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, 1995
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 (IRS 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 18, 1996, the aggregate market value of the Registrant's voting
stock held by non-affiliates was $57,575,423.
On March 18, 1996, there were 9,834,934 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, 1995. Part III
incorporates information by reference from the Proxy Statement dated March 21,
1996 in connection with the Registrant's Annual Meeting of Stockholders to be
held on April 19, 1996.
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 and
1993, and in other financial information accompanying this filing.
During 1994 the majority of the Specialty Construction businesses were
sold. The smallest and last remaining operation of the Specialty
Construction business was sold on December 29, 1995. The secure
communications business was sold on November 30, 1995.
As a result of the restructuring plan, Bairnco's focus is now on its
two remaining core businesses: Arlon's Engineered Materials and Components,
and Kasco's Replacement Products and Services.
At December 31, 1995, Bairnco employed 820 persons including 12
Headquarters personnel. Bairnco's operations occupy approximately 707,600
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 business sectors. 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. Kasco also distributes
equipment to the food industry in Canada and France.
Financial data and other information about the Corporation's segments
is set forth in Note 10 to the Consolidated Financial Statements on pages
23 and 24 and on pages 4 through 7 of Bairnco's 1995 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 1995 Annual Report to Stockholders, and "Management's
Discussion and Analysis" set forth on pages 10 and 11 of Bairnco's 1995
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 under the Arlon brand identity to electronic, industrial and
commercial markets. These products are based on a common technology in
coating, laminating and dispersion chemistry. Arlon's principal products
include high performance materials for the printed circuit board market of
the electronics industry, cast and calendered vinyl film systems, custom
engineered laminates and pressure sensitive adhesive systems, and
calendered and extruded silicone rubber insulation products used in a broad
range of industrial, consumer and commercial products.
Arlon circuit board materials (also referred to as substrates) are
grouped as follows: (1) High performance and high temperature materials
used in circuit boards for military electronics and sophisticated
commercial applications, such as in the surface mount electronics for the
Motorola worldwide satellite telephone systems (Iridium) and circuit boards
used in burn-in ovens to routinely test semiconductors. Intermediate
temperature laminates which provide both improved product reliability in
the field and ease of manufacture are also key to the line. Specialty
products have been developed for the surface mounting of computer chips on
circuit boards and multi-chip modules which are growing segments of the
printed circuit board market; and, (2) Frequency dependent and low signal
loss materials used for circuit boards and antennas used in microwave
applications such as digital cordless telephones, local and global cellular
phone systems, direct broadcast satellite TV systems, global positioning
satellite systems and other personal communications systems. Additional
wireless opportunities for Arlon circuit board materials include local area
networks for computers and public business exchange systems or PBX's, toll
booth reading systems and collision avoidance systems. A major emerging
market for wireless communications is the phone systems which are being
planned for a number of developing countries such as India and Argentina.
These systems are being designed wireless both to reduce system maintenance
costs and to expedite and reduce cost of installation.
Arlon specialty graphic films include cast and calendered vinyl films
that are manufactured and marketed under the Calon brand name. These films
are offered 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, electrical insulation, thermal insulation panels
for appliances and cars, security tags and labels, durable printing stock
for high speed laser printing systems and custom engineered laminates for
specific industrial applications.
A line of silicone rubber based materials, used in a broad range of
consumer, industrial, utility and commercial products, is also manufactured
and marketed under the Arlon brand name. Typical applications of these
materials include silicone rubber roll material used in molding composites,
silicone rubber tape to insulate coil windings of electric traction motors
(most notably locomotive traction motors), insulating tapes for industrial
flexible heaters and power utility 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 Corporation's.
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. For
high performance materials sold to the printed circuit board industry, the
consistent technical performance of the materials supplied in excess of
minimum specified 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, the
Far East 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 chemical companies 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 $8,109,000 as of December 31, 1995,
$7,833,000 as of December 31, 1994 and $7,998,000 as of December 31, 1993.
Substantially all of the backlog as of December 31, 1995 is scheduled for
shipment in 1996.
Employees
As of December 31, 1995, approximately 445 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
under the Kasco name 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 a seasoning line to supermarkets,
as well as other customers.
Kasco also provides preventive maintenance and repair parts and
service for a broad range of supermarket equipment primarily in the meat
and deli areas in selected markets.
Replacement products and services are sold under a number of brand
names including Kasco in the United States and Canada, Atlantic Service in
the United Kingdom, and Bertram & Graf and Biro in Continental Europe.
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. During 1995, Kasco's management
took numerous actions to improve the efficiencies in manufacturing and
distribution. These actions, together with the significant investment in
new grinding and other manufacturing equipment and techniques has resulted
in improved quality, more efficient operations and improved customer
service.
In North America, Kasco supplies its products and services directly
to the supermarket and meat cutting industries through route sales people.
They make regularly scheduled calls on the accounts in their region. They
both supply the Company's products and provide related equipment
maintenance services. The route sales people are continuously trained in
the service and maintenance of the equipment used in the meat preparation
areas of retail food outlets. The field computerization program permits
the route sales people to more efficiently service their customer base.
Kasco currently operates service centers in four regions of North
America. The service centers provide preventive maintenance programs and
emergency repair programs for a broad range of equipment primarily in the
meat preparation and deli areas of supermarkets and other retail food
outlets in their geographical areas.
During 1995 the service center program was refocused on four selected
market areas where Kasco can provide more cost effective, value added
preventive maintenance and emergency service in concentrated geographical
markets. These actions resulted in a $2 million reduction in revenues and
phase out expenses which continued in reducing amounts throughout 1995. The
net impact of the cost savings began to be evident during the last part of
1995 and should provide continuing benefits in 1996.
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, 1995, approximately 363 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 24 of
Bairnco's 1995 Annual Report to Stockholders which is incorporated herein
by reference.
In addition, export sales from the Corporation's US based operations
for the years ended December 31, 1995, 1994 and 1993 were $27,115,000,
$21,093,000 and $17,835,000, respectively. Export sales to any particular
country or geographic area did not exceed 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 68,000 square feet of leased space related to
discontinued operations discussed in Note 3 on page 19 of Bairnco's 1995
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 707,600
Headquarters
Maitland, FL 7,700 Leased(Expires 2000)
Replacement Products and Services (KASCO)
Calgary, Alberta, Canada 2,000 Leased(Expires 1996)
City of Industry, CA 15,000 Leased(Expires 1997)
Edmonton, Alberta, Canada 2,400 Leased(Expires 1996)
Gwent, Wales, UK 25,000 Owned
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 4,800 Leased(Expires 1996)
Scarborough, Ontario, Canada 20,000 Owned
St. Louis, MO 75,000 Owned
St. Louis, MO 50,000 Leased(Expires 1996)
Saskatoon, Saskatchewan, Canada 1,400 Leased(Expires 1996)
Vancouver, B.C., Canada 11,000 Leased(Expires 1998)
Winnipeg, Manitoba, Canada 5,000 Leased(Expires 1997)
Field Warehouses
(Approximately 70 locations
in North America) 24,000 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 intention to spin off
Keene, Bairnco has been named as a defendant in a number of individual
personal injury and wrongful death cases in which it is alleged that
Bairnco is derivatively liable for the asbestos-related claims against
Keene. In 1993, Bairnco and certain of its present and former officers and
directors were also named as defendants in two purported class actions in
which the same types of claims were made. Both of these purported class
actions, which were consolidated in the United States District Court for
the Southern District of New York, were subsequently stayed by order of the
Bankruptcy Court for the Southern District of New York, as described in the
following paragraph.
On December 6, 1993, Keene filed for protection under Chapter 11 of
the Bankruptcy Code. The filing and certain subsequent proceedings led to
a stay of the asbestos-related individual and class actions referred to
above. On May 5, 1995, the Bankruptcy Court overseeing the reorganization
of Keene entered an order allowing the Creditors' Committee to assume from
Keene responsibility for the pursuit of claims arising out of the transfer
of assets for value by Keene to other subsidiaries of Bairnco and the spin-
offs of certain subsidiaries, including Keene, by Bairnco. On June 8,
1995, the Creditors' Committee commenced an adversary proceeding in the
Bankruptcy Court against Bairnco and others alleging that the transfers of
assets by Keene were fraudulent and otherwise violative of law and seeking
compensatory damages of $700 million, plus interest and punitive damages.
Bairnco and other defendants have sought to have the proceeding removed to
the United States District Court for the Southern District of New York to
the judge before whom the class actions described above are pending. Their
application for such transfer is pending. Bairnco and other defendants in
the adversary proceeding have reached an agreement in principle with
respect to the transfer of the adversary proceeding to the District Court
(following the confirmation of Keene's plan of reorganization). The
agreement is, however, subject to final documentation and requires the
approval of the Bankruptcy Court before it can become effective. In the
meantime, no answers or responsive pleadings have been filed in the
adversary proceeding, and all proceedings have been stayed.
Management believes that Bairnco has meritorious defenses to all
claims or liability purportedly derived from Keene and that it is not
liable, as an alter ego, successor, fraudulent transferee or otherwise, for
the asbestos-related claims against Keene or with respect to Keene
products.
Bairnco is party to a separate action brought by Keene in the United
States Bankruptcy Court for the Southern District of New York in which
Keene seeks the exclusive benefit of tax refunds attributable to the
carryback by Keene of certain net operating losses, notwithstanding certain
provisions of tax sharing agreements between Keene and Bairnco. (After
filing this action, Keene ceded control of the action to the Creditors'
Committee.) Pending resolution of the dispute by the Bankruptcy Court, any
refunds actually received are to be placed in escrow. Through December 31,
1995, approximately $12.1 million of refunds had been received and placed
in escrow. Subsequent to year-end, an additional $14.4 million of refunds
were received and placed in escrow. There can be no assurance whatsoever
that resolution of the dispute with Keene will result in the release of any
portion of the refunds to Bairnco.
Bairnco Corporation and its subsidiaries are defendants in a number
of other actions. Management of Bairnco believes that the disposition of
these other actions, as well as the actions and proceedings described
above, will not have a material adverse effect on the consolidated results
of operations or the financial position of Bairnco Corporation and its
subsidiaries as of December 31, 1995.
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 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
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 (54) 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 (61) 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.
Barry M. Steinhart (43) 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 (33) Mr. Pruim was appointed
Controller of Bairnco
Corporation in August, 1994. In
October 1995, Mr. Pruim was also
elected as Acting President of
Kasco Corporation. 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 12 of Bairnco's 1995 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 14 of Bairnco's 1995 Annual Report to Stockholders
which is incorporated herein by reference. The quarterly cash
dividend remained constant at $0.05 per share during 1995. 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 21 of Bairnco's 1995 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, 1995
Common Stock, Par Value $.01 per share 1,967
Item 6. SELECTED FINANCIAL DATA
Reference is made to "Financial History" on page 9 of
Bairnco's 1995 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 1995 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 14 through 24 and the
"Quarterly Results of Operations" on page 12 of Bairnco's 1995
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 1996 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 1996 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 1996 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 1996 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 1995 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, 1995, 1994 and 1993;
- Consolidated Balance Sheets as of December 31, 1995
and 1994;
- Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993;
- Consolidated Statements of Stockholders' Investment
for the years ended December 31, 1995, 1994 and
1993;
- 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, 1995, 1994 and 1993:
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 27 of this
Annual Report on Form 10-K.
b) Reports on Form 8-K - None for fiscal year 1995.
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 26, 1996 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 25, 1996. Our audits were made for the
purpose of forming an opinion on those statements taken as a
whole. The schedule listed in Item 14(a) 2 is the responsibility
of the company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and
is not part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in
the audits of the basic consolidated financial statements and, in
our opinion, fairly states 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 25, 1996
Arthur Andersen LLP
<TABLE>
BAIRNCO CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
Balance Balance
Year Ended Beginning Deductions End
December 31, of Year Expenses <F1> of Year
<S> <C> <C> <C> <C>
1995 - Reserve
for Doubtful
Accounts $1,097,000 $202,000 $(536,000) $ 763,000
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
<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, 1995
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 NA, 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 NA.
