SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the period ended September 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-12396
THE BEARD COMPANY
(Exact name of registrant as specified in its charter)
Oklahoma 73-0970298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Enterprize Plaza, Suite 320
5600 North May Avenue
Oklahoma City, Oklahoma 73112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 842-2333
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 requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of September 30, 1996.
Common Stock $.001 par value - 2,794,074
<PAGE>
THE BEARD COMPANY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1996 (Unaudited) and
December 31, 1995
Statements of Operations - Three Months and Nine Months
ended September 30, 1996 and 1995 (Unaudited)
Statements of Shareholders' Equity, Year ended
December 31, 1995 and Nine Months ended
September 30, 1996 (Unaudited)
Statements of Cash Flows - Nine Months ended
September 30, 1996 and 1995 (Unaudited)
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
THE BEARD COMPANY AND SUBSIDIARIES
Financial Statements
September 30, 1996 (Unaudited) and December 31, 1995 and for the
Three Months and Nine Months Ended September 30, 1996, and 1995 (Unaudited)
PART I
FINANCIAL INFORMATION
<PAGE>
Item 1. Financial Statements
<TABLE>
THE BEARD COMPANY AND SUBSIDIARIES
Balance Sheets
September 30, 1996 (Unaudited) and December 31, 1995
<CAPTION>
September 30, December 31,
Assets 1996 1995
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 105,000 $ 220,000
Accounts receivable, less allowance
for doubtful receivables of
$53,000 in 1996 and $43,000 in
1995 2,341,000 2,259,000
Inventories 2,047,000 2,282,000
Prepaid expense and other current
assets 626,000 401,000
------------ ------------
Total current assets 5,119,000 5,162,000
------------ ------------
Investments and other assets 1,781,000 1,935,000
Property, plant and equipment,
at cost 16,309,000 14,291,000
Less accumulated depreciation,
depletion and amortization 7,827,000 7,133,000
------------ -----------
Net property, plant and equipment 8,482,000 7,158,000
------------ -----------
Intangible assets, at cost 4,277,000 3,795,000
Less accumulated amortization 3,513,000 3,435,000
------------ -----------
Net intangible assets 764,000 360,000
------------ ------------
$ 16,146,000 $ 14,615,000
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable $ 1,576,000 $ 1,354,000
Accrued expense and other
liabilities 638,000 342,000
Short-term debt 641,000 957,000
Current maturities of long-term
debt 618,000 520,000
------------ ------------
Total current liabilities 3,473,000 3,173,000
------------ ------------
Long-term debt less current
maturities 2,306,000 1,454,000
Redeemable preferred stock of
$100 stated value; 5,000,000
shares authorized; 90,156 shares
issued and outstanding (note 2) 1,200,000 1,200,000
Minority interest in consolidated
subsidiaries 145,000 0
Commitments and contingencies
(note 2) 0 0
Common shareholders' equity:
Common stock of $.001 par value
per share; 10,000,000 shares
authorized; 2,794,074 and
2,730,830 shares issued and
outstanding in 1996 and 1995,
respectively 3,000 3,000
Capital in excess of par value 41,619,000 41,446,000
Accumulated deficit (32,600,000) (32,661,000)
------------ ------------
Total common shareholders' equity 9,022,000 8,788,000
------------ ------------
$ 16,146,000 $ 14,615,000
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
THE BEARD COMPANY AND SUBSIDIARIES
Statement of Operations
(Unaudited)
<CAPTION>
For the Three Months Ended For the Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Carbon dioxide $ 4,053,000 $ 3,620,000 $ 10,385,000 $ 8,738,000
Environmental/resource recovery 806,000 752,000 1,864,000 2,060,000
Real estate development 1,083,000 599,000 1,083,000 1,949,000
Other 21,000 18,000 51,000 49,000
------------ ------------ ------------ ------------
5,963,000 4,989,000 13,383,000 12,796,000
Expenses:
Carbon dioxide 2,615,000 2,598,000 7,098,000 6,204,000
Environmental/resource recovery 657,000 581,000 1,787,000 1,649,000
Real estate development 1,043,000 549,000 1,043,000 1,826,000
Selling, general and administrative 1,163,000 881,000 3,210,000 2,690,000
Depreciation, depletion and amortization 347,000 298,000 972,000 865,000
Other 19,000 47,000 41,000 88,000
------------ ------------ ------------ ------------
5,844,000 4,954,000 14,151,000 13,322,000
Operating profit (loss):
Carbon dioxide 508,000 320,000 668,000 430,000
Environmental/resource recovery (162,000) (70,000) (654,000) (263,000)
Real estate development 30,000 38,000 14,000 90,000
Other (257,000) (253,000) (796,000) (783,000)
