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 December 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 February 11, 1997 there were 1,322,052 shares of common stock, par value
$0.50, outstanding.
<PAGE>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
INDEX
-----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
December 31, 1996 and September 30, 1996 (Unaudited)
Consolidated Statements of Operations and Retained Earnings
three months ended December 31, 1996 and 1995 (Unaudited)
Condensed Consolidated Statements of Cash Flows
three months ended December 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)
<S> <C> <C>
December 31, September 30,
ASSETS 1996 1996
- ------ ------------ -------------
CURRENT ASSETS:
Cash $ 3,175,000 $ 3,553,000
Accounts receivable 2,854,000 2,288,000
Other current assets 730,000 710,000
------------ ------------
TOTAL CURRENT ASSETS 6,759,000 6,551,000
INVESTMENT IN LAND 1,219,000 1,115,000
OTHER ASSETS 442,000 445,000
NET PROPERTY AND EQUIPMENT 23,253,000 22,669,000
------------ ------------
TOTAL ASSETS $ 31,673,000 $ 30,780,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,779,000 $ 1,694,000
Accrued expenses 866,000 678,000
Other current liabilities 1,317,000 815,000
------------ ------------
TOTAL CURRENT LIABILITIES 3,962,000 3,187,000
------------ ------------
LONG-TERM DEBT 11,100,000 11,100,000
------------ ------------
DEFERRED INCOME TAXES 5,003,000 5,090,000
------------ ------------
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 14,541,000 14,121,000
Foreign currency translation adjustments and other (2,152,000) (1,937,000)
Treasury stock, at cost, 320,745 shares (4,705,000) (4,705,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 11,608,000 11,403,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 31,673,000 $ 30,780,000
============ ============
<FN>
Note A: The condensed consolidated balance sheet at September 30, 1996 has been
derived from the audited financial statements at that date.
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
-----------------------------------------------------------
(Unaudited)
Three months ended
December 31,
------------------------------
1996 1995
---- ----
Revenues:
Oil and natural gas $ 3,040,000 $ 2,470,000
Contract drilling 510,000 740,000
Gas processing and other 360,000 210,000
------------- -------------
3,910,000 3,420,000
------------- -------------
Costs and expenses:
Oil and natural gas operating 880,000 920,000
Contract drilling operating 399,000 528,000
General and administrative 831,000 801,000
Depreciation, depletion and amortization 828,000 867,000
Interest expense 182,000 212,000
Minority interest in losses - (10,000)
------------- -------------
3,120,000 3,318,000
------------- -------------
Earnings before income taxes 790,000 102,000
Income tax provision (benefit) 370,000 (198,000)
------------- -------------
NET EARNINGS 420,000 300,000
Retained earnings - beginning of period 14,121,000 12,891,000
------------- -------------
Retained earnings - end of period $ 14,541,000 $ 13,191,000
============= =============
NET EARNINGS PER COMMON SHARE $0.32 $0.23
===== =====
See Notes to Condensed Consolidated Financial Statements
<PAGE>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
Three months ended
December 31,
-------------------------
1996 1995
---- ----
Cash Flows from Operating Activities:
Net earnings $ 420,000 $ 300,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, depletion, and amortization 828,000 867,000
Deferred income taxes 59,000 (243,000)
Minority interest in losses - (10,000)
----------- -----------
1,307,000 914,000
Increase from changes
in current assets and liabilities 91,000 1,000,000
----------- -----------
Net cash provided by operating activities 1,398,000 1,914,000
----------- -----------
Cash Flows from Investing Activities:
Capital expenditures - oil and natural gas (1,542,000) (1,563,000)
Additions to investment in land (104,000) (124,000)
Capital expenditures - contract drilling and other (20,000) (41,000)
Decrease (increase) in
long-term receivables and other assets 1,000 (43,000)
----------- -----------
Net cash used in investing activities (1,665,000) (1,771,000)
----------- -----------
Net Cash Provided by Financing Activity:
Contributions from minority interest owner - 20,000
----------- -----------
Net cash provided by financing activity - 20,000
----------- -----------
Effect of exchange rate changes on cash (111,000) (26,000)
----------- -----------
Net (decrease) increase in cash (378,000) 137,000
Cash at beginning of period 3,553,000 2,976,000
----------- -----------
Cash at end of period $ 3,175,000 $ 3,113,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amounts capitalized) $ 169,000 $ 186,000
=========== ===========
Income taxes $ 243,000 $ 77,000
=========== ===========
See Notes to Condensed Consolidated Financial Statements
<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 December 31, 1996, and the
Consolidated Statements of Operations and Retained Earnings and the Condensed
Consolidated Statements of Cash Flows for the three months ended
December 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 changes in cash flows at
December 31, 1996 and for all periods presented have been made. The Condensed
Consolidated Balance Sheet as of September 30, 1996 has been derived from
audited financial statements.
