10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission file number:   1-8120

             BAIRNCO CORPORATION

(Exact name of Registrant as specified in its charter)

                                Delaware                                   13-3057520        

           (State or other jurisdiction of               (IRS Employer

                incorporation or organization)           Identification No.)

       300 Primera Blvd., Lake Mary, Florida                         32746        

    (Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code: (407) 875-2222

Securities registered pursuant to Section 12(b) of the Act:

   Name of each Exchange on

                      Title of each class                  

           which registered               

Common Stock, par value $.01 per share

New York Stock Exchange      

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]  

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    

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes __No X

On July 3, 2004, the aggregate market value of the Registrant's voting stock held by non-affiliates was $62,146,742.

On March 1, 2005, there were 7,535,063 shares of Common Stock outstanding, exclusive of treasury shares or shares held by subsidiaries of the Registrant.

Parts I, II and IV incorporate information by reference from the Annual Report to Stockholders for the fiscal year ended December 31, 2004.  Part III incorporates information by reference from the Proxy Statement dated March 14, 2005 in connection with the Registrant's Annual Meeting of Stockholders to be held on April 21, 2005.

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PART I

Item 1.

BUSINESS

a.

Recent Developments and Description

Bairnco Corporation was incorporated under the laws of the State of New York on April 9, 1981. Effective September 24, 1991, Bairnco Corporation changed its state of incorporation from New York to Delaware.  Unless otherwise indicated herein, the terms "Bairnco" and the "Corporation" refer to Bairnco Corporation and its subsidiaries.

Bairnco operates two core businesses – Arlon and Kasco. Arlon businesses design, manufacture, and sell engineered materials and components for the electronic, industrial and commercial markets. These products are based on common technologies in coating, laminating, polymers, and dispersion chemistry. Kasco is a leading provider of meat-room products and maintenance services for the meat and deli departments of supermarkets; restaurants; meat, poultry and fish processing plants; and manufacturers and distributors of electrical saws and cutting equipment throughout North America, Europe, Asia and South America.

In February of 2000 Bairnco purchased certain assets of the materials business (“Signtech”) of Signtech USA, Ltd., a manufacturer of laminated vinyl fabrics designated for use in the commercial graphics market.  In January 2001, Bairnco purchased selected net assets ("Viscor") of Viscor, Inc.  Viscor's engineered, coated products include transfer adhesives, single and double-coated foam and film tapes, and other custom coated products.  The acquisitions complemented Arlon's graphic and industrial products with product line extensions, additional brand recognition, and penetration into new customer segments and markets.  The acquisitions also expanded Arlon's coating and converting capacity.

To improve productivity, reduce costs and improve product development focus, Arlon's Northbrook, Illinois facility was closed on December 31, 2001 and production was transferred to Arlon's Santa Ana, California and East Providence, Rhode Island plants.

In 2003 the Board of Directors approved a plan for the consolidation of its industrial engineered coated product’s businesses in a new leased facility in San Antonio, Texas. The goal was to create a critical business size with a focused management, development, engineering and production team in one location which is more responsive to our customers’ requirements and to the development of new products, and is more cost effective. The consolidation project was substantially completed at the end of 2004.  Total inception to date consolidation expenses were approximately $2,992,000 plus $3,600,000 of capital expenditures in connection with the plan. In addition, Arlon’s East Providence, Rhode Island facility was sold for $2.0 million in the fourth quarter of 2004 which resulted in a gain of $1.2 million.

During the second quarter of 2003, Arlon, Inc. purchased the MOX-Tape® brand of products, including inventory and related equipment, from Flexfab Horizons International, Inc., of Hastings, Michigan.  The business was moved to Arlon’s Bear, Delaware plant.  MOX-Tape® products consist of un-reinforced and reinforced silicone, self-fusing tapes used in a broad range of applications and markets, including high temperature electrical and mechanical insulation for the military, aerospace, automotive, utility, and power generation markets.  The acquisition expanded Arlon’s self-fusing silicone tapes product line with the addition of the reinforced tapes.  Arlon is a leader in semi-cured and uncured precision-calendered silicone, silicone-coated fabrics, and silicone self-fusing tapes.

At December 31, 2004, Bairnco employed 783 persons including 18 headquarters personnel. Bairnco's operations occupy approximately 861,000 square feet of factory and office space at its principal locations. There is an additional 25,000 square feet of leased space used as field warehouses throughout North America.  

b. & c.

Financial Information about Industry Segments and Narrative Description of Business

Bairnco Corporation is a diversified multinational company that operates two businesses. Arlon’s two segments are Electronic Materials and Coated Materials, which design, manufacture and sell products under the Arlon brand identity to electronic, industrial and commercial markets.  Arlon products are based on common technologies in coating, laminating, polymers and dispersion chemistry.  Replacement Products and Services are manufactured and distributed under the Kasco brand identity principally to supermarkets, meat and deli operations, and meat, poultry and fish processing plants throughout the United States, Canada and Europe.  Kasco also manufactures small band saw blades for cutting metal and wood, and large band saw blades for use at lumber mills.  In Canada and France, in addition to providing its replacement products, Kasc o also sells equipment to the supermarket and food processing industries.

Financial data and other information about the Corporation's segments is set forth in Note 9 to the Consolidated Financial Statements on pages 38 through 40 and on pages 4 through 7 of Bairnco's 2004 Annual Report to Stockholders which is incorporated herein by reference.  This information should be read in conjunction with the "Financial History" set forth under “Item 6. SELECTED FINANCIAL DATA” of this filing, and "Management's Discussion and Analysis" set forth on pages 10 through 18 of Bairnco's 2004 Annual Report to Stockholders, which is incorporated herein by reference.

The principal facilities utilized by each segment are detailed under "Item 2. PROPERTIES" of this filing.

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ARLON ELECTRONIC MATERIALS SEGMENT

Description of Business

Arlon Electronic Materials’ principal products include high performance materials for the printed circuit board industry and silicone rubber-based insulation materials used in a broad range of industrial, military/aerospace, consumer and commercial markets.  

Arlon is known worldwide as a premier supplier of high technology materials to the printed circuit board (PCB) industry.  Arlon products are marketed principally to original equipment manufacturers (OEM’s) and PCB manufacturers by a direct technical sales force, as well as, distributors in the US, and through distributors and manufacturer’s representatives in Europe, the Middle East, and Asia-Pacific, supported by direct technical sales specialists. Arlon’s conventional laminates product line includes a wide variety of specialty polyimide and epoxy laminates and bonding films, as well as, other high performance thermoset laminates. These materials are used in demanding commercial and military market applications including high density interconnect (HDI), surface mount technology (SMT), heat sink bonding, semiconductor testing, wireless communications and microvia PCB's. The microwave and RF product area offers fluoropolymers (i.e. PTFE), ceramic-filled fluoropolymers, and other non-PTFE laminates that deliver the electrical performance needed in frequency-dependent circuit applications such as analog, digital and personal communication systems (PCS), high frequency military electronics, microwave antennas and base stations. These products are supplied as copper-clad laminates with bonding plies or prepregs for production of multi-layer printed circuits.

Arlon also manufactures a line of silicone rubber materials used in a broad range of military, consumer, industrial and commercial products.  Typical applications and products include: silicone bagging materials for producing composite parts; silicone insulating tapes for electric traction motor coil windings; insulation materials for industrial and commercial flexible heaters; silicone materials for high temperature hose and duct markets; insulating tape for medium and high voltage electrical splices and self-fusing tapes for a variety of industrial and commercial applications; as well as compliant, thermally or electrically conductive silicone film adhesives known as Thermabond™ for heat sink-bonding to printed circuit boards.

Competition

There are numerous competitors ranging in size from small, sole proprietorships to units of very large, multinational corporations that in certain instances have far greater market positions and financial resources than the Corporation’s.

Competition for Arlon's products varies by product line and type of customer.  Competition for established lines is usually based on one or more elements such as specification position, lead time, price, product performance, or technical support and customer service. It may also be based on the ability to service emerging technologies through the custom design of new products, or redesign of existing products, as well as the development of materials for new applications.  As an example, for some high performance materials sold to the printed circuit board industry, the consistent technical performance of the materials supplied in excess of specified standards can be the critical competitive element.  In addition, Arlon sells a significant portion of its circuit board materials into the Far East and European markets where local producers of similar materials have a competitive advantage related to their geographic location.

Distribution

Arlon products are marketed by company sales personnel, as well as outside sales representatives and distributors in North and South America, Europe, the Middle East, Asia-Pacific, and other international markets.

Raw Materials and Purchased Parts

The essential raw materials used in Arlon Electronic Materials are silicone rubber, fiberglass cloth, pigments, copper foil, aluminum and Alloy 600 foil, polyethylene foam and various plastic films, special papers and release liners, vinyl resins, various adhesives and solvents, Teflon™ or polytetrafluoroethylene (PTFE) resin, polyimide resin, epoxy resins, other thermoset resins, as well as, various chemicals.  Generally, these materials are each available from several qualified suppliers.  There are, however, several raw materials used in Arlon Electronic Materials’ products that are purchased from chemical companies that are proprietary in nature.  Other raw materials are purchased from a single approved vendor on a "sole source" basis, although alternative sources could be developed in the future if necessary.  However, the qual ification procedure can take several months or longer and could therefore interrupt production if the primary raw material source became unexpectedly unavailable. Current suppliers are located in the United States, Asia, and Europe.

Patents and Trademarks

The Corporation owns patents and several registered trademarks under which certain Arlon Electronic Materials’ products are sold. The Corporation does not believe that the loss of any or all of these trademarks would have a material adverse effect on this segment.

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ARLON COATED MATERIALS SEGMENT

Description of Business

Arlon Coated Materials’ principal products include adhesive coated cast and calendered vinyl films, cast vinyl fabric, custom-engineered laminates, and coated and laminated films, foils, foams and papers used in a broad range of industrial, consumer and commercial products.  

Arlon specialty graphic films are marketed under the Arlon, CalonÒ and MII™ brand names and include cast and calendered vinyl films that are manufactured in a wide variety of colors, face stocks and adhesive systems.  These vinyl films are used in commercial and electrical signage, point of purchase displays, highway signage, fleet markings, and other commercial advertising applications. Arlon also manufactures laminated vinyl fabrics for corporate identity programs. These products are marketed under the Signtechâ brand name and complement the CalonÒ specialty graphic films.  

Arlon manufactures and markets custom-engineered laminates and coated products. Typical applications include insulating foam tapes for thermopane windows, specialty flexible circuit materials, electrical insulation materials for motors and transformers, thermal insulation panels for appliances and cars, durable printing stock, transfer adhesives used in industrial assembly, and single and double-coated foam and film tapes and other custom engineered laminates for specific industrial applications.

Competition

There are numerous competitors ranging in size from small, sole proprietorships to units of very large, multinational corporations that in certain instances have far greater market positions and financial resources than the Corporation’s.

Competition varies by product line and type of customer.  While competition for established lines is usually based on one or more of lead time, price, product performance, or technical support and customer service, it may also be based on the ability to service emerging technologies through the custom design of new products, or redesign of existing products, and materials for the new applications.  

Distribution

Arlon Coated Materials’ products are marketed by company sales personnel, outside sales representatives and distributors in North and South America, Europe, Australia, the Far East and several other international markets.

Raw Materials and Purchased Parts

The essential raw materials used by Arlon Coated Materials include pigments, copper foil, aluminum foil, polyethylene foam and various plastic films, calendered vinyl, special papers and release liners, vinyl resins, various adhesives and solvents, and various chemicals.  Generally, these materials are each available from several qualified suppliers.  There are, however, several raw materials used in Arlon Coated Material's products that are purchased from chemical companies and are proprietary in nature.  Other raw materials are purchased from a single approved vendor on a "sole source" basis, although alternative sources could be developed in the future if necessary.  However, the qualification procedure can take from several months to an extended period of time and could therefore interrupt production if the primary raw ma terial source was lost unexpectedly. Current suppliers are located in the United States, Asia, and Europe.

Patents and Trademarks

The Corporation owns several registered trademarks under which certain Arlon Coated Materials’ products are sold. The Corporation does not believe that the loss of any or all of these trademarks would have a material adverse effect on this segment.

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KASCO REPLACEMENT PRODUCTS AND SERVICES SEGMENT

Description of Business

Kasco is a leading provider of meat-room products and repair services for the meat, deli, and seafood departments of supermarkets; for restaurants; for meat, poultry and fish processing plants; and for manufacturers and distributors of electrical saws and cutting equipment throughout North America, Europe, Asia, and South America.  These products and services include band saw blades for cutting meat and fish, band saw blades for cutting wood and metal, grinder plates and knives for grinding meat, repair and maintenance services for food equipment in retail grocery and restaurant operations, electrical saws and cutting machines, seasoning products, and other related butcher supply products.

Kasco’s products and services are sold under a number of brand names including Kasco in the United States and Canada, Atlantic Service Co. in the United Kingdom and Canada, Bertram & Graf in Germany, and Biro France and EuroKasco in France.

Competition and Marketing

Kasco competes with several large and medium-sized national and regional companies, as well as numerous small local companies.  The principal methods of competition are product quality, geographic coverage capability to service customers, equipment repair service capability, and product price.  

Kasco has a significant distribution network that reaches over 20,000 retail grocery stores, restaurants, delis, and processing plants in the US, Canada, Europe, Latin America and Asia.  Kasco’s distribution network is made up of corporate-direct salesmen, route salesmen, repair service technicians, and distributors who have in-depth knowledge of the local markets and each customer’s needs.  Kasco’s geographic reach also includes product sourcing.  Kasco manufactures or sources high quality and competitively priced meat room cutting blades, butcher supplies, and repair parts, from factories and suppliers around the world.

During 2003 and 2004, Kasco completed major investments in facilities and manufacturing productivity projects, which boosted Kasco’s competitive cost structure and improved product quality and distribution capability.  Revenue, earnings, and cash flow all improved solidly in 2004 versus 2003.

Since 2000, the market environment for Kasco has been difficult due to market contraction through retail consolidation and the industry’s shift to “Case Ready” product offerings.  Kasco has responded by successfully diversifying into repair and maintenance services for the retail grocery industry, and by globally sourcing and effectively distributing high quality and competitively priced butcher supplies and equipment.  During 2005, Kasco will continue to diversify and expand its repair services business and butcher supplies distribution business. Kasco will expand meat band capacity in 2005 with investment in new Normac and Alo Teknik equipment at the Matamoros, Mexico plant.  Kasco will also make investments in new productivity projects during 2005, to further improve our cost position, product quality, and distribution cap ability.

Raw Materials and Purchased Supplies

High quality carbon steel and stainless steel are the principal raw materials used in the manufacture of band saw blades; they are purchased from multiple domestic and international suppliers. Tool steel is utilized in manufacturing meat grinder plates and knives and is purchased from qualified suppliers located in the United States, Europe and Japan. Equipment, replacement parts, and supplies are purchased from a number of manufacturers and distributors in Asia, the United States, and Europe.  In France and Canada, certain specialty equipment and other items used in the supermarket industry and in the food processing industry are purchased and resold under exclusive distributorship agreements with the equipment manufacturers. All of the raw materials and purchased products utilized by this segment have been readily available throughout this last yea r.  

Patents and Trademarks

The Corporation has a number of US and foreign mechanical patents related to several of the products manufactured and sold by Kasco, as well as a number of design patents and registered trademarks.  The Corporation does not believe, however, that the loss of any or all of those patents would have a material adverse effect on this segment.

FOREIGN OPERATIONS

The Corporation has foreign operations located in Canada, Mexico, China, the United Kingdom, France and Germany.  Information on the Corporation's operations by geographical area for the last three fiscal years is set forth in Note 9 to the Consolidated Financial Statements on pages 38 through 40 of Bairnco's 2004 Annual Report to Stockholders which is incorporated herein by reference.

In addition, export sales from the Corporation's US based operations for the years ended December 31, 2004, 2003 and 2002 were approximately $43,557,000, $37,668,000 and $38,720,000, respectively. Export sales to any particular country or geographic area did not exceed 10% of consolidated sales during any of these years.  

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Item 2.

PROPERTIES

The following chart lists for the Corporation as a whole, and by each of its segments, the principal locations of the Corporation's facilities and indicates whether the property is owned or leased and if leased, the lease expiration date.

		LEASED OR OWNED
LOCATION	SQUARE FEET	(LEASE EXPIRATION)
CORPORATION TOTAL	861,000
Headquarters
Lake Mary, FL	11,000	Leased (Expires 2009)
Arlon Electronic Materials
Bear, DE	135,000	Owned
Rancho Cucamonga, CA	80,000	Owned
Suzhou New District, PRC	16,000	Leased (Expires 2005)
Arlon Coated Materials
Dallas, TX	75,000	Leased (Expires 2005)
San Antonio, TX	87,000	Leased (Expires 2008)
San Antonio, TX	16,000	Leased (Expires 2008)
Santa Ana, CA	124,000	Leased (Expires 2008)
San Antonio, TX	138,000	Leased (Expires 2012)
Kasco Replacement Products and Services
Gwent, Wales, UK	25,000	Owned
Montreal, Canada	11,000	Leased (Expires 2006)
Pansdorf, Germany	18,000	Owned
Paris, France	22,000	Leased (Expires 2009)
St. Louis, MO	78,000	Owned
Field Warehouses:
42 locations in North America	25,000	Leased

Item 3.

LEGAL PROCEEDINGS

As discussed in "Management's Discussion and Analysis" set forth on pages 10 through 18 of Bairnco's 2004 Annual Report to Stockholders, which is incorporated herein by reference, in the third quarter Bairnco obtained final resolutions of three long-pending lawsuits.

In one of these lawsuits (the “Transactions Lawsuit’),  trustees representing asbestos claimants brought claims of over $700 million against Bairnco, its subsidiaries, and other defendants.   A judgment in favor of the defendants was affirmed in May 2004 by the U.S. Court of Appeals for the Second Circuit.  Plaintiffs’ time to seek review by the United States Supreme Court of the Court of Appeals’ decision expired in August 2004.

A second lawsuit by these trustees against Bairnco (the “NOL Lawsuit”), involving a dispute over federal income tax refunds that had been held in escrow since the 1990s, was settled in September 2004. Pursuant to a settlement agreement dated September 10, 2004, Bairnco received $24,695,000 (about 70 percent of the escrowed funds), and the NOL Lawsuit was dismissed with prejudice.

The final resolution of the Transactions Lawsuit in favor of Bairnco resulted in the final resolution of a third lawsuit brought by these trustees (the “Properties Lawsuit”), involving a dispute over the title to certain real and personal property.  In 2001, when the Properties Lawsuit was dismissed, without prejudice, against Bairnco and its Arlon subsidiary, the parties agreed that this dispute would be determined in accordance with the final resolution of the Transactions Lawsuit.  

Bairnco Corporation and its subsidiaries are defendants in a number of other pending actions.  Management of Bairnco believes that the disposition of these other actions will not have a material adverse effect on the consolidated results of operations or the financial position of Bairnco and its subsidiaries as of December 31, 2004.

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Item 4.

SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders during the fourth quarter of 2004.

EXECUTIVE OFFICERS OF THE REGISTRANT

The information required with respect to executive officers of the Corporation is as follows:

Name & Age of Executive Officers	Data Pertaining to Executive Officers
Luke E. Fichthorn III (63)	Mr. Fichthorn has served as Chairman of Bairnco since May 23, 1990, and on December 18, 1991, became Chief Executive Officer of Bairnco.  For over twenty-five years, Mr. Fichthorn has been a private investment banker and partner of Twain Associates, a private investment banking and consulting firm.  Mr. Fichthorn served as a director of Keene Corporation, a former subsidiary of Bairnco Corporation from August 1969 until May 1981, and became a director of Bairnco in January 1981.  Mr. Fichthorn is also a director of Florida Rock Industries, Inc. and Patriot Transportation Holding, Inc., neither of which is affiliated with Bairnco.
Larry D. Smith (55)	Mr. Smith was elected Vice President - Administration and Secretary of Bairnco in April 1999. Prior to joining Bairnco, Mr. Smith was employed for over 14 years with Emerson Electric Company in various human resource managerial capacities.  Most recently, Mr. Smith was Vice President Human Resources for Emerson’s Therm-O-Disc, Inc. division in Mansfield, Ohio.
Lawrence C. Maingot (45)	Mr. Maingot was appointed Corporate Controller of Bairnco in December 1999. From May 1997 to December 1999, Mr. Maingot was Bairnco’s Assistant Controller. From April 1992 to May 1997, Mr. Maingot was Bairnco’s Accounting Manager. Prior to joining Bairnco, Mr. Maingot was employed with Arthur Andersen LLP.