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 NA, 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. 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.
v. 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.
w. 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.
x. 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.
y. 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.
z. Amendment dated as of April 18, 1995, to Amended and Restated Credit
Agreement dated as of December 17, 1992, by and among Bairnco
Corporation and certain of its subsidiaries and certain Commercial
Lending Institutions and Continental Bank NA (now Bank of America,
Illinois), as the Agent for Lenders.
Incorporated herein by reference to Exhibit 4 to Bairnco's
Quarterly Report on Form 10-Q for the quarterly period ended
April 1, 1995.
aa. Calculation of Primary and Fully Diluted Earnings per Share for the
years ended December 31, 1995, 1994 and 1993.
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, 1995.
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, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE: <F1>
Income from continuing operations $ 7,781,000 $ 7,255,000 $ 817,000
(Loss) from discontinued
operations, net of income taxes -- -- (23,395,000)
Net Income (Loss) $ 7,781,000 $ 7,255,000 $(22,578,000)
Average common shares outstanding 10,433,000 10,500,000 10,500,000
Common shares issuable in respect
to common stock equivalents,
with a dilutive effect 3,000 -- --
Total common and common equivalent
shares 10,436,000 10,500,000 10,500,000
Primary Earnings Per Common Share:
Continuing operations $ 0.75 $ 0.69 $ 0.08
Discontinued operations -- -- (2.23)
Total $ 0.75 $ 0.69 $ (2.15)
FULLY DILUTED EARNINGS PER SHARE:
Income from continuing operations $ 7,781,000 $ 7,255,000 $ 817,000
(Loss) from discontinued
operations, net of income taxes -- -- (23,395,000)
Net Income (Loss) $ 7,781,000 $ 7,255,000 $(22,578,000)
Total common and common equivalent
shares 10,436,000 10,500,000 10,500,000
Additional common shares assuming
full dilution 4,000 -- --
Total common shares assuming full
dilution 10,440,000 10,500,000 10,500,000
Fully Diluted Earnings Per Common
Share:
Continuing operations $ 0.75 $ 0.69 $ 0.08
Discontinued operations -- -- (2.23)
Total $ 0.75 $ 0.69 $ (2.15)
<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 1995
THE COMPANY
Bairnco Corporation is a diversified multinational company that operates
two business sectors.
Engineered materials and components are designed, manufactured and sold
under the Arlon brand identity to electronic, industrial and commercial
markets. These products are based on a common technology in coating,
laminating and dispersion chemistry. Arlon's principal products include
high performance materials for the printed circuit board industry, cast and
calendered vinyl film systems, custom engineered laminates and pressure
sensitive adhesive systems, and calendered and extruded silicone rubber
insulation products used in a broad range of industrial, consumer and
commercial products.
Replacement products and services are manufactured and distributed under
the Kasco name principally to retail food stores and meat, poultry and fish
processing plants throughout the United States, Canada and Europe. The
principal products include replacement band saw blades for cutting meat,
fish, wood and metal, and on-site maintenance services for the retail food
industry primarily in the meat and deli departments. Kasco also
distributes equipment to the food industry in Canada and France. These
products are sold under a number of brand names including Kasco in the
United States and Canada, Atlantic Service in the United Kingdom, and
Bertram & Graf and Biro in Continental Europe.
STRATEGY
Bairnco's strategy is to serve a broad range of niche markets with quality
products and services, while providing extra value to its customers through
focused and cost effective organizations and facilities. Bairnco strives
to develop true partnership relationships with its customers in these
selected markets through close cooperation in developing value added
solutions to their needs. Bairnco seeks to identify and participate in
those markets that will provide growth opportunities due to either
technical developments or the changing needs of the customers.
OBJECTIVES
Bairnco believes that concentrating its resources in selected market niches
can provide the basis to achieve both superior profitability and growth.
Management's long term objectives are to achieve a 15% compound rate of
earnings growth, a 20% return on stockholders' investment, and a 15% return
on total capital employed.
CONTENTS
Financial Highlights................................... 1
Letter to our Stockholders............................. 2
Engineered Materials & Components (Arlon).............. 4
Replacement Products & Services (Kasco)................ 7
Directors and Management............................... 8
Financial History...................................... 9
Management's Discussion and Analysis................... 10
Quarterly Results of Operations........................ 12
Report of Independent Certified Public Accountants..... 13
Consolidated Financial Statements.... ................. 14
Notes to Consolidated Financial Statements............. 18
<TABLE>
FINANCIAL HIGHLIGHTS
(In thousands except per share data)
<CAPTION>
Percent Change
1995 1994 1993 95/94 94/93
<S> <C> <C> <C> <C> <C>
Net Sales $ 150,507 $ 145,522 $ 134,958 3% 8%
Earnings before Interest,
Charges and Taxes <F1> $ 14,633 $ 13,654 $ 13,617 7% 0%
Operating Profit $ 14,633 $ 13,654 $ 4,874 7% 180%
Income from
Continuing Operations $ 7,781 $ 7,255 $ 817 7% 788%
Earnings per Share from
Continuing Operations $ 0.75 $ 0.69 $ 0.08 9% 763%
Cash Dividends per Share $ 0.20 $ 0.20 $ 0.20 0% 0%
Stockholders' Investment
per Share $ 4.60 $ 4.19 $ 3.67 10% 14%
Total Assets $ 98,196 $ 102,772 $ 107,981 (4%) (5%)
Stockholders' Investment $ 48,024 $ 43,997 $ 38,515 9% 14%
Average Shares Outstanding 10,440 10,500 10,500 (1%) 0%
<FN>
<F1> Excludes impact of non-recurring litigation and restructuring costs of
$8,743 in 1993 - see Note 2 to Consolidated Financial Statements.
</FN>
</TABLE>
Graphic - Bar Chart depicting Sales (y-axis) for five years - 1991 to
1995 (x-axis):
Year Sales
(in thousands)
1991 $128,566
1992 $135,581
1993 $134,958
1994 $145,522
1995 $150,507
Graphic - Bar Chart depicting Income from Continuin Operations (y-axis)
for five years - 1991 to 1995 (x-axis):
Income from
Year Continuing Operations
(in thousands)
1991 $6,643
1992 $7,755
1993 $ 817
1994 $7,255
1995 $7,781
LETTER TO OUR STOCKHOLDERS
1995 was a year of continued progress for Bairnco. Sales and earnings
increased. Debt was again reduced. Our strong financial condition
improved. The quality and focus of management was improved in several
operations.
FINANCIAL RESULTS
Sales increased 3.4% to $150,507,000 in 1995 from $145,522,000 in 1994.
Arlon's sales increased 7.8%. Kasco's sales decreased 4.1% which was
planned as part of the program to focus Kasco on its core business.
In 1995, gross profit increased nominally to $53,317,000 from
$53,177,000 in the prior year. The favorable impact from increased sales
was offset by the decline in gross profit margins to 35.4% from 36.5% last
year. Arlon's gross profit increased only 3.1% as a result of the growth in
lower margin commercial products and margin erosion in certain market
segments due to competitive pressures. Kasco's gross profit declined 3.5% as
a result of the 4.1% sales decrease, whereas its gross profit margin
increased slightly due to an improved sales mix and reduced manufacturing
costs.
Selling and administrative expenses decreased $839,000 or 2.1% to
$38,684,000 from $39,523,000 in 1994. As a percent of sales, these expenses
decreased to 25.7% in 1995 from 27.2% in 1994. Selling expense decreased
slightly as the reductions in Kasco from focusing on the core business were
partially offset by the continued investment in sales and marketing expenses
to grow selected Arlon segments. Administrative expenses continued to be
reduced both absolutely and as a percentage of sales. Research and
development expenses increased 3.0% as Bairnco continued to invest in the
development of new products and improved quality.
Earnings before taxes increased 9.5% to $12,607,000 in 1995 as compared
to $11,510,000 in 1994. The effective tax rate increased to 38.3% from
37.0% in 1994.
Net income increased 7.3% to $7,781,000 in 1995 as compared to $7,255,000
in 1994. Earnings per share increased 8.7% to $.75 from $.69 last year.
As a result of the stock repurchase program, the average number of shares
outstanding in 1995 was 10,440,000, a 0.6% decrease from the 10,500,000
average outstanding in 1994.
DIVESTITURES
During 1995 the two small remaining operations that have been carried as
discontinued operations as the result of the restructuring in 1993 were
sold for prices consistent with the original restructuring.
FINANCIAL MANAGEMENT
Return on capital employed increased to 11.9% from 10.6% last year.
However, the return on stockholders' investment in 1995 was 16.7% down from
17.4% last year as a result of reduced debt and increased net worth.
Management continues to work towards our long term objectives of a 20% return
on stockholders' investment and a 15% return on total capital employed.
In 1995, Bairnco's Board of Directors authorized the repurchase of up to
$5,000,000 of its common stock. During the year the Company repurchased
486,200 shares for $2,580,000. The Board has authorized management to
continue its stock repurchase program in 1996 subject to market conditions
and the capital requirements of the business.
Working capital as a percent of sales increased from 18.1% to 18.8%.
The increase in accounts receivable is due to the increase in export business
which has longer payment terms. Inventories increased 18.4% or $3.7 million.
Inventories were built in anticipation of higher sales which did not
materialize in the last part of the year. A program is in place to reduce
excess inventories during 1996.
Net cash flows provided by operating activities were $14,665,000. These
cash flows provided the cash used to reduce debt, fund Bairnco's capital
expenditure program, pay dividends and repurchase stock in 1995.
During 1995 total debt was reduced by $7,197,000. Debt as a percent of
equity declined to 51.2% from 72.2% in 1994. At yearend 1995, Bairnco
had $22.7 million available under its revolving credit agreement, and $5.6
million available under short term lines of credit.
1995 capital expenditures were $4,831,000 as compared to a plan of
$14,400,000. The reduction in capital expenditures from plan was due
primarily to the deferment of a capacity addition from 1995 to 1997.
Substantial improvements in operating efficiencies in 1995 and planned for
1996 permitted the postponement of this major capital expenditure.
Depreciation and amortization was $6,314,000. The focus of the capital
expenditure program during 1995 was primarily on required replacements,
efficiency and quality improvements, and some capacity additions.
The capital expenditure plan for 1996 is approximately $12.3 million.
Depreciation and amortization is estimated to be approximately $7.0 million.
The planned capital expenditures include anticipated replacements, quality
improvements, cost reduction projects, new product developments, new
processing equipment and capacity additions. Approximately $3 million of the
planned expenditures are contingent upon the realization of the anticipated
growth in several segments of the electronic markets.
DIVIDEND
The quarterly $.05 per share cash dividend was maintained during the year.
MANAGEMENT
During September, 1995, Elmer Pruim, Controller of Bairnco Corporation,
also was appointed acting President of Kasco North America. Elmer had
been working with Kasco management from the beginning of the year to
improve the efficiencies of the administrative and management support
functions. His role was expanded to further expedite the management process
of improved customer service, continued cost reductions and efficiency
improvement programs. Jim Whiteaker resigned to pursue other interests.
During 1995 the management development program, which is one of the
keys to our future success, continued to make progress in all operations.
Many key positions were filled or upgraded through a combination of internal
promotions and external additions. The ongoing improvement and development
of all our employees remains a critical and never ending requirement for
Bairnco's future success.
SUMMARY AND OUTLOOK
1995 was a year of progress for Bairnco. Arlon's results continued
to manifest the benefits of investing in the development of new products,
new markets, and expanded sales, marketing and research efforts.
The program of refocusing Kasco North America to become the preeminent
supplier of cutting products and routine in-store equipment services made
substantial progress during the year. There were substantial expenses
incurred in the reengineering and cost reduction programs. By the fourth
quarter some of the benefits of the actions started to appear in the
financial results as compared to last year. The process is continuing and
will take time. We do, however, expect to see continuing benefits in 1996
and beyond from the actions taken and to be taken.
The outlook for 1996 is for improved sales and earnings. The US economy
is expected to experience slow growth during 1996. The continuing
maintenance of high relative interest rates by the Federal Reserve is
expected to further slow the economy, if not result in no growth or a modest
recession. The pressures from many of our suppliers to increase their prices
has abated with the exception of some select materials that remain in short
supply. It is expected that the combination of growth in certain niche
markets, benefits accruing from past and programmed cost reduction efforts,
aggressive efficiency improvement projects, as well as modest price
increases, should result in continued financial improvement for 1996.
