pro forma                                                     $0.68                  $0.49

                                                                                  SIX MONTHS ENDED
                                                                                  ----------------
                                                                       MARCH 31, 2004          MARCH 31, 2003
                                                                       --------------          --------------

Net earnings, as reported                                                     $7,766                 $6,222
Deduct:  Total stock-based compensation expense determined
     under the fair value based method for all awards, net of
     related tax effects                                                        (248)                  (325)
                                                                     --------------------    -------------------
Pro forma net earnings                                                        $7,518                 $5,897
                                                                     ====================    ===================

Earnings per share:
     Basic - as reported                                                       $1.26                  $1.02
     Basic - pro forma                                                         $1.22                  $0.96

     Diluted - as reported                                                     $1.18                  $0.97
     Diluted - pro forma                                                       $1.14                  $0.91
</TABLE>


During the six months ended March 31, 2004, the Company granted options to
purchase 12,000 shares of its common stock at an average price of $26.64 per
share. The per share weighted average value of stock options granted during this
period was $9.86 on the date of grant using the Black Scholes option-pricing
model with the following assumptions: expected dividend yield of 1.91%, weighted
average risk-free interest rate of 3.8%, expected volatility factor of 35.5% and
a weighted-average expected life of eight years.


(3) ACQUISITION OF ASSETS

In November 2003, the Company acquired certain assets including inventory,
equipment, customer lists, and other intangible assets related to Analytec
Corporation's acoustic cleaner product line.

In January 2004, the Company acquired certain assets including inventory,
customer lists, and other intangible assets related to Baltec, a supplier of
electrical controls for air pollution equipment located in Australia.

The aggregate purchase price of these transactions consisted of cash payments
totaling $662,000. The pro forma effect of these transactions is not material to
the Company.


                                      -10-
<PAGE>


(4) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company has entered into forward exchange contracts with commercial banks 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, which primarily relate to the purchases
by the Company's European subsidiaries of inventory from their U.S. affiliates.
In accordance with SFAS 133, these transactions have been determined to be
effective hedges. The fair value of these contracts has been recognized in
accrued liabilities in the consolidated balance sheet. The related gains and
losses are deferred in shareholders' equity (as a component of comprehensive
income). These deferred gains and losses are recognized in income in the period
in which the related purchases being hedged are acquired. The notional amount of
such contracts at March 31, 2004 was $3,785,000, and the Company has incurred an
unrealized loss of $343,000 thereon. Approximately 76% of the deferred losses
under these contracts will be reclassified to earnings within the next twelve
months.

The Company's U.S. affiliates have outstanding loans to its European
subsidiaries which are denominated in Euros. In order to substantially eliminate
the foreign exchange risk of these advances, the Company uses forward exchange
contracts with maturities comparable to the underlying intercompany loans. As of
March 31, 2004, there were Euro 5.0 million (USD 6.0 million) of intercompany
loans that were economically hedged using forward exchange contracts for the
same amount. Changes in fair value of these foreign exchange contracts are
recorded in earnings.


(5) EARNINGS PER COMMON SHARE

Basic earnings per share is computed by dividing net earnings available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share is computed based upon the weighted
average number of common shares and dilutive common equivalent shares
outstanding. Stock options, which are common stock equivalents, have a dilutive
effect on earnings per share in all periods presented and are therefore included
in the computation of diluted earnings per share. A reconciliation of the
numerators and the denominators of the basic and diluted per-share computations
are as follows:

<TABLE>
<CAPTION>
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                              FOR THE THREE MONTHS ENDED
                                              March 31, 2004                              March 31, 2003
                                 ------------------------------------------  ------------------------------------------
                                  Net Earnings     Shares       Per-Share     Net Earnings     Shares       Per-Share
                                   (Numerator)    (Denom.)        Amt.         (Numerator)    (Denom.)        Amt.
                                   -----------    --------        ----         -----------    --------        ----
<S>                                 <C>             <C>         <C>             <C>             <C>         <C>
Basic earnings per share:
Earnings available to common
shareholders                        $ 4,650         6,167       $ 0.75          $ 3,348         6,111       $ 0.55

Effect of dilutive
securities--stock options             --              472                         --              360

Diluted earnings per share:
Earnings available to common
shareholders and assumed
conversion                          $ 4,650         6,639       $ 0.70          $ 3,348         6,471       $ 0.52
                                 ==========================================  ==========================================
</TABLE>


                                      -11-
<PAGE>

<TABLE>
<CAPTION>
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                               FOR THE SIX MONTHS ENDED
                                              March 31, 2004                              March 31, 2003
                                 ------------------------------------------  ------------------------------------------
                                  Net Earnings     Shares       Per-Share     Net Earnings     Shares       Per-Share
                                   (Numerator)    (Denom.)        Amt.         (Numerator)    (Denom.)        Amt.
                                   -----------    --------        ----         -----------    --------        ----
<S>                                 <C>             <C>         <C>             <C>             <C>         <C>
Basic earnings per share:
Earnings available to common
shareholders                        $ 7,766         6,146       $ 1.26          $ 6,222         6,118       $ 1.02

Effect of dilutive
securities--stock options             --              441                         --              329

Diluted earnings per share:
Earnings available to common
shareholders and assumed
conversion                          $ 7,766         6,587       $ 1.18          $ 6,222         6,447       $ 0.97
                                 ==========================================  ==========================================
</TABLE>

The following table summarizes repurchases of the Company's common stock during
the six-month periods ended March 31, 2004 and 2003. In the aggregate, as of
March 31, 2004, the Company had acquired 2,662,000 of the 4,000,000 shares of
BHA common stock authorized by the Board of Directors for repurchase. No shares
were repurchased by the Company during the quarter ended March 31, 2004.

