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 April 3, 1999
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.
7,907,959 shares of Common Stock Outstanding as of April 26, 1999.
"Safe Harbor" Statement under the Private Securities Reform Act of 1995
Certain of the statements contained in this Quarterly Report
(other than the financial statements and statements of historical
fact), including, without limitation, statements as to management
expectations and beliefs presented under the caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operations", are forward-looking statements. Forward-
looking statements are made based upon management's expectations
and belief concerning future developments and their potential
effect upon the Corporation. There can be no assurance that
future developments will be in accordance with management's
expectations or that the effect of future developments on the
Corporation will be those anticipated by management.
The Corporation wishes to caution readers that the assumptions
which form the basis for forward-looking statements with respect
to or that may impact earnings for the year ended December 31,
1999 and thereafter include many factors that are beyond the
Corporation's ability to control or estimate precisely. These
risks and uncertainties include, but are not limited to, the
market demand and acceptance of the Corporation's existing and
new products; the impact of competitive products; changes in the
market for raw or packaging materials which could impact the
Corporation's manufacturing costs; changes in product mix;
changes in the pricing of the products of the Corporation or its
competitors; the loss of a significant customer or supplier;
production delays or inefficiencies; disruptions in operations
due to labor disputes; the unanticipated costs and disruption in
operations due to Year 2000 non-compliance; the costs and other
effects of complying with environmental regulatory requirements;
losses due to natural disasters where the Corporation is self-
insured; the costs and other effects of legal and administrative
cases and proceedings, settlements and investigations; and
changes in US or international economic or political conditions,
such as inflation or fluctuations in interest or foreign exchange
rates.
While the Corporation periodically reassesses material trends and
uncertainties affecting the Corporation's results of operations
and financial condition in connection with its preparation of
management's discussion and analysis contained in its quarterly
reports, the Corporation does not intend to review or revise any
particular forward-looking statement referenced herein in light
of future events.
PART I - FINANCIAL INFORMATION
Item 1: FINANCIAL STATEMENTS
<TABLE>
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED APRIL 3, 1999 AND APRIL 4, 1998
(Unaudited)
<CAPTION>
1999 1998
<S> <C> <C>
Net sales $ 42,662,000 $ 42,125,000
Cost of sales 28,410,000 28,442,000
Gross profit 14,252,000 13,683,000
Selling and administrative expenses 10,245,000 9,716,000
Operating profit 4,007,000 3,967,000
Interest expense, net 567,000 481,000
Income before income taxes 3,440,000 3,486,000
Provision for income taxes 1,170,000 1,290,000
Net income $ 2,270,000 $ 2,196,000
Basic earnings per share of common
stock (Note 2) $ 0.28 $ 0.25
Diluted earnings per share of common
stock (Note 2) $ 0.28 $ 0.24
Dividends per share of common stock $ 0.05 $ 0.05
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE QUARTERS ENDED APRIL 3, 1999 AND APRIL 4, 1998
(Unaudited)
Note 3
<CAPTION>
1999 1998
<S> <C> <C>
Net income $ 2,270,000 $ 2,196,000
Other comprehensive income, net of tax:
Foreign currency translation adjustment (335,000) (74,000)
Comprehensive income $ 1,935,000 $ 2,122,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF APRIL 3, 1999 AND DECEMBER 31, 1998
<CAPTION>
(Unaudited)
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 792,000 $ 822,000
Accounts receivable, less allowances of
$1,245,000 and $1,224,000, respectively 29,378,000 27,999,000
Inventories (Note 4) 25,811,000 26,179,000
Deferred income taxes 4,137,000 4,137,000
Other current assets 1,909,000 1,709,000
Total current assets 62,027,000 60,846,000
Plant and equipment, at cost 98,256,000 97,291,000
Less-Accumulated depreciation and amortization (57,345,000) (55,889,000)
Plant and equipment, net 40,911,000 41,402,000
Cost in excess of net assets of purchased
