-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UTyyz6ZijlMpMA6I6BOMOWM98KZxDekIccUWDTU76A63dMCuDtFnRWhHox8aa+PF 5+PvaqHVc1WucJLyHdQInw== /in/edgar/work/20000804/0000350750-00-000010/0000350750-00-000010.txt : 20000921 0000350750-00-000010.hdr.sgml : 20000921 ACCESSION NUMBER: 0000350750-00-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000701 FILED AS OF DATE: 20000804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAIRNCO CORP /DE/ CENTRAL INDEX KEY: 0000350750 STANDARD INDUSTRIAL CLASSIFICATION: [2821 ] IRS NUMBER: 133057520 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08120 FILM NUMBER: 686497 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 0001.txt 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 July 1, 2000 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.) 300 Primera Boulevard, Suite 432, Lake Mary, FL 32746 (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. 7,567,784 shares of Common Stock Outstanding as of July 25, 2000. "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, 2000 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, disruptions in operations due to labor disputes; changes in the pricing of the products of the Corporation or its competitors; the costs and other effects of legal and administrative cases and proceedings, settlements and investigations; the ability to achieve anticipated revenue growth, synergies and other cost savings in connection with acquisitions; 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 the product mix; the loss of a significant customer or supplier; production delays or inefficiencies; the costs and other effects of complying with environmental regulatory requirements; losses due to natural disasters where the Corporation is self-insured 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 BAIRNCO CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THE QUARTERS ENDED JULY 1, 2000 AND JULY 3, 1999 (Unaudited)
2000 1999 Net sales $ 48,763,000 $ 42,653,000 Cost of sales 32,428,000 28,171,000 Gross profit 16,335,000 14,482,000 Selling and administrative expenses 11,623,000 10,461,000 Operating profit 4,712,000 4,021,000 Interest expense, net 944,000 515,000 Income before income taxes 3,768,000 3,506,000 Provision for income taxes 1,244,000 1,192,000 Net income $ 2,524,000 $ 2,314,000 Basic earnings per share of common stock (Note 2) $ 0.33 $ 0.29 Diluted earnings per share of common stock (Note 2) $ 0.33 $ 0.29 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 CONDENSED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JULY 1, 2000 AND JULY 3, 1999 (Unaudited)
2000 1999 Net sales $ 94,579,000 $ 85,315,000 Cost of sales 62,903,000 56,581,000 Gross profit 31,676,000 28,734,000 Selling and administrative expenses 22,541,000 20,706,000 Operating profit 9,135,000 8,028,000 Interest expense, net 1,627,000 1,082,000 Income before income taxes 7,508,000 6,946,000 Provision for income taxes 2,478,000 2,362,000 Net income $ 5,030,000 $ 4,584,000 Basic earnings per share of common stock (Note 2) $ 0.65 $ 0.57 Diluted earnings per share of common stock (Note 2) $ 0.65 $ 0.57 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 STATEMENTS OF COMPREHENSIVE INCOME FOR THE QUARTERS ENDED JULY 1, 2000 AND JULY 3, 1999 (Unaudited) Note 3 2000 1999 Net income $ 2,524,000 $ 2,314,000 Other comprehensive income, net of tax: Foreign currency translation adjustment (129,000) (181,000) Comprehensive income $ 2,395,000 $ 2,133,000 The accompanying notes are an integral part of these financial statements. BAIRNCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JULY 1, 2000 AND JULY 3, 1999 (Unaudited) Note 3 2000 1999 Net income $ 5,030,000 $ 4,584,000 Other comprehensive income, net of tax: Foreign currency translation adjustment (356,000) (516,000) Comprehensive income $ 4,674,000 $ 4,068,000 The accompanying notes are an integral part of these financial statements. BAIRNCO CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AS OF JULY 1, 2000 AND DECEMBER 31, 1999 (Unaudited) 2000 1999 ASSETS Current Assets: Cash and cash equivalents $ 572,000 $ 660,000 Accounts receivable, less allowances of $1,498,000 and $1,136,000, respectively 34,467,000 29,107,000 Inventories (Note 4) 30,233,000 25,204,000 Deferred income taxes 4,452,000 4,598,000 Other current assets 2,422,000 3,640,000 Total current assets 72,146,000 63,209,000 Plant and equipment, at cost 114,969,000 101,672,000 Less - Accumulated depreciation (65,931,000) (61,990,000) Plant and equipment, net 49,038,000 39,682,000 Cost in excess of net assets of purchased businesses (Note 5) 12,371,000 11,822,000 Other assets 4,858,000 4,432,000 $138,413,000 $119,145,000 LIABILITIES & STOCKHOLDERS' INVESTMENT Current Liabilities: Short-term debt $ 4,185,000 $ 4,692,000 Accounts