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 1, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8120
BAIRNCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3057520
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2251 Lucien Way, Suite 300, Maitland, FL 32751
(Address of principal executive offices) (Zip Code)
(407) 875-2222
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each issuer's classes of
common stock, as of the latest practicable date.
10,500,259 shares of Common Stock Outstanding as of July 28, 1995.
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED JULY 1, 1995 AND JULY 2, 1994
(Unaudited)
1995 1994
Net sales $ 38,309,000 $ 36,977,000
Cost of sales 24,462,000 23,311,000
Gross profit 13,847,000 13,666,000
Selling and administrative
expenses 9,980,000 9,964,000
Operating profit 3,867,000 3,702,000
Interest expense, net 527,000 536,000
Income before income taxes 3,340,000 3,166,000
Provision for income taxes 1,269,000 1,266,000
Net Income $ 2,071,000 $ 1,900,000
Primary and fully diluted earnings
per share of common stock
(Note 3) $ 0.20 $ 0.18
Dividends per share of common stock $ 0.05 $ 0.05
The accompanying notes are an integral part of these financial
statements.
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JULY 1, 1995 AND JULY 2, 1994
(Unaudited)
1995 1994
Net sales $ 76,832,000 $ 72,653,000
Cost of sales 49,256,000 45,381,000
Gross profit 27,576,000 27,272,000
Selling and administrative
expenses 20,112,000 20,235,000
Operating profit 7,464,000 7,037,000
Interest expense, net 1,074,000 1,037,000
Income before income taxes 6,390,000 6,000,000
Provision for income taxes 2,428,000 2,400,000
Net Income $ 3,962,000 $ 3,600,000
Primary and fully diluted earnings
per share of common stock
(Note 3) $ 0.38 $ 0.34
Dividends per share of common stock $ 0.10 $ 0.10
The accompanying notes are an integral part of these financial
statements.
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JULY 1, 1995 AND DECEMBER 31, 1994
(Unaudited)
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $ 527,000 $ 1,478,000
Accounts receivable, less
allowances of $1,019,000 and
$1,097,000, respectively 24,189,000 20,885,000
Inventories (Note 4) 24,124,000 20,042,000
Deferred income taxes 4,941,000 4,941,000
Other current assets 1,642,000 4,785,000
Total current assets 55,423,000 52,131,000
Plant and equipment, at cost 77,538,000 76,664,000
Less - Accumulated depreciation and
amortization (41,937,000) (40,375,000)
Plant and equipment, net 35,601,000 36,289,000
Cost in excess of net assets of
purchased businesses 8,275,000 8,201,000
Other assets 2,542,000 2,622,000
Net assets of discontinued
operations (Note 2) 3,459,000 3,529,000
$105,300,000 $102,772,000
LIABILITIES & STOCKHOLDERS' INVESTMENT
Current Liabilities:
Short-term debt $ 6,938,000 $ 4,710,000
Current maturities of long-term
debt 189,000 201,000
Accounts payable 10,354,000 9,762,000
Accrued expenses (Note 5) 13,085,000 11,181,000
Total current liabilities 30,566,000 25,854,000
Long-term debt 21,032,000 26,864,000
Deferred income taxes 3,759,000 3,743,000
Other liabilities 2,528,000 2,314,000
Stockholders' Investment:
Preferred stock, par value $.01,
5,000,000 shares authorized,
none issued -- --
Common stock, par value $.01,
30,000,000 shares authorized,
10,952,124 issued 109,000 109,000
Paid-in capital 50,430,000 49,922,000
Retained earnings 6,676,000 3,766,000
Treasury stock, at cost, 451,865
shares (9,800,000) (9,800,000)
Total stockholders'
investment 47,415,000 43,997,000
$105,300,000 $102,772,000
The accompanying notes are an integral part of these financial
statements.
