BAIRNCO CORPORATION
ANNUAL REPORT 1995
THE COMPANY
Bairnco Corporation is a diversified multinational company that operates
two business sectors.
Engineered materials and components are designed, manufactured and sold
under the Arlon brand identity 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 performance materials for the printed circuit board industry, cast and
calendered vinyl film systems, custom engineered laminates and pressure
sensitive adhesive systems, and calendered and extruded silicone rubber
insulation 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
United States and Canada, Atlantic Service in the United Kingdom, and
Bertram & Graf and Biro in Continental Europe.
STRATEGY
Bairnco's strategy is to serve a broad range of niche markets with quality
products and services, while providing extra value to its customers through
focused and cost effective organizations and facilities. Bairnco strives
to develop true partnership relationships with its customers in these
selected markets through close cooperation in developing value added
solutions to their needs. Bairnco seeks to identify and participate in
those markets that will provide growth opportunities due to either
technical developments or the changing needs of the customers.
OBJECTIVES
Bairnco believes that concentrating its resources in selected market niches
can provide the basis to achieve both superior profitability and growth.
Management's long term objectives are to achieve a 15% compound rate of
earnings growth, a 20% return on stockholders' investment, and a 15% return
on total capital employed.
CONTENTS
Financial Highlights................................... 1
Letter to our Stockholders............................. 2
Engineered Materials & Components (Arlon).............. 4
Replacement Products & Services (Kasco)................ 7
Directors and Management............................... 8
Financial History...................................... 9
Management's Discussion and Analysis................... 10
Quarterly Results of Operations........................ 12
Report of Independent Certified Public Accountants..... 13
Consolidated Financial Statements.... ................. 14
Notes to Consolidated Financial Statements............. 18
FINANCIAL HIGHLIGHTS
(In thousands except per share data)
Percent Change
1995 1994 1993 95/94 94/93
Net Sales $ 150,507 $ 145,522 $ 134,958 3% 8%
Earnings before Interest,
Charges and Taxes <F1> $ 14,633 $ 13,654 $ 13,617 7% 0%
Operating Profit $ 14,633 $ 13,654 $ 4,874 7% 180%
Income from
Continuing Operations $ 7,781 $ 7,255 $ 817 7% 788%
Earnings per Share from
Continuing Operations $ 0.75 $ 0.69 $ 0.08 9% 763%
Cash Dividends per Share $ 0.20 $ 0.20 $ 0.20 0% 0%
Stockholders' Investment
per Share $ 4.60 $ 4.19 $ 3.67 10% 14%
Total Assets $ 98,196 $ 102,772 $ 107,981 (4%) (5%)
Stockholders' Investment $ 48,024 $ 43,997 $ 38,515 9% 14%
Average Shares Outstanding 10,440 10,500 10,500 (1%) 0%
<FN>
<F1> Excludes impact of non-recurring litigation and restructuring costs of
$8,743 in 1993 - see Note 2 to Consolidated Financial Statements.
</FN>
Graphic - Bar Chart depicting Sales (y-axis) for five years - 1991 to
1995 (x-axis):
Year Sales
(in thousands)
1991 $128,566
1992 $135,581
1993 $134,958
1994 $145,522
1995 $150,507
Graphic - Bar Chart depicting Income from Continuin Operations (y-axis)
for five years - 1991 to 1995 (x-axis):
Income from
Year Continuing Operations
(in thousands)
1991 $6,643
1992 $7,755
1993 $ 817
1994 $7,255
1995 $7,781
LETTER TO OUR STOCKHOLDERS
1995 was a year of continued progress for Bairnco. Sales and earnings
increased. Debt was again reduced. Our strong financial condition
improved. The quality and focus of management was improved in several
operations.
FINANCIAL RESULTS
Sales increased 3.4% to $150,507,000 in 1995 from $145,522,000 in 1994.
Arlon's sales increased 7.8%. Kasco's sales decreased 4.1% which was
planned as part of the program to focus Kasco on its core business.
In 1995, gross profit increased nominally to $53,317,000 from
$53,177,000 in the prior year. The favorable impact from increased sales
was offset by the decline in gross profit margins to 35.4% from 36.5% last
year. Arlon's gross profit increased only 3.1% as a result of the growth in
lower margin commercial products and margin erosion in certain market
segments due to competitive pressures. Kasco's gross profit declined 3.5% as
a result of the 4.1% sales decrease, whereas its gross profit margin
increased slightly due to an improved sales mix and reduced manufacturing
costs.
Selling and administrative expenses decreased $839,000 or 2.1% to
$38,684,000 from $39,523,000 in 1994. As a percent of sales, these expenses
decreased to 25.7% in 1995 from 27.2% in 1994. Selling expense decreased
slightly as the reductions in Kasco from focusing on the core business were
partially offset by the continued investment in sales and marketing expenses
to grow selected Arlon segments. Administrative expenses continued to be
reduced both absolutely and as a percentage of sales. Research and
development expenses increased 3.0% as Bairnco continued to invest in the
development of new products and improved quality.
Earnings before taxes increased 9.5% to $12,607,000 in 1995 as compared
to $11,510,000 in 1994. The effective tax rate increased to 38.3% from
37.0% in 1994.
Net income increased 7.3% to $7,781,000 in 1995 as compared to $7,255,000
in 1994. Earnings per share increased 8.7% to $.75 from $.69 last year.
As a result of the stock repurchase program, the average number of shares
outstanding in 1995 was 10,440,000, a 0.6% decrease from the 10,500,000
average outstanding in 1994.
DIVESTITURES
During 1995 the two small remaining operations that have been carried as
discontinued operations as the result of the restructuring in 1993 were
sold for prices consistent with the original restructuring.
FINANCIAL MANAGEMENT
Return on capital employed increased to 11.9% from 10.6% last year.
However, the return on stockholders' investment in 1995 was 16.7% down from
17.4% last year as a result of reduced debt and increased net worth.
Management continues to work towards our long term objectives of a 20% return
on stockholders' investment and a 15% return on total capital employed.
In 1995, Bairnco's Board of Directors authorized the repurchase of up to
$5,000,000 of its common stock. During the year the Company repurchased
486,200 shares for $2,580,000. The Board has authorized management to
continue its stock repurchase program in 1996 subject to market conditions
and the capital requirements of the business.
Working capital as a percent of sales increased from 18.1% to 18.8%.
The increase in accounts receivable is due to the increase in export business
which has longer payment terms. Inventories increased 18.4% or $3.7 million.
Inventories were built in anticipation of higher sales which did not
materialize in the last part of the year. A program is in place to reduce
excess inventories during 1996.
Net cash flows provided by operating activities were $14,665,000. These
cash flows provided the cash used to reduce debt, fund Bairnco's capital
expenditure program, pay dividends and repurchase stock in 1995.
During 1995 total debt was reduced by $7,197,000. Debt as a percent of
equity declined to 51.2% from 72.2% in 1994. At yearend 1995, Bairnco
had $22.7 million available under its revolving credit agreement, and $5.6
million available under short term lines of credit.
1995 capital expenditures were $4,831,000 as compared to a plan of
$14,400,000. The reduction in capital expenditures from plan was due
primarily to the deferment of a capacity addition from 1995 to 1997.
Substantial improvements in operating efficiencies in 1995 and planned for
1996 permitted the postponement of this major capital expenditure.
Depreciation and amortization was $6,314,000. The focus of the capital
expenditure program during 1995 was primarily on required replacements,
efficiency and quality improvements, and some capacity additions.
The capital expenditure plan for 1996 is approximately $12.3 million.
Depreciation and amortization is estimated to be approximately $7.0 million.
The planned capital expenditures include anticipated replacements, quality
improvements, cost reduction projects, new product developments, new
processing equipment and capacity additions. Approximately $3 million of the
planned expenditures are contingent upon the realization of the anticipated
growth in several segments of the electronic markets.
DIVIDEND
The quarterly $.05 per share cash dividend was maintained during the year.
MANAGEMENT
During September, 1995, Elmer Pruim, Controller of Bairnco Corporation,
also was appointed acting President of Kasco North America. Elmer had
been working with Kasco management from the beginning of the year to
improve the efficiencies of the administrative and management support
functions. His role was expanded to further expedite the management process
of improved customer service, continued cost reductions and efficiency
improvement programs. Jim Whiteaker resigned to pursue other interests.
During 1995 the management development program, which is one of the
keys to our future success, continued to make progress in all operations.
Many key positions were filled or upgraded through a combination of internal
promotions and external additions. The ongoing improvement and development
of all our employees remains a critical and never ending requirement for
Bairnco's future success.
SUMMARY AND OUTLOOK
1995 was a year of progress for Bairnco. Arlon's results continued
to manifest the benefits of investing in the development of new products,
new markets, and expanded sales, marketing and research efforts.