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PART II

Item 5.

MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

a. & c.    Data regarding market prices of Bairnco's common stock is included in the "Quarterly Results of Operations (Unaudited)" on page 19 of Bairnco's 2004 Annual Report to Stockholders which is incorporated herein by reference.  Bairnco's common stock is traded on the New York Stock Exchange under the symbol BZ.  Data on dividends paid is included in the Consolidated Statements of Operations on page 21 of Bairnco's 2004 Annual Report to Stockholders, which is incorporated herein by reference. In November the Board of Directors increased the quarterly cash dividend to $.06 per share from $.05 per share. The total dividend for 2004 was $0.21 per share.  The Board continues to review the dividend on a quarterly basis.

b.   The approximate number of registered holders of Bairnco common stock (par value $.01 per share) as of December 31, 2004 was 944.

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Item 6.

SELECTED FINANCIAL DATA

The following table contains certain financial and operating data and is qualified by the more detailed consolidated financial statements and notes thereto included in Bairnco's 2004 Annual Report to Stockholders which is incorporated herein by reference.  The balance sheet data as of December 31, 2004 and the statement of operations data for the fiscal year then ended, were derived from the consolidated financial statements and notes thereto that have been audited by Grant Thornton LLP, independent registered public accounting firm. The balance sheet data as of December 31, 2003 and 2002 and the statement of operations data for the fiscal years ended December 31, 2003 and 2002 were derived from the consolidated financial statements and notes thereto that were audited by E rnst & Young LLP, independent registered public accounting firm. The balance sheet data as of December 31, 2001 and 2000 and the statement of operations data for the fiscal years ended December 31, 2001 and 2000 were derived from the consolidated financial statements and notes thereto that were audited by Arthur Andersen LLP. The financial data shown below should be read in conjunction with the consolidated financial statements and the related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Bairnco's 2004 Annual Report to Stockholders which is incorporated herein by reference.

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FINANCIAL HISTORY

		2004	2003	2002	2001	2000
Summary of Operations ($ in thousands)
Net sales	$	165,496	152,696	154,354	160,369	187,513
Gross profit	$	47,884	42,871	44,991	46,535	60,556
Earnings before provision for litigation costs, interest and taxes (a)	$	8,057	4,623	6,802	7,395	16,544
Provision for litigation costs	$	--	--	4,000	6,200	1,000
Operating profit	$	8,057	4,623	2,802	1,195	15,544
Interest expense, net	$	566	768	1,005	2,486	3,481
Income (loss) before income taxes	$	7,491	3,855	1,797	(1,291)	12,063
Provision (benefit) for income taxes	$	2,372	1,206	436	(983)	3,830
Income (loss) from continuing operations	$	5,119	2,649	1,361	(308)	8,233
Income from spun off subsidiary	$	25,710	--	--	--	--
Net income (loss)	$	30,829	2,649	1,361	(308)	8,233
Return from operations on:
Net sales	%	3.1	1.7	0.9	(0.2)	4.4
Average stockholders’ investment	%	7.7	5.0	2.7	(0.6)	15.9
Average capital employed	%	6.5	3.7	2.4	1.3	10.8
Yearend Position ($ in thousands)
Working capital	$	38,220	32,573	23,850	25,801	34,926
Working capital as a % of sales	%	23.1	21.3	15.5	16.1	18.6
Plant and equipment, net	$	34,429	36,476	37,468	42,602	47,341
Total assets	$	118,781	118,229	115,584	118,255	135,769
Total debt	$	1,924	31,833	27,747	33,584	46,190
Stockholders’ investment	$	84,767	54,298	51,516	50,018	52,709
Capital employed	$	86,691	86,131	79,263	83,602	98,899
Per Common Share Data
Basic Earnings (loss) per share from continuing operations	$	0.70	0.36	0.19	(0.04)	1.09
Basic Earnings per share from spun off subsidiary	$	3.49	--	--	--	--
Basic earnings (loss) per share	$	4.19	0.36	0.19	(0.04)	1.09
Diluted Earnings (loss) per share from continuing operations	$	0.68	0.36	0.19	(0.04)	1.09
Diluted Earnings per share from spun off subsidiary	$	3.40	--	--	--	--
Diluted earnings (loss) per share	$	4.07	0.36	0.19	(0.04)	1.09
Cash dividend	$	0.21	0.20	0.20	0.20	0.20
Stockholders’ investment	$	11.20	7.35	7.02	6.82	7.21
Market price:
High	$	11.9000	7.1500	6.1000	8.4000	8.0000
Low	$	6.0000	4.6500	4.6900	5.1500	6.0625
Other Data (in thousands)
Depreciation and amortization	$	7,668	7,797	8,113	9,082	9,097
Capital expenditures	$	5,996	5,664	3,811	3,081	6,388
Weighted average common shares outstanding		7,362	7,338	7,332	7,321	7,567
Weighted average diluted common shares outstanding		7,569	7,391	7,337	7,321	7,678
Current ratio		2.7	2.3	1.7	1.8	2.0
Number of registered common stockholders at yearend		944	992	1,066	1,148	1,246
Average number of employees		770	755	789	841	926
Sales per employee	$	214,930	202,250	195,600	190,700	202,500

(a) Excludes impact of pre-tax provisions for litigation costs of $4.0 million in 2002, $6.2 million in 2001 and $1.0 million in 2000.

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Item 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Reference is made to the "Management's Discussion and Analysis" on pages 10 through 18 of Bairnco's 2004 Annual Report to Stockholders which is incorporated herein by reference.

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

RISK

Market risks relating to the Corporation's operations result primarily from changes in interest rates and changes in foreign currency exchange rates.

Impact of Interest Rates

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 increase (decrease) in market rates in effect on December 31, 2004 would increase (decrease) interest expense and hence reduce (increase) the net income of the Corporation by approximately $13,000 per year.

The following table summarizes the principal cash flows of the Corporation's financial instruments outstanding at December 31, 2004, categorized by type of instrument and by year of maturity.  There have been no changes in market risk factors for the year ended December 31, 2004.

	2005	2006	2007	2008	Total	Fair Value
	(in thousands)
Short Term Debt	$1,030	$      --	$      --	$      --	$1,030	$1,030
Long Term Debt:
Revolving line of credit (3.3125% Interest Rate)	483	--	--	--	483	483
Note Payable	100	100	100	--	300	291
Foreign Loan Facility	80	40	--	--	120	120

Impact of Foreign Currency Exchange Rates

The Corporation’s sales denominated in a currency other than U.S. dollars were approximately 19.1% of total sales.  Net assets maintained in a functional currency other than U.S. dollars at December 31, 2004 were approximately 11.2% of total net assets. The translation effect of changes in foreign currency exchange rates has not historically been significant.  At December 31, 2004, a 10% weaker U.S. dollar against the currencies of all foreign countries in which the Corporation had operations during 2004, would have resulted in an increase of revenues by $2.6 million, and an increase of operating profit by $188,000.  A 10% stronger U.S. dollar would have resulted in similar decreases to revenues and operating profit.

Effect of Inflation

General inflation has had minimal impact on Bairnco's operating results in the last three years.  Sales prices and volumes have been more strongly influenced by specific market supply and demand and by foreign currency exchange rate fluctuations than by inflationary factors.

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to the Consolidated Financial Statements and accompanying Notes included on pages 25 through 40 and the "Quarterly Results of Operations (Unaudited)" on page 19 of Bairnco's 2004 Annual Report to Stockholders which is incorporated herein by reference.  Financial Statement Schedules are included in Part IV of this filing.

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

#

Item 9A.

CONTROLS AND PROCEDURES

Limitations on the Effectiveness of Controls

Our management, including our CEO and CAO, does not expect that our Disclosure Controls or Internal Controls will prevent all errors and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control.  The design of any system of controls also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Notwithstanding the foregoing limitations, we believe that our Disclosure Controls and Internal Controls provide reasonable assurances that the objectives of our control system are met.

Quarterly Evaluation of the Company’s Disclosure Controls and Internal Controls

a)

The Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer and Controller, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as of December 31, 2004, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the “Exchange Act”).  Based upon that evaluation, the Chief Executive Officer and Controller concluded that the Corporation’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Corporation (including its consolidated subsidiaries) required to be included in the Corporation’s Exchange Act filings.

b)

There have been no significant changes in the Corporation’s internal controls or in other factors which could significantly affect internal controls subsequent to the date the Corporation carried out its evaluation.

#

PART III

Item 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required with respect to directors and the audit committee of Bairnco is included in the Proxy Statement for the 2005 Annual Meeting of Stockholders of Bairnco, which has been filed with the Securities and Exchange Commission and is incorporated herein by reference.

See the information regarding executive officers of the Corporation on page 12 of this Annual Report on Form 10-K.

On January 29, 2004, the Board of Directors of Bairnco Corporation (the “Board”) adopted the Financial Code of Ethical Conduct, which applies to the Corporation’s Chief Executive Officer and the chief financial officer, the other financial officers and other financial managers.  The Financial Code of Ethical Conduct is posted on the Corporation’s internet site at www.bairnco.com.

The Board has determined that the Corporation has at least one audit committee financial expert serving on its audit committee.  Gerald L. DeGood, Chairman of the Audit Committee, qualifies as an audit committee financial expert and is an independent member of the Board.  Mr. DeGood meets the independence requirements as set forth in the Exchange Act Section 10A(m)(3).

Item 11.

EXECUTIVE COMPENSATION

The information required by Item 11 is included in the Proxy Statement for the 2005 Annual Meeting of Stockholders of Bairnco, which has been filed with the Securities and Exchange Commission and is incorporated herein by reference.

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 is included in the Proxy Statement for the 2005 Annual Meeting of Stockholders of Bairnco, which has been filed with the Securities and Exchange Commission and is incorporated herein by reference.

#

Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 13 is included in the Proxy Statement for the 2005 Annual Meeting of Stockholders of Bairnco, which has been filed with the Securities and Exchange Commission and is incorporated herein by reference.

Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table presents fees charged for professional audit services rendered by Grant Thornton, LLP and Ernst & Young, LLP for the audit of the Company’s financial statements for the years ended December 31, 2004 and 2003 and fees billed for other services during those years. Grant Thornton, LLP was the principal accountant of the Company beginning in the second quarter of 2004.  Ernst & Young, LLP was the principal accountant of the Company during 2003 and the first quarter of 2004.

	2004	2003
Audit fees (1)	$198,600	$160,100
Audit related fees (2)	34,600	13,700
Tax fees (3)	8,000	32,500
All other fees	--	--
Total	$241,200	$206,300

(1)

Audit fees consisted of audit work (including the tax accrual review) performed in connection with the preparation of the quarterly and year end financial statements, European statutory audits and review of documents filed with the SEC.

(2)

Audit related fees consisted of audits of employee benefit plans, consulting related to Section 404 of the Sarbanes-Oxley Act (Ernst & Young LLP only) and a review of the NOL Lawsuit settlement (Grant Thornton LLP only).

(3)

Tax fees consisted of assistance related to tax compliance and reporting.

Pre-Approval of Audit & Non-Audit Services – Under the Corporation’s Audit Committee Charter, the Audit Committee of the Board of Directors (“Audit Committee”) is required to pre-approve all auditing services and permissible non-audit services, including related fees and terms, to be performed for the Corporation by the independent auditor, subject to de-minimus exceptions for non-audit services described under Section 10A(i)(1)(B) of the Securities Exchange Act of 1934 which are approved by the Audit Committee prior to the completion of the engagement, provided that such services had not been recognized as non-audit services at the time of the engagement.  

All pre-approvals must take place in advance of the services within a period not to exceed three months prior to the start of the engagement. The proposals submitted by the independent accountant to the Audit Committee for pre-approval must be specific as to the type of service and provide detail of the scope of work and fee estimate, including out-of-pocket expenses. The proposals must include detailed back-up documentation regarding the specific services to be provided. Any expected change in the audit scope or related fees from the pre-approved amounts will also require pre-approval in advance of the additional work.

The Committee may form and delegate authority to subcommittees consisting of one or more of its members when appropriate, including the authority to grant pre-approvals of audit and permissible non-audit services, provided that decisions of such subcommittees to grant pre-approvals shall be presented to the full Committee at its next scheduled meeting. The Committee will not delegate to management any of the Committee’s responsibilities related to pre-approval of audit and permissible non-audit services.

The Audit Committee pre-approved all audit services, audit related services and tax review and compliance services for the Corporation by Ernst & Young and Grant Thornton during 2004.

#

PART IV

Item 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

a)

1.  Financial Statements

Included in the 2004 Annual Report to Stockholders which is included as Exhibit 13 to this Annual Report on Form 10-K:

·

Report of Independent Registered Public Accounting Firms;

·

Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002;

·

Consolidated Statements of Comprehensive Income for the years ended December 31, 2004, 2003 and 2002;

·

Consolidated Balance Sheets as of December 31, 2004 and 2003;

·

Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002;

·

Consolidated Statements of Stockholders' Investment for the years ended December 31, 2004, 2003 and 2002;

·

Notes to Consolidated Financial Statements.

2.  Financial Statement Schedules

Included in Part IV of this Annual Report on Form 10-K:

·

Financial Statement Schedule for the years ended December 31, 2004, 2003 and 2002:

Schedule II - Valuation and Qualifying Accounts on page 23 of this Annual Report on Form 10-K.

All other schedules and notes are omitted because they are either not applicable, not required or the information called for therein appears in the Consolidated Financial Statements or Notes thereto.

3.  See Index to Exhibits on pages 26 through 29 of this Annual Report on Form 10-K.

b)

Reports on Form 8-K

•

Fourth Quarter 2004 press release dated October 4, 2004

•

Fourth Quarter 2004 press release dated December 17, 2004 (sale of Arlon’s East Providence, Rhode Island facility)

BAIRNCO CORPORATION AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

	Balance				Balance
Year Ended	Beginning		Accounts		End
December 31,	of Year	Expenses	Written-off	Recoveries	of Year
2004
Allowance for
doubtful accounts	$1,358,000	$   877,000	$   (713,000)	$24,000	$1,546,000
2003
Allowance for
doubtful accounts	$1,295,000	$   371,000	$   (308,000)	$        --	$1,358,000
2002
Allowance for
doubtful accounts	$2,698,000	$1,296,000	$(2,699,000)	$        --	$1,295,000

#

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BAIRNCO CORPORATION
	(Registrant)
Date:  March 10, 2005	By:   /s/ Lawrence C. Maingot
	Lawrence C. Maingot
	Corporate Controller
	(Chief Accounting Officer)

#

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been executed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated above.

 /s/ Luke E. Fichthorn III                                 

Luke E. Fichthorn III

Chairman and CEO

 /s/ Gerald L. DeGood                                         

Gerald L. DeGood

Director, Chairman of the Audit Committee

 /s/ Charles T. Foley                                         

Charles T. Foley

Director

 /s/ James A. Wolf                                             

James A. Wolf

Director

 /s/ William F. Yelverton                                  

William F. Yelverton

Director

 /s/ Lawrence C. Maingot                                 

Lawrence C. Maingot

Corporate Controller

(Chief Accounting Officer)

#

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

EXHIBITS

TO

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

Commission File No.: 1-8120

BAIRNCO CORPORATION

(Exact name of registrant as specified in the charter)

Description	Incorporated Herein by Reference To
Certificate of Incorporation, as amended through September 24, 1991.	Exhibit 3 to Bairnco's Annual Report on Form 10-K for fiscal year ended December 31, 1991.
By Laws, as amended through December 18, 1991.	Exhibit 3 to Bairnco's Annual Report on Form 10-K for fiscal year ended December 31, 1991.
Agreement of the Corporation, dated March 30, 1987, to furnish a copy of any instrument with respect to certain other long-term debt to the Securities and Exchange Commission upon its request.	Exhibit 4(e) to Bairnco's Annual Report on Form 10-K for fiscal year ended December 31, 1986.
Bairnco Corporation 401(k) Savings Plan and Trust.	Exhibit 4.3 to Bairnco's Registration Statement on Form S-8, No. 33-41313.
Bairnco Corporation 2000 Stock Incentive Plan.	Exhibit A to Bairnco's Proxy Statement for the fiscal year ended December 31, 1999.
Bairnco Corporation Management Incentive Compensation Plan.	Exhibit 10 to Bairnco's Annual Report on Form 10-K for fiscal year ended December 31, 1981.
Employment Agreement dated January 22, 1990, between Bairnco Corporation and Luke E. Fichthorn III.	Exhibit 10 to Bairnco's Annual Report on Form 10-K for fiscal year ended December 31, 1989.
Promissory Note dated January 31, 1998, between Bairnco Corporation and Bank of America NT&SA.	Exhibit 4 to Bairnco’s Annual Report on Form 10-K for fiscal year ended December 31, 1997.
Second Amended and Restated Credit Agreement dated as of February 22, 2000, by and among Bairnco Corporation and certain of its subsidiaries and certain Commercial Lending Institutions and Bank of America, N.A., as the Agent for Lenders.	Exhibit 2 to Bairnco’s Current Report on Form 8-K dated February 24, 2000.
Exhibits to Second Amended and Restated Credit Agreement dated as of February 22, 2000, by and among Bairnco Corporation and certain of its subsidiaries and certain Commercial Lending Institutions and Bank of America, N.A., as the Agent for Lenders.	Exhibit 3 to Bairnco’s Current Report on Form 8-K dated February 24, 2000.

#

Description	Incorporated Herein by Reference To
Lease, dated May 17, 1999, between Crescent Resources, Inc. a South Carolina Corporation, and Bairnco Corporation.	Exhibit 10.1 to Bairnco's Annual Report on Form 10-K for fiscal year ended December 31, 1999.
Lease, dated February 16, 2000, between Signtech USA, Ltd., a Texas Limited Partnership, and Arlon Signtech Ltd.	Exhibit 10.2 to Bairnco's Annual Report on Form 10-K for fiscal year ended December 31, 1999.
Standard Industrial Lease dated May 1, 2002 between James E. and Nancy S. Welsh, trustees under Welsh Family Trust, dated April 20, 1979 and Arlon, Inc. as successor to Keene Corporation.	Exhibit 99 to Bairnco's Form 10-Q for the fiscal quarter ended June 29, 2002.
Ernst & Young Preferability Letter Dated January 30, 2003 Re: Change in Actuarial Valuation Measurement Date for Pension Plans.	Exhibit 18 to Bairnco’s Form 10-K for the fiscal year ended December 31, 2002
Commercial/Industrial Lease dated December 18, 2002 between The Ben-Tal Family Trust and Arlon-Viscor LTD., a Texas limited partnership.	Exhibit 99 to Bairnco’s Form 10-K for the fiscal year ended December 31, 2002
First Lease Renewal Agreement, dated February 15, 2003, between Arlon Signtech Ltd, a Texas limited partnership and RAM Global, Ltd., a Texas limited partnership.	Exhibit 99 to Bairnco’s Form 10-K for the fiscal year ended December 31, 2003.
Calculation of Basic and Diluted Earnings per Share for the years ended December 31, 2004, 2003 and 2002.	Exhibit 11 filed herewith.
2004 Annual Report to Stockholders.	Exhibit 13 filed herewith.
Subsidiaries of the Registrant.	Exhibit 21 filed herewith.
Consent of Independent Registered Public Accounting Firm.	Exhibit 23.1 filed herewith.
Consent of Independent Registered Certified Public Accounting Firm.	Exhibit 23.2 filed herewith.
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.	Exhibit 31.1 filed herewith.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.	Exhibit 31.2 filed herewith
Description	Incorporated Herein by Reference To
Certification pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Exhibit 32.1 filed herewith.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Exhibit 32.2 filed herewith.
Report of Independent Registered Public Accounting Firm.	Exhibit 99 filed herewith.