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 1, 1995 AND JULY 2, 1994
(Unaudited)
1995 1994
Cash Flows from Operating Activities:
Net income $ 3,962,000 $ 3,600,000
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 3,421,000 3,364,000
Deferred income taxes 16,000 (183,000)
Changes in current assets and
liabilities:
(Increase) in accounts receivable (3,304,000) (2,308,000)
(Increase) in inventories (4,082,000) (654,000)
Decrease in other current assets 3,143,000 1,241,000
Increase in accounts payable 592,000 1,279,000
Increase in accrued expenses 1,904,000 868,000
Increase (decrease) in other
liabilities 214,000 (9,000)
Translation adjustment and other,
net 808,000 915,000
Net cash provided by
operating activities 6,674,000 8,113,000
Cash Flows from Investing Activities:
Capital expenditures (2,784,000) (2,365,000)
Funds provided by (used in)
discontinued operations 70,000 (813,000)
Net cash (used in)
investing activities (2,714,000) (3,178,000)
Cash Flows from Financing Activities:
Net repayments of external debt (3,861,000) (3,801,000)
Payment of dividends (1,050,000) (1,050,000)
Net cash (used in) financing
activities (4,911,000) (4,851,000)
Net (decrease) increase in cash and
cash equivalents (951,000) 84,000
Cash and cash equivalents,
beginning of period 1,478,000 1,383,000
Cash and cash equivalents,
end of period $ 527,000 $ 1,467,000
The accompanying notes are an integral part of these financial
statements.
BAIRNCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 1, 1995
(Unaudited)
(1) Basis of Presentation
The accompanying consolidated financial statements include the
accounts of Bairnco Corporation and its subsidiaries (Bairnco or the
Corporation) after the elimination of all material intercompany
accounts and transactions.
The unaudited financial information included herein reflects all
adjustments of a normal recurring nature which the Corporation's
management considers necessary for a fair summarized presentation of
the consolidated financial statements included in this Form 10-Q
filing. The consolidated results of operations for the quarter and
six months ended July 1, 1995, are not necessarily indicative of the
results of operations for the full year.
(2) Discontinued Operations
As discussed in Note 3 to Bairnco's 1994 Audited Consolidated
Financial Statements, the Corporation adopted a restructuring plan as
of December 31, 1993 which included a formal plan of divestiture
relating to the businesses that comprised Bairnco's Specialty
Construction Products segment and secure communications electronics
operations. Accordingly, these businesses were classified as
discontinued operations for financial reporting purposes as of
December 31, 1993.
The smallest and last remaining operation of the Specialty
Construction business and the secure communications business remain
to be sold and continue to be reported as discontinued operations.
Net sales from the discontinued operations for the quarters ended
July 1, 1995 and July 2, 1994 were $2.4 million and $6.3 million,
respectively. Net sales from the discontinued operations for the six
months ended July 1, 1995 and July 2, 1994 were $5.5 million and
$11.6 million, respectively. The remaining discontinued operations
are expected to be disposed of during 1995.
(3) Earnings per Common Share
Earnings per common share are based on the weighted average
number of shares outstanding during the periods as follows:
Second Quarter First Six Months
1995 1994 1995 1994
Primary 10,500,000 10,500,000 10,500,000 10,500,000
Fully Diluted 10,500,000 10,500,000 10,500,000 10,500,000
Primary and fully diluted earnings per share include all common
stock equivalents. Statements showing the calculations of primary
and fully diluted earnings per share for the quarters ended July 1,
1995 and July 2, 1994, and for the six months ended July 1, 1995 and
July 2, 1994, are included as Exhibit 11.1 and Exhibit 11.2,
respectively, to this Quarterly Report on Form 10-Q.
(4) Inventories
Inventories consisted of the following as of July 1, 1995 and
December 31, 1994:
1995 1994
Raw materials and supplies $ 4,845,000 $ 4,794,000
Work in process 5,827,000 4,767,000
Finished goods 13,452,000 10,481,000
Total inventories $ 24,124,000 $ 20,042,000
(5) Accrued Expenses
Accrued expenses consisted of the following as of July 1, 1995
and December 31, 1994:
1995 1994
Salaries and wages $ 1,946,000 $ 2,521,000
Income taxes 557,000 315,000
Insurance 1,892,000 2,165,000
Litigation 2,241,000 2,163,000
Other accrued expenses 6,449,000 4,017,000
Total accrued expenses $ 13,085,000 $ 11,181,000
(6) Contingencies
Bairnco Corporation and its subsidiaries are defendants in
certain legal actions which are discussed more fully in Part II, Item
1 ("Legal Proceedings") of this filing.
<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, 1994.
Bairnco Corporation is a diversified multinational company that
operates two distinct businesses under the names Arlon and Kasco.
Engineered materials and components are designed, manufactured
and sold under the Arlon brand to electronic, industrial and
commercial markets. These products are based on a common technology
in coating, laminating and dispersion chemistry. Arlon's principal
products include high technology materials for the printed circuit
board industry, cast and calendered vinyl film systems, custom
engineered laminates and pressure sensitive adhesive systems and
silicone rubber products used in a broad range of industrial,
consumer and commercial products.
