0000350750-95-000006.txt : 19950809 0000350750-95-000006.hdr.sgml : 19950809 ACCESSION NUMBER: 0000350750-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950808 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAIRNCO CORP /DE/ CENTRAL INDEX KEY: 0000350750 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 133057520 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08120 FILM NUMBER: 95559654 BUSINESS ADDRESS: STREET 1: 2251 LUCIEN WAY SUITE 300 CITY: MAITLAND STATE: FL ZIP: 32751 BUSINESS PHONE: 4078752222 MAIL ADDRESS: STREET 1: 2251 LUCIEN WAY, SUITE 300 CITY: MAITLAND STATE: FL ZIP: 32751-7037 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) [X] QUARTERLY EXCHANGE REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 1, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-8120 BAIRNCO CORPORATION (Exact name of registrant as specified in its charter) Delaware 13-3057520 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2251 Lucien Way, Suite 300, Maitland, FL 32751 (Address of principal executive offices) (Zip Code) (407) 875-2222 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No (APPLICABLE ONLY TO CORPORATE ISSUERS) Indicate the number of shares outstanding of each issuer's classes of common stock, as of the latest practicable date. 10,500,259 shares of Common Stock Outstanding as of July 28, 1995. PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS BAIRNCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE QUARTERS ENDED JULY 1, 1995 AND JULY 2, 1994 (Unaudited) 1995 1994 Net sales $ 38,309,000 $ 36,977,000 Cost of sales 24,462,000 23,311,000 Gross profit 13,847,000 13,666,000 Selling and administrative expenses 9,980,000 9,964,000 Operating profit 3,867,000 3,702,000 Interest expense, net 527,000 536,000 Income before income taxes 3,340,000 3,166,000 Provision for income taxes 1,269,000 1,266,000 Net Income $ 2,071,000 $ 1,900,000 Primary and fully diluted earnings per share of common stock (Note 3) $ 0.20 $ 0.18 Dividends per share of common stock $ 0.05 $ 0.05 The accompanying notes are an integral part of these financial statements. BAIRNCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JULY 1, 1995 AND JULY 2, 1994 (Unaudited) 1995 1994 Net sales $ 76,832,000 $ 72,653,000 Cost of sales 49,256,000 45,381,000 Gross profit 27,576,000 27,272,000 Selling and administrative expenses 20,112,000 20,235,000 Operating profit 7,464,000 7,037,000 Interest expense, net 1,074,000 1,037,000 Income before income taxes 6,390,000 6,000,000 Provision for income taxes 2,428,000 2,400,000 Net Income $ 3,962,000 $ 3,600,000 Primary and fully diluted earnings per share of common stock (Note 3) $ 0.38 $ 0.34 Dividends per share of common stock $ 0.10 $ 0.10 The accompanying notes are an integral part of these financial statements. BAIRNCO CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF JULY 1, 1995 AND DECEMBER 31, 1994 (Unaudited) 1995 1994 ASSETS Current assets: Cash and cash equivalents $ 527,000 $ 1,478,000 Accounts receivable, less allowances of $1,019,000 and $1,097,000, respectively 24,189,000 20,885,000 Inventories (Note 4) 24,124,000 20,042,000 Deferred income taxes 4,941,000 4,941,000 Other current assets 1,642,000 4,785,000 Total current assets 55,423,000 52,131,000 Plant and equipment, at cost 77,538,000 76,664,000 Less - Accumulated depreciation and amortization (41,937,000) (40,375,000) Plant and equipment, net 35,601,000 36,289,000 Cost in excess of net assets of purchased businesses 8,275,000 8,201,000 Other assets 2,542,000 2,622,000 Net assets of discontinued operations (Note 2) 3,459,000 3,529,000 $105,300,000 $102,772,000 LIABILITIES & STOCKHOLDERS' INVESTMENT Current Liabilities: Short-term debt $ 6,938,000 $ 4,710,000 Current maturities of long-term debt 189,000 201,000 Accounts payable 10,354,000 9,762,000 Accrued expenses (Note 5) 13,085,000 11,181,000 Total current liabilities 30,566,000 25,854,000 Long-term debt 21,032,000 26,864,000 Deferred income taxes 3,759,000 3,743,000 Other liabilities 2,528,000 2,314,000 Stockholders' Investment: Preferred stock, par value $.01, 5,000,000 shares authorized, none issued -- -- Common stock, par value $.01, 30,000,000 shares authorized, 10,952,124 issued 109,000 109,000 Paid-in capital 50,430,000 49,922,000 Retained earnings 6,676,000 3,766,000 Treasury stock, at cost, 451,865 shares (9,800,000) (9,800,000) Total stockholders' investment 47,415,000 43,997,000 $105,300,000 $102,772,000 The accompanying notes are an integral part of these financial statements. BAIRNCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JULY 1, 1995 AND JULY 2, 1994 (Unaudited) 1995 1994 Cash Flows from Operating Activities: Net income $ 3,962,000 $ 3,600,000 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 3,421,000 3,364,000 Deferred income taxes 16,000 (183,000) Changes in current assets and liabilities: (Increase) in accounts receivable (3,304,000) (2,308,000) (Increase) in inventories (4,082,000) (654,000) Decrease in other current assets 3,143,000 1,241,000 Increase in accounts payable 592,000 1,279,000 Increase in accrued expenses 1,904,000 868,000 Increase (decrease) in other liabilities 214,000 (9,000) Translation adjustment and other, net 808,000 915,000 Net cash provided by operating activities 6,674,000 8,113,000 Cash Flows from Investing Activities: Capital expenditures (2,784,000) (2,365,000) Funds provided by (used in) discontinued operations 70,000 (813,000) Net cash (used in) investing activities (2,714,000) (3,178,000) Cash Flows from Financing Activities: Net repayments of external debt (3,861,000) (3,801,000) Payment of dividends (1,050,000) (1,050,000) Net cash (used in) financing activities (4,911,000) (4,851,000) Net (decrease) increase in cash and cash equivalents (951,000) 84,000 Cash and cash equivalents, beginning of period 1,478,000 1,383,000 Cash and cash equivalents, end of period $ 527,000 $ 1,467,000 The accompanying notes are an integral part of these financial statements. BAIRNCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JULY 1, 1995 (Unaudited) (1) Basis of Presentation The accompanying consolidated financial statements include the accounts of Bairnco Corporation and its subsidiaries (Bairnco or the Corporation) after the elimination of all material intercompany accounts and transactions. The unaudited financial information included herein reflects all adjustments of a normal recurring nature which the Corporation's management considers necessary for a fair summarized presentation of the consolidated financial statements included in this Form 10-Q filing. The consolidated results of operations for the quarter and six months ended July 1, 1995, are not necessarily indicative of the results of operations for the full year. (2) Discontinued Operations As discussed in Note 3 to Bairnco's 1994 Audited Consolidated Financial Statements, the Corporation adopted a restructuring plan as of December 31, 1993 which included a formal plan of divestiture relating to the businesses that comprised Bairnco's Specialty Construction Products segment and secure communications electronics operations. Accordingly, these businesses were classified as discontinued operations for financial reporting purposes as of December 31, 1993. The smallest and last remaining operation of the Specialty Construction business and the secure communications business remain to be sold and continue to be reported as discontinued operations. Net sales from the discontinued operations for the quarters ended July 1, 1995 and July 2, 1994 were $2.4 million and $6.3 million, respectively. Net sales from the discontinued operations for the six months ended July 1, 1995 and July 2, 1994 were $5.5 million and $11.6 million, respectively. The remaining discontinued operations are expected to be disposed of during 1995. (3) Earnings per Common Share Earnings per common share are based on the weighted average number of shares outstanding during the periods as follows: Second Quarter First Six Months 1995 1994 1995 1994 Primary 10,500,000 10,500,000 10,500,000 10,500,000 Fully Diluted 10,500,000 10,500,000 10,500,000 10,500,000 Primary and fully diluted earnings per share include all common stock equivalents. Statements showing the calculations of primary and fully diluted earnings per share for the quarters ended July 1, 1995 and July 2, 1994, and for the six months ended July 1, 1995 and July 2, 1994, are included as Exhibit 11.1 and Exhibit 11.2, respectively, to this Quarterly Report on Form 10-Q. (4) Inventories Inventories consisted of the following as of July 1, 1995 and December 31, 1994: 1995 1994 Raw materials and supplies $ 4,845,000 $ 4,794,000 Work in process 5,827,000 4,767,000 Finished goods 13,452,000 10,481,000 Total inventories $ 24,124,000 $ 20,042,000 (5) Accrued Expenses Accrued expenses consisted of the following as of July 1, 1995 and December 31, 1994: 1995 1994 Salaries and wages $ 1,946,000 $ 2,521,000 Income taxes 557,000 315,000 Insurance 1,892,000 2,165,000 Litigation 2,241,000 2,163,000 Other accrued expenses 6,449,000 4,017,000 Total accrued expenses $ 13,085,000 $ 11,181,000 (6) Contingencies Bairnco Corporation and its subsidiaries are defendants in certain legal actions which are discussed more fully in Part II, Item 1 ("Legal Proceedings") of this filing. