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 June 30, 2000
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 August 4, 2000 there were 1,310,952 shares of common stock, par value
$0.50, outstanding.
Transitional Small Business Disclosure Format Yes No X
----- -----
1
<PAGE>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
INDEX
-----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 2000 and September 30, 1999 (Unaudited)
Consolidated Statements of Operations -
three and nine months ended June 30, 2000 and 1999 (Unaudited)
Condensed Consolidated Statements of Cash Flows -
nine months ended June 30, 2000 and 1999 (Unaudited)
Consolidated Statements of Stockholders'
Equity and Comprehensive Income -
three months ended June 30, 2000 and 1999 (Unaudited)
Consolidated Statements of Stockholders'
Equity and Comprehensive Income -
nine months ended June 30, 2000 and 1999 (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
2
<PAGE>
Item 1. Financial Statements
<TABLE>
<CAPTION>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Unaudited, see Note A below)
ASSETS June 30, September 30,
------ 2000 1999
------------ ------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 6,580,000 $ 2,577,000
Accounts receivable, net 1,632,000 1,873,000
Other current assets 770,000 1,147,000
------------ ------------
TOTAL CURRENT ASSETS 8,982,000 5,597,000
INVESTMENT IN LAND 3,864,000 3,519,000
OTHER ASSETS 203,000 207,000
NET PROPERTY AND EQUIPMENT 24,979,000 23,972,000
------------ ------------
TOTAL ASSETS $ 38,028,000 $ 33,295,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,534,000 $ 1,894,000
Accrued expenses 2,479,000 1,975,000
Income taxes payable 1,372,000 251,000
Other current liabilities 1,061,000 787,000
Current portion, long-term debt 400,000 1,650,000
------------ ------------
TOTAL CURRENT LIABILITIES 6,846,000 6,557,000
------------ ------------
LONG-TERM DEBT 10,251,000 12,631,000
------------ ------------
DEFERRED INCOME TAXES 6,945,000 6,301,000
------------ ------------
MINORITY INTEREST 2,255,000 -
------------ ------------
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 15,731,000 11,801,000
Accumulated other comprehensive loss -
foreign currency translation adjustments (3,042,000) (3,130,000)
Treasury stock, at cost, 331,845 shares at June 30, 2000
and 325,845 shares at September 30, 1999 (4,882,000) (4,789,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 11,731,000 7,806,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 38,028,000 $ 33,295,000
============ ============
<FN>
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
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
Three months ended Nine months ended
June 30, June 30,
------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Oil and natural gas $ 4,110,000 $ 2,370,000 $10,770,000 $ 6,790,000
Contract drilling 850,000 1,210,000 2,700,000 2,540,000
Gas processing and other 260,000 160,000 930,000 550,000
Sale of development rights, net - - 6,540,000 -
----------- ----------- ----------- -----------
5,220,000 3,740,000 20,940,000 9,880,000
----------- ----------- ----------- -----------
Costs and expenses:
Oil and natural gas operating 733,000 738,000 2,313,000 2,243,000
Contract drilling operating 679,000 944,000 2,122,000 1,999,000
General and administrative 848,000 794,000 2,490,000 2,220,000
Depreciation, depletion
and amortization 1,098,000 691,000 2,669,000 2,008,000
Interest 170,000 194,000 576,000 593,000
Foreign exchange losses - - 206,000 -
Minority interest in earnings 6,000 - 3,303,000 -
----------- ----------- ----------- -----------
3,534,000 3,361,000 13,679,000 9,063,000
----------- ----------- ----------- -----------
Earnings before income taxes 1,686,000 379,000 7,261,000 817,000
Income tax provision 966,000 279,000 3,331,000 637,000
----------- ----------- ----------- -----------
NET EARNINGS $ 720,000 $ 100,000 $ 3,930,000 $ 180,000
=========== =========== =========== ===========
BASIC EARNINGS PER COMMON SHARE $ 0.55 $ 0.08 $ 2.98 $ 0.14
=========== =========== =========== ===========
DILUTED EARNINGS PER COMMON SHARE $ 0.53 $ 0.08 $ 2.88 $ 0.14
=========== =========== =========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
BARNWELL INDUSTRIES, INC.
