SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the
-----
Securities Exchange Act of 1934
for the Quarterly Period Ended March 31, 1995
Transition Report Pursuant to Section 13 or 15(d) of the
-------
Securities Exchange Act of 1934
Commission File Number 1-5103
BARNWELL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 72-0496921
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 Alakea Street, Suite 2900, Honolulu, Hawaii 96813
(Address of principal executive offices) (Zip code)
(808) 531-8400
(Registrant's telephone number, including area code)
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
requirement for the past 90 days.
Yes X No
--------- -----
As of May 11, 1995 there were 1,322,052 shares of common stock, par value $0.50,
outstanding.
<PAGE>
<TABLE>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<CAPTION>
March 31, September 30,
ASSETS 1995 1994
- - - - - - ------
(Unaudited) (See Note A below)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 2,596,000 $ 4,198,000
Trading securities 182,000 948,000
Accounts receivable 3,184,000 2,719,000
Other current assets 1,079,000 828,000
--------------- ---------------
TOTAL CURRENT ASSETS 7,041,000 8,693,000
INVESTMENT IN LAND - -
OTHER ASSETS 1,072,000 903,000
NET PROPERTY AND EQUIPMENT 20,832,000 21,026,000
--------------- ---------------
TOTAL ASSETS $ 28,945,000 $ 30,622,000
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
- - - - - - ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,252,000 $ 1,536,000
Accrued expenses 758,000 840,000
Current deferred income taxes 1,394,000 -
Other current liabilities 681,000 1,396,000
--------------- ---------------
TOTAL CURRENT LIABILITIES 4,085,000 3,772,000
LONG-TERM DEBT 10,600,000 10,600,000
DEFERRED INCOME TAXES 5,036,000 6,468,000
STOCKHOLDERS' EQUITY:
Common stock, par value $.50 a share:
Authorized, 4,000,000 shares
Issued, 1,642,797 shares 821,000 821,000
Additional paid-in capital 3,103,000 3,103,000
Retained earnings 12,581,000 12,439,000
Foreign currency translation adjustments and other (2,576,000) (1,876,000)
Treasury stock, at cost, 320,745 shares (4,705,000) (4,705,000)
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 9,224,000 9,782,000
--------------- ---------------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 28,945,000 $ 30,622,000
=============== ===============
<FN>
Note A: The balance sheet at September 30, 1994 has been taken from the audited
financial statements at that date and condensed.
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
-----------------------------------------------------------
(Unaudited)
<CAPTION>
Three months ended Six months ended
March 31, March 31,
--------------------------- ---------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Oil and gas $ 2,380,000 $ 3,530,000 $ 5,290,000 $ 8,170,000
Contract drilling 1,180,000 1,790,000 2,500,000 2,850,000
Interest income and other 170,000 220,000 330,000 360,000
--------------- --------------- --------------- ---------------
3,730,000 5,540,000 8,120,000 11,380,000
--------------- --------------- --------------- ---------------
Cost and expenses:
Oil and gas operating 911,000 794,000 1,766,000 1,584,000
Contract drilling operating 780,000 1,469,000 1,795,000 2,185,000
General and administrative 1,020,000 1,084,000 2,091,000 2,102,000
Depreciation, depletion and amortization 733,000 711,000 1,483,000 1,424,000
Interest expense 182,000 123,000 334,000 239,000
Minority interest in losses (106,000) (58,000) (244,000) (134,000)
--------------- --------------- --------------- ---------------
3,520,000 4,123,000 7,225,000 7,400,000
--------------- --------------- --------------- ---------------
Earnings before income taxes 210,000 1,417,000 895,000 3,980,000
Provision for income taxes 70,000 947,000 555,000 2,160,000
--------------- --------------- --------------- ---------------
NET EARNINGS 140,000 470,000 340,000 1,820,000
Retained earnings - beginning of period 12,540,000 11,467,000 12,439,000 10,183,000
Cash dividends declared (99,000) (66,000) (198,000) (132,000)
--------------- --------------- --------------- ---------------
Retained earnings - end of period $ 12,581,000 $ 11,871,000 $ 12,581,000 $ 11,871,000
=============== =============== =============== ===============
NET EARNINGS PER COMMON SHARE $ 0.11 $ 0.36 $ 0.26 $ 1.38
=============== =============== =============== ===============
Cash dividends declared per share $ 0.075 $ 0.05 $ 0.15 $ 0.10
=============== =============== =============== ===============
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
<CAPTION>
Six months ended
March 31,
-----------
1995 1994
--------------------- ---------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 340,000 $ 1,820,000
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, depletion, and amortization 1,483,000 1,424,000
Deferred income taxes 227,000 349,000
Minority interest in losses (244,000) (134,000)
--------------- ---------------
