LAKE MARY, Fla., Oct. 19 /PRNewswire-FirstCall/ -- Bairnco
Corporation (NYSE:BZ) today reported improved operating results for
the third quarter 2006 as compared to the same period last year,
excluding the impact of professional fees related to the Steel
Partners Tender Offer ("Offer Fees") and the tax benefit from an
increased basis for income tax accounting purposes in certain real
property and related improvements ("Property Tax Benefit") booked
during the third quarter of 2006. Sales for the quarter were up
9.2% to $43,299,000 as compared with the same period in 2005, and
excluding the Offer Fees and Property Tax Benefit, net income
increased $561,000 to $776,000 and diluted earnings per share
increased from $0.03 to $0.11. Net income and diluted earnings per
share for the quarter were $1,329,000 and $0.18, respectively,
taking the Offer Fees and Property Tax Benefit into consideration.
Bairnco Chairman and Chief Executive Officer Luke E. Fichthorn III
stated, "We are pleased with both our improved operating results
for the third quarter of 2006 and the continuing momentum we are
experiencing in many key areas of our business. We are seeing
positive sales trends in our Arlon Electronic Materials and Kasco
divisions. Our initiatives to consolidate our operations and reduce
operating costs continue to make steady progress. The new China
plant was completed and fully staffed in the third quarter and is
now operational. Effective October 1, 2006 Kasco acquired Atlanta
SharpTech with fiscal 2006 sales of $18.7 million for approximately
$14 million. The combined management teams have already begun
integrating the businesses while building on their respective
strengths. We believe continuing internal growth combined with
acquisitions that fit and ongoing cost reduction programs will
drive both short term and long term growth and enhance shareholder
returns." Total sales in the third quarter 2006 were $43,299,000,
as compared to $39,668,000 in 2005. Segment results were as
follows: * Arlon's Electronic Materials sales increased 16.2% from
the third quarter 2005 due primarily to extremely strong activity
in both the electronics and industrial served markets. * Arlon's
Coated Materials sales increased 5.9% from the third quarter 2005
on strong foreign and digital print sales but partially offset by
weaker domestic graphics, automotive and industrial markets. *
Kasco's sales increased 5.6% from the third quarter 2005 due
primarily to continued growth in North American service and repair
revenue and improved European sales both in local currency and US
dollars. Gross profit increased 15.9% to $12,235,000 in the third
quarter 2006 from $10,557,000 in 2005. The gross profit improvement
was from increased sales and production volumes at Arlon's
Electronic Materials and reduced relocation and closing costs in
the third quarter of 2006 versus 2005 which were partially offset
by Arlon's Coated Materials reduced margins due to the change in
mix in the graphics business as corporate re-imaging continues to
be replaced by lower margin digital print products. Gross profit
margin as a percent of sales increased to 28.3% in the third
quarter 2006 from 26.6% in 2005. Third quarter 2006 gross profit
includes $265,000 of start-up expenses related to Arlon's China
manufacturing facility. Third quarter 2005 gross profit reflects
$435,000 in relocation costs related to the move of Kasco's
manufacturing operations to Mexico and $22,000 of China start-up
expenses. Selling and administrative expenses for the third quarter
2006, excluding the Offer Fees, were up 6.6% to $10,859,000.
Included in the Company's third quarter 2006 selling and
administrative expenses is $85,000 of start-up expenses for the
China manufacturing facility. 2005 selling and administrative
expenses included $83,000 of start-up expenses related to the China
manufacturing facility. The Offer Fees were $1,627,000 in the third
quarter 2006 bringing total selling and administrative expenses to
$12,486,000. Net interest expense was $95,000 in 2006 as compared
to $38,000 in 2005 due to increased outstanding borrowings.