-------------------------
AND SUBSIDIARIES
----------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
Nine months ended
June 30,
--------------------------
2000 1999
----------- -----------
Cash Flows from Operating Activities:
<S> <C> <C>
Net earnings $ 3,930,000 $ 180,000
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Minority interest in earnings 3,303,000 -
Depreciation, depletion, and amortization 2,669,000 2,008,000
Deferred income taxes 585,000 103,000
Foreign exchange losses 206,000 -
Gain on sale of equity securities (238,000) -
Earnings on sale of development rights, net (6,540,000) -
----------- -----------
3,915,000 2,291,000
Increase (decrease) from changes
in current assets and liabilities 2,159,000 (1,195,000)
----------- -----------
Net cash provided by operating activities 6,074,000 1,096,000
----------- -----------
Cash Flows from Investing Activities:
Proceeds from sale of development rights, net 6,540,000 -
Proceeds from sale of equity securities 380,000 -
Proceeds from sale of oil and natural gas properties 46,000 124,000
Decrease in other assets 4,000 4,000
Capital expenditures - contract drilling and other (514,000) (207,000)
Additions to investment in land (520,000) (601,000)
Capital expenditures - oil and natural gas (3,411,000) (863,000)
----------- -----------
Net cash provided by (used in) investing activities 2,525,000 (1,543,000)
----------- -----------
Cash Flows from Financing Activities:
Long-term debt borrowings 50,000 756,000
Purchases of common stock for treasury (93,000) -
Distribution to minority interest partner (873,000) -
Repayments of long-term debt (3,666,000) (300,000)
----------- -----------
Net cash (used in) provided by financing activities (4,582,000) 456,000
----------- -----------
Effect of exchange rate
changes on cash and cash equivalents (14,000) 36,000
----------- -----------
Net increase in cash and cash equivalents 4,003,000 45,000
Cash and cash equivalents at beginning of period 2,577,000 2,178,000
----------- -----------
Cash and cash equivalents at end of period $ 6,580,000 $ 2,223,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amounts capitalized) $ 611,000 $ 613,000
=========== ===========
Income taxes $ 1,746,000 $ 73,000
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements
</FN>
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Three months ended June 30, 2000 and 1999
(Unaudited)
Accumulated
Additional Other Total
Common Paid-In Comprehensive Retained Comprehensive Treasury Stockholders'
Stock Capital Income Earnings Loss Stock Equity
-------- ----------- ------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at March 31, 1999 $821,000 $3,103,000 $11,361,000 $ (3,487,000) $ (4,789,000) $ 7,009,000
Comprehensive income:
Net earnings $ 100,000 100,000 100,000
Other comprehensive income,
net of income taxes -
foreign currency
translation adjustments 335,000 335,000 335,000
-------------
Total comprehensive income $ 435,000
-------- ---------- ============= ----------- ------------- ------------- -------------
Balances at June 30, 1999 $821,000 $3,103,000 $11,461,000 $ (3,152,000) $ (4,789,000) $ 7,444,000
======== ========== =========== ============= ============= =============
Balances at March 31, 2000 $821,000 $3,103,000 $15,011,000 $ (2,763,000) $ (4,789,000) $ 11,383,000
Purchase of 6,000
common shares for treasury (93,000) (93,000)
Comprehensive income:
Net earnings $ 720,000 720,000 720,000
Other comprehensive loss,
net of income taxes -
foreign currency
translation adjustments (279,000) (279,000) (279,000)
-------------
Total comprehensive income $ 441,000
-------- ---------- ============= ----------- ------------- ------------- -------------
Balances at June 30, 2000 $821,000 $3,103,000 $15,731,000 $ (3,042,000) $ (4,882,000) $ 11,731,000
======== ========== =========== ============= ============= =============
<FN>
See Notes to Condensed Consolidated Financial Statements
</FN>
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Nine months ended June 30, 2000 and 1999
(Unaudited)
Accumulated
Additional Other Total
Common Paid-In Comprehensive Retained Comprehensive Treasury Stockholders'
Stock Capital Income Earnings Loss Stock Equity
