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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended                                 Commission File Number
     September 30, 1997                                           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 No.)
incorporation or organization)

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

Securities registered pursuant to Section 12(b) of the Act:

                                                           Name of Each Exchange
      Title of each class                                   on Which Registered
      -------------------                                  ---------------------
             None                                                - - - - -

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, $.01 par value per share
              ----------------------------------------------------
                                (Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:

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



                                       -1-




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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.   X
            ---

As of December 9, 1997, the number of shares outstanding of the Registrant's
Common Stock was 6,505,200 shares.

The aggregate market value of the voting stock held by non-affiliates* of the
Registrant's Common Stock was $102,147,411, computed by reference to the closing
price of $19.25 as reported to Registrant at which such stock was quoted by the
NASDAQ National Market on December 9, 1997.

The Registrant's definitive proxy statement for the annual meeting of
stockholders to be held on February 24, 1998 (which will be filed within 120
days after the end of the fiscal year covered by the Form 10-K) is incorporated
to Part III, items 10, 11, 12 and 13, by reference.

*Excludes value of shares held by present officers, directors and principal
stockholders of the Registrant. The determination of "affiliate" status for
purposes of this Annual Report on Form 10-K shall not be deemed a determination
as to whether a person is an affiliate of the Registrant for any other purpose.

                                       -2-




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The statements contained in this Report on Form 10-K that are not purely
historical are forward looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21 E of the Securities Exchange Act of
1934, including statements regarding the Company's expectations, hopes,
intentions or strategies regarding the future. Forward looking statements are
included in the "Factors Affecting Earnings and Stock Price" section,
"Management's Discussion and Analysis," and may be included in other
sections throughout the report. 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," "see," 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, and other factors. Certain
of these factors are discussed in more detail below.

                                     PART I

                                ITEM 1 - BUSINESS

BHA Group Holdings, Inc. (together with its domestic and international
subsidiaries, the "Company" or "BHA") is an industrial service company that
designs, manufactures and sells replacement parts and accessories and provides
rehabilitation and conversion services for the types of industrial air pollution
control equipment known as "baghouses", "cartridge collectors" and
"electrostatic precipitators". This equipment is used to eliminate particulate
from the air by passing particulate laden gases through fabric filters or filter
bags, in the case of baghouses, pleated media filter elements, in the case of
cartridge collectors and between electrically charged collector plates, in the
case of electrostatic precipitators. The Company's business also includes the
maintenance, conversion and rebuilding of this equipment through a network of
employees and independent contractors. The Company's products and services are
marketed throughout North America, South America, Europe, the Near East, the
Pacific Rim and China. While definitive industry statistics are not available,
based upon Dun & Bradstreet reports and other financial information available to
it, the Company believes it is a leader in worldwide sales of air pollution
control replacement parts and services.

The Company was organized as an unincorporated division of Standard Havens, Inc.
("Standard Havens") in 1975 and was incorporated in Delaware as a wholly-owned
subsidiary of Standard Havens in 1986. The Company became publicly-owned when it
completed its initial public offering of common stock in November 1986. The
Company's outstanding common stock was reclassified into Class A Common Stock
and Class B Common Stock in April 1988, after which all of the Company's Class B
Common Stock held by Standard Havens was distributed to the shareholders. In
1988, all Company Class B Common Stock was converted to Class A Common Stock. In
1996, the Class A Common Stock was reclassified as common stock and the Class B
Common Stock was eliminated. Additionally, the shareholders approved an increase
in common stock authorized from 10 million to 20 million shares. The Company
completed its second public offering of common stock in February 1989. Net
proceeds from that public offering (approximately $8.3 million) were used for
working capital purposes and to finance several acquisitions.

In April 1989, the Company formed PrecipTech, Inc. ("PrecipTech"), a Delaware
corporation, as a wholly-owned subsidiary. PrecipTech, which had previously been
a division of BHA, was formed for the purpose of conducting and expanding the
Company's business as it relates to replacement parts, accessories and services
for electrostatic precipitators.

                                       -3-




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During 1989, BHA and PrecipTech completed several acquisitions in efforts to
expand their product line and services. In June 1989, BHA acquired the business
of developing and manufacturing acoustic horns for use in both baghouses and
electrostatic precipitators of Saracco Acoustic Sciences Corporation. PrecipTech
completed three acquisitions of privately held companies or their operating
assets. In April 1989, PrecipTech acquired ESP Specialties, Inc., a company that
manufactures and sells replacement parts for electrostatic precipitators. In
July 1989, PrecipTech acquired Kinetic Controls, Inc., a company specializing in
the manufacture and sale of automatic voltage controllers for electrostatic
precipitators. And in October 1989, PrecipTech acquired Midwest Power
Corporation, a company engaged in the manufacture and sale of replacement parts,
accessories and services for electrostatic precipitators.

During 1992, the Company acquired the Fabric Filters Division of Joy
Environmental Technologies which manufactures fabric filter bags. In August
1994, the Company acquired SF Air Filtration AG, which is based outside of
Zurich, Switzerland. SF Air Filtration AG designs and produces high efficiency
replacement cartridge filter elements which the Company believes will be in
demand as markets continue to move to tighten particulate control. In two
separate transactions during 1995, the Company purchased certain product rights
relating to evaporative gas cooling technology and a dust monitor product line.

During 1994, the Company established BHA Technologies, Inc. (formerly BHA-TEX,
Inc.) ("BHA Technologies"), a Delaware Corporation. This wholly-owned subsidiary
was formed for the purpose of developing polytetrafluoroethylene ("PTFE")
membranes. BHA Technologies successfully developed its own expanded PTFE
membrane, which it manufactures and markets for various applications both within
and outside the Company's traditional air pollution control equipment markets.
In the air pollution control market, expanded PTFE membrane is laminated to a
fabric substrate, which is then converted into a replacement filter and marketed
under the trade name BHA-TEX(R). The benefits to the customer include improved
collection efficiency, increased throughput and lower operating costs. PTFE
membranes are widely used outside of air pollution control applications. These
applications include, but are not limited to, wet filtration, industrial,
electrical insulation, medical and apparel. Some of the products and processes
in these applications are currently under patent protection. In addition to
supplying the Company's air pollution control businesses with expanded PTFE
membranes for use on filter elements, BHA Technologies will evaluate the
market niches and product opportunities available to pursue and develop custom
products and services to meet the needs of this new base of customers.

In November 1996, the Board of Directors approved certain changes to the
Company's corporate structure. The Board determined that servicing the customers
of its corporate business through one company, instead of through various
subsidiaries, will yield the greatest sales, marketing and operational
efficiencies. To achieve this objective, three wholly-owned subsidiaries of the
Company that are involved in various air pollution control businesses were
merged into PrecipTech to form one company. On February 18, 1997, the
shareholders of the Company approved an amendment to the Certificate of
Incorporation of the Company to change PrecipTech's name to BHA Group, Inc. and
the Company's name to BHA Group Holdings, Inc.

                                       -4-




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<PAGE>

In March 1997, the Company established its wholly-owned subsidiary, BHA Shanghai
Environmental Technology Company Limited ("BHA Shanghai") in Shanghai, People's
Republic of China. The purpose of BHA Shanghai is to assemble and sell air
pollution control baghouse, precipitator and evaporative gas conditioning
products and provide after-sale services and relevant technical services to a
market that BHA believes holds significant long-term potential.

In April 1997, the Company incorporated a new wholly-owned subsidiary in Pune,
India, BHA Group International Private Limited ("BHA India"). BHA India was set
up to manufacture and trade in air pollution control equipment and replacement
parts and to render consultancy services to users of such equipment in India and
its surrounding markets. Prior to setting up this company, BHA was represented
in India and its surrounding regions by a sales and service office. The sales
and service office was incorporated to remove the operational restrictions
placed on representative offices and allow for further expansion and growth in
these areas.

FACTORS AFFECTING EARNINGS AND STOCK PRICE


Competition - Based upon Dun & Bradstreet reports and other publicly available
financial information, the Company believes that it is a global leader in the
air pollution control equipment aftermarket. Regional offices have been
established in China, the Pacific Rim and the Near East. As a result of this
movement into the international market, the Company is facing increased
competition from competitors in those specific markets, as well as existing
competitors from the U.S. and Europe. Several of the Company's competitors are,
or are part of, large integrated companies, which have much greater resources
than the Company. The competition also includes several dozen small to mid-size
filter bag manufacturers that compete in local and regional geographic markets.
Generally, original equipment manufacturers in the U.S. have not effectively
competed in the aftermarket for baghouses, but have been a significant factor in
the aftermarket for electrostatic precipitators. The domestic utility markets
for precipitators have been competitive, as this industry is restructuring in
response to deregulation. Competition has had a negative impact on the
profitability of orders executed within this industry group. This overall
slowdown has increased competition for industrial replacement parts and
services. The Company does not see this situation improving significantly during
1998. The Company's domestic electrostatic precipitator replacement parts and
services business has declined from $35 million in fiscal 1994 to $21 million in
fiscal 1997.

                                       -5-




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Although the Company believes that its business in this market will not decline
further, any additional downturn could have a material adverse effect on its
business. Outside of the U.S., however, electrostatic precipitators are more
prevalent than baghouses for use in air pollution control systems. The Company
continues to position itself for additional growth in the international
marketplace. The Company believes that important competitive factors are timely
and dependable service, effective marketing, price and quality. The Company
believes it has the broadest product line in the air pollution control equipment
aftermarket. This, combined with its proprietary telesales system (see
"Marketing" below), enables it to respond promptly to customer requests, thus
providing it with a competitive advantage.

BHA Technologies Business Expansion - The Company sees significant potential in
PTFE membrane applications outside of air pollution control. During 1997, the
Company increased its investment in BHA Technologies and added resources to
enable it to expand its sales, product development and manufacturing
capabilities. While the Company has confidence in its approach to this new
business, it has no operating history relating to this business outside of air
pollution control applications. Accordingly, there can be no assurances that BHA
Technologies will achieve its desired profitability, which could have a material
adverse effect on the Company's operating results.

BUSINESS SEGMENT DATA

The Company sells products and services in several geographical areas.
Operations of the domestic business segment are based in the United States
(U.S.). The domestic business segment provides products and services to the U.S.
markets and exports to Canada, Latin America, the Near East, the Pacific Rim and
China. The foreign business segment manufactures and sells products in Europe.
Set forth below is information regarding the Company's business segments for
each of the years in the three-year period ended September 30, 1997 (in
thousands of dollars):

                                       -6-




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<TABLE>
<CAPTION>

                                               1995         1996           1997

<S>                                           <C>          <C>          <C>     
Domestic Sales                                $101,391     $105,962     $114,168
Foreign Sales (Europe)                          13,332       15,346       16,431
                                              --------     --------     --------
                                              $114,723     $121,308     $130,599
                                              ========     ========     ========

Domestic Assets                               $ 64,299     $ 68,089     $ 76,976
Foreign Assets (Europe)                          7,490        7,946       10,629
                                              --------     --------     --------
                                              $ 71,789     $ 76,035     $ 87,605
                                              ========     ========     ========

Domestic Operating Income                     $  9,281     $  9,703     $ 10,911
Foreign Operating Income (Europe)                  690        1,066        1,679
                                              --------     --------     --------
                                              $  9,971     $ 10,769     $ 12,590
                                              ========     ========     ========
</TABLE>


During 1997, the Company established wholly-owned subsidiaries in China and
India (see "Business"). To date, the majority of the sales to these markets were
U.S. exports. The sales and operating income of these entities were not
significant during fiscal 1997. The total assets in these countries is
approximately $1.0 million. The sales, operating income and fixed assets of
these entities are included in the "Domestic" portion of the "Business Segment
Data" above.

