UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-8120
BAIRNCO CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 13-3057520
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2251 Lucien Way, Maitland, Florida 32751
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 875-2222
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange on
Title of each class which registered
Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
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
On March 17, 1995, the aggregate market value of the Registrant's voting stock
held by non-affiliates was $43,919,523.
On March 17, 1995, there were 10,500,259 shares of Common Stock outstanding,
exclusive of treasury shares or shares held by subsidiaries of the Registrant.
Parts I, II and IV incorporate information by reference from the Annual Report
to Stockholders for the fiscal year ended December 31, 1994. Part III
incorporates information by reference from the Proxy Statement dated March 13,
1995 in connection with the Registrant's Annual Meeting of Stockholders to be
held on April 21, 1995.
PART I
Item 1. BUSINESS
a. Recent Developments and Description
Bairnco Corporation was incorporated under the laws of the
State of New York on April 9, 1981. Effective September 24, 1991,
Bairnco Corporation changed its state of incorporation from New
York to Delaware. Unless otherwise indicated herein, the terms
"Bairnco" and the "Corporation" refer to Bairnco Corporation and
its subsidiaries.
Effective December 31, 1993, Bairnco adopted a restructuring
plan, a major component of which was 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 are classified as
discontinued operations in the consolidated financial statements as
of, and for the years ended, December 31, 1994, 1993 and 1992, and
in other financial information accompanying this filing.
During 1994 the majority of the Specialty Construction
businesses were sold and plans are underway concerning the
disposition of the smallest and last remaining operation of the
Specialty Construction business. The secure communications
business was restructured during the year bringing the operation to
an acceptable level of profitability. Negotiations for this
operation have not yet resulted in an offer equal to the value that
management believes is inherent in the operation. The business
continues to be reported as a discontinued operation. These
remaining operations are expected to be disposed of during 1995.
As a result of the restructuring plan, Bairnco's focus is now
on its two remaining core businesses: Arlon's Engineered Components
and Materials, and KASCO's Replacement Products and Services.
At December 31, 1994, Bairnco's continuing operations employed
884 persons including 13 Headquarters personnel. Bairnco's
continuing operations occupy approximately 758,750 square feet of
factory and office space at its principal locations.
b. & c. Financial Information About Industry Segments
and Narrative Description of Business
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 identity to
electronic, industrial and commercial markets. 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.
Financial data and other information about the Corporation's
segments is set forth in Note 10 to the Consolidated Financial
Statements on pages 19 and 20 and on pages 4 through 7 of Bairnco's
1994 Annual Report to Stockholders which is incorporated herein by
reference. This information should be read in conjunction with the
"Financial History" set forth on page 9 of Bairnco's 1994 Annual
Report to Stockholders, and "Management's Discussion and Analysis"
set forth on pages 10 and 11 of Bairnco's 1994 Annual Report to
Stockholders, which is incorporated herein by reference.
The principal facilities utilized by each segment are detailed
on pages 9 and 10 under "Item 2. PROPERTIES" of this filing.
ENGINEERED MATERIALS AND COMPONENTS (ARLON)
Description of Business
Engineered materials and components are designed, manufactured
and sold to customers in electronic, industrial and commercial
markets under the Arlon brand name. These products are based on a
common technology in coating, laminating and dispersion chemistry.
Arlon's principal products include high technology circuit board
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.
Arlon circuit board materials (also referred to as substrates)
are grouped as follows: high performance and high temperature
materials used in the circuit boards of military electronics and
sophisticated commercial electronic applications such as in the
avionics of commercial airliners and in computerized control
systems; and, frequency dependent and low loss materials used for
circuit boards involved in microwave applications which include
digital cordless telephones, cellular phones, direct broadcast
satellite systems, global positioning satellite systems, other
personal communications equipment, and certain other emerging
opportunities involving wireless communication and data
transmission systems.
Arlon specialty graphic films include cast and calendered
vinyl films that are manufactured and marketed in a wide variety of
colors and with varying face stocks and adhesive systems for the
specialty graphics market which includes commercial sign
manufacturers, graphic printing houses, and numerous customers
involved in various commercial and governmental specification
applications.
Custom engineered laminates and adhesive systems are also
manufactured and marketed under the Arlon brand name and include
insulating foam tapes for thermopane windows, adhesive coated
copper for flexible circuitry, thermal insulation panels for
appliances and cars, security tags and labels, and durable printing
stock for high speed laser printing systems.
A line of silicone rubber products, used in a broad range of
consumer, industrial and commercial products, is also manufactured
and marketed under the Arlon brand name. Typical applications of
these products include silicone rubber for molding composites,
silicone rubber insulating tape for electric traction motor
windings, industrial flexible heaters and power utility insulator
applications.
Competition
Arlon has numerous competitors ranging in size from small,
sole proprietorships to units of very large, multinational
corporations that in certain instances have far greater market
positions and financial resources than the Corporations.
The principal method of competition for Arlon's products
varies by product line and type of customer. While competition for
established lines is usually based on one or more of lead time,
price, product performance, technical support and customer service,
it may also be based on the ability to service emerging
technologies through the custom design of new or redesign of
existing products and materials for the new applications related
thereto. For high technology materials sold to the printed circuit
board industry, the consistent technical performance of the
materials supplied to specified or minimum standards can be the
critical competitive element. In addition, Arlon sells a
significant portion of its circuit board materials into the
Japanese and European markets where local producers of similar
materials have a competitive advantage related to their geographic
location.
Distribution
Arlon products are marketed by company sales personnel,
outside sales representatives and distributors in the United
States, Canada, Europe and several other international markets.
Raw Materials and Purchased Parts
The essential raw materials used in Arlon engineered materials
and components are silicone rubber, fiberglass cloth, pigments,
steel and aluminum parts, copper foil, aluminum foil, polyethylene
foam and various plastic films, special papers and release liners,
vinyl resins, various adhesives and solvents, Teflontm or
polytetrafluoroethelene (PTFE) resin, polyimide resin, epoxy
resins, and various chemicals. Generally, these materials are each
available from several qualified suppliers. There are, however,
several raw materials used in Arlon's products that are purchased
from DuPont and are proprietary in nature. Other raw materials are
purchased from a single approved vendor on a "sole source" basis
although alternative sources could be developed in the future if
necessary. However, the qualification procedure can take up to
several months and could therefore interrupt production if the
primary raw material source was lost unexpectedly.
Due to the number and diversity of Arlon's products it is
unlikely that availability problems with any one raw material would
have a material adverse effect on Arlon. There are no known
limitations to the continued availability of Arlon's raw materials.
Current suppliers are located in the United States, Japan and
France.
Backlog
Order backlog for this segment was $7,833,000 as of December
31, 1994, $7,998,000 as of December 31, 1993 and $6,392,000 as of
December 31, 1992. The increase in 1993 was across all major
product lines. Substantially all of the backlog as of December 31,
1994 is scheduled for shipment in 1995.
Employees
As of December 31, 1994, approximately 438 employees were
employed by the operations comprising Arlon's engineered materials
and components.
Patents and Trademarks
The Corporation owns several registered trademarks under which
certain Arlon products are sold. The Corporation does not believe
that the loss of any or all of these trademarks would have a
material adverse effect on this segment.
REPLACEMENT PRODUCTS AND SERVICES (KASCO)
Description of Business
Replacement products and services are manufactured and
distributed by KASCO 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. KASCO's French and Canadian
operations also distribute equipment to the supermarket and food
processing industries in their respective markets.
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 distributes related supply products and
seasoning to food retailers and other customers.
KASCO also provides repair parts and service for a broad range
of supermarket equipment primarily in the meat and deli areas in
selected markets.
Replacement products and services 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.
Competition and Marketing
KASCO competes with several large and medium-sized national
and regional companies, as well as numerous small local companies.
The principal methods of competition are service, price and product
performance. The performance of meat band saw blades used in
cutting meat or other food items is balanced between minimizing
waste and maximizing the efficiency and productivity of the band
saw machine and operator or other cutting/processing equipment
being used. Significant investment in new grinding and other
manufacturing equipment was made in 1992 and 1993 to improve the
quality of KASCO's finished band saw blades.
Products and services are sold throughout the United States,
Canada and Europe by company sales and maintenance personnel who
make regularly scheduled calls on supermarkets, packers, butchers,
and processors. In the fourth quarter of 1994, the decision was
made to refocus the service center program back to several selected
market areas where KASCO can provide cost effective, value added
preventive maintenance and emergency service in confined
geographical markets. Eight service centers in North America were
closed. The service centers are designed to service both existing
and new customers in the supermarket industry in their respective
geographical areas with equipment maintenance and repair services
and with KASCO's high quality replacement band saw blades and
chopper plates and knives. A portion of replacement product sales
are also made through distributors.
Raw Materials and Purchased Supplies
High quality carbon steel is the principal raw material used
in the manufacture of band saw blades and is purchased from
multiple domestic and international suppliers. Tool steel is
utilized in manufacturing meat chopper plates and knives and is
purchased from qualified suppliers located in the United States,
Europe and Japan. Equipment, replacement parts and supplies are
purchased from a number of manufacturers and distributors, mostly
in the United States and Europe. In the Canadian and French
operations, certain specialty equipment and other items are
purchased and resold under exclusive distributorship agreements
with the equipment manufacturers. All of the raw materials and
purchased products utilized by this sector have been readily
available throughout this last year and it is anticipated that
adequate supplies will continue to be available throughout the
coming year.
Employees
As of December 31, 1994, approximately 433 persons were
employed in the replacement products and services segment.
Patents and Trademarks
The Corporation has a number of United States and foreign
mechanical patents related to several of the products manufactured
and sold by KASCO, as well as a number of design patents and
registered trademarks. The Corporation does not believe, however,
that the loss of any or all of those patents would have a material
adverse effect on this segment.
d. Foreign Operations
The Corporation has foreign operations located in Canada, the
United Kingdom, France, Germany and Belgium. Information on the
Corporation's operations by geographical area for the last three
fiscal years is set forth in Note 10 to the Consolidated Financial
Statements on page 19 of Bairnco's 1994 Annual Report to
Stockholders which is incorporated herein by reference.
In addition, export sales from the Corporation's U.S. based
operations for the years ended December 31, 1994, 1993 and 1992
were $21,093,000, $17,835,000 and $16,546,000, respectively.
Export sales to any particular country or geographic area accounted
for no more than 10% of consolidated sales during any of these
years.
Item 2. PROPERTIES
The following chart lists for the Corporation as a whole, and
by each of its segments, the principal locations of the
Corporation's facilities (excluding approximately 207,500 square
feet of leased space related to discontinued operations discussed
in Note 3 on page 16 of Bairnco's 1994 Annual Report to
Stockholders which is incorporated herein by reference) and
indicates whether the property is owned or leased and if leased,
the lease expiration date.
LEASED OR OWNED
LOCATION SQUARE FEET (LEASE EXPIRATION)
CORPORATION TOTAL 758,750
Headquarters
Maitland, FL 7,700 Leased(Expires 1995)
Replacement Products and Services (KASCO)
Calgary, Alberta, Canada 6,600 Leased(Expires 1998)
City of Industry, CA 15,000 Leased(Expires 1995)
Edmonton, Alberta, Canada 2,400 Leased(Expires 1996)
Gwent, Wales, U.K. 25,000 Leased(Expires 2005)
Lyon, France 11,000 Leased(Expires 1999)
Montreal, Quebec, Canada 9,300 Leased(Expires 1998)
Pansdorf, Germany 22,000 Owned
Paris, France 12,000 Leased(Expires 1996)
Rennes, France 4,000 Leased(Expires 1995)
Quebec City, Quebec, Canada 2,500 Leased(Expires 1997)
Scarborough, Ontario, Canada 32,000 Owned
St. Louis, MO 75,000 Owned
St. Louis, MO 50,000 Leased(Expires 1995)
Vancouver, B.C., Canada 10,000 Leased(Expires 1996)
Vancouver, B.C., Canada 4,250 Leased(Expires 1995)
Winnipeg, Manitoba, Canada 5,000 Leased(Expires 1997)
Field Warehouses
(Approximately 70 locations
in North America) 55,000 Leased
Engineered Materials and Components (Arlon)
Bear, DE 133,000 Owned
East Providence, RI 68,000 Owned
Merksem, Belgium 5,000 Leased(Expires 2002)
Rancho Cucamonga, CA 80,000 Owned
Santa Ana, CA 124,000 Leased(Expires 2003)
Item 3. LEGAL PROCEEDINGS
Since its announcement in January 1990 of its intentions to
spin off Keene, Bairnco has been named as a defendant in a number
of individual personal injury and wrongful death cases in which it
is alleged that Bairnco is derivatively liable for the asbestos-
related claims against Keene. In 1993 Bairnco and certain of its
present and former officers and directors were also named as
defendants in two purported class actions in which the same types
of claims were made. Both of these purported class actions, which
have been consolidated in the United States District Court for the
Southern District of New York, have been stayed by order of the
Bankruptcy Court for the Southern District of New York, as
described in the following paragraph.