Excluding the Property Tax Benefit in 2006, the effective tax rate
for the third quarter of 2005 and 2006 was 35.0%. Excluding the
Offer Fees and the related tax benefit, and the Property Tax
Benefit, net income in the third quarter 2006 increased $561,000 to
$776,000 as compared to $215,000 in 2005, and diluted earnings per
share increased to $0.11 from $0.03 in 2005. Net income increased
$1,114,000 to $1,329,000 in 2006 and diluted earnings per common
share increased to $0.18 from $0.03 in 2005. In November 2005,
Bairnco filed a notification with the Internal Revenue Service that
it planned to increase its basis for income tax accounting purposes
in certain real property and related improvements acquired as part
of an asset purchase in 1989. The Company and its advisors have
concluded that a reasonable passage of time from the filing of the
notification occurred during the third quarter of 2006 for the IRS
to question this position. The Company filed its 2005 federal
income tax return in the third quarter utilizing the increased
income tax basis. This tax return treatment for financial statement
purposes resulted in an increase in deferred tax assets of $0.7
million, a reduction in income tax payable of $0.9 million and a
related reduction in the provision for income taxes of $1,554,000
(the Property Tax Benefit) in the third quarter of 2006. Sales for
the first nine months of 2006 increased 5.9% to $131,151,000 from
$123,878,000 in 2005 primarily due the solid growth in the Arlon
Electronic Materials segment and continued growth in Kasco's North
American service and repair business. Gross profit improved 6.8% to
$38,265,000 from $35,839,000 due to continued strong operating
results from Arlon's Electronic Materials and $638,000 of reduced
relocation and plant development costs which were partially reduced
by lower margins in the Coated Products Segment due to the lower
margins attributable to the product mix shift. Selling and
administrative expenses in the first nine months of 2006 increased
3.9% to $32,762,000, excluding $1,925,000 of Offer Fees, from
$31,549,000 in 2005. Net income increased to $3,690,000 in the
first nine months of 2006 from $2,726,000 in 2005 and diluted
earnings per share increased to $0.50 in 2006 from $0.36 in 2005.
Excluding the impact of the Offer Fees and the related tax benefit,
and the Property Tax Benefit, net income in the first nine months
of 2006 increased 21.8% to $3,320,000 and diluted earnings per
share increased 25.0% to $0.45. The Company reaffirmed its guidance
for 2006 as previously stated in the Company's Schedule 14D-9,
originally filed with the Securities and Exchange Commission on
July 6, 2006, including earnings per share for the second half of
2006 which is expected to be in the range of $0.26 to $0.34,
excluding the Offer Fees and Property Tax Benefit, as compared to
$0.15 for the same period last year. The Company also increased its
guidance for 2007 as a result of positive trends in the business
and the acquisition of Atlanta SharpTech. For the full year 2006,
excluding the Offer Fees and Property Tax Benefit, operating
profits are expected to be in the range of $7.25 million to $7.75
million, and earnings per share are expected to grow to between
$0.56 and $0.64. Although final budgets are not done until later in
the year, current projections for 2007 have been increased to
reflect positive trends in the business and benefits of the
combination of Kasco and Atlanta SharpTech with earnings per share
now in the range of $1.05 to $1.20, sales growing to between $195
million and $205 million and operating profit in the range of $13
million to $15 million. "Safe Harbor" Statement under the Private
Securities Reform Act of 1995 Statements in this press release
referring to the expected future plans and performance of the
Corporation are forward-looking statements. Actual future results
may differ materially from such statements. Factors that could
affect future performance 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;
the impact on production output and costs from the availability of
energy sources and related pricing; changes in the market for raw
or packaging materials which could impact the Corporation's
manufacturing costs; changes in the product mix; 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 loss of a
significant customer or supplier; production delays or
inefficiencies; the ability to achieve anticipated revenue growth,
synergies and other cost savings in connection with acquisitions
and plant consolidations; the costs and other effects of legal and
administrative cases and proceedings, settlements and
investigations; the costs and other effects of complying with
environmental regulatory requirements; disruptions in operations
due to labor disputes; 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 in
connection with its preparation of its press releases, the
Corporation does not intend to review or revise any particular
forward-looking statement referenced herein in light of future
events. Bairnco Corporation is a diversified multinational company