1,806,000 3,459,000
All other (1,063,000) (848,000)
--------------- ---------------
Net cash provided by operating activities 743,000 2,611,000
--------------- ---------------
Cash Flows from Investing Activities:
Capital expenditures - oil and gas segment (1,926,000) (2,765,000)
Capital expenditures - contract drilling segment and other (117,000) (191,000)
Decrease (increase) in long-term other assets 3,000 (104,000)
--------------- ---------------
Net cash used in investing activities (2,040,000) (3,060,000)
--------------- ---------------
Cash Flows from Financing Activities:
Payment of dividends (198,000) (132,000)
---------------- ---------------
Net cash used in financing activities (198,000) (132,000)
--------------- ---------------
Effect of exchange rate changes on cash (107,000) (37,000)
--------------- ---------------
Net decrease in cash (1,602,000) (618,000)
Cash at beginning of period 4,198,000 5,835,000
--------------- ---------------
Cash at end of period $ 2,596,000 $ 5,217,000
=============== ===============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 358,000 $ 212,000
=============== ===============
Income taxes $ 1,640,000 $ 1,192,000
=============== ===============
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
The Condensed Consolidated Balance Sheet as of March 31, 1995, the
Consolidated Statements of Operations and Retained Earnings for the three and
six months ended March 31, 1995 and 1994, and the Condensed Consolidated
Statements of Cash Flows for the six months ended March 31, 1995 and 1994 have
been prepared by Barnwell Industries, Inc. (referred to herein together with its
subsidiaries as "Barnwell" or the "Company") without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
changes in cash flows at March 31, 1995 and for all periods presented have been
made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's September 30, 1994 annual
report to stockholders. The results of operations for the period ended
March 31, 1995 are not necessarily indicative of the operating results for the
full year.
2. NEW STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
-----------------------------------------------
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets To Be Disposed Of." This statement is
effective for years beginning after December 15, 1995 and applies to long-lived
assets and certain identifiable intangible assets whether held and used or to be
disposed of.
The Statement requires that a company review long-lived assets to be held
and used for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. If the future cash
flows expected to result from use of the asset (undiscounted and without
interest charges) are less than the carrying amount of the asset, a company will
recognize an impairment loss. Such impairment loss is measured as the amount by
which the carrying amount of the asset exceeds the fair value of the asset.
The Statement also requires that long-lived assets to be disposed of be
reported at the lower of the asset carrying amount or fair value, less cost to
sell.
The Company has not yet determined when it will adopt the Statement and
has not estimated the impact that adoption of the Statement is expected to have
on its financial statements.
3. EARNINGS PER COMMON SHARE
-------------------------
Earnings per share are based on the weighted average number of outstanding
common shares during the period. The primary weighted average number of
outstanding shares for the quarters and six months ended March 31, 1995 and 1994
was 1,322,052. Fully diluted earnings per share is not presented in that the
dilution in each period is less than 3%.
4. INVESTMENT IN LAND
------------------
The option under which Kaupulehu Makai Venture could have acquired
Kaupulehu Developments' leasehold interest in approximately 2,180 leasehold
acres of conservation zoned property in North Kona, Hawaii expired, unexercised,
on April 30, 1995. Kaupulehu Makai Venture, a joint venture of which the
managing general partner is an affiliated company of Kajima Corporation of
Japan, is developing a golf course and Four Seasons resort project adjacent to
the 2,180 acres held by Kaupulehu Developments. Kaupulehu Developments is a
joint venture in which the Company has a 50.1% interest.
At March 31, 1995, in addition to the 2,180 leasehold acres described
above, Kaupulehu Developments also has development rights with respect to lands
zoned residential all under option to Kaupulehu Makai Venture. This option, if
exercised, entitles the Company to receive $16,157,000 in connection with its
50.1% interest in Kaupulehu Developments. The residential site option expires
on April 30, 2007; however, this option will expire sooner unless 20% of the
consideration is received on or before December 31, 1999 and 50% of the then
remaining consideration is received on or before April 30, 2003. There is no
assurance that this option or any portion of it will be exercised.