businesses 12,114,000 11,840,000
Other assets 4,469,000 4,467,000
$119,521,000 $118,555,000
LIABILITIES & STOCKHOLDERS' INVESTMENT
Current Liabilities:
Short-term debt $ 2,820,000 $ 4,373,000
Accounts payable 12,436,000 9,022,000
Accrued expenses (Note 5) 13,693,000 14,192,000
Total current liabilities 28,949,000 27,587,000
Long-term debt 33,256,000 33,471,000
Deferred income taxes 3,236,000 2,912,000
Other liabilities 8,130,000 8,147,000
Stockholders' Investment:
Preferred stock, par value $.01, 5,000,000
shares authorized, none issued -- --
Common stock, par value $.01, 30,000,000
shares authorized, 11,187,224 shares
issued 112,000 112,000
Paid-in capital 49,165,000 49,165,000
Retained earnings 24,534,000 22,670,000
Accumulated other comprehensive income
(Note 3) 1,410,000 1,745,000
Treasury stock, at cost, 3,279,265 and
2,904,165 shares, respectively (29,271,000) (27,254,000)
Total stockholders' investment 45,950,000 46,438,000
$119,521,000 $118,555,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
BAIRNCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED APRIL 3, 1999 AND APRIL 4, 1998
(Unaudited)
<CAPTION>
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 2,279,000 $ 2,196,000
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 1,843,000 1,704,000
Loss (gain) on disposal of plant and equipment 20,000 (42,000)
Deferred income taxes 324,000 4,000
Change in operating assets and liabilities:
(Increase) in accounts receivable (1,640,000) (2,866,000)
Decrease (increase) in inventories 106,000 (879,000)
(Increase) in other current assets (217,000) (71,000)
Increase in accounts payable 3,566,000 1,143,000
(Decrease) in accrued expenses (337,000) (1,124,000)
Other (444,000) 55,000
Net cash provided by operating activities 5,491,000 120,000
Cash Flows from Investing Activities:
Capital expenditures (1,371,000) (1,775,000)
Proceeds from sale of plant and equipment -- 55,000
Net cash (used in) investing activities (1,371,000) (1,720,000)
Cash Flows from Financing Activities:
Net (repayments) borrowings of external debt (1,637,000) 3,602,000
Payment of dividends (410,000) (443,000)
Purchase of treasury stock (2,017,000) (2,164,000)
Exercise of stock options -- 35,000
Net cash (used in) provided by financing
activities (4,064,000) 1,030,000
Effect of foreign currency exchange rate changes
on cash and cash equivalents (86,000) 1,000
Net (decrease) in cash and cash equivalents (30,000) (569,000)
equivalents
Cash and cash equivalents, beginning of period 822,000 1,217,000
Cash and cash equivalents, end of period $ 792,000 $ 648,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
BAIRNCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 3, 1999
(Unaudited)
(1) Basis of Presentation
The accompanying consolidated condensed 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 consolidated condensed financial statements
included herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and note disclosures which are normally included in
annual financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations, although the Corporation
believes that the disclosures made are adequate to make the
information presented not misleading.
The consolidated results of operations for the quarter ended
April 3, 1999 are not necessarily indicative of the results of
operations for the full year.
(2) Earnings per Common Share
Earnings per share data is based on net income and not
comprehensive income. Statements regarding the computation of
earnings per share for the quarters ended April 3, 1999 and April
4, 1998 are included as Exhibit 11 to this Quarterly Report on
Form 10-Q.
Basic earnings per common share were computed by dividing net
income by the weighted average number of common shares
outstanding during the quarter. Diluted earnings per common
share include the effect of all dilutive stock options.
(3) Comprehensive Income
Comprehensive income includes net income as well as certain other
transactions shown as changes in stockholders' investment. For
Bairnco, comprehensive income includes net income plus the change
in net asset values of foreign divisions as a result of
translating the local currency values of net assets to US dollars
at varying exchange rates. Accumulated other comprehensive
income consists solely of foreign currency translation
adjustments. There are currently no tax expenses or benefits
associated with the foreign currency translation adjustments.