                                           SIX MONTHS ENDED
                                           ----------------
                                  MARCH 31, 2004      MARCH 31, 2003
                                  --------------      --------------
  Shares Purchased                    18,000              40,422
  Average Price Per Share             $24.49              $17.09


(6) 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 March 31, 2004 and September 30, 2003 were as
follows (in thousands):

                                  MARCH 31,           SEPTEMBER 30,
                                    2004                  2003
                             -------------------    -----------------

       Raw materials               $14,667               $13,031
       Work-in-process               2,077                 1,234
       Finished goods                9,663                 9,215
                             -------------------    -----------------
       Total                       $26,407               $23,480
                             ===================    =================


(7) BUSINESS SEGMENTS

BHA reports its operations as three business segments, Domestic Air Pollution
Control (Domestic APC), Europe Air Pollution Control (Europe APC), and BHA
Technologies. Domestic APC consists of the air pollution control products and
services sold or managed from the United States. Such sales include shipments
and services throughout North America, Latin America, Asia, and the Pacific Rim,
as such revenues are derived from BHA's U.S. based management group. The Europe
APC segment represents sales of products and services managed from BHA's
European manufacturing, distribution, and sales offices. BHA Europe generally
services customers throughout Europe, as well as in the Middle East and Northern
Africa. BHA Technologies supplies ePTFE membrane products to BHA's APC business,
and is also developing a market for such products outside of air pollution
control.


                                      -12-
<PAGE>

BHA manages these segments as strategic business units. Europe APC represents a
distinct business unit as it maintains its own manufacturing, sales, marketing,
and project management resources. Sales to other international locations are
included in the Domestic APC business segment, as most or all of the key
manufacturing, engineering, and sales support functions are performed from the
United States. BHA Technologies operates as a distinct entity due to its unique
technologies, as well as the marketing of products unrelated to air pollution
control.

The supply by BHA Technologies of BHA-TEX(R) fabrics to the Company's APC
business segments represents a significant portion of its overall revenues.
These inter-segment sales are at gross margins which are generally consistent
with BHA Technologies' average margins on sales to its third party customers.
The sales dollars for the BHA Technologies' segment as reflected in the table
below include such inter-segment transfers of BHA-TEX(R) fabrics. Other sales of
products and services between the Company's business segments are not material
and as such, are excluded from the net sales amounts.

Reportable segment data was as follows (in thousands):

NET SALES

                                          THREE MONTHS ENDED
                                -------------------------------------
                                    MARCH 31,            MARCH 31,
                                       2004                 2003
                                -----------------     ---------------

    Domestic APC                     $39,636              $39,717
    Europe APC                        11,728                5,868
    BHA Technologies                  10,148                6,580
    Inter-Segment Eliminations        (5,019)              (3,421)
                                -----------------     ---------------
    Total                            $56,493              $48,744
                                =================     ===============

NET SALES

                                           SIX MONTHS ENDED
                                -------------------------------------
                                    MARCH 31,            MARCH 31,
                                       2004                 2003
                                -----------------     ---------------

    Domestic APC                     $70,082              $80,506
    Europe APC                        18,685               11,279
    BHA Technologies                  18,595               13,225
    Inter-Segment Eliminations        (8,202)              (6,201)
                                -----------------     ---------------
    Total                            $99,160              $98,809
                                =================     ===============



                                      -13-
<PAGE>


EARNINGS (LOSS) BEFORE INCOME TAXES

                                         THREE MONTHS ENDED
                            --------------------------------------------
                                 MARCH 31,                MARCH 31,
                                   2004                     2003
                            -------------------     --------------------

      Domestic APC                $3,763                   $4,195
      Europe APC                     905                       32
      BHA Technologies             2,323                      772
                            -------------------     --------------------
      Total                       $6,991                   $4,999
                            ===================     ====================

                                          SIX MONTHS ENDED
                            --------------------------------------------
                                 MARCH 31,                MARCH 31,
                                   2004                     2003
                            -------------------     --------------------

      Domestic APC                $6,617                   $8,177
      Europe APC                   1,214                     (191)
      BHA Technologies             3,848                    1,305
                            -------------------     --------------------
      Total                      $11,679                   $9,291
                            ===================     ====================



                    BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

The Company is a world leader in innovative filtration technology. Its two
principal operating subsidiaries are BHA Group, Inc., the world's largest
supplier of replacement parts and services for industrial air pollution controls
systems, and BHA Technologies, Inc., which manufactures and markets expanded
polytetrafluoroethylene (ePTFE) membrane products for use in a variety of
industrial and consumer products.

