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 July 2, 1994
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 July 29, 1994.
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED JULY 2, 1994 AND JULY 3, 1993
(Unaudited)
<CAPTION>
1994 1993 <F1>
<S> <C> <C>
Net sales $ 36,977,000 $ 35,336,000
Cost of sales 23,311,000 21,063,000
Gross profit 13,666,000 14,273,000
Selling and administrative expenses 9,964,000 9,920,000
Operating profit 3,702,000 4,353,000
Interest expense, net 536,000 575,000
Income before income taxes 3,166,000 3,778,000
Provision for income taxes 1,266,000 1,473,000
Income from continuing operations 1,900,000 2,305,000
(Loss) from discontinued operations,
net of tax -- (373,000)
Net income $ 1,900,000 $ 1,932,000
Primary and fully diluted earnings
per share of common stock (Note 3):
Continuing operations $ 0.18 $ 0.22
Discontinued operations -- (0.04)
Total $ 0.18 $ 0.18
Dividends per share of common stock $ 0.05 $ 0.05
<FN>
<F1> Restated for discontinued operations - see Note 2 to Consolidated
Financial Statements.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JULY 2, 1994 AND JULY 3, 1993
(Unaudited)
<CAPTION>
1994 1993 <F1>
<S> <C> <C>
Net sales $ 72,653,000 $ 68,368,000
Cost of sales 45,381,000 41,541,000
Gross profit 27,272,000 26,827,000
Selling and administrative expenses 20,235,000 19,570,000
Operating profit 7,037,000 7,257,000
Interest expense, net 1,037,000 1,164,000
Income before income taxes 6,000,000 6,093,000
Provision for income taxes 2,400,000 2,376,000
Income from continuing operations 3,600,000 3,717,000
(Loss) from discontinued operations,
net of tax -- (412,000)
Net income $ 3,600,000 $ 3,305,000
Primary and fully diluted earnings
per share of common stock (Note 3):
Continuing operations $ 0.34 $ 0.35
Discontinued operations -- (0.04)
Total $ 0.34 $ 0.31
Dividends per share of common stock $ 0.10 $ 0.10
<FN>
<F1> Restated for discontinued operations - see Note 2 to Consolidated
Financial Statements.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JULY 2, 1994 AND DECEMBER 31, 1993
(Unaudited)
<CAPTION>
1994 1993
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,467,000 $ 1,383,000
Accounts receivable, less allowances
of $905,000 and $844,000, respectively 21,240,000 18,932,000
Inventories:
Raw materials and supplies 4,200,000 3,173,000
Work in process 3,879,000 4,471,000
Finished goods 12,068,000 11,849,000
20,147,000 19,493,000
Deferred income taxes 3,567,000 3,495,000
Other current assets 915,000 2,156,000
Total current assets 47,336,000 45,459,000
Plant and equipment, at cost 77,771,000 76,418,000
Less - Accumulated depreciation and
amortization (40,323,000) (37,764,000)
Plant and equipment, net 37,448,000 38,654,000
Cost in excess of net assets of
purchased businesses 8,247,000 8,244,000
Other assets 2,831,000 3,190,000
Net assets of discontinued operations
(Note 2) 13,247,000 12,434,000
$109,109,000 $107,981,000
LIABILITIES & STOCKHOLDERS' INVESTMENT
Current Liabilities:
Short-term debt $ 5,967,000 $ 5,130,000
Current maturities of long-term debt 188,000 189,000
Accounts payable 8,642,000 7,363,000
Accrued expenses (Note 4) 13,547,000 12,679,000
Total current liabilities 28,344,000 25,361,000
Long-term debt 33,864,000 38,399,000
Deferred income taxes 3,121,000 3,232,000
Other liabilities 2,465,000 2,474,000
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 49,835,000 49,595,000
Retained earnings 1,171,000 (1,389,000)
Treasury stock, at cost, 451,865 shares (9,800,000) (9,800,000)
Total stockholders' investment 41,315,000 38,515,000
$109,109,000 $107,981,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 2, 1994 AND JULY 3, 1993
(Unaudited)
<CAPTION>
1994 1993 <F1>
<S> <C> <C>
Cash Flows from Operating Activities:
Income from continuing operations $ 3,600,000 $ 3,717,000
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 3,364,000 3,346,000
Deferred income taxes (183,000) (2,004,000)
Changes in current assets and
liabilities:
(Increase) in accounts receivable (2,308,000) (1,623,000)
(Increase) in inventories (654,000) (2,574,000)
Decrease (increase) in other
current assets 1,241,000 (51,000)
Increase (decrease) in accounts payable 1,279,000 (44,000)
Increase (decrease) in accrued expenses 868,000 (1,770,000)