------------ ------------ ------------ ------------
119,000 35,000 (768,000) (526,000)
Other income (expense):
Interest income 4,000 2,000 10,000 18,000
Interest expense (74,000) (53,000) (172,000) (141,000)
Gain on sale of assets 54,000 8,000 140,000 196,000
Settlement of take-or-pay contract (note 4) 0 0 939,000 0
Minority interest in operations of
consolidated subsidiaries 16,000 0 13,000 0
Other, including unconsolidated affiliates 2,000 128,000 (101,000) 123,000
------------ ------------ ------------ ------------
Earnings (loss) before income taxes 121,000 120,000 61,000 (330,000)
Income taxes (note 4) 0 0 0 0
------------ ------------ ------------ ------------
Net earnings (loss) $ 121,000 $ 120,000 $ 61,000 $ (330,000)
============ ============ ============ ============
Net earnings (loss) applicable to
common shareholders $ 121,000 $ 120,000 $ 61,000 $ (330,000)
============ ============ ============ ============
Earnings (loss) per common share and
common equivalent share (primary
EPS) (note 3) $ 0.04 $ 0.04 $ 0.02 $ (0.12)
============ ============ ============ ============
Earnings (loss) per common share
assuming maximum dilution (fully
diluted EPS) (note 3) $ 0.04 $ 0.04 $ 0.02 $ (0.12)
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Shareholders' Equity
<CAPTION>
Total
Capital in Common
Common Excess of Accumulated Shareholders'
Stock Par Value Deficit Equity
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance December 31, 1994 $ 3,000 $ 41,321,000 $(32,258,000) $ 9,066,000
Net loss, year ended December 31, 1995 0 0 (403,000) (403,000)
Accretion of discount on preferred stock 0 (51,000) 0 (51,000)
Issuance of 78,700 shares of common stock 0 176,000 0 176,000
---------- ------------ ------------ ------------
Balance December 31, 1995 $ 3,000 $ 41,446,000 $(32,661,000) $ 8,788,000
Net earnings, nine months ended September 30, 1996 0 0 61,000 61,000
Issuance of 63,244 shares of common stock 0 173,000 0 173,000
---------- ------------ ------------ ------------
Balance September 30, 1996 (Unaudited) $ 3,000 $ 41,619,000 $(32,600,000) $ 9,022,000
========== ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
THE BEARD COMPANY AND SUBSIDARIES
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<CAPTION>
For the Nine Months Ended
-------------------------------
September 30, September 30,
1996 1995
------------ ------------
<S> <C> <C>
Operating activities:
Cash received from customers $ 14,101,000 $ 12,351,000
Cash paid to suppliers and employees (12,682,000) (12,344,000)
Interest received 8,000 16,000
Interest paid (278,000) (216,000)
------------ ------------
Net cash provided by (used in)
operating activities 1,149,000 (193,000)
------------ ------------
Investing activities:
Acquisition of property, plant, equipment (1,380,000) (770,000)
Proceeds from sale of assets 319,000 308,000
Other Investments 20,000 (247,000)
------------ ------------
Net cash used in investing activities (1,041,000) (709,000)
------------ ------------
Financing activities:
Proceeds from lines of credit and term notes 2,784,000 2,581,000
Payments on lines of credit and term notes (3,032,000) (1,936,000)
Proceeds from issuance of stock 25,000 0
Preferred stock redemption 0 (58,000)
------------ ------------
Net cash provided by (used in)
financing activities (223,000) 587,000
------------ ------------
Net decrease in cash and cash equivalents (115,000) (315,000)
Cash and cash equivalents at beginning of period 220,000 566,000
------------ ------------
Cash and cash equivalents at end of period $105,000 $251,000
============ ============
Reconciliation of Net earnings (loss) to Net Cash Provided by (Used in)
Operating Activities
Net earnings (loss) $ 61,000 $ (330,000)
Adjustments to reconcile net earnings
(loss) to net cash provided by (used in)
operating Activities:
Depreciation, depletion and amortization 972,000 865,000
Gain on sale of assets (140,000) (196,000)
Net costs capitalized (recognized) on
real estate project (13,000) 67,000
Receipt of property, plant and equipment
as part of settlement of take-or-pay
contract (400,000) 0
Other, including minority interest in
consolidated subsidiaries 96,000 118,000
------------ ------------
Working capital provided by operations 576,000 524,000
Increase in accounts receivable, prepaids
and other current assets from operating
activities (117,000) (618,000)
(Increase) decrease in inventories from
operating activities 248,000 (101,000)
Increase in accounts payable and accrued
expenses from operating activities 442,000 2,000
------------ ------------
Net cash provided by (used in) operating
activities $ 1,149,000 $ (193,000)
