UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY EXCHANGE REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8120
BAIRNCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3057520
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2251 Lucien Way, Suite 300, Maitland, FL 32751
(Address of principal executive offices) (Zip Code)
(407) 875-2222
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report)
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
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS)
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13, or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each issuer's classes
of common stock, as of the latest practicable date.
10,500,259 shares of Common Stock Outstanding as of April 28, 1995.
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED APRIL 1, 1995 AND APRIL 2, 1994
(Unaudited)
1995 1994
Net sales $ 38,523,000 $ 35,676,000
Cost of sales 24,794,000 22,070,000
Gross profit 13,729,000 13,606,000
Selling and administrative
expenses 10,132,000 10,271,000
Operating profit 3,597,000 3,335,000
Interest expense, net 547,000 501,000
Income before income taxes 3,050,000 2,834,000
Provision for income taxes 1,159,000 1,134,000
Net Income $ 1,891,000 $ 1,700,000
Primary and fully diluted earnings
per share of common stock
(Note 3) $ 0.18 $ 0.16
Dividends per share of common stock $ 0.05 $ 0.05
The accompanying notes are an integral part of these financial
statements.
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 1, 1995 AND DECEMBER 31, 1994
(Unaudited)
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $ 1,193,000 $ 1,478,000
Accounts receivable, less
allowances of $1,019,000 and
$1,097,000, respectively 24,595,000 20,885,000
Inventories (Note 4) 21,721,000 20,042,000
Deferred income taxes 4,941,000 4,941,000
Other current assets 4,343,000 4,785,000
Total current assets 56,793,000 52,131,000
Plant and equipment, at cost 76,046,000 76,664,000
Less - Accumulated depreciation and
amortization (40,520,000) (40,375,000)
Plant and equipment, net 35,626,000 36,289,000
Cost in excess of net assets of
purchased businesses 8,314,000 8,201,000
Other assets 2,476,000 2,622,000
Net assets of discontinued
operations (Note 2) 2,980,000 3,529,000
$106,089,000 $102,772,000
LIABILITIES & STOCKHOLDERS' INVESTMENT
Current Liabilities:
Short-term debt $ 5,497,000 $ 4,710,000
Current maturities of long-term
debt 189,000 201,000
Accounts payable 10,758,000 9,762,000
Accrued expenses (Note 5) 11,800,000 11,181,000
Total current liabilities 28,244,000 25,854,000
Long-term debt 25,666,000 26,864,000
Deferred income taxes 3,749,000 3,743,000
Other liabilities 2,528,000 2,314,000
Stockholders' Investment:
Preferred stock, par value $.01,
5,000,000 shares authorized,
none issued -- --
Common stock, par value $.01,
30,000,000 shares authorized,
10,952,124 issued 109,000 109,000
Paid-in capital 50,461,000 49,922,000
Retained earnings 5,132,000 3,766,000
Treasury stock, at cost, 451,865
shares (9,800,000) (9,800,000)
Total stockholders'
investment 45,902,000 43,997,000
$106,089,000 $102,772,000
The accompanying notes are an integral part of these financial
statements.
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED APRIL 1, 1995 AND APRIL 2, 1994
(Unaudited)
1995 1994
Cash Flows from Operating Activities:
Net income $ 1,891,000 $ 1,700,000
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 1,728,000 1,685,000
Deferred income taxes 6,000 (192,000)
Changes in current assets and
liabilities:
(Increase) in accounts receivable (3,710,000) (2,279,000)
(Increase) in inventories (1,679,000) (232,000)
Decrease in other current assets 442,000 1,116,000
Increase in accounts payable 996,000 929,000
Increase in accrued expenses 619,000 707,000
Increase (decrease) in other
liabilities 214,000 (20,000)
Translation adjustment and other,
net 865,000 421,000
Net cash provided by
operating activities 1,372,000 3,835,000
Cash Flows from Investing Activities:
Capital expenditures (1,045,000) (1,097,000)
Funds provided by discontinued
operations 549,000 395,000
Net cash (used in)
investing activities (496,000) (702,000)
Cash Flows from Financing Activities:
Net repayments of external debt (636,000) (3,239,000)
Exercise of stock options -- --
Payment of dividends (525,000) (525,000)
Net cash (used in) financing
activities (1,161,000) (3,764,000)
Net (decrease) in cash and
cash equivalents (285,000) (631,000)
Cash and cash equivalents,
beginning of period 1,478,000 1,383,000
Cash and cash equivalents,
end of period $ 1,193,000 $ 752,000
The accompanying notes are an integral part of these financial
statements.
BAIRNCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 1, 1995
(Unaudited)
(1) Basis of Presentation
The accompanying consolidated financial statements include the
accounts of Bairnco Corporation and its subsidiaries (Bairnco or the
Corporation) after the elimination of all material intercompany
accounts and transactions.
The unaudited financial information included herein reflects all
adjustments of a normal recurring nature which the Corporation's
management considers necessary for a fair summarized presentation of
the consolidated financial statements included in this Form 10-Q
filing. The consolidated results of operations for the quarter ended
April 1, 1995, are not necessarily indicative of the results of
operations for the full year.
(2) Discontinued Operations
As discussed in Note 3 to Bairnco's 1994 Audited Consolidated
Financial Statements, the Corporation adopted a restructuring plan as
of December 31, 1993 which included a formal plan of divestiture
relating to the businesses that comprised Bairnco's Specialty
Construction Products segment and secure communications electronics
operations. Accordingly, these businesses were classified as
discontinued operations for financial reporting purposes as of
December 31, 1993.
The smallest and last remaining operation of the Specialty
Construction business and the secure communications business remain
to be sold and continue to be reported as discontinued operations.
Net sales from the discontinued operations for the quarters ended
April 1, 1995 and April 2, 1994 were $3.1 million and $5.4 million,
respectively. The remaining discontinued operations are expected to
be disposed of during 1995.
(3) Earnings per Common Share
Earnings per common share are based on the weighted average
number of shares outstanding during the periods as follows:
First Quarter
1995 1994
Primary 10,500,000 10,500,000
Fully Diluted 10,500,000 10,500,000
Primary and fully diluted earnings per share include all common
stock equivalents. A statement regarding computation of per share
earnings is included as Exhibit 11 to this Quarterly Report on Form
10-Q.
(4) Inventories
Inventories consisted of the following as of April 1, 1995 and
December 31, 1994:
1995 1994
Raw materials and supplies $ 4,139,000 $ 4,794,000
Work in process 5,798,000 4,767,000
Finished goods 11,784,000 10,481,000
Total inventories $ 21,721,000 $ 20,042,000
(5) Accrued Expenses
Accrued expenses consisted of the following as of April 1, 1995
and December 31, 1994:
1995 1994
Salaries and wages $ 1,595,000 $ 2,521,000
Income taxes 340,000 315,000
Insurance 1,715,000 2,165,000
Litigation 2,213,000 2,163,000
Other accrued expenses 5,937,000 4,017,000
Total accrued expenses $ 11,800,000 $ 11,181,000
(6) Contingencies
Bairnco Corporation and its subsidiaries are defendants in
certain legal actions which are discussed more fully in Part II, Item
1 ("Legal Proceedings") of this filing.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
accompanying Consolidated Financial Statements and related notes and
with Bairnco's Audited Consolidated Financial Statements and related
notes for the year ended December 31, 1994.
Bairnco Corporation is a diversified multinational company that
operates two distinct businesses under the names Arlon and KASCO.
Engineered materials and components are designed, manufactured
and sold under the Arlon brand to electronic, industrial and
commercial markets. These products are based on a common technology
in coating, laminating and dispersion chemistry. Arlon's principal
products include high technology materials for the printed circuit
board industry, cast and calendered vinyl film systems, custom
engineered laminates and pressure sensitive adhesive systems and
silicone rubber products used in a broad range of industrial,
consumer and commercial products.
