UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ________________
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.)
Enterprise 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
Securities registered pursuant to Section 12(b) of the Act:
(Name of each exchange on
(Title of each class) which registered)
Common Stock, $.001 par value American Stock Exchange
Redeemable Preferred Stock, $1.00 par value None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports, and (2) has been subject to such
filing requirement for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form l0-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting common stock held by non-
affiliates of the registrant, computed by using the closing price of
registrant's common stock on the American Stock Exchange as of the close of
business on February 28, 1998 was $7,527,000.
The number of shares outstanding of each of the registrant's classes of
common stock as of February 28, 1998 was
Common Stock $.001 par value - 2,528,239
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement in connection with the 1998
Annual Meeting of Shareholders of The Beard Company are incorporated herein by
reference as to Part III, Items 10, 11, 12 and 13.
<PAGE>
THE BEARD COMPANY
FORM 10-K
For the Fiscal Year Ended December 31, 1997
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 4a. Executive Officers and Significant Employees of the Company
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors, Executive Officers and Significant Employees of the
Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
SIGNATURES
<PAGE>
THE BEARD COMPANY
FORM 10-K
FORWARD LOOKING STATEMENTS
This document contains "forward looking statements" as defined by the
Securities Litigation Reform Act of 1995. These statements should be read in
conjunction with the cautionary statements included in this document, including
those found under "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
PART I
Item 1. Business.
(a) General development of business.
General. As the result of a merger approved by stockholders and effected in
November of 1997 (the "Merger"), The Beard Company was merged into its newly
formed subsidiary which was immediately renamed The Beard Company. The sole
purpose of the Merger was to impose certain transfer restrictions on the
Company's preferred and common stock to prevent inadvertent application of
Section 382 of the Internal Revenue Code in the future and thus protect the
Company's net operating loss carryforwards of approximately $53.8 million as of
December 31, 1997.
The Company operates within two major industry segments: (1) the
environmental/resource recovery segment (the "E/RR" Segment"), consisting of
environmental services and resource recovery activities, and (2) the carbon
dioxide segment (the "CO{2} Segment"), comprised of the production of CO{2}
gas. Beard also has other operations, including (i) a minority-owned
investment in a joint venture for the extraction, production and sale of crude
iodine, and (ii) various assets and investments which the Company has been
liquidating as opportunities have materialized.
As a result of the 1993 Restructure (the "Restructure" - see below) Beard
has approximately $53.8 million of unused net operating losses ("NOL's")
available for carryforward. Unless the context otherwise requires, references
to Beard and the Company herein include Beard and its consolidated
subsidiaries, including Beard Oil Company ("Beard Oil").
Recent Developments
In February of 1998 the Company formed Interstate Travel Facilities, Inc.
("ITF"), which acquired four convenience store/service station properties and
one undeveloped property strategically located on Interstate Highways I-35 and
I-40 in Oklahoma. Two of the stores and the undeveloped property are located
in the north part of the Oklahoma City Metroplex on I-35. The other two stores
are located on I-40 east of Oklahoma City. (See "Recent Activities -
Interstate Travel Facilities, Inc." at pages 14 through 15 of this report).
The operations of the Company's interstate travel facilities will comprise a
new segment of business beginning with the first quarter of 1998.
THE 1993 RESTRUCTURE
The 1993 Restructure. As a result of a restructure (the "Restructure")
effected in October of 1993 with four institutional lenders (the
"Institutions"): (a) Beard divested substantially all of the oil and gas assets
of its subsidiary, Beard Oil; (b) $101,498,000 of long-term debt and other
obligations were effectively eliminated; and (c) the Institutions received 25%
of Beard's then outstanding common stock and $9,125,000 stated value (91,250
shares, or 100%) of Beard's then outstanding preferred stock.