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, 1996 annual
report to stockholders. The results of operations for the period ended
December 31, 1996 are not necessarily indicative of the operating results for
the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and the disclosure of contingent assets and liabilities. Actual
results could differ significantly from those estimates.
2. EARNINGS PER COMMON SHARE
-------------------------
Earnings per share for the three months ended December 31, 1996 are based
on weighted average outstanding common shares of 1,325,695, after consideration
of the dilutive effect of outstanding stock options and convertible securities.
Earnings per share for the three months ended December 31, 1995 are based on
weighted average outstanding common shares of 1,322,052.
<PAGE>
3. INCOME TAXES
------------
The components of the income tax provision (benefit) for the three months
ended December 31, 1996 and 1995 are as follows:
Three months ended
December 31,
-------------------------
1996 1995
---------- ----------
Current - U.S. $ 15,000 $ 5,000
Current - Foreign 296,000 40,000
---------- ----------
Total - Current 311,000 45,000
---------- ----------
Deferred - U.S. (15,000) (5,000)
Deferred - Foreign 74,000 (238,000)
---------- ----------
Total - Deferred 59,000 (243,000)
---------- ----------
$ 370,000 $ (198,000)
========== ==========
In November 1995, officials of the U.S. and Canada formally ratified a new
agreement amending the Canada-U.S. Tax Treaty that reduced 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 three months ended December 31, 1995.
4. STOCK OPTIONS
-------------
The Company adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") effective October 1, 1996 and intends to provide the
required disclosures in its financial statements for the year ending September
30, 1997. Adoption of the fair value method of measuring stock based
compensation prescribed by SFAS 123 would not have had an impact on the
Company's net income or earnings per share for the three months ended December
31, 1996 and 1995.
There were no stock option transactions during the three months ended
December 31, 1996 and 1995.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flows from operations before changes in working capital increased
$393,000 for the three months ended December 31, 1996, as compared to the same
period in the prior year, due to increased earnings generated by the Company's
oil and natural gas segment. This increase was more than offset, however, by a
$909,000 decrease in operating cash flows from changes in non-cash working
capital; accounts payable increased only $92,000 in the current year period, as
compared to a $903,000 increase in the prior year period. The increase in
accounts payable in the prior year period related to oil and natural gas capital
expenditures not yet paid at December 31, 1995.
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 $10,900,000. 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 $1,800,000 of available credit under the facility at
December 31, 1996.
During the quarter ended December 31, 1996, the Company invested $1,542,000
in oil and natural gas properties, as compared to $1,563,000 during the prior
year's first quarter. For the three months ended December 31, 1996, the Company
participated in the drilling of 8 successful and 3 unsuccessful wells in
Alberta, Canada, and 2 successful wells and 1 unsuccessful well in the United
States as follows:
Productive Productive
Oil Wells Gas Wells Dry Holes Total Wells
----------- ----------- ----------- ------------
Exp. Dev. Exp. Dev. Exp. Dev. Exp. Dev.
---- ---- ---- ---- ---- ---- ---- ----
CANADA
- ---------
Gross 1.00 6.00 - 1.00 - 3.00 1.00 10.00
Net 0.07 0.37 - 0.13 - 0.51 0.07 1.01
UNITED STATES
- -------------
Gross - - 2.00 - 1.00 - 3.00 -
Net - - 0.10 - 0.05 - 0.15 -
The Company also invested $104,000 towards the rezoning of the North Kona,
Hawaii, property held by Kaupulehu Developments, a 50.1% owned joint venture.