that operates two distinct businesses - Arlon (Electronic Materials
and Coated Materials segments) and Kasco (Replacement Products and
Services segment). Arlon's principal products include high
technology materials for the printed circuit board industry, cast
and calendered vinyl film systems, custom-engineered laminates and
special silicone rubber compounds and components. Kasco's principal
products include replacement band saw blades for cutting meat,
fish, wood and metal, and on site maintenance primarily in the meat
and deli departments. Kasco also distributes equipment to the food
industry in France. Reconciliation of GAAP to Non-GAAP Financial
Measures Management believes that excluding the unusual Offer Fees
and tax benefit from the increased basis in real property and
related improvements (see discussion above) more clearly reflects
the performance of the Company and allows the Company's
stockholders to compare comparable financial statistics across
periods. The following tables reconcile certain Generally Accepted
Accounting Principles ("GAAP") financial measures with the non-GAAP
financial measures discussed above for the quarters and nine month
periods ended September 30, 2006 and October 1, 2005. The non-GAAP
financial measures exclude the Offer Fees and tax benefit. Quarter
Ended September 30, 2006 October 1, 2005 Selling and administrative
expenses $12,486,000 $10,189,000 Offer Fees 1,627,000 -- Selling
and administrative expenses before Offer Fees $10,859,000
$10,189,000 Operating profit (loss) ($251,000) $368,000 Offer Fees
1,627,000 -- Operating profit before Offer Fees $1,376,000 $368,000
Net income $1,329,000 $215,000 Offer Fees, net of $626,000 of tax
benefit 1,001,000 -- Property Tax Benefit (1,554,000) -- Net income
before Offer Fees, net of tax $776,000 $215,000 Diluted Earnings
per Share of Common Stock $0.18 $0.03 Impact on diluted earnings
per share of common stock of Offer Fees 0.14 -- Impact on diluted
earnings per share of common stock of the Property Tax Benefit
(0.21) -- Diluted earnings per share of common stock before Offer
Fees and the Property Tax Benefit $0.11 $0.03 Nine Months Ended
September 30, 2006 October 1, 2005 Selling and administrative
expenses $34,687,000 $31,549,000 Offer Fees 1,925,000 -- Selling
and administrative expenses before Offer Fees $32,762,000
$31,549,000 Operating profit $3,578,000 $4,290,000 Offer Fees
1,925,000 -- Operating profit before Offer Fees $5,503,000
$4,290,000 Net income $3,690,000 $2,726,000 Offer Fees, net of
$741,000 of tax benefit 1,184,000 -- Property Tax Benefit
(1,554,000) -- Net income before Offer Fees, net of tax $3,320,000
$2,726,000 Diluted Earnings per Share of Common Stock $0.50 $0.36
Impact on diluted earnings per share of common stock of Offer Fees
0.16 -- Impact on diluted earnings per share of common stock of the
Property Tax Benefit (0.21) -- Diluted earnings per share of common
stock before Offer Fees and the Property Tax Benefit $0.45 $0.36
Comparative Results of Operations (Unaudited) Condensed Income
Quarter Ended Nine Months Ended Statements Sep 30, 2006 Oct 1, 2005
Sep 30, 2006 Oct 1, 2005 Net sales $43,299,000 $39,668,000
$131,151,000 $123,878,000 Cost of sales 31,064,000 29,111,000
92,886,000 88,039,000 Gross profit 12,235,000 10,557,000 38,265,000
35,839,000 Selling and administrative expenses 12,486,000
10,189,000 34,687,000 31,549,000 Operating profit (loss) (251,000)
368,000 3,578,000 4,290,000 Interest expense, net 95,000 38,000
273,000 97,000 Income (loss) before income taxes (346,000) 330,000
3,305,000 4,193,000 Provision (benefit) for income taxes
(1,675,000) 115,000 (385,000) 1,467,000 Net income $ 1,329,000
$215,000 $ 3,690,000 $ 2,726,000 Basic Earnings per Share of Common
Stock $0.19 $0.03 $0.52 $0.37 Diluted Earnings per Share of Common
Stock $0.18 $0.03 $0.50 $0.36 Basic Average Common Shares 7,120,000
7,346,000 7,155,000 7,379,000 Diluted Average Common Shares
7,365,000 7,612,000 7,385,000 7,649,000 Condensed Balance Sheets
Sep 30, 2006 Dec 31, 2005 (Unaudited) ASSETS Cash $1,878,000
$5,313,000 Accounts receivable, net 28,685,000 25,713,000
Inventories 29,590,000 27,231,000 Other current assets 6,399,000
7,387,000 Total current assets 66,552,000 65,644,000 Plant and
equipment, net 36,168,000 34,373,000 Cost in excess of net assets
of purchased businesses, net 14,525,000 14,439,000 Other assets
11,149,000 11,312,000 Total Assets $128,394,000 $125,768,000
LIABILITIES AND STOCKHOLDERS' INVESTMENT Short-term debt $829,000
$2,233,000 Current maturities of long-term debt 100,000 134,000
Accounts payable 11,415,000 12,051,000 Accrued expenses 10,912,000
9,406,000 Total current liabilities 23,256,000 23,824,000 Long-term
debt 11,236,000 7,069,000 Other liabilities 8,377,000 11,417,000
Stockholders' investment 85,525,000 83,458,000 Total Liabilities
and Stockholders' Investment $128,394,000 $125,768,000 DATASOURCE:
Bairnco Corporation CONTACT: Kenneth L. Bayne, +1-407-875-2222,
ext. 227, or Larry C. Maingot, +1-407-875-2222, ext. 230, both of
Bairnco Corporation Web site: http://www.bairnco.com/
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