Subsequent Sale of Stock by Certain Institutions; Current Stock Ownership by
the Institutions. In January of 1997 three of the four Institutions sold their
common and preferred shares to five individuals. These individuals thereafter
sold such shares to the Company (the "Repurchase"). Repurchase of the common
(303,890 shares) was effected by the Company in November of 1997 and repurchase
of the preferred (47,729 shares) was effected in January of 1998. As a result
of the Repurchase, together with the subsequent redemption of 14,589 preferred
shares from the sole remaining preferred shareholder, the Company has reduced
its outstanding common shares from 2,832,129 to 2,528,239 (net of treasury
shares) and its outstanding preferred shares from 90,156 to 27,838. The sole
remaining Institution holds 11.68% of the voting power of Beard through its
ownership of common stock and an additional 5.35% through its holdings of
preferred stock, for a total of 17.03% of the total outstanding voting stock of
the Company. Prior to the Repurchase the preferred holders had elected a
director who continues to serve on Beard's six-member Board of Directors.
Mandatory Redemptions of Beard Preferred Stock. 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 the preferred stockholder
and reduce earnings per common share.
Conversion of Beard Preferred Stock. Each share of Beard preferred stock
which has not previously been redeemed may be converted into 5.129425 shares of
Beard common stock after December 31, 2002. Fractional shares will not be
issued, and cash will be paid in redemption thereof.
Preservation of NOL's. The Company estimates that at year-end 1997, Beard
and its consolidated subsidiaries had NOL's of approximately $53.8 million.
Beard considers such NOL's, which expire between 2004 and 2010, to be one of
its most valuable assets and that loss of the NOL's would have a severe
negative impact on the Company's future value. Beard took action to protect the
assets and prevent the triggering of an "ownership change" as defined in
Section 382 of the Code by re-imposing restrictions on all of its shares to
prevent transfer without the Board of Directors' consent to any person if that
person was, or would thereby become, a holder of 5% or more of the fair market
value of Beard's outstanding capital stock.
Indemnification Obligations. As a result of the Restructure and subsequent
Repurchase, the Company continues to have an indemnity obligation to the
remaining Institution and to one of its assignees for certain losses (i)
arising out of the ownership and/or operation of Beard Oil's former oil and gas
assets, including environmental liabilities; (ii) arising under any employee
benefit or severance plan; or (iii) relating to any misrepresentation or
inaccuracy in any representation made by the Company or Beard Oil in connection
with the Restructure (collectively, the "Obligations"). Neither Beard nor
Beard Oil is presently aware of any material liabilities existing as a result
of such Obligations.
Discontinued Operations. In October of 1997 the Company sold substantially
all of the assets of its 85%-owned dry ice subsidiary, Carbonic Reserves, a
company involved in the manufacturing and distribution of solid CO{2} (the
"Solid CO{2} Segment"), which comprised the bulk of the assets of its CO{2}
Segment. Beard discontinued its real estate construction and development
activities in January of 1997. As a result, the Company's continuing
operations in 1997 consist primarily of the E/RR Segment, the CO{2} Segment
(production of CO{2} gas) and other unrelated activities. Accordingly, the net
operating results of the Company's dry ice manufacturing and distribution
business and of its real estate construction and development activities have
been presented as discontinued operations in 1997 and for all periods presented
in the consolidated statements of operations.
At December 31, 1997, the Company had sold all of its real estate
construction and development assets with the exception of one speculative home
which remains for sale. The Company expects to dispose of this home in the
near future at its recorded value as of December 31, 1997. (See Management's
Discussion and Analysis---Discontinued operations at page 26 of this report and
note 2 of the financial statements).
CONTINUING OPERATIONS
Environmental/Resource Recovery Activities. When Beard divested itself of
Beard Oil's oil and gas assets in 1993, it redirected the focus of its oilfield
services subsidiaries to environmental services activities. The Company and
its management have considerable expertise in the environmental field stemming
from previous experience as the founder, as officers and directors, and as the
principal shareholder of USPCI, Inc. (NYSE) from 1968 until its acquisition by
Union Pacific Corporation in 1987-88.
In 1993 Whitetail Services, Inc. ("Whitetail") terminated its oilfield
construction activities and converted its operations to focus upon
environmental services, including soil and groundwater treatment system
installations, site remediation, bioremediation, waste stabilization and
solidification, underground storage tank removal, heavy equipment operations
and emergency spill response. Whitetail's environmental service capabilities
were expanded in 1995 by the addition of environmental drilling and waste
transportation and storage, both of which had previously been conducted by
separate subsidiaries.