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and related notes and with Bairnco's Audited Consolidated Financial Statements and related notes for the year ended December 31, 1994. Bairnco Corporation is a diversified multinational company that operates two distinct businesses under the names Arlon and Kasco. Engineered materials and components are designed, manufactured and sold under the Arlon brand to electronic, industrial and commercial markets. These products are based on a common technology in coating, laminating and dispersion chemistry. Arlon's principal products include high technology materials for the printed circuit board industry, cast and calendered vinyl film systems, custom engineered laminates and pressure sensitive adhesive systems and silicone rubber products used in a broad range of industrial, consumer and commercial products. Replacement products and services are manufactured and distributed under the Kasco name principally to retail food stores and meat, poultry and fish processing plants throughout the United States, Canada and Europe. The principal products include replacement band saw blades for cutting meat, fish, wood and metal, and on site maintenance services for the retail food industry primarily in the meat and deli departments. Kasco also distributes equipment to the food industry in Canada and France. These products are sold under a number of brand names including Kasco in the U.S. and Canada, Atlantic Service in the United Kingdom and Bertram & Graf and Biro in Europe. Comparison of Second Quarter 1995 to Second Quarter 1994 Sales in the second quarter of 1995 were $38,309,000 a 3.6% increase over sales of $36,977,000 in the second quarter of 1994. Sales of Arlon engineered materials and components increased 7.7% due to growing sales to the high end and microwave printed circuit board markets. Sales of Kasco replacement products and services declined 3.6% as increases in the European businesses were more than offset by the planned reduction in Kasco's North American service center revenues. Gross profit increased only 1.3% to $13,847,000 from $13,666,000. The increase is attributable to improved sales which was offset by profit margin declines in major product lines. The gross profit margin as a percent of sales decreased from 37.0% in 1994 to 36.1% in 1995. As in the first quarter, the profit margin declines are due primarily to the continuing decline in military related business which is being replaced with lower margin commercial business and the continuing change of mix in the Kasco products. Selling and administrative expenses were essentially level but declined as a percent of sales from 26.9% in 1994 to 26.1% in 1995. Consistent with the Corporation's long term effort to improve its selling and marketing efforts, sales expense increased slightly while administrative expenses were again reduced. Interest expense decreased slightly to $527,000 from $536,000 last year. The decrease in interest expense was due to a reduction in average indebtedness outstanding in the second quarter of 1995 of approximately $10,000,000 from the second quarter of last year, which was substantially offset by increased short term interest rates. The effective tax rate for the second quarter of 1995 was 38% as compared to 40% in 1994. The provision for income taxes in both periods includes all applicable federal, state, local and foreign income taxes. Net income increased 9% to $2,071,000, or $0.20 per share, from $1,900,000, or $0.18 per share. Comparison of First Six Months 1995 to First Six Months 1994 Sales for the first six months of 1995 were $76,832,000, an increase of 5.8%, as compared with $72,653,000 in 1994. Net income increased 10% to $3,961,000, or $0.38 per share, from $3,600,000, or $0.34 per share. The effective tax rate for the first half of 1995 was 38% as compared to 40% in 1994. The provision for income taxes in both periods includes all applicable federal, state, local