#

EX-11

EXHIBIT 11

BAIRNCO CORPORATION AND SUBSIDIARIES

CALCULATION OF BASIC AND DILUTED EARNINGS PER SHARE

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

	2004	2003	2002
BASIC EARNINGS PER COMMON SHARE:
Net Income	$ 30,829,000	$ 2,649,000	$ 1,361,000
Weighted-average common shares outstanding	7,362,000	7,338,000	7,332,000
Basic Earnings Per Common Share	$           4.19	$          0.36	$          0.19
DILUTED EARNINGS PER COMMON SHARE:
Net Income	$ 30,829,000	$ 2,649,000	$ 1,361,000
Weighted-average common shares outstanding	7,362,000	7,338,000	7,332,000
Dilutive Effect of Restricted Stock	64,000	32,000	--
Common shares issuable in respect to options issued to
employees with a dilutive effect	143,000	21,000	5,000
Total common shares assuming full dilution	7,569,000	7,391,000	7,337,000
Diluted Earnings Per Common Share	$            4.07	$          0.36	$          0.19

Basic earnings per common share were computed by dividing net income by the weighted-average number of shares of common stock outstanding during each year. Diluted earnings per common share includes the effect of all dilutive stock options and restricted stock shares.

EX-13

BAIRNCO CORPORATION

2004 ANNUAL REPORT

Our mission

Bairnco Corporation (“Bairnco” or the “Corporation”) is an organization of people committed to providing value-added industrial and commercial products and services to niche markets which meet or exceed our customers’ requirements leading to the creation of stockholder and employee value.

Our strategy

Bairnco strives to develop true partnership relationships with its customers in selected markets through close cooperation in developing value-added solutions to their needs. Bairnco seeks to identify and participate in those markets that will provide growth opportunities due to either technical developments or the changing needs of customers.

Bairnco implements this mission and strategy through three business segments:

Electronic Materials and Coated Materials are designed, manufactured and sold under the Arlon brand identity.

Replacement products and services are manufactured and distributed under the Kasco brand identity.

Our objectives

Bairnco believes that concentrating its resources in selected market niches can provide the basis to achieve both superior profitability and growth. Management's long-term objectives are to achieve:

10% compound rate of earnings growth

15% return on stockholders' investment

12% return on total capital employed

Our values

Values are the core of Bairnco’s corporate culture. They are the basis for the decisions made regarding the development and deployment of people, the improvement and investment in processes, and the manufacture and distribution of products.

Bairnco’s values are:

·

Personal and corporate integrity

·

The inevitability and opportunity of change

·

Continuous improvement and development

·

Total customer satisfaction

·

Decentralized organization and empowered employees

·

Superior rewards for superior performance

·

Have fun – enjoy your work and your life

CONTENTS

Financial Highlights	1
Letter to Our Stockholders	2
Arlon Electronic Materials	4
Arlon Coated Materials	6
Kasco Replacement Products & Services	7
Directors and Management	8
Financial History	9
Management's Discussion and Analysis	10
Quarterly Results of Operations	19
Reports of Independent Registered Public Accounting Firms	20
Consolidated Financial Statements	21
Notes to Consolidated Financial Statements	25

FINANCIAL HIGHLIGHTS

				Percentage	Change
(In thousands except per share data)	2004	2003	2002	04/03	03/02
Net Sales	$   165,496	$   152,696	$  154,354	8%	(1%)
Earnings before provision for litigation costs, interest and taxes (a)	$       8,057	$       4,623	$      6,802	74%	(32%)
Provision for litigation costs	$             --	$             --	$      4,000	--	--
Operating Profit (a)	$       8,057	$       4,623	$      2,802	74%	65%
Income from continuing operations (a)	$       5,119	$       2,649	$      1,361	93%	95%
Income from spun off subsidiary	$     25,710	$             --	$             --	--	--
Net Income	$     30,829	$       2,649	$      1,361	1064%	95%
Diluted Earnings per share from continuing operations	$         0.68	$         0.36	$        0.19	89%	89%
Diluted Earnings per share from spun off subsidiary	$         3.40	--	--	--	--
Diluted Earnings per Share	$         4.07	$         0.36	$        0.19	1031%	89%
Cash Dividends per Share	$         0.21	$         0.20	$        0.20	5%	0%
Stockholders' Investment per Average Diluted Common
Shares Outstanding	$       11.20	$         7.35	$        7.02	52%	5%
Total Assets	$   118,781	$   118,229	$  115,584	0%	2%
Stockholders' Investment	$     84,767	$     54,298	$    51,516	56%	5%
Weighted Average Diluted Common Shares Outstanding	7,569	7,391	7,337	2%	1%

(a)

Includes pre-tax gain on sale of facility of $1,196,000 million in 2004 and pre-tax gain on sale of facility of $496,000 in 2002.

(Data for Bar Charts for Five Years 2000 to 2004; in 000's)

Year	Net Sales	Adjusted Operating Profit*	Adjusted Income (Loss)*	Adjusted Diluted Earnings (Loss) per Share*
2000	$187,513	$15,544	$8,233	$1.07
2000(b)	$187,513	$16,544	$8,873	$1.16
2001	$160,369	$1,195	$(308)	$(0.04)
2001(b)	$160,369	$7,395	$3,660	$0.50
2002	$154,534	$2,802	$1,361	$0.19
2002(b)	$154,354	$6,306	$3,674	$0.50
2003	$152,696	$4,623	$2,649	$0.36
2004	$165,496	$6,861	$4,329	$0.58

(b) Prior to impact on operating profit, net income and diluted earnings per share of $1.0 million pre-tax provision for litigation costs in the fourth quarter of 2000, $6.2 million pre-tax provision for litigation costs in the third quarter of 2001 and $4.0 million pre-tax provision for litigation costs in the fourth quarter of 2002; also prior to the impact on operating profit, net income and diluted earnings per share of $496,000 pre-tax gain on sale of facility in 2002 and $1,196,000 pre-tax gain on sale of facility in 2004.

* The terms “Adjusted Operating Profit”, “Adjusted Income (Loss)” and “Adjusted Diluted Earnings (Loss) per Share” as depicted at left are non-GAAP financial measures and reflect Operating Profit, Net Income (Loss) and Diluted Earnings (Loss) per Share of the Corporation excluding the impact of pre-tax provisions for litigation costs of $1.0 million in 2000, $6.2 million in 2001 and $4.0 million in 2002.  Adjusted Operating Profit excludes the impact of the pre-tax gain on sale of facility of $496,000 in 2002 and $1,196,000 in 2004. Adjusted Income and Adjusted Diluted Earnings per Share exclude the impact of the income from spun off subsidiary of $25.7 million and the after-tax gain on sale of facility of $327,000 in 2002 and $790,000 in 2004.  The Corporation believes that the use of certain adjusted, non-GAAP fina ncial measures allows management and investors to evaluate and compare core operating results from ongoing operations from period to period in a more meaningful and consistent manner.

LETTER TO OUR STOCKHOLDERS

2004 was a watershed year for Bairnco with the successful conclusion of the Transaction and NOL Lawsuits.  Results from operations continued to improve.  Bairnco enters 2005 with minimal debt and a focused management team.

Results from operations for 2004 were in line with our expectations as our served markets showed signs of a recovery although growth rates were stronger in the first half of the year than the second.  Management continued to improve productivity while staying focused on the basic plan to maintain and improve our core competencies and continuing to invest in new products.  On an 8.4% increase in sales, operating profits increased 48.4% in 2004.

We expect 2005 to be a year of improved results as compared to 2004. The “industrial” economy is assumed to experience moderate growth.  Price increases should be sufficient to offset material cost increases. The ongoing cost improvement programs and the improved sales from new products and some improving markets should contribute to improved results for 2005.

Litigation Won

In 2004, we successfully concluded over a decade of litigation that grew out of asbestos claims against Bairnco’s former subsidiary, Keene Corporation. On April 9, 2004 the U.S. Court of Appeals for the Second Circuit affirmed the U.S. District Court's judgment dismissing, in its entirety, the Transactions Lawsuit against Bairnco and all the other defendants. On May 18, 2004 the U.S. Court of Appeals for the Second Circuit denied the plaintiffs' motion for rehearing, and it again affirmed the dismissal of the Transactions Lawsuit.  

On September 10, 2004 Bairnco and the Keene Creditors Trust signed an agreement to settle the NOL Lawsuit. The NOL Lawsuit involved a dispute between Bairnco and the Trust over tax refunds that had been held in an escrow account since the mid-1990s. Under the agreement, Bairnco received approximately $24,695,000 which is included as Income from Spun off Subsidiary. This ends over 13 years of litigation which cost in excess of $20 million and was a major distraction to the entire organization. Our success is attributable to both the fact that the charges were without merit and the outstanding job of our lawyers, John Hall, Steve Klugman, Jeremy Feigelson and their team at Debevoise & Plimpton.

FINANCIAL RESULTS

Sales for the year ended December 31, 2004 increased 8.4% to $165,496,000 from $152,696,000 in 2003. Gross profit increased 11.7% to $47,884,000 from $42,871,000 in 2003 due to increased sales and improved efficiencies from higher production volumes. The gross profit margin as a percent of sales increased to 28.9% from 28.1%.

The primary consolidation of Arlon’s industrial engineered coated product’s businesses in the new facility in San Antonio, Texas, was substantially completed in 2004. In December 2004, Arlon’s East Providence, Rhode Island facility was sold for $2 million resulting in a pre-tax gain of $1.2 million.  

Excluding the $1.2 million gain on sale of facility, selling and administrative expenses increased to $41,023,000 from $38,248,000 in 2003. As a percent of sales, these selling and administrative expenses decreased to 24.8% in 2004 as compared to 25.0% in 2003.

Operating profit increased 48.4% to $6,861,000 in 2004, excluding the 2004 gain on sale of facility, from $4,623,000 in 2003.

Net interest expense decreased to $566,000 as compared to $768,000 in 2003 due to lower average borrowings.

Income before income taxes in 2004 increased to $7,491,000 as compared to $3,855,000 in 2003.  Excluding the 2004 gain on sale of facility, income before income taxes increased 63.3% to $6,295,000 in 2004 from $3,855,000 in 2003.

Net income from continuing operations increased to $5,119,000 in 2004 from $2,649,000 in 2003. Diluted earnings per share from continuing operations increased to $0.68 ($0.58 excluding the gain on sale of facility) in 2004 from $0.36 in 2003.  

Subsequent to yearend, a review of tax information on the settlement of the NOL Lawsuit resulted in a $1,015,000 tax receivable and related income which is included in Income from Spun off Subsidiary. The total gain on litigation settlement was $25,710,000 or diluted earnings per share of $3.40 resulting in net income for 2004 of $30,829,000 or diluted earnings per share of $4.07.

OPERATION DEVELOPMENTS

On October 4^th, 2004 Kasco’s 30 hourly union employees at its manufacturing and distribution facility located in St. Louis, Missouri went on strike. Management has continued operating the plant with replacement workers. Productivity returned to normal levels by the end of the fourth quarter. Subsequent to year end, based on an economic analysis, the decision was made to move the remaining manufacturing operations in St. Louis to Kasco’s Mexican plant over the first six months of 2005.

During the third quarter, Arlon Electronic Materials new fabrication center in Suzhou, China, became operational. The center inventories and converts laminates for our customers in China. In addition, plans have been approved to open a China manufacturing plant which is expected to be in production by the end of 2005. Capital expenditures for the new plant and equipment are expected to be $6.0 million. Organizational, startup and redundancy expenses are estimated to be $1.2 million with the majority being incurred in the last half of the year. The plant is expected to be profitable in 2006. The plant will produce specialty laminates for our customers worldwide. The two laminate plants in the United States will continue to operate but with reduced volumes.

PRODUCTIVITY AND CONTINUOUS IMPROVEMENT

The decision to operate our businesses on the assumption of modest economic recovery in our markets combined with continuous improvement programs improved our productivity 6.3% in 2004. Material costs were further reduced.  Headcount increased from 761 at the beginning of the year to 783 at the end of the year.

Continuous improvement programs are ongoing with the goal of further improvement in productivity in 2005.

New product sales as a percent of total sales decreased from 14% in 2003 to 10% in 2004 as new product developments failed to replace sales of those products that are now more than five years old.  Research and development expense increased 7.4% in 2004. The development of new products and services to meet the needs of our customers and markets remains a priority.

FINANCIAL MANAGEMENT

Excluding the gain on litigation settlement and the gain on the sale of facility the return on average capital employed was 5.6% in 2004. Although our returns are improving they remain inadequate and substantially below what we deem to be acceptable.

Subsequent to year end the board authorized $5,000,000 as available for management to continue its stock repurchase program in 2005 subject to market conditions and the capital requirements of the business.  

Total debt decreased to $1,924,000 from $31,833,000 at the end of 2003.

Subsequent to year end, we reached an agreement in principle with a group of banks to establish a three year unsecured credit facility for $25 million, including a $15 million revolving credit facility and a $10 million letter of credit facility. The new agreement will replace our current credit facility which was amended subsequent to year end to extend the expiration date for 60 days from February 22, 2005.

Working capital increased 17.3% to $38,220,000 from $32,573,000 at the end of 2003. The increase resulted primarily from higher cash and lower debt balances. Working capital as a percent of sales increased to 23.1% from 21.3%.

Capital expenditures were $5,996,000 in 2004 versus a plan of approximately $6.3 million.  Depreciation and amortization were $7,668,000 in 2004.

Planned capital expenditures in 2005 are approximately $12.0 million. Depreciation is estimated to be $7.5 million. Capital expenditures are for cost reductions, replacements, new information systems and the new China plant and equipment. Capital expenditures will be reviewed and adjusted based on economic and business conditions.

In 2004 we began the process of converting from BPCS software to PeopleSoft’s J.D. Edwards.  We are converting one operation at a time.  The total conversion is targeted to be completed by the middle of 2006.

Our program to comply with Section 404 of Sarbanes Oxley is underway and we expect to be in compliance on a timely basis.  

DIVIDEND

In November the Board of Directors increased the quarterly cash dividend to $.06 per share from $.05 per share. The total dividend for 2004 was $0.21 per share. The Board increased the dividend based on the Corporation’s strong financial condition and the positive future outlook. The Board will continue to review the dividend policy in light of the results and future capital structure of the Corporation.

MANAGEMENT

The retention and development of our key employees remains critical to improving our profitability and to the future growth of our businesses. During 2004 the management development program continued to make progress in all operations. Significant additions were made in marketing, sales management and research and development. The Six-Sigma program was continued in our operations.  

OUTLOOK

The outlook for 2005 is for improved sales and earnings for the year. However, the first quarter is expected to be substantially below last year’s unusually strong first quarter due to weak electronic and wireless markets, the Mexico move costs and an adverse mix change in a segment of the graphics market as compared to the first quarter last year. We anticipate continuing modest growth in the economy and in selected served markets.

Oil and natural gas are the primary feed stocks for the majority of the materials we purchase to manufacture our products.  During the fourth quarter of 2004, material prices for 2005 increased. It appears that we will be able to increase selling prices to offset these material cost increases in most served markets.

2005 results will benefit from the absence of certain expenses that were incurred in 2004. The project costs of $1.3 million for the consolidation of the East Providence facility into San Antonio will not recur. The loss of approximately $500,000 incurred by having the East Providence plant operating for the first five months of 2004 and until it was sold in December will not recur. The start up inefficiencies and scrap at the San Antonio plant should be materially reduced.

2005 results will be reduced by two major projects. The organization and start up of the China facility plus the attendant inefficiencies in the US plants are expected to be approximately $1.2 million most of which will be incurred in the second half of 2005. The costs of moving Kasco’s remaining manufacturing operations to the Mexico plant will be approximately $500,000 spread over the first half of 2005.

Internal cash generation should substantially meet our capital expenditure and working capital requirements.

Bairnco’s un-leveraged balance sheet and anticipated positive free cash flows after 2005 will result in three parallel courses of action which are interdependent. First we are actively considering acquisition opportunities that fit with our existing businesses and which meet our return requirements. Second, we will consider stock repurchases depending on the stock price. Third, we will continue to review our dividend policy.  

The continuing dedication and excellent performance of our teammates remains the key to our past and future success. We are all committed to making 2005 another year of improved results.

Respectfully yours,

/s/ Luke E. Fichthorn III

Luke E. Fichthorn III

ARLON

Arlon designs, manufactures, and sells engineered materials and components for the electronic, industrial and commercial markets. These products are based on proprietary technologies in coating, laminating, polymers, and dispersion chemistry.

Arlon Electronic Materials (“Arlon EM”)

Arlon Electronic Materials is known worldwide as a premier supplier of high technology materials for the printed circuit board (PCB) industry.  In North America, a direct technical sales force and distributors market these products to PCB manufacturers and original equipment manufacturers (OEM’s). In Europe and Asia-Pacific, direct technical sales specialists support a broad network of distributors and manufacturers' representatives.

PHOTO – Arlon's new foam based laminate, FoamClad R/F™, provides a cost effective, high performance solution for high frequency applications, particularly cellular antennas.

PHOTO – Grand opening of Arlon’s Finishing Center in Suzhou, China.

The Arlon Electronic Substrates product line includes a variety of specialty polyimide and epoxy laminates as well as other high performance thermoset products. These materials are used in demanding commercial and military market applications including high density interconnect (HDI), surface mount technology (SMT), heat sink bonding, semiconductor testing, wireless communications, flex/rigid PCBs, and microvia PCB's. The Microwave Materials product line offers fluoropolymer (i.e. PTFE laminates), ceramic-filled fluoropolymer laminates, and other low signal-loss laminates such as closed-cell foam dielectric laminates. These products deliver the electrical performance needed in the frequency-dependent circuit applications such as personal communication systems (PCS), anti-collision radar systems, 3G microwave cell tower and military antennas, emerging RDID systems, as well as, base station subsystems and components. These products are supplied as copper-clad laminates with matched bonding plies or prepregs for production of multi-layer printed circuits.

Recognizing the growing electronics market opportunities in Mainland China, Arlon opened a Finishing Center in Suzhou, China in mid-2004.  This Center is being used to enhance customer relationships in that country as a precursor to completion of a full manufacturing operation.  The new manufacturing operation in China is currently planned to be operational in the fourth quarter of 2005.

During the fourth quarter, Arlon’s Materials for Electronics Division and Nan Ya Plastics Corporation mutually agreed to terminate the agreement whereby Arlon was to distribute Nan Ya laminate and prepreg products in North America. There was no impact on the financial position or results of operations of the Corporation.

In 2004, Arlon introduced several new products to address customer and industry demands to include:

•

Arlon’s FoamClad R/F™ 100 Laminate – Arlon broadened its patented FoamClad R/F product line with additional foam thickness dielectrics for greater breadth of applications.  This product provides a low cost laminate material alternative for microwave circuits, also offering the benefit of much lower weight.

•

Arlon’s 11N product line – This laminate and bonding film system was developed to fit several market needs – first, a lower cost material for double-sided and multilayer RF applications, and second for digital applications requiring good CAF resistance.  These material capabilities of Arlon 11N offer designers servicing many markets a cost-effective solution to meet their specific application needs.

Arlon Silicone Technologies is a world leader in silicone rubber materials used in a broad range of military, consumer, industrial, utility and commercial products. Silicone offers performance features unmatched by other polymers, including high and low service temperature capability, flame retardance, electric arc resistance, and resistance to ultra-violet light and ozone.  Typical products and applications include:

· Silicone substrate insulation for industrial and commercial flexible heaters;

· High temperature insulation for electric power generators and traction motors;

· Silicone sheet rubber bagging materials for manufacturing composite components and structures;

· Self-fusing silicone tapes used for cable-splicing insulation, wire harnessing, pipe and hose sealing, and mechanical protection;

· Thermally and electrically conductive silicone film adhesives for high reliability electronics.  

2004 was a year of continuing innovation in products and processes for Silicone Technologies.  Several new products and technologies were added to the operation’s capabilities. As anticipated, the Primerless Thermabond® products increased significantly in 2004. A next generation thermally conductive, supported Thermabond® adhesive was developed and introduced to the market in 2004.  This new generation facilitates ease of handling in applications.