U. S. export sales to unaffiliated customers in Canada, Latin America, the Near
East, the Pacific Rim and China were $13,653,000, $22,410,000 and $24,966,000
for the years ended September 30, 1995, 1996 and 1997, respectively. These
revenues are included in "Domestic Sales" in the table above.

PRODUCTS AND SERVICES

The Company believes it has the broadest product line in the air pollution
control equipment aftermarket. This, combined with its proprietary telemarketing
system, enables it to respond promptly to customer requests, thus providing it
with a competitive advantage.

The Company manufactures and sells a wide variety of filter bags, replacement
parts and accessories for the air pollution control equipment aftermarket.
Filter bags are manufactured by the Company from fabric purchased in bulk from
fabric manufacturers. The Company manufactures industry standard bags, as well
as bags for customer specific applications. Most filter bags are produced from
fiberglass, polyester, aramid and polypropylene fabrics. A market shift towards
higher efficiency filtration has led to an increased usage of filters that have
PTFE membrane applied to the fabric and other more specialized materials. The
Company's wholly-owned subsidiary, BHA Technologies, manufactures the
expanded PTFE membrane (BHA-TEX'r') used in its filter elements. The Company is
 one of the few filter bag suppliers that manufactures its own PTFE membrane
(see "Business"), which it believes provides it a competitive advantage as it is
able to control availability, raw material costs, quality and product
development. Baghouse replacement parts include support cages for the filter
bags, clamps, spring tensioning systems, continuous particulate monitoring
systems and gaskets. Electrostatic precipitator replacement parts include
collecting plates, wires, discharge electrodes, transformer/rectifiers, rappers
and electronic controls.

                                       -7-




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In addition to standard replacement parts, the Company continues to aggressively
introduce new products and accessories that enhance the performance of a dust
collection system. These new products include continued enhancements to the
Company's electrical products for both baghouses and precipitators and the
introduction of a pleated media filter element and evaporative gas cooling
product lines. Product profitability varies considerably over different product
groups, with standard products typically providing a lower profit margin than
replacement parts and accessories.

The Company's business also includes the maintenance, conversion and rebuilding
of industrial air pollution control equipment through a network of independent
contractors and its own service crews. A comprehensive safety program enables
both the Company and customer to control costs from a risk management
perspective. Conversion and rebuilding services involve the retrofitting of an
entire baghouse or electrostatic precipitator to restore it to original
operating parameters or improve overall performance. BHA is capable of supplying
a variety of other services specifically fitted to its customers' requirements,
including preventive maintenance, system/equipment analysis, inspections,
supervision of customer personnel and training. Information gathered during
preventive maintenance, analysis and inspections is stored in the Company's
database for future reference, and thus is a valuable source of important
customer information. In addition, knowledge gained in solving one customer's
problems is stored in the Company's database and made available on-line to the
Company's salespeople to permit them to respond promptly to similar problems
encountered by other customers. BHA believes it is the leader in providing these
services on a worldwide basis.

CUSTOMER BASE

The Company's customer base is diverse both industrially and geographically, and
includes customers in virtually all sectors of the industrial economy.
International markets include Canada, Europe, Latin America, the Near East, the
Pacific Rim and China. The Company's products and services are used in major
industrial environments such as cement kilns, asphalt plants, steel and iron
foundries, aluminum and copper smelters, rock and gypsum dryers, chemical
plants, grain and food processing plants, refuse to energy plants, waste and
hazardous waste incinerators and electric utilities, as well as many other
areas.

The vast majority of the Company's baghouse sales represent small transactions
with numerous customers. Precipitator replacement parts sales frequently
accompany conversion or rebuild services. No customer accounted for more than
10% of the Company's annual sales during any of its last three fiscal years. The
Company does not believe that it is dependent upon any single customer or group
of customers and has no unusual geographical or industry concentrations of
business or credit risk.

SALES AND MARKETING

One of the Company's principal competitive advantages is its proprietary
telesales system, the core of which is a computer database containing detailed
information on over 120,000 pieces of pollution control equipment (baghouses and
electrostatic precipitators) at over 30,000 plant locations. The growth of the
database has increased significantly due to the focus on international markets.
Because of the large number of different original equipment manufacturers and
varying maintenance procedures, many pieces of customer equipment have unique
features. Included in the Company's database is information on the location of
the equipment; a phone contact for the individuals responsible for maintaining
the equipment; the type of equipment (by manufacturer, design and unique
attributes); when it was installed; what

                                       -8-




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fabric, size and design filter bags are used; when the bags were last serviced;
additional accessories that were installed; application and temperature
requirements; as well as other detailed pieces of useful information about the
equipment and the customer. This information has been gathered over the 21 years
of the Company's existence, and is continually updated following customer calls,
site inspections and maintenance jobs.

The Company keeps information in a central computer database which is accessed
on-line by its telesales representatives. The computer tracks customer calls and
pending orders, which helps make efficient use of the representative's time.
Each day, a list of the most important customer calls is provided to the
representative. This list includes contracts and orders in negotiation, as well
as reminders for calls to customers which have not been serviced for some time.
Once an order is taken, the information is automatically routed to the
operations area which uses the computer to generate invoices and contracts.
Invoice and technical data about the filter bags, cages, precipitator
replacement parts and accessories is sent via computer connection to the
Company's manufacturing facilities. There the bags are sewn, the support cages
and precipitator replacement parts are manufactured, and the accessories are
consolidated for shipment. The order is packaged and sent to the customer
according to a priority schedule.

Each telesales representative is furnished with data to evaluate their
performance and enable them to focus on high opportunity sales calls. Historical
sales data is made available to each telesales representative showing (i)
performance by the month and year toward targeted goals (broken down by product
category) sales volume and profit margin, (ii) the sales history for each
customer, as well as the sales potential for such customer, and (iii) a summary
of each contact with each customer and its results, including notes of any
useful information for further contacts. The Company believes that the system
provides effective feedback to telesales personnel to meet their sales goals.

In addition to its use on a customer-by-customer basis, the Company's telesales
system and database is used to develop industry statistics and analyze market
trends. Information is also extracted for marketing and advertising campaigns
and new product evaluations.

GOVERNMENT REGULATION

The Company is not subject to direct environmental protection regulation with
respect to the manufacture or sale of its products other than regulations
applicable to manufacturers generally. The Company's customers are required to
meet national primary and secondary ambient air quality standards for specific
pollutants, including particulate matter, which have been promulgated under the
Clean Air Act, as amended (the "Act"). Title V, the cornerstone of the Act,
establishes a national operating permit program. Title V requires appropriate
and sufficient record keeping, monitoring and reporting requirements to ensure
compliance with the standards established by the permitting authorities. The
states have primary responsibility for implementing these standards, and in some
cases, have adopted standards which are more stringent than those adopted by the
Environmental Protection Agency ("EPA") under the Act. Revisions to the Act have
expanded the type of emissions monitored and provided the EPA more power to
revoke permits and issue fines. As provisions in the Act are implemented, the
regulations and enforcement practices will force industry to take a more
proactive approach toward the operation and maintenance practices of their
facilities which may have a positive impact on the Company.

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In November 1996, the EPA announced its intentions to promulgate new National
Ambient Air Quality Standards (NAAQS) for the control of particulate matter
("PM"), which includes lead, ground-level ozone, sulfur dioxide, nitrogen
dioxide, carbon monoxide and other fine particulate matter. Currently, the
States do not monitor for small particulate (less than 2.5 microns), therefore
very little data has been collected to determine which areas meet or do not meet
the revised PM-fine standards. On December 1, 1996, the EPA proposed new and
more stringent monitoring requirements for PM-2.5 in conjunction with the
proposed NAAQS for fine particles. If the proposed regulations are put into
effect, different versions of the PM-2.5 monitoring networks will be required in
large metropolitan areas, small cities and rural areas, and each state will have
to prepare a State Implementation Plan that documents its approach to meeting
the new NAAQS. The network of required monitors will be phased in over a three
to four year period beginning in 1998. When considering the proposed
regulations, the industries most likely to be impacted by the changing air
quality standards are the utility, automotive, chemical, petroleum and
manufacturing industries. The Company believes that the growing awareness of the
importance for better air quality and the adoption of the proposed regulations
are positive long-term indicators of the Company's growth potential. Further,
the Company is not aware of any likely statutory changes which may have a
negative impact on its business.

Additionally, the Company manufactures and sells its products in Europe, Latin
America, Canada, the Near East, the Pacific Rim and China. The Company's
international customers, as do the domestic customers, operate in compliance
with certain standards established and promulgated by the permitting
authorities.

BACKLOG

On September 30, 1997, the backlog of orders for replacement parts and
industrial services was $40,806,000 compared to $40,908,000 at September 30,
1996 and $33,310,000 at September 30, 1995. The Company believes that more than
75% of its backlog is shippable by September 30, 1998.

FOREIGN OPERATIONS--EUROPE

The Company entered the European market in 1982 when it acquired BHA Group GmbH
("GmbH"), formerly Filtra GmbH. GmbH is a German corporation that operates as an
air pollution control replacement parts manufacturer and marketer. GmbH
manufactures the air pollution control replacement parts in Ahlen, Germany and
sells the products throughout Europe.

In August 1994, the Company acquired a Swiss corporation, BHA Group AG, formerly
SF Air Filtration AG. BHA Group AG designs and produces high efficiency
replacement cartridge filter elements. This wholly-owned subsidiary manufactures
the pleated media filter elements in Klus/Balsthal, Switzerland and sells these
products throughout Europe.

                                      -10-




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Set forth below is information regarding foreign sales and assets employed (in
thousands of dollars):

<TABLE>
<CAPTION>

                                  FISCAL YEAR ENDED SEPTEMBER 30,
                                 1995          1996           1997

<S>                           <C>           <C>           <C>     
Sales                         $ 13,332      $ 15,346      $ 16,431

Identifiable Assets              7,490         7,946        10,629

Operating Income              $    690      $  1,066      $  1,679

</TABLE>

Below is a schedule outlining the contribution of the Company's foreign group
referred to above as a percentage of the consolidated amounts.