(Decrease) increase in other
liabilities (9,000) 673,000
Translation adjustment and other, net 915,000 (558,000)
Net cash provided by (used in)
operating activities 8,113,000 (888,000)
Cash Flows from Investing Activities:
Capital expenditures (2,365,000) (3,844,000)
Funds (used in) provided by discontinued
operations (813,000) 3,559,000
Net cash (used in) investing
activities (3,178,000) (285,000)
Cash Flows from Financing Activities:
Net (repayments) borrowings of
external debt (3,801,000) 1,920,000
Exercise of stock options -- 20,000
Payment of dividends (1,050,000) (1,050,000)
Net cash (used in) provided by
financing activities (4,851,000) 890,000
Net increase (decrease) in cash and
cash equivalents 84,000 (283,000)
Cash and cash equivalents,
beginning of period 1,383,000 835,000
Cash and cash equivalents,
end of period $ 1,467,000 $ 552,000
<FN>
<F1> Restated for discontinued operations - see Note 2 to Consolidated
Financial Statements.
The accompanying notes are an integral part of these financial statements.
</TABLE>
BAIRNCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 2, 1994
(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 and six months ended July 2, 1994, are
not necessarily indicative of the results of operations for the full year.
(2) Discontinued Operations
As discussed in Note 3 to Bairnco's 1993 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 as of December 31, 1993 for financial
reporting purposes and the accompanying Consolidated Financial Statements
have been reclassified to report separately the net assets and operating
results of discontinued operations. The Letter of Intent with Lindgren RF
Enclosures, Inc., for the sale of Ray Proof Canada, Ltd., Ray Proof North
America and ray Proof Ltd., has been terminated, however, the sale of Ray
Proof Ltd. to Lindgren RF Enclosures, Inc. is expected to be completed in the
third quarter. The formal plan of divestiture related to the other
businesses comprising the discontinued operations is expected to be completed
during the remainder of 1994.
Net sales for the discontinued operations for the quarters ended July 2,
1994 and July 3, 1993 were $6.3 million and $6.1 million, respectively. Net
sales for the discontinued operations for the six months ended July 2, 1994
and July 3, 1993 were $11.6 million and $11.8 million, respectively.
(3) Earnings per Common Share
Earnings per common share are based on the weighted average number of
shares outstanding during the periods as follows:
Second Quarter First Six Months
1994 1993 1994 1993
Primary 10,500,000 10,536,000 10,500,000 10,663,000
Fully Diluted 10,500,000 10,556,000 10,500,000 10,674,000
Primary and fully diluted earnings per share include all common stock
equivalents. Statements showing the calculation of primary and fully diluted
earnings per share for the quarters ended July 2, 1994 and July 3, 1993, and
for the six months ended July 2, 1994 and July 3, 1993, are included as
Exhibit 11.1 and Exhibit 11.2, respectively, to this Quarterly Report on Form
10-Q.
(4) Accrued Expenses
Accrued expenses consisted of the following as of July 2, 1994 and
December 31, 1993:
1994 1993
Salaries and wages $ 1,695,000 $ 1,520,000
Income taxes 1,904,000 --
Insurance 1,900,000 2,346,000
Litigation 3,070,000 3,812,000
Other accrued expenses 4,978,000 5,001,000
Total accrued expenses $ 13,547,000 $ 12,679,000
(5) 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.
<PAGE>
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, 1993.
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, bakery 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 Second Quarter 1994 to Second Quarter 1993
Sales in the second quarter of 1994 were $36,977,000 a 4.6% increase over
sales of $35,336,000 in the second quarter of 1993. Sales of Arlon
engineered materials and components increased 8.7% due to strong sales to the
graphics market, which more than offset continued weak sales to the defense
related markets. Sales of Kasco replacement products and services declined
1.7% due to lower equipment distribution sales in Canada and the translation
impact of the weaker dollar in the second quarter of 1994 as compared to the
second quarter of 1993.