Replacement products and services are manufactured and
distributed under the Kasco name principally to retail food stores
and meat, poultry and fish processing plants throughout the United
States, Canada and Europe. The principal products include
replacement band saw blades for cutting meat, fish, wood and metal,
and on site maintenance services for the retail food industry
primarily in the meat and deli departments. Kasco also distributes
equipment to the food industry in Canada and France. These products
are sold under a number of brand names including Kasco in the U.S.
and Canada, Atlantic Service in the United Kingdom and Bertram & Graf
and Biro in Europe.
Comparison of Second Quarter 1995 to Second Quarter 1994
Sales in the second quarter of 1995 were $38,309,000 a 3.6%
increase over sales of $36,977,000 in the second quarter of 1994.
Sales of Arlon engineered materials and components increased 7.7% due
to growing sales to the high end and microwave printed circuit board
markets. Sales of Kasco replacement products and services declined
3.6% as increases in the European businesses were more than offset by
the planned reduction in Kasco's North American service center
revenues.
Gross profit increased only 1.3% to $13,847,000 from $13,666,000.
The increase is attributable to improved sales which was offset by
profit margin declines in major product lines. The gross profit
margin as a percent of sales decreased from 37.0% in 1994 to 36.1% in
1995. As in the first quarter, the profit margin declines are due
primarily to the continuing decline in military related business
which is being replaced with lower margin commercial business and the
continuing change of mix in the Kasco products.
Selling and administrative expenses were essentially level but
declined as a percent of sales from 26.9% in 1994 to 26.1% in 1995.
Consistent with the Corporation's long term effort to improve its
selling and marketing efforts, sales expense increased slightly while
administrative expenses were again reduced.
Interest expense decreased slightly to $527,000 from $536,000
last year. The decrease in interest expense was due to a reduction
in average indebtedness outstanding in the second quarter of 1995 of
approximately $10,000,000 from the second quarter of last year, which
was substantially offset by increased short term interest rates.
The effective tax rate for the second quarter of 1995 was 38% as
compared to 40% in 1994. The provision for income taxes in both
periods includes all applicable federal, state, local and foreign
income taxes.
Net income increased 9% to $2,071,000, or $0.20 per share, from
$1,900,000, or $0.18 per share.
Comparison of First Six Months 1995 to First Six Months 1994
Sales for the first six months of 1995 were $76,832,000, an
increase of 5.8%, as compared with $72,653,000 in 1994. Net income
increased 10% to $3,961,000, or $0.38 per share, from $3,600,000, or
$0.34 per share.
The effective tax rate for the first half of 1995 was 38% as
compared to 40% in 1994. The provision for income taxes in both
periods includes all applicable federal, state, local and foreign
income taxes.
Liquidity and Capital Resources
At July 1, 1995 Bairnco's total debt was $28,159,000 compared to
$31,775,000 at the end of 1994. At July 1, 1995 approximately $26.2
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 $1.8 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 will be
reduced by $3.0 million as of January 1, 1996. During the second
quarter total debt was reduced approximately $3,100,000 as the result
of tax refunds attributable to the previous restructuring and cash
from operations.
At July 1, 1995, Bairnco had working capital of $24.9 million
compared to $26.3 million at December 31, 1994. Inventories
increased $2,400,000 during the second quarter to meet anticipated
sales growth and to improve customer service. It is expected
inventories will be reduced during the third quarter.
Capital expenditures are currently running slightly under
depreciation and well below plan. The need for the major capacity
addition contemplated in the capital expenditures plan has been
shifted into next year as the result of a series of productivity
improvements. Depending on the timing of specific projects, it is
still expected that capital expenditures will exceed depreciation for
the full year.
Cash provided by operating activities plus the amounts available
under the existing credit facilities are expected to be sufficient to
fulfill Bairnco's anticipated cash requirements in 1995.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Since its announcement in January 1990 of its intention to spin
off Keene, Bairnco has been named as a defendant in a number of
individual personal injury and wrongful death cases in which it is
alleged that Bairnco is derivatively liable for the asbestos-related
claims against Keene. In 1993, Bairnco and certain of its present
and former officers and directors were also named as defendants in
two purported class actions in which the same types of claims were
made. Both of these purported class actions, which 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 spinoffs 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. No answers or
responsive pleadings have yet been filed in the adversary proceeding,
and it has been stayed by the Bankruptcy Court through October 2,
1995.
Management believes that Bairnco has meritorious defenses to all
claims or liability purportedly derived from Keene and that it is not
liable, as an alter ego, successor, fraudulent transferee or
otherwise, for the asbestos-related claims against Keene or with
respect to Keene products.