<TABLE>
<CAPTION>

                                  FISCAL YEAR ENDED SEPTEMBER 30,
                               1995           1996           1997

<S>                             <C>            <C>            <C>
Sales                           12%            13%            13%

Identifiable Assets             10%            10%            12%

Operating Income                 7%            10%            13%
</TABLE>

BHA Group GmbH's operating profits have increased steadily over the past few
years. The improvements are attributed to a marketing focus directed toward
specific countries in Europe and Northern Africa. The majority of BHA Group
GmbH's business is fabric filter related. During fiscal 1997, BHA Group GmbH
executed its first electrostatic precipitator rebuild project in Europe.

BHA Group AG continued to develop the product offering of its fine filtration
products and has increased the number of new applications where the pleated
elements may be used. During fiscal 1997, it continued to generate strong
operating profits and cash flow.

New during 1997, BHA UK Limited, a wholly-owned subsidiary, was established to
enable the Company to expand its presence in the European market.

U.S. EXPORT SALES

The Company's domestic operations export products from the U.S. and provide
services to customers in Canada, Latin America, the Near East, the Pacific Rim
and China. Information regarding the Company's U.S. export sales is included in
the Company's "Business Segment Data."

                                      -11-




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In June 1994, the Company established a liaison office in Bombay, India, with
the intention of providing baghouse and electrostatic precipitator replacement
parts and services to customers in the Near East. This office has provided
regional support for exported product sales from the Company's manufacturing
units located in the United States. In July 1995, approval was received from the
government of India for the establishment of BHA India to replace the Company's
liaison office. The subsidiary was incorporated and approved to do business in
India, effective April 1997.

In September 1995, the Company received approval from the government of Taiwan
for the establishment of a branch office in Taipei, Taiwan. BHA Group
International, Inc., Taiwan Branch provides sales and service assistance to
customers in the Pacific Rim including regional telemarketing for exported
product sales from the Company's manufacturing units in the United States. In an
effort to further expand its presence in this region, the Company has
established a sales office in the Philippines. The Company made application with
the Philippine's government and has been approved, effective March 1997, to
operate as a representative office in support of export sales from the United
States.

As discussed above, parts and services supplied to the Near East, the Pacific
Rim and Chinese markets are primarily U.S. sourced. Sales to customers in China
during fiscal 1997 were not significant. As such, sales to these regions are
included in "U.S. Export Sales" in the "Business Segment Data" section of this
report.

EMPLOYEES

As of September 30, 1997, the Company's domestic operations employed
approximately 700 persons of whom approximately 180 were engaged in sales,
marketing and administration, with the balance being engaged in production. The
Company's foreign operations employed approximately 160 persons, of whom 115
were engaged in sales, marketing and administration, and 45 were engaged in
production. The production personnel in Germany were covered by a textile union
contract which is negotiable annually. The Company restricts access to its
database and customarily requires its employees having access to proprietary
systems and information to execute confidentiality agreements and, when
appropriate, covenants not to compete. The Company believes that its relations
with its employees are good.

PATENTS AND TRADEMARKS

The Company owns patents and trademarks, and has pending patent and trademark
applications relating to replacement parts and accessories for industrial air
pollution control equipment. The Company considers such patents and trademarks,
and the granting of the patent and trademark applications filed, to be
important. However, the business of the Company is not dependent upon such
patents and trademarks, and such patents and trademarks and patent and trademark
applications do not preclude the marketing of generally similar items by
competitors. Patents owned by the Company expire during the period from 1998 to
2006.

                                      -12-




<PAGE>
<PAGE>

                               ITEM 2 - PROPERTIES

CORPORATE HEADQUARTERS

The Company purchased the facility in Kansas City, Missouri, which serves as its
Corporate Headquarters (approximately 66,000 square feet) in 1994.

MANUFACTURING, SALES AND SERVICES FACILITIES

The Company owns (i) five plants in Slater and Salisbury, Missouri (in aggregate
approximately 293,000 square feet), (ii) a plant in Folkston, Georgia
(approximately 105,000 square feet), (iii) a plant in Ahlen, Germany
(approximately 30,000 square feet), and (iv) a new facility in Lee's Summit,
Missouri (approximately 38,000 square feet). The Company leases (i) a facility
in Newport News, Virginia (approximately 17,000 square feet), (ii) a facility in
Klus/Balsthal, Switzerland (approximately 20,000 square feet), (iii) a facility
in Baltimore, Maryland (approximately 3,500 square feet), (iv) a facility in
Covington, Kentucky (approximately 5,000 square feet), (v) a facility in St.
Louis, Missouri (approximately 4,300 square feet), (vi) a warehouse and office
in Shanghai, People's Republic of China (in aggregate approximately 17,000
square feet) and (vii) a facility in Pune, India (approximately 4,800 square
feet). The Company leases office facilities in Taipei, Taiwan and Manila,
Philippines (less than 2,000 square feet per location) for the sales
organizations located in these countries. Operations performed at Slater,
Salisbury and Lee's Summit, Missouri and Ahlen, Germany include cutting and
sewing filtration fabrics, spot welding of metal cages, manufacturing PTFE
membranes and warehouse and assembly operations. The operation in Folkston,
Georgia engages in the manufacture of parts and accessories for electrostatic
precipitators. The operation in Newport News, Virginia is engaged in the
manufacture and assembly of computer based voltage control systems for
electrostatic precipitators. Operations in Klus/Balsthal, Switzerland and
Salisbury, Missouri are engaged in the manufacture of pleated media filter
elements for cartridge collectors. The facilities in Baltimore, Covington and
St. Louis serve as warehouse and office space for the Company's field service
crews. BHA leased the facilities in Shanghai, People's Republic of China and
Pune, India to warehouse and sell company products.

The Company owns a facility in Slater, Missouri (approximately 54,000 square
feet) which is leased to a raw material supplier of the Company.

The buildings owned and office space leased by the Company are considered
adequate for the Company's present needs and suitable for any presently
foreseeable expansion.

                           ITEM 3 - LEGAL PROCEEDINGS

The Company is involved in no material legal proceedings other than ordinary
litigation incidental to the Company's business.

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

No matters were submitted during the fourth quarter of the fiscal year ended
September 30, 1997 to a vote of security holders through the solicitation of
proxies or otherwise.

                                      -13-




<PAGE>
<PAGE>

                                     PART II

                ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK
                       AND RELATED SECURITY HOLDER MATTERS

MARKET INFORMATION

The Common Stock is traded in the over-the-counter market and quoted on the
NASDAQ National Market.

The following table sets for the range of per share bid prices for the Common
Stock on the NASDAQ National Market for the past two fiscal years.

NASDAQ NATIONAL MARKET SYSTEM

                               PER SHARE COMMON STOCK BID
                                          PRICE
<TABLE>
<CAPTION>

                                  HIGH             LOW

<S>                               <C>             <C>  
FISCAL YEAR 1997

    Fourth Quarter                19.50           16.75
    Third Quarter                 19.50           16.14
    Second Quarter                16.82           14.55
    First Quarter                 16.14           13.18

FISCAL YEAR 1996

    Fourth Quarter                13.86           11.82
    Third Quarter                 15.08           10.54
    Second Quarter                11.78           10.33
    First Quarter                 12.40           10.75

</TABLE>

These market quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not necessarily represent actual transactions.
The share price information for the periods presented have been adjusted to
reflect the 10% stock dividends in 1997 and 1996.

HOLDERS

As of December 9, 1997, there were 7,845,956 shares issued and 1,340,756 shares
in treasury. The Company had 6,505,200 shares outstanding and owned by
approximately 922 holders of record as of this date.

DIVIDENDS

During the years ended September 30, 1995, 1996 and 1997, the Company declared
and paid quarterly dividends aggregating $.12 per share to shareholders. The
Company's Board of Directors ("Board of Directors") has since declared a
dividend of $.03 per share, payable on December 2, 1997, to shareholders of
record on November 21, 1997.

                                      -14-




<PAGE>
<PAGE>

The Company does not have a formal policy for paying cash dividends on its
stock. Future determinations concerning dividends will be made, at the
discretion of the Board of Directors, based upon the Company's earnings, its
capital requirements, its financial condition, restrictions placed against
payment of dividends under any financing agreements and such other factors as
the Board of Directors, at its discretion, may from time to time deem relevant.

Additionally, the Company's Board of Directors declared a 10% stock dividend,
payable June 27, 1997 to shareholders of record on June 16, 1997. Under the
dividend, shareholders were issued .10 share of common stock for each share of
common stock held as of the record date. A 10% stock dividend was declared and
paid in fiscal 1996. Future determinations concerning stock dividends will be
made at the discretion of the Board of Directors.

RECENT SALES OF UNREGISTERED SECURITIES

The company has not sold any equity securities during the report period that
were not registered under the Securities Exchange Act of 1933 as amended.

TREASURY STOCK

During the period June 1994 through November 1995, the Company's Board of
Directors authorized it to purchase up to an aggregate of 1,500,000 shares of
BHA Common Stock. The Board has since increased the number of shares authorized
for repurchase to 2,000,000. Since the programs inception in June 1994, the
Company has repurchased approximately 1.2 million shares of its common stock.

                        ITEM 6 - SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction
with Consolidated Financial Statements and notes thereto contained elsewhere in
the Annual Report on Form 10-K. The selected consolidated data for each of the
periods shown have been derived from such consolidated financial statements
which have been audited by KPMG Peat Marwick LLP. The consolidated financial
statements, as of September 30, 1997 and 1996 and for each of the years in the
three-year period ended September 30, 1997, and independent auditors report
thereon are included herein.

<TABLE>
<CAPTION>

                                                                YEARS ENDED SEPTEMBER 30,
                                                 1993       1994        1995       1996       1997
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                                              <C>       <C>         <C>        <C>        <C>    
SELECTED INCOME STATEMENT DATA

Net Sales                                        88,905    100,915     114,723    121,308    130,599
Gross Margin                                     22,668     25,270      31,206     34,817     40,786
Operating Expense                                15,923     17,743      21,235     24,048     28,196
Interest Expense/(Income)-Net                         5        (47)        367        732      1,009
Earnings Before Income Taxes                      6,740      7,574       9,604     10,037     11,581
Net Earnings                                      4,380      4,809       5,954      6,707      8,101
Net Earnings Per Share*                             .55        .62         .85        .99       1.16
Weighted Average Shares Outstanding*              7,899      7,726       7,011      6,751      6,978
</TABLE>


                                      -15-




<PAGE>
<PAGE>

<TABLE>
<CAPTION>

                                                                YEARS ENDED SEPTEMBER 30,
                                                 1993       1994        1995       1996       1997
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                                              <C>        <C>         <C>        <C>        <C>   
SELECTED BALANCE SHEET DATA

Working Capital                                  25,414     24,721      24,887     28,451     32,132
Total Assets                                     60,333     62,751      71,789     76,035     87,605
Short-Term Debt Including Current Portion of         49         56         757        595         62
Long-Term Debt
Long-Term Debt (Less Current Portion)               398        351       9,899      8,244     12,415
Shareholders' Equity                             48,036     48,863      46,440     51,696     56,918
Cash Dividends Declared Per Common Share*           .06        .10         .10        .11        .12
</TABLE>

*Per share data and weighted average common and common equivalent shares
outstanding information for all periods presented have been adjusted to reflect
the 10% stock dividends in 1997 and 1996 and the 3:2 stock splits in 1989 and
1988.