Other new products introduced in 2004 include higher service temperature and lower-cost UL Flexible Heater insulation materials, and a low-outgassing silicone material for sensitive applications such as military electronics and semiconductor markets.  Several very exciting opportunities continue in development for 2005 commercialization.

PHOTO – Offering both Arlon LevelWrap^Ò tapes and MOX-Tape^Ò silicone tape products, greatly expands Arlon’s market position with existing and newly developed products.

PHOTO – Arlon’s Thermabond^Ò products are used widely for high performance aviation and aerospace electronics bonding applications.  Newly developed, higher-performance Thermabond^Ò products have been developed that will broaden customer design latitude.

Arlon Coated Materials (“Arlon CM”)

Arlon manufactures and markets, under the CalonÒ, MII™ and Signtech® brand names, cast and calendered vinyl films and laminates in a wide variety of colors, face stocks and adhesive systems.  These vinyl films and laminates are used in commercial and electrical signage, point of purchase displays, highway signage, fleet markings, and other commercial advertising applications.

PHOTO - Digital is the most current technology for low volume print jobs and customized images.  Decals on this racing motorcycle were produced using Arlon’s high performance print media and an “eco” friendly printer.

PHOTO - Consumer marketing means capturing the attention and increasing the number of visual images before a potential customer.  Arlon’s digital imaging media means the advertiser can print directly on our vinyl and have it applied to a variety of surfaces – in this case a vehicle.  The lower cost of production allows for customization and frequent updates of the product promotion.

PHOTO - Panera is the latest in fast food, targeted to the business person on the go.  Much thought went into the design details to create the perfect atmosphere to attract the desired audience.  From the colors, to unique layout, using Arlon’s Signtech® Flexible substrate and screen printing beds, the store achieved it’s polished look.

We have continued to invest in new product development and to improve the quality of our current product line. Arlon continues to expand the range of available colors and specialty face stocks in order to broaden its product offering to meet the needs of its customers.

Arlon also manufactures and markets custom-engineered laminates and coated products. Typical applications include insulating foam tapes for thermopane windows, specialty flexible circuit materials, electrical insulation materials for motors and transformers, thermal insulation panels for appliances and cars, durable printing stock, transfer adhesives used in industrial assembly, and single and double-coated foam and film tapes and other custom engineered laminates for specific industrial applications.

The keys to Arlon’s success in custom-engineered laminates and coated products are our knowledge base of materials and adhesives technologies and our understanding of customer applications.  Our sales engineers and product managers are dedicated to understanding customer requirements and developing product specifications that meet those customer needs.  

PHOTO - We have all become familiar with the Chuck E Cheese line of stores.  Due to Arlon’s reputation of service and quality printing, we were able to capitalize on our past relationship with the company to produce the image update with the new red and purple awnings.

KASCO

Kasco Replacement Products and Services

Kasco is a leading provider of meat-room products and maintenance services for the meat and deli departments of supermarkets; for restaurants; for meat and fish processing plants; and for distributors of electrical saws and cutting equipment throughout North America, Europe, Asia and South America.  These products and services include:

· Band saw blades for cutting meat and fish

· Chopper plates and knives for grinding meat

· Repair and maintenance service for food equipment in retail grocery and restaurant operations

· Electrical saws and cutting machines

· Seasoning products

· Other related butcher supply products

· Saw blades for cutting wood and metal

Kasco has manufacturing operations in St. Louis, Missouri; Matamoros, Mexico; Crumlin, Wales, United Kingdom; and Pansdorf, Germany. In addition, there are distribution facilities in Montreal, Canada and Paris, France.  Kasco operates under the name Kasco in the US and Mexico, Atlantic Service Co. in the UK and Canada, Biro France and EuroKasco in France, and Bertram & Graf in Germany.

Kasco has a significant distribution network that reaches over 20,000 retail grocery stores, restaurants, delis, equipment distributors, and processing plants in the US, Canada, Europe, Latin America and Asia.  Kasco’s distribution network is made up of corporate-direct salesmen, route salesmen, repair service technicians, and distributors who have in-depth knowledge of the local markets and the customer’s needs. Kasco’s distribution and service network delivers meat-room supplies, and repair and maintenance services, in a cost effective and rapid manner to our customer base.

PHOTO - Bandsaws

PHOTO - Plates & Knives

PHOTO – Kasco NA Repair

2004 was a year of solid growth in revenue, operating profits and cash flow for Kasco.  Major investments in facilities (Matamoros, Mexico) and manufacturing productivity projects during 2003 and 2004 improved Kasco’s cost structure, product quality and distribution capability.  

Since 2000, the market environment for Kasco has been difficult due to market contraction through retail consolidation and the industry’s shift to “Case Ready” product offerings.  Kasco has responded by successfully diversifying into repair and maintenance services for the retail grocery industry, and by globally sourcing and effectively distributing high quality and competitively priced butcher supplies and equipment.  During 2005, Kasco will continue to diversify and expand its repair services business and butcher supplies distribution business. Kasco will expand meat band capacity in 2005 with investment in new Normac and Alo Teknik equipment at the Matamoros, Mexico plant.  Kasco will also make investments in new productivity projects during 2005, to further improve its cost position, product quality, and distribution capa bility.

Directors

1.

Luke E. Fichthorn III

Chairman and CEO

Bairnco Corporation

2.

Gerald L. DeGood *

Consultant

(Chairman of the Audit Committee)

3.

Charles T. Foley *

President

Grove Creek Asset Management, LLC.

4.

James A. Wolf *

Business Consultant

(Chairman of the Corporate Governance and Nominating Committee)

5.

William F. Yelverton *

International Business Consultant

(Chairman of the Compensation Committee)

*

Members of the Audit Committee, the Compensation Committee and the Corporate Governance and Nominating Committee

Management:

1.

Robert M. Carini

Vice President Arlon, Inc. and

President Arlon Electronic Materials         

2.

Lawrence C. Maingot

Controller

Bairnco Corporation

3.

Elmer G. Pruim

Vice President Arlon, Inc. and

President Arlon Coated Materials

4.

Larry D. Smith

Vice President Administration & Secretary

Bairnco Corporation

5.

Brian E. Turner

President

Kasco Corporation

FINANCIAL HISTORY

		2004	2003	2002	2001	2000
Summary of Operations ($ in thousands)
Net sales	$	165,496	152,696	154,354	160,369	187,513
Gross profit	$	47,884	42,871	44,991	46,535	60,556
Earnings before provision for litigation costs, interest and taxes (a)	$	8,057	4,623	6,802	7,395	16,544
Provision for litigation costs	$	--	--	4,000	6,200	1,000
Operating profit	$	8,057	4,623	2,802	1,195	15,544
Interest expense, net	$	566	768	1,005	2,486	3,481
Income (loss) before income taxes	$	7,491	3,855	1,797	(1,291)	12,063
Provision (benefit) for income taxes	$	2,372	1,206	436	(983)	3,830
Income (loss) from continuing operations	$	5,119	2,649	1,361	(308)	8,233
Income from spun off subsidiary	$	25,710	--	--	--	--
Net income (loss)	$	30,829	2,649	1,361	(308)	8,233
Return from operations on:
Net sales	%	3.1	1.7	0.9	(0.2)	4.4
Average stockholders’ investment	%	7.7	5.0	2.7	(0.6)	15.9
Average capital employed	%	6.5	3.7	2.4	1.3	10.8
Yearend Position ($ in thousands)
Working capital	$	38,220	32,573	23,850	25,801	34,926
Working capital as a % of sales	%	23.1	21.3	15.5	16.1	18.6
Plant and equipment, net	$	34,429	36,476	37,468	42,602	47,341
Total assets	$	118,781	118,229	115,584	118,255	135,769
Total debt	$	1,924	31,833	27,747	33,584	46,190
Stockholders’ investment	$	84,767	54,298	51,516	50,018	52,709
Capital employed	$	86,691	86,131	79,263	83,602	98,899
Per Common Share Data
Basic Earnings (loss) per share from continuing operations	$	0.70	0.36	0.19	(0.04)	1.09
Basic Earnings per share from spun off subsidiary	$	3.49	--	--	--	--
Basic earnings (loss) per share	$	4.19	0.36	0.19	(0.04)	1.09
Diluted Earnings (loss) per share from continuing operations	$	0.68	0.36	0.19	(0.04)	1.09
Diluted Earnings per share from spun off subsidiary	$	3.40	--	--	--	--
Diluted earnings (loss) per share	$	4.07	0.36	0.19	(0.04)	1.09
Cash dividend	$	0.21	0.20	0.20	0.20	0.20
Stockholders’ investment	$	11.20	7.35	7.02	6.82	7.21
Market price:
High	$	11.9000	7.1500	6.1000	8.4000	8.0000
Low	$	6.0000	4.6500	4.6900	5.1500	6.0625
Other Data (in thousands)
Depreciation and amortization	$	7,668	7,797	8,113	9,082	9,097
Capital expenditures	$	5,996	5,664	3,811	3,081	6,388
Weighted average common shares outstanding		7,362	7,338	7,332	7,321	7,567
Weighted average diluted common shares outstanding		7,569	7,391	7,337	7,321	7,678
Current ratio		2.7	2.3	1.7	1.8	2.0
Number of registered common stockholders at yearend		944	992	1,066	1,148	1,246
Average number of employees		770	755	789	841	926
Sales per employee	$	214,930	202,250	195,600	190,700	202,500

(a) Excludes impact of pre-tax provisions for litigation costs of $4.0 million in 2002, $6.2 million in 2001 and $1.0 million in 2000.

 MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with the Consolidated Financial Statements and related notes which begin on page 19.

OVERVIEW

Results of operations for 2004 were in line with management’s expectations as the Corporation’s served markets showed signs of a recovery although growth rates were stronger in the first half of the year than the second.  Management continued to improve productivity while staying focused on the basic plan to maintain and improve the Corporation’s core competencies and continuing to invest in new products for future growth.  On an 8.4% increase in sales, operating profits increased 48.4% in 2004.

On April 9, 2004 the U.S. Court of Appeals for the Second Circuit affirmed the U.S. District Court's judgment dismissing, in its entirety, the Transactions Lawsuit against Bairnco and all the other defendants. On May 18, 2004 the U.S. Court of Appeals for the Second Circuit denied the plaintiffs' motion for rehearing, and it again affirmed the dismissal of the Transactions Lawsuit. Plaintiffs in the Transactions Lawsuit were the trustees of the Keene Creditors Trust (the “KCT”), a successor in interest to Keene Corporation (“Keene”), a former subsidiary of Bairnco.  In the Transactions Lawsuit, plaintiffs alleged that certain sales of businesses by Keene to other subsidiaries of Bairnco were fraudulent conveyances and otherwise in violation of state law, as well as the civil RICO statute, 18 U.S.C. Section 1964. Plaintiffs sought compensatory damages of $700 million, interest, punitive damages, and trebling of compensatory damages pursuant to civil RICO.  

On September 10, 2004 Bairnco and the Keene Creditors Trust signed an agreement to settle the NOL Lawsuit. The NOL Lawsuit involved a dispute between Bairnco and the Trust over tax refunds that had been held in an escrow account since the mid-1990s. Under the agreement, Bairnco received $24,695,000. These tax refunds which had not previously been included in Bairnco's financial statements and which are not subject to any federal or state income tax, are included as income from spun off subsidiary in the accompanying consolidated financial statements. Consequently, Bairnco’s stockholders’ investment increased by $24,695,000. The funds were used to repay outstanding debt.

The primary consolidation of Arlon’s industrial engineered coated product’s businesses in the new facility in San Antonio, Texas, was substantially completed in 2004. For 2004, approximately $1.3 million of project consolidation and move expenses were incurred versus a 2004 plan of $1.0 million and actual expenses of $1.7 million in 2003. The increase over plan expenses was due to the decision to move an additional laminator from East Providence. Project expenses do not include labor inefficiencies or excess scrap incurred after the planned startup period. $1.0 million of capital expenditures were made in 2004 as per the plan.  In December 2004, Arlon’s East Providence, Rhode Island facility was sold for $2 million resulting in a pre-tax gain of $1.2 million.  

On October 4^th, 2004 Kasco’s 30 hourly union employees at its manufacturing and distribution facility located in St. Louis, Missouri went on strike. Management has continued operating the plant with replacement workers. Productivity returned to normal levels by the end of the fourth quarter.  Subsequent to year end, based on an economic analysis, the decision was made to move the remaining manufacturing operations in St. Louis to Kasco’s Mexican plant over the first six months of 2005. The expenses related to the move will be approximately $250,000 in each of the first and second quarters.  

During the third quarter, Arlon Electronic Materials new fabrication center in Suzhou, China, became operational. The center inventories and converts laminates for our customers in China. In addition, plans have been approved to open a China manufacturing plant which is expected to be in production by the end of 2005. Capital expenditures for the new plant and equipment are expected to be $6 million. Organizational, startup and redundancy expenses are estimated to be $1.2 million with the majority of the expenses being incurred in the last half of the year. The plant is expected to be profitable in 2006.  The plant will produce specialty laminates for our customers worldwide.  The two laminate plants in the United States will continue to operate but with reduced volumes.

The Corporation has reached an agreement in principle with a group of banks to establish a three year unsecured credit facility for $25 million, including a $15 million revolving credit facility and a $10 million letter of credit facility. The new agreement will replace the Corporation’s current credit facility which was amended subsequent to year end to extend the expiration date for 60 days from February 22, 2005.

In 2004 the Corporation began the process of converting all its operations from BPCS software to PeopleSoft’s J.D. Edwards. The conversion is progressing one operation at time. The first conversion was done at year end 2004. The total conversion is targeted to be completed by the middle of 2006.

Effective January 1, 2002, the Internal Revenue Service (“IRS”) enacted the Extraterritorial Income Exclusion (“EIE”), a statutory exclusion from taxable income.  The income exclusion is calculated based on a percentage of foreign trade income and use of a non-US entity is not required to get the benefit of the exclusion. Effective January 1, 2005, the EIE will begin a phase-out which will be completed in 2007. For transactions during 2005 and 2006, the income exclusion will be 80% and 60% of the exclusion otherwise allowed, respectively.

On October 22, 2004, the American Jobs Creation Act of 2004 ("the Act") was signed into law.  The Act creates a temporary incentive for US multinationals to repatriate accumulated income earned outside the US at an effective tax rate of 5.25%.  On November 15, 2004, the Financial Accounting Standards Board (“FASB”) issued a proposed FASB staff position, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004 ("FAS 109-b"). FAS 109-b would allow companies additional time to evaluate the effect of the Act on whether un-repatriated foreign earnings continue to qualify for Statement of Financial Accounting Standards 109's exception to recognizing deferred tax liabilities and would require explanatory disclosures from those who need the additi onal time. Through December 31, 2004, Bairnco has not provided deferred taxes on foreign earnings because such earnings were intended to be indefinitely reinvested outside the US. Whether Bairnco will ultimately take advantage of this provision depends on a number of factors, including reviewing future Congressional and Treasury guidance before a decision can be made.  Until that time, Bairnco will make no change in its current intention to indefinitely reinvest accumulated earnings (approximately $5.2 million) of its foreign subsidiaries.  

RESULTS OF OPERATIONS

Fiscal 2004 Compared to Fiscal 2003

Sales for the year ended December 31, 2004 increased 8.4% to $165,496,000 from $152,696,000 in 2003. Arlon's Electronic Materials sales increased 15.1% and Arlon’s Coated Materials sales increased 4.7% as all of Arlon’s US served markets experienced growth with the improved economy. Kasco's sales increased 7.2% as compared to last year. Kasco’s North American sales were up 5.4% due to increased service and repair revenues. Kasco’s European operations’ sales were up 9.0% due to the positive currency translation effect of the weakened US dollar versus the British Pound and the Euro.

Gross profit increased 11.7% to $47,884,000 from $42,871,000 in 2003 due to the increased sales and improved efficiencies from higher production volumes. The gross profit margin as a percent of sales increased to 28.9% from 28.1%.

Excluding the gain on sale of facility of $1.2 million, selling and administrative expenses increased 7.3% to $41,023,000 from $38,248,000 in 2003 from increased sales. As a percent of sales, these selling and administrative expenses decreased to 24.8% in 2004 as compared to 25.0% in 2003.

Operating profit (refer to Footnote 9, Reportable Segment Data, to Consolidated Financial Statements) increased 48.4% to $6,861,000, excluding the 2004 gain on sale of facility, from $4,623,000 in 2003. Arlon’s Electronic Materials segment operating profit increased 51.0% to $6,656,000 from increased sales and improved efficiencies from higher production volumes. Arlon’s Coated Materials segment operating profit decreased 16.1% or $501,000, excluding the 2004 gain on sale of facility. The decrease was primarily related to the loss of approximately $500,000 incurred in having the East Providence plant operating for the first five months of 2004 and keeping it open until it was sold in December; expenses at the new industrial facility in San Antonio including recruiting, relocation and wages for research and development personnel, labor inef ficiencies and excess scrap incurred after the planned startup period, and full year occupancy and other operating expenses; and a change in the sales mix as some of the higher margin industrial film sales were replaced with lower margin product sale. Kasco’s segment operating profit increased from $39,000 to $1,585,000 in 2004 from increased revenues and improved efficiencies and reduced costs from the capital investments in the Matamoros, Mexico facility. The increase in the Bairnco headquarters’ segment operating loss of $1,055,000 in 2004 was due to increased recruiting, relocation, wages, travel and equipment operating costs related to the JD Edwards implementation, higher bonuses from the improved operating results, and increased audit and general legal expenses.

Net interest expense decreased to $566,000 in 2004 as compared to $768,000 in 2003 due to the reduced outstanding borrowings.

Excluding the gain on sale of facility, income before income taxes in 2004 increased 63.3% to $6,295,000 as compared to $3,855,000 in 2003.

Income from continuing operations increased to $5,119,000 in 2004 which includes the after-tax gain on sale of facility of $790,000. Excluding the gain on sale of facility, income from continuing operations increased 63.4% to $4,329,000 as compared to $2,649,000 in 2003.  Diluted earnings per common share from continuing operations, which includes $0.10 from the gain on sale of facility, increased to $.68 from $.36 in 2003. No shares were repurchased on the open market during 2004.

The effective tax rate for 2004 was 31.7% as compared to 31.3% in 2003. Subsequent to yearend, a review of tax information on the settlement of the NOL Lawsuit resulted in a $1,015,000 tax receivable and related income which is included in income from spun off subsidiary in the accompanying Consolidated Statement of Income. Total income from spun off subsidiary was thus $25,710,000. Net income was $30,829,000 and diluted earnings per common share were $4.07 in 2004 reflecting the impact of the settlement of the NOL Lawsuit.

Fiscal 2003 Compared to Fiscal 2002

Sales for the year ended December 31, 2003 decreased 1.1% to $152,696,000 from $154,354,000 in 2002. Arlon's sales decreased 4.1% from last year. Sales of Arlon’s Electronic Materials segment were down 5.5% or approximately $2.6 million on continued weakness in the electronics and wireless telecommunications markets. Sales of Arlon’s Coated Materials segment were down 3.2% or approximately $2.3 million primarily due to weak demand from the domestic graphics market. Kasco's sales increased 8.8% as compared to last year. Kasco’s North American sales were up 6.4% on strong service and repair revenues. Kasco’s European operations’ sales were up 11.6% primarily due to the positive currency translation effect of the weakened US dollar versus the British Pound and the Euro. This increase was partially offset by the unfavorable impact of l ower meat consumption due to an unseasonably hot European summer.

Gross profit decreased 4.7% to $42,871,000 from $44,991,000 in 2002 primarily due to lower sales and the $1,682,000 of consolidation and move expenses of Arlon’s new facility for its industrial engineered coated products businesses in San Antonio, Texas. The gross profit margin as a percent of sales decreased slightly to 28.1% from 29.1%.

During the fourth quarter of 2002, the Corporation booked a $4.0 million pre-tax provision for litigation in connection with the Transactions Lawsuit (refer to Note 10 to Consolidated Financial Statements) which reduced net income in 2002 by approximately $2,640,000, or $.36 per share.

