UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
---
Exchange Act of 1934 for the Quarterly Period Ended March 31, 1996
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 10, 1996 there were 1,322,052 shares of common stock, par value $0.50
per share, outstanding.
<PAGE>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
INDEX
-----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1996 and September 30, 1995 (Unaudited)
Consolidated Statements of Operations and Retained Earnings
three and six months ended March 31, 1996 and 1995 (Unaudited)
Condensed Consolidated Statements of Cash Flows
six months ended March 31, 1996 and 1995 (Unaudited)
Notes to Condensed Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION:
Item 6. Exhibits and reports on Form 8-K
Signature
<PAGE>
<TABLE>
<CAPTION>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Unaudited, see Note A below)
MARCH 31, September 30,
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash $ 1,828,000 $ 2,976,000
Accounts receivable 3,116,000 2,485,000
Other current assets 753,000 663,000
------------- -------------
TOTAL CURRENT ASSETS 5,697,000 6,124,000
INVESTMENT IN LAND 862,000 648,000
OTHER ASSETS 831,000 1,011,000
NET PROPERTY AND EQUIPMENT 22,005,000 20,997,000
------------- ------------
TOTAL ASSETS $ 29,395,000 $ 28,780,000
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,146,000 $ 1,065,000
Accrued expenses 606,000 523,000
Other current liabilities 850,000 893,000
------------- ------------
TOTAL CURRENT LIABILITIES 2,602,000 2,481,000
------------- ------------
LONG-TERM DEBT 11,100,000 11,100,000
------------- ------------
DEFERRED INCOME TAXES 4,938,000 4,837,000
------------- ------------
STOCKHOLDERS' EQUITY:
Common stock, par value $.50 per 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 13,451,000 12,891,000
Foreign currency translation adjustments and other (1,915,000) (1,748,000)
Treasury stock, at cost, 320,745 shares (4,705,000) (4,705,000)
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 10,755,000 10,362,000
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,395,000 $ 28,780,000
============= ============
<FN>
Note A: The balance sheet at September 30, 1995 has been taken from the
audited financial statements at that date and condensed.
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
-----------------------------------------------------------
(Unaudited)
Three months ended Six months ended
March 31, March 31,
------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Oil and natural gas $ 2,800,000 $ 2,380,000 $ 5,270,000 $ 5,290,000
Contract drilling 670,000 1,180,000 1,410,000 2,500,000
Interest income and other 190,000 170,000 400,000 330,000
----------- ----------- ----------- -----------
3,660,000 3,730,000 7,080,000 8,120,000
----------- ----------- ----------- -----------
Cost and expenses:
Oil and natural gas operating 826,000 911,000 1,746,000 1,766,000
Contract drilling operating 497,000 780,000 1,025,000 1,795,000
General and administrative 743,000 1,020,000 1,544,000 2,091,000
Depreciation, depletion and
amortization 744,000 733,000 1,611,000 1,483,000
Interest expense 158,000 182,000 370,000 334,000
Minority interest in
earnings (losses) 10,000 (106,000) - (244,000)
----------- ----------- ---------- ----------
2,978,000 3,520,000 6,296,000 7,225,000
----------- ----------- ---------- ----------
Earnings before income taxes 682,000 210,000 784,000 895,000
Provision for income taxes 422,000 70,000 224,000 555,000
----------- ----------- ---------- ----------
NET EARNINGS 260,000 140,000 560,000 340,000
Retained earnings -
beginning of period 13,191,000 12,540,000 12,891,000 12,439,000
Cash dividends declared - (99,000) - (198,000)
----------- ----------- ----------- -----------
Retained earnings - end of period $13,451,000 $12,581,000 $13,451,000 $12,581,000
=========== =========== =========== ===========
NET EARNINGS PER COMMON SHARE $ 0.20 $ 0.11 $ 0.42 $ 0.26
=========== =========== =========== ===========
Cash dividends declared per share $ - $ 0.075 $ - $ 0.15
=========== =========== =========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
Six months ended
March 31,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 560,000 $ 340,000