Respectfully yours,
Luke E. Fichthorn III
Chairman and CEO
ENGINEERED MATERIALS AND COMPONENTS
BUSINESS
Bairnco designs, manufactures, and sells engineered materials and
components for the electronic, industrial and commercial markets under the
Arlon brand name. These products are based on a common technology in
coating, laminating and dispersion chemistry.
PRODUCTS AND APPLICATIONS
CIRCUIT BOARD MATERIALS:
Arlon Materials for Electronics has an international reputation as
the premier supplier of high technology materials for the printed circuit
board industry. Their products include the high performance and high
temperature materials of the Electronic Substrates product line, and the
frequency dependent and low signal loss materials of the Microwave Materials
product line. These products are marketed principally to printed circuit
board manufacturers and OEMs by a direct sales force in concert with strong
technical support teams. These materials are used in products for the
commercial, military, industrial and telecommunications markets.
The economic factors affecting demand for these products include the
level of economic activity in North America, Europe and Asia for high
performance electronics, sophisticated defense electronics procurement, and
telecommunication systems.
The core of the Electronic Substrates line includes premium high
temperature capable laminate products used in circuit boards for military
electronics and sophisticated commercial applications, such as the surface
mount electronics for the Motorola worldwide satellite telephone systems
(Iridium), and circuit boards used in burn-in ovens to routinely test
semiconductors. Intermediate temperature laminates which provide both
improved product reliability in the field and ease of manufacture are also
key to the line. Specialty products have been developed for the surface
mounting of computer chips on circuit boards and multi-chip modules which
are growing segments of the printed circuit board market. Efforts at the
Rancho Cucamonga, California facility continue to stress improved customer
responsiveness both in product design as well as shortened delivery time.
This facility received the ISO 9002 International Quality Standard
certification at the end of 1995.
The Microwave Materials product line produces the world's leading
substrates for microwave applications. The business mix has moved from a
predominantly military base to technology and cost driven commercial
applications. The existing and emerging consumer products operating at
microwave frequencies include digital cordless telephones, local and global
cellular phone systems, direct broadcast satellite TV systems, global
positioning satellite systems, and other personal communications equipment.
Additional wireless opportunities for Arlon circuit board materials include
local area networks for computers and public business exchange systems or
PBX's where telephones operate as microcellular phones within the confines
of a facility or complex.
A major emerging market for wireless communications is the new phone
systems which are being planned for a number of developing countries such as
India and Argentina. These systems are being designed wireless both to reduce
system maintenance costs and to expedite and reduce cost of installation.
This should be a large and growing market over the next decade, as other
countries become involved.
The frequency dependent market area continues to drive toward lower
cost to allow greater commercial/consumer penetration by new electronics
applications. The Arlon Microwave facility in Bear, Delaware continues to
invest in equipment to convert from low volume military to high volume
commercial materials. In addition, new product development continues with
emphasis on low cost, low signal loss materials.
SPECIALTY GRAPHIC FILMS:
Bairnco manufactures and markets, under the Calon brand name, cast
and calendered vinyl films in a wide variety of colors and with varying face
stocks and adhesive systems for specialty graphics which are used by
commercial sign manufacturers, graphic printing houses, and in numerous
commercial and governmental specification applications.
The economic factors affecting this business are the general level of
economic activity in the United States, Canada, Europe, South America and the
Asian Basin.
Arlon NV, Arlon's Belgium based European common market subsidiary
made less progress than expected in 1995. A number of new distributors were
recruited during the last half of 1995.
The Santa Ana facility was certified to the ISO 9001 International
Quality Standard in September 1995. Continued investments in equipment and
R&D resources yielded further improvements in quality and productivity.
Additional productivity gains are expected in 1996.
New graphics products and colors were introduced in 1995 to broaden
the entire product offering. The rate of growth in the graphics market
slowed materially during 1995. This market is now expected to grow modestly
in excess of the economy. Also, 1995 was a year of increased price
competition in the lower performance calendered vinyl films.
Additional new products and colors are planned for introduction in
1996. It is also expected that the enhanced sales and marketing resources
put in place during 1995 will result in improved market penetration.
CUSTOM ENGINEERED LAMINATES AND ADHESIVE SYSTEMS:
Bairnco manufactures and markets custom engineered laminates and
adhesives systems under the Arlon and Chase Foster brand names.
The economic factors impacting this business are primarily the
general level of industrial economic activity in the United States.
Graphic - Arlon's Materials for Electronics Division International Quality
Standard Team in Rancho Cucamonga, California achieved ISO 9002 at the end
of 1995 (from left: Larry Walker, Patricia Zebuth, Rene Martinez, Bob Carini,
Jason Gretton and Steve Carrell.)
Graphic - Brian Millard performs in-line inspection for defects during
casting of Arlon's Calon II high-performance vinyl. In the foreground can
be seen the terminal used to track the film's physical properties which is
necessary to confirm conformance to product specifications.
Typical applications include insulating foam tapes for thermopane
windows, electrical insulation, thermal insulation panels for appliances and
cars, security tags and labels, durable printing stock for high speed laser
printing systems, and custom engineered laminates for specific industrial
applications.
During the year several low margin products were eliminated as part
of a continuing product rationalization program.
Arlon is now focusing on developing new custom engineered laminates
and pressure sensitive systems for specific industrial applications. The
combination of the Santa Ana, California and East Providence, Rhode Island
operations provides a unique ability to meet the needs of new custom laminate
applications.
SILICONE RUBBER TECHNOLOGIES:
Bairnco manufactures a line of silicone rubber based materials used
in a broad range of consumer, industrial, utility and commercial products.
This business is sensitive to the level of general industrial and consumer
spending in the United States.
Graphic - Robert Powers and Richard Corrette monitor the performance of a
computer controlled vacuum lamination system at Arlon's Materials for
Electronics Division, Rancho Cucamonga, California.
Graphic - Arlon's Adhesives & Films Division International Quality Standard
Team in Santa Ana, California achieved ISO 9001 in September 1995 (from left:
Brian Millard, Zsolt Katona, Mike Willott, Dinesh Shah, Rande Hawkinson,
Martha Westcott, Chuck Bules, Jaime Perez and Mike Gonzalez.)
Typical applications of these materials include silicone rubber roll
material used in molding composites, silicone rubber tape to insulate coil
windings of electric traction motors (most notably locomotive traction
motors), insulating tape for industrial flexible heaters, and power utility
applications.
The silicone rubber product line provides significant opportunity for
Arlon in a number of areas. During 1995 progress was made in the development
of Thermabond, a thermally conductive silicone product line designed to
dissipate heat from electronic circuit boards in very high temperature
environments. With increasing miniaturization driving requirements for heat
removal in electronics circuitry Thermabond will form the core of a broader
line of thermal management products. Also, progress was made during the year
in identifying new channels of distribution to serve international markets.
The distributor agreement with Airtech, a leading supplier of vacuum bagging
materials to the composite industry, has begun to develop opportunities in
industrial and aerospace composite markets.
Graphic - Gus Hernandez and Frank Angel package finished goods for
international shipments at Arlon's Adhesives & Films Division, Santa Ana,
California.
In January of 1996, an agreement was reached with Permacel, Inc.,
principally a manufacturer of pressure sensitive adhesive tapes, for Arlon to
acquire the silicone rubber tape operation of that corporation. This
acquisition will provide additional growth opportunity for Arlon in the
silicone rubber markets.
1996 is anticipated to be another year of continued growth for this segment.
Graphic - Dagoberto Hernandez monitors the laminates overall thickness and
performs a surface inspection at Arlon's Materials for Electronics Division,
Rancho Cucamonga, Caifornia.
Graphic - Arlon's Materials for Electronics Division International Quality
Standard Team in Bear, Delaware (from left: Randy Hoback, Matt Woods, Tom
Zawislak, Keith St. John and Mike Conway.)
REPLACEMENT PRODUCTS AND SERVICES
BUSINESS
Bairnco, through its multinational Kasco operations, manufactures and
supplies replacement products and services principally to retail food stores
and meat, poultry and fish processing plants throughout the United States,
Canada and Europe. Replacement band saw blades are also sold for use in wood
and metal industries. The French and Canadian operations also distribute
equipment to the supermarket and food processing industries in their
respective markets.
PRODUCTS AND APPLICATIONS
Kasco manufactures band saw blades for cutting, and chopper plates
and knives for grinding meat in supermarkets and packing plants, band saw
blades used in frozen fish factories, small band saw blades for cutting metal
and wood, and large band saw blades for lumber mills. Kasco also distributes
related supply products and a seasoning line to supermarkets, as well as
other customers.
Kasco also provides preventive maintenance and repair parts and
service for a broad range of supermarket equipment primarily in the meat and
deli areas in selected markets.
VAN SERVICE:
In North America, Kasco supplies its products and services directly
to the supermarket and meat cutting industries through route sales people.
They make regularly scheduled calls on the accounts in their region. They
both supply the Company's products and provide related equipment maintenance
services. The route service people are continuously trained in the service
and maintenance of the equipment used in the meat preparation areas of retail
food outlets.
The field computerization program permits the route service people to
more efficiently service their customer base.
SERVICE CENTERS:
Kasco currently operates service centers in four regions of North
America. The service centers provide preventive maintenance programs and
emergency repair programs for a broad range of equipment primarily in the
meat preparation and deli areas of supermarkets and other retail food outlets
in their geographical areas.
During 1995 the service center program was refocused on four selected
market areas where Kasco can provide cost effective, value added preventive
maintenance and emergency service in concentrated geographical markets.
These actions resulted in a $2 million reduction in revenues and phase-out
expenses which continued in reducing amounts throughout 1995. The net impact
of the cost savings began to be evident during the last part of 1995 and
should provide continuing benefits in 1996.
SPECIAL PRODUCTS:
Through its special products group, Kasco supplies band saw blades to
OEMs in the meat cutting industry and band saw blades for cutting wood and
metal to the OEMs supplying machines to those industries. Special products
also sells through general distribution and is responsible for export sales
throughout the world with the exception of Europe where such sales are the
responsibility of the three Kasco operations in Europe.
EQUIPMENT DISTRIBUTION:
In Canada and France, in addition to providing its standard products,
Kasco distributes equipment used in the supermarket industry and in the food
processing industry.
MANUFACTURING
Kasco and its subsidiaries have manufacturing operations in St.
Louis, Missouri; City of Industry, California; Toronto, Canada; Gwent, Wales,
United Kingdom; and Pansdorf, Germany. During 1995, Kasco's management took
numerous actions to improve the efficiencies in manufacturing and
distribution. There is now in place a continuing cost reduction program
which will result in improved quality, more efficient operations and improved
customer service.
Graphic - Kasco's Production Quality Improvement Team in St. Louis, Missouri
(standing from left: Stan Sak, Al Lowe, Larry Jones, Bob Hunt and Jerry
Brooks; sitting from left: Armando Ibarra, Rose Mayo and Jerry Petersen.)
DIRECTORS (individual photographs)
Luke E. Fichthorn III
Chairman and CEO
Bairnco Corporation
Charles T. Foley
President
Estabrook Capital Management, Inc.