payable 13,646,000 10,719,000 Accrued expenses (Note 6) 14,782,000 14,542,000 Total current liabilities 32,613,000 29,953,000 Long-term debt 42,447,000 26,591,000 Deferred income taxes 6,449,000 5,459,000 Other liabilities 4,594,000 6,975,000 Stockholders' Investment: Preferred stock, par value $.01, 5,000,000 shares authorized, none issued -- -- Common stock, par value $.01, 30,000,000 shares authorized, 11,248,849 and 11,198,849 shares issued, respectively 112,000 112,000 Paid-in capital 49,494,000 49,235,000 Retained earnings 33,973,000 29,719,000 Accumulated other comprehensive income (Note 3) 873,000 1,229,000 Treasury stock, at cost, 3,681,065 and 3,402,065 shares, respectively (32,142,000) (30,128,000) Total stockholders' investment 52,310,000 50,167,000 $138,413,000 $119,145,000 The accompanying notes are an integral part of these financial statements. BAIRNCO CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JULY 1, 2000 AND JULY 3, 1999 (Unaudited) 2000 1999 Cash Flows from Operating Activities: Net income $ 5,030,000 $ 4,584,000 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 4,502,000 3,688,000 (Gain) loss on disposal of plant and equipment (6,000) 25,000 Deferred income taxes 1,136,000 226,000 Change in current assets and liabilities: (Increase) in accounts receivable (4,506,000) (1,396,000) (Increase) decrease in inventories (3,382,000) 392,000 Decrease (increase) in other current assets 1,206,000 (305,000) Increase in accounts payable 1,472,000 1,755,000 (Decrease) in accrued expenses (591,000) (583,000) Other (826,000) (384,000) Net cash provided by operating activities 4,035,000 8,002,000 Cash Flows from Investing Activities: Capital expenditures (3,710,000) (2,641,000) Proceeds from sale of plant and equipment 50,000 2,000 Payment for purchased businesses, net of cash acquired (13,337,000) -- Net cash (used in) investing activities (16,997,000) (2,639,000) Cash Flows from Financing Activities: Net borrowings (repayments) of external debt 15,465,000 (2,472,000) Payment of dividends (767,000) (806,000) Purchase of treasury stock (2,014,000) (2,163,000) Exercise of stock options 250,000 -- Net cash provided by (used in) financing activities 12,934,000 (5,441,000) Effect of foreign currency exchange rate changes on cash and cash equivalents (60,000) (48,000) Net (decrease) in cash and cash equivalents (88,000) (126,000) Cash and cash equivalents, beginning of period 660,000 822,000 Cash and cash equivalents, end of period $ 572,000 $ 696,000 The accompanying notes are an integral part of these financial statements. BAIRNCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS JULY 1, 2000 (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 for interim financial reporting. Certain financial 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 management believes that the disclosures made are adequate to make the information presented not misleading. Management believes the financial statements include all adjustments of a normal and recurring nature necessary to present fairly the results of operations for all interim periods presented. The quarterly financial statements should be read in conjunction with the December 31, 1999 audited financial statements. The consolidated results of operations for the quarter and six-month period ended July 1, 2000 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 and six month periods ended July 1, 2000 and July 3, 1999 are included as Exhibit 11.1 and Exhibit 11.2, respectively, 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 period. 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 July 1, 2000 and December 31, 1999: 2000 1999 Raw materials and supplies $ 7,434,000 $ 5,986,000 Work in process 9,075,000 8,574,000 Finished goods 13,724,000 10,644,000 Total inventories $ 30,233,000 $ 25,204,000 (5) Cost in Excess of Net Assets of Purchased Businesses Cost in excess of net assets of purchased businesses acquired prior to 1971 of approximately $3.5 million 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 $11,029,000 and $10,298,000 at July 1, 2000 and December 31, 1999, respectively, is being amortized over 40 years. Accumulated amortization at July 1, 2000 and December 31, 1999, was $2,144,000 and $1,964,000, respectively. (6) Accrued Expenses Accrued expenses consisted of the following as of July 1, 2000 and December 31, 1999: 2000 1999 Salaries and wages $ 2,456,000 $ 3,114,000 Income taxes 305,000 550,000 Insurance 3,325,000 3,581,000 Litigation 2,085,000 2,588,000 Other accrued expenses 6,611,000 4,709,000 Total accrued expenses $14,782,000 $14,542,000 Accrued expenses-litigation: The Corporation accrues for the estimated costs to defend existing lawsuits, claims and proceedings where it is probable that it will incur such costs