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, 1999
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 small business issuer 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
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
----- -----
As of February 10, 2000 there were 1,316,952 shares of common stock, par value
$0.50, outstanding.
Transitional Small Business Disclosure Format Yes No X
----- -----
<PAGE>
2
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
INDEX
-----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
December 31, 1999 and September 30, 1999 (Unaudited)
Consolidated Statements of Operations
three months ended December 31, 1999 and 1998 (Unaudited)
Condensed Consolidated Statements of Cash Flows
three months ended December 31, 1999 and 1998 (Unaudited)
Consolidated Statements of
Stockholders' Equity and Comprehensive Income
three months ended December 31, 1999 and 1998 (Unaudited)
Notes to Condensed Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition, Year 2000 Compliance, and
Results of Operations
PART II. OTHER INFORMATION:
Item 6. Exhibits and reports on Form 8-K
<PAGE>
3
BARNWELL INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, see Note A below)
ASSETS
- ------
December 31, September 30,
1999 1999
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 2,716,000 $ 2,577,000
Accounts receivable, net 1,463,000 1,873,000
Other current assets 1,065,000 1,147,000
------------ ------------
TOTAL CURRENT ASSETS 5,244,000 5,597,000
------------ ------------
INVESTMENT IN LAND 3,696,000 3,519,000
------------ ------------
OTHER ASSETS 206,000 207,000
------------ ------------
NET PROPERTY AND EQUIPMENT 24,072,000 23,972,000
------------ ------------
TOTAL ASSETS $ 33,218,000 $ 33,295,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,582,000 $ 1,894,000
Accrued expenses 1,696,000 1,975,000
Current portion of long-term debt 1,700,000 1,650,000
Other current liabilities 1,380,000 1,038,000
------------ ------------
TOTAL CURRENT LIABILITIES 6,358,000 6,557,000
------------ ------------
LONG-TERM DEBT 11,736,000 12,631,000
------------ ------------
DEFERRED INCOME TAXES 6,565,000 6,301,000
------------ ------------
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 12,341,000 11,801,000
Accumulated other comprehensive loss -
foreign currency translation adjustments (2,917,000) (3,130,000)
Treasury stock, at cost, 325,845 shares (4,789,000) (4,789,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 8,559,000 7,806,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 33,218,000 $ 33,295,000
============ ============
Note A: The condensed consolidated balance sheet at September 30, 1999 has been
derived from the audited consolidated financial statements at that date.
See Notes to Condensed Consolidated Financial Statements
<PAGE>
4
BARNWELL INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
December 31,
----------------------------
Revenues: 1999 1998
----------- -----------
Oil and natural gas $ 3,130,000 $ 2,350,000
Contract drilling 980,000 750,000
Gas processing and other 200,000 200,000
----------- -----------
4,310,000 3,300,000
----------- -----------
Costs and expenses:
Oil and natural gas operating 750,000 817,000
Contract drilling operating 761,000 576,000
General and administrative 720,000 764,000
Depreciation, depletion
and amortization 704,000 694,000
Interest expense 204,000 206,000
----------- -----------
3,139,000 3,057,000
----------- -----------
Earnings before income taxes 1,171,000 243,000
Income tax provision 631,000 193,000
----------- -----------
NET EARNINGS $ 540,000 $ 50,000
=========== ===========
BASIC AND DILUTED
EARNINGS PER COMMON SHARE $0.41 $0.04
===== =====
See Notes to Condensed Consolidated Financial Statements
<PAGE>
5
BARNWELL INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
December 31,
------------------------
1999 1998
----------- -----------
Cash Flows from Operating Activities:
Net earnings $ 540,000 $ 50,000
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation, depletion, and amortization 704,000 694,000
Deferred income taxes 142,000 15,000
----------- -----------
1,386,000 759,000
Increase (decrease) from changes
in current assets and liabilities 223,000 (931,000)
----------- -----------
Net cash provided by (used in)
operating activities 1,609,000 (172,000)
----------- -----------
Cash Flows from Investing Activities:
Capital expenditures - oil and natural gas (457,000) (211,000)
Capital expenditures - other (23,000) (24,000)
Additions to investment in land (177,000) (171,000)
Proceeds from sale of oil and natural gas properties 50,000 18,000
Decrease in other assets 1,000 1,000
----------- -----------
Net cash used in investing activities (606,000) (387,000)
----------- -----------
Cash Flows from Financing Activities:
Long-term debt borrowings 50,000 150,000
Repayments of long-term debt (916,000) (100,000)
----------- -----------
Net cash (used in)
provided by financing activities (866,000) 50,000
----------- -----------
Effect of exchange rate changes
on cash and cash equivalents 2,000 -
----------- -----------
Net increase (decrease) in cash and cash equivalents 139,000 (509,000)
Cash and cash equivalents at beginning of period 2,577,000 2,178,000
----------- -----------