Richard A. Shantz
Private Investor
William F. Yelverton
CEO - Individual Insurance Group
Prudential Insurance Company of America
MANAGEMENT (individual photographs)
Robert M. Carini
President
Arlon Materials for Electronics
Elmer G. Pruim
Controller, Bairnco Corporation
Acting President, Kasco Corporation
Barry M. Steinhart
Vice President Administration & Secretary
Bairnco Corporation
J. Robert Wilkinson
Vice President Finance & Treasurer
Bairnco Corporation
Mike Willott
President
Arlon Adhesives & Films
<TABLE>
FINANCIAL HISTORY
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Summary of Operations
($ in thousands)
Net sales.................... $ 150,507 145,522 134,958 135,581 128,566
Gross profit................. $ 53,317 53,177 52,645 54,714 52,492
Earnings before interest,
charges and taxes <F1>..... $ 14,633 13,654 13,617 15,846 15,225
Operating profit............. $ 14,633 13,654 4,874 15,846 15,225
Interest expense, net........ $ 2,026 2,144 2,248 2,911 4,277
Income before income taxes... $ 12,607 11,510 2,626 12,935 10,948
Provision for income taxes... $ 4,826 4,255 1,809 5,180 4,305
Income from continuing
operations................. $ 7,781 7,255 817 7,755 6,643
Return from continuing
operations on:
Net sales................ % 5.2 5.0 0.6 5.7 5.2
Stockholders' investment. % 16.7 17.4 1.4 12.1 11.0
Capital employed......... % 11.9 10.6 2.0 8.6 8.4
Year-End Position ($ in thousands)
Working capital.............. $ 28,350 26,277 20,098 18,983 20,342
Plant and equipment, net..... $ 34,449 36,289 38,654 39,232 32,025
Total assets excluding
discontinued operations.... $ 98,196 99,243 95,547 98,916 90,982
Net assets of discontinued
operations................. $ -- 3,529 12,434 34,337 39,109
Total assets............... $ 98,196 102,772 107,981 133,253 130,091
Total debt................... $ 24,578 31,775 43,718 45,733 45,891
Stockholders' investment..... $ 48,024 43,997 38,515 62,055 59,529
Capital employed-total....... $ 72,602 75,772 82,233 107,788 105,420
Capital employed-proforma <F2>$ 72,602 75,772 82,233 85,895 83,527
Per Share Data
Primary and fully diluted
income from continuing
operations................. $ 0.75 0.69 0.08 0.72 0.61
Cash dividend................ $ 0.20 0.20 0.20 0.20 0.20
Stockholders' investment..... $ 4.60 4.19 3.67 5.91 5.68
Market Price:
High....................... $ 6 5-1/2 8-1/2 8-1/4 9
Low........................ $ 3-7/8 3 3-3/8 5-5/8 3-3/4
Other Data (in thousands)
Backlog...................... $ 8,109 7,833 7,998 6,392 9,615
Depreciation and
amortization............... $ 6,314 6,502 6,700 5,808 5,748
Capital expenditures <F3>.... $ 4,831 5,176 6,318 13,195 5,858
Average shares
outstanding <F4>........... 10,440 10,500 10,500 10,749 10,807
Current ratio................ 2.2 2.0 1.8 1.7 1.9
Number of common
stockholders............... 1,967 2,198 2,326 2,440 2,586
Average number of employees.. 874 915 920 935 903
Sales per employee .......... $ 172,200 159,040 146,700 145,000 142,400
<FN>
<F1> Excludes impact of non-recurring litigation and restructuring costs
of $8,743 (pre-tax) in 1993 - see Note 2 to Consolidated Financial
Statements.
<F2> Stockholders' investment and capital employed adjusted on a proforma
basis for discontinued operations NRV writedown and loss on
discontinuance recorded in 1993.
<F3> Exclusive of acquired businesses' plant & equipment at date of
acquisition.
<F4> Assuming full dilution.
</FN>
</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 14.
As stated in Note 3 therein, Bairnco adopted a restructuring plan
effective December 31, 1993, a major component of which involved a formal
plan of divestiture relating to the businesses that comprised Bairnco's
Specialty Construction Products segment and secure communications
electronics operations. The operating results discussed below exclude the
discontinued operations.
Results of Operations: 1995 Compared to 1994
Net sales increased 3.4% to $150,507,000 in 1995 from $145,522,000 in
1994. Sales of Arlon engineered materials and components increased 7.8%
due to growing sales to the high end and microwave printed circuit board
markets. Sales of Kasco replacement products and services declined 4.1%
due to the planned reduction in Kasco's North American service center
revenues as part of the program to focus Kasco on its core business.
The backlog of unfilled orders for Arlon at the end of 1995 was
$8,109,000, up 3.5% from $7,833,000 at the end of 1994. Kasco does not have
a backlog.
In 1995, gross profit increased nominally to $53,317,000 from
$53,177,000 in the prior year. The favorable impact from increased sales
was offset by the decline in gross profit margins to 35.4% from 36.5% last
year. Arlon's gross profit increased only 3.1% as a result of the growth
in lower margin commercial products and margin erosion in certain market
segments due to competitive pressures. Kasco's gross profit declined 3.5%
as a result of the 4.1% sales decrease, whereas its gross profit margin
increased slightly due to an improved sales mix and reduced manufacturing
costs.
Selling and administrative expenses decreased $839,000 or 2.1% to
$38,684,000 from $39,523,000 in 1994. As a percent of sales, these
expenses decreased to 25.7% in 1995 from 27.2% in 1994. Selling expenses
decreased slightly as the reductions in Kasco from focusing on the core
business were partially offset by the continued investment in sales and
marketing expense to grow selected Arlon segments. Administrative expenses
continued to be reduced both absolutely and as a percentage of sales.
Research and development expenses increased 3.0% as Bairnco continued to
invest in the development of new products and improved quality.
Operating profit in 1995 was $14,633,000, or 9.7% of net sales,
compared to operating profit in 1994 of $13,654,000, or 9.4% of net sales.
Net interest expense decreased to $2,026,000 in 1995 from $2,144,000
in 1994 due primarily to a $7.2 million reduction in debt of which
approximately $3.5 million occurred during the fourth quarter of 1995.
Income before income taxes increased 9.5% to $12,607,000 in 1995 as
compared to $11,510,000 in 1994. The effective tax rate increased to 38.3%
in 1995 from 37.0% in 1994. The lower effective tax rate in 1994 resulted
from the benefit of foreign losses which were booked at a higher tax rate.
The provision for income taxes in both years includes all applicable
federal, state, local and foreign income taxes. Audits of the
Corporation's consolidated US federal income tax returns have been
completed for all years through 1992.
Net income increased 7.3% to $7,781,000 in 1995 as compared to
$7,255,000 in 1994. Earnings per share increased 8.7% to $.75 from $.69
last year. The average number of shares outstanding in 1995 was
10,440,000, a 0.6% decrease from the 10,500,000 average outstanding in 1994
due to the stock repurchase program.
Results of Operations: 1994 Compared to 1993
Net sales increased 7.8% to $145,522,000 in 1994 from $134,958,000 in
1993. Arlon engineered materials and components sales in 1994 increased
$9,817,000, or 11.9%, from 1993 due to strong sales to the graphics market,
more than offsetting continued weak sales to the defense related markets.
Sales of Kasco replacement products and services increased $747,000, or
1.4%, from 1993 as the European economic improvements were offset by the
impact of the retrenchment and refocusing of the Kasco service center
business in the fourth quarter of 1994.
The backlog of unfilled orders for Arlon at the end of 1994 was
$7,833,000, down slightly from $7,998,000 at the end of 1993. Kasco does
not have a backlog.
In 1994, gross profit increased 1.0% to $53,177,000, or 36.5% of net
sales, from $52,645,000, or 39.0% of net sales, in 1993. The increase in
gross profit was attributable to the increase in sales, whereas the decline
in the gross profit as a percentage of sales was due to a significant
decline in Kasco's gross profit resulting from the service center
operations and to a lesser extent the lower gross margin at Arlon as a
result of the continuing shift in the business mix to lower margin
commercial products from higher margin military products.
Selling and administrative expenses increased 1.3% in 1994 to
$39,523,000 from $39,028,000 in 1993. As a percent of sales, these expenses
decreased to 27.2% in 1994 from 28.9% in 1993. The composition of these
expenses continues to change in accordance with the ongoing plan to make
the administrative functions more efficient while increasing sales and
marketing efforts to develop new products and to increase penetration into
selected markets.
Operating profit in 1994 was $13,654,000, or 9.4% of net sales,
compared to operating profit in 1993 of $13,617,000, or 10.1% of net sales,
excluding the non-recurring restructuring and litigation charges. After
recognition of the non-recurring restructuring and litigation costs, which
totaled $8,743,000, 1993 operating profit was $4,874,000.
Net interest expense decreased to $2,144,000 in 1994 from $2,248,000
in 1993 due primarily to a $11,943,000 reduction in indebtedness which was
largely offset by increased interest rates.
The effective tax rate for 1994 was 37.0% as compared to 68.9% in
1993. The high effective tax rate for 1993 reflects the absence of a tax
benefit on a portion of the restructuring costs recognized at Kasco. The
provision for income taxes in both years includes all applicable federal,
state, local and foreign income taxes.
Income from continuing operations for 1994 was $7,255,000 or $.69 per
share. Excluding the restructuring and litigation related charges, which
net of related tax benefits amounted to $6,263,000 or approximately $.60
per share, 1993 income from continuing operations was $7,080,000 or $.67
per share. Income from continuing operations including the charges was
$817,000 or $.08 per share in 1993.
Liquidity and Capital Resources
At December 31, 1995, Bairnco had working capital of $28.4 million
compared to $26.3 million at December 31, 1994. The increase in accounts
receivable is due to the increase in export business which has longer
payment terms. Inventories increased 18.4% or $3.7 million from the end of
1994. During 1995, certain inventories were built in anticipation of
higher sales which did not materialize in the last part of the year.
Management has developed a program to reduce any excess inventories during
1996 and believes no loss will be incurred on its disposition. The
decrease in other current assets in 1995 was due primarily to the tax
refund received during the second quarter of 1995.
The increase in other assets primarily reflects the long term portion of
the notes receivable on the discontinued operations disposed of during 1995
(refer to Note 3 to the Consolidated Financial Statements).
At December 31, 1995, $24.6 million of total debt was outstanding
compared to $31.8 million at the end of 1994. As of December 31, 1995,
approximately $22.7 million was available for borrowing under the
Corporation's secured reducing revolving credit agreement with a consortium
of four banks. The credit agreement expires in August 1999. In addition,
approximately $5.6 million was available under various short term domestic
and foreign uncommitted credit facilities. Debt as a percent of equity
declined to 51.2% at the end of 1995 from 72.2% at the end of 1994.
Bairnco made $4,831,000 of capital expenditures in 1995 as compared
to its plan at the start of the year of approximately $14.4 million. The
reduction in capital expenditures from plan was due primarily to the
deferment of a capacity addition from 1995 to 1997. Substantial
improvements in operating efficiencies in 1995 and planned for 1996
resulted in the postponement of this major capital expenditure. Total
capital expenditures in 1996 are expected to be approximately $12.3
million. Approximately $3.0 million of the planned expenditures are
contingent upon realization of the anticipated growth in several segments
of the electronics market.
In 1995, Bairnco's Board of Directors authorized the repurchase of up
to $5,000,000 of its common stock. During the year the Company repurchased
486,200 shares for $2,580,000. The Board has authorized management to
continue its stock repurchase program in 1996 subject to market conditions
and the capital requirements of the business.
Cash provided by operating activities plus the amounts available
under the existing credit facilities are expected to be sufficient to fulfill
Bairnco's anticipated cash requirements in 1996.
Other Matters
Bairnco Corporation and its subsidiaries are defendants in a number
of legal actions and proceedings which are discussed in more detail in Note
11 to the Consolidated Financial Statements. Management of Bairnco believes
that the disposition of these actions and proceedings will not have a
material adverse effect on the consolidated results of operations or the
financial position of Bairnco Corporation and its subsidiaries as of
December 31, 1995.
Outlook
Management is not aware of any adverse trends that would materially
affect the Company's strong financial position. The outlook for 1996 is
for improved sales and earnings. It is expected that the combination of
growth in certain niche markets, benefits accruing from past and programmed
cost reduction efforts, aggressive efficiency improvement projects, as well
as modest price increases, should result in continued financial improvement
for 1996.