(4) Inventories
Inventories consisted of the following as of April 3, 1999 and
December 31, 1998:
1999 1998
Raw materials and supplies $ 5,723,000 $ 5,701,000
Work in process 6,378,000 6,604,000
Finished goods 13,710,000 13,874,000
Total inventories $25,811,000 $26,179,000
(5) Accrued Expenses
Accrued expenses consisted of the following as of April 3, 1999
and December 31, 1998:
1999 1998
Salaries and wages $ 2,061,000 $ 2,669,000
Income taxes 1,094,000 633,000
Insurance 2,598,000 2,462,000
Litigation 3,410,000 3,580,000
Other accrued expenses 4,530,000 4,848,000
Total accrued expenses $13,693,000 $14,192,000
(6) Reportable Segment Data
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131"), which is
effective for fiscal years beginning after December 15, 1997. SFAS 131
introduces a new model for segment reporting called the management
approach. The management approach is based on the way the chief
operating decision-maker organizes segments within a company for making
operating decisions and assessing performance.
SFAS 131 requires disclosures for each segment that are similar to those
required under previous standards with the addition of limited quarterly
disclosure requirements. Bairnco adopted SFAS 131 effective January 1,
1998.
There are no differences to the 1998 annual report in the basis of
segmentation or in the basis of measurement of segment profit or loss
included herein. In addition, there has been no material change in
total assets of the segments from the amounts disclosed in the 1998
annual report. Financial information about the Corporation's operating
segments for the first quarter of 1999 and 1998 as required under SFAS
131 is as follows:
1999 Net Sales Operating Profit (Loss)
Arlon $29,943,000 $4,010,000
Kasco 12,719,000 966,000
Headquarters -- (969,000)
$42,662,000 $4,007,000
1998 Net Sales Operating Profit (Loss)
Arlon $30,063,000 $4,172,000
Kasco 12,062,000 661,000
Headquarters -- (866,000)
$42,125,000 $3,967,000
(7) 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 Condensed Financial Statements and
related notes and with Bairnco's Audited Consolidated Financial
Statements and related notes for the year ended December 31,
1998.
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 common
technologies in coating, laminating, polymers 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, on site maintenance services and seasonings for ready-
to-cook foods 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 1999 to First Quarter 1998
The results for the first quarter were improved over last year's
first quarter which was the best quarter of 1998 as the impact of
the "Asian flu" and the down turn in the electronic market
depressed results for the next three quarters. The improved
results are primarily due to the inclusion of the acquisition
made last year and substantial improvements in operating
efficiencies.
Sales in the first quarter 1999 were $42,662,000, an increase of
1.3% from $42,125,000 in 1998. [Last year the first quarter was
Bairnco's best quarter, whereas historically it has been the
third best quarter.] Arlon's sales were down only 0.4%
from last year due to the inclusion of the acquisition and modest
recoveries from the depressed markets of the last three quarters
of last year. Kasco's sales increased 5.4% due to improved sales
in the U.S.
Gross profit increased 4.2% to $14,252,000 from $13,683,000 due
to improved manufacturing efficiencies and the contribution from
the acquisition. The gross profit margin as a percent of sales
increased to 33.4% from 32.5%.
Selling and administrative expenses increased 5.4% to $10,245,000
from $9,716,000. As a percent of sales, selling and
administrative expenses increased to 24.0% from 23.1%.
Productivity as measured by sales per employee improved 4.6% from
$198,900 in 1998 to $208,100 in 1999.
Interest expense increased to $567,000 in 1999 as compared to
$481,000 in 1998 due primarily to higher average borrowings
resulting from the acquisition in the fourth quarter of 1998 and
the continuing program to repurchase Bairnco common stock.
The effective tax rate for the first quarter of 1999 was 34%
versus 37% for 1998. The provision for income taxes in both
periods includes all applicable federal, state, local and foreign
income taxes.
Net income was up to $2,270,000 as compared to $2,196,000 in the
first quarter of 1998. These results represent a significant
improvement over the results for the prior three quarters.
Diluted earnings per common share increased 16.7% to $.28 from
$.24 as a result of improved earnings and the reduced number of
shares outstanding.
Dividend
The first quarter cash dividend of $.05 per share was paid on
March 31, 1999 to stockholders of record on March 8, 1999.
Liquidity and Capital Resources
At April 3, 1999, Bairnco had working capital of $33.1 million
compared to $33.3 million at December 31, 1998. The increase in
accounts receivable relates primarily to the increased sales in
the first quarter of 1999 versus the fourth quarter of 1998.
During the first quarter 1999, the Board of Directors authorized
an additional $5,000,000 to be available for the ongoing
repurchase of Bairnco's common stock. The Board has authorized
management to continue its stock repurchase program subject to
market conditions and capital requirements of the business.