Cash and cash equivalents at end of period $ 2,716,000 $ 1,669,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amounts capitalized) $ 188,000 $ 195,000
=========== ===========
Income taxes $ 578,000 $ 52,000
=========== ===========
See Notes to Condensed Consolidated Financial Statements
<PAGE>
6
<TABLE>
<CAPTION>
BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Three months ended December 31, 1999 and 1998
(Unaudited)
Accumulated
Additional Comprehensive Other Total
Common Paid-In Income Retained Comprehensive Treasury Stockholders'
Stock Capital (Loss) Earnings Loss Stock Equity
-------- --------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
At September 30, 1998 $821,000 $3,103,000 $11,281,000 $ (3,672,000) $ (4,789,000) $ 6,744,000
Comprehensive income:
Net earnings $ 50,000 50,000 50,000
Other comprehensive loss,
net of income taxes -
foreign currency
translation adjustments (16,000) (16,000) (16,000)
------------
Total comprehensive income $ 34,000
-------- ---------- ============ ----------- ------------ ------------ ------------
At December 31, 1998 $821,000 $3,103,000 $11,331,000 $ (3,688,000) $ (4,789,000) $ 6,778,000
======== ========== =========== ============ ============ ============
At September 30, 1999 $821,000 $3,103,000 $11,801,000 $ (3,130,000) $ (4,789,000) $ 7,806,000
Comprehensive income:
Net earnings $ 540,000 540,000 540,000
Other comprehensive income,
net of income taxes -
foreign currency
translation adjustments 213,000 213,000 213,000
------------
Total comprehensive income $ 753,000
--------- ---------- ============ ----------- ------------ ------------ ------------
At December 31, 1999 $821,000 $3,103,000 $12,341,000 $ (2,917,000) $ (4,789,000) $ 8,559,000
======== ========== =========== ============ ============ ============
<FN>
See Notes to Condensed Consolidated Financial Statements
</FN>
</TABLE>
<PAGE>
7
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, 1999 and the
Consolidated Statements of Operations, the Condensed Consolidated Statements of
Cash Flows, and the Consolidated Statements of Stockholders' Equity and
Comprehensive Income for the three months ended December 31, 1999 and 1998 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, 1999 and for all periods presented have
been made. The Condensed Consolidated Balance Sheet as of September 30, 1999 has
been derived from audited consolidated 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 consolidated
financial statements and notes thereto included in the Company's September 30,
1999 annual report to stockholders. The results of operations for the period
ended December 31, 1999 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
-------------------------
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net earnings by the weighted-average number of common shares
outstanding for the period. The weighted-average number of common shares
outstanding for three months ended December 31, 1999 and 1998 was 1,316,952.
Diluted EPS includes the potentially dilutive effect of outstanding common
stock options and securities which are convertible to common shares. The
weighted-average number of common and potentially dilutive common shares
outstanding was 1,319,277 and 1,316,952 for the three months ended December 31,
1999 and 1998, respectively.
Reconciliations between the numerator and denominator of the basic and
diluted earnings per share computations for the three months ended December 31,
1999 is as follows:
Three months ended December 31, 1999
------------------------------------------
Net Earnings Shares Per-Share
(Numerator) (Denominator) Amount
----------- ---------- ------
Basic earnings per share $ 540,000 1,316,952 $ 0.41
Effect of dilutive securities -
common stock options - 2,325 -
----------- ---------- ------
Diluted earnings per share $ 540,000 1,319,277 $ 0.41
=========== ========== ======
<PAGE>
8
Assumed conversion of certain common stock options was excluded from the
computation of diluted EPS for the three months ended December 31, 1999 and 1998
because its effect would be antidilutive. As of December 31, 1999 and 1998,
antidilutive options to acquire 50,000 shares and 55,000 shares, respectively,
of the Company's stock were outstanding.
Assumed conversion of the convertible debentures to 75,000 shares of
common stock at December 31, 1999 and 95,000 shares of common stock at December
31, 1998 was excluded from the computation of diluted EPS for the three months
ended December 31, 1999 and 1998 because its effect would be antidilutive.
3. SEGMENT INFORMATION
-------------------
The Company operates three segments: exploring for, developing, producing
and selling oil and natural gas in Canada; investing in leasehold land in
Hawaii; and drilling wells and installing and repairing water pumping systems in
Hawaii. The Company's reportable segments are strategic business units that
offer different products and services. They are managed separately as each
segment requires different operational methods, operational assets and marketing
strategies, and operate in different geographical locations.
The Company does not allocate general and administrative expenses,
interest expense, interest income or income taxes to segments, and there are no
transactions between segments that affect segment profit or loss.