For purposes of this "Management's Discussion and Analysis," as well as the
segment reporting information included in Note 7 to the Condensed Consolidated
Financial Statements, the Domestic Air Pollution Control ("Domestic APC")
segment represents all air pollution control business for which the products or
services are sold or managed from the U.S. Generally, this includes sales to
customers in the U.S. and exports to customers in Canada, Latin America, and
Asia. The Europe APC segment represents all air pollution control business for
which the products or services are sold or managed primarily from Europe. Such
revenues are typically generated in Europe, Northern Africa, and the Middle
East. BHA Technologies, a subsidiary engaged in the production and sale of ePTFE
membrane for both APC and non-APC applications, sold worldwide, represents BHA's
third business segment.

Within the Domestic APC segment, there are three distinct sales groups which
include domestic fabric filter, domestic electrostatic precipitator ("ESP") and
export sales. The domestic fabric filter group sells parts and services for
baghouse equipment throughout the U.S. and Canada. In this market, BHA
distinguishes itself from the competition by using a combination of innovative
products together with problem solving advice provided by its sales people,
product managers and technical advisors. Through the use of its proprietary
telesales system, the Company can cost-effectively service a diverse customer
base. The vast majority of


                                      -14-
<PAGE>

the Company's baghouse sales represent small transactions with numerous
customers. The average order size for this business is approximately $4,000.
This sales approach generally results in BHA avoiding competing on the basis of
"commodity products". As a result, the Company generates higher gross margins
than its direct competitors in this market. This core business is, however,
supplemented with certain targeted large transactions of up to $1.0 million.
Depending upon the mix of business, the gross margins within this sales group
can vary significantly between fiscal periods.

The domestic ESP sales group uses a sales strategy similar to that of the
domestic fabric filter group, however, this business is much more dependent on
major projects. The majority of the Company's ESP sales are to the utility
industry and the sales staff works closely with customers to plan major project
work to coincide with scheduled plant outages, generally during the spring and
fall months. The average order size for this sales group is approximately
$50,000 and quarterly shipments fluctuate significantly based upon the timing of
major project work. The Company considers major projects to be those orders with
sales values ranging from $250,000 up to several million dollars for any single
transaction.

The export sales group sells both fabric filter and ESP parts and services to
customers throughout Latin America, the Pacific Rim and Asia. Historically,
approximately 60% of the sales volume generated by this sales group can be
categorized as "day-to-day" small to mid-size orders. This business is
supplemented by larger transactions such as ESP and baghouse project work or
orders to supply large quantities of filter bags to support major equipment
change-outs. The results of this sales group are significantly impacted by the
economic and political situations in its key markets as well as the timing of
large shipments.

The Europe APC segment also uses the Company's proprietary telesales system and
the problem solving approach to distinguish itself from the competition. This
segment sells the full line of the Company's products for fabric filter and ESP
equipment. In recent years, approximately 80% of the sales within this segment
can be characterized as "day-to-day" transactions and approximately 20% have
been the result of major projects. During the first six months of fiscal 2004,
major project work contributed approximately 25% of the Europe segment's sales.
Based upon the cost structure and sales volumes, this segment requires a
combination of steady daily orders combined with some project work in order to
generate profitable operations for a given quarterly period. On average, nearly
30% of the product costs for this segment are raw materials or products imported
from the U.S. As a result, the relative value of the Euro and the USD has a
significant impact on the Europe APC segment's results of operations.

The BHA Technologies segment typically sells its products through strategic
alliances with major companies in several markets as opposed to direct sales to
end users. Under these relationships, BHA Technologies is generally the
exclusive supplier of ePTFE membrane goods to its partners. These partners
incorporate the membrane into their products which are then sold to a third
party. Because of this sales structure, approximately two-thirds of the sales by
BHA Technologies to third party customers have been to its three largest
customers and the operating results of this segment are highly dependent upon
these relationships. The production costs of ePTFE membrane products include
substantial fixed overhead and BHA Technologies has significant available
capacity for future growth. As a result, increases in plant throughput can have
a significant favorable impact on gross margins.


                                      -15-
<PAGE>


RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following table summarizes the Company's revenues by segment and, within the
Domestic APC segment, by sales group. Amounts are in thousands.