Gross profit decreased 4.3% to $13,666,000 from $14,273,000. The decline
in gross profit was attributable to lower gross profit margins as a percent
of sales which declined to 37.0% in 1994 from 40.4% in 1993. In the second
quarter of 1993, our operations had a very profitable mix of business due to
certain large high profit margin defense related programs. Additionally, the
gross profit margin of Kasco's replacement products and services has eroded
since last year as a result of the changing mix of business to a higher
percentage of sales related to repair services which continue to have very
low margins due to the high front end costs of the service center program
which has yet to achieve critical mass.
Selling and administrative expenses increased only 0.4% to $9,964,000
from $9,920,000. As a percent of sales, selling and administrative expenses
declined to 26.9% from 28.1%.
Interest expense decreased 6.8% to $536,000 from $575,000 last year. The
decrease in interest expense was due to a reduction in indebtedness of
approximately $7,500,000 from the second quarter of 1993, which was
substantially offset by increased short term interest rates.
The effective tax rate for the second quarter of 1994 was 40% as compared
to 39% in 1993. The provision for income taxes in both periods includes all
applicable federal, state, local and foreign income taxes.
Income from continuing operations was $1,900,000 or $0.18 per share,
which was a decrease of 17.6% from $2,305,000 or $0.22 per share in the
second quarter 1993.
Comparison of First Six Months 1994 to First Six Months 1993
Sales for the first six months of 1994 were $72,653,000, an increase of
6.3% as compared with $68,368,000 in 1993. The increase was due to higher
sales of Arlon's cast and calendered vinyl film systems for the graphics
market. Income from continuing operations decreased 3.1% to $3,600,000, or
$0.34 per share, from $3,717,000, or $0.35 per share. The decrease was due
to the reduction in second quarter gross profit and margins.
The effective tax rate for the first half of 1994 was 40% as compared to
39% in 1993. The provision for income taxes in both periods includes all
applicable federal, state, local and foreign income taxes.
Liquidity and Capital Resources
At July 2, 1994 Bairnco's total debt was $40,019,000 compared to
$43,718,000 at the end of 1993. At July 2, 1994 approximately $19.9 million
was available for borrowing under the Corporation's secured reducing
revolving credit agreement ("Credit Agreement") with a consortium of four
banks. In addition, approximately $2.3 million was available under various
short term domestic and foreign uncommitted credit facilities. Under the
terms of the Credit Agreement, the maximum amount available for borrowings
pursuant thereto will be reduced by $5,000,000 as of December 31, 1994. Cash
and cash equivalents are being maintained at minimum levels in order to
utilize all available cash to reduce outstanding debt.
Bairnco made approximately $2.4 million of capital expenditures during
the first half of 1994. Total capital expenditures for 1994 are expected to
be approximately $6.5 million.
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 1994.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On July 9, 1990, a consolidated class action complaint was filed in the
U.S. District Court for the Southern District of New York (superseding eight
complaints filed in April 1990) against Bairnco and certain of its current
and former officers and directors. A subsequently filed amended complaint
alleged violations of the federal securities laws concerning disclosure of
matters relating to asbestos personal injury and property damage claims
asserted against Keene (Bairnco's subsidiary until August 6, 1990) and sought
unspecified damages for losses purportedly incurred by persons who purchased
Bairnco common stock between March 13, 1989 and April 2, 1990. The
Corporation and the individual defendants denied the principal allegations of
the complaint and vigorously defended the action. After extensive discovery
and preparations for trial, the parties reached an agreement for the
settlement of the action on terms favorable to Bairnco in light of the
ongoing cost of defense, including trial. Following a hearing held on May
20, 1994, the Court approved the settlement as fair, reasonable and adequate
and entered judgment dismissing the action with prejudice. The settlement
included the resolution, without additional cost to Bairnco, of two purported
derivative actions arising out of the same circumstances as the class
actions.
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 has provided evidence and other information to
the Examiner. On July 18, 1994, the Examiner's preliminary report was filed
with the Bankruptcy Court under seal pending further order of the Court.