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, depletion, and amortization 1,611,000 1,483,000
Deferred income taxes 133,000 227,000
Minority interest in losses - (244,000)
----------- -----------
2,304,000 1,806,000
All other (557,000) (1,063,000)
----------- -----------
Net cash provided by operating activities 1,747,000 743,000
----------- -----------
Cash Flows from Investing Activities:
Capital expenditures - oil and gas segment (2,810,000) (1,926,000)
Additions to investment in land (314,000) -
Capital expenditures - contract drilling and other (52,000) (117,000)
Decrease in long-term other assets 207,000 3,000
----------- -----------
Net cash used in investing activities (2,969,000) (2,040,000)
----------- -----------
Cash Flows from Financing Activities:
Net contributions from
joint venture minority interest owner 100,000 -
Payment of dividends - (198,000)
----------- -----------
Net cash provided by
(used in) financing activities 100,000 (198,000)
----------- -----------
Effect of exchange rate changes on cash (26,000) (107,000)
----------- -----------
Net decrease in cash (1,148,000) (1,602,000)
Cash at beginning of period 2,976,000 4,198,000
----------- -----------
Cash at end of period $ 1,828,000 $ 2,596,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 383,000 $ 358,000
=========== ===========
Income taxes $ 143,000 $ 1,640,000
=========== ===========
<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, 1996, the
Consolidated Statements of Operations and Retained Earnings for the three and
six months ended March 31, 1996 and 1995, and the Condensed Consolidated
Statements of Cash Flows for the six months ended March 31, 1996 and 1995 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
cash flows at March 31, 1996 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, 1995 annual
report to stockholders. The results of operations for the period ended
March 31, 1996 are not necessarily indicative of the operating results for the
full year.
2. EARNINGS PER COMMON SHARE
-------------------------
Earnings per share for the three and six months ended March 31, 1996 are
based on 1,324,373 and 1,324,593, respectively, of weighted average outstanding
common shares during each period, after consideration of the dilutive effect of
outstanding stock options and convertible securities. Earnings per share for
the three and six months ended March 31, 1995 are based on weighted average
outstanding common shares of 1,322,052.
3. INCOME TAXES
------------
The components of the provision for income taxes for the three and six
months ended March 31, 1996 and 1995 are as follows:
Three months ended Six months ended
March 31, March 31,
-------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Current - U.S. $ 20,000 $ 20,000 $ 25,000 $ 50,000
Current - Foreign 26,000 (110,000) 66,000 278,000
---------- ---------- ---------- ----------
Total - Current 46,000 (90,000) 91,000 328,000
---------- ---------- ---------- ----------
Deferred - U.S. (20,000) (20,000) (25,000) (50,000)
Deferred - Foreign 396,000 180,000 158,000 277,000
---------- ---------- ---------- ----------
Total - Deferred 376,000 160,000 133,000 227,000
---------- ---------- ---------- ----------
$ 422,000 $ 70,000 $ 224,000 $ 555,000
========== ========== ========== ==========
<PAGE>
4. NEW STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
-----------------------------------------------
In October 1995, the Financial Accounting Standards Board issued SFAS 123,
"Accounting for Stock-Based Compensation." SFAS 123 establishes a new, fair
value based method of measuring stock-based compensation, but does not require
an entity to adopt the new method for purposes of preparing its basic financial
statements. For entities not adopting the new method, SFAS 123 requires
disclosure in the footnotes of proforma net earnings and earnings per share
information as if the fair value based method had been adopted. Adoption of
SFAS 123 is required for no later than the Company's year ending September 30,
1997. The Company has not yet determined if it will adopt the fair value based
method of accounting for stock-based compensation for purposes of preparing its
basic financial statements.