<PAGE>
<PAGE>

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
                            AND RESULTS OF OPERATIONS

FISCAL 1997 COMPARED TO FISCAL 1996
NET SALES

Consolidated net sales for BHA Group Holdings, Inc. ("BHA") increased 8% to
$130.6 million for the year ended September 30, 1997 ("fiscal year 1997") from
$121.3 million for the year ended September 30, 1996 ("fiscal year 1996").
"Domestic" sales for the purposes of this "Management's Discussion and Analysis"
are those to customers in the U.S. and Canada. The increase in overall sales was
largely attributable to a 17% increase to $71.6 million in BHA's domestic sales
of fabric filter products and services for the air pollution control market. An
increase in the sales volume of new products developed for fine filtration
applications contributed to the growth in the domestic business. The
introduction of these new products proved to be very successful during fiscal
year 1997. In addition, international sales of both fabric filter and
electrostatic precipitator products and services increased 10% to $38.0 million
during the year. The increase was attributable to higher sales of both U.S.
exports and those originating from BHA's foreign operated businesses. These
sales increases during fiscal year 1997 were offset by lower sales of domestic
electrostatic precipitator replacement parts and services that decreased 18% to
$21.0 million. This decrease in the sales of this business was due to a
continued decrease in the labor portion of project revenues.

GROSS MARGIN

Consolidated gross margin as a percentage of sales was 31.2% and 28.7% during
fiscal years 1997 and 1996, respectively. The improvement in the consolidated
gross margin percentage was attributable to an increase in international sales
and the continued successful introduction of newer products for fine filtration
applications in our domestic business. The gross margin percentage for the
domestic electrostatic precipitator business increased during the year due to a
change in the sales mix as more replacement parts were sold compared to services
performed. The gross margin percentage for BHA's operations in Europe were
similar to the prior year.

OPERATING EXPENSE

Selling and advertising expense as a percentage of sales was 11.4% and 10.5%
for fiscal years 1997 and 1996, respectively. The increase was due in part to
expenses associated with expanding BHA's international operations. During fiscal
year 1997 a sales office was opened in Shanghai, China, and the sales and
technical support office in India was moved and expanded. In addition, higher
expenses were incurred to expand BHA's sales and marketing efforts in the area
of fine filtration products for both its traditional base of air pollution
control customers and the new target group of potential PTFE membrane customers
outside of air pollution control applications. General and administrative
expense as a percentage of sales for 1997 was 10.2% compared to 9.3% in 1996.
The increase was due in part to higher expenses associated with the enhancement
of BHA's technological capabilities through the purchase of computers and
related equipment.

NET INTEREST EXPENSE

Net interest expense for fiscal years 1997 and 1996 was $1.0 million and
$732,000, respectively. The increase was attributable to $7.5 million in new
borrowings from domestic banks during the year to fund capital expenditures and
to purchase treasury stock.

                                      -17-




<PAGE>
<PAGE>

INCOME TAXES

The effective income tax rates were 30.1% and 33.2% in fiscal years 1997 and
1996, respectively. The decrease was attributable to research and
experimentation tax credits earned and benefits from the increase in BHA's
international business.

NET EARNINGS

Net earnings were $8.1 million and $6.7 million for fiscal years 1997 and 1996,
respectively. The improvement was attributable to higher sales volume and an
increase in gross margin percentage combined with a lower effective income tax
rate.

FISCAL 1996 COMPARED TO FISCAL 1995
NET SALES

Consolidated net sales during fiscal year 1996 were $121.3 million, which
represented a 6% increase over the year ended September 30, 1995 ("fiscal year
1995"). The increase was attributable to higher international sales of fabric
filter and electrostatic precipitator replacement parts and services in Europe,
Latin America, the Near East and the Pacific Rim. During fiscal year 1996 these
sales increased 43% to $34.7 million. The domestic fabric filter business
increased 5% during the year to $61.1 million. Increase in the sales of newer
products and major projects during the year were the primary reasons for the
change. The domestic electrostatic precipitator business decreased 21% to $25.5
million as the market for these services remained extremely competitive. The
decrease in sales was due to a decline in the labor portion of engineered
rebuild projects due to customers electing to execute the work using internal
resources.

GROSS MARGIN

Consolidated gross margin as a percentage of sales was 28.7% and 27.2% during
fiscal years 1996 and 1995, respectively. The improvement in the consolidated
gross margin percentage was primarily attributable to the continued increase in
international sales. The gross margin percentages associated with BHA's
international orders are typically higher than its domestic orders. The gross
margin percentages for the domestic fabric filter business increased over the
same period in the prior year due to a sales mix of replacement parts and
services that favored newer products. The domestic electrostatic precipitator
business also showed increased gross margin percentages from the prior year as
the sales mix for this business during fiscal 1996 favored replacement parts
rather than engineered rebuild projects.

OPERATING EXPENSES

Selling and advertising expense as a percentage of sales were 10.5% and 9.4% for
fiscal years 1996 and 1995, respectively. The increase was attributable to
higher selling 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 1996 was 9.3%, which was consistent with
9.1% for 1995.

NET INTEREST EXPENSE

Net interest expense for fiscal years 1996 and 1995 was $732,000 and $367,000,
respectively. The increase in interest expense during 1996 was attributable to
an increase in the average borrowings outstanding under BHA's revolving credit
facilities. This was primarily a function of timing as BHA did not borrow
significant amounts under its lines of credit in 1995 until after the first
quarter of that fiscal year. During 1996, BHA reduced its net borrowings under
its lines of credit by $1.3 million.

                                      -18-




<PAGE>
<PAGE>

INCOME TAXES

The effective income tax rates were 33.2% and 38.0% in fiscal years 1996 and
1995, respectively. The decrease in the effective tax rate was attributable to
research and experimentation tax credits earned, other benefits derived from the
increase in BHA's international business and a lower effective state income tax
rate.

NET EARNINGS

Net earnings were $6.7 million and $6.0 million for fiscal years 1996 and 1995,
respectively. The improvement was attributable to higher sales volume and an
increase in gross margin percentage combined with a lower effective income tax
rate.

LIQUIDITY AND CAPITAL RESOURCES

Net working capital increased from $28.5 million at September 30, 1996 to $32.1
million at September 30, 1997. The current ratio of 3.1 in 1997 was consistent
with the current ratio in 1996. Cash increased from $2.3 million to $2.6 million
during the year. Cash provided by operating activities was $10.6 million, $8.4
million and $5.1 million in fiscal years 1997, 1996 and 1995, respectively. The
amount of net cash provided by operating activities can fluctuate significantly
as a result of changes in accounts receivable, inventory and accounts payable
balances.

Investing activities have resulted in a net use of cash during the past three
fiscal years due primarily to expenditures for property, plant and equipment.
Capital expenditures were $10.5 million, $4.2 million and $9.9 million, in
fiscal years 1997, 1996 and 1995, respectively. The increase in capital
expenditures during fiscal 1997 included the purchase of land and a building to
expand the operations of BHA Technologies along with the enhancement of our
technological capabilities through the purchases of computers and related
equipment. At September 30, 1997, BHA had unfulfilled commitments for capital
expenditures aggregating $1.5 million.

During fiscal 1997, net cash provided by financing activities of $270,000
included the proceeds from long-term debt of $7.5 million which was used to
purchase $2.7 million in treasury stock, and repay $2.2 million on its lines of
credit and $1.7 million of long-term debt. During fiscal 1996, net cash used in
financing activities of $3.5 million included net repayments on lines of credit
of $1.3 million. During fiscal 1995, net cash provided by financing activities
of $1.5 million included the proceeds from long-term debt of $2.5 million and
net borrowings of $8.2 million on lines of credit. The 1995 borrowings were
offset by $8.0 million in treasury stock purchases.

At September 30, 1997, BHA had unused domestic bank lines of credit of $18.2
million. In November 1996, BHA borrowed $5 million under a five-year unsecured
term note at a fixed interest rate of 7.02%. The proceeds were used to pay down
existing variable interest rate debt. In March 1997, BHA borrowed $2.5 million
under a two-year unsecured term note at a one-year interest rate of 3.90%. The
interest rate adjusts to a variable rate after one year. The proceeds were used
to purchase the land and building to expand the operating capacity of BHA
Technologies. In July 1997, BHA increased its revolving credit capacity
from $18 million to $23 million. BHA believes that cash flow from operations and
available credit lines will be sufficient to meet its capital needs for the
foreseeable future.

                                      -19-




<PAGE>
<PAGE>

OUTLOOK

The statements contained in this "Outlook" section are based on current
expectations. These statements are forward looking and actual results may differ
materially.

BHA expects that its earnings during the early part of fiscal 1998 will not
increase as compared to the same periods in the previous year. The order backlog
at September 30, 1997 of $41 million had not increased over the backlog at
September 30, 1996. This factor is expected to impact sales growth during the
first quarter of fiscal 1998. Slower sales growth combined with higher fixed
operating expenses is expected to negatively impact earnings growth during the
first six months of fiscal 1998.

Strong new order activity during the first and second quarters of fiscal 1998
should enable BHA to build its order backlog which is expected to generate
earnings growth on the air pollution control side of the business during the
last six months of the year.

BHA's traditional business is the sale of replacement parts and service for use
in air pollution control applications. BHA sees significant potential in PTFE
membrane applications outside of air pollution control. During 1997, BHA
increased its investment in its wholly-owned subsidiary, BHA Technologies
to enable it to expand its product development and manufacturing capabilities.
BHA Technologies, Inc. has also added sales, marketing and technical resources
to enable it to expand its business. BHA Technologies is currently in the
process of qualifying its products with customers in a variety of industries.
Through September 30, 1997, sales to this new base of customers
have been minimal. Earnings growth for BHA during the last six months of fiscal
1998 is, to a large extent, dependent on BHA Technologies ability to
convert a number of these opportunities into orders that will ship during
fiscal 1998.

During fiscal 1997, 5% of BHA's revenues were derived from U.S. exports to
customers in Asia. Since 1994, BHA has aggressively expanded its presence by
establishing sales, marketing and service locations throughout the region in
anticipation of increasing demand for its products and services in these growing
markets. The current political and economic situations in this region are
causing a wide spread slowdown in these markets. BHA sees significant long-term
potential in Asia and plans on maintaining a presence in established markets.
BHA's near-term strategy in response to the current situation in these markets
will be to focus its sales efforts on the better performing countries and on
customers in the region that have strong export potential. If this strategy is
not successful and the economies in the region continue to deteriorate, earnings
growth during the last six months of the year may be negatively impacted.