============ ============
Supplemental Schedule of Noncash Investing and Financing Activities
Purchase of property, plant and equipment
and intangible assets through issuance of
debt obligations $ 1,040,000 $ 598,000
============ ============
Receipt of property, plant and equipment
as part of settlement of take-or-pay
contract $ 400,000 $ 0
============ ============
Payment of note payable through issuance
of 50,000 shares of common stock $ 138,000 $ 0
============ ============
Sale of property for a note receivable $ 0 $ 104,000
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE BEARD COMPANY AND SUBSIDARIES
Notes to Financial Statements
September 30, 1996 and 1995
(Unaudited)
(1) The accompanying consolidated financial statements include the accounts
of The Beard Company and its wholly and majority-owned subsidiaries.
All significant intercompany transactions have been eliminated.
The financial information included herein is unaudited; however, such
information reflects all adjustments which are, in the opinion of
management, necessary for a fair statement of the results for the
interim periods presented.
The results of operations for the three and nine-month periods ended
September 30, 1996 are not necessarily indicative of the results to
be expected for the full year.
The Company operates within three major industry Segments: (1) the
carbon dioxide ("CO2") Segment, comprised of (a) the manufacture and
distribution of dry ice (solid CO2) and (b) the production of CO2;
(2) the environmental/resource recovery ("E/RR") Segment, consisting
of environmental services and resource recovery activities; and
(3) the real estate ("R/E") Segment, consisting of real estate
construction and development. The Company also has other operations,
including a minority-owned investment in a joint venture for the
extraction, production and sale of crude iodine.
(2) The Company's preferred stock is mandatorily redeemable through
December 31, 2002 from one-third of Beard's "consolidated net income"
as defined. Accordingly, one-third of future "consolidated net income"
will accrete directly to preferred stockholders and reduce earnings
per common share. The Company's operations through September 30,
1996, were not sufficient to begin the sharing of the consolidated
net income. To the extent that the preferred stock is not redeemed
by December 31, 2002, the shares of preferred stock can be converted
into shares of the Company's common stock.
(3) Primary earnings per common share for the nine-month period ended
September 30, 1996 and the three-month periods ended September 30,
1996 and 1995, are computed by dividing net earnings available to
common shareholders by the weighted average number of shares of
common stock and common stock equivalents outstanding during the
period. Common stock equivalents include shares issuable upon
exercise of incentive and non-qualified stock options using the
treasury stock method. Fully diluted earnings per share for the
periods listed above include the potential dilution of the earnings
available to common stockholders as if the preferred stock was
converted to common stock. The calculation includes the weighted
average number of shares of common shares outstanding, the common
stock equivalents, and the common shares that would result from
the conversion of the preferred shares.
The calculation of loss per common share for the nine-month
period ended September 30, 1995, does not include common equivalent
shares or potentially dilutive securities outstanding, as the
effect would be antidilutive.
The following table contains the components of the common share and
common equivalent share amounts used in the calculation of earnings
per share in the Company's statement of operations:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30
1996 1995 1996 1995
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Primary EPS:
Weighted average common
shares outstanding 2,756,752 2,652,130 2,743,067 2,652,130
Options considered to be
common stock equivalents 42,155 23,364 39,196 0
------------ ------------ ------------ -----------
2,798,907 2,675,494 2,782,263 2,652,130
============ ============ ============ ===========
Fully diluted EPS:
Weighted average common
shares outstanding 2,756,752 2,652,130 2,743,067 2,652,130
Options considered to be
comon stock equivalents 42,155 23,364 39,196 0
Conversion of preferred
stock 462,445 462,445 462,445 *
------------ ------------ ------------ -----------
3,261,352 3,137,939 3,244,708 2,652,130
============ ============ ============ ===========
</TABLE>
* The results would be antidilutive. As such, no additional shares are
considered.