and foreign income taxes. Liquidity and Capital Resources At July 1, 1995 Bairnco's total debt was $28,159,000 compared to $31,775,000 at the end of 1994. At July 1, 1995 approximately $26.2 million was available for borrowing under the Corporation's secured reducing revolving credit agreement ("Credit Agreement") with a consortium of four banks. In addition, approximately $1.8 million was available under various short term domestic and foreign uncommitted credit facilities. Under the terms of the Credit Agreement, the maximum amount available for borrowings will be reduced by $3.0 million as of January 1, 1996. During the second quarter total debt was reduced approximately $3,100,000 as the result of tax refunds attributable to the previous restructuring and cash from operations. At July 1, 1995, Bairnco had working capital of $24.9 million compared to $26.3 million at December 31, 1994. Inventories increased $2,400,000 during the second quarter to meet anticipated sales growth and to improve customer service. It is expected inventories will be reduced during the third quarter. Capital expenditures are currently running slightly under depreciation and well below plan. The need for the major capacity addition contemplated in the capital expenditures plan has been shifted into next year as the result of a series of productivity improvements. Depending on the timing of specific projects, it is still expected that capital expenditures will exceed depreciation for the full year. Cash provided by operating activities plus the amounts available under the existing credit facilities are expected to be sufficient to fulfill Bairnco's anticipated cash requirements in 1995. PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Since its announcement in January 1990 of its intention to spin off Keene, Bairnco has been named as a defendant in a number of individual personal injury and wrongful death cases in which it is alleged that Bairnco is derivatively liable for the asbestos-related claims against Keene. In 1993, Bairnco and certain of its present and former officers and directors were also named as defendants in two purported class actions in which the same types of claims were made. Both of these purported class actions, which were consolidated in the United States District Court for the Southern District of New York, were subsequently stayed by order of the Bankruptcy Court for the Southern District of New York, as described in the following paragraph. On December 6, 1993, Keene filed for protection under Chapter 11 of the Bankruptcy Code. The filing and certain subsequent proceedings led to a stay of the asbestos-related individual and class actions referred to above. On May 5, 1995, the Bankruptcy Court overseeing the reorganization of Keene entered an order allowing the Creditors' Committee to assume from Keene responsibility for the pursuit of claims arising out of the transfer of assets for value by Keene to other subsidiaries of Bairnco and the spinoffs of certain subsidiaries, including Keene, by Bairnco. On June 8, 1995, the Creditors' Committee commenced an adversary proceeding in the Bankruptcy Court against Bairnco and others alleging that the transfers of assets by Keene were fraudulent and otherwise violative of law and seeking compensatory damages of $700 million, plus interest and punitive damages. Bairnco and other defendants have sought to have the proceeding removed to the United States District Court for the Southern District of New York to the judge before whom the class actions described above are pending. No answers or responsive pleadings have yet been filed in the adversary proceeding, and it has been stayed by the Bankruptcy Court through October 2, 1995. Management believes that Bairnco has meritorious defenses to all claims or liability purportedly derived from Keene and that it is not liable, as an alter ego, successor, fraudulent transferee or otherwise, for the asbestos-related claims against Keene or with respect to Keene products. Bairnco is party to a separate action brought by Keene in the United States Bankruptcy Court for the Southern District of New York in which Keene seeks the exclusive benefit of tax refunds attributable to the carryback by Keene of certain net operating losses, notwithstanding certain provisions of tax sharing agreements between Keene and Bairnco. (After filing this action, Keene ceded control of the