During the first quarter Bairnco repurchased 375,100 shares of
its common stock at a total cost of $2,017,000.
At April 3, 1999, Bairnco's total debt outstanding was
$36,076,000 compared to $37,844,000 at the end of 1998. At April
3, 1999 approximately $10.7 million was available for borrowing
under the Corporation's secured reducing revolving credit
agreement, as amended. In addition, approximately $6.0 million
was available under various short-term domestic and foreign
uncommitted credit facilities.
Bairnco made approximately $1.4 million of capital expenditures
during the first quarter of 1999. Total capital expenditures for
1999 are expected to approximate $8.5 million.
Cash provided by operating activities plus the amounts available
under the existing credit facilities are expected to be
sufficient to fulfill Bairnco's anticipated cash requirements in
1999.
Year 2000 Compliance
As stated in Bairnco's 1998 Annual Report on Form 10-K, the
Corporation has evaluated and identified its internal risks of
software failure due to processing errors arising from
calculations using the Year 2000 date. The plan that was
established to maintain the integrity of its financial systems
and ensure the reliability of its operating systems is proceeding
on schedule. The total estimated cost of achieving Year 2000
compliance remains at approximately $250,000 and includes
software and installation costs. Of this amount, approximately
$200,000 had been incurred through April 3, 1999 with the
remainder expected to be incurred during the second and third
quarters of 1999.
In January of 1998 Bairnco adopted a formal plan to address the
Year 2000 issue. This plan has defined roles, identified staff
members to execute the plan, set target dates, and provided a
detailed budget. The plan also incorporates the use of outside
consultants. The plan is periodically updated and modified, and
progress is monitored against it to ensure that target dates are
being met and that the Corporation designates whatever resources
are necessary to meet the plan's requirements.
Bairnco has compiled a checklist for all areas that may be
affected by this issue. The Corporation has formed task forces
at each of its operating divisions and charged them with doing
thorough and complete audits of their facilities using the
checklist as a guide. The Corporation is aware of some hardware
issues and has assembled a plan to have the outmoded equipment
replaced. This process has begun and will be completed during
the second and third quarters of 1999.
Bairnco has assessed the software in use at all of its operations
and identified applications that do not currently process using a
four-digit field to record the date. The Corporation is in the
process of adapting or replacing any such programs and expects to
have the work completed on schedule. Through April 3, 1999, five
of the seven North American locations' operating information
technology ("IT") systems plus all of the European locations' IT
systems had been upgraded to be Year 2000 compliant with the
remaining two North American locations expected to be completed
by the end of the third quarter of 1999. These two locations are
in various stages of validation and implementation of the
upgraded systems.
Bairnco has contacted the majority of its suppliers and customers
with whom the Corporation has a material business relationship
regarding their Year 2000 state of readiness. The responses to
date have indicated they are, or expect to be, Year 2000
compliant.
Based on the results of our efforts to date as discussed above,
the Corporation believes it will not experience any material
disruption in its operations due to Year 2000 issues with its
computer software programs and operating systems or its interface
with key suppliers and vendors. However, the implementation and
validation of Bairnco's IT and non-IT systems, and the evaluation
of the state of readiness of Bairnco's material business partners
are ongoing. The disruption in service of any critical suppliers
or the failure of the Corporation's operating systems to comply,
could result in a shutdown of the operations affected for the
duration of the disruption.
The Corporation is currently analyzing the risks of a "most
reasonably likely worst case scenario" in order to determine
whether to develop a contingency plan to address this uncertainty.
This process is scheduled for completion during the second
quarter of 1999 and if necessary, a contingency plan will be
formalized and implemented during the third quarter of 1999.
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 April
3, 1999.
Outlook
The outlook for 1999 is for resumed growth and progress towards
our objectives. We continue to see modest improvements in served
markets as compared to the run rates of the last nine months of
last year. Both foreign and domestic competition remains intense
in most markets.
Last year's earnings per share were $.72 excluding the legal
charge in the fourth quarter. Based on the first quarter results
and the trend of the business entering the second quarter, we
expect the results for 1999 to show a substantial improvement
over last year.
Management is not aware of any adverse trends that would
materially affect the Corporation's strong financial position.
Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The interest on the Corporation's bank debt is floating and based
on prevailing market interest rates. For market rate based debt,
interest rate changes generally do not affect the market value of
the debt but do impact future interest expense and hence earnings
and cash flows, assuming other factors remain unchanged. A
theoretical one percentage point change in market rates in effect
on April 3, 1999 would increase interest expense and hence reduce
the net income of the Corporation by approximately $250,000 per
year.
The Corporation's fiscal first quarter 1999 sales denominated in a
currency other than U.S. dollars were approximately 16% of total
sales and net assets maintained in a functional currency other than
U.S. dollars at April 3, 1999 were less than 15% of total net
assets. The effects of changes in foreign currency exchange rates
has not historically been significant to the Corporation's
operations or net assets.
PART II - OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS
Bairnco and its subsidiaries are among the defendants in a
lawsuit pending in the U.S. District Court for the Southern
District of New York (the "Transactions Lawsuit") in which it is
alleged that Bairnco and others are derivatively liable for the
asbestos-related claims against its former subsidiary, Keene
Corporation ("Keene"). The plaintiffs in the Transactions
Lawsuit are the trustees of Keene Creditors Trust ("KCT"), a
successor in interest to Keene. In the Transactions Lawsuit
complaint, the KCT alleges that certain sales of assets by Keene
to other subsidiaries of Bairnco were fraudulent conveyances and
otherwise violative of state law, as well as being violative of
the civil RICO statute, 18 U.S.C. Section 1964. The complaint
seeks compensatory damages of $700 million, interest, punitive
damages, and trebling of the compensatory damages pursuant to
civil RICO. In a series of decisions that remain subject to
appeal, the court has dismissed plaintiff's civil RICO claims;
dismissed 14 of the 21 defendants named in the complaint; and
partially granted defendants' motions for summary judgment on
statute of limitations grounds. Discovery is now underway as to
the remaining claims and defendants.
Keene was spun off in 1990, filed for relief under Chapter 11 of
the Bankruptcy Code in 1993, and emerged from Chapter 11 pursuant
to a plan of reorganization approved in 1996 (the "Keene Plan").
The Keene Plan provided for the creation of the KCT, and
transferred the authority to prosecute the Transactions Lawsuit
from the Official Committee of Unsecured Creditors of Keene
(which initiated the lawsuit in the Bankruptcy Court in 1995) to
the KCT. The Keene Plan further provided that only the KCT, and
no other entity, can sue Bairnco in connection with the claims in
the Transactions Lawsuit complaint. Therefore, although a number
of other asbestos-related personal injury and property damage
cases against Bairnco nominally remain pending in courts around
the country, it is expected that the resolution of the
Transactions Lawsuit in substance will resolve all such claims.
Bairnco also is the defendant in a separate action by the KCT
(the "NOL Lawsuit"), also pending in the United States District
Court for the Southern District of New York, in which the KCT
seeks the exclusive benefit of tax refunds attributable to the
carryback by Keene of certain net operating losses ("NOL
Refunds"), notwithstanding certain provisions of applicable tax
sharing agreements between Keene and Bairnco. (As with the
Transactions Lawsuit, the NOL Lawsuit was commenced during
Keene's Chapter 11 case and, pursuant to the Keene Plan, the KCT
became the plaintiff in the lawsuit and the lawsuit was moved
from the bankruptcy Court to the District Court.) Pending
resolution of the NOL Lawsuit, any refunds actually received are
to be placed in escrow. Through April 3, 1999, approximately
$28.5 million of NOL Refunds had been received and placed in
escrow. There can be no assurance whatsoever that resolution of
the NOL Lawsuit will result in the release of any portion of the
NOL Refunds to Bairnco.
Bairnco and its Arlon subsidiary ("Arlon") also are among the
defendants in a third action by the KCT (the "Properties
Lawsuit"), commenced December 8, 1998 and pending in the United
States District Court for the Southern District of New York. In
the Properties Lawsuit complaint, the KCT seeks a declaratory
judgment that it owns certain patents and real property purchased
by Arlon from Keene in 1989, based on the allegations that
technical title to these assets was not conveyed at the time of
the sale and that no proof of claim specifically referencing
these assets was filed during Keene's Chapter 11 case. In an
answer and counterclaims, Bairnco and Arlon have denied the KCT's
claims and have requested a declaratory judgment that full title
to the patents and real property in question in fact was
transferred to Arlon at the time of the 1989 asset sale.