The Company expects total fiscal 1997 capital expenditures to be approximately
10% higher than capital expenditures in fiscal 1996. Capital expenditures are
expected to be funded by both cash flows from operations and existing cash
balances.
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Oil and Natural Gas
- -------------------
SELECTED OPERATING STATISTICS
------------------------------------------
Average Price Per Unit
------------------------------------------
Three months ended Increase
December 31, (Decrease)
---------------------- ----------------
1996 1995 $ %
-------- ---------- ------- -----
Liquids (Bbls)* $18.50 $10.87 7.63 70%
Oil (Bbls)* $22.41 $15.08 7.33 49%
Natural gas (MCF)** $ 1.27 $ 0.94 0.33 35%
Net Production
------------------------------------------
Three months ended Increase
December 31, (Decrease)
---------------------- -----------------
1996 1995 Units %
--------- ---------- -------- -----
Liquids (Bbls)* 17,000 21,000 (4,000) (19%)
Oil (Bbls)* 48,000 51,000 (3,000) (6%)
Natural gas (MCF)** 1,118,000 1,278,000 (160,000) (13%)
*Bbls = stock tank barrel equivalent to 42 U.S. gallons
**MCF = 1,000 cubic feet
Oil and natural gas revenues increased $570,000 (23%) for the three months
ended December 31, 1996, as compared to the same period in 1995, due to price
increases of 70%, 49% and 35% for natural gas liquids, oil and natural gas,
respectively. These increases were partially offset by production decreases of
19%, 6% and 13% for natural gas liquids, oil and natural gas, respectively. The
decrease in natural gas units sold was principally due to lower production from
several of the Company's mature properties.
<PAGE>
Contract Drilling
- -----------------
Contract drilling revenues and costs are associated with water well
drilling and water pump installation in Hawaii. Contract drilling revenues and
costs decreased $230,000 (31%) and $129,000 (24%), respectively, for the three
months ended December 31, 1996, as compared to the same period in 1995, due to
lower water well drilling and pump installation activity in the current year
period. As a result of this lower activity, operating profit before
depreciation decreased to $111,000 for the three months ended December 31, 1996,
as compared to $212,000 for the same period in 1995. Operating profit before
depreciation as a percentage of revenues decreased to 22% for the three months
ended December 31, 1996, as compared to 29% for the same period in 1995, due to
lower efficiencies resulting from the decreased activity, and continued
competitive pressures within the industry. The Company expects competition
within the industry to continue and potentially grow as demand for water well
drilling in Hawaii is not expected to increase in the 1997 fiscal year.
Gas Processing and Other
- ------------------------
Gas processing and other income increased $150,000 (71%) for the three
months ended December 31, 1996, as compared to the same period in 1995, due to
an increase in non-unit gas processed at the Dunvegan gas plant and increased
interest income.
Interest Expense
- ----------------
Interest expense decreased $30,000 (14%) for the three months ended
December 31, 1996, as compared to the same period in 1995, due to lower average
interest rates and an increase in capitalized interest costs related to the
Company's investment in land.
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 reduced 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 three months ended December 31, 1995.
<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: February 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Barnwell Industries Inc.'s 1997 first 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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 3175
<SECURITIES> 0
<RECEIVABLES> 2864
<ALLOWANCES> 10
<INVENTORY> 93
<CURRENT-ASSETS> 6759
<PP&E> 54348
<DEPRECIATION> 31095
<TOTAL-ASSETS> 31673
<CURRENT-LIABILITIES> 3962
<BONDS> 11100
0
0
<COMMON> 821
<OTHER-SE> 10787
<TOTAL-LIABILITY-AND-EQUITY> 31673
<SALES> 3550
<TOTAL-REVENUES> 3910
<CGS> 1279
<TOTAL-COSTS> 1279
<OTHER-EXPENSES> 828
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 182
<INCOME-PRETAX> 790
<INCOME-TAX> 370
<INCOME-CONTINUING> 420
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 420
<EPS-PRIMARY> .32
<EPS-DILUTED> 0
</TABLE>