The program of refocusing Kasco North America to become the preeminent
supplier of cutting products and routine in-store equipment services made
substantial progress during the year. There were substantial expenses
incurred in the reengineering and cost reduction programs. By the fourth
quarter some of the benefits of the actions started to appear in the
financial results as compared to last year. The process is continuing and
will take time. We do, however, expect to see continuing benefits in 1996
and beyond from the actions taken and to be taken.
The outlook for 1996 is for improved sales and earnings. The US economy
is expected to experience slow growth during 1996. The continuing
maintenance of high relative interest rates by the Federal Reserve is
expected to further slow the economy, if not result in no growth or a modest
recession. The pressures from many of our suppliers to increase their prices
has abated with the exception of some select materials that remain in short
supply. It is expected that the combination of growth in certain niche
markets, benefits accruing from past and programmed cost reduction efforts,
aggressive efficiency improvement projects, as well as modest price
increases, should result in continued financial improvement for 1996.
Respectfully yours,
Luke E. Fichthorn III
Chairman and CEO
ENGINEERED MATERIALS AND COMPONENTS
BUSINESS
Bairnco designs, manufactures, and sells engineered materials and
components for the electronic, industrial and commercial markets under the
Arlon brand name. These products are based on a common technology in
coating, laminating and dispersion chemistry.
PRODUCTS AND APPLICATIONS
CIRCUIT BOARD MATERIALS:
Arlon Materials for Electronics has an international reputation as
the premier supplier of high technology materials for the printed circuit
board industry. Their products include the high performance and high
temperature materials of the Electronic Substrates product line, and the
frequency dependent and low signal loss materials of the Microwave Materials
product line. These products are marketed principally to printed circuit
board manufacturers and OEMs by a direct sales force in concert with strong
technical support teams. These materials are used in products for the
commercial, military, industrial and telecommunications markets.
The economic factors affecting demand for these products include the
level of economic activity in North America, Europe and Asia for high
performance electronics, sophisticated defense electronics procurement, and
telecommunication systems.
The core of the Electronic Substrates line includes premium high
temperature capable laminate products used in circuit boards for military
electronics and sophisticated commercial applications, such as the surface
mount electronics for the Motorola worldwide satellite telephone systems
(Iridium), and circuit boards used in burn-in ovens to routinely test
semiconductors. Intermediate temperature laminates which provide both
improved product reliability in the field and ease of manufacture are also
key to the line. Specialty products have been developed for the surface
mounting of computer chips on circuit boards and multi-chip modules which
are growing segments of the printed circuit board market. Efforts at the
Rancho Cucamonga, California facility continue to stress improved customer
responsiveness both in product design as well as shortened delivery time.
This facility received the ISO 9002 International Quality Standard
certification at the end of 1995.
The Microwave Materials product line produces the world's leading
substrates for microwave applications. The business mix has moved from a
predominantly military base to technology and cost driven commercial
applications. The existing and emerging consumer products operating at
microwave frequencies include digital cordless telephones, local and global
cellular phone systems, direct broadcast satellite TV systems, global
positioning satellite systems, and other personal communications equipment.
Additional wireless opportunities for Arlon circuit board materials include
local area networks for computers and public business exchange systems or
PBX's where telephones operate as microcellular phones within the confines
of a facility or complex.
A major emerging market for wireless communications is the new phone
systems which are being planned for a number of developing countries such as
India and Argentina. These systems are being designed wireless both to reduce
system maintenance costs and to expedite and reduce cost of installation.
This should be a large and growing market over the next decade, as other
countries become involved.
The frequency dependent market area continues to drive toward lower
cost to allow greater commercial/consumer penetration by new electronics
applications. The Arlon Microwave facility in Bear, Delaware continues to
invest in equipment to convert from low volume military to high volume
commercial materials. In addition, new product development continues with
emphasis on low cost, low signal loss materials.
SPECIALTY GRAPHIC FILMS:
Bairnco manufactures and markets, under the Calon brand name, cast
and calendered vinyl films in a wide variety of colors and with varying face
stocks and adhesive systems for specialty graphics which are used by
commercial sign manufacturers, graphic printing houses, and in numerous
commercial and governmental specification applications.
The economic factors affecting this business are the general level of
economic activity in the United States, Canada, Europe, South America and the
Asian Basin.
Arlon NV, Arlon's Belgium based European common market subsidiary
made less progress than expected in 1995. A number of new distributors were
recruited during the last half of 1995.
The Santa Ana facility was certified to the ISO 9001 International
Quality Standard in September 1995. Continued investments in equipment and
R&D resources yielded further improvements in quality and productivity.
Additional productivity gains are expected in 1996.
New graphics products and colors were introduced in 1995 to broaden
the entire product offering. The rate of growth in the graphics market
slowed materially during 1995. This market is now expected to grow modestly
in excess of the economy. Also, 1995 was a year of increased price
competition in the lower performance calendered vinyl films.
Additional new products and colors are planned for introduction in
1996. It is also expected that the enhanced sales and marketing resources
put in place during 1995 will result in improved market penetration.
CUSTOM ENGINEERED LAMINATES AND ADHESIVE SYSTEMS:
Bairnco manufactures and markets custom engineered laminates and
adhesives systems under the Arlon and Chase Foster brand names.
The economic factors impacting this business are primarily the
general level of industrial economic activity in the United States.
Graphic - Arlon's Materials for Electronics Division International Quality
Standard Team in Rancho Cucamonga, California achieved ISO 9002 at the end
of 1995 (from left: Larry Walker, Patricia Zebuth, Rene Martinez, Bob Carini,
Jason Gretton and Steve Carrell.)
Graphic - Brian Millard performs in-line inspection for defects during
casting of Arlon's Calon II high-performance vinyl. In the foreground can
be seen the terminal used to track the film's physical properties which is
necessary to confirm conformance to product specifications.
Typical applications include insulating foam tapes for thermopane
windows, electrical insulation, thermal insulation panels for appliances and
cars, security tags and labels, durable printing stock for high speed laser
printing systems, and custom engineered laminates for specific industrial
applications.
During the year several low margin products were eliminated as part
of a continuing product rationalization program.
Arlon is now focusing on developing new custom engineered laminates
and pressure sensitive systems for specific industrial applications. The
combination of the Santa Ana, California and East Providence, Rhode Island
operations provides a unique ability to meet the needs of new custom laminate
applications.
SILICONE RUBBER TECHNOLOGIES:
Bairnco manufactures a line of silicone rubber based materials used
in a broad range of consumer, industrial, utility and commercial products.
This business is sensitive to the level of general industrial and consumer
spending in the United States.
Graphic - Robert Powers and Richard Corrette monitor the performance of a
computer controlled vacuum lamination system at Arlon's Materials for
Electronics Division, Rancho Cucamonga, California.
Graphic - Arlon's Adhesives & Films Division International Quality Standard
Team in Santa Ana, California achieved ISO 9001 in September 1995 (from left:
Brian Millard, Zsolt Katona, Mike Willott, Dinesh Shah, Rande Hawkinson,
Martha Westcott, Chuck Bules, Jaime Perez and Mike Gonzalez.)
Typical applications of these materials include silicone rubber roll
material used in molding composites, silicone rubber tape to insulate coil
windings of electric traction motors (most notably locomotive traction
motors), insulating tape for industrial flexible heaters, and power utility
applications.
The silicone rubber product line provides significant opportunity for
Arlon in a number of areas. During 1995 progress was made in the development
of Thermabond, a thermally conductive silicone product line designed to
dissipate heat from electronic circuit boards in very high temperature
environments. With increasing miniaturization driving requirements for heat
removal in electronics circuitry Thermabond will form the core of a broader
line of thermal management products. Also, progress was made during the year
in identifying new channels of distribution to serve international markets.
The distributor agreement with Airtech, a leading supplier of vacuum bagging
materials to the composite industry, has begun to develop opportunities in
industrial and aerospace composite markets.
Graphic - Gus Hernandez and Frank Angel package finished goods for
international shipments at Arlon's Adhesives & Films Division, Santa Ana,
California.
In January of 1996, an agreement was reached with Permacel, Inc.,
principally a manufacturer of pressure sensitive adhesive tapes, for Arlon to
acquire the silicone rubber tape operation of that corporation. This
acquisition will provide additional growth opportunity for Arlon in the
silicone rubber markets.
1996 is anticipated to be another year of continued growth for this segment.
Graphic - Dagoberto Hernandez monitors the laminates overall thickness and
performs a surface inspection at Arlon's Materials for Electronics Division,
Rancho Cucamonga, Caifornia.
Graphic - Arlon's Materials for Electronics Division International Quality
Standard Team in Bear, Delaware (from left: Randy Hoback, Matt Woods, Tom
Zawislak, Keith St. John and Mike Conway.)
REPLACEMENT PRODUCTS AND SERVICES
BUSINESS
Bairnco, through its multinational Kasco operations, manufactures and
supplies replacement products and services principally to retail food stores
and meat, poultry and fish processing plants throughout the United States,
Canada and Europe. Replacement band saw blades are also sold for use in wood
and metal industries. The French and Canadian operations also distribute
equipment to the supermarket and food processing industries in their
respective markets.