Management believes that Bairnco has meritorious defenses to all claims
of liability 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 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 financial position of Bairnco Corporation and its subsidiaries as of July
2, 1994.
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 May 20, 1994. Stockholders' ratified management's selection of
Arthur Andersen & Co. as auditors for Bairnco for the 1994 fiscal year and
elected all nominees to the Board of Directors.
Item 4. EXHIBITS
Exhibit 11.1: Calculation of Primary and Fully Diluted Earnings per
Share for the Quarters ended July 2, 1994 and July 3, 1993.
Exhibit 11.2: Calculation of Primary and Fully Diluted Earnings per
Share for the Six Months ended July 2, 1994 and July 3, 1993.
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: August 10, 1994
EXHIBITS
TO FORM 10-Q
FOR QUARTER ENDED
July 2, 1994
EXHIBIT 11.1
<TABLE>
BAIRNCO CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
FOR THE QUARTERS ENDED JULY 2, 1994 AND JULY 3, 1993
(Unaudited)
<CAPTION>
1994 1993
<S> <C> <C>
PRIMARY EARNINGS PER SHARE:
Income from continuing operations $ 1,900,000 $ 2,305,000
(Loss) from discontinued operations, net of
income taxes -- (373,000)
Net income $ 1,900,000 $ 1,932,000
Average common shares outstanding 10,500,000 10,500,000
Common shares issuable in respect to common
stock equivalents, with a dilutive effect -- 36,000
Total common and common equivalent shares 10,500,000 10,536,000
Primary Earnings Per Common Share:
Continuing operations $ 0.18 $ 0.22
Discontinued operations -- (0.04)
Total $ 0.18 $ 0.18
FULLY DILUTED EARNINGS PER SHARE:
Income from continuing operations $ 1,900,000 $ 2,305,000
(Loss) from discontinued operations, net of
income taxes -- (373,000)
Net income $ 1,900,000 $ 1,932,000
Total common and common equivalent shares 10,500,000 10,536,000
Additional common shares assuming
full dilution -- 20,000
Total common shares assuming full dilution 10,500,000 10,556,000
Fully Diluted Earnings Per Common Share:
Continuing operations $ 0.18 $ 0.22
Discontinued operations -- (0.04)
Total $ 0.18 $ 0.18
Earnings per share are based on the average number of shares
outstanding during each period. Primary earnings per share include all
common stock equivalents. Fully diluted earnings per share include all
common stock equivalents plus the additional common shares issuable
assuming full dilution.
</TABLE>
EXHIBIT 11.2
<TABLE>
BAIRNCO CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
FOR THE SIX MONTHS ENDED JULY 2, 1994 AND JULY 3, 1993
(Unaudited)
<CAPTION>
1994 1993
<S> <C> <C>
PRIMARY EARNINGS PER SHARE:
Income from continuing operations $ 3,600,000 $ 3,717,000
(Loss) from discontinued operations, net of
income taxes -- (412,000)
Net income $ 3,600,000 $ 3,305,000
Average common shares outstanding 10,500,000 10,499,000
Common shares issuable in respect to common
stock equivalents, with a dilutive effect -- 164,000
Total common and common equivalent shares 10,500,000 10,663,000
Primary Earnings Per Common Share:
Continuing operations $ 0.34 $ 0.35
Discontinued operations -- (0.04)
Total $ 0.34 $ 0.31
FULLY DILUTED EARNINGS PER SHARE:
Income from continuing operations $ 3,600,000 $ 3,717,000
(Loss) from discontinued operations, net of
income taxes -- (412,000)
Net income $ 3,600,000 $ 3,305,000
Total common and common equivalent shares 10,500,000 10,663,000
Additional common shares assuming
full dilution -- 11,000
Total common shares assuming full dilution 10,500,000 10,674,000
Fully Diluted Earnings Per Common Share:
Continuing operations $ 0.34 $ 0.35
Discontinued operations -- (0.04)
Total $ 0.34 $ 0.31
Earnings per share are based on the average number of shares
outstanding during each period. Primary earnings per share include all
common stock equivalents. Fully diluted earnings per share include all
common stock equivalents plus the additional common shares issuable
assuming full dilution.
</TABLE>