Replacement products and services are manufactured and
distributed under the KASCO name principally to retail food stores
and meat, poultry and fish processing plants throughout the United
States, Canada and Europe. The principal products include
replacement band saw blades for cutting meat, fish, wood and metal,
and on site maintenance services for the retail food industry
primarily in the meat and deli departments. KASCO also distributes
equipment to the food industry in Canada and France. These products
are sold under a number of brand names including KASCO in the U.S.
and Canada, Atlantic Service in the United Kingdom and Bertram & Graf
and Biro in Europe.
Comparison of First Quarter 1995 to First Quarter 1994
Sales in the first quarter 1995 were $38,523,000 an 8.0% increase
from $35,676,000 in 1994. The increase in the first quarter sales
was attributable to good growth in all the Arlon product lines.
KASCO's sales were up modestly as the increases in the European
businesses were offset by the planned reduction in KASCO's U.S.
service center business.
Gross profit increased only 1% to $13,729,000 from $13,606,000.
The increase is attributable to improved sales which was offset by
profit margin declines in major product lines. The gross profit
margin as a percent of sales decreased from 38.1% to 35.6%. The
profit margin declines are due to the continuing decline in military
related business which is being replaced with lower margin commercial
business, a shifting product mix in the graphics business, and
material cost increases which preceded effective selling price
increases, and continuing costs to refocus KASCO.
Selling and administrative expenses decreased to $10,132,000 from
$10,271,000. As a percent of sales, selling and administrative
expenses decreased to 26.3% from 28.8%.
Interest expense increased $46,000 to $547,000 for the first
quarter. This increase was the result of higher interest rates that
were partially offset by reduced borrowings.
The effective tax rate for the first quarter of 1995 was 38% as
compared to 40% in 1994. The provision for income taxes in both
periods includes all applicable federal, state, local and foreign
income taxes.
Net income increased 11.2% to $1,891,000, or $0.18 per share, as
compared to $1,700,000, or $0.16 per share, in the first quarter
1994.
Liquidity and Capital Resources
In April, Bairnco's secured reducing revolving credit agreement
with a consortium of four banks led by Bank of America, Illinois,
and including, SunBank, N.A., NBD Bank, N.A., and First Union Bank of
Florida, was amended. The total commitment under the agreement was
reduced from $55.0 million to $52.0 million and the termination date
was extended from August 31, 1997 to August 31, 1999. The maximum
amount available for borrowings will be reduced by $3.0 million as of
January 1, 1996, $4.0 million as of January 1, 1997, $5.0 million as
of January 1, 1998, and $10.0 million as of January 1, 1999. The
amended agreement permits Bairnco to repurchase up to $5.0 million of
its common stock.
At April 1, 1995, Bairnco had working capital of $28.5 million
compared to $26.3 million at December 31, 1994. At April 1, 1995
Bairnco's total debt outstanding was $31,352,000 compared to
$31,775,000 at the end of 1994. At April 1, 1995 approximately $21.7
million was available for borrowing under the Corporation's secured
reducing revolving credit agreement, as amended April 18, 1995. In
addition, approximately $3.2 million was available under various
short term domestic and foreign uncommitted credit facilities.
Bairnco made approximately $1,045,000 of capital expenditures
during the first quarter 1995. Total capital expenditures in 1995
are expected to be approximately $14.4 million which includes
approximately $6.0 million related to a new facility which is not
committed and is still under review.
Cash provided by operating activities plus the amounts available
under the existing credit facilities are expected to be sufficient to
fulfill Bairnco's anticipated cash requirements in 1995.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Since its announcement in January 1990 of its intention to spin
off Keene, Bairnco has been named as a defendant in a number of
individual personal injury and wrongful death cases in which it is
alleged that Bairnco is derivatively liable for the asbestos-related
claims against Keene. In 1993, Bairnco and certain of its present
and former officers and directors were also named as defendants in
two purported class actions in which the same types of claims were
made. Both of these purported class actions, which have been
consolidated in the United States District Court for the Southern
District of New York, have been stayed by order of the Bankruptcy
Court for the Southern District of New York, as described in the
following paragraph.