PRODUCTS AND APPLICATIONS
Kasco manufactures band saw blades for cutting, and chopper plates
and knives for grinding meat in supermarkets and packing plants, band saw
blades used in frozen fish factories, small band saw blades for cutting metal
and wood, and large band saw blades for lumber mills. Kasco also distributes
related supply products and a seasoning line to supermarkets, as well as
other customers.
Kasco also provides preventive maintenance and repair parts and
service for a broad range of supermarket equipment primarily in the meat and
deli areas in selected markets.
VAN SERVICE:
In North America, Kasco supplies its products and services directly
to the supermarket and meat cutting industries through route sales people.
They make regularly scheduled calls on the accounts in their region. They
both supply the Company's products and provide related equipment maintenance
services. The route service people are continuously trained in the service
and maintenance of the equipment used in the meat preparation areas of retail
food outlets.
The field computerization program permits the route service people to
more efficiently service their customer base.
SERVICE CENTERS:
Kasco currently operates service centers in four regions of North
America. The service centers provide preventive maintenance programs and
emergency repair programs for a broad range of equipment primarily in the
meat preparation and deli areas of supermarkets and other retail food outlets
in their geographical areas.
During 1995 the service center program was refocused on four selected
market areas where Kasco can provide cost effective, value added preventive
maintenance and emergency service in concentrated geographical markets.
These actions resulted in a $2 million reduction in revenues and phase-out
expenses which continued in reducing amounts throughout 1995. The net impact
of the cost savings began to be evident during the last part of 1995 and
should provide continuing benefits in 1996.
SPECIAL PRODUCTS:
Through its special products group, Kasco supplies band saw blades to
OEMs in the meat cutting industry and band saw blades for cutting wood and
metal to the OEMs supplying machines to those industries. Special products
also sells through general distribution and is responsible for export sales
throughout the world with the exception of Europe where such sales are the
responsibility of the three Kasco operations in Europe.
EQUIPMENT DISTRIBUTION:
In Canada and France, in addition to providing its standard products,
Kasco distributes equipment used in the supermarket industry and in the food
processing industry.
MANUFACTURING
Kasco and its subsidiaries have manufacturing operations in St.
Louis, Missouri; City of Industry, California; Toronto, Canada; Gwent, Wales,
United Kingdom; and Pansdorf, Germany. During 1995, Kasco's management took
numerous actions to improve the efficiencies in manufacturing and
distribution. There is now in place a continuing cost reduction program
which will result in improved quality, more efficient operations and improved
customer service.
Graphic - Kasco's Production Quality Improvement Team in St. Louis, Missouri
(standing from left: Stan Sak, Al Lowe, Larry Jones, Bob Hunt and Jerry
Brooks; sitting from left: Armando Ibarra, Rose Mayo and Jerry Petersen.)
DIRECTORS (individual photographs)
Luke E. Fichthorn III
Chairman and CEO
Bairnco Corporation
Charles T. Foley
President
Estabrook Capital Management, Inc.
Richard A. Shantz
Private Investor
William F. Yelverton
CEO - Individual Insurance Group
Prudential Insurance Company of America
MANAGEMENT (individual photographs)
Robert M. Carini
President
Arlon Materials for Electronics
Elmer G. Pruim
Controller, Bairnco Corporation
Acting President, Kasco Corporation
Barry M. Steinhart
Vice President Administration & Secretary
Bairnco Corporation
J. Robert Wilkinson
Vice President Finance & Treasurer
Bairnco Corporation
Mike Willott
President
Arlon Adhesives & Films
FINANCIAL HISTORY
1995 1994 1993 1992 1991
Summary of Operations
($ in thousands)
Net sales.................... $ 150,507 145,522 134,958 135,581 128,566
Gross profit................. $ 53,317 53,177 52,645 54,714 52,492
Earnings before interest,
charges and taxes <F1>..... $ 14,633 13,654 13,617 15,846 15,225
Operating profit............. $ 14,633 13,654 4,874 15,846 15,225
Interest expense, net........ $ 2,026 2,144 2,248 2,911 4,277
Income before income taxes... $ 12,607 11,510 2,626 12,935 10,948
Provision for income taxes... $ 4,826 4,255 1,809 5,180 4,305
Income from continuing
operations................. $ 7,781 7,255 817 7,755 6,643
Return from continuing
operations on:
Net sales................ % 5.2 5.0 0.6 5.7 5.2
Stockholders' investment. % 16.7 17.4 1.4 12.1 11.0
Capital employed......... % 11.9 10.6 2.0 8.6 8.4
Year-End Position ($ in thousands)
Working capital.............. $ 28,350 26,277 20,098 18,983 20,342
Plant and equipment, net..... $ 34,449 36,289 38,654 39,232 32,025
Total assets excluding
discontinued operations.... $ 98,196 99,243 95,547 98,916 90,982
Net assets of discontinued
operations................. $ -- 3,529 12,434 34,337 39,109
Total assets............... $ 98,196 102,772 107,981 133,253 130,091
Total debt................... $ 24,578 31,775 43,718 45,733 45,891
Stockholders' investment..... $ 48,024 43,997 38,515 62,055 59,529
Capital employed-total....... $ 72,602 75,772 82,233 107,788 105,420
Capital employed-proforma <F2>$ 72,602 75,772 82,233 85,895 83,527
Per Share Data
Primary and fully diluted
income from continuing
operations................. $ 0.75 0.69 0.08 0.72 0.61
Cash dividend................ $ 0.20 0.20 0.20 0.20 0.20
Stockholders' investment..... $ 4.60 4.19 3.67 5.91 5.68
Market Price:
High....................... $ 6 5-1/2 8-1/2 8-1/4 9
Low........................ $ 3-7/8 3 3-3/8 5-5/8 3-3/4
Other Data (in thousands)
Backlog...................... $ 8,109 7,833 7,998 6,392 9,615
Depreciation and
amortization............... $ 6,314 6,502 6,700 5,808 5,748
Capital expenditures <F3>.... $ 4,831 5,176 6,318 13,195 5,858
Average shares
outstanding <F4>........... 10,440 10,500 10,500 10,749 10,807
Current ratio................ 2.2 2.0 1.8 1.7 1.9
Number of common
stockholders............... 1,967 2,198 2,326 2,440 2,586
Average number of employees.. 874 915 920 935 903
Sales per employee .......... $ 172,200 159,040 146,700 145,000 142,400
<FN>
<F1> Excludes impact of non-recurring litigation and restructuring costs
of $8,743 (pre-tax) in 1993 - see Note 2 to Consolidated Financial
Statements.
<F2> Stockholders' investment and capital employed adjusted on a proforma
basis for discontinued operations NRV writedown and loss on
discontinuance recorded in 1993.
<F3> Exclusive of acquired businesses' plant & equipment at date of
acquisition.
<F4> Assuming full dilution.
</FN>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and related notes which begin on page 14.
As stated in Note 3 therein, Bairnco adopted a restructuring plan
effective December 31, 1993, a major component of which involved a formal
plan of divestiture relating to the businesses that comprised Bairnco's
Specialty Construction Products segment and secure communications
electronics operations. The operating results discussed below exclude the
discontinued operations.
Results of Operations: 1995 Compared to 1994
Net sales increased 3.4% to $150,507,000 in 1995 from $145,522,000 in
1994. Sales of Arlon engineered materials and components increased 7.8%
due to growing sales to the high end and microwave printed circuit board
markets. Sales of Kasco replacement products and services declined 4.1%
due to the planned reduction in Kasco's North American service center
revenues as part of the program to focus Kasco on its core business.
The backlog of unfilled orders for Arlon at the end of 1995 was
$8,109,000, up 3.5% from $7,833,000 at the end of 1994. Kasco does not have
a backlog.
In 1995, gross profit increased nominally to $53,317,000 from
$53,177,000 in the prior year. The favorable impact from increased sales
was offset by the decline in gross profit margins to 35.4% from 36.5% last
year. Arlon's gross profit increased only 3.1% as a result of the growth
in lower margin commercial products and margin erosion in certain market
segments due to competitive pressures. Kasco's gross profit declined 3.5%
as a result of the 4.1% sales decrease, whereas its gross profit margin
increased slightly due to an improved sales mix and reduced manufacturing
costs.
Selling and administrative expenses decreased $839,000 or 2.1% to
$38,684,000 from $39,523,000 in 1994. As a percent of sales, these
expenses decreased to 25.7% in 1995 from 27.2% in 1994. Selling expenses
decreased slightly as the reductions in Kasco from focusing on the core
business were partially offset by the continued investment in sales and
marketing expense to grow selected Arlon segments. Administrative expenses
continued to be reduced both absolutely and as a percentage of sales.
Research and development expenses increased 3.0% as Bairnco continued to
invest in the development of new products and improved quality.