Gross margin percentage improvement was a key driver of earnings growth during
fiscal 1997. BHA must continue to sell a mix of business favoring its newer
product introductions in the area of fine filtration and maintain its
international market share to keep gross margin percentages at the current
level. Further expansion in gross margin percentages requires continued
increases in sales of the newer products to air pollution control customers,
additional growth in market share outside the United States and success in
selling PTFE membrane products to industries outside of air pollution control.

                                      -20-




<PAGE>
<PAGE>

BHA's effective tax rate for fiscal 1997 was 30.1% which reflected the benefits
of research and experimentation credits earned and a lower tax rate associated
with its international business. BHA expects that its tax rate for its upcoming
fiscal year will increase, as it does not anticipate that the benefits
associated with these items will be as significant in fiscal 1998.

BHA is conducting a comprehensive review of its computer systems to identify the
systems that could be affected by the "Year 2000" issue. BHA is currently
utilizing internal resources to verify that its systems are Year 2000 compliant.
These tests will be completed by December 1998. The costs associated with these
tests have been charged to expense. Management does not believe the total
expenses associated with Year 2000 compliance will be material to the
consolidated financial statements.

In November 1997, BHA purchased the common stock of Purificacion y Filtracion,
S.L. (Purfilter) in Barcelona, Spain for $1.3 million in cash using a portion of
the available borrowings under BHA's existing credit facilities. This
acquisition will be accounted for as a purchase and is expected to enable BHA to
increase its overall share of the European market for air pollution control
replacement parts and services.

The U.S. inflation rate grew at a moderate pace during 1997. BHA believes that
its business is not affected by inflation, except to the extent the economy in
general is affected.

NEW ACCOUNTING PRONOUNCEMENTS

During fiscal year 1997 the Financial Accounting Standards Board issued a number
of new pronouncements. Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings per Share", is effective for BHA's fiscal year 1998. This
statement requires the restatement of earnings per share to show both a "basic"
and "diluted" earnings per share number. Basic earnings per share is computed by
dividing net earnings by the weighted average number of outstanding common
shares. If SFAS No. 128 had been applied, basic earnings per share for fiscal
years 1997, 1996 and 1995 would have been $1.23, $1.01 and $0.87, respectively,
and dilutive earnings per share would have been $1.16, $0.99 and $0.85,
respectively.

SFAS No. 129, "Disclosure of Information about Capital Structure", is effective
for BHA's fiscal year 1998. SFAS No. 130, "Reporting Comprehensive Income", is
effective for BHA's fiscal 1999. SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", is effective for BHA's fiscal 1999.
Management does not expect the adoption of these statements to have a
significant impact on the consolidated financial statements.

FORWARD LOOKING INFORMATION

This report contains forward-looking statements that reflect BHA'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 BHA's products and services, and other factors.
You should also consult the section entitled "Factors Affecting Earnings and
Stock Price" which is included in BHA's Report of Form 10-K.

              ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Incorporated by reference to the consolidated financial statements attached
herewith. See Index to Consolidated Financial Statements and Schedules.

                                      -21-




<PAGE>
<PAGE>

          ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no disagreements with the Company's principal accountants which
require disclosure pursuant to this item.

                                      -22-




<PAGE>
<PAGE>

                                    PART III

Part III (Items 10, 11, 12 and 13) is omitted by the Company in accordance with
General Instruction G to Form 10-K. The Company intends to file with the
Commission a definitive proxy statement pursuant to Regulation 14A not later
than 120 days following the close of its fiscal year ending September 30, 1997.




                                      -23-





<PAGE>
<PAGE>

                                     PART IV

    ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) Financial Statements: See accompanying Index to Consolidated Financial
       Statements and Schedules.

(a)(2) Financial Statement Schedules: See accompanying Index to Consolidated
       Financial Statements and Schedules. All schedules not listed have been
       omitted because they are not applicable or the information has been
       otherwise supplied in the Registrant's Financial Statements and
       Schedules.

(a)(3) Exhibits:

       (3a)   Certificate of Incorporation, as amended (1) (2) (9).

       (3b)   By-Laws, as amended (8).

       (10a)  BHA Group, Inc. 1986 Stock Option Plan as amended, including form
              of Option Agreement (3).

       (10b)  Second Amendment to the BHA Group, Inc. 1986 Stock Option Plan
              (5).

       (10c)  Lease Agreement dated September 30, 1991, with SH Properties, Inc.
              (4).

       (10d)  Loan Agreement between Standard Havens, Inc. and certain insurance
              companies (1), and assumption agreement pursuant to which the
              company became the sole obligor under the loan (2).

       (10e)  Employee Stock Ownership Plan of BHA (1).

       (10f)  401(K) Plan of BHA (1).

       (10g)  Loan Agreement between BHA Group, Inc. and Boatmen's First
              National Bank of Kansas City, N.A. (2).

       (10h)  Directors and Officers Insurance and Company Reimbursement Policy
              issued by National Union Fire Insurance Company of Pittsburgh,
              Pennsylvania (2).

       (10i)  Employment Agreement dated September 1, 1993 between BHA Group,
              Inc. and Lamson Rheinfrank, Jr. (6).

       (10j)  Employment Agreement dated September 1, 1993 between BHA Group,
              Inc. and Michael T. Zak (6).

       (10k)  Employment Agreement dated September 1, 1993 between BHA Group,
              Inc. and James E. Lund (6).

                                      -24-




<PAGE>
<PAGE>

       (10l)  Employment Agreement dated September 1, 1993 between BHA Group,
              Inc. and James J. Thome (6).

       (10m)  Employment Agreement dated September 1, 1993 between BHA Group,
              Inc. and James C. King (6).

       (10n)  Employment Agreement dated January 1, 1995 between BHA Group, Inc.
              and James C. Shay (8).

       (10o)  Rights Agreement dated as of December 13, 1995, between BHA Group,
              Inc., and Boatmen's Trust Company, including Form of Rights
              Certificate (Exhibit A) and Summary of Rights to Purchase Common
              Stock (Exhibit B) (7).

       (11)   Computation of earnings per common share (10).

       (21)   Subsidiaries of the Registrant (10).

       (23)   Independent Auditors' Consent (10).

       (27)   Financial Data Schedule - Article 5 (10).

(b) Reports on Form 8-K: No reports on Form 8-K were filed by the Company during
    the quarter ended September 30, 1997.

(c) Exhibits: See (a) (3) above.

(d) Financial Statement Schedules: See (a) (2) above.

NOTES TO INDEX

(1) Filed as an exhibit to the Company's Registration Statement on Form S-1, as
    amended (Registration No. 33-8644) which is incorporated herein by
    reference.

(2) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
    fiscal year ended September 30, 1988 which is incorporated herein by
    reference.

(3) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
    fiscal year ended September 30, 1990 which is incorporated herein by
    reference.

(4) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
    fiscal year ended September 30, 1991 which is incorporated herein by
    reference.

(5) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
    fiscal year ended September 30, 1992 which is incorporated herein by
    reference.

(6) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
    fiscal year ended September 30, 1993 which is incorporated herein by
    reference.

                                      -25-




<PAGE>
<PAGE>

(7) Filed as an exhibit to the Company Current Report on Form 8-K filed with the
    Securities and Exchange Commission on December 15, 1995, which is
    incorporated herein by reference.

(8) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
    fiscal year ended September 30, 1995 ,which is incorporated herein by
    reference.

(9) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
    fiscal year ended September 30, 1996, which is incorporated herein by
    reference.

(10) Filed as an exhibit hereto.

                                      -26-




<PAGE>
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                   BHA GROUP HOLDINGS, INC.

Dated:     December 29, 1997             By:   /s/ James E. Lund
           ---------------------               ---------------------------------
                                               James E. Lund, President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the Registrant and in
the capacities and on the dates indicated.

Dated:     December 29, 1997             By:   /s/ James E. Lund
           ---------------------               ---------------------------------
                                               James E. Lund, President
                                               Principal Executive Officer and
                                               Director


Dated:     December 29, 1997             By:   /s/ Lamson Rheinfrank, Jr.
           ---------------------               ---------------------------------
                                               Lamson Rheinfrank, Jr.
                                               Chairman of the Board


Dated:     December 29, 1997             By:   /s/ Michael T. Zak
           ---------------------               ---------------------------------
                                                   Michael T. Zak
                                                   Vice Chairman and Director


Dated:     December 29, 1997             By:   /s/ Don H. Alexander
           ---------------------               ---------------------------------
                                                   Don H. Alexander
                                                   Director


Dated:     December 29, 1997             By:   /s/ Robert Freeland
           ---------------------               ---------------------------------
                                                   Robert Freeland
                                                   Director


Dated:     December 29, 1997             By:   /s/ Thomas A. McDonnell
           ---------------------               ---------------------------------
                                                   Thomas A. McDonnell
                                                   Director


Dated:     December 29, 1997             By:   /s/ James J. Thome
           ---------------------               ---------------------------------
                                                   James J. Thome
                                                   Executive Vice President,
                                                   Principal Operating Officer
                                                   and Director


Dated:     December 29, 1997             By:   /s/ Richard C. Green, Jr.
           ---------------------               ---------------------------------
                                                   Richard C. Green, Jr.
                                                   Director


Dated:     December 29, 1997             By:   /s/ James C. Shay
           ---------------------               ---------------------------------
                                                   James C. Shay
                                                   Principal Financial & 
                                                   Accounting Officer, Secretary
                                                   and Treasurer


                                      -27-




<PAGE>
<PAGE>

                    BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

Independent Auditors' Report

Financial Statements:
    Consolidated Balance Sheets - September 30, 1997 and 1996
    Consolidated Statements of Earnings
       Years ended September 30, 1997, 1996 and 1995
    Consolidated Statements of Shareholders' Equity
       Years ended September 30, 1997, 1996 and 1995
    Consolidated Statements of Cash Flows
       Years ended September 30, 1997, 1996 and 1995
    Notes to Consolidated Financial Statements

                                                                        Schedule
                                                                        --------
Schedule - Years ended September 30, 1997, 1996 and 1995 as required:
    Valuation and Qualifying Accounts                                      II

All other schedules are omitted because they are not applicable or the
information is contained in the consolidated financial statements or notes
thereto.