Three months ended December 31,
------------------------------
1999 1998
------------ ------------
Revenues:
Oil and natural gas $ 3,130,000 $ 2,350,000
Contract drilling 980,000 750,000
Other 140,000 183,000
------------ ------------
Total $ 4,250,000 $ 3,283,000
============ ============
Depreciation, depletion
and amortization:
Oil and natural gas $ 628,000 $ 650,000
Contract drilling 49,000 26,000
Other 27,000 18,000
------------ ------------
Total $ 704,000 $ 694,000
============ ============
Operating profit
(before general
and administrative expenses):
Oil and natural gas $ 1,752,000 $ 883,000
Contract drilling 170,000 148,000
Other 113,000 165,000
------------ ------------
Total 2,035,000 1,196,000
General and
administrative expenses (720,000) (764,000)
Interest expense (204,000) (206,000)
Interest income 60,000 17,000
------------ ------------
Earnings before income taxes $ 1,171,000 $ 243,000
============ ============
<PAGE>
9
4. INCOME TAXES
------------
The components of the income tax provision for the three months ended
December 31, 1999 and 1998 are as follows:
Three months ended
December 31,
---------------------------
1999 1998
---------- ----------
Current - U.S. $ - $ -
Current - Foreign 489,000 178,000
---------- ----------
Total - Current 489,000 178,000
---------- ----------
Deferred - U.S. 60,000 15,000
Deferred - Foreign 82,000 -
---------- ----------
Total - Deferred 142,000 15,000
---------- ----------
$ 631,000 $ 193,000
========== ==========
5. SUBSEQUENT EVENT - INVESTMENT IN LAND
-------------------------------------
On January 3, 2000, Kaupulehu Makai Venture, an affiliate of Kajima
Corporation of Japan, exercised a portion of the option granted by Kaupulehu
Developments, a 50.1%-owned general partnership, for the development of
residential parcels within the Four Seasons Resort Hualalai at Historic
Ka'upulehu on the Island of Hawaii. As a result, after repayment of debt of
$1,300,000 and distributions to Kaupulehu Developments' minority interest
partner, the Company's consolidated cash position increased by $4,130,000 in
January 2000. This transaction will be reflected in the Company's results for
the three and six months ended March 31, 2000.
6. FUTURE ACCOUNTING CHANGES
-------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments and hedging activities and
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The provisions of SFAS No. 133 are effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. In July 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133, an
Amendment of FASB Statement No. 133," which defers the effective date of SFAS
No. 133 to be effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. Management does not expect adoption of SFAS No. 133 will have a
material effect on the Company's financial condition, results of operations or
liquidity.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS
----------------------
FORWARD-LOOKING STATEMENTS
- --------------------------
This Form 10-QSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including various forecasts, projections of the Company's
future performance, statements of the Company's plans and objectives or other
similar types of information. Although the Company believes that its
expectations are based on reasonable assumptions, it cannot assure that the
expectations contained in such forward-looking statements will be achieved. Such
statements involve risks, uncertainties and assumptions which could cause actual
results to differ materially from those contained in such statements. These
forward-looking statements speak only as of the date of filing of this Form
10-QSB, and the Company expressly disclaims any obligation or undertaking to
publicly release any updates or revisions to any forward-looking statements
contained herein.
<PAGE>
10
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flows from operations totaled $1,609,000 for the three months ended
December 31, 1999, an increase of $1,781,000 as compared to the same period in
the prior year. This increase was due to higher operating profit generated by
the Company's oil and natural gas segment and to the timing of receivable
collections and payables disbursements.
At December 31, 1999, the Company had $2,716,000 in cash and cash
equivalents, and approximately $2,500,000 of available credit under its credit
facility with a Canadian bank. Additionally, on January 3, 2000, Kaupulehu Makai
Venture, an affiliate of Kajima Corporation of Japan, exercised a portion of the
option granted by Kaupulehu Developments, a 50.1%-owned general partnership, for
the development of residential parcels within the Four Seasons Resort Hualalai
at Historic Ka'upulehu on the Island of Hawaii. As a result, after repayment of
debt of $1,300,000 and distributions to Kaupulehu Developments' minority
interest partner, the Company's consolidated cash position increased by
$4,130,000 in January 2000. This transaction will be reflected in the Company's
results for the three and six months ended March 31, 2000.
During the quarter ended December 31, 1999, the Company invested $457,000
in oil and natural gas properties in Canada, as compared to $211,000 during the
prior year's first quarter.
The Company participated in the drilling of seven successful wells and
three recompletions in Alberta, Canada, during the three months ended December
31, 1999 as follows:
Productive Productive
Oil Wells Gas Wells Dry Holes Total Wells
------------- ------------- ------------- -------------
Exp. Dev. Exp. Dev. Exp. Dev. Exp. Dev.