Operating profit in 1995 was $14,633,000, or 9.7% of net sales,
compared to operating profit in 1994 of $13,654,000, or 9.4% of net sales.
Net interest expense decreased to $2,026,000 in 1995 from $2,144,000
in 1994 due primarily to a $7.2 million reduction in debt of which
approximately $3.5 million occurred during the fourth quarter of 1995.
Income before income taxes increased 9.5% to $12,607,000 in 1995 as
compared to $11,510,000 in 1994. The effective tax rate increased to 38.3%
in 1995 from 37.0% in 1994. The lower effective tax rate in 1994 resulted
from the benefit of foreign losses which were booked at a higher tax rate.
The provision for income taxes in both years includes all applicable
federal, state, local and foreign income taxes. Audits of the
Corporation's consolidated US federal income tax returns have been
completed for all years through 1992.
Net income increased 7.3% to $7,781,000 in 1995 as compared to
$7,255,000 in 1994. Earnings per share increased 8.7% to $.75 from $.69
last year. The average number of shares outstanding in 1995 was
10,440,000, a 0.6% decrease from the 10,500,000 average outstanding in 1994
due to the stock repurchase program.
Results of Operations: 1994 Compared to 1993
Net sales increased 7.8% to $145,522,000 in 1994 from $134,958,000 in
1993. Arlon engineered materials and components sales in 1994 increased
$9,817,000, or 11.9%, from 1993 due to strong sales to the graphics market,
more than offsetting continued weak sales to the defense related markets.
Sales of Kasco replacement products and services increased $747,000, or
1.4%, from 1993 as the European economic improvements were offset by the
impact of the retrenchment and refocusing of the Kasco service center
business in the fourth quarter of 1994.
The backlog of unfilled orders for Arlon at the end of 1994 was
$7,833,000, down slightly from $7,998,000 at the end of 1993. Kasco does
not have a backlog.
In 1994, gross profit increased 1.0% to $53,177,000, or 36.5% of net
sales, from $52,645,000, or 39.0% of net sales, in 1993. The increase in
gross profit was attributable to the increase in sales, whereas the decline
in the gross profit as a percentage of sales was due to a significant
decline in Kasco's gross profit resulting from the service center
operations and to a lesser extent the lower gross margin at Arlon as a
result of the continuing shift in the business mix to lower margin
commercial products from higher margin military products.
Selling and administrative expenses increased 1.3% in 1994 to
$39,523,000 from $39,028,000 in 1993. As a percent of sales, these expenses
decreased to 27.2% in 1994 from 28.9% in 1993. The composition of these
expenses continues to change in accordance with the ongoing plan to make
the administrative functions more efficient while increasing sales and
marketing efforts to develop new products and to increase penetration into
selected markets.
Operating profit in 1994 was $13,654,000, or 9.4% of net sales,
compared to operating profit in 1993 of $13,617,000, or 10.1% of net sales,
excluding the non-recurring restructuring and litigation charges. After
recognition of the non-recurring restructuring and litigation costs, which
totaled $8,743,000, 1993 operating profit was $4,874,000.
Net interest expense decreased to $2,144,000 in 1994 from $2,248,000
in 1993 due primarily to a $11,943,000 reduction in indebtedness which was
largely offset by increased interest rates.
The effective tax rate for 1994 was 37.0% as compared to 68.9% in
1993. The high effective tax rate for 1993 reflects the absence of a tax
benefit on a portion of the restructuring costs recognized at Kasco. The
provision for income taxes in both years includes all applicable federal,
state, local and foreign income taxes.
Income from continuing operations for 1994 was $7,255,000 or $.69 per
share. Excluding the restructuring and litigation related charges, which
net of related tax benefits amounted to $6,263,000 or approximately $.60
per share, 1993 income from continuing operations was $7,080,000 or $.67
per share. Income from continuing operations including the charges was
$817,000 or $.08 per share in 1993.
Liquidity and Capital Resources
At December 31, 1995, Bairnco had working capital of $28.4 million
compared to $26.3 million at December 31, 1994. The increase in accounts
receivable is due to the increase in export business which has longer
payment terms. Inventories increased 18.4% or $3.7 million from the end of
1994. During 1995, certain inventories were built in anticipation of
higher sales which did not materialize in the last part of the year.
Management has developed a program to reduce any excess inventories during
1996 and believes no loss will be incurred on its disposition. The
decrease in other current assets in 1995 was due primarily to the tax
refund received during the second quarter of 1995.
The increase in other assets primarily reflects the long term portion of
the notes receivable on the discontinued operations disposed of during 1995
(refer to Note 3 to the Consolidated Financial Statements).
At December 31, 1995, $24.6 million of total debt was outstanding
compared to $31.8 million at the end of 1994. As of December 31, 1995,
approximately $22.7 million was available for borrowing under the
Corporation's secured reducing revolving credit agreement with a consortium
of four banks. The credit agreement expires in August 1999. In addition,
approximately $5.6 million was available under various short term domestic
and foreign uncommitted credit facilities. Debt as a percent of equity
declined to 51.2% at the end of 1995 from 72.2% at the end of 1994.
Bairnco made $4,831,000 of capital expenditures in 1995 as compared
to its plan at the start of the year of approximately $14.4 million. The
reduction in capital expenditures from plan was due primarily to the
deferment of a capacity addition from 1995 to 1997. Substantial
improvements in operating efficiencies in 1995 and planned for 1996
resulted in the postponement of this major capital expenditure. Total
capital expenditures in 1996 are expected to be approximately $12.3
million. Approximately $3.0 million of the planned expenditures are
contingent upon realization of the anticipated growth in several segments
of the electronics market.
In 1995, Bairnco's Board of Directors authorized the repurchase of up
to $5,000,000 of its common stock. During the year the Company repurchased
486,200 shares for $2,580,000. The Board has authorized management to
continue its stock repurchase program in 1996 subject to market conditions
and the capital requirements of the business.
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 1996.
Other Matters
Bairnco Corporation and its subsidiaries are defendants in a number
of legal actions and proceedings which are discussed in more detail in Note
11 to the Consolidated Financial Statements. Management of Bairnco believes
that the disposition of these actions and proceedings 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
December 31, 1995.
Outlook
Management is not aware of any adverse trends that would materially
affect the Company's strong financial position. The outlook for 1996 is
for improved sales and earnings. It is expected that the combination of
growth in certain niche markets, benefits accruing from past and programmed
cost reduction efforts, aggressive efficiency improvement projects, as well
as modest price increases, should result in continued financial improvement
for 1996.