On December 6, 1993, Keene filed for protection under Chapter
11 of the Bankruptcy Code. The filing and certain subsequent
proceedings led to a stay of the asbestos-related individual and
class actions referred to above. In an order entered on March 11,
1994, the Bankruptcy Court overseeing the reorganization of Keene
entered an order appointing an examiner (the "Examiner") to
evaluate and report to the Court whether there are any viable
claims arising out of the transfer of assets for value by Keene to
other subsidiaries of Bairnco or the spinoffs of certain
subsidiaries, including Keene, by Bairnco. Bairnco provided
evidence and other information to the Examiner. The Examiner's
preliminary report was released on October 3, 1994. Since that
time, the Court has held a number of hearings at which the
preliminary report has been discussed. The Court has not ruled on
whether the potential claims discussed in the report should be
prosecuted, and if so by whom or under what circumstances.
Management believes that Bairnco has meritorious defenses to
all claims or liability purportedly derived from Keene and that it
is not liable, as an alter ego, successor, fraudulent transferee or
otherwise, for the asbestos-related claims against Keene or with
respect to Keene products.
Bairnco is party to an action in the United States Bankruptcy
Court for the Southern District of New York brought by its former
subsidiary Keene Corporation, which presently is in Chapter 11, to
determine which of the two companies is entitled to receive the
benefit of tax refunds attributable to the carryback by Keene of
certain net operating losses. (After filing this action, Keene
ceded control of the action to the official committee of unsecured
creditors that previously was formed in the Chapter 11 proceeding.)
Pending resolution of the dispute by the Bankruptcy Court, any
refunds actually received are to be placed in escrow. Keene
alleges that the refunds in question could total approximately $30
million. There can be no assurance whatsoever that refunds in such
amount will be payable or that resolution of the dispute with Keene
will result in the release of any portion of the refunds to
Bairnco.
Bairnco Corporation and its subsidiaries are defendants in a
number of other actions. Management of Bairnco believes that the
disposition of these other actions, as well as the actions and
proceedings described above, will not have a material adverse
effect on the consolidated results of operations or the financial
position of Bairnco Corporation and its subsidiaries as of December
31, 1994.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during
the fourth quarter of 1994.<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Effective January 16, 1995, Duncan J. del Toro resigned as
President of Bairnco Corporation. It is the Corporation's intent
not to fill this position in the near future.
The information required with respect to executive officers of
the Corporation is as follows:
Name and Age of Data Pertaining to
Executive Officers Executive Officers
Luke E. Fichthorn III (53) Mr. Fichthorn has served as
Chairman of Bairnco since May
1990, and on December 18,
1991, became Chief Executive
Officer of Bairnco. For over
nineteen years, Mr. Fichthorn
has been a private investment
banker and partner of Twain
Associates, a private
investment banking and
consulting firm. Mr.
Fichthorn served as a director
of Keene Corporation, a former
subsidiary of Bairnco
Corporation from August, 1969
until May, 1981, and became a
director of Bairnco in
January, 1981. Mr. Fichthorn
is also a director of Florida
Rock Industries, Inc. and FRP
Properties, Inc., neither of
which is affiliated with
Bairnco.
J. Robert Wilkinson (60) Mr. Wilkinson was elected Vice
President - Finance and
Treasurer in March 1990. From
September 1986 to September
1989, Mr. Wilkinson was
Bairnco's Vice President -
Controller. From October 1989
to March 1990 he was Executive
Vice President of Shielding
Systems Corporation, a wholly-
owned subsidiary of Bairnco.
Prior to joining Bairnco, Mr.
Wilkinson served as Vice
President and Controller of
Transway International
Corporation from November 1981
to June 1986.
Name and Age of Data Pertaining to
Executive Officers Executive Officers
Barry M. Steinhart (42) Mr. Steinhart was elected Vice
President - Administration and
Secretary in March 1990. From
June of 1983 through July
1986, Mr. Steinhart served as
Division Personnel Manager and
Manager of Human Resources of
Lightolier, a wholly-owned
subsidiary of the Genlyte
Group which was a wholly-owned
subsidiary of Bairnco until
August 1988. From August 1986
through December 1988, Mr.
Steinhart served as Director
of Human Resources for Keene
Corporation, which was a
wholly-owned subsidiary of
Bairnco Corporation until
August, 1990. From January
1989 to February 1990, Mr.
Steinhart served as Bairnco's
Director of Human Resources.
Elmer G. Pruim III (32) Mr. Pruim was appointed
Controller of Bairnco
Corporation in August, 1994.
Mr. Pruim was previously an
Audit Manager with Arthur
Andersen LLP.
PART II
Item 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
a. & c. Data regarding market prices of Bairnco's common
stock is included in the "Quarterly Results of Operations" on page
11 of Bairnco's 1994 Annual Report to Stockholders which is
incorporated herein by reference. Bairnco's common stock is traded
on the New York Stock Exchange under the symbol BZ. Data on
dividends paid is included in the Consolidated Statements of Income
on page 12 of Bairnco's 1994 Annual Report to Stockholders which is
incorporated herein by reference. The quarterly cash dividend
remained constant at $0.05 per share during 1994. The Board
continues to review the dividend on a quarterly basis. Data on the
limitations of Bairnco's ability to pay dividends is included in
Note 7 to the Consolidated Financial Statements on page 18 of
Bairnco's 1994 Annual Report to Stockholders which is incorporated
herein by reference.
b. The approximate number of common equity security holders
is as follows:
Approximate Number
of Holders of Record
Title of Stock as of December 31, 1994
Common Stock, Par Value $.01 per share 2,198
Item 6. SELECTED FINANCIAL DATA
Reference is made to "Financial History" on page 9 of Bairnco's
1994 Annual Report to Stockholders, which is incorporated herein by
reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is made to the "Management's Discussion and Analysis"
on pages 10 and 11 of Bairnco's 1994 Annual Report to Stockholders
which is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Consolidated Financial Statements and
accompanying Notes included on pages 12 through 20 and the
"Quarterly Results of Operations" on page 11 of Bairnco's 1994
Annual Report to Stockholders which is incorporated herein by
reference. Financial Statement Schedules are included in Part IV
of this filing.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required with respect to directors of Bairnco
is included in the Proxy Statement for the 1995 Annual Meeting of
Stockholders of Bairnco, which has been filed with the Securities
and Exchange Commission and is incorporated herein by reference.
See the information regarding executive officers of the
Corporation which begins on page 13 of this Annual Report on Form
10-K.
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 is included in the Proxy
Statement for the 1995 Annual Meeting of Stockholders of Bairnco,
which has been filed with the Securities and Exchange Commission
and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is included in the Proxy
Statement for the 1995 Annual Meeting of Stockholders of Bairnco,
which has been filed with the Securities and Exchange Commission
and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is included in the Proxy
Statement for the 1995 Annual Meeting of Stockholders of Bairnco,
which has been filed with the Securities and Exchange Commission
and is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
a) 1. Financial Statements
Included in the 1994 Annual Report to Stockholders which is
included as Exhibit 13 to this Annual Report on Form 10-K:
- Report of Independent Certified Public Accountants;
- Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992;
- Consolidated Balance Sheets as of December 31, 1994
and 1993;
- Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992;
- Consolidated Statements of Stockholders' Investment for
the years ended December 31, 1994, 1993 and 1992;
- Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
Included in Part IV of this Annual Report on Form 10-K:
- Report of Independent Certified Public Accountants on
Financial Statement Schedules on page 21 of this
Annual Report on Form 10-K;
- Financial Statement Schedules for the years ended
December 31, 1994, 1993 and 1992:
Schedule II - Valuation and Qualifying Accounts on
page 22 of this Annual Report on Form 10-K;
All other schedules and notes specified under Regulation
S-K are omitted because they are either not applicable, not
required or the information called for therein appears in
the Consolidated Financial Statements or Notes thereto.
3. See Index to Exhibits on pages 24 through 28 of this
Annual Report on Form 10-K.
b) Reports on Form 8-K - None for fiscal year 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BAIRNCO CORPORATION
(Registrant)
Date: March 22, 1995 By: /s/ J. Robert Wilkinson
J. Robert Wilkinson
Vice President-Finance and
Treasurer
(Principal Financial Officer)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been executed below by the following persons
on behalf of the Registrant and in the capacities and on the date
indicated above.
/s/ Luke E. Fichthorn III
Luke E. Fichthorn III - Chairman and CEO
/s/ Richard A. Shantz
Richard A. Shantz - Director
/s/ Charles T. Foley
Charles T. Foley - Director
/s/ William F. Yelverton
William F. Yelverton - Director
/s/ J. Robert Wilkinson
J. Robert Wilkinson - Vice President-Finance
and Treasurer
(Principal Financial Officer)
/s/ Elmer G. Pruim III
Elmer G. Pruim III - Controller
(Principal Accounting Officer)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
TO BAIRNCO CORPORATION:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in
Bairnco Corporation's Annual Report to Stockholders incorporated by
reference in this Form 10-K, and have issued our report thereon
dated January 27, 1995. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The
schedules listed in Item 14(a) 2 are the responsibility of the
company's management and are presented for purposes of complying
with the Securities and Exchange Commission's rules and are not
part of the basic consolidated financial statements. These
schedules have been subjected to the auditing procedures applied
in the audits of the basic consolidated financial statements and,
in our opinion, fairly state in all material respects the financial
data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Orlando, Florida
January 27, 1995
Arthur Andersen LLP
<TABLE>
BAIRNCO CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
Balance
Year Ended Beginning Deductions Balance
December 31, of Year Expenses <F1> End of Year
<S> <C> <C> <C> <C>
1994 - Reserve for
Doubtful Accounts $ 844,000 $430,000 $(177,000) $1,097,000
1993 - Reserve for
Doubtful Accounts $ 798,000 $356,000 $(310,000) $ 844,000
1992 - Reserve for
Doubtful Accounts $1,039,000 $284,000 $(525,000) $ 798,000
<FN>
<F1> Actual charges incurred in connection with the purpose for
which the reserves were established.
</FN>
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
Commission File No.: 1-8120
BAIRNCO CORPORATION
(Exact name of registrant as specified in the charter)
INDEX TO EXHIBITS
a. Certificate of Incorporation, as amended through September 24, 1991.
Incorporated herein by reference to Exhibit 3 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1991.
b. By Laws, as amended through December 18, 1991.
Incorporated herein by reference to Exhibit 3 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1991.
c. Amended and Restated Credit Agreement, dated as of December 17, 1992,
among Bairnco Corporation and certain of its subsidiaries, as
guarantors, and certain Commercial Lending Institutions and
Continental Bank N.A., as the Agent for Lenders.
Incorporated herein by reference to Exhibit 3.1 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1992.
d. Promissory note, dated December 17, 1992, between Bairnco Corporation
and Continental Bank N.A..
Incorporated herein by reference to Exhibit 3.2 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1992.
e. Amendment dated as of March 16, 1994 to Amended and Restated Credit
Agreement dated as of December 17, 1992, by and among Bairnco
Corporation and certain of its subsidiaries and certain Commercial
Lending Institutions and Continental Bank N.A., as the Agent for
Lenders.