(4) During February 1996, the Company settled a take-or-pay agreement
under which a customer was obligated to purchase certain volumes
of liquid CO2. The Company received $539,000 of cash and assets
valued at $400,000 and recognized a gain of approximately $939,000.
(5) In accordance with the provisions of the Statement of Financial
Accounting Standard No. 109, Accounting for Income Taxes ("SFAS
No. 109"), the Company's deferred tax asset is carried at zero book
value, reflecting the uncertainties of the Company's utilization
of the net deductible timing differences. There is no provision for
income taxes in 1996 or 1995 due to the availability of net operating
losses and other carryforwards.
At September 30, 1996, the Company estimates that it had the
following income tax carryforwards available for both income tax
and financial reporting purposes (in thousands):
<TABLE>
<CAPTION>
Expiration
Date Amount
----------- --------
<S> <C> <C>
Federal regular tax operating loss
carryforwards 2001-2010 $ 66,900
Investment tax credit carryforward 1996-2000 1,200
Tax depletion carryforward Indefinite 5,500
--------
Total $ 73,600
========
</TABLE>
(6) In the normal course of business various actions and
claims have been brought or asserted against the Company.
Management does not consider them to be material to the Company's
financial position, liquidity or results of operations.
<PAGE>
THE BEARD COMPANY AND SUBSIDARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion focuses on material changes in the Company's
financial condition since December 31, 1995 and results of operations
for the quarter ended September 30, 1996 compared to the prior year
third quarter and the nine months ended September 30, 1996 compared
to the prior year nine months. Such discussion should be read in
conjunction with the Company's financial statements including the related
footnotes.
In preparing the discussion and analysis, the Company has presumed readers
have read or have access to the discussion and analysis of the prior year's
results of operations, liquidity and capital resources as contained in the
Company's 1995 Form 10-K.
The Company operates within three major industry Segments: (1) the carbon
dioxide ("CO2") Segment, comprised of (a) the manufacture and distribution
of dry ice (solid CO2) and (b) the production of CO2; (2) the environmental/
resource recovery ("E/RR") Segment, consisting of environmental services and
resource recovery activities, and (3) the real estate ("R/E") Segment,
consisting of real estate construction and development.
Material changes in financial condition - September 30, 1996 as compared with
December 31, 1995.
The following table reflects some of the changes in the Company's financial
condition during the periods indicated:
<TABLE>
<CAPTION>
September 30, December 31, Increase
1996 1995 (Decrease)
------------- ------------ ----------
<S> <C> <C> <C>
Cash and cash equivalents $ 105,000 $ 220,000 $ (115,000)
Working capital $1,646,000 $1,989,000 $ (343,000)
Current ratio 1.47 to 1 1.63 to 1
</TABLE>
The Company's ability to generate working capital from operations during the
first nine months of 1996 was affected by a slowdown in sales in the E/RR and
R/E Segments during the first six months of the year. In spite of the
slowdown experienced early in the year in these Segments, operations for the
first nine months of 1996 generated working capital of $37,000 excluding the
impact of the $539,000 cash portion of the settlement of the take-or-pay
agreement.
The settlement of the take-or-pay agreement by the Company's dry ice
subsidiary, Carbonic Reserves ("Carbonics"), in February 1996 infused
$539,000 of cash into Carbonics. The infusion of this cash plus $400,000
of equipment resulted in the addition of $939,000 of pre-tax income. The
settlement enabled Carbonics to pay down bank debt and trade payables.
Offsetting this improvement in working capital was the increase in debt
resulting from the acquisition in May 1996 of Horizontal Drilling
Technologies, Inc. ("HDT"), an environmental services subsidiary.
In addition to the proceeds from the take-or-pay settlement, the Company has
been able to satisfy its liquidity needs through its working capital and
borrowing arrangements. Future cash flows and availability of credit are
subject to a number of variables, including the price and demand for dry
ice, a continuing source of economical CO2, continuing private and
governmental demand for environmental services and continuing demand for
residential real estate. Despite these uncertainties, the Company anticipates
that its cash flow from operations and continued availability of credit on
a basis similar to that experienced to date will be sufficient to meet its
planned operating costs and capital spending requirements.