In 1990 the Company acquired more than 80% of Energy International
Corporation ("EI"), a research and development firm specializing in coal-
related technologies. During the four years that Beard owned EI, EI developed
a new patented technology know as Mulled Coal Technology (the "M/C
Technology"). In 1994 Beard sold EI to a subsidiary of The Williams Companies,
Inc., but retained the M/C Technology which was contributed to a wholly-owned
subsidiary, Beard Technologies, Inc. ("BTI"). In early 1996 BTI, as the
principal subcontractor, delivered its final report in connection with a 23-
month contract with the United States Department of Energy (the "DOE") to
demonstrate the storage, handling and transportation characteristics of Mulled
Coal under commercial conditions. The results and conclusions of the final
report far surpassed BTI's original expectations. (See "Resource Recovery
Activities - Department of Energy Contract"). Since that time BTI has continued
to pursue the commercial development of the M/C Technology.
In May of 1996 the Company acquired 80% of Horizontal Drilling Technologies,
Inc. ("HDT"), a company specializing in trenchless technology. As part of the
purchase consideration the seller received 20% of the common stock of
Whitetail. HDT specializes in directional drilling and has completed various
aspects of utility and environmental remediation projects in 14 states. It has
focused much of its attention since the acquisition on cable and fiber optics
installations.
In January of 1997 the Company acquired 80% of ISITOP, Inc., which
specializes in the remediation of creosote and polycyclic aromatic hydrocarbon
("PAH") contamination.
Collectively, the E/RR Segment can provide environmental related services to
industry and government on a nationwide scale utilizing the newest emerging
technologies and state of the art assessment-to-remediation techniques. Now
that BTI has successfully demonstrated the commercial feasibility of its M/C
Technology, it is focusing its current efforts on marketing such technology in
the eastern coal producing states, where it hopes to set up several coal
recovery projects for the larger coal companies and/or utilities operating
there.
Carbon Dioxide Operations. The Company's carbon dioxide activities now
consist of the production of CO{2} gas which is conducted through Beard. The
Company owns non-operated working and overriding royalty interests in two
producing CO{2} gas units in Colorado and New Mexico.
(b) Financial information about industry segments.
Financial information about industry segments is contained in the Statements
of Operations and Note (16) of Notes to the Company's Financial Statements.
See Part II, Item 8---Financial Statements and Supplementary Data.
(c) Narrative description of business segments.
The Company operates within two major industry segments: E/RR and CO{2}.
All of such activities, with the exception of Beard's CO{2} gas production
activities, are conducted through subsidiaries. Beard, through its corporate
staff, performs management, financial, consultative, administrative and other
services for its subsidiaries.
ENVIRONMENTAL/RESOURCE RECOVERY ACTIVITIES
General. Following the 1993 Restructure, the operations of several of Beard
Oil's oilfield services subsidiaries were redirected to focus upon
environmental services activities. Following the sale of the Company's
research and development company in 1994 another subsidiary has continued to
pursue the commercial development of the patented coal technology developed by
its R&D predecessor. In May of 1996 a company was acquired which utilizes
trenchless technology for its environmental remediation projects. In January
of 1997 another subsidiary became the exclusive U.S. licensee for the use of a
chemical process for the remediation of creosote and PAH contamination.
The Company and its management have considerable expertise in the
environmental area stemming from previous experience as the founder, as
officers and directors, and as the principal shareholder of USPCI, Inc. (NYSE)
from 1968 until its takeover by Union Pacific Corporation in 1987-88.
Environmental Services Activities
Whitetail Services, Inc. In 1990 Beard Oil took over the operations of a
small oilfield construction business operating in central Oklahoma. Beard Oil
operated the business through a wholly-owned subsidiary named Whitetail
Services, Inc. ("Whitetail") which started to expand the business. With the
deterioration in oil and gas drilling activities in early 1991, Whitetail's
services were broadened to include environmental cleanup of non-hazardous
material.
In 1993 Beard Oil made the decision to discontinue Whitetail's oilfield
construction activities and Whitetail's outstanding construction contracts were
concluded. The employees involved with such contracts were terminated. Beard
Oil transferred the corporate shell of Whitetail and part of its equipment to
Beard. Whitetail retained 12 employees who were involved in its environmental
cleanup activities.