Incorporated herein by reference to Exhibit 3 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1993.
f. Promissory note, dated as of September 1, 1989, between Arlon, Inc.
and the Delaware Economic Development Authority.
Incorporated herein by reference to Exhibit 4 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1989.
g. Indenture of Trust, series 1989, dated as of September 1, 1989, between
the Delaware Economic Development Authority and Manufacturers and
Traders Trust Company, securing variable rate demand Industrial
Development Refunding Revenue Bonds (Arlon, Inc. Project), series 1989
of the Delaware Economic Development Authority.
Incorporated herein by reference to Exhibit 4 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1989.
h. Loan Agreement, dated as of September 1, 1989, between the Delaware
Economic Development Authority and Arlon, Inc..
Incorporated herein by reference to Exhibit 4 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1989.
i. Reimbursement Agreement dated as of September 1, 1989 by and among
Arlon, Inc., Bairnco Corporation and Continental Bank.
Incorporated herein by reference to Exhibit 4 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1989.
j. Agreement of the Company, dated March 30, 1987, to furnish a copy of
any instrument with respect to certain other long-term debt to the
Securities and Exchange Commission upon its request.
Incorporated herein by reference to Exhibit 4(e) to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1986.
k. Extension and Modification of Lease Agreement between Max Rothenberg
and Michael L. Friedman and Shielding Systems Corporation.
Incorporated herein by reference to Exhibit 10.1 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1992.
l. Lease dated December 31, 1991 between Reybold Homes, Inc. and Arlon,
Inc..
Incorporated herein by reference to Exhibit 10.2 to Bairnco's Annual
Report on form 10-K for fiscal year ended December 31, 1992.
m. Lease dated December 10, 1991 between Mattei Corporation and Bairnco
Corporation.
Incorporated herein by reference to Exhibit 10 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1991.
n. Lease dated February 18, 1991 between Pensionfund Realty Limited and
KASCO Food Equipment Sales and Service Division of Atlantic Service
Co., Ltd..
Incorporated herein by reference to Exhibit 10 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1991.
o. Lease dated February 8, 1990 between Leggett and Platt, Inc. and KASCO
Corporation.
Incorporated herein by reference to Exhibit 10 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1991.
p. Lease dated February 5, 1990 between Fernwood Developments Ltd. and
KASCO Atlantic Service Company, Ltd..
Incorporated herein by reference to Exhibit 10 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1991.
q. Agreements, each dated November 8, 1965, between Max Rothenberg and
Michael L. Friedman and Shielding Systems Corporation as successor to
Keene Corporation and amendment thereto, dated January 20, 1970.
Incorporated herein by reference to Exhibit 10 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1989.
r. Lease, dated October 7, 1986, between Sinnott Investments Ltd. and
KASCO Corporation as successor to Atlantic Service Co., Ltd..
Incorporated herein by reference to Exhibit 10 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1986.
s. Lease, dated July 1, 1985, between Succession V H Fortin and KASCO
Corporation as successor to Atlantic Service Co., Ltd..
Incorporated herein by reference to Exhibit 10 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1986.
t. Lease, dated May 1, 1985, between John B. Merrill, Joseph S. Weedon
and Richard A. Westberg and KASCO Corporation as successor to Atlantic
Service, Inc..
Incorporated herein by reference to Exhibit 10 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1986.
u. Industrial Real Estate Lease, dated March 28, 1984, between Gerry
Strauss, as trustee and Michael L. Strauss and Trenmark Division of
Arlon, Inc. as successor to Keene Corporation.
Incorporated herein by reference to Exhibit 10 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1984.
v. Standard Industrial Lease dated June 30, 1983 between James E. and
Nancy S. Welsh, trustees under Welsh Family Trust, dated April 20,
1979 and Arlon, Inc. as successor to Keene Corporation.
Incorporated herein by reference to Exhibit 10 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1983.
w. Bairnco Corporation 401(k) Savings Plan and Trust.
Incorporated herein by reference to Exhibit 4.3 to Bairnco's
Registration Statement on Form S-8, No. 33-41313.
x. Bairnco Corporation 1990 Stock Incentive Plan.
Incorporated herein by reference to Exhibit 4.3 to Bairnco's
Registration Statement on Form S-8, No. 33-36330.
y. Bairnco Corporation Management Incentive Compensation Plan.
Incorporated herein by reference to Exhibit 10 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1981.
z. Employment Agreement dated January 22, 1990, between Bairnco
Corporation and Luke E. Fichthorn III.
Incorporated herein by reference to Exhibit 10 to Bairnco's Annual
Report on Form 10-K for fiscal year ended December 31, 1989.
aa. Calculation of Primary and Fully Diluted Earnings per Share for the
years ended December 31, 1994, 1993 and 1992.
Exhibit 11 filed herewith.
ab. 1994 Annual Report to Stockholders.
Exhibit 13 filed herewith.
ac. Subsidiaries of the Registrant.
Exhibit 21 filed herewith.
ad. Consent of Independent Certified Public Accountants.
Exhibit 23 filed herewith.
ae. Financial Data Schedules.
Exhibit 27 filed herewith (electronic filing only).
af. Form 11-K Re: Bairnco Corporation 401(k) Savings Plan and Trust for
the fiscal year ended December 31, 1994.
Exhibit 99 filed herewith.
<TABLE>
EXHIBIT 11
BAIRNCO CORPORATION AND SUBSIDIARIES
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE: <F1>
Income from continuing operations $ 7,255,000 $ 817,000 $ 7,755,000
(Loss) from discontinued operations,
net of income taxes -- (23,395,000) (257,000)
Net Income (Loss) $ 7,255,000 $(22,578,000) $ 7,498,000
Average common shares outstanding 10,500,000 10,500,000 10,496,000
Common shares issuable in respect
to common stock equivalents,
with a dilutive effect -- -- 248,000
Total common and common equivalent
shares 10,500,000 10,500,000 10,744,000
Primary Earnings Per Common Share:
Continuing operations $ 0.69 $ 0.08 $ 0.72
Discontinued operations -- (2.23) (0.02)
Total $ 0.69 $ (2.15) $ 0.70
FULLY DILUTED EARNINGS PER SHARE: <F1>
Income from continuing operations $ 7,255,000 $ 817,000 $ 7,755,000
(Loss) from discontinued operations,
net of income taxes -- (23,395,000) (257,000)
Net Income (Loss) $ 7,255,000 $(22,578,000) $ 7,498,000
Total common and common equivalent
shares 10,500,000 10,500,000 10,744,000
Additional common shares assuming
full dilution -- -- 5,000
Total common shares assuming full
dilution 10,500,000 10,500,000 10,749,000
Fully Diluted Earnings Per Common Share:
Continuing operations $ 0.69 $ 0.08 $ 0.72
Discontinued operations -- (2.23) (0.02)
Total $ 0.69 $ (2.15) $ 0.70
<FN>
<F1> Earnings per share is based on the average number of shares outstanding
during each period. Primary earnings per share includes all common stock
equivalents. Fully diluted earnings per share includes all common stock
equivalents plus the additional common shares issuable assuming full
dilution.
</FN>
</TABLE>
BAIRNCO CORPORATION
ANNUAL REPORT 1994
THE COMPANY
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 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 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 United
States and Canada, Atlantic Service in the United Kingdom, and Bertram & Graf
and Biro in 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)................ 6
Directors and Management............................... 8
Financial History...................................... 9
Management's Discussion and Analysis................... 10
Quarterly Results of Operations........................ 11
Consolidated Financial Statements...................... 12
Notes to Consolidated Financial Statements............. 15
FINANCIAL HIGHLIGHTS
(In thousands except per share data)
Percent Change
1994 1993 1992 94/93 93/92
Net Sales $ 145,522 $ 134,958 $ 135,581 8% 0%
Earnings before Interest,
Charges, and Taxes (a) $ 13,654 $ 13,617 $ 15,846 0% (14%)
Operating Profit $ 13,654 $ 4,874 $ 15,846 180% (69%)
Income from
Continuing Operations $ 7,255 $ 817 $ 7,755 788% (89%)
Earnings per Share from
Continuing Operations $ 0.69 $ 0.08 $ 0.72 763% (89%)
Cash Dividends per Share $ 0.20 $ 0.20 $ 0.20 0% 0%
Stockholders' Investment
per Share $ 4.19 $ 3.67 $ 5.91 14% (38%)
Total Assets $ 102,772 $ 107,981 $ 133,253 (5%) (19%)
Stockholders' Investment $ 43,997 $ 38,515 $ 62,055 14% (38%)
Average Shares
Outstanding 10,500 10,500 10,749 0% (2%)
(a) Excludes impact of non-recurring litigation and restructuring
costs of $8,743 in 1993 - see Note 2 to Consolidated Financial Statements.
Graphic - Bar Chart depicting Sales (y-axis) for five years - 1990 to
1994 (x-axis):
SALES
Year (In thousands)
1990 $130,404
1991 $128,566
1992 $135,581
1993 $134,958
1994 $145,522
Graphic - Bar Chart depicting Earnings before Interest, Charges, and
Taxes (y-axis) for five years - 1990 to 1994 (x-axis):
EARNINGS (Before Interest, Charges,
Year and Taxes - In thousands)
1990 $15,117
1991 $15,225
1992 $15,846
1993 $13,617
1994 $13,654
LETTER TO OUR STOCKHOLDERS
Overall Bairnco had a good year in 1994. Most importantly net income
was $7,255,000 as compared to a net loss in 1993 of ($22,578,000) after
substantial restructuring expenses and losses from discontinued operations.
Operating profit in 1994 was up slightly over the 1993 results excluding the
non-recurring litigation and restructuring costs in 1993, as the improved
results at Arlon were substantially offset by the erosion in KASCO's operating
profit due primarily to the difficulties with its service center program.
This program was revised in the fourth quarter of 1994. Key elements of the
divestiture program were accomplished. Debt was reduced by $11,943,000. The
quality and focus of management was improved in many operations.
FINANCIAL RESULTS
Sales increased 7.8% to $145,522,000 in 1994 from $134,958,000 in 1993, due
to the 11.9% increase in Arlon sales and the 1.4% increase in KASCO sales.
In 1994, gross profit increased 1.0% to $53,177,000 from $52,645,000 in the
prior year. The good results at Arlon were substantially offset by the poor
results at KASCO's North American operations. Arlon's gross profit increased
10.5%, slightly less than the sales increase of 11.9%, as a result of the
continuing shift in the business mix to lower margin commercial products from
military products. KASCO's gross profit declined 9.2% while sales increased
1.4%.
Selling and administrative expenses increased 1.3% to $39,523,000 as compared
to $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.
Selling expenses increased 8.9%. Approximately half the increase was
attributable to the increase in Arlon's sales. The other half of the increase
was primarily due to the costs associated with KASCO's service center program.
Again, the action plan that was implemented during the fourth quarter will
reduce these KASCO related costs in the future. Administrative expenses
decreased 7.1% while research and development expenses decreased 4.8%.
Earnings before taxes and non-recurring litigation and restructuring costs
that were incurred in 1993 were $11,510,000 in 1994 up slightly from the
$11,369,000 in 1993.
Earnings before taxes from continuing operations were $11,510,000 in 1994 as
compared to $2,626,000 after charges of $8,743,000 in 1993.
Income from continuing operations was $7,255,000, or $.69 per share in 1994,
as compared to $817,000, or $.08 per share in 1993.
Net income in 1994 was $7,255,000, or $.69 per share as compared to a loss of
($22,578,000), or ($2.15) per share in 1993 which included the loss from
discontinued operations.
RESTRUCTURING AND DIVESTITURES
During 1994 the strategic decision made in 1993 to focus Bairnco's management
and financial resources on its two core business areas and to divest the
non-related businesses was implemented.
The majority of the specialty construction businesses were sold in 1994.
RayProof Limited and RayProof North America were sold to buyers that
understood the businesses and should provide good continuity to the customers
of these businesses. Plans are underway concerning the disposition of the
smallest and last remaining operation of the specialty construction business.
The secure communications business was restructured during the year bringing
the operation to an acceptable level of profitability. Negotiations for this
operation have not yet resulted in an offer equal to the value that management
believes is inherent in the operation. The business continues to be reported
as a discontinued operation.
