UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY EXCHANGE REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8120
BAIRNCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3057520
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2251 Lucien Way, Suite 300, Maitland, FL 32751
(Address of principal executive offices) (Zip Code)
(407) 875-2222
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes No
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each issuer's classes of common
stock, as of the latest practicable date.
9,848,934 shares of Common Stock Outstanding as of April 26, 1996.
PART I - FINANCIAL INFORMATION
Item 1: FINANCIAL STATEMENTS
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED MARCH 30, 1996 AND APRIL 1, 1995
(Unaudited)
1996 1995
Net sales $ 38,094,000 $ 38,523,000
Cost of sales 24,656,000 24,794,000
Gross profit 13,438,000 13,729,000
Selling and administrative expenses 9,621,000 10,132,000
Operating profit 3,817,000 3,597,000
Interest expense, net 415,000 547,000
Income before income taxes 3,402,000 3,050,000
Provision for income taxes 1,293,000 1,159,000
Net Income $ 2,109,000 $ 1,891,000
Primary and fully diluted earnings
per share of common stock (Note 2) $ 0.21 $ 0.18
Dividends per share of common stock $ 0.05 $ 0.05
The accompanying notes are an integral part of these financial statements.
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 30, 1996 AND DECEMBER 31, 1995
(Unaudited)
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 1,042,000 $ 608,000
Accounts receivable, less allowances
of $801,000 and $763,000,
respectively 23,748,000 21,472,000
Inventories (Note 3) 24,066,000 23,736,000
Deferred income taxes 3,396,000 3,396,000
Other current assets 2,364,000 2,130,000
Total current assets 54,616,000 51,342,000
Plant and equipment, at cost 80,224,000 77,792,000
Less - Accumulated depreciation and
amortization (44,652,000) (43,343,000)
Plant and equipment, net 35,572,000 34,449,000
Cost in excess of net assets of
purchased businesses 8,083,000 8,152,000
Other assets 4,099,000 4,253,000
$102,370,000 $ 98,196,000
LIABILITIES & STOCKHOLDERS' INVESTMENT
Current Liabilities:
Short-term debt $ 4,561,000 $ 3,156,000
Current maturities of long-term debt 186,000 186,000
Accounts payable 7,599,000 7,885,000
Accrued expenses (Note 4) 12,451,000 11,765,000
Total current liabilities 24,797,000 22,992,000
Long-term debt 24,084,000 21,236,000
Deferred income taxes 3,214,000 3,215,000
Other liabilities 2,919,000 2,729,000
Stockholders' Investment:
Preferred stock, par value $.01,
5,000,000 shares authorized,
none issued -- --
Common stock, par value $.01,
30,000,000 shares authorized,
11,121,999 and 11,062,499 shares
issued, respectively 111,000 111,000
Paid-in capital 50,996,000 50,833,000
Retained earnings 11,083,000 9,460,000
Treasury stock, at cost, 1,287,065
and 938,065 shares, respectively (14,834,000) (12,380,000)
Total stockholders' investment 47,356,000 48,024,000
$102,370,000 $ 98,196,000
The accompanying notes are an integral part of these financial statements.
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED MARCH 30, 1996 AND APRIL 1, 1995
(Unaudited)
1996 1995
Cash Flows from Operating Activities:
Net income $ 2,109,000 $ 1,891,000
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 1,701,000 1,728,000
(Gain) loss on disposal of plant
and equipment (2,000) 186,000
Deferred income taxes (1,000) 6,000
Change in operating assets and
liabilities:
(Increase) in accounts receivable (2,276,000) (3,710,000)
(Increase) in inventories (330,000) (1,679,000)
(Increase) decrease in other
current assets (234,000) 442,000
(Decrease) increase in accounts
payable (286,000) 996,000
Increase in accrued expenses 686,000 619,000
Cash provided by discontinued operations -- 549,000
Other 259,000 352,000
Net cash provided by operating
activities 1,626,000 1,380,000
Cash Flows from Investing Activities:
Capital expenditures (2,847,000) (1,045,000)
Proceeds from collection on notes
receivable 82,000 --
Proceeds from sales of plant and
equipment 19,000 81,000
Net cash (used in) investing
activities (2,746,000) (964,000)
Cash Flows from Financing Activities:
Net borrowings (repayments) of external
debt 3,892,000 (636,000)
Payment of dividends (487,000) (525,000)
Purchase of treasury stock (2,454,000) --
Exercise of stock options 302,000 --
Net cash provided by (used in)
financing activities 1,253,000 (1,161,000)
Effect of foreign currency exchange rate
changes on cash and cash equivalents 301,000 460,000
Net increase (decrease) in cash and
cash equivalents 434,000 (285,000)
Cash and cash equivalents, beginning
of period 608,000 1,478,000
Cash and cash equivalents, end of period $ 1,042,000 $ 1,193,000
The accompanying notes are an integral part of these financial statements.
BAIRNCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
(Unaudited)
(1) Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Bairnco Corporation and its subsidiaries ("Bairnco" or the "Corporation")
after the elimination of all material intercompany accounts and transactions.