---- ---- ---- ---- ---- ---- ---- ----
Gross - 3.00 - 4.00 - - - 7.00
Net - 0.31 - 1.35 - - - 1.66
The Company also invested $177,000 (including interest costs capitalized)
towards the rezoning of the North Kona, Hawaii property held by Kaupulehu
Developments. In December 1999, the Third Circuit Court of the County of Hawaii
remanded Kaupulehu Developments' Special Management Area ("SMA") Use Permit
Petition back to the County of Hawaii Planning Commission for further review due
to procedural issues. In late December 1999, the County of Hawaii Planning
Commission reaffirmed their approval of the SMA Use Permit Petition. Additional
steps must be completed in order for Kaupulehu Developments to proceed with
development of this area, including the resolution of a legal challenge to a
prior State of Hawaii zoning approval for this project which is before the
Hawaii Supreme Court. If Kaupulehu Developments is unable to prevail in the case
which is before the Hawaii Supreme Court, and if Kaupulehu Developments is
subsequently unable to obtain the State of Hawaii's approval after making
additional efforts with the modifications it believes are necessary to obtain
the approval, there will be a materially adverse impairment of the value of the
Company's investment in land.
<PAGE>
11
YEAR 2000 COMPLIANCE
- --------------------
The Company has not experienced any significant disruptions to financial
or operating activities resulting from Year 2000 issues. Management does not
expect Year 2000 issues to have a material adverse effect on the Company's
operations or financial results.
RESULTS OF OPERATIONS
- ---------------------
Oil and Natural Gas
- -------------------
SELECTED OPERATING STATISTICS
----------------------------------------------
Average Price Per Unit
----------------------------------------------
Three months ended Increase
December 31, (Decrease)
--------------------- -----------------
1999 1998 $ %
------ ------ ------- ----
Liquids (Bbls)* $14.31 $ 8.44 $ 5.87 70%
Oil (Bbls)* $22.40 $12.15 $10.25 84%
Natural gas (MCF)** $ 2.00 $ 1.42 $ 0.58 41%
Net Production
----------------------------------------------
Three months ended Increase
December 31, (Decrease)
----------------------- -----------------
1999 1998 Units %
------- --------- -------- ----
Liquids (Bbls)* 30,000 20,000 10,000 50%
Oil (Bbls)* 46,000 62,000 (16,000) (26%)
Natural gas (MCF)** 830,000 1,002,000 (172,000) (17%)
*Bbls = stock tank barrel equivalent to 42 U.S. gallons
**MCF = 1,000 cubic feet
Oil and natural gas revenues increased $780,000 (33%) for the three months
ended December 31, 1999, as compared to the same period in 1998, due to 84%, 70%
and 41% increases in oil, natural gas liquids, and natural gas prices,
respectively, and a 50% increase in natural gas liquids net production. The
increase was partially offset by 26% and 17% decreases in oil and natural gas
net production, respectively, due to normal production declines at the Company's
mature properties, Thornbury, Hillsdown, Highvale, Gilby and Zama. Natural gas
net production at Dunvegan, the Company's principal gas property, has increased
due in part to the well recompletions performed last year, and has accordingly
abated a portion of the decrease in production from the aforementioned
properties.
Contract Drilling
- -----------------
Contract drilling revenues and costs increased $230,000 (31%) and $185,000
(32%), respectively, for the three months ended December 31, 1999, as compared
to the same period in 1998, as one of the drilling contracts in the three months
ended December 31, 1999 was operating 24 hours a day, seven days a week. The
drill rigs operating in the three months ended December 31, 1998 were used five
days a week during daylight only. Accordingly, operating profit before
depreciation increased $45,000 (26%) to $219,000 for the three months ended
December 31, 1999, as compared to $174,000 for the same period in 1998.
<PAGE>
12
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
Executive Vice President,
Chief Financial Officer
Date: February 14, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Barnwell Industries Inc.'s fiscal 2000 first quarter 10-QSB and is qualified
in its entirety by reference to such 10-QSB.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 2716
<SECURITIES> 0
<RECEIVABLES> 1659
<ALLOWANCES> 196
<INVENTORY> 106
<CURRENT-ASSETS> 5244
<PP&E> 61240
<DEPRECIATION> 37168
<TOTAL-ASSETS> 33218
<CURRENT-LIABILITIES> 6358
<BONDS> 11736
0
0
<COMMON> 821
<OTHER-SE> 7738
<TOTAL-LIABILITY-AND-EQUITY> 33218
<SALES> 4110
<TOTAL-REVENUES> 4310
<CGS> 1511
<TOTAL-COSTS> 1511
<OTHER-EXPENSES> 704
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 204
<INCOME-PRETAX> 1171
<INCOME-TAX> 631
<INCOME-CONTINUING> 540
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 540
<EPS-BASIC> .41
<EPS-DILUTED> .41
</TABLE>