-------- ---------- ------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances 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 $ 180,000 180,000 180,000
Other comprehensive income,
net of income taxes -
foreign currency
translation adjustments 520,000 520,000 520,000
-------------
Total comprehensive income $ 700,000
-------- ---------- ============= ----------- ------------- ------------- -------------
Balances at June 30, 1999 $821,000 $3,103,000 $11,461,000 $ (3,152,000) $ (4,789,000) $ 7,444,000
======== ========== =========== ============= ============= =============
Balances at
September 30, 1999 $821,000 $3,103,000 $11,801,000 $ (3,130,000) $ (4,789,000) $ 7,806,000
Purchase of 6,000
common shares for treasury (93,000) (93,000)
Comprehensive income:
Net earnings $ 3,930,000 3,930,000 3,930,000
Other comprehensive loss,
net of income taxes -
foreign currency
translation adjustments (118,000) (118,000) (118,000)
-------------
Total comprehensive income $ 3,812,000
=============
Foreign exchange
losses recognized 206,000 206,000
-------- ---------- ----------- ------------- ------------- -------------
Balances at June 30, 2000 $821,000 $3,103,000 $15,731,000 $ (3,042,000) $ (4,882,000) $ 11,731,000
======== ========== =========== ============= ============= =============
<FN>
See Notes to Condensed Consolidated Financial Statements
</FN>
</TABLE>
7
<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 June 30, 2000, the
Consolidated Statements of Operations for the three and nine months ended June
30, 2000 and 1999, the Condensed Consolidated Statements of Cash Flows for the
nine months ended June 30, 2000 and 1999, and the Consolidated Statements of
Stockholders' Equity and Comprehensive Income for the three and nine months
ended June 30, 2000 and 1999 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 June 30, 2000 and
for all periods presented have been made. The Condensed Consolidated Balance
Sheet as of September 30, 1999 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. These condensed consolidated
financial statements should be read in conjunction with the 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 June 30, 2000 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 the three and nine months ended June 30, 2000 was 1,316,420 and
1,316,775, respectively. The weighted-average common shares outstanding for the
three and nine months ended June 30, 1999 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 1,395,465 and 1,390,659 for the three and nine months ended June
30, 2000, respectively, and 1,316,952 for the three and nine months ended June
30, 1999.
Reconciliations between the numerator and denominator of the basic and
diluted earnings per share computations for the three and nine months ended June
30, 2000 are as follows:
8
<PAGE>
Three months ended June 30, 2000
------------------------------------------
Net Earnings Shares Per-Share
(Numerator) (Denominator) Amount
------------------------------------------
Basic earnings per share $ 720,000 1,316,420 $ 0.55
======
Effect of dilutive securities -
Common stock options - 14,045
Convertible debentures 21,000 65,000
---------- ----------
Diluted earnings per share $ 741,000 1,395,465 $ 0.53
========== ========== ======
Nine months ended June 30, 2000
------------------------------------------
Net Earnings Shares Per-Share
(Numerator) (Denominator) Amount
------------------------------------------
Basic earnings per share $3,930,000 1,316,775 $ 2.98
=========
Effect of dilutive securities -
Common stock options - 8,884
Convertible debentures 69,000 65,000
---------- ----------
Diluted earnings per share $3,999,000 1,390,659 $ 2.88
========== ========== =========
Assumed conversion of certain common stock options was excluded from the
computation of diluted EPS for the three and nine months ended June 30, 2000 and
1999 because their inclusion would be antidilutive. For the three and nine
months ended June 30, 2000 and 1999, antidilutive options to acquire 50,000
shares of the Company's common stock were outstanding.
Assumed conversion of convertible debentures to 85,000 shares of common
stock at June 30, 1999 was excluded from the computation of diluted EPS for the
three and nine months ended June 30, 1999 because their inclusion would be
antidilutive.