in the future. These non-discounted accruals are management's best estimate of the most likely cost to defend the litigation based on discussions with counsel. Such estimates are reviewed and evaluated in light of ongoing experiences and expectations. Any changes in estimates from this review process are reflected in operations currently. In the fourth quarter of 1998, Bairnco recorded a $7,500,000 pre- tax provision for litigation costs. The litigation provision added to the existing reserves for asbestos-related litigation expenditures due to a change in the estimate to defend the Transaction Lawsuit (refer to Part II, Item 1. "Legal Proceedings" of this filing). Through July 1, 2000, approximately $4.1 million had been spent. The remaining litigation reserves included in accrued expenses and other long- term liabilities in the Corporation's consolidated condensed balance sheet are expected to be spent by the middle of 2002. These litigation reserves and related time frame for spending assume a vigorous defense of the case through discovery, summary judgment motions and trial. Accrued expenses-insurance: Accrued expenses-insurance represents the estimated costs of known and anticipated claims under the Corporation's general liability, automobile liability, property and workers compensation insurance policies for all of its US operations. The Corporation provides reserves on reported claims and claims incurred but not reported at each balance sheet date based upon the estimated amount of the probable claim or the amount of the deductible, whichever is lower. Such estimates are reviewed and evaluated in light of emerging claim experience and existing circumstances. Any changes in estimates from this review process are reflected in operations currently. (7) Reportable Segment Data Bairnco's segment disclosures are prepared in accordance with Statement of Financial Accounting Standards No. 131. There are no differences to the 1999 annual report in the basis of segmentation or in the basis of measurement of segment profit or loss included herein. Financial information about the Corporation's operating segments for the second quarter of 2000 and 1999 as required under SFAS 131 is as follows: 2000 Net Sales Operating Profit (Loss) Arlon $37,790,000 $ 5,264,000 Kasco 10,973,000 518,000 Headquarters -- (1,070,000) $48,763,000 $ 4,712,000 1999 Net Sales Operating Profit (Loss) Arlon $30,372,000 $ 3,976,000 Kasco 12,281,000 1,129,000 Headquarters -- (1,084,000) $42,653,000 $ 4,021,000 Financial information about the Corporation's operating segments for the six-month periods ended July 1, 2000 and July 3, 1999 as required by SFAS 131 is as follows: 2000 Net Sales Operating Profit (Loss) Arlon $72,093,000 $10,148,000 Kasco 22,486,000 889,000 Headquarters -- (1,902,000) $94,579,000 $ 9,135,000 1999 Net Sales Operating Profit (Loss) Arlon $60,315,000 $ 7,986,000 Kasco 25,000,000 2,095,000 Headquarters -- (2,053,000) $85,315,000 $ 8,028,000 The total assets of the segments as of July 1, 2000 and December 31, 1999 are as follows: 2000 1999 Arlon $ 88,561,000 $ 69,915,000 Kasco 40,627,000 39,294,000 Headquarters 9,225,000 9,936,000 $138,413,000 $119,145,000 (8) 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, 1999. 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 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 Second Quarter 2000 to Second Quarter 1999 The results for the second quarter 2000 were improved over last year's second quarter. Sales in the second quarter 2000 were $48,763,000, an increase of 14.3% from $42,653,000 in 1999. Arlon's sales were up 24.4% from last year due to strength of the electronics and electrical markets and the Signtech acquisition. Kasco's sales decreased 10.7% due to competitive pressures in the U.S. markets, reduced meat consumption in European markets and negative currency translation impact of the strong dollar. Gross profit increased 12.8% to $16,335,000 from $14,482,000 due to the increased sales. The gross profit margin as a percent of sales decreased marginally to 33.5% from 34.0%. Selling and administrative expenses increased 11.1% to $11,623,000 from $10,461,000. As a percent of sales, selling and administrative expenses decreased to 23.8% from 24.5%. Net interest expense increased to $944,000 in 2000 as compared to $515,000 in 1999 due to higher average borrowings resulting from the Signtech acquisition in the first quarter of 2000 and the continuing program to repurchase Bairnco common stock, and higher average interest rates. The effective tax rate for the second quarter of 2000 was 33% versus 34% in 1999. The provision for income taxes in both periods includes all applicable federal, state, local, and foreign income taxes. Net income increased 9.1% to $2,524,000 as