Management believes that Bairnco has meritorious defenses to all
claims or liability purportedly derived from Keene and that it is
not liable, as an alter ego, successor, fraudulent transferee or
otherwise, for the asbestos-related claims against Keene or with
respect to Keene products.
Bairnco Corporation and its subsidiaries are defendants in a
number of other actions. Management of Bairnco believes that the
disposition of these other actions, as well as the actions and
proceedings described above, will not have a material adverse
effect on the consolidated results of operations or the financial
position of Bairnco Corporation and its subsidiaries as of April
3, 1999.
Item 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
Item 3: DEFAULTS UPON SENIOR SECURITIES
None.
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the first quarter of 1999. The annual meeting of
stockholders of Bairnco was held in Maitland, Florida on April
22, 1999. Stockholders ratified management's selection of Arthur
Andersen LLP as auditors for Bairnco for the 1999 fiscal year and
elected all nominees to the Board of Directors. The following
table sets forth the results of votes:
Votes Against
Votes For or Withheld
a. Votes on Ratification of Management's
selection of Auditors:
Arthur Andersen LLP 6,981,254 46,459
b. Votes on Election of Directors:
Luke E. Fichthorn III 6,963,001 64,712
Charles T. Foley 6,963,301 64,412
Richard A. Shantz 6,962,101 65,612
William F. Yelverton 6,965,065 62,648
Item 5: OTHER INFORMATION
None.
Item 6(a): EXHIBITS
Exhibit 11 - Calculation of Basic and Diluted Earnings per Share
for the Quarters ended April 3, 1999 and April 4, 1998.
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 3, 1999
EXHIBITS
TO FORM 10-Q
FOR QUARTER ENDED
April 3, 1999
<TABLE>
EXHIBIT 11
BAIRNCO CORPORATION
CALCULATION OF BASIC AND DILUTED EARNINGS PER SHARE
FOR THE QUARTERS ENDED APRIL 3, 1999 AND APRIL 4, 1998
(Unaudited)
<CAPTION>
1999 1998
<S> <C> <C>
BASIC EARNINGS PER COMMON SHARE:
Net income $ 2,270,000 $ 2,196,000
Average common shares outstanding 8,165,000 8,896,000
Basic Earnings Per Common Share $ 0.28 $ 0.25
DILUTED EARNINGS PER COMMON SHARE:
Net income $ 2,270,000 $ 2,196,000
Average common shares outstanding 8,165,000 8,896,000
Common shares issuable in respect to
options issued to employees with a
dilutive effect 22,000 274,000
Total diluted common shares outstanding 8,187,000 9,170,000
Diluted Earnings Per Common Share $ 0.28 $ 0.24
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM BAIRNCO'S FIRST
QUARTER 1999 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> APR-03-1999 APR-04-1998
<CASH> 792,000 648,000
<SECURITIES> 0 0
<RECEIVABLES> 30,623,000 28,690,000
<ALLOWANCES> 1,245,000 966,000
<INVENTORY> 25,811,000 27,202,000
<CURRENT-ASSETS> 62,027,000 61,024,000
<PP&E> 98,256,000 91,179,000
<DEPRECIATION> 57,345,000 51,191,000
<TOTAL-ASSETS> 119,521,000 112,346,000
<CURRENT-LIABILITIES> 28,949,000 25,744,000
<BONDS> 33,256,000 27,294,000
0 0
0 0
<COMMON> 112,000 112,000
<OTHER-SE> 45,838,000 51,903,000
<TOTAL-LIABILITY-AND-EQUITY> 119,521,000 112,346,000
<SALES> 42,662,000 42,125,000
<TOTAL-REVENUES> 42,662,000 42,125,000
<CGS> 28,410,000 28,442,000
<TOTAL-COSTS> 28,410,000 28,442,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 567,000 481,000
<INCOME-PRETAX> 3,440,000 3,486,000
<INCOME-TAX> 1,170,000 1,290,000
<INCOME-CONTINUING> 2,270,000 2,196,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,270,000 2,196,000
<EPS-PRIMARY> 0.28 0.25
<EPS-DILUTED> 0.28 0.24
</TABLE>