3. INCOME TAXES
------------
The components of the provision for income taxes for the three and nine
months ended June 30, 2000 and 1999 are as follows:
Three months ended Nine months ended
June 30, June 30,
-------------------------- -------------------------
2000 1999 2000 1999
---------- --------- ---------- ---------
Current - U.S. $ 3,000 $ - $ 270,000 $ -
Current - Foreign 1,051,000 206,000 2,476,000 534,000
---------- --------- ---------- ---------
Total - Current 1,054,000 206,000 2,746,000 534,000
---------- --------- ---------- ---------
Deferred - U.S. 20,000 73,000 680,000 103,000
Deferred - Foreign (108,000) - (95,000) -
---------- --------- ---------- ---------
Total - Deferred (88,000) 73,000 585,000 103,000
---------- --------- ---------- ---------
$ 966,000 279,000 $3,331,000 $ 637,000
========== ========= ========== =========
9
<PAGE>
4. 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.
<TABLE>
<CAPTION>
Three months ended June 30, Nine months ended June 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
Revenues:
<S> <C> <C> <C> <C>
Oil and natural gas $ 4,110,000 $ 2,370,000 $10,770,000 $ 6,790,000
Contract drilling 850,000 1,210,000 2,700,000 2,540,000
Land development - - 6,540,000 -
Other 168,000 141,000 685,000 496,000
----------- ----------- ----------- -----------
Total $ 5,128,000 $ 3,721,000 $20,695,000 $ 9,826,000
=========== =========== =========== ===========
Depreciation, depletion
and amortization:
Oil and natural gas $ 994,000 $ 626,000 $ 2,303,000 $ 1,827,000
Contract drilling 51,000 30,000 149,000 82,000
Other 53,000 35,000 217,000 99,000
----------- ----------- ----------- -----------
Total $ 1,098,000 $ 691,000 $ 2,669,000 $ 2,008,000
=========== =========== =========== ===========
Operating profit
(before general and
administrative
expenses):
Oil and natural gas $ 2,383,000 $ 1,006,000 $ 6,154,000 $ 2,720,000
Contract drilling 120,000 236,000 429,000 459,000
Land development (6,000) - 3,237,000 -
Other 115,000 106,000 468,000 397,000
----------- ----------- ----------- -----------
Total 2,612,000 1,348,000 10,288,000 3,576,000
General and
administrative expenses (848,000) (794,000) (2,490,000) (2,220,000)
Interest expense (170,000) (194,000) (576,000) (593,000)
Interest income 92,000 19,000 245,000 54,000
Foreign exchange losses - - (206,000) -
----------- ----------- ----------- -----------
Earnings before
income taxes $ 1,686,000 $ 379,000 $ 7,261,000 $ 817,000
=========== =========== =========== ===========
</TABLE>
5. 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.
10
<PAGE>
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. In June 2000, the FASB issued SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities,
an Amendment of FASB Statement No. 133," which addresses a limited number of
issues causing implementation difficulties for certain entities that apply SFAS
No. 133. Management does not expect adoption of SFAS No. 133, as amended by SFAS
No. 138, will have a material effect on the Company's financial condition,
results of operations or liquidity.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion No. 25." Interpretation No. 44 clarifies the application of APB Opinion
No. 25 for certain issues involving employee stock compensation and is generally
effective July 1, 2000. Adoption of Interpretation No. 44 is not expected to
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.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash flows from operations totaled $6,074,000 for the nine months ended
June 30, 2000, an increase of $4,978,000 as compared to the same period in the
prior year, due to an increase in operating profit generated by the Company's
oil and natural gas segment and to the timing of receivable collections and
payables disbursements.
In January 2000, Kaupulehu Makai Venture, an affiliate of Kajima
Corporation of Japan, exercised a portion of the option granted in 1990 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. The Company recognized revenues of
$6,540,000, net of costs associated with the transaction, from the receipt of
the option monies. $1,300,000 of the proceeds were used to repay Kaupulehu
Developments' borrowings from a Hawaii bank, and $873,000 were distributed to
Kaupulehu Developments' minority interest partner, Cambridge Hawaii Limited
Partnership ("CHLP"), which holds the remaining 49.9% interest in Kaupulehu
Developments. CHLP is a Hawaii limited partnership comprised of three Canadian
limited partnerships. These three limited partnerships are in turn comprised of
individuals, one of whom is Mr. Terry Johnston. Mr. Johnston was elected to the
Board of Directors of the Company in March 2000.