During the fourth quarter one of Arlon's small product lines which was not
part of the 1993 restructuring plan, but was a distraction to the Arlon
management and did not fit with the long term focus of the business, was sold.
The sale of this $2,000,000 product line is not material to our ongoing
operations.
FINANCIAL MANAGEMENT
The return on stockholders' investment in 1994 was 17.4% and the return on
capital employed was 10.6%. Management continues to expect that Bairnco's
future results will approach our long term objectives of a 20% return on
stockholders' investment and a 15% return on total capital employed.
Net cash flows provided by operating activities were $10,022,000. These cash
flows together with the net funds received from the disposition of discontinued
operations provided the cash used to reduce debt and fund Bairnco's capital
expenditure program in 1994.
During 1994 total debt was reduced by $11,943,000 and as a percent of equity
declined from 114% in 1993 to 72% in 1994. At year end 1994 Bairnco had
$21.4 million available under its revolving credit agreement, and $4.0 million
available under short term lines of credit.
1994 capital expenditures were $5,176,000 as compared to the budget of
$6,500,000. Depreciation and amortization was $6,502,000. The focus of the
capital expenditure program during 1994 was primarily on normal replacements
and some capacity additions.
The capital expenditure budget for 1995 is approximately $14.4 million.
Depreciation and amortization is estimated to be approximately $6.2 million.
The planned capital expenditures include normal replacements, quality
improvements, cost reduction projects, new product developments and capacity
additions. The large increase in planned capital expenditures
is due to substantial sales growth over the last three years at one of
Arlon's major facilities. It is expected that a major new capacity addition
will be required by the end of 1995 to be operational in mid 1996. The scope
of this project is still under review.
DIVIDEND
The quarterly $.05 per share cash dividend was maintained during the year.
MANAGEMENT
Effective January 16, 1995, Duncan del Toro resigned as President of Bairnco
Corporation to pursue other business interests. As a result of a more focussed
Bairnco and the quality of our three Division Presidents, we do not intend to
fill this position in the near future.
Jim Whiteaker was appointed President of KASCO North America effective July 11,
1994. Jim was previously Operations Manager for FMC Corporation's retail
citrus machinery business. He has a background that includes both marketing
and engineering positions. We expect Jim to play a major role in the
development of KASCO's business and in restoring it to its historical levels
of profitability in all of North America.
In the first quarter of 1994, Tim Mortenson, Controller of Bairnco Corporation,
was promoted to Vice-President and Controller of KASCO Corporation.
Effective August 1, 1994, Elmer Pruim was appointed Controller of Bairnco
Corporation. Elmer was previously an Audit Manager for Arthur Andersen LLP.
Elmer has already become a meaningful contributor to the Bairnco organization.
During 1994 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 element for Bairnco's future
success.
SUMMARY AND OUTLOOK
1994 was a year of progress for Bairnco. The restructuring program adopted at
the end of 1993 was substantially implemented during 1994. The improvements
in Arlon's results began to manifest the benefits of investing in the
development of new products, new markets, and expanded sales, marketing and
research efforts.
The poor results at KASCO were a severe disappointment. The reduced level of
profitability is primarily attributable to the very poor implementation of the
original service center program. During the fourth quarter, the program was
reevaluated and a more focused program was developed. This program is being
implemented and concentrates on a few selected markets with a revised approach.
KASCO management believes it can be a value added supplier of cost efficient
services to its customers with this new program.
The outlook for 1995 is for improved sales and earnings. The U.S. economy is
expected to continue to experience modest growth at least through the first
half of 1995. At some point, the continuing escalation of interest rates by
the Federal Reserve is expected to slow the economy, if not result in no growth
or a modest recession. There are strong pressures from many of our suppliers
to increase their prices. It is expected that the combination of continuing
cost and efficiency improvement programs combined with price increases will
result in no margin deterioration from these cost pressures. As a result of
certain niche growth products and markets, combined with cost reductions from
refocusing KASCO, 1995 should be a year of improved earnings and continued
progress.
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 system (Iridium). Intermediate
temperature laminates which provide both improved product reliability in the
field and ease of manufacturing is another area of expertise. Specialty
products have been developed for 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.
The Microwave Materials product line produces the world's leading substrates
for microwave applications. The business mix is moving 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 T.V. systems, global positioning satellite systems,
and other personal communications equipment.
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.
Emerging 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. The elimination of wiring costs, the ease of
renovations and the flexibility of mobile phones are the primary advantages of
such a system. Other applications are being developed continuously in the
wireless area. Some of these applications are less sensitive to signal loss
and can therefore be designed with conventional circuit materials, which are
also lower cost, while others absolutely require low loss materials such as
those produced by Arlon. This will continue to be an attractive area for
Arlon in the foreseeable future.
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.
Graphic - John Diag, Coater Operator, monitors Calon Cast Vinyl manufacturing
specifications on a real time basis at Arlon's Adhesives & Films Division,
Santa Ana, California.
The economic factors affecting this business are the general level of economic
activity in the United States, Europe, South America and the Asian Basin.
Late in 1994 a new manager was hired for Arlon N.V., Arlon's Belgium based
European common market subsidiary. While the European market remained weak in
1994 due to economic conditions, under the leadership of the new manager,
combined with the improved service capabilities and new product lines
introduced in 1994, sales are expected to show meaningful improvements in
1995 and beyond.
Investments in new equipment and R&D resources yielded improvements in quality
and productivity, and new graphics products are being test-marketed prior to
introduction in 1995.
The Graphics sector continues to grow and the new range of Arlon calendered
vinyl films continues to penetrate the North American and export sign and
graphics markets. In 1995, new products are planned for introduction to
further increase market penetration. Arlon has a world-class range of
products to serve these markets and continues to invest in sales and technical
resources to provide excellent support for our customers.
Graphic - Raul Patino, QA Senior Technician, Jaime Perez, QA Supervisor, and
Trieu Do, QA Technician, inspect perforated Calon product for accepatable
appearance and punch pattern at Arlon's Adhesives & Films Division, Santa Ana,
California.
Graphic - Wahid Saadat, R&D Chemist, Belen Trajano, R&D Engineer, and Chan
Syamphay, R&D Lab Technician, evaluate the cutting and handling properties of
Calon Cast Vinyl Film at Arlon's Adhesives & Films Division, Santa Ana,
California.
CUSTOM ENGINEERED LAMINATES AND ADHESIVE SYSTEMS:
Bairnco manufactures and markets custom engineered laminates and adhesives
systems under the Arlon brand name.
The economic factors impacting this business are primarily the general level
of economic activity in the United States.
Typical applications include insulating foam tapes for thermopane windows,
adhesive coated copper for flexible circuitry, electrical insulation, thermal
insulation panels for appliances and cars, security tags and labels, and
durable printing stock for high speed laser printing systems.
Arlon is also developing new products for the industrial pressure sensitive
systems and specialty laminates markets. The combination of the Santa Ana,
California and East Providence, Rhode Island operations provides a unique
ability to meet the needs of emerging new markets such as high durability
coatings and flexible laminated products for the electronics industry.
Graphic - Tom Carey and Rock Messick, Silicone Calendar Operators, verify
surface quality of glass reinforced silicone at Arlon's Silicone Technologies
Division, Bear, Delaware.
Graphic - Ron Frazier and Bill Sherman, Microwave Press Operators, prepare a
laminate for the press operation at Arlon's Materials for Electronics Division,
Bear, Delaware.
SILICONE RUBBER TECHNOLOGIES:
Bairnco manufactures a line of silicone rubber materials used in a broad range
of consumer, industrial and commercial products. This business is sensitive
both to the level of general industrial and consumer spending in the United
States.
Typical applications of these materials include silicone rubber for molding
composites, silicone rubber insulating tape for electric traction motor
windings, industrial flexible heaters, and power utility insulator
applications. The silicone rubber product line provides significant
opportunity for Bairnco via several avenues. Opportunities exist for
current products or variants in both new geographical markets and through new
distribution channels. In particular, key international markets, where little
emphasis has been placed, offer good growth potential. Additionally, a
distributor agreement has been signed with Airtech, a leading supplier of
vacuum bagging materials to the composite industry. This partnership is
anticipated to foster growth in industrial and aerospace composite markets.
A key marketing person has been added to pursue the many opportunities in
this business area.
During 1994 a small product line, comprised of specialty environmental and
electromagnetic interference seals and conductive gaskets serving primarily
military markets, was sold. The remaining Silicone Rubber Technologies line
is a growth oriented materials business which will continue to focus its
efforts on engineered products for commercial and industrial applications.
Graphic - Betty Clugston, Side Arm Operator, slits reinforced silicone rubber
product to customer specifications at Arlon's Silicone Technologies Division,
Bear, Delaware.
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 distributes related supply
products and seasoning to supermarkets and 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 van sales people. These van
sales people 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.
Graphic - Harry Donovan, Welder and Flash Grinder, monitors the welding of
this meat band saw blade to ensure it meets with KASCO's high quality
standards.
A field computerization system was expanded to include all service people
in 1994. This computerization program permits the route service people to
more efficiently service their customer base.
SERVICE CENTERS:
KASCO currently operates service centers in 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 respective
geographical areas.
In the fourth quarter of 1994, the decision was made to refocus the service
center program back to several selected market areas where KASCO can provide
cost effective, value added preventive maintenance and emergency service in
confined geographical markets. Eight service centers in North America were
closed. These service centers although achieving increasing revenues
continued to fail to achieve the critical mass necessary to support the
attendant overhead structure and provide the level of service deserved by our
clients and consistent with KASCO's objective of being a superior quality
provider. These actions will result in lower revenues and initial phase out
expenses which will continue through the first half of 1995 but substantially
lower costs over time. The cost savings will begin to be evident during the
second quarter of 1995.
Graphic - Al Ford, Toothing Machine Operator, monitors the operation of his
grinding machine, assuring quality band saw blades are produced.
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 handles
the sale of KASCO manufactured products 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 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 1994, KASCO added new production lines
in the United States which incorporate manufacturing and grinding techniques
that enhance the overall quality of KASCO's finished band saw blades. The
improved processes and equipment continue to enable KASCO to provide a
superior band saw blade for its customers. KASCO is committed to continuing
quality improvements to ensure conformance of the Company's products to our
customer requirements.
Graphic - Dan Winkler, Quality Auditor, and Melissa Coffin, Project Engineer,
check the tooth hardness of a meat cutting band saw blade in the
Microhardness Lab at KASCO's Manufacturing and Distribution Facility in
St. Louis, Missouri.
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
Chairman and CEO
New York Life Worldwide Holding, Inc.