Selling and administrative expenses decreased to $38,248,000 from $38,685,000, excluding the 2002 litigation provision of $4.0 million and the $496,000 gain on sale of Arlon’s Northbrook, Illinois facility. As a percent of sales, these selling and administrative expenses decreased slightly to 25.0% in 2003 as compared to 25.1% in 2002.

Operating profit was $4,623,000 in 2003, as compared to $2,802,000 in 2002. Arlon’s Electronic Materials segment operating profit was down 3.5% from 2002 on reduced sales. Arlon’s Coated Materials segment operating profit decreased $2,169,000 from 2002 on 3.2% reduced sales and the $1.7 million of consolidation and move expenses. Excluding the litigation provision and the gain on sale of facility in 2002 and the consolidation expenses in 2003, operating profit was $6,305,000 in 2003 as compared to $6,306,000 in 2002.

Net interest expense decreased to $768,000 in 2003 as compared to $1,005,000 in 2002 due to lower average interest rates.

Income before income taxes in 2003 increased to $3,855,000 as compared to $1,797,000 in 2002.

Bairnco’s effective tax rate in 2002 was 24.3% which resulted from the interaction between the significant reduction in pre-tax income due to the $4.0 million litigation provision and the tax benefit of the EIE. The effective tax rate in 2003 was 31.3% which results primarily from the tax benefit of the EIE.

Net income increased to $2,649,000 in 2003 from $1,361,000 in 2002.  Diluted earnings per common share increased to $0.36 in 2003 from $0.19 in 2002.  Excluding the 2002 litigation provision, gain on sale of facility and the 2003 industrial consolidation expenses, net income was $3,759,000 or $0.51 per share as compared to $3,741,000 or $0.51 per share in 2002.

LIQUIDITY AND CAPITAL RESOURCES

The Corporation's sources of liquidity include primarily cash generated from operations and amounts available under credit facilities. The Corporation believes that these sources are expected to be sufficient to fund Bairnco's anticipated cash requirements for working capital, capital expenditures, dividends, stock repurchases and other financial commitments in 2005.

At December 31, 2004, $1.9 million of total debt was outstanding compared to $31.8 million at the end of 2003.  The decrease in debt was due to the pay down of all domestic borrowings under the Corporation’s credit agreement (“Credit Agreement”) as a result of the $24.7 million settlement of the NOL lawsuit and strong cash generation from operations during the year. As of December 31, 2004, approximately $44.2 million was available for borrowing under the Corporation’s secured, reducing revolving credit agreement.  In addition, approximately $5.6 million was available under various short-term domestic and foreign uncommitted credit facilities. Debt as a percent of equity decreased to 2.3% at the end of 2004 from 58.6% at the end of 2003 as a result of the decreased borrowings and increased equity.

The Credit Agreement, which has an original expiration date of February 22, 2005, was amended subsequent to year end to extend the expiration date by 60 days. Also, subsequent to year end, the Corporation reached an agreement in principle with a group of banks to establish a new three year unsecured credit facility for $25 million, including a $15 million revolving credit facility and a $10 million letter of credit facility.

A summary of the Corporation's total contractual obligations and other commercial commitments as of December 31, 2004 is as follows:

	Payments Due by Period
Contractual Cash Obligations (in thousands)	Total	2005	2006	2007	2008	2009	After 2009
Short-term Lines of Credit	$  1,030	$  1,030	$        --	$       --	$        --	$      --	$        --
Note Payable	300	100	100	100	--	--	--
Other foreign loan facility	120	80	40	--	--	--	--
Long-term Debt:
Revolving Line of Credit	483	483	--	--	--	--	--
Operating Leases	11,464	2,885	2,607	2,403	1,441	731	1,397
Total Contractual Cash Obligations	$13,397	$  4,578	$  2,747	$  2,503	$   1,441	$    731	$  1,397

	Amount of Commitment Expiring per Period
Other Commercial Commitments (in thousands)	Total	2005	2006 & Thereafter
Standby Letters of Credit	$3,115	$3,115	$             --

At December 31, 2004, Bairnco had working capital of $38.2 million compared to $32.6 million at December 31, 2003.  The decreases in short term debt and current portion of long term debt were due to the pay down of all domestic borrowings under the credit agreement.  The increase in cash was due to positive cash flows from operations subsequent to the pay down of all domestic borrowings.  The increase in accounts receivable was due to increased sales during the fourth quarter of 2004 as compared to the fourth quarter of 2003. The increase in other current assets reflects the $1,015,000 tax receivable.

During 2002 the Corporation adopted a change in the measurement date of its US pension benefit plans from September 30 to November 30. This change had no significant effect on the 2002 or prior years’ pension expense or pension obligations. Management believes the change in measurement date is preferable as it facilitates and improves the year-end benefit cost planning. The decrease in the discount rate from 7.0% in 2002 to 6.25% in 2003 (refer to Note 8 to Consolidated Financial Statements) significantly increased the accumulated benefit obligation of the plans as of November 30, 2003. Thus, in the fourth quarter 2003, the Corporation made $3.2 million of contributions to the Bairnco Corporation Retirement Plan and the two hourly employee pension plans which resulted in these plans again being fully funded as compared to the accumulated benefit oblig ation of each of the plans. The Corporation made a similar $2.8 million contribution to the plans in 2002 as a result of the decline in the stock market over the previous two years which resulted in the fair value of plan assets declining by approximately $3.3 million from September 30, 2000 to November 30, 2002. During 2004, the discount rate decreased from 6.25% to 6.1% and management made the decision to contribute an additional $300,000 to the plans in the fourth quarter although they were fully funded as of November 30, 2004.

Bairnco’s expected long-term rate of return on plan assets is based on historical returns of its investment funds as adjusted to reflect expectations of future returns taking into consideration forecasts of long term expected inflation rates. Bairnco’s expected long-term rate of return was 8.5% in 2004 and 2003 and 9.0% in 2002. The impact of the reduction in 2003 was an increase in the 2003 pension expense of approximately $130,000. The additional contribution in 2003 coupled with the increased fair value of plan assets as of November 30, 2003 due to improved asset performance resulted in a reduction in pension expense in 2004 of $244,000, to $1.1 million. Pension expense in 2005 is expected to be approximately $1.0 million.

Bairnco made $5,996,000 of capital expenditures in 2004 as compared to plan of approximately $6.3 million. Capital expenditures were focused on equipment replacements, expenditures associated with the new facility for Arlon’s industrial coated products, and the acquisition of the Corporation’s new information systems software. Total capital expenditures planned for 2005 are approximately $12.0 million and depreciation is estimated to be approximately $7.5 million. These capital expenditures are associated with the construction of a new manufacturing facility in China for the Electronic Materials segment, along with ongoing cost reductions and necessary equipment replacements, and the continued implementation of new information systems software. Prior to commitment, planned capital expenditures will be reviewed and adjusted based on economic and b usiness conditions and levels of new business.

Bairnco did not repurchase any shares of its common stock on the open market during 2004. The diluted average number of shares outstanding at December 31, 2004 was 7,569,000, a 2.4% increase from the 7,391,000 diluted average shares outstanding at December 31, 2003. Subsequent to year end, the Board authorized an additional $5,000,000 as available for management to continue its stock repurchase program in 2005 subject to market conditions and the capital requirements of the business.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Forward Looking Statements

Certain of the statements contained in Management’s Discussion and Analysis, in other parts of this annual report and in other Corporation filings, are forward-looking statements.  These forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based upon management’s expectations, assumptions and beliefs 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. Actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.

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, 2005 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, changes in US or international economic or political conditions, such as inflation or fluctuations in interest or foreign exchange rates; disruptions in operations due to labor disputes; renegotiation of the Corporation’s Credit Agreement; changes in the pricing of the products of the Corporation or its competitors; the market demand and acceptance of the Corporation’s existing and new products; the impact of competitive products; the volatility of the electronics market; chang es 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 impact of low cost competition from China; the costs and other effects of legal and administrative cases and proceedings, settlements and investigations; the impact on production output and costs from the availability of energy sources and related pricing; the ability to achieve anticipated revenue growth, synergies and other cost savings in connection with acquisitions; the costs and other effects of complying with environmental regulatory requirements; and losses due to natural disasters where the Corporation is self-insured.

While the Corporation periodically reassesses material trends and uncertainties affecting the Corporation’s results of operations and financial condition, the Corporation does not intend to review or revise any particular forward-looking statement referenced herein in light of new information, future events or otherwise.

Litigation

On April 9, 2004 the U.S. Court of Appeals for the Second Circuit affirmed the U.S. District Court's judgment dismissing, in its entirety, the Transactions Lawsuit against Bairnco and all the other defendants. On May 18, 2004 the U.S. Court of Appeals for the Second Circuit denied the plaintiffs' motion for rehearing, and it again affirmed the dismissal of the Transactions Lawsuit. Plaintiffs in the Transactions Lawsuit were the trustees of the Keene Creditors Trust (the “KCT”), a successor in interest to Keene Corporation (“Keene”), a former subsidiary of Bairnco.  In the Transactions Lawsuit, plaintiffs alleged that certain sales of businesses by Keene to other subsidiaries of Bairnco were fraudulent conveyances and otherwise in violation of state law, as well as the civil RICO statute, 18 U.S.C. Section 1964. Plaintiffs sought compensatory damages of $700 million, interest, punitive damages, and trebling of compensatory damages pursuant to civil RICO.  

On September 10, 2004 Bairnco and the KCT signed an agreement to settle the NOL Lawsuit. The NOL Lawsuit involved a dispute between Bairnco and the KCT over tax refunds that had been held in an escrow account since the mid-1990s. Under the agreement, Bairnco received $24,695,000. Along with the May 2004 affirmation by the U.S. Court of Appeals for the Second Circuit of the dismissal of the Transactions Lawsuit brought by the KCT against Bairnco, Bairnco's subsidiaries and others, the settlement of the NOL Lawsuit concludes more than a decade of litigation against Bairnco that arose out of transactions with its former subsidiary, Keene Corporation.

Bairnco Corporation and its subsidiaries are defendants in a number of other pending actions.  Management of Bairnco believes that the disposition of these other actions will not have a material adverse effect on the consolidated results of operations or the financial position of Bairnco and its subsidiaries as of December 31, 2004.

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Changes in estimates are made when circumstances warrant and are reflected in reported results of operations; if material, the effects of the changes in estimates are disclosed in the notes to the consolidated financial statements. Management continually reviews its accounting policies, how they are applied and how they are reported and disclosed in the financial statements. The following is a summary of the Corporation’s more significant accounting policies and how they are applied in the preparation of the financial statements.

The valuation of our accounts receivable is reviewed on a monthly basis.  The allowance for doubtful accounts is estimated based on historical experience of write-offs and future expectations of conditions that might impact the collectibility of accounts.

The Corporation estimates losses for inventory shrinkage, and excess, slow move and obsolete inventory based on historical inventory shrink experience and on the aging of the inventory and the likelihood of recovering the inventory costs based on anticipated demand and selling price.

The consolidated balance sheets include significant amounts of long-lived assets and goodwill.  Current accounting standards require testing these assets for impairment based on assumptions regarding our future business outlook. While management continues to review and analyze many factors that can impact business prospects in the future, the analyses are subjective and are based on conditions existing at and trends leading up to the time the assumptions are made.  Actual results could differ materially from these assumptions. Management’s judgments with regard to the Corporation’s future business prospects could impact whether or not an impairment is deemed to have occurred, as well as the timing of the recognition of such an impairment charge.

A combination of insurance and self-insurance is used for a number of risks including general liability, workers' compensation, vehicle liability and employee-related health care benefits.  Liabilities associated with the risks that are retained are estimated by considering various historical trends and forward looking assumptions.  The estimated accruals for these liabilities could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.

Accounting Developments

In December 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 132 (revised 2003), Employers Disclosures about Pensions and Other Postretirement Benefits – an amendment of FASB Statements No. 87, 88, and 106. The statement revised employers’ disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by SFAS 87, SFAS 88 and SFAS 106. The statement was adopted effective December 15, 2003 and the additional disclosures required by the statement about assets, obligations, cash flows and net periodic benefit costs of defined benefit pension plans are included in Note 8 to Consolidated Financial Statements.

In November 2004, the FASB issued SFAS 151, Inventory Costs - an amendment of ARB No. 43, Chapter 4.  The statement amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). The statement will be adopted effective January 1, 2005 and its provisions applied prospectively. The adoption of this statement is not expected to have any impact on the Corporation’s financial position or results of operations.

In December 2004, the FASB issued SFAS 123 (revised 2004), Share Based Payments. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services but focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. The statement is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005, although earlier adoption is encouraged. The adoption of this statement is not expected to have a material impact on the Corporation’s financial position or results of operations.

Consolidation of Industrial Engineered Coating Product’s Businesses

For the fourth quarter 2004 approximately $98,000 of consolidation and move expenses were incurred plus $32,000 of capital expenditures were made in connection with the plan for the consolidation of its industrial engineered coated product’s businesses in a new leased facility in San Antonio, Texas. Total consolidation expenses for the year ended December 31, 2004 were approximately $1,310,000 plus $1,048,000 of capital expenditures in connection with the plan.  Expenditures related to the consolidation of the new facility were concluded in 2004.

Through December 31, 2004, total severance costs of $432,000 had been expensed since the first quarter of 2003, including $196,000 in 2004. The severance costs were charged to cost of sales in the consolidated statement of operations. Accrued severance costs at December 31, 2004 were $22,000.  A total of $410,000 in severance costs have been paid, including $381,000 in 2004.  

Business Outlook

The outlook for 2005 is for improved sales and earnings for the year. However, the first quarter is expected to be substantially below last year’s unusually strong first quarter due to weak electronic and wireless markets, the Mexico move costs and an adverse mix change in a segment of the graphics market as compared to the first quarter last year. The “industrial” economy is assumed to experience moderate growth. Price increases should be sufficient to offset anticipated material cost increases. The ongoing cost improvement programs and the improved sales from new products and some improving markets should also contribute to improved results for 2005.

Interest rates and inflation are expected to increase. The weak dollar and the strong Euro are expected to help Bairnco’s competitive position in some domestic market niches and in most of its export markets excluding China.

2005 results will benefit from the absence of certain expenses that were incurred in 2004. The project costs of $1.3 million for the consolidation of the East Providence facility into San Antonio will not recur. The loss of approximately $500,000 incurred by having the East Providence plant operating for the first five months of 2004 and being open until it was sold in December will not recur. The start up inefficiencies and scrap at the San Antonio plant should be materially reduced.

2005 results will be reduced by two major projects. The organization and start up of the China facility and the attendant inefficiencies in the US plants are expected to be approximately $1.2 million most of which will be incurred in the second half of 2005. The costs of moving Kasco’s remaining manufacturing operations to the Mexico plant will be approximately $500,000 spread over the first half of 2005.

Even with the major capital expenditure program and the expected increased requirements for working capital due to anticipated sales increases, internal cash generation should substantially meet the Corporation’s requirements.

The program to comply with Section 404 of Sarbanes Oxley is underway and management expects to be in compliance with the regulations on a timely basis.  

Management is not aware of any adverse trends that would materially affect the Company's financial position.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Market risks relating to the Corporation's operations result primarily from changes in interest rates and changes in foreign currency exchange rates.

Impact of Interest Rates

The interest on the Corporation’s bank debt is floating and based on the 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 December 31, 2004 would change interest expense and hence change net income of the Corporation by approximately $13,000 per year.

The following table summarizes the principal cash outflows of the Corporation's financial instruments outstanding at December 31, 2004, categorized by type of instrument and by year of maturity. There have been no changes in market risk factors for the year ended December 31, 2004.

	2005	2006	2007	2008	Total	Fair Value
	(in thousands)
Short Term Debt	$1,030	$      --	$      --	$      --	$1,030	$1,030
Long Term Debt:
Revolving line of credit (3.3125% Interest Rate)	483	--	--	--	483	483
Note Payable	100	100	100	--	300	291
Foreign Loan Facility	80	40	--	--	120	120

Changes in the required discount rate used to value pension obligations had a significant impact on the Corporation’s cash outflows during 2003. The discount rate was reduced to 6.25% in 2003 from 7.0% in 2002 resulting in an increased benefit obligation and causing a $3.2 million contribution to be made to the pension plans in order to fully fund the plans at November 30, 2003 (measurement date). The discount rate was further reduced in 2004 to 6.1% however the plan remained fully funded. The Corporation contributed an additional $300,000. The Corporation remains exposed to the effect of changing discount rates and the differences between its actual investment results and the actuarial assumptions.

Impact of Foreign Currency Exchange Rates

The Corporation’s sales denominated in a currency other than U.S. dollars were approximately 19.1% of total sales for the year ended December 31, 2004.  Net assets maintained in a functional currency other than U.S. dollars at December 31, 2004 were approximately 11.2% of total net assets. The translation effect of changes in foreign currency exchange rates on the Corporation's revenues, earnings and net assets maintained in a functional currency other than U.S. dollars has not historically been significant.  At December 31, 2004, a 10% weaker U.S. dollar against the currencies of all foreign countries in which the Corporation had operations during 2004, would have resulted in an increase of revenues by $2.6 million, and an increase in operating profit by $188,000.  A 10% stronger U.S. dollar would have resulted in similar decreases to revenues and operating profit.

Section 303A.12(a) NYSE Disclosure Requirements

During 2004, the Company submitted to the NYSE an unqualified Section 12(a) CEO Certification dated April 23, 2004.

The Company also filed with the SEC the CEO/CFO certifications required under Section 302 of the Sarbanes-Oxley Act as Exhibits 31.1 and 31.2 to the 2003 Annual Report on Form 10-K.

Quarterly Results of Operations (Unaudited)

(In thousands except market price and per share data)                                                                     

	1st		2nd		3rd		4th		Total
	2004	2003	2004	2003	2004	2003	2004	2003	2004	2003
Net Sales	$42,577	$39,972	$41,700	$38,294	$40,675	$37,295	$40,544	$37,135	$165,496	$152,696
Cost of sales	29,880	28,392	29,656	27,815	29,142	26,910	28,934	26,708	117,612	109,825
Gross Profit	12,697	11,580	12,044	10,479	11,533	10,385	11,610	10,427	47,884	42,871
Selling and
administrative expenses	10,564	10,093	10,109	9,463	10,156	9,325	8,998	9,367	39,827	38,248
Operating Profit	2,133	1,487	1,935	1,016	1,377	1,060	2,612	1,060	8,057	4,623
Interest expense, net	202	199	197	174	149	205	18	190	566	768
Income before income
taxes	1,931	1,288	1,738	842	1,228	855	2,594	870	7,491	3,855
Provision for income
taxes	676	399	608	261	368	265	720	281	2,372	1,206
Income from continuing
operations	1,255	889	1,130	581	860	590	1,874	589	5,119	2,649
Income from spun off Subsidiary	--	--	--	--	24,695	--	1,065	--	25,760	--
Net Income	$ 1,255	$   889	$ 1,130	$   581	$25,555	$   590	$ 2,939	$   589	$ 30,879	$  2,649
Basic Earnings per share  from Continuing Operations	$  0.17	$  0.12	$  0.15	$  0.08	$  0.12	$  0.08	$  0.25	$  0.08	$   0.70	$   0.36
Basic Earnings per share  from Spun off Subsidiary	--	--	--	--	3.35	--	0.14	--	3.49	--
Basic Earnings per Share	$  0.17	$  0.12	$  0.15	$  0.08	$  3.47	$  0.08	$  0.39	$  0.08	$   4.19	$   0.36
Diluted Earnings per share  from Continuing Operations	$  0.17	$  0.12	$  0.15	$  0.08	$  0.11	$  0.08	$  0.24	$  0.08	$   0.68	$   0.36
Diluted Earnings per share  from Spun off Subsidiary	--	--	--	--	3.25	--	0.13	--	3.40	--
Diluted Earnings per Share	$  0.17	$  0.12	$  0.15	$  0.08	$  3.37	$  0.08	$  0.38	$  0.08	$   4.07	$   0.36
Diluted Average Common  Shares Outstanding	7,431	7,336	7,515	7,366	7,587	7,411	7,660	7,436	7,569	7,391
Market Price:
High	$ 7.240	$ 5.340	$ 9.000	$ 6.450	$11.800	$ 7.090	$11.900	$ 7.150	$ 11.900	$  7.150
Low	$ 6.000	$ 4.650	$ 7.110	$ 5.010	$ 7.840	$ 5.550	$10.760	$ 5.750	$  6.000	$  4.650

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Bairnco Corporation:

We have audited the accompanying consolidated balance sheet of Bairnco Corporation and subsidiaries (collectively, the “Company”) as of December 31, 2004, and the related consolidated statements of income, comprehensive income, stockholders’ investment and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bairnco Corporation and subsidiaries as of December 31, 2004, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Grant Thornton LLP

Orlando, Florida

January 27, 2005

Report of Independent Registered Public Accounting Firm

To Bairnco Corporation:

We have audited the accompanying consolidated balance sheet of Bairnco Corporation (a Delaware Corporation) and subsidiaries as of December 31, 2003, and the related consolidated statements of income, comprehensive income, stockholders' investment, and cash flows for each of the two years in the period ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bairnco Corporation and subsidiaries at December 31, 2003, and the consolidated results of their operations and their cash flows for each of the two years in the period then ended in conformity with U.S. generally accepted accounting principles.