11
<PAGE>
During the nine months ended June 30, 2000, the Company repaid $2,066,000
of its borrowings under a credit facility with a Canadian bank and $300,000 of
outstanding convertible debentures. The credit facility with the Canadian bank
has been renewed through April 2001 for $17,000,000 Canadian dollars, or its
U.S. dollar equivalent of approximately $11,400,000, subject to the Company
pledging several of its properties which are not currently pledged; the Company
intends to pledge such properties. At June 30, 2000, the Company had $6,580,000
in cash and cash equivalents and approximately $2,000,000 of available credit
under its credit facility with a Canadian bank.
The Company invested $1,259,000 and $3,411,000 in oil and natural gas
properties for the three and nine months ended June 30, 2000, respectively, as
compared to $360,000 and $863,000 for the three and nine months ended June 30,
1999, respectively.
During the three months ended June 30, 2000, the Company participated in
the drilling of nine successful wells and three dry holes as follows:
Productive Productive
Oil Wells Gas Wells Dry Holes Total Wells
------------- ------------- ------------- --------------
Exp. Dev. Exp. Dev. Exp. Dev. Exp. Dev.
---- ---- ---- ---- ---- ---- ---- -----
Gross - 5.00 - 4.00 1.00 2.00 1.00 11.00
Net - 0.46 - 0.50 0.25 0.80 0.25 1.76
During the nine months ended June 30, 2000, the Company participated in
the drilling of 26 successful wells, one with two producing zones, and three dry
holes as follows:
Productive Productive
Oil Wells Gas Wells Dry Holes Total Wells
------------- ------------- ------------- --------------
Exp. Dev. Exp. Dev. Exp. Dev. Exp. Dev.
---- ---- ---- ---- ---- ---- ---- -----
Gross - 12.00 - 14.00 1.00 2.00 1.00 28.00
Net - 1.19 - 2.93 0.25 0.80 0.25 4.92
Additionally, during the three and nine months ended June 30, 2000, the
Company participated in the recompletion of 4 gross wells (0.25 net wells) and
16 gross wells (2.35 net wells), respectively, in Alberta, Canada.
The Company invested $520,000 (including interest costs capitalized)
towards the rezoning of the North Kona, Hawaii property held by Kaupulehu
Developments during the nine months ended June 30, 2000. 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.
Additionally, Kaupulehu Developments is in the process of negotiating a revised
development agreement and residential fee purchase prices with the lessor of the
2,100 acre parcel. Management cannot predict the outcome of these negotiations.
The Company also invested $278,000 to improve its contract drilling
storage and maintenance yard at Sand Island, Oahu, Hawaii during the nine months
ended June 30, 2000. These improvements have satisfied the Company's obligation
to improve the property under the terms of the property lease.
12
<PAGE>
During the three months ended June 30, 2000, the Company repurchased 6,000
shares of its common stock on the open market for $93,000 (average price of
$15.50 per share) under a March 2000 stock buyback plan authorizing the
repurchase of up to 100,000 shares. The Company plans to repurchase additional
shares from time to time in the open market or in privately negotiated
transactions, depending on market conditions.