MANAGEMENT (Individual Photographs)
Robert M. Carini
President
Arlon Materials for Electronics
Elmer G. Pruim
Controller
Bairnco 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
Gary M. Wimberly
Director of Systems
Bairnco Corporation
James L. Whiteaker
President
KASCO North America
<TABLE>
FINANCIAL HISTORY
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Summary of Operations
($ in thousands)
Net sales....................... $ 145,522 134,958 135,581 128,566 130,404
Gross profit.................... $ 53,177 52,645 54,714 52,492 54,949
Earnings before interest,
charges and taxes <F1>........ $ 13,654 13,617 15,846 15,225 15,117
Operating profit................ $ 13,654 4,874 15,846 15,225 8,977
Interest expense, net........... $ 2,144 2,248 2,911 4,277 5,524
Income before income taxes...... $ 11,510 2,626 12,935 10,948 3,453
Provision for income taxes...... $ 4,255 1,809 5,180 4,305 2,436
Income from continuing
operations.................... $ 7,255 817 7,755 6,643 1,017
Return from continuing
operations on:
Net sales................... % 5.0 0.6 5.7 5.2 0.8
Stockholders' investment.... % 17.4 1.4 12.1 11.0 1.6
Capital employed............ % 10.6 2.0 8.6 8.4 4.1
Proforma return on:
Net sales <F1>................ % 5.0 5.3 5.7 5.2 3.6
Stockholders' investment <F1>
<F2>........................ % 17.4 17.4 18.4 17.2 11.5
Capital employed <F1> <F2>.... % 10.6 9.7 10.7 10.5 9.1
Year-End Position ($ in thousands)
Working capital................. $ 26,277 20,098 18,983 20,342 17,401
Plant and equipment, net........ $ 36,289 38,654 39,232 32,025 31,499
Total assets excluding
discontinued operations....... $ 99,243 95,547 98,916 90,982 90,455
Net assets of discontinued
operations.................... $ 3,529 12,434 34,337 39,109 43,853
Total assets................ $ 102,772 107,981 133,253 130,091 134,308
Total debt...................... $ 31,775 43,718 45,733 45,891 53,109
Stockholders' investment........ $ 43,997 38,515 62,055 59,529 57,123
Capital employed-total.......... $ 75,772 82,233 107,788 105,420 110,232
Capital employed-proforma <F2>.. $ 75,772 82,233 85,895 83,527 88,339
Per Share Data
Income from continuing operations:
Primary and fully diluted.... $ 0.69 0.08 0.72 0.61 0.10
Cash dividend................... $ 0.20 0.20 0.20 0.20 0.40
Cash dividend rate at year-end.. $ 0.20 0.20 0.20 0.20 0.20
Stockholders' investment........ $ 4.19 3.67 5.91 5.68 5.47
Market Price:
High......................... $ 5-1/2 8-1/2 8-1/4 9 18-3/8
Low.......................... $ 3 3-3/8 5-5/8 3-3/4 3-3/4
Other Data (in thousands)
Backlog.......... .............. $ 7,833 7,998 6,392 9,615 7,467
Depreciation and amortization... $ 6,502 6,700 5,808 5,748 6,115
Capital expenditures <F3>....... $ 5,176 6,318 13,195 5,858 5,977
Average shares outstanding <F4>. 10,500 10,500 10,749 10,807 10,442
Current ratio................... 2.0 1.8 1.7 1.9 1.7
Number of common stockholders... 2,198 2,326 2,440 2,586 2,756
Average number of employees .... 915 920 935 903 927
Sales per employee ............. $ 159,040 146,700 145,000 142,400 140,700
<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, and excludes impact of restructuring costs of $6,140 (pre-tax)
in 1990.
<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>
</TABLE>
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 12.
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: 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 totalled $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 an $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. Audits
of the Corporation's consolidated U.S. federal income tax returns
have been completed for all years through 1992.
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.
Results of Operations: 1993 Compared to 1992
Net sales declined slightly to $134,958,000 in 1993 from
$135,581,000 in 1992. Arlon engineered materials and components
sales in 1993 increased $3,718,000, or 4.7%, from 1992 due to
increased sales of circuit board materials and vinyl graphics
materials. KASCO replacement products and services sales in 1993
declined $4,341,000, or 7.6%, as compared to 1992, a result of
changes in exchange rates and sales declines in the Canadian and
European markets due to the weak economic conditions that prevailed
in these established markets throughout the year, partially offset
by the increased sales through KASCO service centers.
The backlog of unfilled orders for Arlon at the end of 1993 was
$7,998,000, up from $6,392,000 at the end of 1992. The increase
was across all major product lines. KASCO does not have a backlog.
In 1993, gross profit decreased 3.8% to $52,645,000, or 39.0% of
net sales, from $54,714,000, or 40.4% of net sales, in 1992. This
decrease was attributable to the decline in KASCO's sales and an
increase in depreciation associated with the major capital
expenditures made in 1992.
Selling and administrative expenses increased slightly in 1993 to
$39,028,000 from $38,868,000 in 1992. Modest increases in the
selling and marketing areas were partially offset by declines in
other areas.
During the fourth quarter of 1993, restructuring costs of
$5,743,000 (pre-tax) were recognized in conjunction with programs
then underway to focus KASCO on those lines of business with the
greatest growth and profit potential 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. Also in the fourth quarter,
Bairnco 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), and the defense against claims
that Bairnco is liable for injuries allegedly caused by asbestos-
containing products manufactured by Keene or its predecessors.
Liquidity and Capital Resources
At December 31, 1994, Bairnco had working capital of $26.3 million
compared to $20.1 million at December 31, 1993. At December 31,
1994, $31.8 million of total debt was outstanding compared to $43.7
million at the end of 1993. In March 1994, Bairnco's secured
reducing revolving credit agreement with a consortium of four banks
led by Bank of America, Illinois, and including, SunBank, N.A., NBD
Bank, N.A., and First Union National Bank of Florida, was amended
to permit the execution of the restructuring plan adopted by
Bairnco effective December 31, 1993. As of December 31, 1994,
$21.4 million of the revolving credit facility provided under the
agreement was unused and available for borrowing. The credit
agreement expires in August 1997. In addition, approximately $4.0
million was available under various short term domestic and foreign
uncommitted credit facilities. Debt was 41.9% of Bairnco's total
capitalization at the end of 1994, a decrease from 53.2% at the end of 1993.
Bairnco made $5.2 million of capital expenditures in 1994 as
compared to its plan at the start of the year of approximately $6.5
million. Total capital expenditures in 1995 are expected to be
approximately $14.4 million which includes approximately $1.0 million
deferred from 1994. Reflected in the 1995 capital expenditures
plan is approximately $6.0 million related to a new facility
which is not committed and is still under review.
Cash provided by operating activities plus the amounts available
under the existing credit facilities are expected to be sufficient
to fulfill Bairnco's anticipated cash requirements in 1995.
<TABLE>
QUARTERLY RESULTS OF OPERATIONS (Unaudited)
(In thousands except per share data)
<CAPTION>
1st 2nd 3rd 4th Total
1994 1993 1994 1993 1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales.................... $35,676 $33,032 $36,977 $35,336 $35,918 $33,434 $36,951 $33,156 $145,522 $134,958
Cost of sales............. 22,070 20,478 23,311 21,063 23,054 20,375 23,910 20,397 92,345 82,313
Gross Profit................. 13,606 12,554 13,666 14,273 12,864 13,059 13,041 12,759 53,177 52,645
Selling and administrative
expenses................. 10,271 9,650 9,964 9,920 9,396 9,698 9,892 9,760 39,523 39,028
Restructuring costs <F1>.. -- -- -- -- -- -- -- 5,743 -- 5,743
Provision for
litigation costs <F1>.... -- -- -- -- -- -- -- 3,000 -- 3,000
Operating Profit (Loss)...... 3,335 2,904 3,702 4,353 3,468 3,361 3,149 (5,744) 13,654 4,874
Interest expense, net..... 501 589 536 575 559 573 548 511 2,144 2,248
Income (loss) before
income taxes.............. 2,834 2,315 3,166 3,778 2,909 2,788 2,601 (6,255) 11,510 2,626
Provision for income taxes 1,134 903 1,266 1,473 1,164 1,087 691 (1,654) 4,255 1,809
Income (Loss) from
Continuing Operations..... $ 1,700 $ 1,412 $ 1,900 $ 2,305 $ 1,745 $ 1,701 $ 1,910 $(4,601) $ 7,255 $ 817
Earnings (Loss) per Share -
Continuing Operations..... $ 0.16 $ 0.13 $ 0.18 $ 0.22 $ 0.17 $ 0.16 $ 0.18 $ (0.44) $ 0.69 $ 0.08
Market Price:
High...................... $ 3-7/8 $ 8-1/2 $ 5-1/4 $ 6-1/4 $ 5-1/2 $ 5-7/8 $ 4-5/8 $ 4-3/8 $ 5-1/2 $ 8-1/2
Low....................... 3-1/4 5-1/4 3 4-3/4 4-1/8 3-3/8 3-3/4 3-1/2 3 3-3/8
<FN>
<F1> See Note 2 to Consolidated Financial Statements.
</FN>
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1994, 1993 and 1992
Bairnco Corporation and Subsidiaries
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net Sales............................ $145,522,000 $134,958,000 $135,581,000
Cost of sales...................... 92,345,000 82,313,000 80,867,000
Gross Profit......................... 53,177,000 52,645,000 54,714,000
Selling and administrative
expenses......................... 39,523,000 39,028,000 38,868,000
Restructuring costs (Note 2)....... -- 5,743,000 --
Provision for litigation costs
(Note 2)......................... -- 3,000,000 --
Operating Profit..................... 13,654,000 4,874,000 15,846,000
Interest expense, net.............. 2,144,000 2,248,000 2,911,000
Income before Income Taxes........... 11,510,000 2,626,000 12,935,000
Provision for income taxes (Note 5) 4,255,000 1,809,000 5,180,000
Income from Continuing Operations.... 7,255,000 817,000 7,755,000
Discontinued Operations (Note 3):
(Loss) from operations, net of
income tax (benefit) provision
of ($6,733,000) and $30,000, in
1993 and 1992, respectively.... -- (21,679,000) (257,000)
(Loss) on discontinuance, net of
income tax (benefit) of
($884,000) in 1993............. -- (1,716,000) --
Net income (loss).................. $ 7,255,000 $(22,578,000) $ 7,498,000
Earnings (Loss) per Share of Common
Stock (Note 4):
Earnings per Share from Continuing
Operations......................... $ 0.69 $ 0.08 $ 0.72
Discontinued operations (Note 3)... -- (2.23) (0.02)
Net income (loss).................. $ 0.69 $ (2.15) $ 0.70
Dividends per Share of Common Stock.. $ 0.20 $ 0.20 $ 0.20
The accompanying notes are an integral part of these financial statements.
</TABLE>
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, 1994
and 1993, and the related consolidated statements of income, stockholders'
investment and cash flows for each of the three years in the period ended
December 31, 1994. 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, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted
accounting principles.