Ernst & Young LLP

Tampa, Florida
January 29, 2004

 CONSOLIDATED STATEMENTS OF INCOME

For the years ended December 31, 2004, 2003 and 2002

Bairnco Corporation and Subsidiaries

	2004	2003	2002
Net Sales	$ 165,496,000	$ 152,696,000	$ 154,354,000
Cost of sales	117,612,000	109,825,000	109,363,000
Gross Profit	47,884,000	42,871,000	44,991,000
Selling and administrative expenses	39,827,000	38,248,000	38,189,000
Provision for litigation costs	--	--	4,000,000
Operating Profit	8,057,000	4,623,000	2,802,000
Interest expense, net	566,000	768,000	1,005,000
Income before Income Taxes	7,491,000	3,855,000	1,797,000
Provision for income taxes	2,372,000	1,206,000	436,000
Income from continuing operations	5,119,000	2,649,000	1,361,000
Income from spun off subsidiary	25,710,000	--	--
Net Income	$  30,829,000	$     2,649,000	$     1,361,000
Basic Earnings per share from continuing operations	$             0.70	$              0.36	$              0.19
Basic Earnings per share from spun off subsidiary	$             3.49	$                  --	$                  --
Basic Earnings per share of Common Stock	$             4.19	$              0.36	$              0.19
Diluted Earnings per share from continuing operations	$             0.68	$              0.36	$              0.19
Diluted Earnings per share from spun off subsidiary	$             3.40	$                  --	$                  --
Diluted Earnings per share of Common Stock	$             4.07	$              0.36	$              0.19
Dividends per Share of Common Stock	$             0.21	$              0.20	$              0.20

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2004, 2003 and 2002

Bairnco Corporation and Subsidiaries

	2004	2003	2002
Net Income	$ 30,829,000	$   2,649,000	$   1,361,000
Other comprehensive income (loss):
Currency translation adjustment	775,000	1,493,000	970,000
Minimum pension liability adjustment, net of $3,500 tax in                 2004; $7,000 tax in 2003; $(342,000) tax in 2002	(6,000)	(13,000)	609,000
Comprehensive Income	$ 31,598,000	$  4,129,000	$   2,940,000

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED BALANCE SHEETS

December 31, 2004 and 2003

Bairnco Corporation and Subsidiaries

	2004	2003
Assets
Current Assets:
Cash and cash equivalents	$    3,451,000	$       796,000
Accounts receivable, less allowances of $1,546,000 and $1,358,000, respectively	24,912,000	23,511,000
Inventories:
Raw materials and supplies	9,326,000	5,402,000
Work in process	7,268,000	6,791,000
Finished goods	8,370,000	13,323,000
	24,964,000	25,516,000
Deferred income taxes	3,518,000	4,585,000
Other current assets	4,184,000	3,288,000
Total current assets	61,029,000	57,696,000
Plant and Equipment, at cost:
Land	1,462,000	1,555,000
Buildings and leasehold interests and improvements	17,595,000	18,321,000
Machinery and equipment	98,177,000	95,862,000
	117,234,000	115,738,000
Less – Accumulated depreciation and amortization	(82,805,000)	(79,262,000)
	34,429,000	36,476,000
Cost in Excess of Net Assets of Purchased Businesses	14,542,000	14,360,000
Other Assets	8,781,000	9,697,000
	$ 118,781,000	$ 118,229,000
Liabilities and Stockholders’ Investment
Current Liabilities:
Short-term debt	$     1,030,000	$     1,875,000
Current maturities of long-term debt	663,000	2,173,000
Accounts payable	10,601,000	10,159,000
Accrued expenses	10,515,000	10,916,000
Total current liabilities	22,809,000	25,123,000
Long-Term Debt	231,000	27,785,000
Deferred Income Taxes	9,741,000	10,017,000
Other Liabilities	1,233,000	1,006,000
Commitments and Contingencies (Notes 2, 6 and 10)
Stockholders’ Investment:
Preferred stock, par value $.01, 5,000,000 shares authorized, none issued	--	--
Common stock, par value $.01; authorized 30,000,000 shares; 11,562,682 and 11,512,474 shares issued, respectively; 7,524,813 and 7,474,605 shares outstanding, respectively	116,000	115,000
Paid-in capital	51,222,000	50,912,000
Retained earnings	64,984,000	35,729,000
Unamortized cost of restricted stock awards	(442,000)	(576,000)
Accumulated Other Comprehensive Income (Loss):
Currency translation adjustment	3,693,000	2,918,000
Minimum pension liability adjustment, net of  $3,500 and $31,000 income tax, respectively	(61,000)	(55,000)
Treasury stock, at cost, 4,037,869 shares	(34,745,000)	(34,745,000)
Total stockholders’ investment	84,767,000	54,298,000
	$ 118,781,000	$ 118,229,000

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2004, 2003 and 2002

Bairnco Corporation and Subsidiaries

	2004	2003	2002
Cash Flows from Operating Activities:
Net income	$    30,829,000	$     2,649,000	$     1,361,000
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization	7,668,000	7,797,000	8,113,000
(Gain) loss on disposal of plant and equipment	(1,094,000)	90,000	(400,000)
Deferred income taxes	779,000	1,047,000	3,094,000
Change in current operating assets and liabilities:
Accounts receivable, net	(1,044,000)	31,000	2,482,000
Inventories	921,000	166,000	1,239,000
Other current assets	(888,000)	528,000	(2,499,000)
Accounts payable	372,000	(16,000)	(1,140,000)
Accrued expenses	(684,000)	(4,539,000)	1,068,000
Other	1,104,000	(2,879,000)	(3,212,000)
Net cash provided by operating activities	37,963,000	4,874,000	10,106,000
Cash Flows from Investing Activities:
Capital expenditures	(5,996,000)	(5,664,000)	(3,811,000)
Payment for purchased businesses, net of cash acquired	(67,000)	(1,900,000)	(502,000)
Proceeds from sale of plant and equipment	1,715,000	87,000	1,469,000
Net cash (used in) investing activities	(4,348,000)	(7,477,000)	(2,844,000)
Cash Flows from Financing Activities:
Net increase (decrease) in short-term debt	(901,000)	529,000	(3,317,000)
Proceeds from long-term debt	4,500,000	19,952,000	11,000,000
Long-term debt repayments	(33,598,000)	(16,657,000)	(13,722,000)
Payment of dividends	(1,489,000)	(1,478,000)	(1,467,000)
Purchase of treasury stock	--	--	(9,000)
Exercise of stock options	311,000	38,000	34,000
Net cash (used in) provided by financing activities	(31,177,000)	2,384,000	(7,481,000)
Effect of foreign currency exchange rate changes on cash and cash      equivalents	217,000	310,000	168,000
Net increase (decrease) in cash and cash equivalents	2,655,000	91,000	(51,000)
Cash and cash equivalents, beginning of year	796,000	705,000	756,000
Cash and cash equivalents, end of year	$      3,451,000	$       796,000	$       705,000
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest	$         662,000	$       783,000	$   1,045,000
Income taxes	$      1,730,000	$       480,000	$      566,000
Non-cash financing activities:
Acquisition and subsequent re-issuance of common stock	$                    --	$                  --	$          9,000

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT

For the years ended December 31, 2004, 2003 and 2002

Bairnco Corporation and Subsidiaries

				Unamortized	Accumulated Comprehensive Income
				Cost of	Pension	Currency
	Common	Paid-in	Retained	Restricted	Liability	Translation	Treasury
	Stock	Capital	Earnings	Stock Awards	Adjustment	Adjustment	Stock
Balance, December 31, 2001	$114,000	$50,163,000	$34,673,000	$              --	$ (651,000)	$   455,000	$(34,736,000)
Net income			1,361,000
Cash dividends ($.20 per share)			(1,467,000)
Issuance of 6,667 shares pursuant to exercise of stock options	--	34,000
Acquisition of treasury stock (1,496              shares at cost)							( 9,000)
Currency translation adjustment						970,000
Pension liability adjustment, net of                  $(342,000) tax					609,000
Balance, December 31, 2002	$114,000	$50,197,000	$34,567,000	$              --	$ (42,000)	$1,425,000	$(34,745,000)
Net income			2,649,000
Cash dividends ($.20 per share)			(1,487,000)
Issuance of 7,666 shares pursuant to            exercise of stock options	--	38,000
Issuance of restricted stock (133,000           shares)	1,000	677,000		(678,000)
Earned compensation				102,000
Currency translation adjustment						1,493,000
Pension liability adjustment, net of                  $7,000 tax					(13,000)
Balance, December 31, 2003	$115,000	$50,912,000	$35,729,000	$(576,000)	$(55,000)	$2,918,000	$(34,745,000)
Net income			30,829,000
Cash dividends ($.21 per share)			(1,574,000)
Issuance of 50,208 shares pursuant to            exercise of stock options	1,000	310,000
Earned compensation				134,000
Currency translation adjustment						775,000
Pension liability adjustment, net of                  $3,500 tax					(6,000)
Balance, December 31, 2004	$116,000	$51,222,000	$64,984,000	$(442,000)	$(61,000)	$3,693,000	$(34,745,000)

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  Nature of Operations and Summary of Significant Accounting Policies

Nature of operations:

Bairnco Corporation, a Delaware Corporation, is a diversified multinational company that operates three business segments: Arlon’s Electronic Materials and Coated Materials segments which design, manufacture, market and sell products to electronic, industrial and commercial markets worldwide; and, Kasco’s Replacement Products and Services segment which manufactures and distributes products and services principally to retail food stores and meat, poultry and fish processing plants throughout the United States, Canada and Europe.

Arlon’s products are based on a common technology in coating, laminating and dispersion chemistry. Arlon Electronic Materials’ principal products include high performance materials for the printed circuit board industry and silicone rubber-based insulation materials used in a broad range of industrial, military/aerospace, consumer and commercial markets. Arlon Coated Materials’ principal products include adhesive coated cast and calendered vinyl films, cast vinyl fabric, custom-engineered laminates, and coated and laminated films, foils, foams and papers used in a broad range of industrial, consumer and commercial products.  

Kasco’s principal products include replacement band saw blades for cutting meat, fish, wood and metal, 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.

Principles of consolidation:

The accompanying consolidated financial statements include the accounts of Bairnco Corporation and its subsidiaries (“Bairnco” or the “Corporation”) after the elimination of all inter-company accounts and transactions.

Use of estimates:

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates. Changes in estimates are made when circumstances warrant and are reflected in reported results of operations; if material, the effects of the changes in estimates are disclosed in the notes to the consolidated financial statements.

New accounting pronouncements:

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 151, Inventory Costs - an amendment of ARB No. 43, Chapter 4 (“SFAS 151”).  SFAS 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). The statement will be adopted effective January 1, 2005 and its provisions applied prospectively. The adoption of this statement is not expected to have any impact on the Corporation’s financial position or results of operations.

In December 2004, the FASB issued SFAS 123 (revised 2004), Share-Based Payments. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services but focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. The statement is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005, although earlier adoption is encouraged. The Corporation has not yet determined what the impact on its financial position, results of operations or disclosures will be nor has it decided whether it will adopt the statement prior to its third quarter 2005.

Cash and cash equivalents:

The Corporation considers cash in banks, commercial paper, demand notes and similar investments with an original maturity of less than three months from date of purchase as cash and cash equivalents for the purposes of the consolidated financial statements. Of the $3,451,000 of cash and cash equivalents at December 31, 2004, $310,000 was denominated in Canadian dollars, $309,000 in British Pounds, and $173,000 in Euros. Of the $796,000 of cash and cash equivalents at December 31, 2003, $73,000 was denominated in Canadian dollars, $321,000 in British Pounds, and $136,000 in Euros.

Accounts receivable and related allowances:

Credit is extended to customers based on an evaluation of a customers' financial condition and, generally, collateral is not required. Accounts receivable are generally due within 30 days and are stated at amounts due from customers net of an allowance for doubtful accounts.  Accounts outstanding longer than the contractual payment terms are considered past due. The Corporation makes judgments as to the collectibility of accounts receivable based on historical trends and future expectations. Management estimates an allowance for doubtful accounts which adjusts gross trade accounts receivable downward to its net realizable value. Trade receivables are recorded net of allowances of $1,546,000 and $1,358,000 at December 31, 2004 and 2003, respectively.  To determine the allowance for sales returns, management uses historical trends to estimate future period product returns. The allowance for doubtful accounts is based on an analysis of all receivables for possible impairment issues, and historical write-off percentages. The Corporation writes-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts.  The Corporation does not generally charge interest on past due receivables.

Changes in the Corporation’s allowance for doubtful accounts are as follows:

	2004	2003
Balance, beginning of year	$ 1,358,000	$ 1,295,000
Bad debt expense	877,000	371,000
Accounts written-off	(713,000)	(308,000)
Recoveries	24,000	--
Balance, end of year	$ 1,546,000	$ 1,358,000

Inventories:

Inventories are stated at the lower of cost or market. Inventory costs include material, labor and manufacturing overhead related to the purchase and production of inventories. Inventories are stated principally on a first-in, first-out (“FIFO”) basis. The Corporation provides estimated inventory allowances for shrinkage, excess, slow moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable value.

Plant and equipment:

The Corporation provides for depreciation and amortization of plant and equipment principally on a straight-line basis by charges to income in amounts estimated to allocate the cost of these assets over their useful lives.  Rates of depreciation and amortization vary among the several classifications as well as among the constituent items in each classification, but generally fall within the following ranges:

	Years
Buildings and leasehold interests and improvements	5 - 40
Machinery and equipment	3 - 20

Depreciation and amortization expense of $7,629,000, $7,774,000 and $8,103,000 was recognized during 2004, 2003 and 2002, respectively.

When property is sold or otherwise disposed of, the asset cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the statement of income.  The Corporation disposed of approximately $3.2 million and $1.5 million of fully depreciated assets that were no longer in use during the years ended December 31, 2004 and 2003, respectively.

Leasehold interests and improvements are amortized over the terms of the respective leases, or over their estimated useful lives, whichever is shorter.

Maintenance and repairs are charged to operations.  Renewals and betterments are capitalized.

Accelerated methods of depreciation are used for income tax purposes, and appropriate provisions are made for the related deferred income taxes.

Cost in excess of net assets of purchased businesses and other intangibles:

Effective January 1, 2002, the Corporation adopted SFAS 142, Goodwill and Other Intangible Assets.  SFAS 142 provides for the non-amortization of goodwill. Goodwill is now subject to at least an annual assessment for impairment by applying a fair-value based test on January 1^st of each year. Other intangible assets with finite lives will be amortized over their useful lives. Other intangible assets with indefinite lives will be subject to a lower of cost or market impairment test.  This annual impairment testing of goodwill and other indefinite lived intangible assets could result in more volatility in reported income, as impairment losses could occur irregularly and in varying amounts.

The change in the carrying amount of cost in excess of net assets of purchased businesses (“goodwill”) for the years ended December 31, 2004 and 2003 is as follows:

	Arlon EM Segment	Arlon CM Segment	Kasco Segment	Total
Balance, December 31, 2002	$173,000	$6,208,000	$6,895,000	$13,276,000
Impact of contingent consideration earn-out        (Note 2)	--	369,000	--	369,000
Impact of MOX-TapeÒ acquisition (Note 2)	472,000	--	--	472,000
Impact of exchange rate fluctuations on foreign    goodwill	--	--	243,000	243,000
Balance, December 31, 2003	$645,000	$6,577,000	$7,138,000	$14,360,000
Impact of contingent consideration earn-out        (Note 2)	--	67,000	--	67,000
Impact of exchange rate fluctuations on foreign    goodwill	--	--	115,000	115,000
Balance, December 31, 2004	$645,000	$6,644,000	$7,253,000	$14,542,000

Other identifiable intangible assets, net of amortization, are included in other assets and totaled $140,000 and $190,000 at December 31, 2004 and 2003, respectively.  The $190,000 balance at December 31, 2003 includes an $11,000 intangible asset related to the pension liability adjustment. The remaining items are being amortized over their estimated lives, which generally range from three to ten years.  Amortization expense recognized was $39,000 during 2004, $23,000 during 2003 and $10,000 during 2002.

Impairment of long-lived assets:

Effective January 1, 2002, the Corporation adopted SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 144 supersedes SFAS 121 and requires that one accounting impairment model be used for long-lived assets to be held and used and to be disposed of by sale, whether previously held and used or newly acquired, and broadens the presentation of discontinued operations to include more disposal transactions. The adoption of SFAS 144 had no financial impact on the results of operations and financial position of the Corporation.

Revenue recognition:

Revenues are recognized when products are shipped or when services are rendered. Service revenues consist of repair and maintenance work performed on equipment used in the supermarket industry.

Shipping and handling costs:

Shipping and handling costs, such as freight to our customers' destinations, are included in selling and administrative expenses on the accompanying consolidated statements of operations. These costs, when included in the sales price charged to our customers, are recognized in net sales. Total shipping and handling costs included in selling and administrative expenses were approximately $3.5 million for the year ended December 31, 2004 and $3.2 million in the years ended December 31, 2003 and 2002.

Vendor Rebates:

The Corporation accounts for vendor volume rebates in accordance with the guidance of Emerging Issues Task Force (“EITF”) 02-16, Accounting by a Customer for Certain Consideration Received from a Vendor. Vendor rebates or refunds of a specified amount of cash consideration that are payable only upon achieving a specified cumulative level of purchases, are accounted for as a reduction of cost of sales in the accompanying consolidated statements of operations.

Income taxes:

The Corporation accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Corporation’s financial statements or tax returns.  In estimating future tax consequences, the Corporation generally considers all expected future events other than enactment of changes in the tax law or changes in tax rates.  Changes in tax laws or rates will be recognized in the future years in which they occur.  Temporary differences between income for financial reporting and income tax purposes arise primarily from the timing of the deduction of certain accruals and from the use of accelerated methods of depreciation for income tax reporting purposes compared to the method of depreciation used for financ ial reporting purposes.

Accrued expenses-insurance:

The Corporation's US insurance programs for general liability, automobile liability, workers compensation and certain employee related health care benefits are effectively self-insured. Claims in excess of self-insurance levels are fully insured. Accrued expenses-insurance represents the estimated costs of known and anticipated claims under these insurance programs.  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.

Stock options:

The Corporation accounts for stock options under Accounting Principles Board Opinion No. 25 (“APB 25”), under which no compensation expense has been recognized (refer to Note 7 to Consolidated Financial Statements).  In October 1995, the FASB issued SFAS 123, Accounting for Stock-Based Compensation, which was effective for years beginning after December 15, 1995.  SFAS 123 established financial accounting and reporting standards for stock-based employee compensation plans.  The statement defines a fair value based method of accounting for an employee stock option or similar equity instrument and encourages all entities to adopt that method of accounting for all of their stock compensation plans.  However, it also allows an entity to continue to measure compensation costs for those plans using the intrinsic value based m ethod of accounting prescribed by APB 25, but requires pro-forma disclosure of net income and earnings per share for the effects on compensation expense had the accounting guidance for SFAS 123 been adopted.

