Exhibit 99.1
Risk Factors Contained in Bairnco Corporation (the "Corporation", "we" or "our")
Annual Report on Form 10-K for the Twelve Months ended December 31, 2006
Item 1A. RISK FACTORS
The Corporation's future results may be affected by a number of factors over
which we have little or no control. The following issues, uncertainties, and
risks, among other things, should be considered in evaluating our business and
future outlook. Additional risks not currently identified or known to us could
also negatively impact our financial results.
This annual report on Form 10-K and other written reports and public
statements made by us from time to time may contain statements which, to the
extent they are not based on historical fact, constitute forward looking
statements made pursuant to the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are made based upon
management's expectations, assumptions and beliefs concerning future
developments and their potential effect upon the Corporation. While we believe
in good faith that these expectations, assumptions and beliefs are reasonable,
investors are cautioned that all forward looking statements involve risk and
uncertainties and may therefore be materially different from actual results.
Investors should consider the following factors carefully, in addition to
the other information contained in this Form 10-K, before deciding to purchase,
sell or hold our securities:
The Offer and the Merger may be delayed or may not be completed. Pursuant to
the terms of the Merger Agreement (previously filed with the SEC by BZ
Acquisition on February 23, 2007 as an exhibit to its Schedule TO) the Offer,
currently scheduled to expire on March 16, 2007, may be extended for a period up
to 40 business days in the aggregate. The obligation of Steel Partners II to
close the Offer is subject to a number of conditions described in the Merger
Agreement. The obligation of Steel Partners II to effect the Merger following
the closing of the Offer is also subject to a number of conditions and, unless
Steel Partners II holds at least 90% of the outstanding shares on a fully
diluted basis after the closing of the Offer, approval of the Merger by the
shareholders (including Steel Partners II and its affiliates) will be required,
which could take several months to procure. Accordingly, we cannot assure you
that either the Offer or the Merger will be completed in a timely manner, or
completed at all. [The Offer and the Merger closed in April 2007, as described
in the WHX Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2007.]
A decline in governmental funding for military operations. If, as a result
of a loss of funding or a significant cut in federal budgets, spending on
military projects were to be reduced significantly, our earnings and cash flows
related to the Electronic Materials segment could be negatively effected.
Potential supply constraints and significant price fluctuations of
electricity, natural gas and other petroleum based products. In our production
and distribution processes, we consume significant amounts of electricity,
natural gas, fuel and other petroleum-based commodities, including adhesives and
other products. The availability and pricing of these commodities are subject to
market forces that are beyond our control. Our suppliers contract separately for
the purchase of such commodities and our sources of supply could be interrupted
should our suppliers not be able to obtain these materials due to higher demand
or other factors interrupting their availability. Last year, particularly in the
Gulf Coast region affected by severe hurricanes, supplies of these commodities
were occasionally disrupted and subject to tremendous price fluctuations.
Variability in the supply and prices of these commodities could materially
affect our operating results from period to period and rising costs could erode
our profitability.
Weather can materially affect our quarterly results. A significant portion
of our business in the Kasco segment involves on-site delivery, service and
repair. In addition, a significant amount of our business in the Coated
Materials segment is to the outdoor sign industry. Inclement weather affects
both our ability to produce and distribute our products and affects our
customers' short-term demand since their work also can be hampered by weather.
Therefore, our results can be negatively affected by inclement weather. Severe
weather such as hurricanes, tropical storms and earthquakes can damage our
facilities, resulting in increased repair costs and business disruption.
We operate in a highly competitive industry. In our served markets, we
compete against large private and public companies. This results in intense
competition in a number of markets in which we operate. In addition, the ongoing
move of our customer base in the Electronics segment to low cost China
manufacturing reduces pricing and increases competition. Significant competition
could in turn lead to lower prices, lower levels of shipments and/or higher
costs in some markets that could have a negative effect on our results of
operations.
Industry consolidation creates more purchasing power for fewer, larger
customers. The electronics industry, sign industry and supermarket industry have
all experienced recent consolidations. This trend tends to put more purchasing
power in the hands of a few large customers who can dictate lower prices of our
products. Failure to effectively negotiate pricing agreements and implement
on-going cost down projects can have a material negative impact on our
profitability.
Failure to manage and successfully integrate acquisitions could adversely
affect our business. We continually evaluate opportunities for growth through
strategic acquisitions. We believe that there are risks related to acquiring
businesses including overpaying for acquisitions, losing key employees of the
acquired business, unanticipated costs associated with the acquisitions,
diversion of management time and resources, increased legal and compliance costs
and unanticipated liabilities of an acquired company. Failure to manage and
successfully integrate acquisitions could have a material adverse effect on our
consolidated financial position, results of operations, or cash flows.
Our future success depends greatly upon attracting and retaining qualified
personnel. A significant factor in our future profitability is our ability to
attract, develop and retain qualified personnel. Our success in attracting
qualified personnel is affected by changing demographics of the available pool
of workers with the training and skills necessary to fill the available
positions, the impact on the labor supply due to general economic conditions,
and our ability to offer competitive compensation and benefit packages.
Litigation could affect our profitability. The nature of our business
exposes us to various litigation matters including product liability claims,
employment, health and safety matters, environmental matters, regulatory and
administrative proceedings. We contest these matters vigorously and make
insurance claims where appropriate. However, litigation is inherently costly and
unpredictable, making it difficult to accurately estimate the outcome of any
litigation. Although we make accruals as we believe warranted, the amounts that
we accrue could vary significantly from any amounts we actually pay due to the
inherent uncertainties in the estimation process.
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