Orlando, Florida
January 27, 1995
Arthur Andersen LLP
<TABLE>
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
Bairnco Corporation and Subsidiaries
<CAPTION>
1994 1993
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents.................. $ 1,478,000 $ 1,383,000
Accounts receivable, less allowances of
$1,097,000 and $844,000, respectively.... 20,885,000 18,932,000
Inventories:
Raw materials and supplies............... 4,794,000 3,173,000
Work in process.......................... 4,767,000 4,471,000
Finished goods........................... 10,481,000 11,849,000
20,042,000 19,493,000
Deferred income taxes (Note 5)............. 4,941,000 3,495,000
Other current assets (Note 5).............. 4,785,000 2,156,000
Total current assets................... 52,131,000 45,459,000
Plant and Equipment, at cost:
Land....................................... 1,241,000 1,344,000
Buildings and leasehold interests and
improvements............................. 15,163,000 15,836,000
Machinery and equipment.................... 60,260,000 59,238,000
76,664,000 76,418,000
Less - Accumulated depreciation
and amortization......................... (40,375,000) (37,764,000)
36,289,000 38,654,000
Cost in Excess of Net Assets of Purchased
Businesses (Note 1)........................ 8,201,000 8,244,000
Other Assets (Note 1)........................ 2,622,000 3,190,000
Net Assets of Discontinued Operations
(Note 3)................................... 3,529,000 12,434,000
$102,772,000 $107,981,000
Liabilities and Stockholders' Investment
Current Liabilities:
Short-term debt............................ $ 4,710,000 $ 5,130,000
Current maturities of long-term debt
(Note 7)................................. 201,000 189,000
Accounts payable........................... 9,762,000 7,363,000
Accrued expenses (Note 6).................. 11,181,000 12,679,000
Total current liabilities.............. 25,854,000 25,361,000
Long-Term Debt (Note 7)...................... 26,864,000 38,399,000
Deferred Income Taxes (Note 5)............... 3,743,000 3,232,000
Other Liabilities............................ 2,314,000 2,474,000
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, 10,952,124 issued..... 109,000 109,000
Paid-in capital............................ 49,922,000 49,595,000
Retained earnings (deficit)................ 3,766,000 (1,389,000)
Treasury stock, at cost, 451,865 shares.... (9,800,000) (9,800,000)
Total stockholders' investment......... 43,997,000 38,515,000
$102,772,000 $107,981,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
Bairnco Corporation and Subsidiaries
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Income from continuing operations..... $ 7,255,000 $ 817,000 $ 7,755,000
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization..... 6,502,000 6,700,000 5,808,000
Loss on disposal of plant and
equipment....................... 18,000 -- 161,000
Deferred income taxes............. 242,000 (222,000) 1,083,000
Changes in non-current assets
related to restructuring........ -- 2,992,000 --
Change in current assets and
liabilities, net of effect from
acquisitions and dispositions:
(Increase) decrease in accounts
receivable, net............... (1,953,000) 575,000 (1,160,000)
(Increase) decrease in
inventories................... (549,000) 284,000 (368,000)
(Increase) in other current
assets........................ (2,629,000) (27,000) (908,000)
Increase (decrease) in accounts
payable....................... 2,399,000 (839,000) 396,000
(Decrease) in accrued expenses.. (1,498,000) (284,000) (1,067,000)
(Decrease) increase in other
liabilities................... (160,000) 1,119,000 1,172,000
Translation adjustment and other, net. 395,000 (822,000) (2,829,000)
Net cash provided by operating
activities.................... 10,022,000 10,293,000 10,043,000
Cash Flows from Investing Activities:
Capital expenditures.................. (5,176,000) (6,318,000) (13,195,000)
Proceeds from sale of plant and
equipment........................... 1,728,000 -- --
Funds provided by discontinued
operations.......................... 7,728,000 350,000 4,515,000
Net cash provided by (used in)
investing activities.......... 4,280,000 (5,968,000) (8,680,000)
Cash Flows from Financing Activities:
Net (repayment) borrowings of external
debt................................ (12,107,000) (1,697,000) 462,000
Payment of dividends.................. (2,100,000) (2,100,000) (2,098,000)
Repurchase of the Corporation's stock. -- -- (1,000)
Exercise of stock options............. -- 20,000 51,000
Net cash (used in) financing
activities.................... (14,207,000) (3,777,000) (1,586,000)
Net increase (decrease) in cash
and cash equivalents.................. 95,000 548,000 (223,000)
Cash and cash equivalents,
beginning of year..................... 1,383,000 835,000 1,058,000
Cash and cash equivalents, end of year.. $ 1,478,000 $ 1,383,000 $ 835,000
Cash paid (received) during the year for:
Interest.............................. $ 2,242,000 $ 2,138,000 $ 2,931,000
Income Taxes.......................... $ (533,000) $ 2,703,000 $ 1,161,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
For the years ended December 31, 1994, 1993, and 1992
Bairnco Corporation and Subsidiaries
<CAPTION>
Retained
Common Paid-In Earnings Treasury
Stock Capital (Deficit) Stock
<S> <C> <C> <C> <C>
Balance, December 31, 1991........ $109,000 $51,330,000 $17,889,000 $(9,799,000)
Net income....................... -- -- 7,498,000 --
Acquisition of treasury stock
(176 shares at cost)........... -- -- -- (1,000)
Cash dividends ($.20 per share).. -- -- (2,098,000) --
Issuance of 10,225 shares
pursuant to exercise of
stock options.................. -- 51,000 -- --
Currency translation adjustment
(Note 1)....................... -- (2,924,000) -- --
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)
The accompanying notes are integral part of these financial statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
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.
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.
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 $5,816,000 at
December 31, 1994, is being amortized over 40 years. Accumulated amortization
at December 31, 1994 was $1,099,000. Amortization expense of $146,000,
$221,000 and $230,000 was recognized during 1994, 1993 and 1992, respectively.
Intangibles:
Intangible assets of purchased businesses, net of amortization, are included
in other assets and totalled $127,000 and $650,000 at December 31, 1994 and
1993, respectively. These items are amortized over their estimated lives,
which generally range from three to twenty years. Amortization expense
recognized was $159,000 during 1994, $217,000 during 1993 and $359,000 during
1992.
Approximately $361,000 of the decrease in intangibles in 1994 is attributable
to the sale of Arlon's silicone rubber specialties product line.
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 $1.9 million and $1.6 million at December
31, 1994 and 1993, respectively.
(2) Restructuring Costs and Provision For Litigation Costs
Pursuant to the restructuring plan adopted by Bairnco effective December 31,
1993, restructuring costs totalling $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
and plans are underway concerning the disposition of the smallest and last
remaining operation of the Specialty Construction business. The sales price
of the net assets sold of the discontinued operations was approximately $2.9
million in 1994. The secure communications business was restructured during
the year bringing the operation to an acceptable level of profitability.
Negotiations for this operation have not yet resulted in an offer equal to
the value that management believes is inherent in the operation. The
business continues to be reported as a discontinued operation. The net
realizable value of discontinued operations as of December 31, 1994 was $3.5
million which consisted of estimated net sales proceeds and tax benefits
associated with the remaining operations to be sold. These operations are
expected to be disposed of during 1995.
Net sales from the discontinued operations for the years ended December 31,
1994, 1993 and 1992 were $20.2 million, $22.8 million and $28.9 million,
respectively. The 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, 1994, 1993 and 1992. Earnings per share are based on
the weighted average number of shares outstanding during the year as follows:
1994 1993 1992
Primary 10,500,000 10,500,000 10,744,000
Fully Diluted 10,500,000 10,500,000 10,749,000
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:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Income (Loss) before
Income Taxes:
Domestic..................... $11,096,000 $ 3,116,000 $10,927,000
Foreign...................... 414,000 (490,000) 2,008,000
Total Income before
Income Taxes................. $11,510,000 $ 2,626,000 $12,935,000
Provision for Income Taxes:
Domestic:
Currently payable............ $ 3,731,000 $ 2,418,000 $ 1,506,000
Deferred..................... 751,000 (439,000) 2,986,000
Foreign:
Currently payable............ (135,000) (19,000) 735,000
Deferred..................... (92,000) (151,000) (47,000)
Total Provision for
Income Taxes................. $ 4,255,000 $ 1,809,000 $ 5,180,000
</TABLE>
Bairnco's restated net current and non-current deferred tax assets
(liabilities) are comprised of the following at December 31:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Current Deferred Tax Items:
Accrued Expenses............... $ 2,528,000 $ 2,521,000 $ 1,724,000
Other.......................... 1,236,000 974,000 1,262,000
Tax Credit Carryforwards....... 1,177,000 -- --
Net Current Deferred
Tax Asset.................... 4,941,000 3,495,000 2,986,000
Non-Current Deferred Tax Items:
Fixed Assets................... (2,749,000) (2,196,000) (1,639,000)
Pensions....................... (781,000) (716,000) (766,000)
Intangible Assets.............. (102,000) (168,000) (183,000)
Other.......................... (111,000) (152,000) (357,000)
Net Non-Current
Deferred Tax Liability....... (3,743,000) (3,232,000) (2,945,000)
Net Deferred Tax Asset....... $ 1,198,000 $ 263,000 $ 41,000
</TABLE>
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 $7.7 million to be realized from
the discontinued operations sold in 1994, 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. Current income taxes receivable of $1,091,000 were
included in other current assets at December 31, 1993.
In 1994, 1993 and 1992 the Corporation's restated effective tax rates were
37.0%, 68.9% and 40.1%, respectively, of income (loss) from continuing
operations before income taxes. An analysis of the differences between these
rates and the U.S. federal statutory income tax rate is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Computed income taxes
at statutory rate.............. $ 3,910,000 $ 893,000 $ 4,398,000
State and local taxes, net
of federal tax benefit......... 310,000 63,000 359,000
Write-off of goodwill............ -- 865,000 --
Dividend income.................. 185,000 160,000 156,000
Amortization of goodwill......... 43,000 55,000 60,000
Foreign income taxed at
different rates................ (368,000) (4,000) 5,000
Tax credits...................... (242,000) (175,000) (138,000)
Other, net....................... 417,000 (48,000) 340,000
Provision for income taxes....... $ 4,255,000 $ 1,809,000 $ 5,180,000
</TABLE>
Audits of the federal income tax returns of the Corporation and its
subsidiaries have been completed through 1992.
Provision has not been made for U.S. 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 U.S.
foreign tax credits would largely eliminate any U.S. income tax incurred.
(6) Accrued Expenses
Accrued expenses consisted of the following as of December 31, 1994 and 1993,
respectively:
1994 1993
Salaries and wages.............. $ 2,521,000 $ 1,520,000
Income taxes.................... 315,000 --
Insurance....................... 2,165,000 2,346,000
Litigation...................... 2,163,000 3,812,000
Other accrued expenses.......... 4,017,000 5,001,000
Total accrued expenses........ $11,181,000 $12,679,000
(7) Long-Term Debt
Long-term debt consists of the following as of December 31:
1994 1993
Revolving Credit Notes.......... $23,553,000 $37,893,000
Equipment Loans................. 464,000 639,000
Industrial Revenue Bonds........ 3,000,000 --
Other........................... 48,000 56,000
27,065,000 38,588,000
Less Current Maturities......... 201,000 189,000
Total......................... $26,864,000 $38,399,000
The Corporation has a credit agreement ("Credit Agreement") with a consortium
of four banks which provides a secured, reducing revolving credit facility for
a maximum loan commitment at December 31, 1994 of $45 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, 1994, $23.6 million of
revolving credit was outstanding and payable in installments from 1995 to
1997. In addition, $10.0 million of irrevocable standby letters of credit were
outstanding under the Credit Agreement which are not reflected in the
accompanying consolidated financial statements. Approximately $6.7 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, 1994, were 7.1% on U.S. borrowings
and ranged from 6.3% to 6.8% 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 U.S. subsidiaries
are pledged as collateral under the Credit Agreement, which expires on August
31, 1997.
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, 1994,
future declarations of dividends and repurchases of Bairnco's stock, were
limited to $1,714,000 plus 25% of future consolidated quarterly net earnings
of the Corporation. At December 31, 1994 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 6.0% to 7.8% due in 1995 through 1998.
The annual maturity requirements for amounts due after December 31, 1994, are
summarized as follows:
Year Ended December 31,
1995........................ $ 201,000
1996........................ 187,000
1997........................ 23,665,000
1998........................ 12,000
1999........................ --
Due after December 31, 1999... 3,000,000
Total Long-Term Debt........ $27,065,000
(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. 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 1994
and 1993 were as follows:
1994 1993
Outstanding options,
beginning of year............. 1,086,287 1,090,320
Options granted between
$3.375 and $7.375 per share... 32,500 18,300
Options canceled between
$4.00 and $7.75 per share..... (136,637) (18,333)
Options exercised at
$5.00 per share............... -- (4,000)
Outstanding options between
$3.375 and $8.25 per share,
end of year................. 982,150 1,086,287
Exercisable options between
$4.00 and $8.25 per share,
end of year................. 666,397 650,937
At December 31, 1994, 1,401,375 shares 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 U.S. 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 book accounting 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.
Net periodic pension cost for the U.S. plans included the following:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Service cost-benefits
earned during the year........ $ 915,000 $ 962,000 $ 913,000
Interest cost on projected
benefit obligation............ 1,493,000 1,405,000 1,305,000
Return on plan assets:
Expected return-(gain)........ (1,803,000) (1,661,000) (1,520,000)
Asset gain (loss)............. (2,774,000) 242,000 (710,000)
Actual return-loss (gain)..... 971,000 (1,903,000) (810,000)
Net amortization and deferral... (2,584,000) 471,000 (493,000)
Net periodic pension cost....... $ 795,000 $ 935,000 $ 915,000
</TABLE>
The following table describes the funded status of U.S. 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).