                                      -28-







<PAGE>
<PAGE>

The Board of Directors BHA Group Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of BHA Group
Holdings, Inc. and subsidiaries as of September 30, 1997 and 1996 and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the years in the three-year period ended September 30, 1997. These
consolidated financial statements are the responsibility of BHA's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of BHA Group Holdings,
Inc. and subsidiaries at September 30, 1997 and 1996 and the results of their
operations and their cash flows for each of the years in the three-year period
ended September 30, 1997 in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

November 11, 1997
Kansas City, Missouri




<PAGE>
<PAGE>


Consolidated Balance Sheets

<TABLE>
<CAPTION>
September 30,                                                                    1997     1996
-------------                                                                   -----     -----
(In thousands)
<S>                                                                            <C>           <C>
ASSETS
Current assets:

  Cash and cash equivalents                                                    $ 2,590       $ 2,304
  Accounts receivable, less allowance for doubtful receivables
        of $965 in 1997 and $932 in 1996                                        21,947        19,364
  Inventories (note 1)                                                          19,936        18,358

  Income taxes receivable                                                          518            --
  Prepaid expenses                                                               1,250         1,105
  Deferred income taxes (note 3)                                                 1,216           975
                                                                              ---------     ---------
    Total current assets                                                        47,457        42,106
                                                                              ---------     ---------
Property, plant and equipment, at cost:
  Land and improvements                                                          1,262           955
  Buildings and improvements                                                    20,356        15,896
  Machinery and equipment                                                       31,616        26,358
  Office furniture, fixtures and equipment                                       3,514         2,877
                                                                              ---------     ---------
                                                                                56,748        46,086
  Less accumulated depreciation and amortization                                24,537        20,662  
                                                                              ---------     ---------
    Net property, plant and equipment                                           32,211        25,424
                                                                              ---------     ---------
  Intangible and other assets, less accumulated amortization                    3,001         3,422
  Excess of cost over net assets of businesses acquired,  
    less accumulated amortization                                                4,936         5,083
                                                                              ---------     ---------
                                                                               $87,605       $76,035
                                                                              =========     =========
</TABLE>




<PAGE>
<PAGE>



<TABLE>
<CAPTION>
September 30,                                                                    1997          1996
-------------                                                                    ----          ----
(In thousands, except share data)


<S>                                                                            <C>           <C>
Liabilities and Shareholders' Equity

Current liabilities:

  Current installments of long-term debt (note 2)                              $    62        $    595
  Accounts payable                                                               8,341           5,764
  Accrued compensation and employee benefit costs                                4,371           4,453
  Accrued expenses and other current liabilities                                 1,636           1,308
  Reserve for warranty and product service                                         915             970
  Income taxes payable                                                            --               565
                                                                              ---------       ---------
    Total current liabilities                                                   15,325          13,655
                                                                              ---------       ---------
Deferred income taxes (note 3)                                                   2,947           2,440
Long-term debt, excluding current installments (note 2)                         12,415           8,244
Shareholders' equity (notes 2 and 4):
  Common Stock $.01 par value 
    Authorized 20,000,000 shares:
    issued 7,837,789 and 7,091,211 shares, respectively                             78              71
  Additional paid-in capital                                                    47,607          33,392
  Retained earnings                                                             27,773          31,963
  Foreign currency translation adjustment                                         (148)           (138)
  Unearned compensation (note 4)                                                  (211)           (315)
  Less cost of 1,335,210 and 1,077,787, respectively, 
    shares of common stock in treasury                                         (18,181)        (13,277)
                                                                              ---------       ---------
    Total shareholders' equity                                                  56,918          51,696
                                                                              ---------       ---------
Commitments and contingent liabilities (note 5)                                $ 87,605       $ 76,035
                                                                              =========       =========
</TABLE>


                    See accompanying notes to consolidated financial statements.




<PAGE>
<PAGE>


Consolidated Statements of Earnings



<TABLE>
<CAPTION>
Years ended September 30,               1997                1996           1995
------------------------               -----                ----           ----
(In thousands, except per data share)


<S>                                    <C>                <C>              <C>     
Net sales                             $130,599            $121,308          $114,723
Cost of sales                           89,813              86,491            83,517
                                       --------           --------         ---------
  Gross margin                          40,786              34,817            31,206
                                       --------           --------         ---------
Operating expenses:
  Selling and advertising expense       14,888              12,744            10,778
  General and administrative expense    13,308              11,304            10,457
                                       --------           --------         ---------
    Total operating expenses            28,196              24,048            21,235
                                       --------           --------         ---------
    Operating income                    12,590              10,769             9,971
Interest expense                        (1,048)               (757)             (409)
Interest income                             39                  25                42
                                       --------           --------         ---------
    Earnings before income taxes        11,581              10,037             9,604
                                       --------           --------         ---------
Income taxes (note 3):
  Current                                3,214               3,369             3,704
                                       --------           --------         ---------
  Deferred                                 266                 (39)              (54)
                                       --------           --------         ---------
    Total income taxes                   3,480               3,330             3,650
                                       --------           --------         ---------
    Net earnings                       $ 8,101            $  6,707           $ 5,954
                                       ========           ========         =========
Earnings per common share *               1.16                0.99              0.85
                                       ========           ========         =========
</TABLE>

* Earnings per share for all periods presented have been adjusted to reflect the
  1997 and 1996 stock dividends of 10% 


See accompanying notes to consolidated financial statements.


<PAGE>

<PAGE>

                                 Consolidated Statements of Shareholders' Equity


<TABLE>
<CAPTION>
Years ended September 30,                                   1997             1996            1995
-------------------------                                   ----             ----            ----
(In thousands, except share and per data share) 
<S>                                                         <C>            <C>              <C>
Common stock:

  Balance at beginning of year                              $    71         $     64        $      64
  Issuance of 34,490 shares of common stock in 1997,
        21,100 shares in 1996 and 46,300 shares in 1995         --               --              --
  Issuance of 712,088 shares in 1997 and 643,809 shares
        in 1996 for 10% stock dividend                            7                7              --
                                                           ---------        ---------        ---------
  Balance at end of year                                         78               71               64
                                                           ---------        ---------        ---------
Additional paid-in capital:

  Balance at beginning of year                               33,392           24,923           24,402
  Excess over par value of common stock issued                  433              160              521
  Common stock issued from treasury for stock 
     option exercises                                          (165)            (616)             --
  Income tax benefit from stock option exercises                157              401              --
  Issuance of 10% stock dividend                             13,790            8,524              --
                                                           ---------        ---------        ---------
  Balance at end of year                                     47,607           33,392           24,923
                                                           ---------        ---------        ---------
Retained earnings:
  Balance at beginning of year                               31,963           33,194           27,926
  Net earnings                                                8,101            6,707            5,954
  Payment of cash dividends on common stock
        ($0.12, $0.11 and $0.10 per share in 1997,
         1996 and 1995, respectively)                          (740)            (675)            (686)
  Issuance of 10% stock dividend                            (11,551)          (7,263)              --
                                                           ---------        ---------        ---------
  Balance at end of year                                     27,773           31,963           33,194
                                                           ---------        ---------        ---------
Foreign currency translation adjustment:
  Balance at beginning of year                                 (138)             281               38
  Equity adjustment from foreign currency translation           (10)            (419)             243
                                                           ---------        ---------        ---------
  Balance at end of year                                       (148)            (138)             281
                                                           ---------        ---------        ---------
Unearned compensation (note 4):
  Balance at beginning of year                                 (315)            (418)             --
  Issuance of 45,000 shares of restricted common stock           --              --              (517)
  Recognition of compensation expense                           104              103               99
                                                           ---------        ---------        ---------
  Balance at end of year                                       (211)            (315)            (418)
                                                           ---------        ---------        ---------
Treasury stock:
  Balance at beginning of year                              (13,277)         (11,604)          (3,567)
  Acquisition of 149,990, 42,198 and 625,100 shares of
        common stock at cost in 1997, 1996 and 1995,
        respectively                                         (2,669)            (601)          (8,037)
  Issuance of 8,534 shares in 1997 and 31,878 shares
        in 1996 from treasury for stock option
        exercises, net                                           11              195             -- 
  Issuance of 115,967 new treasury shares in 1997
        and 95,867 new treasury shares in 1996 
        for 10% stock dividend                               (2,246)          (1,267)            --
                                                           ---------        ---------        ---------
  Balance at end of year                                    (18,181)         (13,277)         (11,604)
                                                           ---------        ---------        ---------
    Total shareholders' equity                              $56,918          $51,696          $46,440
                                                           =========        =========        =========
</TABLE>
   

                    See accompanying notes to consolidated financial statements.


<PAGE>
<PAGE>


Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
Years ended September 30,                              1997                  1996              1995
-------------------------                              ----                  ----               ----
(In thousands)
<S>                                                   <C>                 <C>                <C>
Cash flows from operating activities:
  Net earnings                                         $8,101              $   6,707         $  5,954
  Adjustments to reconcile net earnings to net cash
        provided by operating activities:
    Depreciation and amortization                       4,490                  4,461            4,286
    Provision for deferred income taxes                   266                   (39)              (54)
  Changes in assets and liabilities:

    Accounts receivable                                (2,583)                  (289)          (4,117)
    Inventories                                        (1,578)                (3,493)          (2,412)
    Prepaid expenses                                     (145)                  (249)             366
    Income taxes                                         (926)                   240              344
    Accounts payable                                    2,577                   (535)            (879)
    Accrued expenses and other current liabilities        429                  1,553            1,576
                                                     ---------              ---------        ---------
      Net cash provided by operating activities        10,631                  8,356            5,064
                                                     ---------              ---------        ---------
Cash flows from investing activities:
  Additions to property, plant and equipment          (10,523)                (4,195)          (9,857)
  Acquisition of product rights and additions to
    other intangible assets                               (82)                  (274)          (1,460)
                                                     ---------              ---------        ---------
      Net cash used in investing activities           (10,605)                (4,469)         (11,317)
                                                     ---------              ---------        ---------
Cash flows from financing activities:
  Proceeds from issuance of common stock                  195                     32                4
  Payment of cash dividends on common stock              (740)                  (675)            (686)
  Purchase of treasury stock                           (2,669)                  (601)          (8,037)
  Stock option exercises-- net payments                  (154)                  (421)            --
  Proceeds from long-term debt                          7,500                     --            2,500
  Repayments of long-term debt                         (1,708)                  (564)            (457)
  Borrowings (repayments) on lines of credit, net      (2,154)                (1,252)           8,206
                                                     ---------              ---------        ---------
      Net cash provided by (used in) financing
          activities                                      270                 (3,481)           1,530
                                                     ---------              ---------        ---------
  Effect of exchange rate changes                         (10)                  (419)             243
                                                     ---------              ---------        ---------
    Net increase (decrease) in cash and cash 
     equivalents                                          286                    (13)          (4,480)
Cash and cash equivalents at beginning of year          2,304                  2,317            6,797
                                                     ---------              ---------        ---------
Cash and cash equivalents at end of year                2,590                  2,304            2,317
                                                     =========              ==========       =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
  Interest                                              1,025                    708              402
                                                     =========              ==========       =========
  Income taxes                                          4,297                  3,863            3,306
                                                     =========              ==========       =========
Supplemental disclosure of noncash investing
    and financing activities:
  Issuance of common stock to directors,
    officers and employees                                238                    128              517
                                                     =========              ==========       =========
                                             
</TABLE>



See accompanying notes to consolidated financial statements.