The unaudited financial information included herein reflects all adjustments
of a normal recurring nature which the Corporation's management considers
necessary for a fair summarized presentation of the consolidated financial
statements included in this Form 10-Q filing. The consolidated results of
operations for the quarter ended March 30, 1996, are not necessarily
indicative of the results of operations for the full year.
(2) Earnings per Common Share
Earnings per common share are based on the weighted average number of shares
outstanding during the periods as follows:
First Quarter
1996 1995
Primary 10,069,000 10,500,000
Fully Diluted 10,069,000 10,500,000
Primary and fully diluted earnings per share include all common stock
equivalents. A statement regarding computation of per share earnings is
included as Exhibit 11 to this Quarterly Report on Form 10-Q.
(3) Inventories
Inventories consisted of the following as of March 30, 1996 and December 31,
1995:
1996 1995
Raw materials and supplies $ 4,703,000 $ 4,651,000
Work in process 4,995,000 5,451,000
Finished goods 14,368,000 13,634,000
Total inventories $ 24,066,000 $ 23,736,000
(4) Accrued Expenses
Accrued expenses consisted of the following as of March 30, 1996 and December
31, 1995:
1996 1995
Salaries and wages $ 1,842,000 $ 2,312,000
Income taxes 1,343,000 360,000
Insurance 1,768,000 2,026,000
Litigation 1,902,000 1,942,000
Other accrued expenses 5,596,000 5,125,000
Total accrued expenses $ 12,451,000 $ 11,765,000
(5) Contingencies
Bairnco Corporation and its subsidiaries are defendants in certain legal
actions which are discussed more fully in Part II, Item 1 ("Legal
Proceedings") of this filing.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and related notes and with Bairnco's
Audited Consolidated Financial Statements and related notes for the year
ended December 31, 1995.
Bairnco Corporation is a diversified multinational company that operates two
distinct businesses under the names Arlon and Kasco.
Engineered materials and components are designed, manufactured and sold under
the Arlon brand identity to electronic, industrial and commercial markets.
These products are based on a common technology in coating, laminating and
dispersion chemistry. Arlon's principal products include high 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.
Comparison of First Quarter 1996 to First Quarter 1995
Sales in the first quarter 1996 decreased $429,000 or 1.1% to $38,094,000
from $38,523,000 in 1995. The decrease in the first quarter sales was
attributable to a 9.9% decline in Kasco's sales. Arlon sales increased 3.6%
as the growing telecommunications and graphics markets offset the decline in
demand from the semiconductor and computer markets.
Gross profit decreased 2.1% to $13,438,000 from $13,729,000. The decrease is
attributable to lower sales and profit margin declines in major product
lines. The gross profit margin as a percent of sales decreased from 35.6% to
35.3%. The profit margin declines are due to the continuing increase in
Arlon's lower margin commercial business and a shifting product mix in the
graphics markets. Kasco's gross profit and gross profit margin as a percent
of sales both showed improvement as the divisions continued to focus on the
core business.
Selling and administrative expenses decreased 5.0% to $9,621,000 from
$10,132,000. As a percent of sales, selling and administrative expenses
decreased to 25.3% from 26.3%. These decreases resulted primarily from a
$400,000 reduction in Kasco's North American operations' selling expenses as
the divisions continued to focus on the core business.
Interest expense decreased $132,000 to $415,000 for the first quarter from
$547,000 last year. This decrease was the result of combined lower interest
rates and lower average borrowings.
The effective tax rate for both the first quarter of 1996 and 1995 was 38%.
The provision for income taxes in both periods includes all applicable
federal, state, local and foreign income taxes.
Net income increased 11.5% to $2,109,000 as compared to $1,891,000 in the
first quarter 1995. First quarter earnings of $.21 per share were up 16.7%
from last year as a result of improved earnings and a reduced number of
shares outstanding.
Liquidity and Capital Resources
At March 30, 1996, Bairnco had working capital of $29.8 million compared to
$28.4 million at December 31, 1995. The increase in accounts receivable
relates to the increased sales activity during the first quarter of 1996 over
that of the fourth quarter 1995. The increase in accrued expenses is
primarily due to the increase in accrued income taxes resulting from the
first quarter 1996 earnings.
During the first quarter the Corporation repurchased an additional 349,000
shares of common stock. This completed the program to repurchase $5,000,000
of Bairnco's common stock authorized by the Board in the first quarter of
last year. A total of 835,200 shares were repurchased during the last twelve
months.
At March 30, 1996, Bairnco's total debt outstanding was $28,831,000 compared
to $24,578,000 at the end of 1995. This increase was primarily due to the
stock repurchases made during the first quarter and the acquisition of a
small silicone product line that will be integrated with Bairnco's current
silicone materials business at Arlon's Bear, Delaware facility. At March 30,
1996, approximately $20.3 million was available for borrowing under the
Corporation's secured reducing revolving credit agreement, as amended April
18, 1995. In addition, approximately $4.2 million was available under
various short-term domestic and foreign uncommitted credit facilities.