Additional capital expenditures of $2,398,000 were made by the following
Segments in property, plant and equipment during the first nine months
of 1996, as reflected in the table on the following page:
<TABLE>
<S> <C>
Carbon dioxide $1,598,000
Environmental/resource recovery 800,000
----------
$2,398,000
==========
</TABLE>
Included in the above are $570,000 of additions financed through the
issuance of seller-financed notes.
The Company's working capital, the CO2 Segment's line of credit, and equipment
financing arrangements currently being negotiated are expected to be
sufficient to fund the current and presently foreseeable capital expenditure
requirements, including the $410,000 projected for the last three months of
1996.
Through the period ending December 31, 2002, the Company's liquidity will be
reduced to the extent it is required to redeem any of the Beard preferred
stock pursuant to the mandatory redemption provisions. See Note 2 to the
accompanying financial statements.
Material changes in results of operations - Quarter ended September 30, 1996
as compared with the Quarter ended September 30, 1995.
The income for the quarter ended September 30, 1996 was $121,000, compared
to income of $120,000 for the third quarter of the prior year. An
improvement in operating margins for the 1996 quarter was offset by a
decrease in the positive net effect of other income and expenses generated in
the current quarter as compared to the prior year's third quarter.
The current quarter resulted in an $84,000 improvement over the operating
income recorded in the year earlier quarter. There were revenue gains in
all Segments; however, improved operating margins in the CO2 Segment
were partially offset by lower margins in the other two Segments.
Operating results of the Company's three Segments are reflected below:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Operating profit (loss):
Carbon dioxide $508,000 $320,000
Environmental/resource recovery (162,000) (70,000)
Real estate 30,000 38,000
-------- --------
Subtotal 376,000 288,000
Other (257,000) (253,000)
-------- --------
Total $119,000 $35,000
======== ========
</TABLE>
The "Other" in the above table reflects primarily general and corporate
activities, as well as other activities and investments of the Company.
Carbon dioxide
Third quarter 1996 operations reflected an operating profit of $508,000
compared to a $320,000 profit for the 1995 third quarter. The primary
component of revenues for this Segment is dry ice sales which are seasonal
with the downturn occurring from December through February, while the brisk
sales period occurs from June through August and then again in October.
The dry ice component of this Segment generated an operating profit of
$452,000 in the 1996 third quarter versus an operating profit of $286,000
in 1995.
Revenues from this Segment totaled $4,053,000 for the 1996 third quarter,
a 12% increase over last year's third quarter. The factors contributing
to this improvement included increases in the volume of dry ice sales, in
the sales of dry ice equipment constructed for sale, and in the Company's
allocated share of sales from its working interest in a producing CO2 unit.
This improvement in revenues was somewhat offset by increases in expenses
associated with advertising and sales, insurance, and an incentive-sales
arrangement for employees.
Revenues and operating profit would have increased by an additional $76,000
if the Company had not settled the take-or-pay agreement early in 1996.
Environmental/resource recovery
The E/RR Segment generated a larger operating loss in the third quarter of
1996 as compared with the same period in 1995. The Segment reflected a 7%
increase in revenues, which resulted primarily from the acquisition of
HDT during the second quarter. This increase was offset somewhat, however,
by a decline in the revenues generated by resource recovery activities
due to the completion in February 1996 of a contract with the U. S.
Department of Energy involving activities related to the Company's
patented Mulled Coal technology. Management has been pursuing and
will continue to pursue the commercial development of this technology during
the remainder of 1996. The costs of pursuing this development, as well as
increased operating expenses related to the Company's environmental services
activities, offset the increased revenues and resulted in the decline in
operating margins.
Real estate construction and development
The Segment sold three homes in the third quarter of 1996 as compared to
two homes sold in the same quarter of 1995. The higher costs associated
with these homes resulted in approximately the same operating profit for the
third quarter of 1996 as compared to the same quarter in 1995. The Company
expects the slower sales for the year to continue due to a variety of
factors, including market hesitation following a change in ownership in late
1994 of the two country clubs adjacent and in close proximity to the
Company's development.