<TABLE>
Quarterly Results of Operations (Unaudited)
(In thousands except per share data)
<CAPTION>
1st 2nd 3rd 4th Total
1995 1994 1995 1994 1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $38,523 $35,676 $38,309 $36,977 $37,386 $35,918 $36,289 $36,951 $150,507 $145,522
Cost of sales......... 24,794 22,070 24,462 23,311 24,511 23,054 23,423 23,910 97,190 92,345
Gross Profit............ 13,729 13,606 13,847 13,666 12,875 12,864 12,866 13,041 53,317 53,177
Selling and
administrative
expenses............ 10,132 10,271 9,980 9,964 9,292 9,396 9,280 9,892 38,684 39,523
Operating Profit........ 3,597 3,335 3,867 3,702 3,583 3,468 3,586 3,149 14,633 13,654
Interest expense, net. 547 501 527 536 479 559 473 548 2,026 2,144
Income before income
taxes................. 3,050 2,834 3,340 3,166 3,104 2,909 3,113 2,601 12,607 11,510
Provision for income
taxes............... 1,159 1,134 1,269 1,266 1,211 1,164 1,187 691 4,826 4,255
Income from
Continuing Operations. $ 1,891 $ 1,700 $ 2,071 $ 1,900 $ 1,893 $ 1,745 $ 1,926 $ 1,910 $ 7,781 $ 7,255
Earnings per Share -
Continuing Operations. $ 0.18 $ 0.16 $ 0.20 $ 0.18 $ 0.18 $ 0.17 $ 0.19 $ 0.18 $ 0.75 $ 0.69
Market Price:
High.................. $ 4-7/8 $ 3-7/8 $ 4-7/8 $ 5-1/4 $ 5-1/2 $ 5-1/2 $ 6 $ 4-5/8 $ 6 $ 5-1/2
Low................... 3-7/8 3-1/4 3-7/8 3 4-3/8 4-1/8 4-3/8 3-3/4 3-7/8 3
</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, 1995 and 1994, and the related consolidated statements of
income, stockholders' investment and cash flows for each of the three
years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Bairnco Corporation and subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Orlando, Florida
January 25, 1996
Arthur Andersen LLP
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1995, 1994 and 1993
Bairnco Corporation and Subsidiaries
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net Sales................................ $ 150,507,000 $ 145,522,000 $ 134,958,000
Cost of sales.......................... 97,190,000 92,345,000 82,313,000
Gross Profit............................. 53,317,000 53,177,000 52,645,000
Selling and administrative expenses.... 38,684,000 39,523,000 39,028,000
Restructuring costs (Note 2)........... -- -- 5,743,000
Provision for litigation costs (Note 2) -- -- 3,000,000
Operating Profit......................... 14,633,000 13,654,000 4,874,000
Interest expense, net.................. 2,026,000 2,144,000 2,248,000
Income before Income Taxes............... 12,607,000 11,510,000 2,626,000
Provision for income taxes (Note 5).... 4,826,000 4,255,000 1,809,000
Income from Continuing Operations........ 7,781,000 7,255,000 817,000
Discontinued Operations (Note 3):
(Loss) from operations, net of income
tax (benefit) of ($6,733,000)
in 1993............... -- -- (21,679,000)
(Loss) on discontinuance, net of
income tax (benefit) of ($884,000)
in 1993............................ -- -- (1,716,000)
Net income (loss)...................... $ 7,781,000 $ 7,255,000 $ (22,578,000)
Earnings (Loss) per Share of Common Stock
(Note 4):
Earnings per Share from Continuing
Operations............................. $ 0.75 $ 0.69 $ 0.08
Discontinued operations (Note 3)..... -- -- (2.23)
Net income (loss)...................... $ 0.75 $ 0.69 $ (2.15)
Dividends per Share of Common Stock...... $ 0.20 $ 0.20 $ 0.20
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
Bairnco Corporation and Subsidiaries
<CAPTION>
1995 1994
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents.................... $ 608,000 $ 1,478,000
Accounts receivable, less allowances of
$763,000 and $1,097,000 respectively....... 21,472,000 20,885,000
Inventories:
Raw materials and supplies................. 4,651,000 4,794,000
Work in process............................ 5,451,000 4,767,000
Finished goods............................. 13,634,000 10,481,000
23,736,000 20,042,000
Deferred income taxes (Note 5)............. 3,396,000 4,941,000
Other current assets (Note 3).............. 2,130,000 4,785,000
Total current assets..................... 51,342,000 52,131,000
Plant and Equipment, at cost:
Land......................................... 1,534,000 1,241,000
Buildings and leasehold interests and
improvements............................... 16,332,000 15,163,000
Machinery and equipment...................... 59,926,000 60,260,000
77,792,000 76,664,000
Less - Accumulated depreciation and
amortization............................... (43,343,000) (40,375,000)
34,449,000 36,289,000
Cost in Excess of Net Assets of Purchased
Businesses (Note 1).......................... 8,152,000 8,201,000
Other Assets (Notes 1 and 3)................... 4,253,000 2,622,000
Net Assets of Discontinued Operations (Note 3). -- 3,529,000
$ 98,196,000 $102,772,000
Liabilities and Stockholders' Investment
Current Liabilities:
Short-term debt.............................. $ 3,156,000 $ 4,710,000
Current maturities of long-term debt (Note 7) 186,000 201,000
Accounts payable............................. 7,885,000 9,762,000
Accrued expenses (Note 6).................... 11,765,000 11,181,000
Total current liabilities................ 22,992,000 25,854,000
Long-Term Debt (Note 7)........................ 21,236,000 26,864,000
Deferred Income Taxes (Note 5)................. 3,215,000 3,743,000
Other Liabilities.............................. 2,729,000 2,314,000
Stockholders' Investment (Notes 4, 7 and 8):
Preferred stock, par value $.01, 5,000,000
shares authorized, none issued............. -- --
Common stock, par value $.01, 30,000,000
shares authorized, 11,062,499 and
10,952,124 issued, respectively............ 111,000 109,000
Paid-in capital.............................. 50,833,000 49,922,000
Retained earnings ........................... 9,460,000 3,766,000
Treasury stock, at cost, 938,065 and 451,865
shares, respectively....................... (12,380,000) (9,800,000)
Total stockholders' investment........... 48,024,000 43,997,000
$ 98,196,000 $102,772,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
Bairnco Corporation and Subsidiaries
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Income from continuing operations............ $ 7,781,000 $ 7,255,000 $ 817,000
Adjustments to reconcile to net cash provided
by operating activities:
Depreciation and amortization............ 6,314,000 6,502,000 6,700,000
Loss on disposal of plant and equipment.. 294,000 18,000 --
Deferred income taxes.................... 1,561,000 242,000 (222,000)
Changes in non-current assets related to
restructuring.......................... -- -- 2,992,000
Change in operating assets and liabilities:
(Increase) decrease in accounts
receivable, net........................... (587,000) (1,953,000) 575,000
(Increase) decrease in inventories.......... (3,694,000) (549,000) 284,000
Decrease (increase) in other current
assets.................................... 3,205,000 (2,629,000) (27,000)
(Decrease) increase in accounts
payable................................... (1,877,000) 2,399,000 (839,000)
(Decrease) in accrued expenses.............. (1,019,000) (1,498,000) (284,000)
Cash provided by discontinued operations. 1,988,000 4,863,000 350,000
Other.................................... 699,000 (115,000) 865,000
Net cash provided by operating activities.. 14,665,000 14,535,000 11,211,000
Cash Flows from Investing Activities:
Capital expenditures......................... (4,831,000) (5,176,000) (6,318,000)
Proceeds from sale of plant and equipment.... 328,000 1,728,000 --
Proceeds from sale of discontinued operations 100,000 2,865,000 --
Net cash (used in) investing activities.... (4,403,000) (583,000) (6,318,000)
Cash Flows from Financing Activities:
Net (repayment) of external debt............. (7,427,000) (12,107,000) (1,697,000)
Payment of dividends......................... (2,087,000) (2,100,000) (2,100,000)
Purchase of treasury stock................... (2,580,000) -- --
Exercise of stock options.................... 560,000 -- 20,000
Net cash (used in) financing activities.... (11,534,000) (14,207,000) (3,777,000)
Effect of foreign currency exchange rate changes
on cash and cash equivalents................. 402,000 350,000 (568,000)
Net (decrease) increase in cash and cash
equivalents.................................. (870,000) 95,000 548,000
Cash and cash equivalents, beginning of year... 1,478,000 1,383,000 835,000
Cash and cash equivalents, end of year......... $ 608,000 $ 1,478,000 $ 1,383,000
Supplemental Disclosures of Cash Flow Information:
Cash paid (received) during the year for:
Interest................................... $ 1,992,000 $ 2,242,000 $ 2,138,000
Income Taxes............................... $ (310,000) $ (533,000) $ 2,703,000
Noncash investing activities:
Notes Received from Sale of Discontinued
Operations............................... $ 2,500,000 $ -- $ --
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
For the years ended December 31, 1995, 1994 and 1993
Bairnco Corporation and Subsidiaries
<CAPTION>
Retained
Common Paid-In Earnings Treasury
Stock Capital (Deficit) Stock
<S> <C> <C> <C> <C>
Balance, December 31, 1992............ $ 109,000 $48,457,000 $23,289,000 $ (9,800,000)
Net (loss).......................... -- -- (22,578,000) --
Cash dividends ($.20 per share)..... -- -- (2,100,000) --
Issuance of 4,000 shares pursuant
to exercise of stock options...... -- 20,000 -- --
Currency translation adjustment
(Note 1).......................... -- (724,000) -- --
Transfer of currency translation
adjustment related to discontinued
operations to income statement.... -- 1,842,000 -- --
Balance, December 31, 1993............ 109,000 49,595,000 (1,389,000) (9,800,000)
Net income.......................... -- -- 7,255,000 --
Cash dividends ($.20 per share)..... -- -- (2,100,000) --
Currency translation adjustment
(Note 1).......................... -- 327,000 -- --
Balance, December 31, 1994............ 109,000 49,922,000 3,766,000 (9,800,000)
Net income.......................... -- -- 7,781,000 --
Cash dividends ($.20 per share)..... -- -- (2,087,000) --
Issuance of 110,375 shares pursuant
to exercise of stock options...... 2,000 558,000 -- --
Acquisition of treasury stock
(486,200 shares at cost).......... -- -- -- (2,580,000)
Currency translation adjustment
(Note 1).......................... -- 353,000 -- --
Balance, December 31, 1995............ $ 111,000 $50,833,000 $ 9,460,000 $(12,380,000)
The accompanying notes are integral part of these financial statements.
</TABLE>
(1) Nature of Operations and Summary of Significant Accounting Policies
Nature of operations:
Bairnco Corporation is a diversified multinational company that operates
two business sectors: Engineered Materials and Components which are
designed, manufactured and sold under the Arlon brand identity to
electronic, industrial and commercial markets worldwide; and, Replacement
Products and Services which are manufactured and distributed under the
Kasco name principally to retail food stores and meat, poultry and fish
processing plants throughout the United States, Canada and Europe.
Arlon's products are based on a common technology in coating, laminating
and dispersion chemistry. Arlon's principal products include high
performance materials for the printed circuit board industry, cast and
calendered vinyl film systems, custom engineered laminates and pressure
sensitive adhesive systems, and calendered and extruded silicone rubber
insulation products used in a broad range of industrial, consumer and
commercial products.
Kasco's principal products include replacement band saw blades for cutting
meat, fish, wood and metal, and on-site maintenance services for the retail
food industry primarily in the meat and deli departments. Kasco also
distributes equipment to the food industry in Canada and France.
Principles of consolidation:
The accompanying consolidated financial statements include the accounts of
Bairnco Corporation and its subsidiaries (Bairnco or the Corporation) after
the elimination of all material intercompany accounts and transactions.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Consolidated statements of cash flows:
The Corporation considers cash in banks, commercial paper, demand notes and
similar investments with a maturity of less than three months as cash and
cash equivalents for the purposes of the consolidated statements of cash
flows.
Certain reclassifications were made to prior year balances in order to
conform to current year presentation.
Inventories:
Inventories are stated at cost, which is not in excess of market. Inventory
costs include material, labor and overhead. Inventories are stated
principally on a first-in, first-out (FIFO) basis.
Plant and equipment:
The Corporation provides for depreciation of plant and equipment
principally on a straight-line basis by charges to income in amounts
estimated to allocate the cost of these assets over their useful lives.