Quarterly Results of Operations (Unaudited)
(In thousands except per share data)
1st 2nd 3rd 4th Total
1995 1994 1995 1994 1995 1994 1995 1994 1995 1994
Net Sales............... $38,523 $35,676 $38,309 $36,977 $37,386 $35,918 $36,289 $36,951 $150,507 $145,522
Cost of sales......... 24,794 22,070 24,462 23,311 24,511 23,054 23,423 23,910 97,190 92,345
Gross Profit............ 13,729 13,606 13,847 13,666 12,875 12,864 12,866 13,041 53,317 53,177
Selling and
administrative
expenses............ 10,132 10,271 9,980 9,964 9,292 9,396 9,280 9,892 38,684 39,523
Operating Profit........ 3,597 3,335 3,867 3,702 3,583 3,468 3,586 3,149 14,633 13,654
Interest expense, net. 547 501 527 536 479 559 473 548 2,026 2,144
Income before income
taxes................. 3,050 2,834 3,340 3,166 3,104 2,909 3,113 2,601 12,607 11,510
Provision for income
taxes............... 1,159 1,134 1,269 1,266 1,211 1,164 1,187 691 4,826 4,255
Income from
Continuing Operations. $ 1,891 $ 1,700 $ 2,071 $ 1,900 $ 1,893 $ 1,745 $ 1,926 $ 1,910 $ 7,781 $ 7,255
Earnings per Share -
Continuing Operations. $ 0.18 $ 0.16 $ 0.20 $ 0.18 $ 0.18 $ 0.17 $ 0.19 $ 0.18 $ 0.75 $ 0.69
Market Price:
High.................. $ 4-7/8 $ 3-7/8 $ 4-7/8 $ 5-1/4 $ 5-1/2 $ 5-1/2 $ 6 $ 4-5/8 $ 6 $ 5-1/2
Low................... 3-7/8 3-1/4 3-7/8 3 4-3/8 4-1/8 4-3/8 3-3/4 3-7/8 3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of Bairnco Corporation
We have audited the accompanying consolidated balance sheets of
Bairnco Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of
income, stockholders' investment and cash flows for each of the three
years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 Bairnco Corporation and subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Orlando, Florida
January 25, 1996
Arthur Andersen LLP
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1995, 1994 and 1993
Bairnco Corporation and Subsidiaries
1995 1994 1993
Net Sales................................ $ 150,507,000 $ 145,522,000 $ 134,958,000
Cost of sales.......................... 97,190,000 92,345,000 82,313,000
Gross Profit............................. 53,317,000 53,177,000 52,645,000
Selling and administrative expenses.... 38,684,000 39,523,000 39,028,000
Restructuring costs (Note 2)........... -- -- 5,743,000
Provision for litigation costs (Note 2) -- -- 3,000,000
Operating Profit......................... 14,633,000 13,654,000 4,874,000
Interest expense, net.................. 2,026,000 2,144,000 2,248,000
Income before Income Taxes............... 12,607,000 11,510,000 2,626,000
Provision for income taxes (Note 5).... 4,826,000 4,255,000 1,809,000
Income from Continuing Operations........ 7,781,000 7,255,000 817,000
Discontinued Operations (Note 3):
(Loss) from operations, net of income
tax (benefit) of ($6,733,000)
in 1993............... -- -- (21,679,000)
(Loss) on discontinuance, net of
income tax (benefit) of ($884,000)
in 1993............................ -- -- (1,716,000)
Net income (loss)...................... $ 7,781,000 $ 7,255,000 $ (22,578,000)
Earnings (Loss) per Share of Common Stock
(Note 4):
Earnings per Share from Continuing
Operations............................. $ 0.75 $ 0.69 $ 0.08
Discontinued operations (Note 3)..... -- -- (2.23)
Net income (loss)...................... $ 0.75 $ 0.69 $ (2.15)
Dividends per Share of Common Stock...... $ 0.20 $ 0.20 $ 0.20
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
Bairnco Corporation and Subsidiaries
1995 1994
Assets
Current Assets:
Cash and cash equivalents.................... $ 608,000 $ 1,478,000
Accounts receivable, less allowances of
$763,000 and $1,097,000 respectively....... 21,472,000 20,885,000
Inventories:
Raw materials and supplies................. 4,651,000 4,794,000
Work in process............................ 5,451,000 4,767,000
Finished goods............................. 13,634,000 10,481,000
23,736,000 20,042,000
Deferred income taxes (Note 5)............. 3,396,000 4,941,000
Other current assets (Note 3).............. 2,130,000 4,785,000
Total current assets..................... 51,342,000 52,131,000
Plant and Equipment, at cost:
Land......................................... 1,534,000 1,241,000
Buildings and leasehold interests and
improvements............................... 16,332,000 15,163,000
Machinery and equipment...................... 59,926,000 60,260,000
77,792,000 76,664,000
Less - Accumulated depreciation and
amortization............................... (43,343,000) (40,375,000)
34,449,000 36,289,000
Cost in Excess of Net Assets of Purchased
Businesses (Note 1).......................... 8,152,000 8,201,000
Other Assets (Notes 1 and 3)................... 4,253,000 2,622,000
Net Assets of Discontinued Operations (Note 3). -- 3,529,000
$ 98,196,000 $102,772,000
Liabilities and Stockholders' Investment
Current Liabilities:
Short-term debt.............................. $ 3,156,000 $ 4,710,000
Current maturities of long-term debt (Note 7) 186,000 201,000
Accounts payable............................. 7,885,000 9,762,000
Accrued expenses (Note 6).................... 11,765,000 11,181,000
Total current liabilities................ 22,992,000 25,854,000
Long-Term Debt (Note 7)........................ 21,236,000 26,864,000
Deferred Income Taxes (Note 5)................. 3,215,000 3,743,000
Other Liabilities.............................. 2,729,000 2,314,000
Stockholders' Investment (Notes 4, 7 and 8):
Preferred stock, par value $.01, 5,000,000
shares authorized, none issued............. -- --
Common stock, par value $.01, 30,000,000
shares authorized, 11,062,499 and
10,952,124 issued, respectively............ 111,000 109,000
Paid-in capital.............................. 50,833,000 49,922,000
Retained earnings ........................... 9,460,000 3,766,000
Treasury stock, at cost, 938,065 and 451,865
shares, respectively....................... (12,380,000) (9,800,000)
Total stockholders' investment........... 48,024,000 43,997,000
$ 98,196,000 $102,772,000
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
Bairnco Corporation and Subsidiaries
1995 1994 1993
Cash Flows from Operating Activities:
Income from continuing operations............ $ 7,781,000 $ 7,255,000 $ 817,000
Adjustments to reconcile to net cash provided
by operating activities:
Depreciation and amortization............ 6,314,000 6,502,000 6,700,000
Loss on disposal of plant and equipment.. 294,000 18,000 --
Deferred income taxes.................... 1,561,000 242,000 (222,000)
Changes in non-current assets related to
restructuring.......................... -- -- 2,992,000
Change in operating assets and liabilities:
(Increase) decrease in accounts
receivable, net........................... (587,000) (1,953,000) 575,000
(Increase) decrease in inventories.......... (3,694,000) (549,000) 284,000
Decrease (increase) in other current
assets.................................... 3,205,000 (2,629,000) (27,000)
(Decrease) increase in accounts
payable................................... (1,877,000) 2,399,000 (839,000)
(Decrease) in accrued expenses.............. (1,019,000) (1,498,000) (284,000)
Cash provided by discontinued operations. 1,988,000 4,863,000 350,000
Other.................................... 699,000 (115,000) 865,000
Net cash provided by operating activities.. 14,665,000 14,535,000 11,211,000
Cash Flows from Investing Activities:
Capital expenditures......................... (4,831,000) (5,176,000) (6,318,000)
Proceeds from sale of plant and equipment.... 328,000 1,728,000 --
Proceeds from sale of discontinued operations 100,000 2,865,000 --
Net cash (used in) investing activities.... (4,403,000) (583,000) (6,318,000)
Cash Flows from Financing Activities:
Net (repayment) of external debt............. (7,427,000) (12,107,000) (1,697,000)
Payment of dividends......................... (2,087,000) (2,100,000) (2,100,000)
Purchase of treasury stock................... (2,580,000) -- --
Exercise of stock options.................... 560,000 -- 20,000
Net cash (used in) financing activities.... (11,534,000) (14,207,000) (3,777,000)
Effect of foreign currency exchange rate changes
on cash and cash equivalents................. 402,000 350,000 (568,000)
Net (decrease) increase in cash and cash
equivalents.................................. (870,000) 95,000 548,000
Cash and cash equivalents, beginning of year... 1,478,000 1,383,000 835,000
Cash and cash equivalents, end of year......... $ 608,000 $ 1,478,000 $ 1,383,000
Supplemental Disclosures of Cash Flow Information:
Cash paid (received) during the year for:
Interest................................... $ 1,992,000 $ 2,242,000 $ 2,138,000
Income Taxes............................... $ (310,000) $ (533,000) $ 2,703,000
Noncash investing activities:
Notes Received from Sale of Discontinued
Operations............................... $ 2,500,000 $ -- $ --
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
For the years ended December 31, 1995, 1994 and 1993
Bairnco Corporation and Subsidiaries
Retained
Common Paid-In Earnings Treasury
Stock Capital (Deficit) Stock
Balance, December 31, 1992............ $ 109,000 $48,457,000 $23,289,000 $ (9,800,000)
Net (loss).......................... -- -- (22,578,000) --
Cash dividends ($.20 per share)..... -- -- (2,100,000) --
Issuance of 4,000 shares pursuant
to exercise of stock options...... -- 20,000 -- --
Currency translation adjustment
(Note 1).......................... -- (724,000) -- --
Transfer of currency translation
adjustment related to discontinued
operations to income statement.... -- 1,842,000 -- --
Balance, December 31, 1993............ 109,000 49,595,000 (1,389,000) (9,800,000)
Net income.......................... -- -- 7,255,000 --
Cash dividends ($.20 per share)..... -- -- (2,100,000) --
Currency translation adjustment
(Note 1).......................... -- 327,000 -- --
Balance, December 31, 1994............ 109,000 49,922,000 3,766,000 (9,800,000)
Net income.......................... -- -- 7,781,000 --
Cash dividends ($.20 per share)..... -- -- (2,087,000) --
Issuance of 110,375 shares pursuant
to exercise of stock options...... 2,000 558,000 -- --
Acquisition of treasury stock
(486,200 shares at cost).......... -- -- -- (2,580,000)
Currency translation adjustment
(Note 1).......................... -- 353,000 -- --
Balance, December 31, 1995............ $ 111,000 $50,833,000 $ 9,460,000 $(12,380,000)
The accompanying notes are integral part of these financial statements.
(1) Nature of Operations and Summary of Significant Accounting Policies
Nature of operations:
Bairnco Corporation is a diversified multinational company that operates
two business sectors: Engineered Materials and Components which are
designed, manufactured and sold under the Arlon brand identity to
electronic, industrial and commercial markets worldwide; and, Replacement
Products and Services which 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.
Arlon's products are based on a common technology in coating, laminating
and dispersion chemistry. Arlon's principal products include high
performance materials for the printed circuit board industry, cast and
calendered vinyl film systems, custom engineered laminates and pressure
sensitive adhesive systems, and calendered and extruded silicone rubber
insulation products used in a broad range of industrial, consumer and
commercial products.