On December 31, 2002, the FASB issued SFAS 148, Accounting for Stock-Based Compensation-Transition and Disclosure.  SFAS 148 amends SFAS 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition to SFAS 123’s fair value method of accounting for stock-based employee compensation. SFAS 148 also amends the disclosure provisions of SFAS 123 to require disclosure of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported earnings in interim financial statements. The disclosure provisions of SFAS 148 are applicable to all companies with stock-based employee compensation. SFAS 148 is effective for fiscal years ending after December 15, 2002.

The Corporation adopted the disclosure provisions of SFAS 148 as of December 31, 2002. In preparing these disclosures, the Corporation determined the values using the Black Scholes model based on the following assumptions:

	For the Year Ended December 31,
	2004	2003	2002
Expected Life	5.0 years	6.8 years	5.5 years
Volatility	27.8%	27.5%	27.9%
Risk-free interest rate	4.5%	4.5%	4.5%
Dividend yield	2.34%	3.32%	3.31%

Had SFAS 123 been implemented, the Corporation’s net income and earnings per share would have been reduced to the amounts indicated below:

	2004	2003	2002
Net income (in thousands):
As reported	$ 30,829	$ 2,649	$ 1,361
Deduct: Total stock-based employee   compensation expense determined under fair value based method for all awards, net of related tax effects	(39)	(48)	(47)
Pro forma	$ 30,790	$ 2,601	$ 1,314
Basic earnings per share:
As reported	$   4.19	$   0.36	$   0.19
Pro forma	$   4.18	$   0.35	$   0.18
Diluted earnings per share:
As reported	$   4.07	$   0.36	$   0.19
Pro forma	$   4.07	$   0.35	$   0.18

Restricted Stock Award Program:

During the second quarter 2003, the Compensation Committee of the Board of Directors (the “Committee”), approved a restricted stock award program under the Bairnco Corporation 2000 Stock Incentive Plan. The program provides long-term incentive rewards to key members of the senior management team to further ensure their retention as employees and the linkage of their performance to the long-term performance of the Corporation. Under this new program, the Committee granted 133,000 shares of restricted stock to officers and three key senior management members during the second quarter of 2003. Under the terms of the restricted stock agreements, each employee must remain employed by the Corporation for a period of 5 years from the date of grant in order for the restricted stock to vest an d the restrictions to be lifted. If employment is terminated prior to vesting for any reason other than death, disability or retirement, all restricted stock shall be forfeited immediately and returned to the Corporation.  In the event of a change in control, shares outstanding under the program would vest immediately.

The fair market value of shares at the date of award of $5.10 per share has been recorded as “Unamortized cost of restricted stock awards” (unearned compensation) and is shown, net of amortization, as a separate component of Stockholders’ Investment in the accompanying Consolidated Balance Sheets.  The unearned compensation is being amortized over the vesting period of the shares.  In accordance with APB Opinion 25, the Corporation will recognize a compensation charge over the vesting period equal to the fair market value of these shares on the date of the award.

Translation of foreign currencies:

For foreign subsidiaries, the local currency is the functional currency. Assets and liabilities of foreign subsidiaries are translated at the rates of exchange in effect at the balance sheet date while income and expenses are translated at the average monthly rates of exchange in effect during the year. Translation gains and losses are included as a component of stockholders' investment.

Fair value of financial instruments:

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to the short-term maturities of these assets and liabilities.  

The carrying amount of the Corporation’s short-term and long-term debt approximates fair value, since the debt is at floating rates and therefore approximates rates currently offered to the Corporation for debt of the same remaining maturities.

The carrying amount of the zero-interest note payable related to the MOX-Tape^Ò acquisition (refer to Note 2 to Consolidated Financial Statements) has been recorded at a discount and approximates fair value, based on average borrowing rates for the Corporation at the time of acquisition.

Accounting for derivatives:

The Corporation’s French Kasco operation had forward exchange rate contracts used to cover trade payable needs for forecasted US and UK purchases in 2003 and 2002.  The Corporation recognized $191,000 in exchange rate losses on open forward exchange rate contracts as of December 31, 2003 and $80,000 in exchange rate losses on open forward exchange rate contracts as of December 31, 2002. There were no open positions as of December 31, 2004.

In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities.  The statement is intended to result in more consistent reporting of contracts as either freestanding derivative instruments subject to SFAS 133 in its entirety, or as hybrid instruments with debt host contracts and embedded derivative features.  SFAS 149 is effective for contracts entered into or modified after June 30, 2003, and hedging relationships designated after June 30, 2003.  The adoption of SFAS 149 had no impact on the Corporation’s financial position or results of operations.

(2) Acquisitions

On January 10, 2001, Bairnco purchased selected net assets (“Viscor”) of Viscor, Inc.  The terms of Viscor's asset purchase agreement provide for additional consideration to be paid by Bairnco if Viscor's results of operations exceed certain targeted levels. Such additional consideration is paid semi-annually in cash and is recorded when earned, by the achievement of certain targeted levels for the preceding six month period, as additional goodwill. The maximum amount of contingent consideration is approximately $4.5 million payable over the 5-year period ended December 31, 2005.  The Corporation recorded an additional $67,000 in Cost in Excess as additional purchase price for the year ended December 31, 2004. The cumulative additional consideration recorded as goodwill is approximately $1.0 million through December 31, 2004.

On May 23, 2003, Bairnco purchased the MOX-Tape^Ò brand of products, including inventory and related equipment, from Flexfab Horizons International, Inc., (“Flexfab”) of Hastings, Michigan.  MOX-Tape^Ò products consist of un-reinforced and reinforced silicone, self-fusing tapes used in a broad range of applications and markets, including high temperature electrical and mechanical insulation for the military, aerospace, automotive, utility and power generation markets. The business has been moved to Arlon’s Bear, Delaware plant.  The acquisition has been accounted for under the purchase method of accounting and was financed through available borrowings under Bairnco’s line of credit and a $400,000, non-interest bearing note payab le to Flexfab, payable in $100,000 installments over four years.  The note was recorded at a discount, based on average borrowing rates for the Corporation at the time of acquisition. The purchase price was allocated to the assets acquired based on the fair market value of the assets at the date of acquisition.  The purchase price exceeded the fair value of net assets acquired by approximately $0.5 million.  Pro forma earnings for the year ended December 31, 2003 including the MOX-Tape^Ò product line were not material to the Corporation.  

(3)

Earnings per Share

The Corporation computes earnings per share (“EPS”) under SFAS 128, Earnings Per Share.  The following disclosures comply with the requirements of SFAS 128.    

	2004	2003	2002
Basic Earnings per Common Share:
Net Income	$ 30,829,000	$ 2,649,000	$ 1,361,000
Average common shares outstanding	7,362,000	7,338,000	7,332,000
Basic Earnings Per Common Share	$            4.19	$          0.36	$          0.19
Diluted Earnings per Common Share:
Net Income	$ 30,829,000	$ 2,649,000	$ 1,361,000
Average common shares outstanding	7,362,000	7,338,000	7,332,000
Dilutive effect of restricted stock	64,000	32,000	--
Common shares issuable in respect to options     issued to employees with a dilutive effect	143,000	21,000	5,000
Total diluted common shares outstanding	7,569,000	7,391,000	7,337,000
Diluted Earnings Per Common Share	$           4.07	$          0.36	$          0.19

Basic earnings per common share were computed by dividing net income by the weighted-average number of shares of common stock outstanding during the year.  Diluted earnings per common share include the effect of all dilutive stock options and restricted stock shares.

(4)

Income Taxes

The components of income before income taxes and the provision (benefit) for domestic and foreign income taxes are as follows:

	2004	2003	2002
Income before Income Taxes:
Domestic (excluding income from spun off subsidiary)	$5,616,000	$     3,001,000	$       371,000
Foreign	1,875,000	854,000	1,426,000
Total Income before Income Taxes	$7,491,000	$     3,855,000	$    1,797,000
Provision (Benefit) for Income Taxes:
Domestic:
Currently payable	$1,168,000	$     (240,000)	$ (1,814,000)
Deferred	776,000	1,044,000	1,774,000
Foreign:
Currently payable	408,000	355,000	477,000
Deferred	20,000	47,000	(1,000)
Total Provision for Income Taxes	$2,372,000	$    1,206,000	$       436,000

Bairnco's net current and non-current deferred tax assets (liabilities) include the following at December 31:

	2004	2003
Current Deferred Tax Items:
Accrued expenses - litigation provision	$        24,000	$      407,000
Accrued expenses – other	1,206,000	1,437,000
Inventories	1,066,000	1,080,000
Receivables	1,222,000	1,661,000
Net Current Deferred Tax Asset	3,518,000	4,585,000
Non-Current Deferred Tax Items:
Fixed assets	(6,516,000)	(6,594,000)
Pensions	(2,650,000)	(2,911,000)
Intangible assets	(20,000)	41,000
Other	(555,000)	(553,000)
Net Non-Current Deferred Tax Liability	(9,741,000)	(10,017,000)
Net Deferred Tax Liability	$ (6,223,000)	$ (5,432,000)

Management expects that future operations will generate sufficient taxable income to realize the existing net temporary differences.  As a result, the Corporation has not recorded any valuation allowances against its deferred tax assets.

In 2004, 2003 and 2002 the Corporation's effective tax rates were 31.7%, 31.3% and 24.3%, respectively, of income before income taxes.  An analysis of the differences between these rates and the US federal statutory income tax rate is as follows:

	2004	2003	2002
Computed income taxes at statutory rate	$ 2,547,000	$ 1,311,000	$    611,000
State and local taxes, net of federal tax benefit	52,000	67,000	86,000
Dividend income	636,000	65,000	--
Foreign income taxed at different rates	(210,000)	112,000	(9,000)
Tax credits	(636,000)	--	--
Benefit of Extraterritorial Income Exclusion	(416,000)	(335,000)	(299,000)
Meals and entertainment	58,000	67,000	95,000
Other, net	341,000	(81,000)	(48,000)
Provision for income taxes	$ 2,372,000	$ 1,206,000	$    436,000

The rate reconciling item of $636,000 for tax credits is an estimate of the amount of foreign tax credit that will be available to offset the US tax on deemed foreign dividend income.  For 2004, Kasco Corporation will report approximately $1,871,000 of deemed dividend income from foreign subsidiaries.  The amount of foreign tax credit allowed to offset the US tax imposed on these deemed dividends is limited to the amount of total US tax multiplied by the proportion of foreign dividends to total worldwide income.

Effective January 1, 2002, the Internal Revenue Service (“IRS”) eliminated all tax benefits associated with Foreign Sales Corporations, and the Bairnco FSC dissolved accordingly.  As a replacement tax benefit for exporters, the IRS enacted the Extraterritorial Income Exclusion, a statutory exclusion from taxable income. The income exclusion is calculated based on a percentage of foreign trade income, and use of a non-US entity is not required to get the benefit of the exclusion. Effective January 1, 2005, the Extraterritorial Income Exclusion will begin a phase-out which will be completed in 2007.  For transactions during 2005 and 2006, the income exclusion will be 80% and 60% of the exclusion otherwise allowed, respectively.

On October 22, 2004, the American Jobs Creation Act of 2004 (the “Act") was signed into law.  The Act creates a temporary incentive for US multinationals to repatriate accumulated income earned outside the US at an effective tax rate of 5.25%.  On November 15, 2004, the FASB issued a proposed FASB staff position, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004 ("FAS 109-b"). FAS 109-b would allow companies additional time to evaluate the effect of the Act on whether un-repatriated foreign earnings continue to qualify for SFAS 109's exception to recognizing deferred tax liabilities and would require explanatory disclosures from those who need the additional time.  Through December 31, 2004, Bairnco has not provided deferred taxes on for eign earnings because such earnings were intended to be indefinitely reinvested outside the US. Whether Bairnco will ultimately take advantage of this provision depends on a number of factors, including reviewing future Congressional and Treasury guidance before a decision can be made.  Until that time, Bairnco will make no change in its current intention to indefinitely reinvest accumulated earnings (approximately $5.2 million) of its foreign subsidiaries.  

The consolidated income tax returns for the years ending December 31, 1997 and December 31, 2002 are currently under audit by the Internal Revenue Service.  The audit is expected to be completed in the second quarter of 2005.  When this audit is complete, the tax return for the year ending December 31, 2003 will be Bairnco’s only remaining unexamined tax return filed in an open year.

(5)

Accrued Expenses

Accrued expenses consisted of the following as of December 31, 2004 and 2003, respectively:

	2004	2003
Salaries and wages	$  2,404,000	$  1,768,000
Income taxes	624,000	241,000
Insurance	2,709,000	2,903,000
Litigation	108,000	1,243,000
Other accrued expenses	4,670,000	4,761,000
Total accrued expenses	$10,515,000	$10,916,000

(6)

Debt and Lease Commitments

Long-term debt consisted of the following as of December 31, 2004 and 2003, respectively:

	2004	2003
Revolving credit notes	$483,000	$27,392,000
Term loan	--	2,000,000
Credit Agreement borrowings	483,000	29,392,000
Non-interest bearing note payable (Note 2)	291,000	382,000
Other foreign loan facility	120,000	184,000
	894,000	29,958,000
Less: Current Maturities	663,000	2,173,000
Total	$231,000	$27,785,000

The Corporation has a credit agreement (“Credit Agreement”) with a consortium of four banks led by Bank of America, N.A., and including SunTrust Bank, Wachovia Securities, and M&T Bank. The Credit Agreement, which has an original expiration date of February 22, 2005, provides a secured, reducing revolving credit facility for a maximum loan commitment at December 31, 2004 of $44.7 million and a letter of credit facility of $9 million, although the letter of credit facility may be decreased to $5 million or increased to $15 million with a corresponding change in the revolving credit facility.

Subsequent to year end, the Corporation reached an agreement in principle with a group of banks to establish a three year unsecured credit facility (the “Credit Facility”) for $25 million, including a $15 million revolving credit facility and a $10 million letter of credit facility. The Credit Facility will replace the Credit Agreement which was amended subsequent to year end to extend the expiration date for 60 days from February 22, 2005.  

At December 31, 2004, $483,000 of revolving credit notes were outstanding and payable in 2005, all representing foreign borrowings.  In addition, approximately $3.1 million of irrevocable standby letters of credit were outstanding under the Credit Agreement, which are not reflected in the accompanying consolidated financial statements. $2.7 million of the letters of credit guarantee various insurance activities.  An outstanding $0.4 million letter of credit guarantees a short-term operating credit line for the China fabrication center. Interest rates vary on the revolving credit notes and are set at the time of borrowing in relationship to one of several reference rates, as selected by the Corporation at the time of the borrowing. Interest rates on revolving credit notes outstanding at December 31, 2004, were 3.3125%. A commitment fee is paid on the unused portion of the total credit facility. As of December 31, 2004, approximately $44.2 million was available for borrowing under the Credit Agreement.

Substantially all of the assets of the Corporation are pledged as collateral under the Credit Agreement.

The Credit Agreement contains covenants, which require the Corporation to meet minimum interest coverage ratios, and which limit the ratio of total debt to capital employed as defined in the Credit Agreement. In addition, minimum levels of stockholders' investment must be maintained.  At December 31, 2004, the Corporation was in compliance with all covenants contained in the Credit Agreement.

The Corporation has other short-term debt outstanding at rates of 2.9% to 3.5% due in 2005.  This short-term debt consists of lines of credit with domestic and foreign financial institutions to meet short-term working capital needs. Outstanding foreign short-term borrowings totaled $1,030,000 and $724,000 at December 31, 2004 and 2003, respectively. Of the $1,030,000 payable at December 31, 2004, $154,000 is payable in Chinese Renminbis and $876,000 is payable in Euros.

The annual maturity requirements for long-term debt due after December 31, 2005, are summarized as follows:

Year Ended December 31,
2006	$140,000
2007	91,000
Total Long-term Debt	$231,000

Leases:

The Corporation leases certain property and equipment under various operating lease arrangements that expire over the next 9 years.  Future minimum lease payments under scheduled operating leases that have initial or remaining non-cancelable terms in excess of one year are as follows:

Year Ended December 31,
2005	$  2,885,000
2006	2,607,000
2007	2,403,000
2008	1,441,000
2009	731,000
2010 and thereafter	1,397,000
Total minimum payments	$11,464,000

Rent expense for all operating leases amounted to approximately $3.2 million, $3.1 million and $2.6 million for the years ended December 31, 2004, 2003 and 2002, respectively.

(7)

Stock Options

The Corporation has a stock incentive plan which was established in 1990 (“1990 Plan”) and expired in 2000. The expiration of the 1990 Plan had no effect on any stock options then outstanding.  On April 21, 2000, the shareholders of the Corporation approved the Bairnco 2000 Stock Incentive Plan (“2000 Plan”). The 2000 Plan permits the grant of options to purchase not more than 750,000 shares of common stock. The 2000 Plan provides for the grant of non-qualified options and options qualifying as incentive stock options under the Internal Revenue Code to officers and other key executive and management employees, and to each outside Director of the Corporation at an option price equal to the fair market value on the date of grant.  Non-qualified stock options may also be granted at book value. The term of each option may not exce ed 10 years from the date the option becomes exercisable (or, in the case of an incentive stock option, 10 years from the date of grant).  

A senior executive of the Corporation presently holds performance based, non-qualified stock options granted under the 1990 Plan to purchase a total of 166,667 shares of common stock at option prices equal to the fair market value on the date of grant.  Half of these performance options became exercisable as a result of the Corporation’s earnings performance in 1995. The remaining half became fully exercisable on May 31, 2000. These options remain exercisable for ten years from the date they first became exercisable.

Changes in the stock options granted under the 1990 Plan during 2004, 2003 and 2002 were as follows:

	2004		2003		2002
	Options	Weighted Average Exercise Price	Options	Weighted Average Exercise Price	Options	Weighted Average Exercise Price
Outstanding at    Beginning of year	324,160	$6.27	440,216	$6.22	484,858	$6.25
Exercised	(39,058)	6.19	(7,666)	5.03	(6,667)	5.03
Canceled	(13,858)	6.91	(108,390)	6.14	(37,975)	6.79
Outstanding at    End of year	271,244	$6.25	324,160	$6.27	440,216	$6.22
Exercisable at    End of year	271,244	$6.25	322,460	$6.27	423,283	$6.21

No shares were available for grants under the 1990 Plan as of December 31, 2004, 2003 and 2002. The weighted average remaining life of the 271,244 options outstanding at December 31, 2004 was 4.0 years.

Changes in the stock options granted under the 2000 Plan during 2004, 2003 and 2002 were as follows:

	2004		2003		2002
	Options	Weighted Average Exercise Price	Options	Weighted Average Exercise Price	Options	Weighted Average Exercise Price
Outstanding at    Beginning of year	162,400	$5.57	80,500	$6.22	51,100	$6.80
Granted	20,250	8.79	89,050	5.05	35,200	5.40
Exercised	(11,150)	6.10	--	--	--	--
Canceled	(1,475)	5.53	(7,150)	6.38	(5,800)	6.35
Outstanding at    End of year	170,025	$5.92	162,400	$5.57	80,500	$6.22
Exercisable at    End of year	68,607	$5.94	34,280	$6.56	17,094	$6.98

At December 31, 2004, 2003 and 2002, 568,825, 587,600 and 669,500 shares, respectively, were available for option grants under the 2000 Plan.  The weighted-average remaining life of the 170,025 options outstanding at December 31, 2004 was 10.0 years.

As of December 31, 2004, outstanding options have the following ranges of exercise prices and weighted average remaining lives:

	Ranges of Exercise Prices
	$3.38 to $5.55	$5.71 to $7.88	$8.47 to $11.00	All Ranges
Outstanding stock options:
Number of options	132,784	280,235	28,250	441,269
Weighted average exercise price	$5.09	$6.25	$9.79	$6.12
Weighted average remaining life	9.3 years	4.7 years	9.0 years	6.3 years
Exercisable stock options:
Number of options	56,441	270,410	13,000	339,851
Weighted average exercise price	$5.05	$6.24	$10.09	$6.19
Weighted average remaining life	7.1 years	4.4 years	5.5 years	4.9 years

There were no charges to income in connection with stock option grants or exercises during 2004, 2003 and 2002.