5. INCOME TAXES
------------
The components of the provision for income taxes for the three and six
months ended March 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
------------ --------------------
1995 1994 1995 1994
---------------- ------------- ------------------- -----------
<S> <C> <C> <C> <C>
Current - U.S. $ 20,000 $ 50,000 $ 50,000 $ 80,000
Current - Foreign (110,000) 782,000 278,000 1,731,000
------------- ----------- -------------- --------------
Total - Current (90,000) 832,000 328,000 1,811,000
------------- ----------- -------------- --------------
Deferred - U.S. (20,000) 30,000 (50,000) -
Deferred - Foreign 180,000 85,000 277,000 349,000
------------ ----------- -------------- --------------
Total - Deferred 160,000 115,000 227,000 349,000
------------ ----------- -------------- --------------
$ 70,000 $ 947,000 $ 555,000 $ 2,160,000
============ =========== ============== ==============
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
----------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
LIQUIDITY AND CAPITAL RESOURCES
- - - - - - -------------------------------
Net cash flows provided by operating activities for the six months ended
March 31, 1995 totaled $743,000, as compared to $2,611,000 for the six months
ended March 31, 1994, a decrease of $1,868,000. The decrease was due to the
receipt of $1,586,000 in the prior year period as a result of the termination
of gas purchase, sales and transportation agreements with Alberta & Southern
Gas Co., Ltd. ("A&S"). This payment increased the prior year's six month
net earnings by approximately $880,000. No such payment was received in the
current period. The remaining decrease was due to decreased operating profit
resulting from lower natural gas prices.
The Company invested $1,926,000 in the exploration and development of oil
and gas properties and $117,000 in other capital expenditures. Additionally,
the Company declared and paid dividends totaling $198,000. Due to the decline
in natural gas prices the Company has elected to suspend the payment of
dividends. Additionally, pending a review of investment opportunities in oil
and natural gas properties, the Company may increase its capital expenditures
budget as the purchase price of natural gas property leases has also decreased.
The option under which Kaupulehu Makai Venture could have acquired
Kaupulehu Developments' leasehold interest in approximately 2,180 leasehold
acres of conservation zoned property in North Kona, Hawaii expired, unexercised,
on April 30, 1995. Deferred income taxes of $1,394,000 are classified as a
current liability as a result of the option expiration. The Company currently
intends to fund the payment of these taxes from cash flow generated by
operations and the utilization of its available credit under its current
banking facility.
The Company's revolving credit facility with its Canadian bank is expected
to be renewed through March 1, 1996 for $16,000,000 Canadian dollars or its U.S.
dollar equivalent of approximately $11,400,000. Upon such renewal, if after
March 1996 the facility is converted to a six-year term loan, the Company has
agreed to change the repayment schedule of the then outstanding balance to the
following: year 1 - 26%; year 2 - 24%; year 3 - 17%; year 4 - 15%; year 5 - 12%
and year 6 - 6%. The Company had approximately $800,000 of available credit
under the facility at March 31, 1995.
<PAGE>
<TABLE>
RESULTS OF OPERATIONS
- - - - - - ---------------------
Oil and Gas
- - - - - - -----------
SELECTED OPERATING STATISTICS
-----------------------------
Average Prices
<CAPTION>
Three months ended Six months ended
March 31, March 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Oil (Bbls)* $ 14.48 $ 10.09 $ 14.53 $ 11.93
Liquids (Bbls)* $ 11.30 $ 7.69 $ 10.72 $ 8.97
Gas (MCF)** $ 0.96 $ 1.85 $ 1.09 $ 1.68
</TABLE>
<TABLE>
Net Sales Volumes
<CAPTION>
Three months ended Six months ended
March 31, March 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Oil (Bbls)* 55,000 50,000 103,000 97,000
Liquids (Bbls)* 19,000 30,000 42,000 48,000
Gas (MCF)** 1,142,000 1,275,000 2,410,000 2,478,000
<FN>
*Bbls = stock tank barrel equivalent to 42 U.S. gallons
**MCF = 1,000 cubic feet
</TABLE>
Oil and gas revenues decreased $1,150,000 (33%) and $2,880,000 (35%) for
the three and six months ended March 31, 1995, respectively, as compared to the
same periods in 1994. A $1,586,000 decontracting payment, received from A&S in
November 1993, was included in oil and gas revenues in the prior year's six
month period. There was no such payment received in the six months ended March
31, 1995. This decontracting payment was the result of the termination of the
Company's Dunvegan natural gas purchase, sales and transportation agreements
with A&S, effective November 1, 1993.