<TABLE>
<CAPTION>
1994 1993
Overfunded Underfunded Overfunded Underfunded
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligation:
Vested..................... $(15,580,000) $ (2,190,000) $(16,039,000) $ (2,190,000)
Non-vested................. (430,000) (43,000) (517,000) (44,000)
Accumulated benefit
obligation................... (16,010,000) (2,233,000) (16,556,000) (2,234,000)
Additional amounts related
to projected pay increases... (2,224,000) (57,000) (2,641,000) (119,000)
Projected benefit obligation... (18,234,000) (2,290,000) (19,197,000) (2,353,000)
Plan assets at fair value...... 17,841,000 1,338,000 18,493,000 1,306,000
Projected benefit obligation
in excess of plan assets..... (393,000) (952,000) (704,000) (1,047,000)
Unrecognized net transition
obligation................... 491,000 369,000 570,000 52,000
Unrecognized prior service
cost......................... (4,000) 139,000 220,000 448,000
Unrecognized net loss.......... 1,956,000 262,000 2,034,000 393,000
Adjustment to recognize
minimum liability............ -- (713,000) -- (774,000)
Prepaid (accrued) pension
cost recognized in balance
sheet at September 30........ 2,050,000 (895,000) 2,120,000 (928,000)
Fourth quarter accruals........ (147,000) (51,000) (187,000) (46,000)
Fourth quarter contributions... 179,000 42,000 201,000 70,000
Effect of curtailment.......... (136,000) -- -- --
Prepaid (accrued) pension
costs at December 31......... $ 1,946,000 $ (904,000) $ 2,134,000 $ (904,000)
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligations in the table above was 8% at September 30, 1994
and 7% at September 30, 1993. The rate of projected pay increases, where
applicable, was 5% at both September 30, 1994 and 1993. The expected
long-term rate of return on retirement plan assets was 9% at both September
30, 1994 and 1993.
(10) Business Segment Data
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, 1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
Segment
Operating
Net Sales Profit Loss Assets <F3>
<S> <C> <C> <C>
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 <F1> $ 76,165,000
Foreign................. 26,826,000 (2,601,000) <F2> 19,382,000
Total.............. $134,958,000 $ 4,874,000 $ 95,547,000
1992
United States........... $105,703,000 $ 12,808,000 $ 77,351,000
Foreign................. 29,878,000 3,038,000 21,565,000
Total.............. $135,581,000 $ 15,846,000 $ 98,916,000
<FN>
<F1> After $4,736,000 of restructuring and litigation costs - see Note 2
to Consolidated Financial Statements.
<F2> After $4,007,000 of restructuring costs - see Note 2 to Consolidated
Financial Statements.
<F3> Excludes net assets of discontinued operations of $3,529,000,
$12,434,000 and $34,337,000 for 1994, 1993 and 1992, respectively.
</FN>
</TABLE>
Information about the Corporation's major lines of business for the years
ended December 31, 1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
Segment Depreciation
Operating Capital and
Net Sales Profit(Loss) Assets <F1> Expenditures Amortization
<S> <C> <C> <C> <C> <C>
1994
Engineered Materials and Components (Arlon).. $ 92,214,000 $15,712,000 $50,234,000 $ 2,084,000 $ 3,562,000
Replacement Products and Services (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
Engineered Materials and Components (Arlon) $ 82,397,000 $12,884,000 $48,870,000 $ 2,673,000 $ 3,523,000
Replacement Products and Services -
Operations............................... 52,561,000 5,625,000 40,205,000 3,617,000 3,096,000
Replacement Products and Services -
Restructuring............................ -- (5,743,000) -- -- --
Replacement Products and Services (KASCO).... 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
1992
Engineered Materials and Components (Arlon).. $ 78,679,000 $13,359,000 $48,949,000 $ 9,274,000 $ 3,128,000
Replacement Products and Services (KASCO).... 56,902,000 7,277,000 45,776,000 3,866,000 2,592,000
Corporate.................................... -- (4,790,000) 4,191,000 55,000 88,000
Total............................... $135,581,000 $15,846,000 $98,916,000 $13,195,000 $ 5,808,000
<FN>
<F1> Excludes net assets of discontinued operations of $3,529,000, $12,434,000
and $34,337,000 for 1994, 1993 and 1992, respectively.
<F2> Includes $3.0 million provision for anticipated litigation costs - See
Note 2 to Consolidated Financial Statements.
</FN>
</TABLE>
(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 have been consolidated
in the United States District Court for the Southern District of New York, have
been stayed by order of the Bankruptcy Court for the Southern District of New
York, as described in the following paragraph.
On December 6, 1993, Keene filed for protection under Chapter 11 of the
Bankruptcy Code. The filing and certain subsequent proceedings led to a stay
of the asbestos-related individual and class actions referred to above. In an
order entered on March 11, 1994, the Bankruptcy Court overseeing the
reorganization of Keene entered an order appointing an examiner (the
"Examiner") to evaluate and report to the Court whether there are any viable
claims arising out of the transfer of assets for value by Keene to other
subsidiaries of Bairnco or the spinoffs of certain subsidiaries, including
Keene, by Bairnco. Bairnco provided evidence and other information to the
Examiner. The Examiner's preliminary report was released on October 3, 1994.
Since that time, the Court has held a number of hearings at which the report
has been discussed. The Court has not ruled on whether the potential claims
discussed in the report should be prosecuted, and if so by whom or under what
circumstances.
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 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, 1994.
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 Sun Bank Center,
Office Tower 2, University Hall, 200 South Orange Avenue,
Orlando, Florida 32801,
on April 21, 1995 at 10:00 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
EXHIBIT 21
BAIRNCO CORPORATION AND SUBSIDIARIES
Subsidiaries of Registrant
as of March 22, 1995
Percentage State/Country of
Ownership Incorporation
Arlon, Inc. 100% Delaware
KASCO Corporation 100% Delaware
Shielding Systems Corporation 100% Delaware
Bertram & Graf Gmbh(1) 100% Germany
Invabond Ltd.(1) 100% Ireland
Atlantic Service Co. Ltd.(1) 100% Canada
Atlantic Service Co.(UK)Ltd.(1) 98.9% United Kingdom
EuroKasco S.A. (1) 100% France
Arlon Europe N.V. (1) 100% Belgium
(1) Indirect wholly-owned subsidiary of Bairnco Corporation.
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO BAIRNCO CORPORATION:
As independent certified public accountants, we hereby consent to the
incorporation of our reports included and incorporated by reference in this
Form 10-K, into the Company's previously filed Registration Statements on
Form S-8 (Files 33-18372 (prior registration number 2-74988), 33-36330 and
33-41313).
Orlando, Florida
March 22, 1995
Arthur Andersen LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BAIRNCO'S
1994 ANNUAL REPORT TO STOCKHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,478,000
<SECURITIES> 0
<RECEIVABLES> 21,982,000
<ALLOWANCES> 1,097,000
<INVENTORY> 20,042,000
<CURRENT-ASSETS> 52,131,000
<PP&E> 76,664,000
<DEPRECIATION> 40,375,000
<TOTAL-ASSETS> 102,772,000
<CURRENT-LIABILITIES> 25,854,000
<BONDS> 26,864,000
<COMMON> 109,000
0
0
<OTHER-SE> 43,888,000
<TOTAL-LIABILITY-AND-EQUITY> 102,772,000
<SALES> 145,522,000
<TOTAL-REVENUES> 145,522,000
<CGS> 92,345,000
<TOTAL-COSTS> 92,345,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,144,000
<INCOME-PRETAX> 11,510,000
<INCOME-TAX> 4,255,000
<INCOME-CONTINUING> 7,255,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,255,000
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.69
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORT OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 33-41313
A. Full title of the plan and the address of the plan,
if different from that of the issuer named below:
Bairnco Corporation 401(K)
Savings Plan and Trust
B. Name of issuer of the securities held pursuant to
the plan and the address of its principal executive
office:
Bairnco Corporation
2251 Lucien Way
Maitland, Florida 32751
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Advisory Committee of
Bairnco Corporation 401(k) Savings Plan and Trust:
We have audited the accompanying statements of net assets available
for benefits of Bairnco Corporation 401(k) Savings Plan and Trust
as of December 31, 1994 and 1993, and the related statements of
changes in net assets available for benefits for the years then
ended. These financial statements and the schedules referred to
below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial
statements and schedules 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 our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for
benefits of the Plan as of December 31, 1994 and 1993, and the
changes in net assets available for benefits for the years then
ended, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental
schedules of reportable transactions, assets held for investment
and transactions with parties in interest are presented for
purposes of complying with the Department of Labor Rules and
Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 and are not a required part
of the basic financial statements. Such schedules have been
subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, are fairly stated,
in all material respects, in relation to the basic financial
statements taken as a whole.
Orlando, Florida
March 17, 1995
Arthur Andersen LLP
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1994 AND 1993
1994 1993
ASSETS
INVESTMENTS, at market value (Note 3)
Money market fund $ 435,919 $ 245,206
Corporate bond fund 309,654 279,304
Common stock fund 679,727 547,225
Bairnco common stock fund 136,704 48,562
TOTAL INVESTMENTS 1,562,004 1,120,297
RECEIVABLES
Participants' contributions 56,399 48,561
Accrued investment income 6,949 2,318
TOTAL RECEIVABLES 63,348 50,879
TOTAL ASSETS 1,625,352 1,171,176
NET ASSETS AVAILABLE FOR BENEFITS $ 1,625,352 $ 1,171,176
The accompanying notes are an integral part of these financial
statements.
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(Note 6)
1994 1993
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year $ 1,171,176 $ 680,440
ADDITIONS
Participants' contributions 678,506 546,062
Investment income 63,602 23,354
Net realized and unrealized
depreciation on investments
(Note 2) (79,905) (2,802)
662,203 566,614
DEDUCTIONS
Distributions 194,389 69,403
Administrative expenses (Note 4) 13,638 6,475
208,027 75,878
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 1,625,352 $ 1,171,176
The accompanying notes are an integral part of these financial
statements.
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 and 1993
1. PLAN DESCRIPTION:
The following description of the Bairnco Corporation 401(k)
Savings Plan and Trust (the "Plan") provides only general
information. Participants of the Plan should refer to the Plan
document for a complete description of the Plan's provisions. The
Plan document is available from Bairnco Corporation at its offices
in Maitland, Florida.
General
Bairnco Corporation ("Bairnco" or the "Corporation")
established the Plan effective July 1, 1991. The Plan is a defined
contribution plan under which all full-time employees become
eligible for participation after the completion of six months of
service and the attainment of age eighteen. Employees who are
eligible for participation may enroll in the Plan as of any January
1 or July 1. Once an employee enrolls in the Plan, salary
deferrals (contributions) may commence on any quarterly date of
January 1, April 1, July 1 or October 1. The Plan excludes non-
resident aliens, leased employees and independent contractors from
participating in the Plan. Union employees of the Corporation are
permitted to participate in the Plan. The Plan is subject to the
Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
Under the terms of the Plan, allowable contributions are
outlined as follows:
Employee Contributions - The participants may elect to defer
a minimum of 1% and a maximum of 25% of compensation, as
defined in the Plan, not to exceed $9,240 and $8,994, for 1994
and 1993, respectively. The maximum dollar amount that may be
deferred is adjusted annually by the Internal Revenue Service.
The amount of the compensation which is deferred, plus any
earnings or losses on that amount, is not subject to federal
income tax until the funds are actually distributed to the
participant by the Plan. However, contributions are subject
to FICA (Social Security and Medicare Taxes) even though the
compensation has not yet been distributed.
Employer Contributions - Although the Corporation may make
matching contributions pursuant to the Plan, no such
contributions were made to the Plan during 1994 or 1993.
In order to satisfy the rules of Section 401(k) of the
Internal Revenue Code, contributions to the Plan by the Highly
Compensated Participant group (as defined in the Plan) are
limited to an average deferral percentage based upon the
average deferral percentage of the Non-Highly Compensated
Participant group (as defined in the Plan).
Participant Accounts
Participants' contributions to the Plan are placed into a
trust fund which is maintained for the exclusive benefit of the
Plan's participants or a participant's designated beneficiary in
the event of the death of the participant. Within the trust fund,
separate accounts are maintained for each participant into which
are allocated the portion of the trust fund attributable to each
participant's contributions and investment earnings and losses.
The Trustee's (see Note 4) direct costs of administering the Trust
Fund and the individual participant accounts are charged to the
participants' accounts. The benefit to which a participant is
entitled is the amount that can be provided from the participant's
aggregate account.
Vesting
A participant shall at all times have a 100 percent
nonforfeitable interest in the value of his/her account
attributable to all contributions made plus or minus investment
earnings and losses thereon and related administrative costs.