Rates of depreciation vary among the several classifications as well as
among the constituent items in each classification, but generally fall
within the following ranges:
Years
Buildings and leasehold interests and improvements 5 - 40
Machinery and equipment 3 - 20
When property is sold or otherwise disposed of, the asset cost and
accumulated depreciation are removed from the accounts and any resulting
gain or loss is included in the statement of income.
Leasehold interests and improvements are amortized over the terms of the
respective leases, or over their estimated useful lives, whichever is
shorter.
Maintenance and repairs are charged to operations. Renewals and
betterments are capitalized.
Accelerated methods of depreciation are used for income tax purposes, and
appropriate provisions are made for the related deferred income taxes.
Cost in excess of net assets of purchased businesses:
Cost in excess of net assets of purchased businesses acquired prior to 1971
is not being amortized since, in the opinion of management, there has been
no diminution in value. For businesses acquired subsequent to 1970, the
cost in excess of net assets of purchased businesses, aggregating
$5,931,000 and $5,816,000 at December 31, 1995 and 1994, respectively, is
being amortized over 40 years. Accumulated amortization at December 31,
1995 and 1994, was $1,265,000 and $1,099,000, respectively. Amortization
expense of $150,000, $146,000 and $221,000 was recognized during 1995, 1994
and 1993, respectively.
At each balance sheet date, the Corporation evaluates the realizability of
its cost in excess of net assets of purchased businesses based upon
expectations of nondiscounted cash flows and operating income for each
division having a material cost in excess of net assets of purchased
businesses balance. Based upon its most recent analysis, the Corporation
believes that no material impairment of its cost in excess of net assets of
purchased businesses exists at December 31, 1995.
Intangibles:
Intangible assets of purchased businesses, net of amortization, are
included in other assets and totaled $94,000 and $127,000 at December 31,
1995 and 1994, respectively. These items are amortized over their
estimated lives, which generally range from three to twenty years.
Amortization expense recognized was $33,000 during 1995, $159,000 during
1994 and $217,000 during 1993.
Translation of foreign currencies:
Balance sheet accounts of foreign subsidiaries are translated at the rates
of exchange in effect at the balance sheet date while income and expenses
are translated at the monthly average rates of exchange in effect during
the year. The cumulative effect of such translation adjustments has been
included as an increase to paid-in capital and was $2.3 million and $1.9
million at December 31, 1995 and 1994, respectively.
Fair value of financial instruments
The carrying values of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities, approximate fair value due to the
short-term maturities of these assets and liabilities.
The interest rates on the notes receivable (see Note 3 to the Consolidated
Financial Statements) are reset at least quarterly to reflect current
market rates. Consequently, the carrying values of the notes receivable
approximate fair value.
The carrying amount of the Corporation's short-term and long-term debt
approximates fair value, since the debt is at floating rates or rates
approximating rates currently offered to the Corporation for debt of the
same remaining maturities.
(2) Restructuring Costs and Provision For Litigation Costs
Pursuant to the restructuring plan adopted by Bairnco effective December
31, 1993, restructuring costs totaling $5,743,000 (pre-tax) were recognized
in the fourth quarter of 1993. The restructuring costs were entirely
attributable to programs underway at Bairnco's Kasco subsidiary to phase
out unprofitable and low potential product lines and to rationalize Kasco's
North American production facilities. All but approximately $500,000 of
the restructuring costs related to the revaluation of certain assets and
other non-cash charges necessitated by the adoption of the restructuring
plan. The charges included a reduction of approximately $2.5 million in
the carrying value of Kasco's cost in excess of net assets of purchased
businesses as well as adjustments to the carrying values of inventory,
machinery and equipment, and other current assets.
In the fourth quarter of 1993, Bairnco also recorded a $3,000,000 pre-tax
provision for anticipated litigation expenses. The litigation provision
established a reserve for future litigation related expenditures resulting
from the December 1993 bankruptcy filing by Bairnco's former subsidiary,
Keene Corporation (see Note 11 to Consolidated Financial Statements), and
the defense against claims that Bairnco is liable for injuries allegedly
caused by asbestos-containing products manufactured or distributed by Keene
or its predecessors.
After recognition of related tax benefits, these two items reduced income
from continuing operations in 1993 by $6,263,000 or approximately $.60 per
share.
(3) Discontinued Operations
The restructuring plan adopted by Bairnco effective December 31, 1993,
included a formal plan of divestiture relating to the businesses that
comprised Bairnco's Specialty Construction Products segment and secure
communications electronics operations. Accordingly, these businesses were
classified as discontinued operations for financial reporting purposes as
of December 31, 1993.
In connection with management's plan to sell these businesses, the 1993
loss from operations for the discontinued operations included a charge to
adjust the carrying values of the related assets and liabilities to their
expected net realizable value of $12.4 million as of December 31, 1993
which was comprised of estimated net sales proceeds and tax benefits
associated with the divestitures. The loss on discontinuance for the
discontinued operations included provisions for estimated operating losses
until divestiture and other costs expected to be incurred as a result of
the divestiture plan.
During 1994 the majority of the Specialty Construction businesses were
sold. The smallest and last remaining operation of the Specialty
Construction business was sold on December 29, 1995. The secure
communications business was sold on November 30, 1995. The net sales price
of the discontinued operations sold in 1995 was $2.6 million and consisted
of $100,000 in cash and two promissory notes. The current portion of the
promissory notes is $550,000 and is included in Other Current Assets in the
Consolidated Balance Sheet as of December 31, 1995. The remaining
$1,950,000 represents the net long term portion of the promissory notes and
is included in Other Assets in the Consolidated Balance Sheet as of
December 31, 1995. No gain or loss was recognized on the sale of these
operations in either 1994 or 1995.
As part of the asset purchase agreements for the two discontinued
operations disposed of in 1995, the Corporation has guaranteed certain
lease payments of one facility and remains the lessee/guarantor of a second
facility even though such obligations have been transferred to the
respective buyers. The total lease payments guaranteed as of December 31,
1995 amounted to approximately $1.1 million. In the event the Corporation
is called upon to satisfy these guarantees, such payments would be offset
by certain buyout provisions which could reduce the total lease payments by
as much as $335,000, in addition to any recoveries from sub-leasing the
property of which the Corporation remains the lessee/guarantor.
Net sales from the discontinued operations for the years ended December 31,
1995, 1994 and 1993 were $10.6 million, $20.2 million and $22.8 million,
respectively. The 1995 and 1994 losses of the discontinued operations
approximated the prior estimates.
(4) Earnings per Share
Primary and fully-diluted earnings per share are equal within each of the
years ended December 31, 1995, 1994 and 1993. Earnings per share are based
on the weighted average number of common shares outstanding during the year
as follows:
1995 1994 1993
Primary 10,436,000 10,500,000 10,500,000
Fully-Diluted 10,440,000 10,500,000 10,500,000
Primary and fully-diluted shares outstanding reflect all common stock
equivalents (primarily outstanding stock options as described in Note 8 to
the Consolidated Financial Statements) to the extent they are not
antidilutive.
(5) Income Taxes
The components of income from continuing operations before income
taxes and the provisions for domestic and foreign income taxes on continuing
operations are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income (Loss) before Income Taxes:
Domestic $11,360,000 $11,096,000 $ 3,116,000
Foreign 1,247,000 414,000 (490,000)
Total Income before Income Taxes $12,607,000 $11,510,000 $ 2,626,000
Provision for Income Taxes:
Domestic:
Currently payable $ 1,671,000 $ 3,731,000 $ 2,418,000
Deferred 2,413,000 751,000 (439,000)
Foreign:
Currently payable 943,000 (135,000) (19,000)
Deferred (201,000) (92,000) (151,000)
Total Provision for Income Taxes $ 4,826,000 $ 4,255,000 $ 1,809,000
</TABLE>
Bairnco's restated net current and non-current deferred tax assets
(liabilities) are comprised of the following at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current Deferred Tax Items:
Accrued Expenses $ 2,211,000 $ 2,528,000 $ 2,521,000
Other 1,185,000 1,236,000 974,000
Tax Credit Carryforwards -- 1,177,000 --
Net Current Deferred Tax Asset 3,396,000 4,941,000 3,495,000
Non-Current Deferred Tax Items:
Fixed Assets (2,650,000) (2,749,000) (2,196,000)
Pensions (938,000) (781,000) (716,000)
Intangible Assets (107,000) (102,000) (168,000)
Other 480,000 (111,000) (152,000)
Net Non-Current Deferred Tax
Liability (3,215,000) (3,743,000) (3,232,000)
Net Deferred Tax Asset $ 181,000 $ 1,198,000 $ 263,000
</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 $1.1 and $7.7 million to
be realized from the discontinued operations sold in 1995 and 1994,
respectively, certain reclassifications were made between current and
deferred income taxes and net assets of discontinued operations. Other
current assets on the balance sheet include current income taxes receivable
of $3,527,000 at December 31, 1994 due to the reclassifications.
In 1995, 1994 and 1993 the Corporation's restated effective tax rates
were 38.3%, 37.0% and 68.9%, respectively, of income from continuing
operations before income taxes. An analysis of the differences between these
rates and the US federal statutory income tax rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Computed income taxes at statutory
rate $ 4,287,000 $ 3,910,000 $ 893,000
State and local taxes, net of
federal tax benefit 205,000 310,000 63,000
Write-off of goodwill -- -- 865,000
Dividend income 193,000 185,000 160,000
Amortization of goodwill 9,000 43,000 55,000
Foreign income taxed at different
rates 318,000 (368,000) (4,000)
Tax credits (281,000) (242,000) (175,000)
Other, net 95,000 417,000 (48,000)
Provision for income taxes $ 4,826,000 $ 4,255,000 $ 1,809,000
</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 US income taxes on approximately $3.2
million of undistributed earnings of international subsidiaries. These
earnings could become subject to additional tax if they were remitted as
dividends or if the Corporation should sell its stock in the subsidiaries.
It is not practicable to estimate the amount of additional tax that might be
payable on the foreign earnings; however, the Corporation believes that US
foreign tax credits would largely eliminate any US income tax incurred.
(6) Accrued Expenses
Accrued expenses consisted of the following as of December 31, 1995 and
1994, respectively:
1995 1994
Salaries and wages $ 2,312,000 $ 2,521,000
Income taxes 360,000 315,000
Insurance 2,026,000 2,165,000
Litigation 1,942,000 2,163,000
Other accrued expenses 5,125,000 4,017,000
Total accrued expenses $11,765,000 $11,181,000
(7) Long-Term Debt
Long-term debt consists of the following as of December 31:
1995 1994
Revolving Credit Notes....... $18,099,000 $23,553,000
Equipment Loans.............. 290,000 464,000
Industrial Revenue Bonds..... 3,000,000 3,000,000
Other........................ 33,000 48,000
21,422,000 27,065,000
Less Current Maturities..... 186,000 201,000
Total..................... $21,236,000 $26,864,000
The Corporation has a credit agreement ("Credit Agreement") with a
consortium of four banks which provides a secured, reducing revolving
credit facility for maximum loan commitment at December 31, 1995 of $39
million and a letter of credit facility of at least $10 million,
although the letter of credit facility may be increased up to $20
million with a corresponding decrease in the revolving credit facility.
At December 31, 1995, $18.1 million of revolving credit was
outstanding and payable in installments from 1996 to 1999. In addition,
$8.5 million of irrevocable standby letters of credit were outstanding
under the Credit Agreement, which are not reflected in the accompanying
consolidated financial statements. Approximately $5.2 million of the
letters of credit guarantee various trade and insurance activities. An
outstanding $3.3 million letter of credit supports the Industrial
Revenue Bonds. Interest rates vary on the revolving credit and are set
at the time of borrowing in relationship to one of several reference
rates, as selected by the Corporation at the time of the borrowing.
Interest rates on the revolving credit outstanding at December 31, 1995,
were 6.5% on US borrowings and ranged from 4.8% to 6.0% on European
borrowings. A commitment fee is paid on the unused portion of the total
credit.
Substantially all of the assets of the Corporation and its US
subsidiaries are pledged as collateral under the Credit Agreement, which
expires on August 31, 1999.