The remaining decreases were primarily attributable to 48% and 35%
decreases in natural gas prices and 10% and 3% decreases in natural gas volumes
for the three and six months ended March 31, 1995, respectively, as compared to
the same periods in the prior year. Additionally, the Province of Alberta's
royalty tax credit program changed effective January 1, 1995, reducing net
earnings for the quarter ended March 31, 1995 by approximately $85,000; net
earnings in the third and fourth quarters of fiscal 1995 will be similarly
affected. These decreases were partially offset by 44% and 22% increases in
oil prices and 10% and 6% increases in oil volumes sold for the three and six
months ended March 31, 1995, respectively, as compared to the same periods of
last year. The increase in oil production in the current periods is partially
attributable to a recent discovery in North Dakota where the Company now has an
interest in three producing oil wells.
<PAGE>
Oil and gas expenses increased $117,000 (15%) and $182,000 (11%) for the
three and six months ended March 31, 1995, respectively, as compared to the same
periods in 1994, due primarily to new production in the Lacombe, Pembina and
Wood River areas.
Contract Drilling
- - - - - - -----------------
Although contract drilling revenues for the three and six months ended
March 31, 1995 decreased $610,000 (34%) and $350,000 (12%), respectively, gross
margin before depreciation increased $79,000 (25%) and $40,000 (6%),
respectively, as compared to the same periods in the prior year. This is
because more of the current periods' revenues were generated by water well
drilling operations than pump installation operations. Well drilling contracts
generally have higher gross margins than pump installation contracts. Well
drilling revenues increased $640,000 and $267,000 for the three and six months
ended March 31, 1995, and pump installation revenues decreased approximately
$1,260,000 and $618,000 for the three and six months ended March 31, 1995,
respectively, as compared to the same periods in the prior year.
Interest Expense
- - - - - - ----------------
Interest expense increased $59,000 (48%) and $95,000 (40%) for the three
and six months ended March 31, 1995, respectively, as compared to the same
periods in 1994. The increases for both periods were due to higher average
interest rates.
New Statement of Financial Accounting Standards
- - - - - - -----------------------------------------------
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets To Be Disposed Of." This statement is
effective for years beginning after December 15, 1995 and applies to long-lived
assets and certain identifiable intangible assets whether held and used or to be
disposed of.
The Statement requires that a company review long-lived assets to be held
and used for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. If the future cash
flows expected to result from use of the asset (undiscounted and without
interest charges) are less than the carrying amount of the asset, a company will
recognize an impairment loss. Such impairment loss is measured as the amount by
which the carrying amount of the asset exceeds the fair value of the asset.
The Statement also requires that long-lived assets to be disposed of be
reported at the lower of the asset carrying amount or fair value, less cost to
sell.
The Company has not yet determined when it will adopt the Statement and
has not estimated the impact that adoption of the Statement is expected to have
on its financial statements.
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
None.
SIGNATURE
---------
Pursuant to the requirements 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.
BARNWELL INDUSTRIES, INC.
-------------------------
(Registrant)
/s/ Russell M. Gifford
-------------------------
Russell M. Gifford
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Barnwell Industries Inc.'s 1995 Second Quarter 10-Q and is qualified in
its entirety by reference to such 10-Q filing.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 2596
<SECURITIES> 182
<RECEIVABLES> 3184
<ALLOWANCES> 26
<INVENTORY> 120
<CURRENT-ASSETS> 7041
<PP&E> 46240
<DEPRECIATION> 25408
<TOTAL-ASSETS> 28945
<CURRENT-LIABILITIES> 4085
<BONDS> 10600
<COMMON> 821
0
0
<OTHER-SE> 8403
<TOTAL-LIABILITY-AND-EQUITY> 9224
<SALES> 7790
<TOTAL-REVENUES> 8120
<CGS> 3561
<TOTAL-COSTS> 3561
<OTHER-EXPENSES> 3330
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 334
<INCOME-PRETAX> 895
<INCOME-TAX> 555
<INCOME-CONTINUING> 340
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 340
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