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                  ----------------------------------
                                                      MARCH 31,         MARCH 31,
                                                         2004              2003
                                                  ----------------  ----------------
    <S>                                               <C>                <C>
    Domestic APC Segment:
         U.S. Fabric Filter                           $23,290            $19,765
         U.S. Electrostatic Precipitator (ESP)         10,128             16,374
         Export Sales                                   6,218              3,578
                                                  ----------------  ----------------
             Total Domestic APC Segment                39,636             39,717
    Europe APC Segment                                 11,728              5,868
    BHA Technologies Segment                           10,148              6,580
    Inter-Segment Eliminations                         (5,019)            (3,421)
                                                  ----------------  ----------------
    Total Revenues                                    $56,493            $48,744
                                                  ================  ================

                                                           SIX MONTHS ENDED
                                                  ----------------------------------
                                                      MARCH 31,         MARCH 31,
                                                         2004              2003
                                                  ----------------  ----------------

    Domestic APC Segment:
         U.S. Fabric Filter                           $40,933            $36,785
         U.S. Electrostatic Precipitator (ESP)         19,380             36,818
         Export Sales                                   9,769              6,903
                                                  ----------------  ----------------
             Total Domestic APC Segment                70,082             80,506
    Europe APC Segment                                 18,685             11,279
    BHA Technologies Segment                           18,595             13,225
    Inter-Segment Eliminations                         (8,202)            (6,201)
                                                  ----------------  ----------------
    Total Revenues                                    $99,160            $98,809
                                                  ================  ================
</TABLE>

FISCAL 2004 COMPARED TO FISCAL 2003

NET SALES

Consolidated net sales for the six months ended March 31, 2004 ("fiscal 2004")
increased slightly to $99.2 million from $98.8 million for the same period in
fiscal 2003. Consolidated sales for the quarter ended March 31, 2004 ("second
quarter") increased 16% to $56.5 million from $48.7 million for the same period
in fiscal 2003.

Sales in the Domestic APC segment decreased 13% for the first six months of
fiscal 2004 and decreased by less than 1% for the most recent quarter when
compared to the same periods in the prior year. The decline was anticipated, as
sales of electrostatic precipitator ("ESP") parts and services returned to
historical levels after an unusually strong performance in fiscal 2003. The
sales of electrostatic precipitator ("ESP") parts and services declined by 47%
from $36.8 million for the first six months of fiscal 2003 to $19.4 million for
the most recent six months. Sales of ESP parts and services declined in the most
recent quarter by 38% from $16.4 million to $10.1 million as compared to the
second quarter of fiscal 2003. The lower sales in the ESP product line were
partially offset by improvements in this segment's other sales groups. Sales of
fabric filter replacement parts and services increased 11% to $40.9 million for
the six-month period and 18% to $23.3 million for the most recent quarter as
spending in the U.S.


                                      -16-
<PAGE>

manufacturing sector began to increase. Export sales also rebounded in fiscal
2004 due largely to sales of fine filtration products in Asia and Latin America.
For the first six months of fiscal 2004, export sales were $9.8 million, an
increase of 42%, as compared to the same period in fiscal 2003. During the most
recent quarter, export sales increased 42% to $6.2 million as compared to the
second quarter of the prior year.

Sales in the Company's Europe APC segment, when expressed in U.S. dollars
("USD"), increased by 66% for the first six months of fiscal 2004 to $18.7
million compared to $11.3 million for the same period in the prior year. During
the most recent quarter, sales were nearly double the volume recorded during the
second quarter of fiscal 2003, increasing to $11.7 million from $5.9 million.
When expressed in Euros, sales of this segment increased by 39% during the first
six months and 68% for the second quarter of fiscal 2004 as compared to the same
periods in the prior year. The sales increase reflects execution of several
large projects together with improved "day to day" sales of replacement parts
and services. The weaker dollar relative to the European currencies has improved
the Company's competitive position in Europe.

Shipments of ePTFE membrane from BHA Technologies to third party customers
increased by 48% for the first six months of fiscal 2004 and 62% in the second
quarter as compared to the prior year periods. BHA Technologies generated
increases from sales of ePTFE membrane for applications in industrial outerwear,
other industrial products and in consumer outerwear products. The majority of
the sales growth continues to be attributable to incremental business in
non-consumer apparel. Inter-segment shipments of BHA Tex (R) products for use in
the Company's Domestic APC and Europe APC segments increased by 32% for the
first six months of fiscal 2004 to $8.2 million from $6.2 million for the same
period in fiscal 2003.


GROSS MARGIN

Consolidated gross margin was 35.4% of sales for the first six months of fiscal
2004 compared to 31.4% for the same period in the prior year. In the second
quarter, gross margin was 34.8% of sales compared to 32.4% in the prior year.
The improvements were attributable to several factors including: 1) increased
ePTFE production resulted in a decrease in per unit cost and improved margins in
the BHA Technologies segment, 2) improved sales mix within the Domestic APC
business segment that included higher shipments of fine filtration products as
compared to lower margin ESP project work during the prior year, 3) improvements
in plant productivity and increased throughput resulted in lower per unit costs
in fabric filter manufacturing and 4) the strong Euro resulted in a decrease in
the relative cost of raw materials and parts purchased from the U.S.