Bairnco is party to 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. Keene alleges that the
refunds in question could total approximately $30 million. There can
be no assurance whatsoever that refunds in such amount will be
payable or that resolution of the dispute with Keene will result in
the release of any portion of the refunds to Bairnco.
Bairnco Corporation and its subsidiaries are defendants in a
number of other actions. Management of Bairnco believes that the
disposition of these other actions, as well as the actions and
proceedings described above, will not have a material adverse effect
on the consolidated results of operations or the financial position
of Bairnco Corporation and its subsidiaries as of July 1, 1995.
Item 2. OTHER INFORMATION
None.
Item 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 4. EXHIBITS
Exhibit 11.1: Calculation of Primary and Fully Diluted Earnings
per Share for the Quarters ended July 1, 1995 and July 2, 1994.
Exhibit 11.2: Calculation of Primary and Fully Diluted Earnings
per Share for the Six Months ended July 1, 1995 and July 2, 1994.
Exhibit 27: Financial Data Schedules for the Quarter and Six Months
ended July 1, 1995.
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 9, 1995
Exhibit 11.1
BAIRNCO CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
FOR THE QUARTERS ENDED JULY 1, 1995 AND JULY 2, 1994
(Unaudited)
1995 1994
PRIMARY EARNINGS PER SHARE:
Net income $ 2,071,000 $ 1,900,000
Average common shares outstanding 10,500,000 10,500,000
Common shares issuable in respect
to common stock equivalents,
with a dilutive effect -- --
Total common and common
equivalent shares 10,500,000 10,500,000
Primary Earnings Per Common Share $ 0.20 $ 0.18
FULLY DILUTED EARNINGS PER SHARE:
Net income $ 2,071,000 $ 1,900,000
Total common and common
equivalent shares 10,500,000 10,500,000
Additional common shares assuming
full dilution -- --
Total common shares assuming
full dilution 10,500,000 10,500,000
Fully Diluted Earnings Per
Common Share $ 0.20 $ 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.
Exhibit 11.2
BAIRNCO CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
FOR THE SIX MONTHS ENDED JULY 1, 1995 AND JULY 2, 1994
(Unaudited)
1995 1994
PRIMARY EARNINGS PER SHARE:
Net income $ 3,962,000 $ 3,600,000
Average common shares outstanding 10,500,000 10,500,000
Common shares issuable in respect
to common stock equivalents,
with a dilutive effect -- --
Total common and common
equivalent shares 10,500,000 10,500,000
Primary Earnings Per Common Share $ 0.38 $ 0.34
FULLY DILUTED EARNINGS PER SHARE:
Net income $ 3,962,000 $ 3,600,000
Total common and common
equivalent shares 10,500,000 10,500,000
Additional common shares assuming
full dilution -- --
Total common shares assuming
full dilution 10,500,000 10,500,000
Fully Diluted Earnings Per
Common Share $ 0.38 $ 0.34
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> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BAIRNCO'S
SECOND QUARTER 1995 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> JUL-01-1995 JUL-01-1995
<CASH> 527,000 527,000
<SECURITIES> 0 0
<RECEIVABLES> 25,208,000 25,208,000
<ALLOWANCES> 1,019,000 1,019,000
<INVENTORY> 24,124,000 24,124,000
<CURRENT-ASSETS> 55,423,000 55,423,000
<PP&E> 77,538,000 77,538,000
<DEPRECIATION> 41,937,000 41,937,000
<TOTAL-ASSETS> 105,300,000 105,300,000
<CURRENT-LIABILITIES> 30,566,000 30,566,000
<BONDS> 21,032,000 21,032,000
<COMMON> 109,000 109,000
0 0
0 0
<OTHER-SE> 47,306,000 47,306,000
<TOTAL-LIABILITY-AND-EQUITY> 105,300,000 105,300,000
<SALES> 38,309,000 76,832,000
<TOTAL-REVENUES> 38,309,000 76,832,000
<CGS> 24,462,000 49,256,000
<TOTAL-COSTS> 24,462,000 49,256,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 527,000 1,074,000
<INCOME-PRETAX> 3,340,000 6,390,000
<INCOME-TAX> 1,269,000 2,428,000
<INCOME-CONTINUING> 2,071,000 3,962,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,071,000 3,962,000
<EPS-PRIMARY> 0.20 0.38
<EPS-DILUTED> 0.20 0.38
</TABLE>