Kasco's 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.
Principles of consolidation:
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 preparation of consolidated 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 consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Consolidated statements of cash flows:
The Corporation considers cash in banks, commercial paper, demand notes and
similar investments with a maturity of less than three months as cash and
cash equivalents for the purposes of the consolidated statements of cash
flows.
Certain reclassifications were made to prior year balances in order to
conform to current year presentation.
Inventories:
Inventories are stated at cost, which is not in excess of market. Inventory
costs include material, labor and overhead. Inventories are stated
principally on a first-in, first-out (FIFO) basis.
Plant and equipment:
The Corporation provides for depreciation of plant and equipment
principally on a straight-line basis by charges to income in amounts
estimated to allocate the cost of these assets over their useful lives.
Rates of depreciation vary among the several classifications as well as
among the constituent items in each classification, but generally fall
within the following ranges:
Years
Buildings and leasehold interests and improvements 5 - 40
Machinery and equipment 3 - 20
When property is sold or otherwise disposed of, the asset cost and
accumulated depreciation are removed from the accounts and any resulting
gain or loss is included in the statement of income.
Leasehold interests and improvements are amortized over the terms of the
respective leases, or over their estimated useful lives, whichever is
shorter.
Maintenance and repairs are charged to operations. Renewals and
betterments are capitalized.
Accelerated methods of depreciation are used for income tax purposes, and
appropriate provisions are made for the related deferred income taxes.
Cost in excess of net assets of purchased businesses:
Cost in excess of net assets of purchased businesses acquired prior to 1971
is not being amortized since, in the opinion of management, there has been
no diminution in value. For businesses acquired subsequent to 1970, the
cost in excess of net assets of purchased businesses, aggregating
$5,931,000 and $5,816,000 at December 31, 1995 and 1994, respectively, is
being amortized over 40 years. Accumulated amortization at December 31,
1995 and 1994, was $1,265,000 and $1,099,000, respectively. Amortization
expense of $150,000, $146,000 and $221,000 was recognized during 1995, 1994
and 1993, respectively.
At each balance sheet date, the Corporation evaluates the realizability of
its cost in excess of net assets of purchased businesses based upon
expectations of nondiscounted cash flows and operating income for each
division having a material cost in excess of net assets of purchased
businesses balance. Based upon its most recent analysis, the Corporation
believes that no material impairment of its cost in excess of net assets of
purchased businesses exists at December 31, 1995.
Intangibles:
Intangible assets of purchased businesses, net of amortization, are
included in other assets and totaled $94,000 and $127,000 at December 31,
1995 and 1994, respectively. These items are amortized over their
estimated lives, which generally range from three to twenty years.
Amortization expense recognized was $33,000 during 1995, $159,000 during
1994 and $217,000 during 1993.
Translation of foreign currencies:
Balance sheet accounts of foreign subsidiaries are translated at the rates
of exchange in effect at the balance sheet date while income and expenses
are translated at the monthly average rates of exchange in effect during
the year. The cumulative effect of such translation adjustments has been
included as an increase to paid-in capital and was $2.3 million and $1.9
million at December 31, 1995 and 1994, respectively.
Fair value of financial instruments
The carrying values of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities, approximate fair value due to the
short-term maturities of these assets and liabilities.
The interest rates on the notes receivable (see Note 3 to the Consolidated
Financial Statements) are reset at least quarterly to reflect current
market rates. Consequently, the carrying values of the notes receivable
approximate fair value.
The carrying amount of the Corporation's short-term and long-term debt
approximates fair value, since the debt is at floating rates or rates
approximating rates currently offered to the Corporation for debt of the
same remaining maturities.
(2) Restructuring Costs and Provision For Litigation Costs
Pursuant to the restructuring plan adopted by Bairnco effective December
31, 1993, restructuring costs totaling $5,743,000 (pre-tax) were recognized
in the fourth quarter of 1993. The restructuring costs were entirely
attributable to programs underway at Bairnco's Kasco subsidiary to phase
out unprofitable and low potential product lines and to rationalize Kasco's
North American production facilities. All but approximately $500,000 of
the restructuring costs related to the revaluation of certain assets and
other non-cash charges necessitated by the adoption of the restructuring
plan. The charges included a reduction of approximately $2.5 million in
the carrying value of Kasco's cost in excess of net assets of purchased
businesses as well as adjustments to the carrying values of inventory,
machinery and equipment, and other current assets.
In the fourth quarter of 1993, Bairnco also recorded a $3,000,000 pre-tax
provision for anticipated litigation expenses. The litigation provision
established a reserve for future litigation related expenditures resulting
from the December 1993 bankruptcy filing by Bairnco's former subsidiary,
Keene Corporation (see Note 11 to Consolidated Financial Statements), and
the defense against claims that Bairnco is liable for injuries allegedly
caused by asbestos-containing products manufactured or distributed by Keene
or its predecessors.
After recognition of related tax benefits, these two items reduced income
from continuing operations in 1993 by $6,263,000 or approximately $.60 per
share.
(3) Discontinued Operations
The restructuring plan adopted by Bairnco effective December 31, 1993,
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.
In connection with management's plan to sell these businesses, the 1993
loss from operations for the discontinued operations included a charge to
adjust the carrying values of the related assets and liabilities to their
expected net realizable value of $12.4 million as of December 31, 1993
which was comprised of estimated net sales proceeds and tax benefits
associated with the divestitures. The loss on discontinuance for the
discontinued operations included provisions for estimated operating losses
until divestiture and other costs expected to be incurred as a result of
the divestiture plan.
During 1994 the majority of the Specialty Construction businesses were
sold. The smallest and last remaining operation of the Specialty
Construction business was sold on December 29, 1995. The secure
communications business was sold on November 30, 1995. The net sales price
of the discontinued operations sold in 1995 was $2.6 million and consisted
of $100,000 in cash and two promissory notes. The current portion of the
promissory notes is $550,000 and is included in Other Current Assets in the
Consolidated Balance Sheet as of December 31, 1995. The remaining
$1,950,000 represents the net long term portion of the promissory notes and
is included in Other Assets in the Consolidated Balance Sheet as of
December 31, 1995. No gain or loss was recognized on the sale of these
operations in either 1994 or 1995.
As part of the asset purchase agreements for the two discontinued
operations disposed of in 1995, the Corporation has guaranteed certain
lease payments of one facility and remains the lessee/guarantor of a second
facility even though such obligations have been transferred to the
respective buyers. The total lease payments guaranteed as of December 31,
1995 amounted to approximately $1.1 million. In the event the Corporation
is called upon to satisfy these guarantees, such payments would be offset
by certain buyout provisions which could reduce the total lease payments by
as much as $335,000, in addition to any recoveries from sub-leasing the
property of which the Corporation remains the lessee/guarantor.
Net sales from the discontinued operations for the years ended December 31,
1995, 1994 and 1993 were $10.6 million, $20.2 million and $22.8 million,
respectively. The 1995 and 1994 losses of the discontinued operations
approximated the prior estimates.
(4) Earnings per Share
Primary and fully-diluted earnings per share are equal within each of the
years ended December 31, 1995, 1994 and 1993. Earnings per share are based
on the weighted average number of common shares outstanding during the year
as follows:
1995 1994 1993
Primary 10,436,000 10,500,000 10,500,000
Fully-Diluted 10,440,000 10,500,000 10,500,000
Primary and fully-diluted shares outstanding reflect all common stock
equivalents (primarily outstanding stock options as described in Note 8 to
the Consolidated Financial Statements) to the extent they are not
antidilutive.
(5) Income Taxes
The components of income from continuing operations before income
taxes and the provisions for domestic and foreign income taxes on continuing
operations are as follows:
1995 1994 1993
Income (Loss) before Income Taxes:
Domestic $11,360,000 $11,096,000 $ 3,116,000
Foreign 1,247,000 414,000 (490,000)
Total Income before Income Taxes $12,607,000 $11,510,000 $ 2,626,000
Provision for Income Taxes:
Domestic:
Currently payable $ 1,671,000 $ 3,731,000 $ 2,418,000
Deferred 2,413,000 751,000 (439,000)
Foreign:
Currently payable 943,000 (135,000) (19,000)
Deferred (201,000) (92,000) (151,000)
Total Provision for Income Taxes $ 4,826,000 $ 4,255,000 $ 1,809,000
Bairnco's restated net current and non-current deferred tax assets
(liabilities) are comprised of the following at December 31:
1995 1994 1993
Current Deferred Tax Items:
Accrued Expenses $ 2,211,000 $ 2,528,000 $ 2,521,000
Other 1,185,000 1,236,000 974,000
Tax Credit Carryforwards -- 1,177,000 --
Net Current Deferred Tax Asset 3,396,000 4,941,000 3,495,000
Non-Current Deferred Tax Items:
Fixed Assets (2,650,000) (2,749,000) (2,196,000)
Pensions (938,000) (781,000) (716,000)
Intangible Assets (107,000) (102,000) (168,000)
Other 480,000 (111,000) (152,000)
Net Non-Current Deferred Tax
Liability (3,215,000) (3,743,000) (3,232,000)
Net Deferred Tax Asset $ 181,000 $ 1,198,000 $ 263,000
Management expects that future operations will generate sufficient
taxable income to realize the existing net temporary differences. As a
result, the Corporation has not recorded any valuation allowances against its
deferred tax assets.