OPERATING EXPENSES

Operating expenses were $23.3 million (23.5% of sales) for the first six-months
of fiscal 2004 compared to $21.5 million (21.7% of sales) for the same period in
fiscal 2003. For the second quarter of fiscal 2004, operating expenses were
$12.6 million (22.3% of sales) compared to $10.7 million (21.9% of sales) for
the same period in the prior year. The $1.8 million (8.5%) increase in operating
expenses for the first six-months of fiscal 2004 as compared to the same period
in the prior year was the result of: 1) increases in accruals for retirement
plan contributions and management incentive bonus plans, both of which are
subject to variable funding based upon consolidated earnings, 2) the weakening
USD as compared to the Euro resulted in an increase in USD denominated expenses
of the Europe APC business segment, 3) normal wage increases and 4) higher legal
and professional expenses, including costs of corporate governance activities.

                                      -17-
<PAGE>

INTEREST EXPENSE, NET

Net interest expense for the first six-months of fiscal 2004 was $0.2 million
compared to $0.3 million for the same period in the prior year. All of the
Company's borrowings are at variable interest rates.


EARNINGS BEFORE INCOME TAXES

Pre-tax earnings for the Domestic APC segment were $6.6 million for the first
six-months of fiscal 2004 compared to $8.2 million for the same period in the
prior year. For the second quarter of fiscal 2004, pre-tax earnings for this
segment were $3.8 million compared to $4.2 million in the prior year. The
decline in pre-tax profits is consistent with the lower sales volume.
Additionally, the higher operating expenses for management incentive bonus and
retirement contributions primarily impact this segment since amounts are
allocated to the domestic segments based upon relative payroll dollars.

The Europe APC segment reported pre-tax earnings of $1.2 million for the first
six-months of fiscal 2004 compared to a pre-tax loss of $0.2 million for the
same period in the prior year. The improved operating results are consistent
with the higher sales volumes as the operating costs of the Europe segment are
largely fixed in nature.

BHA Technologies' pre-tax earnings for the first six months of fiscal 2004 were
$3.8 million compared to pre-tax earnings of $1.3 million for the same period in
the prior year. The improvement in operating results is consistent with a 48%
increase in shipments to third party customers and a 32% increase in shipments
of BHA Tex products to the Company's APC businesses. Pre-tax earnings as a
percentage of sales (third party and inter-company combined) for this segment
increased from 9.9% for the first six months of fiscal 2003 to 20.7% in the most
recent six-month period. The ePTFE manufacturing process includes significant
fixed costs resulting in strong earnings leverage from higher production
volumes.


INCOME TAXES

The effective income tax rate for the first six-months of fiscal 2004 was 33.5%
compared to 33.0% for the same period in the prior year. The rate for the
current year is generally consistent with the actual rate of tax for all of
fiscal 2003.


NET EARNINGS

Net earnings for the first six-months of fiscal 2004 were $7.8 million ($1.18
per diluted share) compared to earnings of $6.2 million ($0.97 per diluted
share) for the same period in fiscal 2003. Net earnings in the second quarter of
fiscal 2004 were $4.7 million ($0.70 per diluted share) compared to earnings of
$3.3 million ($0.52 per diluted share) for the same period in the prior year.
The average number of common and common equivalent shares increased by
approximately 140,000 to 6.6 million shares due to the impact of the Company's
higher share prices on the number of common equivalent shares outstanding.


LIQUIDITY AND CAPITAL RESOURCES

Net working capital increased from $50.3 million at September 30, 2003 to $56.9
million at March 31, 2004. The current ratio at March 31, 2004 and September 30,
2003 was 3.1 and 2.9, respectively. The Company's cash decreased from $18.8
million at September 30, 2003 to $17.0 million at March 31, 2004.


                                      -18-
<PAGE>

During the six months ended March 31, 2004, the Company generated $4.1 million
in cash from operating activities compared to $6.9 million in the first six
months of the prior year. The decrease in cash provided by operating activities
is the result of increased working capital required to support the higher sales
volume.

Investing activities resulted in an increase in cash during the six months ended
March 31, 2004, as compared to a net use of cash for the first six months of
fiscal 2003. In the most recent period, cash in the amount of $2.2 million that
was previously deposited to secure bank guarantees was released by the banks.
This source of unrestricted cash offset cash used for investing activities
including $1.5 million used to acquire property plant and equipment and $0.7
million invested in product line acquisitions. During the first six months of
fiscal 2003, the Company invested $2.0 million in capital expenditures.

During the first six months of fiscal 2004, cash used by the Company in
financing activities included dividend payments of $3.1 million, repurchase of
the Company's common stock for $0.4 million and repayment of bank borrowings of
$1.7 million. During the first six months of fiscal 2003, the Company's
financing activities included $0.9 million in net debt repayments, $0.3 million
in dividend payments, and $0.7 million used to repurchase the Company's common
stock.

At March 31, 2004, BHA had unused lines of credit of $20.9 million. The debt
structure includes: an $18.0 million revolving credit facility maturing on April
30, 2006; $5.6 million under an amortizing term loan with a final maturity in
2006; a European revolving credit facility of $7.0 million with a maturity on
April 30, 2006; and a capital lease related to an industrial revenue bond
transaction for $5.8 million with annual sinking fund payments and a final
maturity in 2018. The Company believes that cash flows from operations and
available credit lines will be sufficient to meet its capital needs for the
foreseeable future.


OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements.


MANAGEMENT JUDGMENTS AND ESTIMATES

In preparing the financial statements, a number of assumptions and estimates are
determined, that in the judgment of management, are proper in light of existing
general economic and Company-specific circumstances. Examples of areas in which
judgments and estimates are required include the collectibility of receivables,
the value of certain inventories and the evaluation of certain contingent
liabilities, including product warranties and claims arising in the ordinary
course of business. While the Company believes it has taken reasonable care in
preparing these estimates and making these judgments, actual results could and
probably will differ from the estimates.


CRITICAL ACCOUNTING POLICIES

The Company's critical accounting policies include the timing of revenue
recognition on certain projects, inventory valuation, estimates related to
collectibility of receivables and estimation of potential warranty claims.

In some instances, arrangements with customers involve multiple elements which
are delivered at different points in time. These situations typically arise when
the Company has delivered parts, but is also obligated to perform installation
services or parts are delivered over time, rather than on a single delivery
date. In determining the appropriate amount of revenue to be recognized, the
Company evaluates whether the delivered elements have standalone value to


                                      -19-
<PAGE>

the customer, whether the fair value of the undelivered elements is reliably
determinable and whether delivery of the remaining elements is probable and
within the Company's control. In instances where all of these conditions are
satisfied, the Company recognizes revenue for the elements that have been
delivered to the customer. In instances where one or more of these conditions
have not been satisfied, the Company defers the recognition of revenue until all
these conditions are satisfied or all elements have been delivered.

The Company values its inventories on the first-in, first-out (FIFO) accounting
method using standard costs and provides reserves for estimated losses for slow
moving or obsolete items. The reserve requirement is estimated based upon a
review of specific inventory items that are identified as slow moving and
consideration of potential salvage value and carrying costs.

Accounts receivables are reported net of reserves for uncollectible accounts.
The Company estimates the amount of the reserve requirement based upon a review
of delinquent accounts, the Company's historical loss experience and the current
economic factors impacting its customers.

The Company provides warranties on the products and services it sells which vary
in length and terms based upon the nature of such products and services, as well
as the customer's industry. A reserve has been established for potential
warranty claims. The Company estimates its reserve requirement based upon
specific product failures identified, as well as historical loss experiences.


OUTLOOK

One of the Company's primary business goals is to increase compounded earnings
per share at a 12% to 15% rate over time. Between fiscal 2000 and 2003, the
Company's consolidated earnings per diluted share increased at a 19% annual
compounded rate. The overall financial condition of the Company has improved as
bank borrowings, net of cash, were reduced by $30.0 million during the
three-year period. The Company's earnings growth during that period was the
result of an increase in ESP parts and service work for electric utility
customers in the U.S. and the success of BHA Technologies. These areas of the
Company's business provided strength to offset the overall weakness the Company
experienced in its worldwide fabric filter replacement parts and service
business. Although its financial results have been mixed, the Company believes
it has improved its market position and competitive advantage in each of its
major business areas. The following are various factors for consideration as the
Company moves into its third quarter:

     o    Publicly available information provides an indication that the U.S.
          economy is improving. The Company had previously provided guidance
          that it expected an improvement in its market for the sale of fabric
          filter replacement parts and services to trail an improvement in
          overall manufacturing conditions by as much as six months. The Company
          saw an increase in new orders starting in January of 2004. Although
          encouraged with the recent increase in activity, the Company expects
          that business conditions will remain competitive. The Company believes
          that it is well positioned with its products, people and approach to
          service this market. These factors, combined with a lower cost
          structure, are expected to benefit the Company as business conditions
          improve.

     o    The Company believes that over the past three years it has established
          itself as the premier supplier for ESP replacement parts, services and
          rebuilds in the U.S. The Company has also been successful in expanding
          this business in certain international


                                      -20-
<PAGE>

          markets. The Company's overall ESP replacement parts and service
          results were especially strong during fiscal 2003. The Company's
          system for tracking project work to be executed over a three-year time
          horizon provided an indication that the total market for ESP rebuild
          work to be executed during the fall of 2003 and the spring of 2004
          outage seasons would be lower than the same periods in the prior year.
          For this reason, the Company projected lower shipments of ESP parts
          and services during the just completed six-month period. The Company
          expects that sales of ESP rebuilds will show a substantial increase in
          the upcoming third quarter as compared to the third quarter of the
          prior year. Historically, the second quarter sales have exceeded third
          quarter sales in this portion of the Company's business. During fiscal
          2004, third quarter shipments will be greater than the second quarter
          due to the timing of several larger projects to be executed in the
          current year. Preliminary information available to the Company and
          current quote activity also provide an indication that business should
          continue to increase during the fall of 2004 and spring of 2005 outage
          seasons. This factor, combined with the Company's existing backlog of
          business scheduled for the next fiscal year, are early positive
          indicators of potential results for fiscal 2005 and 2006.

     o    The Company is pleased with its sales and earnings growth in the BHA
          Technologies segment. Although the Company believes that this segment
          is well positioned for additional growth, it is currently very
          dependent upon a few significant supply agreements. Incremental third
          party revenues within this segment are likely to be structured under
          multi-year supply arrangements with new customers. The extent to which
          this segment will increase its sales and earnings will be dependent
          upon the timing of final product commercialization and order execution
          in its target markets.