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, 1996 totaled $1,747,000, as compared to $743,000 for the first six
months of the prior year, an increase of $1,004,000. This increase is largely
attributable to a $913,000 payment of accrued income taxes in the prior year
period which reduced the prior period's cash flows from operating activities;
there was no similar payment in the current period. Cash and working capital at
March 31, 1996 were $1,828,000 and $3,095,000, respectively.
The Company's revolving credit facility with its Canadian bank has been
renewed through March 1, 1997 for $15,000,000 Canadian dollars or its U.S.
dollar equivalent of approximately $11,000,000. If after March 1997 the
facility is converted to a five-year term loan, the Company has agreed to the
following repayment schedule of the then outstanding balance: year 1 - 30%;
year 2 - 27%; year 3 - 16%; year 4 - 14%; year 5 - 13%. The Company had
approximately $1,900,000 of available credit under the facility at
March 31, 1996.
The Dunvegan Unit owners have approved the construction of a sour natural
gas plant which will enable the Company to process and sell production from
currently shut in sour gas wells, as well as generate additional gas processing
fees from non-unit natural gas. The Company's capital expenditures for this
plant will total approximately $900,000. Approximately $280,000 of this amount
was incurred as of March 31, 1996 with the remainder estimated to be incurred by
September 30, 1996.
During the quarter ended March 31, 1996, the Company invested $1,247,000 in
oil and natural gas properties, as compared to $968,000 during the prior year's
second quarter. This increase in capital expenditures is due to the
aforementioned $280,000 of expenditures towards the construction of a sour
natural gas plant in the Dunvegan area. For the three months ended
March 31, 1996, the Company participated in the drilling of 17 wells in Alberta,
Canada and North Dakota as follows:
Productive Productive
Oil Wells Gas Wells Dry Holes Total Wells
----------- ----------- ----------- ------------
Exp. Dev. Exp. Dev. Exp. Dev. Exp. Dev.
---- ---- ---- ---- ---- ---- ---- ----
Gross 1.00 6.00 2.00 4.00 2.00 2.00 5.00 12.00
Net 0.15 1.37 0.30 0.56 0.42 0.15 0.87 2.08
<PAGE>
During the six months ended March 31, 1996, the Company invested $2,810,000
in oil and natural gas properties, as compared to $1,926,000 during the prior
year period, by participating in the construction of the aforementioned sour
natural gas plant and in the drilling of 23 wells in Alberta, Canada and North
Dakota as follows:
Productive Productive
Oil Wells Gas Wells Dry Holes Total Wells
----------- ----------- ----------- ------------
Exp. Dev. Exp. Dev. Exp. Dev. Exp. Dev.
---- ---- ---- ---- ---- ---- ---- ----
Gross 1.00 8.00 3.00 5.00 2.00 4.00 6.00 17.00
Net 0.15 1.82 0.59 0.65 0.42 0.42 1.16 2.89
"Net well" refers to Barnwell's aggregate participating interest in a given
number of gross wells. For example, a 50% interest in a well represents one
gross well, but 0.50 net well. The gross figure includes Barnwell's interest,
as well as the portion owned by others.
The Company anticipates participating in the drilling of 12 to 16 wells
(3.5 to 3.8 net wells) in the last six months of the fiscal year. These
drilling activities together with the construction of the Dunvegan sour natural
gas plant will increase oil and natural gas capital expenditures to
approximately $5,500,000 for fiscal 1996, approximately 60% more than fiscal
1995's oil and natural gas capital expenditures. Due to the increased amount of
capital expenditures, the Company anticipates that a portion will be funded by
the use of the Company's available credit.
The Company invested $314,000 towards the rezoning of the North Kona,
Hawaii, property held by Kaupulehu Developments, a 50.1% owned joint venture,
and invested $52,000 in contract drilling assets for the six months ended
March 31, 1996.