Whitetail handles a wide range of environmental services, including soil and
groundwater treatment system installations, site remediation, bioremediation,
waste stabilization and solidification, underground storage tank ("UST")
removal, heavy equipment operations and emergency spill response. Recently
Whitetail has diversified its capabilities to include the replacement of old
water lines with new lines in order to upgrade municipal water distribution
systems.
Through its SQG Services Division ("SQG Services") Whitetail provides
consulting services to generators of small quantities of hazardous and non-
hazardous industrial waste and handles the removal and disposal of same. SQG
Services also provides services for removal and disposal of waste products, and
handles all related documentation, ensuring compliance with government
regulations and reducing future liability. One of SQG Services' unique
features is its characterization services which sample and identify the
customer's waste, ensuring that it is properly analyzed and safely handled from
that point forward.
All of SQG Services' personnel must undergo rigorous training, including
OSHA required 40 Hour Hazardous Waste Operations and Emergency Response
training ("HAZWOPER"), CPR/First Aid, Confined Space and other specialized
training certifications that apply to their work.
In late 1996 Whitetail shifted its marketing focus, placing increased
emphasis on the development of private sector accounts while continuing to
service current governmental, public sector clients. In early 1997, marketing
efforts were initiated to promote diversification into underground utility
construction including telecommunications, and water, sewer and gas mains.
While it has handled jobs in several other states, Whitetail has operated
primarily to date in Oklahoma, Texas, Kansas, Arkansas, and Missouri. As a
result of the HDT acquisition (see below), Beard's ownership in Whitetail was
reduced to 80%.
Since the takeover of Whitetail's operations by Beard in 1990 the number of
Whitetail's employees has increased from 12 to 45 (42 full time and three part
time) as of December 31, 1997. Ten full time employees were added in 1997
primarily as a result of Whitetail's diversification into municipal utility
construction.
Horizontal Drilling Technologies, Inc. In May of 1996 the Company acquired
80% of the common stock of Horizontal Drilling Technologies, Inc. ("HDT"). The
seller received 20% of the common stock of Whitetail as part of the
consideration for the purchase of HDT. HDT specializes in directional
horizontal drilling and in the installation of horizontal wells for soil and
groundwater remediation. HDT has completed a broad range of projects for
utilities, municipalities, pipeline companies, environmental service companies
and others in 14 states. Because of the tremendous growth currently being
enjoyed by the telecommunications industry, HDT is concentrating much of its
present marketing efforts on cable and fiber optic installations.
During 1997 HDT and Whitetail, in a joint marketing effort, diversified into
several phases of utility construction utilizing HDT's directional drilling
techniques and Whitetail's construction capabilities. As a result of this team
effort, numerous water and gas main rehabilitation and relocation projects and
fiber optic network builds have been completed during the last 12 months.
ISITOP, Inc. In January of 1997 Beard changed the name of a wholly-owned,
inactive subsidiary to ISITOP, Inc. ("ISITOP"). ISITOP has obtained an
exclusive license for the United States from a company which has developed a
chemical (54GO{TM} 101) and has tested a process which utilizes such chemical
for the remediation of creosote and PAH contamination. U.S. Patent #5,670,460
for method and composition for 54GO{TM} Products was granted September 23,
1997. This patent covers all applications utilizing 54GO{TM} Products,
including ISITOP's applications. A specific application for remediation is
expected to be applied for in May 1998.
ISITOP is 80%-owned by Beard and 20%-owned by two members of ISITOP's
management team, who are also the principals of the company from which the
license was obtained. Pursuant to employment agreements and other related
agreements these two parties also have options to acquire an additional 30% of
ISITOP following payout of all sums owed by ISITOP to Beard.
Creosote is a very complex mixture of hydrocarbons and hydrocarbon
derivatives. It revolutionized the use of wood and wood products in wet
environments by preventing rapid decomposition. Creosote compounds are still in
use today, primarily to treat telephone poles, railroad ties, bridge timbers
and similar construction materials and to a lesser extent as medicinal agents.
Creosote mixtures contain many compounds that are known to cause several
forms of cancer in animals and have been linked to several types of cancer
(skin, etc.) in humans. The specific chemical family of cancer producing agents
found in creosote are a group of molecules that are made up of several
connected ring structures known as polycyclic aromatic hydrocarbons ("PAH's").