Due to the factors discussed above, visibility with respect to future results
beyond 90 days remains a challenge. For more information, you should refer to
the sections entitled, "Outlook" and "Factors Affecting Earnings and Share
Price" included in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on November 11, 2003. The following is
specific guidance being provided for the third quarter of fiscal 2004:

     o    For the third quarter of fiscal 2004, the Company anticipates that
          consolidated net sales will be significantly higher than the same
          period in the prior year. The year-over-year expected increase in
          sales for the quarter is in the 40% range. The expected increase in
          sales is due in part to the timing of major ESP project work in the
          current year as compared to the prior year.

     o    Earnings for the third quarter of fiscal 2004 are expected to be in
          the range of $.45 to $.55 per diluted share as compared to $.27
          reported for the same period in the prior year.


BACKLOG

On March 31, 2004, the Company's backlog of orders was $71.9 million compared to
a backlog of $51.3 million at March 31, 2003 and $60.4 million at September 30,
2003. Approximately $7.2 million of the March 31, 2004 backlog is scheduled to
ship after March 31, 2005.


                                      -21-
<PAGE>


FORWARD-LOOKING INFORMATION

This report contains forward-looking statements that reflect the Company's
current views with respect to future events and financial performance. The
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results or those
anticipated. The words "should," "believe," "anticipate," "expect," and other
expressions that indicate future events and trends identify forward-looking
statements. Actual future results and trends may differ materially from
historical results or those anticipated depending on a variety of factors,
including, but not limited to, competition, the performance of newly established
domestic and international operations, demand and price for the Company's
products and services, general U.S. and international business conditions and
other factors. Readers should consult the section entitled "Factors Affecting
Earnings and Stock Price" in the Company's annual report of Form 10-K for the
fiscal year ended September 30, 2003. The Company cautions that the foregoing
list of important factors is not exclusive.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATES

All of the Company's indebtedness is at variable rates of interest. The Company
has not used derivative financial instruments to hedge its exposure to interest
rate changes. Based upon borrowings outstanding at March 31, 2004, a 1%
fluctuation in market rates would impact interest expense by approximately
$130,000 annually.


EXCHANGE RATES AND FORWARD EXCHANGE CONTRACTS

The Company views its equity investments in foreign subsidiaries as long-term
commitments and does not hedge the translation exposures relative to such equity
investments.

Certain of the Company's operations, primarily its international subsidiaries,
make some of their purchases and sales in currencies other than their functional
currencies. This subjects the Company to the risks associated with fluctuations
of currency exchange rates. The Company reduces this risk by utilizing natural
hedging (offsetting receivables and payables). At March 31, 2004, the amount of
unhedged exposures was approximately $1.0 million.

The Company's U.S. affiliates have outstanding loans to its European
subsidiaries which are denominated in Euros. In order to substantially eliminate
the foreign exchange risk of these advances, the Company uses forward exchange
contracts with maturities comparable to the underlying intercompany loans. As of
March 31, 2004, there were Euro 5.0 million (USD 6.0 million) of intercompany
loans that were economically hedged using forward exchange contracts for the
same amount. Changes in fair value of these foreign exchange contracts are
recorded in earnings.

BHA periodically enters into forward exchange contracts with commercial banks 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 March 31, 2004, the notional amount
of these forward exchange contracts was approximately $3.8 million and the
Company has incurred an unrealized loss of $343,000 thereon.


ACCOUNTS RECEIVABLE

The Company's customer base operates in numerous industries in the U.S. and
internationally. With the weakness in the global manufacturing economy, the
Company is seeing an increasing level of customer bankruptcies and slow payment
problems that management believes have been appropriately reserved for. Although
there is not a significant concentration of sales in


                                      -22-
<PAGE>

any one industry or with any individual customer, certain of the Company's
customers operate in industries, such as electric utility, steel, textile and
foundry, which were severely impacted by the recent economic uncertainties.
Additionally, the Company executes significant projects and fulfills membrane
supply contracts that can result in open receivables from individual customers
that at times exceed $1 million. It is considered unlikely that the failure of
one or more customers would have a material adverse effect on the Company's
financial condition. However, near term operating results could be adversely
impacted by an increase in bad debt expense in the event that these customers'
financial results fail to recover in the near term.


ITEM 4.  CONTROLS AND PROCEDURES

CEO and CFO Certifications. Immediately following the "Signatures" section of
this quarterly report are the certifications of the CEO and the CFO required by
Rules 13a-14 and 15d-14 the Securities Exchange Act of 1934, as amended (the
"Certifications"). This section of the quarterly report contains the information
concerning the evaluation of Disclosure Controls & Procedures and changes to
Internal Controls Over Financial Reporting referred to in the Certifications and
this information should be read in conjunction with the Certifications for a
more complete understanding of the topics presented.