compared to $2,314,000 in the second quarter of 1999. Diluted earnings per common share increased 13.8% to $.33 from $.29 as a result of improved earnings and the reduced number of shares outstanding. Comparison of First Six Months 2000 to First Six Months 1999 Sales for the first half of 2000 were up 10.9% to $94,579,000 from $85,315,000 in 1999 due primarily to the strength of the electronics market and the Signtech acquisition. Gross profit increased 10.2% to $31,676,000 from $28,734,000 in the first half of 1999. The gross profit margin as a percent of sales decreased slightly to 33.5% from 33.7%. Selling and administrative expenses increased 8.9% to $22,541,000 from $20,706,000. As a percent of sales, selling and administrative expenses decreased to 23.8% from 24.3%. Net interest expense increased to $1,627,000 as compared to $1,082,000 in the first half of 1999. The effective tax rate for the first half of 2000 was 33% versus 34% in 1999. The provision for income taxes in both periods includes all applicable federal, state, local, and foreign income taxes. Net income increased 9.7% to $5,030,000 from $4,584,000 and diluted earnings per common share increased 14.0% to $.65 from $.57 in 1999. Acquisition On February 16, 2000, Bairnco purchased certain assets of the materials business ("Signtech") of Signtech USA, Ltd. for approximately $14.5 million. $2.0 million of this amount was placed in escrow subject to final audit of the acquired inventory and accounts receivable. The purchase of Signtech was funded with long-term debt. Signtech manufactures and distributes flexible reinforced vinyl materials used as the substrate in flexible faced sign systems. Signtech's products are sold primarily on a specification basis for corporate specified programs using various striping, heat transfer and screen print applications. Signtech's sales for the year ended December 31, 1999 were approximately $16.0 million. The transaction was accounted for as a purchase and, accordingly, the operating results of Signtech have been included in the Corporation's consolidated financial statements since the date of acquisition. The purchase price was allocated to the assets acquired based on their estimated fair values. During the second quarter 2000, $645,000 of the purchase price was refunded from escrow based on the final audited values of the acquired inventory and accounts receivable. The Corporation does not believe that the final purchase price allocation will differ significantly from the preliminary purchase price allocation recorded at February 16, 2000. Dividend The second quarter cash dividend of $.05 per share was paid on June 29, 2000 to stockholders of record on June 5, 2000. Liquidity and Capital Resources At July 1, 2000, Bairnco had working capital of $39.5 million compared to $33.3 million at December 31, 1999. The increase in accounts receivable and inventories are due to the increased sales in the second quarter of 2000 versus the fourth quarter of 1999 and the impact of the Signtech acquisition. Other current assets are down with the realization of the tax receivable in the first quarter of 2000. The increase in accounts payable is consistent with the build in inventories and the impact of the Signtech acquisition. During the second quarter Bairnco repurchased 137,000 shares of its common stock at a total cost of $1,000,000. Total shares repurchased during the first half of 2000 were 279,000. The Board has authorized management to continue its stock repurchase program subject to market conditions and capital requirements of the business. At July 1, 2000, Bairnco's total debt outstanding was $46,632,000 compared to $31,283,000 at the end of 1999. The increase was primarily due to the acquisition of Signtech. At July 1, 2000 approximately $25.6 million was available for borrowing under the Corporation's secured reducing revolving credit agreement, as amended. In addition, approximately $4.4 million was available under various short-term domestic and foreign uncommitted credit facilities. Bairnco made approximately $1.8 million of capital expenditures during the second quarter of 2000 bringing the total capital expenditures for the first half of 2000 to $3.7 million. Total capital expenditures for 2000 are expected to approximate $8.3 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 2000. Year 2000 Date Conversion During the first six months of 2000, the Corporation did not experience any 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. 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 July 1, 2000. Outlook The outlook for 2000 is for reasonable growth in our traditional industrial markets with additional growth expected from our continued penetration in certain market segments, new products and the Signtech acquisition. Both foreign and domestic competition remains intense in most markets. Based on the first half of 2000 results and the trend of the business entering the third quarter, we expect 2000 to be another year of growth. 