These compounds are in families of chemicals known by names like "anthracene",
"fluorene" and "benzo-pyrenes". These mixtures make up the preparations known
as "creosote" and are related by their poly ring structure. Because of this
biological structure, many are either known carcinogens or cancer suspect
agents.
Even though the use of creosote was "restricted" in the mid-1960's, it and
many of its sister mixtures are still in wide use both in the U.S. and
throughout the world. The U.S. alone has over 700 wood preserving plants which
are estimated to use or produce more than 495,000 tons of creosote and creosote
byproducts per year.
In the three-step licensed process used by ISITOP, the contaminated soils
are placed into on-site containers for processing using a proprietary chemical
wash (54GO{TM} 101---solvent specific) followed by bioremediation and perhaps
some air drying. The process can take place at the contaminated area,
eliminating the high costs and exposure of disposal and trucking.
ISITOP completed the first field test of its chemical process in May of
1997. The site was a storage yard of an old narrow gauge railroad near
Durango, Colorado, where railroad ties had been stored for many years (the
"Durango Project"). The owners of the site estimated that approximately 25
gallons of liquid creosote had been spilled over an extended period of
approximately 30 years. A total of 72 cubic yards of contaminated soil was
treated at the site.
Measuring the contamination of sites is often related to BAP (Benzo (A)
Pyrene) equivalents. Each of the constituents of concern (known cancer causing
Analytes) are factored and assigned a BAP value. The value at the beginning of
the Durango Project was 251.02 BAP equivalent. Many states have established a
value of 8 mg/kg as a prime remediation goal. The Durango Project was
completed within 150 days with a BAP equivalent of 2.053.
ISITOP is currently holding discussions with the developers of two major
remediation technologies to evaluate how ISITOP's chemical process can enhance
their process. Studies by Dr. Joe Bowden of CDS Environmental, and a staff
consultant to ISITOP, indicate that ISITOP's process can expedite processes
such as steam and soil heating, dramatically reducing the time and expense of
such processes. These processes would enable in-situ remediation while
reducing the costs of remediation.
ISITOP has also developed a process for cleaning of tanks at creosote
treating facilities, and has several proposals outstanding utilizing such
process. Utilization of the process would enable the end user to recover the
materials within the storage tanks without manned entry, allowing them to sell
the recovered materials.
Despite the dearth of commercial projects to date, ISITOP believes that it
is positioning itself and its technologies to become a significant player in
the remediation market.
Incorporated Tank Systems. Through another subsidiary, Incorporated Tank
Systems ("ITS"), the Company conducts wastewater storage tank rental
operations. ITS has 36 wastewater storage tanks available for rental. As of
March 12, 1998, eight tanks were rented.
Resource Recovery Activities
History/Formation of Beard Technologies, Inc. In early 1990, the Company
acquired more than 80% of Energy International Corporation ("EI"), a research
and development firm specializing in coal-related technologies. During the
four years that Beard owned EI, EI developed a new technology known as Mulled
Coal Technology (the "M/C Technology").
In May 1994 Beard sold EI to a subsidiary of The Williams Companies, Inc.,
retaining certain assets and the patent rights to the M/C Technology which
Beard contributed to a wholly-owned subsidiary which was renamed Beard
Technologies, Inc. ("BTI"). BTI has continued to pursue the commercial
development of the M/C Technology. BTI has one full time employee.
The M/C Technology. Underground coal mines have always produced a certain
amount of fine coal which is difficult to clean and to market due to handling
problems. Existing washing processes used to deal with this problem are all
wet processes, and the end product must be dewatered to make it acceptable in
the market place, which is difficult and usually expensive. The Mulled Coal
process is an innovative and inexpensive solution to fine coal handling
problems. It is a process which involves the addition of a low cost
specifically formulated reagent to wet fine coal in a simple mixing step to
produce a material ("Mulled Coal") that handles, stores and transports like dry
coal. But, unlike thermally dried fine coal, Mulled Coal is not dusty, will
not rewet, will not freeze, and causes no environmental or safety hazards
related to fugitive coal dust.
Patent Protection. The U.S. patent for the M/C Technology was issued in
1993. Since then patents have been issued for Australia, Europe (enforceable
in Germany, Great Britain, Italy and Spain), Poland and South Africa. Patent
applications are pending in a number of other nations.