Disclosure Controls & Procedures and Internal Control Over Financial Reporting.
Disclosure Controls & Procedures are procedures that are designed for the
purpose of ensuring that information required to be disclosed in the Company's
reports filed under the Exchange Act (such as this quarterly report), is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms. Internal Control Over Financial Reporting are
designed for the purpose of providing reasonable assurance that the Company's
transactions are properly authorized, recorded and reported and that the
Company's assets are safeguarded from improper use to permit the preparation of
the Company's financial statements in conformity with generally accepted
accounting principles.

Limitations on the Effectiveness of Controls. The Company's management,
including the CEO and CFO, does not expect that the Company's Disclosure
Controls or Internal Control Over Financial Reporting will prevent all error and
all fraud. A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Because of the limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. Further,
the design of any control system is based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions. Because of these inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

Conclusions regarding Disclosure Controls. Based upon the required evaluation of
Disclosure Controls, the CEO and CFO have concluded that, as of March 31, 2004,
subject to the limitations noted above, the Company's Disclosure Controls are
effective to ensure that material information relating to the Company and its
consolidated subsidiaries is made known to management, including the CEO and
CFO, particularly during the period when the Company's periodic reports are
being prepared.


                                      -23-
<PAGE>

Changes to Internal Control over Financial Reporting. In accordance with the
SEC's requirements, the CEO and the CFO note that during the quarterly period
covered by this Report, there were no significant changes in our Internal
Control over Financial Reporting that have materially affected, or are
reasonably likely to materially affect, our Internal Control over Financial
Reporting.


PART II. OTHER INFORMATION

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On February 24, 2004, at the Annual Meeting of Shareholders of BHA Group
Holdings, Inc.

(a)  The following persons were elected as Directors to serve until the next
     Annual Meeting of Shareholders or until their respective successors shall
     have been duly elected and qualified, by the following vote:

                                        FOR         AUTHORITY WITHHELD
         Don H. Alexander            5,215,773            114,234
         Robert J. Druten            5,221,288            108,719
         Robert D. Freeland          5,215,873            114,134
         James E. Lund               3,900,254          1,429,753
         Thomas A. McDonnell         5,214,211            115,796
         Lamson Rheinfrank, Jr.      3,900,254          1,429,753
         James J. Thome              3,899,784          1,430,223

(b)  Voting for the ratification of KPMG LLP as the independent auditors of the
     Company for the fiscal year ending September 30, 2004 was as follows:

                     FOR             AGAINST          WITHHELD
                  5,320,504           7,906            1,597


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K:

(a)  Exhibits:

     (31.1) Certification of Chief Executive Officer pursuant to Rules 13(a) -
            14(a) and 15(d) - 14(a) of the Securities Exchange Act, as
            amended.

     (31.2) Certification of Chief Financial Officer pursuant to Rules 13(a) -
            14(a) and 15(d) - 14(a) of the Securities Exchange Act, as
            amended.

     (32.1) Certification of Chief Executive Officer pursuant to 18 U.S.C.
            1350.

     (32.2) Certification of Chief Financial Officer pursuant to 18 U.S.C.
            1350.

(b)  Reports on Form 8-K:

     On January 21, 2004, the Company filed a Form 8-K under Item 7 and Item 9
     furnished pursuant to Item 12, which included a copy of its press release
     dated that same day in which the Company announced its earnings for the
     quarter ended December 31, 2003.

                                      -24-
<PAGE>

     No other reports on Form 8-K were filed by the Company during the quarter
     ended March 31, 2004.


                                   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 HOLDINGS, INC.
                                               (Registrant)





           April 21, 2004                 By:  /s/ James C. Shay
-------------------------------------          -------------------------------
                Date                                     (Signature)
                                               James C. Shay
                                               Senior Vice President, Finance
                                               and Administration,
                                               Principal Financial and
                                               Accounting Officer


                                          By:  /s/ James E. Lund
                                               -------------------------------
                                                         (Signature)
                                               James E. Lund
                                               President and
                                               Chief Executive Officer





                                      -25-
<PAGE>



                            BHA GROUP HOLDINGS, INC.
                                  EXHIBIT INDEX


     EXHIBIT NO.                            DESCRIPTION
     -----------                            -----------

       (31.1)       Certification of Chief Executive Officer pursuant to Rules
                    13(a) - 14(a) and 15(d) - 14(a) of the Securities Act, as
                    amended.

       (31.2)       Certification of Chief Financial Officer pursuant to Rules
                    13(a) - 14(a) and 15(d) - 14(a) of the Securities Act, as
                    amended.

       (32.1)       Certification of Chief Executive Officer pursuant to 18
                    U.S.C. 1350.

       (32.2)       Certification of Chief Financial Officer pursuant to 18
                    U.S.C. 1350.









                                      -26-