<PAGE>
<PAGE>

                                      Notes to Consolidated Financial Statements

1.  Summary of Significant Accounting Policies

Presentation

The consolidated financial statements include the accounts of BHA Group
Holdings, Inc. (BHA) and its wholly-owned foreign and domestic subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.

Revenue Recognition

BHA recognizes revenue at the time products are shipped or services are
performed.

Uses of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Inventories

BHA values its inventory at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method. Components of inventories at
September 30, 1997 and 1996 were as follows:




$ in thousands              1997           1996
--------------              ----           ----
Raw materials             $ 11,697       $ 13,448
Work-in-process              1,015            373
Finished goods               7,224          4,537
                          --------       --------
Total                     $ 19,936       $ 18,358
                          ========       ========

Property, Plant and Equipment

Property, plant and equipment are carried at cost. Major renewals and
betterments are charged to the property accounts; replacements, maintenance and
repairs which do not improve or extend the life of the respective assets are
charged to expense as incurred.

Depreciation and amortization

Depreciation and amortization of property, plant and equipment are computed
on the straight-line method using estimated useful lives by major asset class
as follows:

Buildings and improvements                     30 years
Machinery and equipment                       4-8 years
Office furniture, fixtures and equipment     3-10 years

Income Taxes 

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in earnings in the period
that includes the enactment date.

No provision is made for income taxes on undistributed earnings of the foreign
subsidiaries because such earnings have been indefinitely invested in the
foreign subsidiaries.

Warranty and Product Service

BHA provides a reserve for estimated warranty and product service claims based
on historical experience and consideration of changes in products and
technology.

Foreign Currency Translation

Financial statements of BHA's foreign subsidiaries are translated into U.S.
dollars at current and average exchange rates. Translation gains and losses are
included in shareholders' equity. Transaction gains and losses resulting from
fluctuations in exchange rates between the functional currency (U.S. dollars)
and the currency in which a foreign currency transaction is denominated are
included in net earnings. Transaction gains included in the consolidated
statements of earnings for 1997, 1996 and 1995 amounted to $93,027, $24,304 and
$14,700, respectively.



<PAGE>
<PAGE>



Notes Continued



Forward Exchange Contracts

BHA periodically enters into forward exchange contracts in order to fix the
currency exchange rate related to intercompany transactions with its foreign
subsidiaries. Changes in the value of these instruments due to currency
movements offset the foreign exchange gains and losses of the corresponding
intercompany transactions. At September 30, 1997, the aggregate amount of such
forward exchange contracts was approximately $1,700,000. The fair value of the
outstanding forward exchange contracts approximates the aggregate amount
outstanding at September 30, 1997. There were no forward exchange contracts
outstanding at September 30, 1996.


Treasury Stock


Since June 1994, the Board of Directors of BHA have periodically approved the
purchase of up to 2,000,000 shares of the Company's common stock. The purchases
of common stock are recorded at cost on the date of purchase. Issuances of
common stock from the treasury are recorded at the average cost of common stock
held in the treasury.


Earnings Per Common Share

Earnings per common share is computed based on the average number of common
shares and common share equivalents outstanding (6,977,553, 6,751,247 and
7,010,654 for 1997, 1996 and 1995, respectively). The common share equivalents
which had a dilutive effect on earnings per share and were included in the
computation of earnings per share amounted to 408,262, 136,245 and 149,960 for
1997, 1996 and 1995, respectively. The stock options which result in common
share equivalents are described in note 4.


During fiscal year 1997 the Financial Accounting Standards Board issued a number
of new pronouncements. Statement of Financial Acounting Standards No. 128,
"Earnings per share", is effective for BHA's fiscal year 1998. This statement
requires the restatement of earnings per share to show both a "basic" and
"diluted" earnings per share number. Basic earnings per share is computed by
dividing net earnings by the weighted average number of outstanding common
shares. Basic earnings per share for fiscal years 1997, 1996 and 1995 would have
been $1.23, $1.01 and $0.87, respectively, and dilutive earnings per share would
have been $1.16, $0.99 and $0.85, respectively.



A 10% stock dividend was distributed in June 1997 and July 1996. All per share
and weighted average number of common shares and common share equivalents
outstanding data in the consolidated financial statements and related notes have
been restated to reflect the stock dividends for all periods presented.


Cost in Excess of Net Assets Acquired and Intangible Assets

Cost in excess of net assets acquired is being amortized over periods ranging
from thirty to forty years, and is presented in the accompanying consolidated
balance sheets net of accumulated amortization of $979,000 and $832,000 at
September 30, 1997 and 1996, respectively.

Intangible assets are being amortized over periods ranging from five to
seventeen years and are presented in the accompanying consolidated balance
sheets net of accumulated amortization of $4,944,000 and $4,441,000 at September
30, 1997 and 1996, respectively.

BHA assesses the recoverability and measures any impairment of cost in excess of
net assets acquired and intangible assets by determining whether the
amortization of such balances over the remaining life can be recovered through
undiscounted future operating cash flows.

Business Risk

BHA has no significant or unusual geographical or industry concentrations of
business or credit risk.

Statements of Cash Flows

For purposes of the consolidated statements of cash flows, BHA considers
overnight invested cash and investments in marketable securities, with
maturities of three months or less to be cash equivalents.

Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable and accounts payable
approximate fair value because of the short maturities of these instruments. The
fair value of long-term debt is estimated by discounting future cash flows using
current market rates. The carrying amount of long-term debt approximates fair
value at September 30, 1997.




<PAGE>
<PAGE>

2. Notes Payable to Banks and Long-term Debt

A summary of notes payable to banks and long-term debt at September 30, 1997 and
1996 are as follows:

$ in thousands                                     1997      1996
--------------                                     ----      ----
Unsecured lines of credit
  with variable interest rates                    $4,800     6,954
Notes payable to domestic banks
  bearing interest at 3.90% to 7.02%               7,500     1,625
Other notes payable                                  177       260
Less current installments                             62       595
                                                 -------    ------
Long term debt,
  excluding current installments                 $12,415    $8,244
                                                 =======    ======

In November 1996, BHA entered into a $5,000,000 unsecured term loan, the
proceeds of which were used to repay existing long term debt and provide for
general corporate matters. This term loan has a fixed interest rate of 7.02% and
matures in October 2001. Principal and interest payments of $154,000 are due in
monthly installments starting in November 1998. In March 1997, BHA entered into
a $2,500,000 unsecured term loan to fund capital expenditures. This term loan
has a one year interest rate of 3.90% and converts to a variable rate based on
LIBOR in March 1998. This term loan matures in March 1999 and principal is due
upon maturity.

BHA has domestic unsecured bank lines of credit amounting to $23,000,000 for
working capital purposes and other corporate matters. These lines bear interest
at variable rates based on either the prime rate or LIBOR. These lines expire in
the following fiscal years: 1999-$5,000,000; 2000 - $8,000,000; 2002 -
$10,000,000. The facilities include revolving credit agreements of $18,000,000
in which BHA pays a 0.25% commitment fee on the unused portion. At September 30,
1997, $4,800,000 was outstanding under all domestic bank lines of credit at a
weighted average interest rate of 6.63%.

BHA's foreign subsidiary located in Germany maintains a line of credit with a
foreign bank in the amount of DM1,800,000 (approximately $1,023,000 U.S.). BHA's
foreign subsidiary located in Switzerland also maintains a line of credit with a
foreign bank in the amount of SFR 200,000 (approximately $138,000 U.S.). As of
September 30, 1997, there were no amounts outstanding under these lines of
credit. As of September 30, 1996, $29,000 was outstanding.

The term loans and domestic bank lines of credit require BHA, among other
things, to maintain minimum levels of net worth, minimum fixed charge coverage,
minimum current ratio and maximum leverage ratio. BHA was in compliance with all
covenants at September 30, 1997. At September 30, 1997, $9,203,000 of retained
earnings were available for dividends.

Scheduled payments on long-term debt for the next five fiscal years are as
follows:

 $ in thousands
 ---------------
        1998                       $62
        1999                     3,900
        2000                     6,445
        2001                     1,764
        2002                       306
        ----                   -------
                               $12,477
                               =======

3.      Income Taxes

The components of total income tax expense for the years ended September 30,
1997, 1996 and 1995 are as follows:

$ in thousands                 1997          1996        1995
--------------                 ----          ----        ----
Current income tax expense:
  Federal                      2,260        2,433       2,967
  Foreign                        548          606         304
  State and local                406          330         433

Deferred income tax
  expense (benefit):
  Federal                        250           (19)       (48)
  State                           16           (20)        (6)
                              ------        ------     -------
                              $3,480        $3,330     $3,650
                              ======        ======     =======

The effective tax rate differs from the expected tax rate for the respective
years as follows:
    
                                1997          1996       1995
                                ----          ----       ----
Expected income tax expense     34.0%         34.0%      34.0%
State income taxes, net          2.3           2.2        2.9
Difference in tax rates of
   foreign subsidiaries         (3.6)         (2.9)       (.7)
Research and
   experimentation credits      (3.4)         (2.0)        --
Other, net                        .8           1.9        1.8
                               ------         ------     ------
Effective income tax rate       30.1%         33.2%      38.0%
                               ======         ======     ======



<PAGE>
<PAGE>



The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at September 30, 1997
and 1996 are presented as follows:

<TABLE>
<CAPTION>
$ in thousands                               1997            1996
---------------                              ----            ----
<S>                                          <C>             <C>
Deferred tax assets:
  Reserves not currently deductible          $1,114          $912
  Inventories                                   153           314
  Other, net                                    316           267
                                             ------         ------
  Total gross deferred tax assets             1,583         1,493
                                             ------         ------
Deferred tax liabilities:
  Intangible and other assets                   374           725
  Property, plant and equipment                 941           814
  Prepaid expenses                              193           197

  Deferred compensation                         145           163
  Other, net                                  1,661          1,059
                                             ------         ------
  Total gross deferred tax liabilities        3,314          2,958
                                             ------         ------
  Net deferred tax liability                  1,731         $1,465
                                             ======         ======
</TABLE>

At September 30, 1997 and 1996, deferred tax assets and liabilities are
classified in the accompanying consolidated balance sheets as follows:

<TABLE>
<CAPTION>
 $ in thousands                              1997             1996
----------------                             ----             ----
<S>                                         <C>               <C> 
Current deferred income tax asset           $1,216           $975
                                            ------         ------
Non-current deferred income tax liability   (2,947)        (2,440)
                                            ------         ------
Net deferred income tax liability           (1,731)       $(1,465)
                                            ======         =======
</TABLE>

BHA has not recorded a valuation allowance relating to deferred tax assets, as
taxable temporary differences are expected to be offset by deductible temporary
differences.