The Credit Agreement contains covenants which require the Corporation to
meet minimum interest coverage ratios and which limit the ratio of total
liabilities to stockholders' investment as defined in the Credit
Agreement. In addition, minimum levels of stockholders' investment must
be maintained. The Credit Agreement also places certain restrictions on
the declaration of dividends and repurchases of the Corporation's stock.
At December 31, 1995, future declarations of dividends and repurchases
of Bairnco's stock, were limited to $2,247,000 plus 30% of future
consolidated quarterly net earnings of the Corporation. In addition, the
Credit Agreement contains a separate provision which allows the
Corporation to repurchase up to an additional $5,000,000 of its stock.
At December 31, 1995, future repurchases of the Corporation's stock were
limited to $2,420,000 under this provision. At December 31, 1995 the
Corporation was in compliance with all covenants contained in the Credit
Agreement.
The Corporation has equipment loans, mortgages and other debt outstanding
at rates of 5.6% to 7.7% due in 1996 through 1998.
The annual maturity requirements for amounts due after December 31, 1995,
are summarized as follows:
Year Ended December 31,
1996 $ 186,000
1997 126,000
1998 11,000
1999 18,099,000
2000 --
Due after December 31, 2000 3,000,000
Total Long-Term Debt $21,422,000
(8) Stock Options
The Corporation has a stock incentive plan which was established in 1990
("1990 Plan"). The 1990 Plan permits the grant of options to purchase not
more than 2,500,000 shares of common stock. The 1990 Plan provides for the
grant of non-qualified options and options qualifying as incentive stock
options under the Internal Revenue Code to key employees and each outside
Director of the Corporation at an option price equal to the fair market
value on the date of grant. Non-qualified stock options may also be
granted at book value. The term of each option may not exceed 10 years
from the date the option becomes exercisable (or, in the case of an
incentive stock option, 10 years from the date of grant).
A senior executive of the Corporation presently holds performance based,
non-qualified stock options granted under the 1990 Plan to purchase a total
of 250,000 shares of common stock at option prices equal to the fair market
value or book value on the date of grant. These performance options become
exercisable in equal installments if levels of $.70, $.75 and $.80 of net
income per share are attained by the Corporation during calendar years up
through 1995 (with only one installment becoming exercisable for a given
year) or, become fully exercisable on the tenth anniversary of the date of
grant if the executive is still employed by the Corporation. On January
28, 1993, 83,333 of these options became exercisable as a result of the
Corporation's earnings performance for 1992. On January 25, 1996, an
additional 83,333 of these options became exercisable as a result of the
Corporation's earnings performance for 1995. These options remain
exercisable for ten years from the date they first become exercisable.
Changes in the stock options granted under the 1990 Plan during 1995 and
1994 were as follows:
1995 1994
Outstanding options between $3.375 and
$8.25, beginning of year 982,150 1,086,287
Options granted between $4.00 and
$5.875 per share 21,600 32,500
Options canceled between $3.375 and
$7.75 per share (176,425) (136,637)
Options exercised between $3.375 and
$5.25 per share (110,375) --
Outstanding options between $3.375
and $8.25 per share, end of year 716,950 982,150
Exercisable options between $3.375 and
$8.25 per share, end of year 506,917 666,397
At December 31, 1995 and 1994, 1,556,200 and 1,401,375 shares,
respectively, were available for option grants under the 1990 Plan. There
were no charges to income in connection with stock option activity during
the years presented.
(9) Pension Plans
The Corporation has several pension plans which cover substantially all of
its employees. The benefits paid under these plans generally are based on
employees' years of service and compensation during the last years of
employment. Annual contributions made to the US plans are determined in
compliance with the minimum funding requirements of ERISA using a different
actuarial cost method and actuarial assumptions than are used for
determining pension expense for financial reporting purposes. Plan assets
consist primarily of publicly traded equity and debt securities. The
Corporation maintains unfunded supplemental plans in the United States to
provide retirement benefits in excess of levels provided under the
Corporation's other plans. The Corporation's foreign subsidiaries provide
retirement benefits for employees consistent with local practices. The
foreign plans are not significant in the aggregate and therefore are not
included in the following disclosures.
The following table describes the funded status of US pension plans.
Overfunded plans are those in which the amount provided for future benefits
(fair value of plan assets) exceeds the accumulated benefit obligation
(actuarial present value of benefits earned to date based on present pay
levels).
<TABLE>
<CAPTION>
1995 1994
Overfunded Underfunded Overfunded Underfunded
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligation:
Vested $(18,137,000) $(2,409,000) $(15,580,000) $(2,190,000)
Non-vested (427,000) (66,000) (430,000) (43,000)
Accumulated benefit
obligation (18,564,000) (2,475,000) (16,010,000) (2,233,000)
Additional amounts related
to projected pay increases (2,670,000) (69,000) (2,224,000) (57,000)
Projected benefit obligation (21,234,000) (2,544,000) (18,234,000) (2,290,000)
Plan assets at fair value 20,172,000 1,587,000 17,841,000 1,338,000
Projected benefit obligation
in excess of plan assets (1,062,000) (957,000) (393,000) (952,000)
Unrecognized net transition
obligation 334,000 330,000 491,000 369,000
Unrecognized prior service
cost (61,000) 116,000 (4,000) 139,000
Unrecognized net loss 2,514,000 307,000 1,956,000 262,000
Adjustment to recognize
minimum liability -- (685,000) -- (713,000)
Prepaid (accrued) pension
cost recognized in balance
sheet at September 30 1,725,000 (889,000) 2,050,000 (895,000)
Fourth quarter accruals (225,000) (48,000) (147,000) (51,000)
Fourth quarter contributions 169,000 44,000 179,000 42,000
Effect of curtailment (36,000) -- (136,000) --
Prepaid (accrued) pension
costs at December 31 $ 1,633,000 $ (893,000) $ 1,946,000 $ (904,000)
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligations in the table above was 7.5% at September 30,
1995 and 8% at September 30, 1994. The rate of projected pay increases,
where applicable, was 5% at both September 30, 1995 and 1994. The expected
long-term rate of return on retirement plan assets was 9% at both September
30, 1995 and 1994.
Net periodic pension cost for the US plans included the following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Service cost-benefits earned
during the year $ 858,000 $ 915,000 $ 962,000
Interest cost on projected
benefit obligation 1,646,000 1,493,000 1,405,000
Return on plan assets:
Expected return-(gain) (1,666,000) (1,803,000) (1,661,000)
Asset gain (loss) 2,879,000 (2,774,000) 242,000
Actual return-(gain) loss (4,545,000) 971,000 (1,903,000)
Net amortization and deferral 3,135,000 (2,584,000) 471,000
Net periodic pension cost $ 1,094,000 $ 795,000 $ 935,000
</TABLE>
(10) Business Segment Data
The Corporation operates two distinct businesses: Arlon - Engineered
Materials and Components' segment; and, Kasco - Replacement Products and
Services' segment. Information about the Corporation's major lines of
business for the years ended December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Segment Depreciation
Operating Capital and
Net Sales Profit(Loss) Assets <F1> Expenditures Amortization
<S> <C> <C> <C> <C> <C>
1995
Arlon $ 99,391,000 $ 15,389,000 $ 55,108,000 $ 1,999,000 $ 3,274,000
Kasco 51,116,000 2,889,000 38,690,000 2,805,000 2,975,000
Corporate -- (3,645,000) 4,398,000 27,000 65,000
Total $150,507,000 $ 14,633,000 $ 98,196,000 $ 4,831,000 $ 6,314,000
1994
Arlon $ 92,214,000 $ 15,712,000 $ 50,234,000 $ 2,084,000 $ 3,562,000
Kasco 53,308,000 2,197,000 39,317,000 3,083,000 2,874,000
Corporate -- (4,255,000) 9,692,000 9,000 66,000
Total $145,522,000 $ 13,654,000 $ 99,243,000 $ 5,176,000 $ 6,502,000
1993
Arlon $ 82,397,000 $ 12,884,000 $ 48,870,000 $ 2,673,000 $ 3,523,000
Kasco:
Operations 52,561,000 5,625,000 40,205,000 3,617,000 3,096,000
Restructuring -- (5,743,000) -- -- --
52,561,000 (118,000) 40,205,000 3,617,000 3,096,000
Corporate -- (7,892,000)<F2> 6,472,000 28,000 81,000
Total $134,958,000 $ 4,874,000 $ 95,547,000 $ 6,318,000 $ 6,700,000
<FN>
<F1> Excludes net assets of discontinued operations of $3,529,000 and
$12,434,000 for 1994 and 1993, respectively.
<F2> Includes $3.0 million provision for anticipated litigation costs -
See Note 2 to Consolidated Financial Statements.
</FN>
</TABLE>
The Corporation has operations in Canada and several European countries.
Information about the Corporation's operations by geographical area for
the years ended December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Segment
Operating
Net Sales Profit(Loss) Assets <F1>
<S> <C> <C> <C>
1995
United States $122,510,000 $ 12,797,000 $ 77,917,000
Foreign 27,997,000 1,836,000 20,279,000
Total $150,507,000 $ 14,633,000 $ 98,196,000
1994
United States $119,045,000 $ 12,754,000 $ 80,579,000
Foreign 26,477,000 900,000 18,664,000
Total $145,522,000 $ 13,654,000 $ 99,243,000
1993
United States $108,132,000 $ 7,475,000 <F2> $ 76,165,000
Foreign 26,826,000 (2,601,000)<F3> 19,382,000
Total $134,958,000 $ 4,874,000 $ 95,547,000
<FN>
<F1> Excludes net assets of discontinued operations of $3,529,000 and
$12,434,000 for 1994 and 1993, respectively.
<F2> After $4,736,000 of restructuring and litigation costs - see Note 2
to Consolidated Financial Statements.
<F3> After $4,007,000 of restructuring costs - see Note 2 to Consolidated
Financial Statements.
</FN>
</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 were consolidated in the United States District Court for the
Southern District of New York, were subsequently stayed by order of the
Bankruptcy Court for the Southern District of New York, as described in the
following paragraph.
On December 6, 1993, Keene filed for protection under Chapter 11 of the
Bankruptcy Code. The filing and certain subsequent proceedings led to a
stay of the asbestos-related individual and class actions referred to
above. On May 5, 1995, the Bankruptcy Court overseeing the reorganization
of Keene entered an order allowing the Creditors' Committee to assume from
Keene responsibility for the pursuit of claims arising out of the transfer
of assets for value by Keene to other subsidiaries of Bairnco and the spin-
offs of certain subsidiaries, including Keene, by Bairnco. On June 8,
1995, the Creditors' Committee commenced an adversary proceeding in the
Bankruptcy Court against Bairnco and others alleging that the transfers of
assets by Keene were fraudulent and otherwise violative of law and seeking
compensatory damages of $700 million, plus interest and punitive damages.
Bairnco and other defendants have sought to have the proceeding removed to
the United States District Court for the Southern District of New York to
the judge before whom the class actions described above are pending. Their
application for such transfer is pending. Bairnco and other defendants in
the adversary proceeding have reached an agreement in principle with
respect to the transfer of the adversary proceeding to the District Court
(following the confirmation of Keene's plan of reorganization). The
agreement is, however, subject to final documentation and requires the
approval of the Bankruptcy Court before it can become effective. In the
meantime, no answers or responsive pleadings have been filed in the
adversary proceeding, and all proceedings have been stayed.
Management believes that Bairnco has meritorious defenses to all claims or
liability purportedly derived from Keene and that it is not liable, as an
alter ego, successor, fraudulent transferee or otherwise, for the asbestos-
related claims against Keene or with respect to Keene products.
Bairnco is party to a separate action brought by Keene in the United States
Bankruptcy Court for the Southern District of New York in which Keene
seeks the exclusive benefit of tax refunds attributable to the carryback by
Keene of certain net operating losses, notwithstanding certain provisions
of tax sharing agreements between Keene and Bairnco. (After filing this
action, Keene ceded control of the action to the Creditors' Committee.)