action to the Creditors' Committee.) Pending resolution of the dispute by the Bankruptcy Court, any refunds actually received are to be placed in escrow. Keene alleges that the refunds in question could total approximately $30 million. There can be no assurance whatsoever that refunds in such amount will be payable or that resolution of the dispute with Keene will result in the release of any portion of the refunds to Bairnco. Bairnco Corporation and its subsidiaries are defendants in a number of other actions. Management of Bairnco believes that the disposition of these other actions, as well as the actions and proceedings described above, will not have a material adverse effect on the consolidated results of operations or the financial position of Bairnco Corporation and its subsidiaries as of July 1, 1995. Item 2. OTHER INFORMATION None. Item 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. Item 4. EXHIBITS Exhibit 11.1: Calculation of Primary and Fully Diluted Earnings per Share for the Quarters ended July 1, 1995 and July 2, 1994. Exhibit 11.2: Calculation of Primary and Fully Diluted Earnings per Share for the Six Months ended July 1, 1995 and July 2, 1994. Exhibit 27: Financial Data Schedules for the Quarter and Six Months ended July 1, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Bairnco has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BAIRNCO CORPORATION (Registrant) /s/ J. Robert Wilkinson J. Robert Wilkinson Vice President Finance and Treasurer (Chief Financial Officer) DATE: August 9, 1995 EX-11 2 Exhibit 11.1 BAIRNCO CORPORATION CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE FOR THE QUARTERS ENDED JULY 1, 1995 AND JULY 2, 1994 (Unaudited) 1995 1994 PRIMARY EARNINGS PER SHARE: Net income $ 2,071,000 $ 1,900,000 Average common shares outstanding 10,500,000 10,500,000 Common shares issuable in respect to common stock equivalents, with a dilutive effect -- -- Total common and common equivalent shares 10,500,000 10,500,000 Primary Earnings Per Common Share $ 0.20 $ 0.18 FULLY DILUTED EARNINGS PER SHARE: Net income $ 2,071,000 $ 1,900,000 Total common and common equivalent shares 10,500,000 10,500,000 Additional common shares assuming full dilution -- -- Total common shares assuming full dilution 10,500,000 10,500,000 Fully Diluted Earnings Per Common Share $ 0.20 $ 0.18 Earnings per share are based on the average number of shares outstanding during each period. Primary earnings per share include all common stock equivalents. Fully diluted earnings per share include all common stock equivalents plus the additional common shares issuable assuming full dilution. Exhibit 11.2 BAIRNCO CORPORATION CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE FOR THE SIX MONTHS ENDED JULY 1, 1995 AND JULY 2, 1994 (Unaudited) 1995 1994 PRIMARY EARNINGS PER SHARE: Net income $ 3,962,000 $ 3,600,000 Average common shares outstanding 10,500,000 10,500,000 Common shares issuable in respect to common stock equivalents, with a dilutive effect -- -- Total common and common equivalent shares 10,500,000 10,500,000 Primary Earnings Per Common Share $ 0.38 $ 0.34 FULLY DILUTED EARNINGS PER SHARE: Net income $ 3,962,000 $ 3,600,000 Total common and common equivalent shares 10,500,000 10,500,000 Additional common shares assuming full dilution -- -- Total common shares assuming full dilution 10,500,000 10,500,000 Fully Diluted Earnings Per Common Share $ 0.38 $ 0.34 Earnings per share are based on the average number of shares outstanding during each period. Primary earnings per share include all common stock equivalents. Fully diluted earnings per share include all common stock equivalents plus the additional common shares issuable assuming full dilution. EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BAIRNCO'S SECOND QUARTER 1995 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS 6-MOS DEC-31-1995 DEC-31-1995 JUL-01-1995 JUL-01-1995 527,000 527,000 0 0 25,208,000 25,208,000 1,019,000 1,019,000 24,124,000 24,124,000 55,423,000 55,423,000 77,538,000 77,538,000 41,937,000 41,937,000 105,300,000 105,300,000 30,566,000 30,566,000 21,032,000 21,032,000 109,000 109,000 0 0 0 0 47,306,000 47,306,000 105,300,000 105,300,000 38,309,000 76,832,000 38,309,000 76,832,000 24,462,000 49,256,000 24,462,000 49,256,000 0 0 0 0 527,000 1,074,000 3,340,000 6,390,000 1,269,000 2,428,000 2,071,000 3,962,000 0 0 0 0 0 0 2,071,000 3,962,000 0.20 0.38 0.20 0.38