Additional inventory of custom homes has been financed primarily from the
Segment's credit line. Any remaining cash requirement will be funded from
the proceeds of home sales. It is anticipated that only a small portion
of the cash flow from the development will continue to be reinvested in
custom homes during the remaining life of the project, and no more
speculative homes are planned. As of September 30, 1996, 19 of the
original 62 lots remain to be developed and three speculative homes are
unsold. The majority of the cash flow generated by the real estate
development will be used to repay debt, redeployed as working capital by the
Company or used for general corporate purposes.
Other activities
Other operations, consisting mostly of general and corporate activities,
generated a slightly larger operating loss for the third quarter of 1996
than the same period of last year.
Selling, general and administrative expenses
The Company's selling, general and administrative expenses ("SG&A") in the
current quarter increased to $1,163,000 from $881,000 in the 1995 third
quarter. SG&A expenses incurred by the CO2 Segment during the third
quarter of 1996, which represent 58% of the total SG&A costs, increased
by $208,000 over the same period last year. This increase was associated
with an increase in expenses related to Carbonics' advertising and sales
expenses, insurance, and an incentive sales arrangement for employees.
Depreciation, depletion and amortization expenses
The third quarter of 1996 had an increase in DD&A expense of $49,000,
reflecting additions to property, plant and equipment made during the
past year.
Other income and expenses
Other income and expenses resulted in a gain of $2,000 for the third quarter
of 1996, down sharply from the $85,000 gain recorded for such items in the
same period of 1995. The decrease was due primarily to the fact that
the third quarter of 1995 included recognition of $220,000 of income related
to a previous reorganization. The third quarter of 1996 included an
increase in interest expense of $21,000 as well as a $30,000 impairment
provision recorded against the carrying value of the Company's interest in
certain investments. Such items were offset by a $46,000 gain on sale of
assets.
Material changes in results of operations - Nine months ended September 30,
1996 as compared with the Nine months ended September 30, 1995.
The income for the nine months ended September 30, 1996 was $61,000, compared
to a loss of $330,000 for the first nine months of the prior year. The first
three quarters of 1996 benefited from a settlement of the take-or-pay
agreement in the CO2 Segment. The $939,000 recorded from the settlement
more than offset the overall decline in operating margins which resulted
primarily from a $391,000 decrease in the operating margin of the E/RR
Segment.
Operating results of the Company's three Segments are reflected below:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Operating profit (loss):
Carbon dioxide $ 668,000 $ 430,000
Environmental/resource recovery (654,000) (263,000)
Real estate 14,000 90,000
------------ -----------
Subtotal 28,000 257,000
Other (796,000) (783,000)
------------ -----------
Total $ (768,000) $ (526,000)
============ ===========
</TABLE>
The "Other" in the above table reflects primarily general and corporate
activities, as well as other activities and investments of the Company.
Carbon dioxide
Operations for the first nine months of 1996 resulted in an operating profit
of $668,000 compared to a $430,000 operating profit for the 1995 first nine
months. The primary component of revenues for this Segment is dry ice sales
sales which are seasonal with the downturn occurring from December through
February, while the brisk sales period occurs from June through August and
then again in October. The nine months operating results of both 1996 and
1995 reflect the normal downturn in the sales cycle at the first of the
year. The dry ice component of this Segment generated an operating profit
of $510,000 in the 1996 first nine months versus an operating profit of
$370,000 in the comparable 1995 period.
Revenues from this Segment totaled $10,385,000 for the first nine months of
1996, a 19% increase over the same period last year. The factors
contributing to this improvement included increases in the volume of dry ice
sales, in the sales of dry ice equipment constructed for sale, and in the
Company's allocated share of sales from its working interest in a producing
CO2 unit. This improvement in revenues was somewhat offset by increases in
expenses associated with advertising and sales, insurance, and an incentive-
sales arrangement for employees.
Revenues and operating profit for 1996 would have increased by an additional
$220,000 if the Company had not settled the take-or-pay agreement early in
1996.
Environmental/resource recovery
A significant decline in revenues generated by the E/RR Segment in the first
six months of the year led to a decline in operating margins in the first
nine months of 1996 as compared to the same period in 1995. This decline
in revenues was primarily caused by a slow down in the environmental services
industry, as governmental demand for environmental services declined pending
resolution of administrative problems relating to the Oklahoma Corporation
Commission Indemnity Fund. Also contributing to the decline in revenue was
the completion in February 1996 of a contract involving the resource recovery
activities related to the Company's patented Mulled Coal technology.
Management will continue to pursue the commercial development of this
technology during the remainder of 1996.