As a result of tax benefits of approximately $1.1 and $7.7 million to
be realized from the discontinued operations sold in 1995 and 1994,
respectively, certain reclassifications were made between current and
deferred income taxes and net assets of discontinued operations. Other
current assets on the balance sheet include current income taxes receivable
of $3,527,000 at December 31, 1994 due to the reclassifications.
In 1995, 1994 and 1993 the Corporation's restated effective tax rates
were 38.3%, 37.0% and 68.9%, respectively, of income from continuing
operations before income taxes. An analysis of the differences between these
rates and the US federal statutory income tax rate is as follows:
1995 1994 1993
Computed income taxes at statutory
rate $ 4,287,000 $ 3,910,000 $ 893,000
State and local taxes, net of
federal tax benefit 205,000 310,000 63,000
Write-off of goodwill -- -- 865,000
Dividend income 193,000 185,000 160,000
Amortization of goodwill 9,000 43,000 55,000
Foreign income taxed at different
rates 318,000 (368,000) (4,000)
Tax credits (281,000) (242,000) (175,000)
Other, net 95,000 417,000 (48,000)
Provision for income taxes $ 4,826,000 $ 4,255,000 $ 1,809,000
Audits of the federal income tax returns of the Corporation and its
subsidiaries have been completed through 1992.
Provision has not been made for US income taxes on approximately $3.2
million of undistributed earnings of international subsidiaries. These
earnings could become subject to additional tax if they were remitted as
dividends or if the Corporation should sell its stock in the subsidiaries.
It is not practicable to estimate the amount of additional tax that might be
payable on the foreign earnings; however, the Corporation believes that US
foreign tax credits would largely eliminate any US income tax incurred.
(6) Accrued Expenses
Accrued expenses consisted of the following as of December 31, 1995 and
1994, respectively:
1995 1994
Salaries and wages $ 2,312,000 $ 2,521,000
Income taxes 360,000 315,000
Insurance 2,026,000 2,165,000
Litigation 1,942,000 2,163,000
Other accrued expenses 5,125,000 4,017,000
Total accrued expenses $11,765,000 $11,181,000
(7) Long-Term Debt
Long-term debt consists of the following as of December 31:
1995 1994
Revolving Credit Notes....... $18,099,000 $23,553,000
Equipment Loans.............. 290,000 464,000
Industrial Revenue Bonds..... 3,000,000 3,000,000
Other........................ 33,000 48,000
21,422,000 27,065,000
Less Current Maturities..... 186,000 201,000
Total..................... $21,236,000 $26,864,000
The Corporation has a credit agreement ("Credit Agreement") with a
consortium of four banks which provides a secured, reducing revolving
credit facility for maximum loan commitment at December 31, 1995 of $39
million and a letter of credit facility of at least $10 million,
although the letter of credit facility may be increased up to $20
million with a corresponding decrease in the revolving credit facility.
At December 31, 1995, $18.1 million of revolving credit was
outstanding and payable in installments from 1996 to 1999. In addition,
$8.5 million of irrevocable standby letters of credit were outstanding
under the Credit Agreement, which are not reflected in the accompanying
consolidated financial statements. Approximately $5.2 million of the
letters of credit guarantee various trade and insurance activities. An
outstanding $3.3 million letter of credit supports the Industrial
Revenue Bonds. Interest rates vary on the revolving credit and are set
at the time of borrowing in relationship to one of several reference
rates, as selected by the Corporation at the time of the borrowing.
Interest rates on the revolving credit outstanding at December 31, 1995,
were 6.5% on US borrowings and ranged from 4.8% to 6.0% on European
borrowings. A commitment fee is paid on the unused portion of the total
credit.
Substantially all of the assets of the Corporation and its US
subsidiaries are pledged as collateral under the Credit Agreement, which
expires on August 31, 1999.
The Credit Agreement contains covenants which require the Corporation to
meet minimum interest coverage ratios and which limit the ratio of total
liabilities to stockholders' investment as defined in the Credit
Agreement. In addition, minimum levels of stockholders' investment must
be maintained. The Credit Agreement also places certain restrictions on
the declaration of dividends and repurchases of the Corporation's stock.
At December 31, 1995, future declarations of dividends and repurchases
of Bairnco's stock, were limited to $2,247,000 plus 30% of future
consolidated quarterly net earnings of the Corporation. In addition, the
Credit Agreement contains a separate provision which allows the
Corporation to repurchase up to an additional $5,000,000 of its stock.
At December 31, 1995, future repurchases of the Corporation's stock were
limited to $2,420,000 under this provision. At December 31, 1995 the
Corporation was in compliance with all covenants contained in the Credit
Agreement.
The Corporation has equipment loans, mortgages and other debt outstanding
at rates of 5.6% to 7.7% due in 1996 through 1998.
The annual maturity requirements for amounts due after December 31, 1995,
are summarized as follows:
Year Ended December 31,
1996 $ 186,000
1997 126,000
1998 11,000
1999 18,099,000
2000 --
Due after December 31, 2000 3,000,000
Total Long-Term Debt $21,422,000
(8) Stock Options
The Corporation has a stock incentive plan which was established in 1990
("1990 Plan"). The 1990 Plan permits the grant of options to purchase not
more than 2,500,000 shares of common stock. The 1990 Plan provides for the
grant of non-qualified options and options qualifying as incentive stock
options under the Internal Revenue Code to key employees and each outside
Director of the Corporation at an option price equal to the fair market
value on the date of grant. Non-qualified stock options may also be
granted at book value. The term of each option may not exceed 10 years
from the date the option becomes exercisable (or, in the case of an
incentive stock option, 10 years from the date of grant).
A senior executive of the Corporation presently holds performance based,
non-qualified stock options granted under the 1990 Plan to purchase a total
of 250,000 shares of common stock at option prices equal to the fair market
value or book value on the date of grant. These performance options become
exercisable in equal installments if levels of $.70, $.75 and $.80 of net
income per share are attained by the Corporation during calendar years up
through 1995 (with only one installment becoming exercisable for a given
year) or, become fully exercisable on the tenth anniversary of the date of
grant if the executive is still employed by the Corporation. On January
28, 1993, 83,333 of these options became exercisable as a result of the
Corporation's earnings performance for 1992. On January 25, 1996, an
additional 83,333 of these options became exercisable as a result of the
Corporation's earnings performance for 1995. These options remain
exercisable for ten years from the date they first become exercisable.
Changes in the stock options granted under the 1990 Plan during 1995 and
1994 were as follows:
1995 1994
Outstanding options between $3.375 and
$8.25, beginning of year 982,150 1,086,287
Options granted between $4.00 and
$5.875 per share 21,600 32,500
Options canceled between $3.375 and
$7.75 per share (176,425) (136,637)
Options exercised between $3.375 and
$5.25 per share (110,375) --
Outstanding options between $3.375
and $8.25 per share, end of year 716,950 982,150
Exercisable options between $3.375 and
$8.25 per share, end of year 506,917 666,397
At December 31, 1995 and 1994, 1,556,200 and 1,401,375 shares,
respectively, were available for option grants under the 1990 Plan. There
were no charges to income in connection with stock option activity during
the years presented.
(9) Pension Plans
The Corporation has several pension plans which cover substantially all of
its employees. The benefits paid under these plans generally are based on
employees' years of service and compensation during the last years of
employment. Annual contributions made to the US plans are determined in
compliance with the minimum funding requirements of ERISA using a different
actuarial cost method and actuarial assumptions than are used for
determining pension expense for financial reporting purposes. Plan assets
consist primarily of publicly traded equity and debt securities. The
Corporation maintains unfunded supplemental plans in the United States to
provide retirement benefits in excess of levels provided under the
Corporation's other plans. The Corporation's foreign subsidiaries provide
retirement benefits for employees consistent with local practices. The
foreign plans are not significant in the aggregate and therefore are not
included in the following disclosures.
The following table describes the funded status of US pension plans.
Overfunded plans are those in which the amount provided for future benefits
(fair value of plan assets) exceeds the accumulated benefit obligation
(actuarial present value of benefits earned to date based on present pay
levels).