Bairnco made approximately $2,847,000 of capital expenditures during the
first quarter 1996. Total capital expenditures in 1996 are now expected to
be approximately $14.9 million which includes approximately $1.8 million
related to the small silicone product line acquisition.
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 Part II,
Item 1 ("Legal Proceedings") of this filing. 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 March
30, 1996.
The Corporation has discontinued the property and business interruption
insurance for earthquake damage in California and became self-insured for
these exposures in mid-March 1996. The cost of this insurance had continued
to escalate and the loss deductibles that the Corporation would have had to
retain under the available policies were significant.
Outlook
Management is not aware of any adverse trends that would materially affect
the Corporation's strong financial position. Although the economy and many
of Bairnco's markets have weakened or are showing lower growth, it is to
expected that 1996 will be another year of continued improvement.
PART II - OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS
Since its announcement in January 1990 of its intention to spin-off Keene
Corporation ("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 in the adversary proceeding have entered into a stipulation,
which has been approved by the Bankruptcy Court, that calls for the adversary
proceeding to be litigated in the United States District Court for the
Southern District of New York following the confirmation of Keene's plan of
reorganization. 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
exclusive benefit of tax refunds attributable to the carryback by Keene of
certain net operating losses ("NOL's"), 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 March 30, 1996,
approximately $28.5 million of refunds had been received and placed in
escrow. By stipulation, which has been approved by the Bankruptcy Court,
Bairnco and the Creditors' Committee have agreed to stay the NOL lawsuit
without date pending confirmation of Keene's plan of reorganization (see
below). 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.
The Internal Revenue Service has taken the position that the NOL refunds,
which are issued on a provisional basis, ultimately might be disapproved or
reduced by the congressional Joint Committee on Taxation and in that event
would have to be returned to the government in whole or in part. There can
be no assurance that the NOL refunds ultimately will be approved.
On March 11, 1996, Keene began soliciting votes to accept or reject its
proposed plan of reorganization. The deadline for receipt of votes is May
14, 1996, and a confirmation hearing is scheduled in the Bankruptcy Court for
June 12, 1996. There can be no assurance that the plan will be approved.
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
March 30, 1996.
Item 2: OTHER INFORMATION
None.
Item 3: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of Bairnco was held in Maitland, Florida
on April 19, 1996. Stockholders ratified management's selection of Arthur
Andersen LLP as auditors for Bairnco for the 1996 fiscal year and elected
all nominees to the Board of Directors.
Item 4: EXHIBITS
Exhibit 11: Calculation of Primary and Fully Diluted Earnings per Share
for the Quarters ended March 30, 1996 and April 1, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Bairnco
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
BAIRNCO CORPORATION
(Registrant)
/s/ J. Robert Wilkinson
J. Robert Wilkinson
Vice President Finance and Treasurer
(Chief Financial Officer)
DATE: May 10, 1996
EXHIBITS
TO FORM 10-Q
FOR QUARTER ENDED
March 30, 1996
Exhibit 11
BAIRNCO CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
FOR THE QUARTERS ENDED MARCH 30, 1996 AND APRIL 1, 1995
(Unaudited)
1996 1995
PRIMARY EARNINGS PER SHARE:
Net income $ 2,109,000 $ 1,891,000
Average common shares outstanding 9,948,000 10,500,000
Common shares issuable in respect to
common stock equivalents, with a
dilutive effect 121,000 --
Total common and common equivalent
shares 10,069,000 10,500,000
Primary Earnings Per Common Share $ 0.21 $ 0.18
FULLY DILUTED EARNINGS PER SHARE:
Net income $ 2,109,000 $ 1,891,000
Total common and common equivalent
shares 10,069,000 10,500,000
Additional common shares assuming full
dilution -- --
Total common shares assuming full
dilution 10,069,000 10,500,000
Fully Diluted Earnings Per Common Share $ 0.21 $ 0.18
Earnings per share are based on the average number of shares outstanding
during each period. Primary earnings per share include all common stock
equivalents. Fully diluted earnings per share include all common stock
equivalents plus the additional common shares issuable assuming full
dilution.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BAIRNCO'S
FIRST QUARTER 1996 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-30-1996
<CASH> 1,042,000
<SECURITIES> 0
<RECEIVABLES> 24,549,000
<ALLOWANCES> 801,000
<INVENTORY> 24,066,000
<CURRENT-ASSETS> 54,616,000
<PP&E> 80,224,000
<DEPRECIATION> 44,652,000
<TOTAL-ASSETS> 102,370,000
<CURRENT-LIABILITIES> 24,797,000
<BONDS> 24,084,000
0
0
<COMMON> 111,000
<OTHER-SE> 47,245,000
<TOTAL-LIABILITY-AND-EQUITY> 102,370,000
<SALES> 38,094,000
<TOTAL-REVENUES> 38,094,000
<CGS> 24,656,000
<TOTAL-COSTS> 24,656,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 415,000
<INCOME-PRETAX> 3,402,000
<INCOME-TAX> 1,293,000
<INCOME-CONTINUING> 2,109,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,109,000
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