RESULTS OF OPERATIONS
- ---------------------
Oil and Gas
- -----------
SELECTED OPERATING STATISTICS
-----------------------------
Average Prices
----------------------------------------------
Three months ended Increase
March 31, (Decrease)
------------------------ ----------------
1996 1995 $ %
--------- --------- -------- ----
Oil (Bbls)* $ 15.42 $ 14.48 0.94 6
Liquids (Bbls)* $ 13.77 $ 11.30 2.47 22
Gas (MCF)** $ 1.26 $ 0.96 0.30 31
Six months ended Increase
March 31, (Decrease)
------------------------ ----------------
1996 1995 $ %
--------- --------- -------- -----
Oil (Bbls)* $ 15.25 $ 14.53 0.72 5
Liquids (Bbls)* $ 12.35 $ 10.72 1.63 15
Gas (MCF)** $ 1.09 $ 1.09 - -
<PAGE>
Net Sales Volumes
----------------------------------------------
Three months ended Increase
March 31, (Decrease)
------------------------ ----------------
1996 1995 Units %
--------- --------- -------- -----
Oil (Bbls)* 50,000 55,000 (5,000) (9)
Liquids (Bbls)* 22,000 19,000 3,000 16
Gas (MCF)** 1,130,000 1,142,000 (12,000) (1)
Six months ended Increase
March 31, (Decrease)
------------------------ ----------------
1996 1995 Units %
--------- --------- -------- -----
Oil (Bbls)* 101,000 103,000 (2,000) (2)
Liquids (Bbls)* 43,000 42,000 1,000 2
Gas (MCF)** 2,411,000 2,410,000 1,000 -
*Bbls = stock tank barrel equivalent to 42 U.S. gallons
**MCF = 1,000 cubic feet
Oil and natural gas revenues increased $420,000 (18%) for the three months
ended March 31, 1996, as compared to the same period in 1995, due primarily to a
31% increase in natural gas prices. The remaining increase was attributable to
22% and 16% increases in natural gas liquids prices and production,
respectively. Revenues from oil sales decreased due to a 9% decrease in oil
production, partially offset by a 6% increase in oil prices.
Oil and natural gas revenues remained relatively constant (decreased
$20,000) for the six months ended March 31, 1996, as compared to the same period
in 1995, as increases in oil and natural gas liquids prices were offset by a
$60,000 decrease in the Alberta Royalty Tax Credit resulting primarily from
changes to the Province of Alberta's royalty tax credit program, effective
January 1, 1995.
Oil and natural gas operating expenses decreased $85,000 (9%) for the three
months ended March 31, 1996, as compared to the same period in 1995, due to
lower production at areas with relatively higher operating costs. For the six
months ended March 31, 1996, oil and natural gas expenses decreased only
$20,000, as compared to the same period in 1995.
Contract Drilling
- -----------------
Contract drilling revenues and costs are associated with water well
drilling and water pump installation in Hawaii. Contract drilling revenues
decreased $510,000 (43%) and $1,090,000 (44%), respectively, for the three and
six months ended March 31, 1996, as compared to the same periods in 1995, due to
lower water well drilling and pump installation activity in the current year
periods. As a result of the lower activity, operating profit before
depreciation decreased $227,000 (57%) and $320,000 (45%), respectively, for the
three and six months ended March 31, 1996, as compared to the same periods in
1995. Additionally, the lower demand for water well drilling in Hawaii has
increased competitive pressures, reducing operating profit before depreciation
as a percentage of revenues to 26% and 27% for the three and six months ended
March 31, 1996, respectively, as compared to 34% and 28% in the three and six
month periods of the prior year, respectively. The Company expects operating
profit before depreciation for the last half of the 1996 fiscal year to be lower
than that of the current six month period.
<PAGE>
Interest Income and Other
- -------------------------
Interest income and other increased $20,000 (12%) and $70,000 (21%) for the
three and six months ended March 31, 1996, respectively, as compared to the same
periods in 1995, due to increases in natural gas processing income, chiefly from
non-unit gas processed at the Dunvegan gas plant, partially offset by decreases
in interest income as a result of lower average cash balances.