BHA has not provided deferred taxes on the cumulative undistributed
earnings/(losses) of its foreign subsidiaries, which approximate $1,319,000,
$955,000 and $285,000 at September 30, 1997, 1996 and 1995, respectively, as
management considers these earnings to be permanently invested. Net earnings of
the foreign subsidiaries were approximately $364,000, $670,000 and $468,000 for
the years ended September 30, 1997, 1996 and 1995, respectively.

4. Incentive Stock Plan

BHA has an incentive stock plan for key employees, officers and directors. The
plan originally provided for 1,280,000 shares of common stock available for
issuance of stock options, restricted stock and payment to outside directors in
lieu of cash. Stock options are granted at a price equal to the fair market
value of BHA Common Stock at the date of grant for terms of up to ten years.

In accordance with the terms of the incentive stock plan, the Compensation
Committee of the Board of Directors, which administers the plan, made
adjustments to the plan and the outstanding options to take into account the
dilutive effect of the stock dividends in 1997 and 1996. The number of shares
available for issuance under the plan was increased from 1,280,000 to 1,517,600.

During 1995, BHA awarded 45,000 shares of restricted stock, under the incentive
stock plan, to certain employees. The market value of the awards at the date of
issuance is being recognized as compensation expense ratably over the five-year
vesting period.

On October 1, 1996, BHA adopted Statement of Financial Accounting Standard No.
123, "Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123 establishes
a fair value-based method of accounting for stock-based employee compensation
plans. BHA has chosen to adopt the pro-forma disclosure requirements of SFAS
123, and continue to record stock compensation in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) which is permitted under SFAS 123. Under APB 25 compensation expense is
recorded on the date of grant for stock options granted only if the current
market price of the underlying stock exceeds the exercise price.

A summary of transactions in the incentive stock plan is as follows:

<TABLE>
<CAPTION>
                                1997                          1996                        1995
                                       Weighted-                    Weighted-                  Weighted-
                          Number        average          Number      average       Number      average
                            of         exercise           of        exercise        of         exercise
                          Shares         price          Shares*       price*       Shares*     price*
                         ---------    ----------      -----------   -----------   ----------   ---------
<S>                        <C>           <C>            <C>            <C>          <C>         <C>
Outstanding
at beginning
of year                   1,052,903       $9.58        1,168,080       $9.04        919,183     $8.61
Granted                       5,500       16.75            6,050       10.54        254,100     10.56
Canceled                    (10,588)      10.54          (26,624)      10.85         (3,630)     9.92
Exercised                   (48,332)       7.52          (94,603)       2.57         (1,573)     2.63
                          ---------       ------       ---------       -----    -----------     ------
Outstanding at
end of year                 999,483        9.71        1,052,903        9.58      1,168,080      9.04
                          =========       ======       =========       =====     ===========    ======
Exercisable at
end of year                 810,850        9.73          534,651        9.74        585,123      8.62
</TABLE>

* All share and exercise price information has been adjusted to reflect the 1997
  and 1996 stock dividends of 10%.


<PAGE>
<PAGE>


<TABLE>
<CAPTION>
                      Options Outstanding                      Options Exercisable
                      --------------------                    -----------------------
        Range of          Number       Weighted-       Weighted          Number        Weighted
        Exercise       Outstanding  avg. contracted  avg. exercise     exercisable      average
         Prices         at 9/30/97    life in yrs.       price         at 9/30/97    exercise price
       ----------     ------------  ---------------  --------------   ------------   --------------
<S>                       <C>            <C>            <C>             <C>             <C> 
 $6.34-10.54              841,220          4.9            $8.90           658,087        $8.75
 $11.84-16.75             158,263          4.6           $14.06           152,763        $13.96
                          -------                                         -------       
                          999,483                                         810,850
                          =======                                         =======       
</TABLE>

The per share weighted-average fair value of stock options granted during 1997
and 1996 was $5.98 and $4.30, respectively, on the date of grant using the Black
Scholes option pricing model with the following weighted average assumptions:
1997-expected dividend yield of 1.0%, risk free interest rate of 6.1%, expected
volatility factor of 18.9% and an expected term of 8 years; 1996 - expected
dividend yield of 1.0%, risk free interest rate of 6.1%, expected volatility
factor of 21.1% and an expected term of 8 years.

Since BHA applies APB 25 in accounting for its incentive stock plan, no
compensation expense has been recognized for stock options in net income.
Stock-based compensation expense, if recorded under SFAS 123 would have reduced
net income by $12,000 in 1997 and $8,000 in 1996, with no effect on earnings per
share in 1997 or 1996.

Compensation expense for options granted prior to October 1, 1995 is not
considered. The full impact of calculating compensation expense for stock
options under SFAS 123 is not reflected in the pro-forma net earnings amounts
above since compensation expense is reflected over the option's vesting period
of four years for both 1997 and 1996 options.


5. Commitments and Contingent Liabilities

Employee Benefit Plans 

BHA has a noncontributory Employee Stock Ownership Plan (ESOP) which includes
substantially all domestic employees who are not covered by collective
bargaining agreements. BHA, with approval of its Board of Directors, makes
discretionary contributions to the ESOP. Benefits become vested according to
years of service. Contributions charged to operating expense were $1,175,000,
$983,000 and $865,000 for the years ended September 30, 1997, 1996 and 1995,
respectively.

BHA's eligible domestic employees participate in a voluntary 401(k) employee
benefit plan (401(k) plan). The 401(k) Plan covers eligible employees not
covered by a collective bargaining agreement. The 401(k) Plan provides that 100%
of a participant's contribution will be matched by BHA subject to a maximum
contribution which is determined annually at the discretion of the Board of
Directors. BHA matching contributions become vested based on years of service.
BHA made matching contributions of $253,000, $232,000 and $110,000 for the years
ended September 30, 1997, 1996 and 1995, respectively.

Leases

A summary of noncancelable, long-term operating lease commitments on office
facilities and equipment follows:

<TABLE>
<CAPTION>
        Years ending September 30:      $ in thousands
        -------------------------       ---------------
           <S>                            <C>

                  1998                      $1,446
                  1999                         814
                  2000                         212
                  2001                          23
                  2002                          14
</TABLE>

It is expected that in the normal course of business, expiring leases will be
renewed or replaced by similar leases on other properties. Total rental expense
on noncancelable, long-term operating leases amounted to approximately
$1,036,000, $652,000 and $640,000 for the years ended September 30, 1997, 1996
and 1995, respectively.

Letters of Credit

The terms of certain contracts require that BHA issue standby letters of credit
to assure performance. In addition to the bank lines of credit described in Note
2, BHA has another line of credit agreement totaling $2,000,000 for the issuance
of these letters of credit. Open standby letters of credit amounted to $578,000
and $248,000 at September 30, 1997 and 1996, respectively.

Litigation

In the normal course of business, BHA is party to certain actions arising out of
various allegations of product or professional liability. BHA has insurance
coverage for substantially all such actions, subject to coverage limitations and
deductibles for each claim. In the opinion of management, the amount of loss, if
any, from the final outcome of these actions will not have a material adverse
impact on the consolidated financial statements.



<PAGE>
<PAGE>


6. Supplemental Financial Information

The Company sells products and services in several geographic areas. Operations
of the domestic business segment are based in the United States (U.S.). The
domestic business segment provides products and services to the U.S. markets and
exports to Canada, Latin America, the Near East, the Pacific Rim and China. The
foreign business segment manufactures and sells in Europe. Set forth below is
information regarding the Company's business segments for each of the years in
the three-year period ended September 30, 1997:

<TABLE>
<CAPTION>
 ($ in thousands)              1997            1996            1995
------------------             ----            ----            ----
<S>                            <C>            <C>            <C>   
Domestic assets                76,976         68,089         64,299
Foreign assets                 10,629          7,946          7,490
                              -------        -------        -------
Total                          87,605         76,035         71,789
                              =======        =======        =======
Domestic sales                114,168        105,962        101,391
Foreign sales                  16,431         15,346         13,332
                              -------        -------        -------
Total                         130,599        121,308        114,723
                              =======        =======        =======
Domestic operating income      10,911          9,703          9,281
Foreign operating income        1,679          1,066            690
                              -------        -------        -------
Total                          12,590         10,769          9,971
                              =======        =======        =======
</TABLE>


U.S. export sales to unaffiliated customers in Canada, Latin America, the Near
East, the Pacific Rim and China were $24,966,000, $22,410,000 and $13,653,000
for the years ended September 30, 1997, 1996 and 1995, respectively. These
revenues are included in "Domestic sales" in the table above.


7. Quarterly Financial Data (Unaudited)

Summarized quarterly financial data are as follows:

<TABLE>
<CAPTION>
Three months ended Dec.31         March 31       June 30        Sept. 30
 -------------------------        --------       -------        --------
($ in thousands, except per share data)
<S>                 <C>             <C>            <C>            <C>   
1997
Net sales           31,116          33,646         33,054         32,783
Gross margin         9,347          10,274         10,574         10,591
Net earnings         1,795           1,972          2,006          2,328
Earnings per share*    .26             .29            .29            .33

1996
Net sales           27,699          31,202         30,928         31,479
Gross margin         8,095           8,938          8,621          9,163
Net earnings         1,506           1,740          1,780          1,681
Earnings per share*    .23             .25           .26             .25
</TABLE>

* Earnings per share for all periods presented have been adjusted to reflect the
  1997 stock dividend of 10%

The quarter ended September 30, 1997 reflects recognition of research and
experimentation credits of $132,000 ($0.02 per share).












<PAGE>
<PAGE>

                                                                     Schedule II


                    BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                            (IN THOUSANDS OF DOLLARS)


<TABLE>
<CAPTION>
                                                               Charged to
                                                 Beginning      Costs and                        Ending
                                                  Balance       Expenses        Deductions       Balance
                                                                      
<S>                                          <C>                      <C>            <C>            <C>
Allowance for doubtful receivables:
Year ended September 30, 1997                $         932            385            352            965
                                                ============   ============   ============    ===========

Year ended September 30, 1996                $         830            382            280            932
                                                ============   ============   ============    ===========

Year ended September 30, 1995                $         757            451            378            830
                                                ============   ============   ============    ===========

Reserve for Warranty and Product Service
Year ended September 30, 1997                $         970          1,715          1,770            915
                                                ============   ============   ============    ===========

Year ended September 30, 1996                $         849          1,481          1,360            970
                                                ============   ============   ============    ===========

Year ended September 30, 1995                $         796          1,169          1,116            849
                                                ============   ============   ============    ===========
</TABLE>




                                             -35-




<PAGE>
<PAGE>



                                  EXHIBIT INDEX

   EXHIBIT NO.                     DESCRIPTION                              PAGE

       3a            Certificate of Incorporation, as Amended

       11               Computation of Per Share Earnings

       21            Subsidiaries of BHA Group Holdings, Inc.

       23                 Independent Auditors' Consent

       27              Financial Data Schedule - Article 5



                                      -36-


                          STATEMENT OF DIFFERENCES
                          ------------------------

The registered trademark symbol shall be expressed as.................   'r'


<PAGE>