(8)

Pension Plans

The Corporation has several pension plans which cover substantially all of its employees.  The benefits paid under these plans generally are based on employees' years of service and compensation during the last years of employment.  Annual contributions made to the US plans are determined in compliance with the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”) using a different actuarial cost method and actuarial assumptions than are used for determining pension expense for financial reporting purposes.  Plan assets consist primarily of publicly traded equity and debt securities.  The Corporation maintains an unfunded supplemental plan in the United States of America to provide retirement benefits in excess of levels provided under the Corporation's other plans.  

The Corporation’s Canadian subsidiary provides retirement benefits for its employees through a defined contribution plan. The plan was converted from a defined benefit plan in 1993 and, upon conversion a surplus was generated that is maintained in a separate holding account to fund the employer portion of contributions. As of December 31, 2004 and 2003, the plan had approximately $1.9 million and $1.7 million, respectively, in the holding account. The employer portion of contributions for 2004 and 2003 was approximately $55,000 and $46,000, respectively.  The Corporation's European subsidiaries provide retirement benefits for employees consistent with local practices. The foreign plans are not significant in the aggregate and therefore are not included in the following disclosures.

During 2002 the Corporation adopted a change in the measurement date of its US pension benefit plans from September 30 to November 30. Information presented in the tables below reflects a measurement date of November 30. This change had no significant effect on the 2002 or prior years’ pension expense or pension obligations. Management believes this change in measurement date is preferable as it facilitates and improves the year-end benefit cost planning.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with plan assets in excess of accumulated benefit obligations were $40,673,000, $37,944,000 and $38,973,000, respectively, at November 30, 2004, and $38,039,000, $35,654,000 and $36,000,000, respectively, at November 30, 2003.  The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plan with accumulated benefit obligations in excess of plan assets were $631,000, $631,000 and $0, respectively, at November 30, 2004, and $599,000, $599,000 and $0, respectively, at November 30, 2003.

The following table describes the funded status of US pension plans:

	2004	2003
Change in  Benefit Obligation:
Benefit obligation at November 30, 2003 and         2002, respectively	$   38,638,000	$   33,997,000
Service cost	1,007,000	866,000
Interest cost	2,384,000	2,321,000
Actuarial loss	1,373,000	3,471,000
Benefits paid	(2,098,000)	(2,017,000)
Benefit obligation at November 30, 2004 and         2003, respectively	41,304,000	38,638,000
Change in Plan Assets:
Fair value of plan assets at November 30,               2003 and 2002, respectively	36,000,000	31,462,000
Actual return on plan assets	4,740,000	3,334,000
Employer contributions	310,000	3,200,000
Benefits paid	(2,077,000)	(1,996,000)
Fair value of plan assets at November 30,               2004 and 2003, respectively	38,973,000	36,000,000
Funded status	(2,331,000)	(2,638,000)
Unrecognized net transition obligation	3,000	34,000
Unrecognized prior service cost	267,000	305,000
Unrecognized net actuarial loss	9,944,000	10,971,000
Prepaid pension costs at November 30, 2004           and 2003, respectively	7,883,000	8,672,000
December accruals	(92,000)	(112,000)
December contributions	2,000	2,000
Prepaid pension costs at yearend	$    7,793,000	$    8,562,000

The following assumptions were used for purposes of computing the net periodic pension cost and determining the benefit obligation of all US salaried employee plans:

Assumption	Used for Net Periodic Pension Cost in Fiscal Year January through December of		Used for Benefit Obligations as of November 30
	2004	2003	2004	2003
Discount Rate	6.25%	7.0%	6.1%	6.25%
Salary Increase	3.5%	3.5%	3.5%	3.5%
Long-term Rate of Return	8.5%	8.5%	(Not applicable)	(Not applicable)

The following assumptions were used for purposes of computing the net periodic pension cost and determining the benefit obligation of all US hourly employee plans:

Assumption	Used for Net Periodic Pension Cost in Fiscal Year January through December of		Used for Benefit Obligations as of November 30
	2004	2003	2004	2003
Discount Rate	6.25%	7.0%	6.1%	6.25%
Salary Increase	(Not applicable)	(Not applicable)	(Not applicable)	(Not applicable)
Long-term Rate of Return	8.5%	8.5%	(Not applicable)	(Not applicable)

Amounts recognized in the consolidated balance sheets of the Corporation consist of the following:

	2004	2003
Prepaid benefit cost	$8,418,000	$9,174,000
Accrued benefit liability	(631,000)	(599,000)
Intangible asset	--	11,000
Accumulated other comprehensive income	96,000	86,000
Net amount recognized at November 30	7,883,000	8,672,000
December accruals	(92,000)	(112,000)
December contributions	2,000	2,000
Net amount recognized at December 31	$7,793,000	$8,562,000

Net periodic pension cost for the US plans included the following for the years ended December 31:

	2004	2003	2002
Service cost-benefits earned during the year	$ 1,020,000	$    863,000	$    899,000
Interest cost on projected benefit obligation	2,389,000	2,325,000	2,276,000
Expected return on plan assets	(3,056,000)	(2,555,000)	(2,848,000)
Amortization of net obligation at date of transition	32,000	32,000	32,000
Amortization of prior service cost	49,000	49,000	49,000
Amortization of accumulated losses	666,000	630,000	43,000
Net periodic pension cost	$ 1,100,000	$ 1,344,000	$   451,000

The major categories of plan assets as of November 30, 2004 and 2003 were as follows:

	2004		2003
Major Categories	Fair Value of Plan Assets	% of Total Fair Value of Plan Assets	Fair Value of Plan Assets	% of Total Fair Value of Plan Assets
Equity funds	$ 27,216,000	69.8%	$ 21,713,000	60.3%
Fixed income funds	11,096,000	28.5%	10,721,000	29.8%
Cash and cash equivalents	661,000	1.7%	3,566,000	9.9%
Total	$ 38,973,000		$ 36,000,000

Assuming no additional adverse changes in the discount rate used for measuring the benefit obligation and assuming the rate of return on assets equals or exceeds the actuarial assumption, then the Corporation is expected to contribute to the US plans in 2005 an amount not to exceed its expected pension expense of $1.0 million.

Expected benefit payments for each of the next five years and for years six through ten are as follows:

Fiscal Year	Amount
2005	$2,155,000
2006	$2,235,000
2007	$2,297,000
2008	$2,417,000
2009	$2,515,000
2010 through 2014	$14,094,000

Investment Policy:

All investments will be made solely in the interest of the plan participants and their beneficiaries in order to provide prudent growth over time consistent with preservation of principal while providing liquidity so that benefits may be paid. Plan investments will be done through investment managers, as appointed by the Investment Committee, and be diversified so as to minimize the risk of large losses.  All actions by investment managers shall be made in accordance with the fiduciary standards established by ERISA, as amended, and other applicable laws and regulations.

The general classes of investment funds include equities, fixed income (bond funds) and cash equivalents. Equity investments include common, preferred and convertible stock, including both domestic and foreign issues. Plan assets may be invested 100% in equity funds although the range of equity fund investments is typically in the 55% to 75% of total market value of plan assets. Fixed income funds include US Government obligations, marketable non-convertible preferred stock and corporate bonds, insurance contracts, zero coupon securities and certificates of deposit.  Cash equivalents include investments with a maturity of less than one year and shall include US Government securities, repurchase agreements, bank certificates of deposit, prime commercial paper and short term investments.

Investments or activities strictly prohibited include short sales, margin purchases or any form of stock borrowing, privately placed or non-marketable securities, restricted securities, common stocks not listed on the New York, American or NASDAQ Stock Exchanges, derivative investments, investments in excess of 6% of the specific fund’s assets when the indication of ownership is outside the jurisdiction of the District Courts of the United States, investments of more than 10% of the specific fund’s assets in securities of any one issuer, except for US Government obligations, and investments in equities in any single industry in excess of 20% (at cost) of total plan assets.

Investment managers have full responsibility for investment selection and diversification within the limits of the investment restrictions set forth herein and as may be additionally imposed by the Investment Committee. The Plan Administrator shall supply the Investment Committee with the performance results of all investments and investment managers, benchmarked against their peer’s performance, at least quarterly.

Bairnco’s expected long term rate of return on plan assets is based on historical returns of its investment funds as adjusted to reflect expectations of future returns taking into consideration forecasts of long term expected inflation rates.

(9)

Reportable Segment Data

Operating segments are components of an enterprise that:

a.

Engage in business activities from which they may earn revenues and incur expenses,

b.

Whose operating results are regularly reviewed by the company’s chief operating decision-maker to make decisions about resources to be allocated to the segment and assess its performance, and

c.

For which discrete financial information is available.

Operating segments with similar products and services, production processes, types of customers, and sales channels are combined into reportable segments for disclosure purposes.  Bairnco has three reportable segments – Arlon Electronic Materials segment, Arlon Coated Materials segment and Kasco Replacement Products and Services segment.

The Arlon Electronic Materials and Arlon Coated Materials segments design, manufacture, market and sell laminated and coated products to the electronic, industrial and commercial markets under the Arlon^â and Calon^â brand names. These products are based on common technologies in coating, laminating, polymers, and dispersion chemistry.

Among the products included in the Arlon Electronic Materials segment are high technology materials for the printed circuit board industry and silicone rubber products for insulating tapes and flexible heaters. Among the products included in the Arlon Coated Materials segment are vinyl films for graphics art applications, foam tapes used in window glazing, and electrical and thermal insulation products.

The Kasco Replacement Products and Services segment manufactures, sells and services products and equipment used in supermarkets, meat and deli operations, and meat, poultry, and fish processing plants throughout the United States, Canada and Europe.  It also manufactures and sells small band saw blades for cutting wood and metal, and large band saw blades for use at lumber mills.

Bairnco evaluates segment performance based on income before interest and taxes and excluding allocation of headquarters expense.  Segment income and assets are measured on a basis that is consistent with the methods described in the summary of significant accounting policies.  Segment assets exclude US deferred income taxes, taxes receivable and assets attributable to US employee benefit programs.  Inter-segment transactions are not material.  No customer accounts for 10% or more of consolidated revenue.

Financial information about the Corporation’s operating segments for the years ended December 31, 2004, 2003 and 2002 is as follows:

		Operating			Capital	Depreciation/
	Net Sales	Profit (Loss)		Assets	Expenditures	Amortization
2004
Arlon EM	$  51,274,000	$   6,656,000		$  24,283,000	$ 1,403,000	$ 2,412,000
Arlon CM	71,752,000	3,798,000		46,262,000	2,467,000	2,567,000
Kasco	42,470,000	1,585,000		30,290,000	1,258,000	2,610,000
Headquarters	--	(3,982,000)		17,946,000	868,000	79,000
Total	$165,496,000	$   8,057,000		$118,781,000	$ 5,996,000	$ 7,668,000
2003
Arlon EM	$  44,540,000	$   4,408,000		$  24,424,000	$    507,000	$ 2,437,000
Arlon CM	68,521,000	3,103,000		47,875,000	3,405,000	2,509,000
Kasco	39,635,000	39,000		29,838,000	1,690,000	2,719,000
Headquarters	--	(2,927,000)		16,092,000	62,000	132,000
Total	$152,696,000	$   4,623,000		$118,229,000	$ 5,664,000	$ 7,797,000
2002
Arlon EM	$  47,109,000	$   4,566,000		$  25,069,000	$ 1,032,000	$ 2,617,000
Arlon CM	70,820,000	5,272,000		47,025,000	1,573,000	2,717,000
Kasco	36,425,000	127,000		28,500,000	1,168,000	2,684,000
Headquarters	--	(7,163,000)	(a)	14,990,000	38,000	95,000
Total	$154,354,000	$   2,802,000		$115,584,000	$ 3,811,000	$ 8,113,000

(a) Includes impact of $4.0 million pre-tax provision for litigation costs

The Corporation has operations in Canada and several European countries. Information about the Corporation’s operations by geographical area for the years ended December 31, 2004, 2003 and 2002 is as follows:

	Sales to External Customers	Long-lived Segment Assets
2004
United States	$139,148,000	$53,482,000
France	14,544,000	395,000
Other Foreign	11,804,000	3,875,000
2003
United States	$128,231,000	$56,159,000
France	13,456,000	430,000
Other Foreign	11,009,000	3,944,000
2002
United States	$132,628,000	$54,660,000
France	12,052,000	257,000
Other Foreign	9,674,000	3,659,000

 (10)

Contingencies

During the third quarter 2004, Bairnco obtained final resolutions of three long-pending lawsuits.

In one of these lawsuits (the “Transactions Lawsuit”),  trustees representing asbestos claimants brought claims of over $700 million against Bairnco, its subsidiaries, and other defendants. A judgment in favor of the defendants was affirmed in May 2004 by the U.S. Court of Appeals for the Second Circuit. Plaintiffs’ time to seek review by the United States Supreme Court of the Court of Appeals’ decision expired in August 2004.

A second lawsuit by these trustees against Bairnco (the “NOL Lawsuit”), involving a dispute over federal income tax refunds that had been held in escrow since the 1990s, was settled in September 2004. Pursuant to a settlement agreement dated September 10, 2004, Bairnco received $24,695,000 (about 70 percent of the escrowed funds), and the NOL Lawsuit was dismissed with prejudice. Subsequent to yearend, a review of tax information on the settlement of the NOL Lawsuit resulted in a $1,015,000 tax receivable and related income which, along with the $24,695,000 settlement, is included in Income from Spun off Subsidiary in the accompanying Consolidated Statements of Income.

The final resolution of the Transactions Lawsuit in favor of Bairnco resulted in the final resolution of a third lawsuit brought by these trustees (the “Properties Lawsuit”), involving a dispute over the title to certain real and personal property. In 2001, when the Properties Lawsuit was dismissed, without prejudice, against Bairnco and its Arlon subsidiary, the parties agreed that this dispute would be determined in accordance with the final resolution of the Transactions Lawsuit.  

Bairnco Corporation and its subsidiaries are defendants in a number of other pending actions.  Management of Bairnco believes that the disposition of these other actions will not have a material adverse effect on the consolidated results of operations or the financial position of Bairnco and its subsidiaries as of December 31, 2004.

CORPORATE INFORMATION

Corporate Office

300 Primera Boulevard, Suite 432

Lake Mary, Florida 32746

(407) 875-2222

www.bairnco.com

Principal Facilities

Bear, Delaware

Dallas, Texas

Rancho Cucamonga, California

St. Louis, Missouri

San Antonio, Texas

Santa Ana, California

Crumlin, Wales, United Kingdom

Matamoros, Mexico

Paris, France

Pansdorf, Germany

Transfer Agent and Registrar

Trust Company Bank

P.O. Box 4625

Atlanta, Georgia 30302

(800) 568-3476

Independent Certified Public Accountants

Grant Thornton LLP

200 S. Orange Avenue, Suite 2100

Orlando, Florida 32801

(407) 481-5100

www.grantthornton.com

Stock Listing

Bairnco common stock is listed on the New York Stock Exchange.

Symbol - BZ.

Annual Meeting

The annual stockholders meeting will be held at Bairnco’s Corporate Office

on April 21, 2005 at 9:00 a.m.

Form 10-K

Stockholders may obtain without charge a copy of Bairnco's Form 10-K filed with the Securities and Exchange Commission by writing to Investor Relations at the Corporate Office address.

Investor Relations Information

Contact Lawrence C. Maingot, Corporate Controller, Bairnco Corporation

(407) 875-2222, extension 230.

BAIRNCO CORPORATION

300 Primera Boulevard, Suite 432

Lake Mary, Florida 32746

407-875-2222

FAX 407-875-3398

www.bairnco.com

EX-21

EXHIBIT 21

BAIRNCO CORPORATION AND SUBSIDIARIES

Subsidiaries of Registrant

as of March 10, 2005

	Percentage	State/Country of
	Ownership	Incorporation
Arlon, Inc.	100%	Delaware
Kasco Corporation	100%	Delaware
Arlon Adhesives & Films, Inc. (1)	100%	Texas
Arlon Partners, Inc. (1)	100%	Delaware
Arlon Signtech, Ltd. (1)	100%	Texas
Arlon Viscor, Ltd. (1)	100%	Texas
Arlon MED International, LLC (1)	100%	Delaware
Arlon Materials for Electronics Co. Ltd. (1)	100%	China
Arlon Material Technologies Co. Ltd. (1)	100%	China
Bertram & Graf GmbH (1)	100%	Germany
Atlantic Service Co. Ltd. (1)	100%	Canada
Atlantic Service Co. (UK) Ltd. (1)	100%	United Kingdom
EuroKasco S.A. (1)	100%	France
Kasco Mexico LLC	100%	Delaware
Kasco Ensambly S.A. de C.V. (1)	100%	Mexico

(1) Indirect wholly-owned subsidiary of Bairnco Corporation.

EX-23

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

To Bairnco Corporation:

We have issued our reports dated January 27, 2005, accompanying the consolidated financial statements and schedule incorporated by reference in the Annual Report of Bairnco Corporation on Form 10-K for the year ended December 31, 2004.  We hereby consent to the incorporation by reference of said reports in the Registration Statements of Bairnco Corporation on Form S-8 (File No. 33-36330, effective July 18, 1990 and File No. 33-41313, effective, June 19, 1991).

/s/ Grant Thornton LLP

Orlando, Florida

March 4, 2005

EX-23

EXHIBIT 23.2

Consent of Independent Registered Certified Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8, File No. 33-36330) pertaining to the Bairnco Corporation 1990 Stock Incentive Plan of Bairnco Corporation and subsidiaries and (Form S-8, File No. 33-41313) pertaining to the Bairnco Corporation 401(k) Savings Plan and Trust of Bairnco Corporation and subsidiaries of our report dated January 29, 2004, with respect to the consolidated financial statements of Bairnco Corporation and subsidiaries incorporated by reference in the Annual Report (Form 10-K) for the year ended December 31, 2004, included in the 2004 Annual Report to Shareholders of Bairnco Corporation.

Our audits also included the financial statement schedule of Bairnco Corporation listed in Item 15(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Tampa, Florida

March 8, 2005

EX-31

EXHIBIT 31.1

CERTIFICATION

I, Luke E. Fichthorn, III, certify that:

1.

I have reviewed this annual report on Form 10-K of Bairnco Corporation;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.

The company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and we have:

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)

[Reserved]

c)

evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.

The company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors:

a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date:

March 10, 2005

/s/ Luke E. Fichthorn, III  _

Luke E. Fichthorn, III

Chairman & Chief Executive Officer

#

EX-31

EXHIBIT 31.2

CERTIFICATION

I, Lawrence C. Maingot, certify that:

1.

I have reviewed this annual report on Form 10-K of Bairnco Corporation;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.

The company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and we have:

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)

[Reserved]

c)

evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.

The company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors:

a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date:

March 10, 2005

/s/ Lawrence C. Maingot

Lawrence C. Maingot

Controller & Chief Accounting Officer

#

EX-32

EXHIBIT 32.1

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Bairnco Corporation (the “Corporation”) on Form 10-K for the fiscal year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Luke E. Fichthorn III, Chairman & Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Luke E. Fichthorn, III_

Luke E. Fichthorn, III

Chairman &

Chief Executive Officer

#

EX-32

EXHIBIT 32.2

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Bairnco Corporation (the “Corporation”) on Form 10-K for the fiscal year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lawrence C. Maingot, Controller & Chief Accounting Officer of the Corporation, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Lawrence C. Maingot

Lawrence C. Maingot

Controller &

Chief Accounting Officer

#

EX-99

EXHIBIT 99

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Bairnco Corporation:

We have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) the consolidated financial statements of Bairnco Corporation and subsidiaries referred to in our report dated January 27, 2005, which is included in the annual report to stockholders and incorporated by reference in Part IV, Item 15(a)2 of this form.  Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The Schedule II is presented for purposes of additional analysis and is not a required part of the basic financial statements.  This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

 /s/ Grant Thornton LLP

Orlando, Florida

January 27, 2005