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 July 1, 2000 would increase interest expense and hence reduce the net income of the Corporation by approximately $310,000 per year. The Corporation's fiscal second quarter 2000 sales denominated in a currency other than U.S. dollars were approximately 10.5% of total sales and net assets maintained in a functional currency other than U.S. dollars at July 1, 2000 were approximately 13.8% 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. The court has entered a scheduling order requiring the completion of all discovery (including expert discovery) by January 18, 2002. A trial date has not been set, but the Court has scheduled a conference for January 18, 2002, to determine dates for filing a pretrial order, for trial, and/or for any pretrial motions. These dates remain subject to adjustment based upon the progress of discovery. 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 July 1, 2000, 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. The Properties Lawsuit has been transferred to the Transactions Lawsuit Judge for consolidated discovery and other proceedings. 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 July 1, 2000. 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 second quarter of 2000. Item 5: OTHER INFORMATION None. Item 6(a): EXHIBITS Exhibit 11.1 - Calculation of Basic and Diluted Earnings per Share for the Quarters ended July 1, 2000 and July 3, 1999. Exhibit 11.2 - Calculation of Basic and Diluted Earnings per Share for the Six Months ended July 1, 2000 and July 3, 1999. 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/ James W. Lambert James W. Lambert Vice President Finance and Treasurer (Chief Financial Officer) DATE: August 4, 2000 EXHIBITS TO FORM 10-Q FOR QUARTER ENDED July 1, 2000 EX-11 2 0002.txt EXHIBIT 11.1 BAIRNCO CORPORATION AND SUBSIDIARIES CALCULATION OF BASIC AND DILUTED EARNINGS PER SHARE FOR THE QUARTERS ENDED JULY 1, 2000 AND JULY 3, 1999 (Unaudited) 2000 1999 BASIC EARNINGS PER COMMON SHARE: Net income $2,524,000 $2,314,000 Average common shares outstanding 7,595,000 7,903,000 Basic Earnings Per Common Share $ 0.33 $ 0.29 DILUTED EARNINGS PER COMMON SHARE: Net income $2,524,000 $2,314,000 Average common shares outstanding 7,595,000 7,903,000 Common shares issuable in respect to options issued to employees with a dilutive effect 119,000 50,000 Total diluted common shares outstanding 7,714,000 7,953,000 Diluted Earnings Per Common Share $ 0.33 $ 0.29 EX-11 3 0003.txt EXHIBIT 11.2 BAIRNCO CORPORATION AND SUBSIDIARIES CALCULATION OF BASIC AND DILUTED EARNINGS PER SHARE FOR THE SIX MONTHS ENDED JULY 1, 2000 AND JULY 3, 1999 (Unaudited) 2000 1999 BASIC EARNINGS PER COMMON SHARE: Net income $5,030,000 $4,584,000 Average common shares outstanding 7,681,000 8,052,000 Basic Earnings Per Common Share $ 0.65 $ 0.57 DILUTED EARNINGS PER COMMON SHARE: Net income $5,030,000 $4,584,000 Average common shares outstanding 7,681,000 8,052,000 Common shares issuable in respect to options issued to employees with a dilutive effect 105,000 37,000 Total diluted common shares outstanding 7,786,000 8,089,000 Diluted Earnings Per Common Share $ 0.65 $ 0.57 EX-27 4 0004.txt
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM BAIRNCO'S SECOND QUARTER 2000 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION. 3-MOS 3-MOS 6-MOS 6-MOS DEC-31-2000 DEC-31-1999 DEC-31-2000 DEC-31-1999 JUL-01-2000 JUL-03-1999 JUL-01-2000 JUL-03-1999 572,000 696,000 572,000 696,000 0 0 0 0 35,965,000 30,287,000 35,965,000 30,287,000 1,498,000 1,320,000 1,498,000 1,320,000 30,233,000 25,387,000 30,233,000 25,387,000 72,146,000 61,174,000 72,146,000 61,174,000 114,969,000 99,370,000 114,969,000 99,370,000 65,931,000 58,979,000 65,931,000 58,979,000 138,413,000 117,957,000 138,413,000 117,957,000 32,613,000 27,225,000 32,613,000 27,225,000 42,447,000 31,934,000 42,447,000 31,934,000 0 0 0 0 0 0 0 0 112,000 112,000 112,000 112,000 52,198,000 47,423,000 52,198,000 47,423,000 138,413,000 117,957,000 138,413,000 117,957,000 48,763,000 42,653,000 94,579,000 85,315,000 48,763,000 42,653,000 94,579,000 85,315,000 32,428,000 28,171,000 62,903,000 56,581,000 32,428,000 28,171,000 62,903,000 56,581,000 0 0 0 0 0 0 0 0 944,000 515,000 1,627,000 1,082,000 3,768,000 3,506,000 7,508,000 6,946,000 1,244,000 1,192,000 2,478,000 2,362,000 2,524,000 2,314,000 5,030,000 4,584,000 0 0 0 0 0 0 0 0 0 0 0 0 2,524,000 2,314,000 5,030,000 4,584,000 0.33 0.29 0.65 0.57 0.33 0.29 0.65 0.57
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