RESULTS OF OPERATIONS
---------------------
Oil and Gas
-----------
SELECTED OPERATING STATISTICS
-----------------------------
Average Prices
------------------------------------------------
Three months ended Increase
June 30, (Decrease)
----------------------- -----------------
2000 1999 $ %
------- ------- ------ ----
Oil (Bbls)* $ 25.89 $ 15.11 $10.78 71%
Liquids (Bbls)* $ 17.04 $ 9.35 $ 7.69 82%
Gas (MCF)** $ 2.55 $ 1.57 $ 0.98 62%
Nine months ended Increase
June 30, (Decrease)
----------------------- -----------------
2000 1999 $ %
------- ------- ------ ----
Oil (Bbls)* $ 25.07 $ 12.67 $12.40 98%
Liquids (Bbls)* $ 15.94 $ 8.33 $ 7.61 91%
Gas (MCF)** $ 2.15 $ 1.49 $ 0.66 44%
Net Sales Volumes
------------------------------------------------
Three months ended Increase
June 30, (Decrease)
----------------------- -----------------
2000 1999 Units %
--------- ------- ------- ----
Oil (Bbls)* 47,000 49,000 (2,000) (4%)
Liquids (Bbls)* 26,000 19,000 7,000 37%
Gas (MCF)** 917,000 943,000 (26,000) (3%)
Nine months ended Increase
June 30, (Decrease)
----------------------- -----------------
2000 1999 Units %
--------- --------- ------- ----
Oil (Bbls)* 143,000 167,000 (24,000) (14%)
Liquids (Bbls)* 81,000 61,000 20,000 33%
Gas (MCF)** 2,615,000 2,834,000 (219,000) (8%)
*Bbls = stock tank barrel equivalent to 42 U.S. gallons
**MCF = 1,000 cubic feet
Oil and natural gas revenues increased $1,740,000 (73%) for the three
months ended June 30, 2000, as compared to the same period in 1999, due to 71%,
62% and 82% increases in oil, natural gas and natural gas liquids prices,
respectively.
Oil and natural gas revenues increased $3,980,000 (59%) for the nine
months ended June 30, 2000, as compared to the same period in 1999, due
primarily to 98%, 44% and 91% increases in oil, natural gas and natural gas
liquids prices, respectively.
Contract Drilling
-----------------
Contract drilling revenues and operating expenses decreased $360,000 (30%)
and $265,000 (28%), respectively, for the three months ended June 30, 2000, as
compared to the same period in 1999, as revenues and operating expenses for the
prior year period included work under a contract that required around-the-clock
operations, 24 hours per day, seven days a week; all of the revenues for the
current year period were under daylight-only contracts.
13
<PAGE>
Gas Processing and Other
------------------------
Gas processing and other income increased $100,000 (63%) for the three
months ended June 30, 2000, as compared to the same period in 1999, due to
interest earned on higher average cash balances.
Gas processing and other income increased $380,000 (69%) for the nine
months ended June 30, 2000, as compared to the same period in 1999, due to a
$238,000 gain on the sale of equity securities and interest earned on higher
average cash balances.
Sale of Development Rights, Net
-------------------------------
In January 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, the Company recognized
$3,243,000 of pre-tax earnings, net of minority interests, in the nine months
ended June 30, 2000. There were no sales of development rights in the nine
months ended June 30, 1999.
General and Administrative Expenses
-----------------------------------
General and administrative expenses increased $270,000 (12%) for the nine
months ended June 30, 2000, as compared to the same period in 1999, due
primarily to general and administrative costs associated with the $6,540,000
sale of development rights, and higher personnel costs due in part to the
Company taking almost all of its natural gas and oil in kind and marketing such
products itself, instead of through the operator of the oil or natural gas
property.
Interest Expense
----------------
Interest expense decreased $24,000 (12%) for the three months ended June
30, 2000, as compared to the same period in 1999, due to lower average loan
balances, partially offset by higher average interest rates.
Depletion, Depreciation and Amortization
----------------------------------------
Depletion, depreciation and amortization increased $407,000 (59%) and
$661,000 (33%) for the three and nine months ended June 30, 2000, respectively,
as compared to the same periods in the prior year. The increases are due
primarily to an increase in the depletion rate, resulting from increased capital
expenditures, and secondarily to depreciation of fixed assets purchased in late
fiscal 1999 and the current periods.
Foreign Exchange Losses
-----------------------
The Company conducts foreign operations in Canada. Consequently, the
Company is subject to foreign currency transaction gains and losses due to
fluctuations of the exchange rates between the Canadian dollar and the U.S.
dollar. During the nine months ended June 30, 2000, the Company realized foreign
currency transaction losses of $206,000. There were no foreign currency
transaction gains or losses in the three and nine months ended June 30, 1999.
The Company cannot accurately predict future fluctuations between the Canadian
and U.S. dollars.
14
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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 and
Chief Financial Officer
Date: August 8, 2000