Real estate construction and development
Results from the sale of zero lot-line homes were hampered by a decline in
sales, as three homes were sold in the first nine months of 1996, as
compared to six homes sold in the same period in 1995. The decline in
sales can be attributed to a variety of factors, including market hesitation
following a change in ownership in late 1994 of the two country clubs
adjacent and in close proximity to the Company's development.
Additional inventory of custom homes has been financed primarily from the
Segment's credit line. Any remaining cash requirement will be funded from
the proceeds of home sales. It is anticipated that only a small portion
of the cash flow from the development will continue to be reinvested in
custom homes during the remaining life of the project, and no more
speculative homes are planned. As of September 30, 1996, 19 of the original
62 lots remain to be developed and three speculative homes are unsold. The
majority of the cash flow generated by the real estate development will
be used to repay debt, redeployed as working capital by the Company or used
for general corporate purposes.
Other activities
Other operations, consisting mostly of general and corporate activities,
generated a slightly greater operating loss for the first nine months of
1996 as compared to the same period last year.
Selling, general and administrative expenses
The Company's selling, general and administrative expenses ("SG&A") in the
first nine months of 1996 increased to $3,210,000 from $2,690,000 in the
comparable 1995 period. SG&A expenses incurred by the CO2 Segment during
the first nine months of 1996, which represent 58% of the total SG&A costs,
increased by $460,000 over the same period last year. This increase was
associated with increases in expenses related to advertising and sales,
insurance, and an incentive-sales arrangement for employees.
Depreciation, depletion and amortization expenses
The first nine months of 1996 had an increase in DD&A expense of $107,000,
reflecting additions to property, plant and equipment made during the past
year.
Other income and expenses
The positive net effect of other income and expenses for the first nine
months of 1996 increased significantly compared to the same period in
1995. As previously mentioned, the Company benefited in the first nine
months of 1996 from the settlement of a take-or-pay agreement in the CO2
Segment. This settlement resulted in a gain of $939,000. This gain was
partially offset by a decrease in the gain on sale of assets of $56,000,
as well as a $150,000 impairment provision recorded against the carrying
value of the Company's interest in certain investments and the
recognition, in the third quarter of 1995, of $220,000 of income received
from a previous reorganization.
PART II. OTHER INFORMATION.
Item 2. Changes in Securities.
The Company's preferred stock is mandatorily redeemable through December 31,
2002 from one-third of Beard's "consolidated net income" as defined in the
instrument governing the rights of the preferred stockholders. Accordingly,
one-third of future "consolidated net income" will accrete directly to
preferred stockholders and reduce earnings per common share. As a result
of these redemption requirements, the payment of any dividends to the
common stockholders in the near future is very unlikely. See Note 2 to the
accompanying financial statements.
Item 6. Exhibits and Reports on Form 8-K:
(a) The following exhibits are filed with this Form 10-Q and are identified
by the numbers indicated:
27 Financial Data Schedules.
(b) No reports on Form 8-K were filed during the period covered by this
report.
<PAGE>
SIGNATURES
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.
THE BEARD COMPANY
(Registrant)
HERB MEE, JR.
(Date) November 11, 1996 Herb Mee, Jr., President and
Chief Financial Officer
JACK A. MARTINE
(Date) November 11, 1996 Jack A. Martine, Controller and
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Method of Filing
- ----------- ----------------
<S> <C> <C>
27 Financial Data Schedule Filed herewith electronically
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 105
<SECURITIES> 0
<RECEIVABLES> 2,394
<ALLOWANCES> (53)
<INVENTORY> 2,047
<CURRENT-ASSETS> 5,119
<PP&E> 16,309
<DEPRECIATION> (7,827)
<TOTAL-ASSETS> 16,146
<CURRENT-LIABILITIES> 3,473
<BONDS> 0
1,200
0
<COMMON> 3
<OTHER-SE> 9,019
<TOTAL-LIABILITY-AND-EQUITY> 16,146
<SALES> 11,468
<TOTAL-REVENUES> 13,383
<CGS> 8,141
<TOTAL-COSTS> 14,151
<OTHER-EXPENSES> (1,165)
<LOSS-PROVISION> 164
<INTEREST-EXPENSE> 172
<INCOME-PRETAX> 61
<INCOME-TAX> 0
<INCOME-CONTINUING> 61
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