Pending resolution of the dispute by the Bankruptcy Court, any refunds
actually received are to be placed in escrow. Through December 31, 1995,
approximately $12.1 million of refunds had been received and placed in
escrow. Subsequent to yearend, an additional $16.4 million of refunds were
received and placed in escrow. There can be no assurance whatsoever that
resolution of the dispute with Keene will result in the release of any
portion of the refunds to Bairnco.
Bairnco Corporation and its subsidiaries are defendants in a number of
other actions. Management of Bairnco believes that the disposition of
these other actions, as well as the actions and proceedings described
above, will not have a material adverse effect on the consolidated results
of operations or the financial position of Bairnco Corporation and its
subsidiaries as of December 31, 1995.
CORPORATE INFORMATION
Corporate Office
Suite 300, 2251 Lucien Way
Maitland, Florida, 32751
407-875-2222
Principal Facilities
Bear, Delaware
City of Industry, California
East Providence, Rhode Island
Rancho Cucamonga, California
St. Louis, Missouri
Santa Ana, California
Vancouver, B.C., Canada
Toronto, Ontario, Canada
Antwerp, Belgium
Gwent, Wales, United Kingdom
Paris, France
Pansdorf, Germany
Transfer Agent and Registrar
Trust Company Bank
P.O. Box 4625
Atlanta, Georgia 30302
404-588-7815
Independent Certified Public Accountants
Arthur Andersen LLP
200 South Orange Avenue, Suite 2100
Orlando, Florida, 32801
407-841-4601
Stock Listing
Bairnco common stock is listed on the New York Stock Exchange.
Symbol - BZ.
Annual Meeting
The annual stockholders meeting will be held at the Sheraton Orlando North,
600 North Lake Destiny Road,
Maitland, Florida, 32751,
on April 19, 1996 at 9:00 a.m.
Form 10-K
Stockholders may obtain without charge a copy of Bairnco's Form 10-K filed
with the Securities and Exchange Commission by writing to Investor
Relations at the Corporate Office address.
Investor Relations Information
Contact Investor Relations at Bairnco's Corporate Office.
BAIRNCO CORPORATION
Suite 300, 2251 Lucien Way
Maitland, Florida 32751
407-875-2222
FAX 407-875-3398
EXHIBIT 21
BAIRNCO CORPORATION AND SUBSIDIARIES
Subsidiaries of Registrant
as of March 26, 1996
Percentage State/Country of
Ownership Incorporation
Arlon, Inc. 100% Delaware
Kasco Corporation 100% Delaware
Bairnco Foreign Sales Corporation 100% Barbados
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 33-36330 and 33-41313).
Orlando, Florida
March 26, 1996
Arthur Andersen LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM BAIRNCO'S 1995 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-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 608,000
<SECURITIES> 0
<RECEIVABLES> 22,235,000
<ALLOWANCES> 763,000
<INVENTORY> 23,736,000
<CURRENT-ASSETS> 51,342,000
<PP&E> 77,792,000
<DEPRECIATION> 43,343,000
<TOTAL-ASSETS> 98,196,000
<CURRENT-LIABILITIES> 22,992,000
<BONDS> 21,236,000
0
0
<COMMON> 111,000
<OTHER-SE> 47,913,000
<TOTAL-LIABILITY-AND-EQUITY> 98,196,000
<SALES> 150,507,000
<TOTAL-REVENUES> 150,507,000
<CGS> 97,190,000
<TOTAL-COSTS> 97,190,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,026,000
<INCOME-PRETAX> 12,607,000
<INCOME-TAX> 4,826,000
<INCOME-CONTINUING> 7,781,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,781,000
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.75
</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, 1995
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, 1995 and 1994, 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 that 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 Bairnco Corporation 401(k) Savings Plan and Trust as
of December 31, 1995 and 1994, 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 15, 1996
Arthur Andersen LLP
<TABLE>
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1995 AND 1994
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
INVESTMENTS, at fair market value
(Notes 2 & 3)
Money market fund $ 630,998 $ 435,919
Corporate bond fund 409,483 309,654
Common stock fund 1,120,700 679,727
Bairnco common stock fund 154,559 136,704
Participant notes receivable 12,744 --
TOTAL INVESTMENTS 2,328,484 1,562,004
RECEIVABLES
Participants' contributions 46,494 56,399
Accrued investment income 6,865 6,949
TOTAL RECEIVABLES 53,359 63,348
TOTAL ASSETS 2,381,843 1,625,352
NET ASSETS AVAILABLE FOR BENEFITS $ 2,381,843 $ 1,625,352
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(Note 6)
<CAPTION>
1995 1994
<S> <C> <C>
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year $ 1,625,352 $ 1,171,176
ADDITIONS:
Participants' contributions 724,508 678,506
Investment income 61,710 63,602
Net realized and unrealized
appreciation (depreciation)
on investments (Note 2) 319,307 (79,905)
1,105,525 662,203
DEDUCTIONS:
Distributions 349,034 194,389
Administrative expenses (Note 4) -- 13,638
349,034 208,027
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 2,381,843 $ 1,625,352
The accompanying notes are an integral part of these financial statements.
</TABLE>
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
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.
Once an employee becomes eligible for participation, salary deferrals
(contributions) may commence on any subsequent semi-annual enrollment date
of January 1 or July 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 for both 1995 and 1994. 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 1995 or 1994. 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 related 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 participant'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/her 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.
Participant Notes Receivable
Effective January 1, 1995, a participant may borrow, with the
approval of the Administrative Committee, from his/her account for the
purposes of purchasing a principal residence, educational or medical
expenses, and to prevent foreclosure on the home of a participant. Funds
may be borrowed at a minimum of $1,000 up to a maximum equal to the lesser
of (1) a total of $50,000 of borrowings within one year or (2) 50% of the
participant's account balance.
Loan transactions are treated as a transfer to(from) the investment
fund from(to) the participant notes receivable account. Loan terms range
from 1-5 years or up to 15 years for the purchase of a primary residence.
The loans are secured by the balance in the participant's account and bear
interest at a rate commensurate with local prevailing rates as determined
quarterly by the plan administrator. During 1995, interest rates ranged
from 7.5% to 8.5%. Principal and interest are paid quarterly through
payroll deductions. As of December 31, 1995, there were seven loans
outstanding.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis Of Accounting-
The accounting records of the Plan and the Plan's assets are
maintained by SunTrust Banks of Florida, Inc. (formerly SunBank, NA)
("SunTrust"). The participants' account balances are determined on the
cash basis; however, the Plan's financial statements contained herein are
presented on an accrual basis.
Investment Valuation and Income Recognition-
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. Participant notes receivable are valued at cost which
approximates fair value.
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 from the sale
of investments amounted to $143,345 and $2,542 for the Plan years ended
December 31, 1995 and 1994, respectively.
3. INVESTMENTS:
There are four investment options into which participants may direct
the investment of their accounts. These are a Capital Growth Fund (common
stock fund), an Investment Grade Bond Fund (corporate bond fund), a Prime
Quality Fund (money market fund) and the Bairnco Corporation Common Stock
Fund (Bairnco common stock fund). Participants invest in units of
participation of the fund which represents an undivided interest in the
underlying assets of the fund. Participants may separately direct the
investment of future deferrals and existing account balances into these
four investment options in increments of 10%. During 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. Effective January 1, 1995, participants were permitted
to modify their elections for future deferrals and existing account
balances between investment funds on a daily basis.
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, SunTrust has acted as Plan Trustee
pursuant to the Plan document which is signed by the Corporation and
Trustee. SunTrust manages the Plan assets, makes investment decisions
within the funds and makes distributions to participants as directed by the
Plan Administrator. The 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. Through December 31,
1994, these expenses paid by the Plan were reported as deductions of the
net assets of the Plan. During 1995, all investment managers' fees were
paid directly by the Plan and the assets of the Plan reported at net market
value. The fees charged were based on a percentage of the net assets of
the respective funds as follows:
Capital Growth Fund 1.15%
Investment Grade Bond Fund 0.75%
Prime Quality Fund 0.58%
Bairnco Stock Fund 0.75%
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, 1995.
<TABLE>
<CAPTION>
BAIRNCO
COMMON CORP. MONEY COMMON PART.
STOCK BOND MARKET STOCK NOTES
FUND FUND FUND FUND REC. TOTAL
<S> <C> <C> <C> <C> <C> <C>
Net Assets Available for
Plan Benefits, 01/01/95 $ 710,079 $323,062 $451,213 $140,998 $ -- $1,625,352
ADDITIONS:
Participants' contributions 331,015 140,113 211,721 41,659 -- 724,508
Investment income 10,003 23,128 28,579 -- -- 61,710
Net realized and unrealized
appreciation(depreciation)
on investments 232,090 37,735 (31) 49,513 -- 319,307
Loan repayments 513 352 283 100 (1,248) --
Transfers from other funds 26,604 8,758 40,980 1,247 -- 77,589
600,225 210,086 281,532 92,519 (1,248) 1,183,114
DEDUCTIONS:
Distributions (142,315) (100,445) (82,104) (24,170) -- (349,034)
Loans (5,646) (3,685) (2,742) (1,919) 13,992 --
Transfers to other funds (17,975) (8,383) (1,432) (49,799) -- (77,589)
(165,936) (112,513) (86,278) (75,888) 13,992 (426,623)
Net Assets Available for
Plan Benefits, 12/31/95 $1,144,368 $420,635 $646,467 $157,629 $12,744 $2,381,843
</TABLE>
The following schedule presents changes in the net assets of the
investment funds for the year ended December 31, 1994.
<TABLE>
<CAPTION>
BAIRNCO
COMMON CORP. 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,
SunTrust, as Plan Trustee, and any person or corporation which renders
services to the Plan. Certain 1995 and 1994 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 1995 and 1994 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 March 5, 1996, 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.
9. SUPPLEMENTAL SCHEDULES:
Supplemental Schedule I lists the reportable transactions of the Plan
for the year ended December 31, 1995. Purchases and sales are made at
market value on the date of transaction.
Supplemental Schedule II lists the Plan assets held for investment at
December 31, 1995.
Supplemental Schedule III lists transactions with parties in interest
of the Plan for the year ended December 31, 1995.
SCHEDULE I
<TABLE>
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<CAPTION>
Cost of Sales Net Gain
Description of Transaction Purchases Sales Proceeds on Sales
<S> <C> <C> <C> <C>
Purchases:
STI Classic Prime Quality Money Market
Fund, Class A Trust Shares $438,011
STI Classic Prime Quality Money Market
Fund, Class A Trust Shares 487,655
Sales:
STI Classic Prime Quality Money Market
Fund, Class A Trust Shares $487,655 $487,655 $ --
STI Classic Prime Quality Money Market
Fund, Class A Trust Shares 435,917 435,917 --
Total All Funds $925,666 $923,572 $923,572 $ --
The accompanying notes are an integral part of this schedule.
</TABLE>
SCHEDULE II
<TABLE>
BAIRNCO CORPORATION
401(k) SAVINGS PLAN AND TRUST
SCHEDULE OF ASSETS HELD FOR INVESTMENT
AS OF DECEMBER 31, 1995
<CAPTION>
Market Value Unrealized
Description (Note 2) Cost Appreciation
<S> <C> <C> <C>
Common Stocks
Bairnco Corporation, 10,885 units
@ $14.20 per unit $ 154,559 $ 115,538 $ 39,021
Other Common Stock, 82,892 units
@ $13.52 per unit 1,120,700 1,012,506 108,194
Total Common Stocks 1,275,259 1,128,044 147,215
Other Investments
Money Market Funds, 630,998 units
@ $1.00 per unit 630,998 630,998 --
Corporate Bonds, 38,594 units
@ $10.61 per unit 409,483 380,736 28,747
Participant Notes Receivable 12,744 12,744 --
Total Other Investments 1,053,225 1,024,478 28,747
Total $2,328,484 $2,152,522 $ 175,962
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, 1995
Description Amount
Sold 9,398.862 units of Bairnco Corporation Stock
Fund between $10.295 and $14.205 per unit $106,927
Purchased 6,613.682 units of Bairnco Corporation
Stock Fund between $10.295 and $13.702 per unit $ 75,291
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 15, 1996 By: /s/ J. ROBERT WILKINSON
J. ROBERT WILKINSON
Administrative Committee Member