General and Administrative Expenses
- -----------------------------------
General and administrative expenses decreased $277,000 (27%) and $547,000
(26%) for the three and six months ended March 31, 1996, respectively, as
compared to the same periods in 1995, as costs incurred for the rezoning of
Kaupulehu Developments' leasehold interest in conservation zoned property
decreased from $170,000 and $408,000 to $119,000 and $243,000, respectively.
Additionally, these costs were capitalized in the current period and included in
investment in land in the accompanying condensed consolidated balance sheets.
The remaining decrease for both periods was largely attributable to reductions
in personnel costs.
Depreciation, Depletion and Amortization
- ----------------------------------------
Depreciation, depletion and amortization increased $128,000 (9%) for the
six months ended March 31, 1996, as compared to the same period in 1995, due to
an increase in depletion, partially offset by decreased depreciation expense.
Depletion increased for the six months ended March 31, 1996, as compared to the
same period in 1995, due to a 14% increase in the depletion rate. This increase
in the depletion rate is partially due to the current year's estimated capital
expenditures for the Dunvegan sour natural gas plant, which does not result in
an increase in reserves. Depreciation decreased because certain water well
drilling assets became fully depreciated during the prior fiscal year.
Interest Expense
- ----------------
Interest expense decreased $24,000 (13%) for the three months ended
March 31, 1996, as compared to the same period in 1995, due to the
capitalization of interest costs related to the Company's investment in land,
net of the impact on interest expense attributable to slightly higher loan
balances and interest rates.
Interest expense increased $36,000 (11%) for the six months ended
March 31, 1996, as compared to the same period in 1995, due to higher average
loan balances and interest rates, partially offset by the capitalization of
interest costs related to the Company's investment in land.
<PAGE>
Income Taxes
- ------------
In November 1995, officials of the U.S. and Canada formally ratified a new
agreement amending the Canada-U.S. Tax Treaty that reduces the Canadian Branch
tax, effective January 1, 1996, from 10% to 6% and, effective January 1, 1997,
to 5%. This change resulted in the recognition of a deferred income tax benefit
of $290,000 in the first quarter ended December 31, 1995, which is included in
the six months ended March 31, 1996.
New Statement of Financial Accounting Standards
- -----------------------------------------------
In October 1995, the Financial Accounting Standards Board issued SFAS 123,
"Accounting for Stock-Based Compensation." SFAS 123 establishes a new, fair
value based method of measuring stock-based compensation, but does not require
an entity to adopt the new method for preparing its basic financial statements.
For entities not adopting the new method, SFAS 123 requires disclosure in the
footnotes of proforma net earnings and earnings per share information as if the
fair value based method had been adopted. Adoption of SFAS 123 is required for
no later than the Company's year ending September 30, 1997. The Company has not
yet determined if it will adopt the fair value based method of accounting for
stock-based compensation for purposes of preparing its basic financial
statements.
<PAGE>
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
Date: May 10, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Barnwell Industries Inc.'s 1996 second quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB.
</LEGEND>
<CIK> 0000010048
<NAME> BARNWELL INDUSTRIES INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 1828
<SECURITIES> 0
<RECEIVABLES> 3179
<ALLOWANCES> 63
<INVENTORY> 60
<CURRENT-ASSETS> 5697
<PP&E> 51123
<DEPRECIATION> 29118
<TOTAL-ASSETS> 29395
<CURRENT-LIABILITIES> 2602
<BONDS> 11100
0
0
<COMMON> 821
<OTHER-SE> 9934
<TOTAL-LIABILITY-AND-EQUITY> 29395
<SALES> 6680
<TOTAL-REVENUES> 7080
<CGS> 2771
<TOTAL-COSTS> 2771
<OTHER-EXPENSES> 1611
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 370
<INCOME-PRETAX> 784
<INCOME-TAX> 224
<INCOME-CONTINUING> 560
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 560
<EPS-PRIMARY> .42
<EPS-DILUTED> 0
</TABLE>