1995 1994
Overfunded Underfunded Overfunded Underfunded
Actuarial present value of
benefit obligation:
Vested $(18,137,000) $(2,409,000) $(15,580,000) $(2,190,000)
Non-vested (427,000) (66,000) (430,000) (43,000)
Accumulated benefit
obligation (18,564,000) (2,475,000) (16,010,000) (2,233,000)
Additional amounts related
to projected pay increases (2,670,000) (69,000) (2,224,000) (57,000)
Projected benefit obligation (21,234,000) (2,544,000) (18,234,000) (2,290,000)
Plan assets at fair value 20,172,000 1,587,000 17,841,000 1,338,000
Projected benefit obligation
in excess of plan assets (1,062,000) (957,000) (393,000) (952,000)
Unrecognized net transition
obligation 334,000 330,000 491,000 369,000
Unrecognized prior service
cost (61,000) 116,000 (4,000) 139,000
Unrecognized net loss 2,514,000 307,000 1,956,000 262,000
Adjustment to recognize
minimum liability -- (685,000) -- (713,000)
Prepaid (accrued) pension
cost recognized in balance
sheet at September 30 1,725,000 (889,000) 2,050,000 (895,000)
Fourth quarter accruals (225,000) (48,000) (147,000) (51,000)
Fourth quarter contributions 169,000 44,000 179,000 42,000
Effect of curtailment (36,000) -- (136,000) --
Prepaid (accrued) pension
costs at December 31 $ 1,633,000 $ (893,000) $ 1,946,000 $ (904,000)
The discount rate used in determining the actuarial present value of the
projected benefit obligations in the table above was 7.5% at September 30,
1995 and 8% at September 30, 1994. The rate of projected pay increases,
where applicable, was 5% at both September 30, 1995 and 1994. The expected
long-term rate of return on retirement plan assets was 9% at both September
30, 1995 and 1994.
Net periodic pension cost for the US plans included the following:
1995 1994 1993
Service cost-benefits earned
during the year $ 858,000 $ 915,000 $ 962,000
Interest cost on projected
benefit obligation 1,646,000 1,493,000 1,405,000
Return on plan assets:
Expected return-(gain) (1,666,000) (1,803,000) (1,661,000)
Asset gain (loss) 2,879,000 (2,774,000) 242,000
Actual return-(gain) loss (4,545,000) 971,000 (1,903,000)
Net amortization and deferral 3,135,000 (2,584,000) 471,000
Net periodic pension cost $ 1,094,000 $ 795,000 $ 935,000
(10) Business Segment Data
The Corporation operates two distinct businesses: Arlon - Engineered
Materials and Components' segment; and, Kasco - Replacement Products and
Services' segment. Information about the Corporation's major lines of
business for the years ended December 31, 1995, 1994 and 1993 is as follows:
Segment Depreciation
Operating Capital and
Net Sales Profit(Loss) Assets <F1> Expenditures Amortization
1995
Arlon $ 99,391,000 $ 15,389,000 $ 55,108,000 $ 1,999,000 $ 3,274,000
Kasco 51,116,000 2,889,000 38,690,000 2,805,000 2,975,000
Corporate -- (3,645,000) 4,398,000 27,000 65,000
Total $150,507,000 $ 14,633,000 $ 98,196,000 $ 4,831,000 $ 6,314,000
1994
Arlon $ 92,214,000 $ 15,712,000 $ 50,234,000 $ 2,084,000 $ 3,562,000
Kasco 53,308,000 2,197,000 39,317,000 3,083,000 2,874,000
Corporate -- (4,255,000) 9,692,000 9,000 66,000
Total $145,522,000 $ 13,654,000 $ 99,243,000 $ 5,176,000 $ 6,502,000
1993
Arlon $ 82,397,000 $ 12,884,000 $ 48,870,000 $ 2,673,000 $ 3,523,000
Kasco:
Operations 52,561,000 5,625,000 40,205,000 3,617,000 3,096,000
Restructuring -- (5,743,000) -- -- --
52,561,000 (118,000) 40,205,000 3,617,000 3,096,000
Corporate -- (7,892,000)<F2> 6,472,000 28,000 81,000
Total $134,958,000 $ 4,874,000 $ 95,547,000 $ 6,318,000 $ 6,700,000
<FN>
<F1> Excludes net assets of discontinued operations of $3,529,000 and
$12,434,000 for 1994 and 1993, respectively.
<F2> Includes $3.0 million provision for anticipated litigation costs -
See Note 2 to Consolidated Financial Statements.
</FN>
The Corporation has operations in Canada and several European countries.
Information about the Corporation's operations by geographical area for
the years ended December 31, 1995, 1994 and 1993 is as follows:
Segment
Operating
Net Sales Profit(Loss) Assets <F1>
1995
United States $122,510,000 $ 12,797,000 $ 77,917,000
Foreign 27,997,000 1,836,000 20,279,000
Total $150,507,000 $ 14,633,000 $ 98,196,000
1994
United States $119,045,000 $ 12,754,000 $ 80,579,000
Foreign 26,477,000 900,000 18,664,000
Total $145,522,000 $ 13,654,000 $ 99,243,000
1993
United States $108,132,000 $ 7,475,000 <F2> $ 76,165,000
Foreign 26,826,000 (2,601,000)<F3> 19,382,000
Total $134,958,000 $ 4,874,000 $ 95,547,000
<FN>
<F1> Excludes net assets of discontinued operations of $3,529,000 and
$12,434,000 for 1994 and 1993, respectively.
<F2> After $4,736,000 of restructuring and litigation costs - see Note 2
to Consolidated Financial Statements.
<F3> After $4,007,000 of restructuring costs - see Note 2 to Consolidated
Financial Statements.
</FN>
(11) Contingencies
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 were consolidated in the United States District Court for the
Southern District of New York, were subsequently 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. On May 5, 1995, the Bankruptcy Court overseeing the reorganization
of Keene entered an order allowing the Creditors' Committee to assume from
Keene responsibility for the pursuit of claims arising out of the transfer
of assets for value by Keene to other subsidiaries of Bairnco and the spin-
offs of certain subsidiaries, including Keene, by Bairnco. On June 8,
1995, the Creditors' Committee commenced an adversary proceeding in the
Bankruptcy Court against Bairnco and others alleging that the transfers of
assets by Keene were fraudulent and otherwise violative of law and seeking
compensatory damages of $700 million, plus interest and punitive damages.
Bairnco and other defendants have sought to have the proceeding removed to
the United States District Court for the Southern District of New York to
the judge before whom the class actions described above are pending. Their
application for such transfer is pending. Bairnco and other defendants in
the adversary proceeding have reached an agreement in principle with
respect to the transfer of the adversary proceeding to the District Court
(following the confirmation of Keene's plan of reorganization). The
agreement is, however, subject to final documentation and requires the
approval of the Bankruptcy Court before it can become effective. In the
meantime, no answers or responsive pleadings have been filed in the
adversary proceeding, and all proceedings have been stayed.
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 a separate action brought by Keene in the United States
Bankruptcy Court for the Southern District of New York in which Keene
seeks the exclusive benefit of tax refunds attributable to the carryback by
Keene of certain net operating losses, notwithstanding certain provisions
of tax sharing agreements between Keene and Bairnco. (After filing this
action, Keene ceded control of the action to the Creditors' Committee.)
Pending resolution of the dispute by the Bankruptcy Court, any refunds
actually received are to be placed in escrow. Through December 31, 1995,
approximately $12.1 million of refunds had been received and placed in
escrow. Subsequent to yearend, an additional $16.4 million of refunds were
received and placed in escrow. There can be no assurance whatsoever 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 December 31, 1995.
CORPORATE INFORMATION
Corporate Office
Suite 300, 2251 Lucien Way
Maitland, Florida, 32751
407-875-2222
Principal Facilities
Bear, Delaware
City of Industry, California
East Providence, Rhode Island
Rancho Cucamonga, California
St. Louis, Missouri
Santa Ana, California
Vancouver, B.C., Canada
Toronto, Ontario, Canada
Antwerp, Belgium
Gwent, Wales, United Kingdom
Paris, France
Pansdorf, Germany
Transfer Agent and Registrar
Trust Company Bank
P.O. Box 4625
Atlanta, Georgia 30302
404-588-7815
Independent Certified Public Accountants
Arthur Andersen LLP
200 South Orange Avenue, Suite 2100
Orlando, Florida, 32801
407-841-4601
Stock Listing
Bairnco common stock is listed on the New York Stock Exchange.
Symbol - BZ.
Annual Meeting
The annual stockholders meeting will be held at the Sheraton Orlando North,
600 North Lake Destiny Road,
Maitland, Florida, 32751,
on April 19, 1996 at 9:00 a.m.
Form 10-K
Stockholders may obtain without charge a copy of Bairnco's Form 10-K filed
with the Securities and Exchange Commission by writing to Investor
Relations at the Corporate Office address.
Investor Relations Information
Contact Investor Relations at Bairnco's Corporate Office.
BAIRNCO CORPORATION
Suite 300, 2251 Lucien Way
Maitland, Florida 32751
407-875-2222
FAX 407-875-3398