On December 6, 1993, Keene filed for protection under Chapter 11
of the Bankruptcy Code. The filing and certain subsequent
proceedings led to a stay of the asbestos-related individual and
class actions referred to above. In an order entered on March 11,
1994, the Bankruptcy Court overseeing the reorganization of Keene
entered an order appointing an examiner (the "Examiner") to evaluate
and report to the Court whether there are any viable claims arising
out of the transfer of assets for value by Keene to other
subsidiaries of Bairnco or the spinoffs of certain subsidiaries,
including Keene, by Bairnco. Bairnco provided evidence and other
information to the Examiner. The Examiner's preliminary report was
released on October 3, 1994. Since that time, the Court has held a
number of hearings at which the preliminary report has been
discussed. The Court has not ruled on the conditions, if any, under
which the potential claims discussed in the report should be
prosecuted, but, on May 5, 1995, it entered an order allowing the
Creditors' Committee to assume from Keene responsibility for the
pursuit, if any, of such claims. Further proceedings concerning the
potential claims and their possible pursuit by the Creditors'
Committee are scheduled for May 1995.
Management believes that Bairnco has meritorious defenses to all
claims or liability purportedly derived from Keene and that it is not
liable, as an alter ego, successor, fraudulent transferee or
otherwise, for the asbestos-related claims against Keene or with
respect to Keene products.
Bairnco is party to an action in the United States Bankruptcy
Court for the Southern District of New York brought by its former
subsidiary Keene Corporation, which presently is in Chapter 11, to
determine which of the two companies is entitled to receive the
benefit of tax refunds attributable to the carryback by Keene of
certain net operating losses. (After filing this action, Keene ceded
control of the action to the official committee of unsecured
creditors that previously was formed in the Chapter 11 proceeding.)
Pending resolution of the dispute by the Bankruptcy Court, any
refunds actually received are to be placed in escrow. Keene alleges
that the refunds in question could total approximately $30 million.
There can be no assurance whatsoever that refunds in such amount will
be payable or that resolution of the dispute with Keene will result
in the release of any portion of the refunds to Bairnco.
Bairnco Corporation and its subsidiaries are defendants in a
number of other actions. Management of Bairnco believes that the
disposition of these other actions, as well as the actions and
proceedings described above, will not have a material adverse effect
on the consolidated results of operations or the financial position
of Bairnco Corporation and its subsidiaries as of April 1, 1995.
Item 2. OTHER INFORMATION
None.
Item 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of Bairnco was held in
Orlando, Florida on April 21, 1995. Stockholders ratified
management's selection of Arthur Andersen LLP as auditors for
Bairnco for the 1995 fiscal year and elected all nominees to the
Board of Directors.
Item 4. EXHIBITS
Exhibit 4: Amendment dated as of April 18, 1995 to Amended and
Restated Credit Agreement dated as of December 17, 1992, by and
among Bairnco Corporation and certain of its subsidiaries and
certain Commercial Lending Institutions and Continental Bank N.A.
(now Bank of America, Illinois), as the Agent for Lenders,
which is incorporated herein by reference to Exhibit 3.1 to
Bairnco's Annual Report on Form 10-K for fiscal year ended December
31, 1992.
Exhibit 11: Calculation of Primary and Fully Diluted Earnings
per Share for the Quarters ended April 1, 1995 and April 2, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Bairnco has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
BAIRNCO CORPORATION
(Registrant)
/s/ J. Robert Wilkinson
J. Robert Wilkinson
Vice President Finance
and Treasurer
(Chief Financial Officer)
DATE: May 9, 1995