The vested portion of any participant's employer matching
account shall be 20% after three years of service and 20% each year
thereafter, so that the employee's accrued benefit relating to
employer contributions will be 100% vested after seven years,
regardless of when the contribution was made during the term of
employment.
Transfers From Other Qualified Plans
Participants who have an interest in any other qualified
employee benefit plan (as described in Section 401(a) of the
Internal Revenue Code) may transfer the distributions from these
plans directly into the Plan at the discretion of the
Administrative Committee (see Note 4).
Distributions
A participant who has attained age 59-1/2 may elect, by filing
a written application with the Administrative Committee, to
withdraw any amount up to 100 percent of the vested portion of his
account, for any reason. For participants who have not attained
age 59-1/2, the reasons for such withdrawals are restricted to
those defined in the Plan.
Upon termination of employment, a participant can elect to
have the balance in the participant's account distributed to the
participant in a single lump sum cash distribution or a partial
distribution if requested in writing by the participant. As an
alternative, the participant may also elect to leave the related
funds in the Plan or transfer the related funds into another
qualified plan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accounting records of the Plan and the Plan's assets are
maintained by SunBank, N.A.. The participants' account balances
are determined on the cash basis; however, the Plan's financial
statements contained herein are presented on an accrual basis.
Investments are stated at fair market value. Securities which
are traded on a national securities exchange are valued at the last
reported sales price on the last business day of the year. Any
unlisted securities are valued at the bid price next preceding the
close of business on the valuation date.
Any unrealized appreciation/depreciation on investments
represents the difference between fair value of investments at the
beginning of the Plan year or when acquired, whichever is later,
and the fair value of investments at the end of the Plan year. Net
realized gains/(losses) from the sale of investments amounted to
$2,542 and $(5,408) for the Plan years ended December 31, 1994 and
1993, respectively.
3. INVESTMENTS:
There are four investment options into which participants may
direct the investment of their accounts. These are a Corporate
Equity Fund (common stock fund), an Intermediate Fixed Income Fund
(corporate bond fund), a Retirement Reserve Fund (money market
fund) and the Bairnco Corporation Common Stock Fund (Bairnco common
stock fund). Participants may separately direct the investment of
future deferrals and existing account balances into these four
investment options in increments of 10%. During 1993 and 1994,
participants were permitted to modify their elections for
investment of future deferrals and existing account balances
between investment funds as of January 1, April 1, July 1 or
October 1. Notice of the change had to be given to the Plan
Administrator prior to the fifth business day of the month
preceding the date of change.
Investments within the corporate bond fund and common stock
fund are made by the Plan Trustee (Note 4) on behalf of the Plan.
These investments are maintained in an investment portfolio with
the Corporation's defined retirement benefit plan investments. As
such, the individual stock and bond investments allocable to the
Plan cannot be specifically identified in the attached Schedule of
Assets Held for Investment. The combined statements of investments
for these funds may be obtained from the Plan Trustee.
4. TRUST AGREEMENT:
Since the inception of the Plan, SunBank, N.A. has acted as
Plan Trustee pursuant to the Plan document which is signed by the
Corporation and Trustee. SunBank, N.A. manages the Plan assets,
makes investment decisions within the funds and makes distributions
to participants as directed by the Plan Administrator. The 401(k)
Administrative Committee of the Corporation is the Plan
Administrator. Expenses incurred by the Plan Trustee or the Plan
Administrator in the performance of their duties may be paid by the
Plan or the Corporation at the Corporation's discretion.
5. PLAN TERMINATION:
Although it has not expressed any intent to do so, the
Corporation reserves the right under the Plan to terminate the
Plan, in whole or in part, at any time. In the event of the Plan's
termination, the Plan assets will be distributed to the
participants in lump sum distributions or transferred to another
qualified plan at the direction of the participant. Upon the
Plan's termination all amounts credited to participants' accounts
are 100% vested.
6. CHANGES IN NET ASSETS BY INVESTMENT FUND:
The following schedule presents changes in the net assets of
the investment funds for the year ended December 31, 1994.
<TABLE>
<CAPTION>
BAIRNCO
COMMON CORPORATE MONEY COMMON
STOCK BOND MARKET STOCK
FUND FUND FUND FUND TOTAL
<S> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS, 01/01/94 $ 574,012 $ 286,896 $ 264,725 $ 45,543 $1,171,176
ADDITIONS:
Participants' contributions 343,699 141,741 158,863 34,203 678,506
Investment income 39,684 6,114 14,684 3,120 63,602
Net realized and unrealized
appreciation (depreciation)
on investments (81,918) (4,076) -- 6,089 (79,905)
Transfers from other funds 1,865 -- 64,746 62,261 128,872
303,330 143,779 238,293 105,673 791,075
DEDUCTIONS:
Distributions (101,653) (35,051) (48,421) (9,264) (194,389)
Administrative expenses (6,191) (3,109) (3,384) (954) (13,638)
Transfers to other funds (59,419) (69,453) -- -- (128,872)
(167,263) (107,613) (51,805) (10,218) (336,899)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS, 12/31/94 $ 710,079 $ 323,062 $ 451,213 $ 140,998 $1,625,352
</TABLE>
7. TRANSACTIONS WITH PARTIES IN INTEREST:
Under Department of Labor Rules and Regulations for Reporting
and Disclosure, the Plan is required to report investment
transactions with and compensation paid to a "party in interest".
The term "party in interest" is broadly defined but includes
Bairnco Corporation as the Plan's sponsor, SunBank, N.A., as Plan
Trustee, and any person or corporation which renders services to
the Plan. Certain 1994 and 1993 fees for legal and accounting
services provided in connection with the Plan were paid by the Plan
sponsor on behalf of the Plan during these years. Additional fees
paid by the Plan during 1994 and 1993 for services rendered by
parties in interest were based on rates which the Plan's
Administrator believes were customary and reasonable.
8. INCOME TAX STATUS:
The Plan obtained its latest determination letter on November
6, 1992, in which the Internal Revenue Service stated that the
Plan, as then designed, was in compliance with the applicable
requirements of the Internal Revenue Code. The Plan has been
amended since receiving the determination letter. However, the
plan administrator and the plan's tax counsel believe the Plan is
currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore,
they believe that the Plan was qualified and the related trust was
tax exempt as of December 31, 1994.
9. SUPPLEMENTAL SCHEDULES:
Supplemental Schedule I lists the reportable transactions of
the Plan for the year ended December 31, 1994. Purchases and sales
are made at current value on the date of transaction.
Supplemental Schedule II lists the Plan assets held for
investment at December 31, 1994.
Supplemental Schedule III lists transactions with parties in
interest of the Plan for the year ended December 31, 1994.
<TABLE>
<CAPTION>
SCHEDULE I
BAIRNCO CORPORATION
401 (k) SAVINGS PLAN AND TRUST
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
Sales
Sales Sales Net Gain
Description of Asset Purchases Cost Proceeds (Loss)
<S> <C> <C> <C> <C>
Money Market Fund
Purchases:
STI Classic Prime Quality Money
Market Fund, Class A Trust Shares $ 243,517
Sales:
STI Classic Prime Quality Money
Market Fund, Class A Trust Shares $ 52,805 $ 52,805 $ --
Total Money Market Fund $ 243,517 $ 52,805 $ 52,805 $ --
Corporate Bond Fund
Purchases:
SunTrust Corporate Inter Fixed
Income Fund, 3,091 units between
$24.19 and $24.91 per unit $ 75,886
STI Classic Prime Quality Money
Market Fund, Class A Trust Shares 504,350
STI Classic Investment Grade
Bond Fund, 37,042.317 units
between $9.54 and $9.71 per unit 359,033
Sales:
SunTrust Corporate Inter Fixed
Income Fund, 14,238 units between
$24.33 and $24.76 per unit $ 339,471 $ 351,785 $ 12,314
STI Classic Prime Quality Money
Market Fund, Class A Trust Shares 507,653 507,653 --
STI Classic Investment Grade
Bond Fund, 4,719.545 units
between $9.55 and $9.68 per unit 45,791 45,405 (386)
Total Corporate Bond Fund $ 939,269 $ 892,915 $ 904,843 $ 11,928
Common Stock Fund
Purchases:
STI Classic Capital Growth Fund,
35,601.77 units between
$10.83 and $12.73 per unit $ 418,274
STI Classic Prime Quality Money
Market Fund, Class A Trust Shares 423,413
Sales:
STI Classic Capital Growth Fund,
18,103.255 units between
$10.83 and $12.49 per unit $ 216,073 $ 211,289 $ (4,784)
STI Classic Prime Quality Money
Market Fund, Class A Trust Shares 415,977 415,977 --
Total Common Stock Fund $ 841,687 $ 632,050 $ 627,266 $ (4,784)
</TABLE>
<TABLE>
<CAPTION>
(Schedule I continued)
Sales
Sales Sales Net Gain
Description of Asset Purchases Cost Proceeds (Loss)
<S> <C> <C> <C> <C>
Bairnco Common Stock Fund
Purchases:
Bairnco Corporation Common Stock,
23,862 units between $3.25
and $5.25 per unit $ 94,458
STI Classic Prime Quality Money
Market Fund, Class A Trust Shares 102,488
Sales:
STI Classic Prime Quality Money
Market Fund, Class A Trust Shares $ 104,917 $ 104,917 $ --
Total Bairnco Common Stock Fund $ 196,946 $ 104,917 $ 104,917 $ --
The accompanying notes are an integral part of this schedule.
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE II
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
SCHEDULE OF ASSETS HELD FOR INVESTMENT
AS OF DECEMBER 31, 1994
Market Value Unrealized
Description (Note 2) Cost Depreciation
<S> <C> <C> <C>
Common Stocks
Bairnco Corporation, 33,642 shares $ 136,704 $ 153,277 $(16,573)
Other Common Stock 679,727 741,836 (62,109)
Total Common Stocks $ 816,431 $ 895,113 $(78,682)
Other Investments
Money Market Funds $ 435,919 $ 435,919 $ --
Corporate Bonds 309,654 313,242 (3,588)
Total Other Investments $ 745,573 $ 749,161 $ (3,588)
Total $1,562,004 $1,644,274 $(82,270)
The accompanying notes are an integral part of this schedule.
</TABLE>
SCHEDULE III
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
SCHEDULE OF TRANSACTIONS WITH PARTIES IN INTEREST
FOR THE YEAR ENDED DECEMBER 31, 1994
Description Amount
Sold 359 shares of Bairnco Corporation Common Stock
at $3.750 less commission of $43.08 $ 1,303
Sold 1,047 shares of Bairnco Corporation Common Stock
at $3.625 less commission of $94.23 $ 3,701
Sold 719 shares of Bairnco Corporation Common Stock
at $4.125 less commission of $64.71 $ 2,901
Purchased 516 shares of Bairnco Corporation Common
Stock at $3.750 plus commission of $61.92 $ (1,997)
Purchased 4,965 shares of Bairnco Corporation Common
Stock at $3.250 plus commission of $446.85 $(16,583)
Purchased 1,345 shares of Bairnco Corporation Common
Stock at $3.625 plus commission of $121.05 $ (4,997)
Purchased 538 shares of Bairnco Corporation Common
Stock at $3.625 plus commission of $48.42 $ (1,999)
Purchased 402 shares of Bairnco Corporation Common
Stock at $4.875 plus commission of $36.18 $ (1,996)
Purchased 636 shares of Bairnco Corporation Common
Stock at $5.250 plus commission of $57.24 $ (3,396)
Purchased 1,036 shares of Bairnco Corporation Common
Stock at $4.250 plus commission of $93.24 $ (4,496)
Purchased 12,224 shares of Bairnco Corporation Common
Stock at $4.000 plus commission of $1,100.16 $(49,996)
Purchased 2,200 shares of Bairnco Corporation Common
Stock at $4.000 plus commission of $198.00 $ (8,998)
The accompanying notes are an integral part of this schedule.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Administrative Committee has duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly
authorized.
BAIRNCO CORPORATION 401(K)
SAVINGS PLAN AND TRUST
(Name of Plan)
Date: March 17, 1995 By: /s/ J. Robert Wilkinson
J. ROBERT WILKINSON
Administrative Committee Member