Department of Energy Contract. Prior to 1994 the M/C Technology had only
been successfully demonstrated in the laboratory. In March 1994 the United
States Department of Energy (the "DOE") awarded a contract to EI under which
the DOE agreed to fund a majority of the cost of demonstrating the feasibility
of the M/C Technology at a near commercial scale. BTI, EI and the DOE entered
into agreements whereby EI remained as the prime contractor with BTI providing
technical and on-site management for the project (the "DOE Project").
The DOE Project was located at a large coal preparation plant near
Birmingham, Alabama, which is owned and operated by a major coal producer. At
the completion of the production phase of the project, the Mulled Coal was
shipped to an Alabama power company. The 23-month program was completed in
February of 1996 and the final project reports were delivered to the DOE in
March of 1996.
Results of the DOE Project were highly encouraging. The design of process
equipment and controls worked very well. Excellent quality Mulled Coal was
produced on a continuous basis, in a commercial environment and at a production
rate which was 50 times higher than production rates for previous pilot plant
tests. Actual operating costs at the near commercial scale were far lower than
costs which had been projected from laboratory and pilot plant tests. And,
most importantly, the Mulled Coal caused no problems with storage, handling and
shipping.
Commercial Development Activities. As a result of the DOE Project, BTI
considers the M/C Technology to be fully ready for commercialization. During
the past 24 months efforts have been made to make producers in the U.S. and
other coal producing nations aware of the technology and its advantages. BTI
has called on numerous coal producers, preparation plant builders and coal
preparation engineering firms to acquaint them with the technology and to
explore licensing arrangements related to the M/C Technology. It has also
called on several utilities that burn large quantities of coal.
Millions of tons of fine wet coal have been discarded to large coal slurry
impoundments throughout the eastern coal producing states, representing an
enormous potential source of low cost fuel. BTI will pursue entering into
selected slurry impoundment recovery projects as a venture partner with an
experienced coal producer, preparation plant operator or allied service
company.
During the last quarter of 1997 and the first quarter of 1998 there has been
a flurry of activity focused upon the development of fine coal waste
impoundment recovery projects which qualify for Federal tax credits under
Section 29 of the Internal Revenue Code. These projects involve recovering the
raw slurry with a dredge, using a sophisticated washing plant to remove clay
and other fine impurities from the coal, thermally drying the covered clean
coal product, and finally producing a high BTU fine coal briquette which
qualifies for the tax subsidy. In order to qualify for the tax credit, the
projects must be in operation by July of 1998.
There are at least 20 Section 29 pond recovery projects in various stages of
development. As a result, development activity for conventional (non-
subsidized) projects has temporarily come to a standstill.
BTI intends to participate in slurry pond recovery projects---not as an
owner, but as a contract operator and as a consultant. Currently BTI is
negotiating with a midwestern utility to be the contract operator of five
projects which collectively are expected to produce over 2 million tons of coal
per year for the next eight years.
In late February of 1998 BTI set up a vibra-core drilling rig which is used
in an advanced but simple method of recovering 3" diameter exploratory cores
from slurry ponds. The first drilling job for a commercial client involved
drilling seven core holes in a pond where the coal slurry was covered by about
five feet of water. The drilling project was successfully completed during the
first week of March 1998. BTI anticipates that there will be a strong demand
for its slurry pond drilling services for the balance of 1998.
The BTI fine coal preparation laboratory has been gearing up to perform core
analyses for slurry pond recovery projects. In addition to supporting our own
pond evaluations, BTI has begun offering similar services to others who are
developing pond recovery projects. The first large commercial job came into
the lab in the second week of March 1998. BTI expects a strong demand for
commercial lab services for at least the next six months.
Facilities. Whitetail, its SQG Services Division and HDT utilize an office
and related facilities leased by Whitetail in Oklahoma City. HDT also rents a
small office in Wichita. BTI leases an office and laboratory facilities from
the Applied Research Center at the University of Pittsburgh ("UPARC"). The
UPARC facilities give BTI access to a wide range of coal and mineral testing
capabilities. ISITOP is furnished office space in Farmington, New Mexico as
part of its arrangement with the company from which it obtained its license.
Principal Products and Services. The principal services rendered by Beard's
E/RR Segment are: (1) Soil and groundwater treatment system installations;
site remediation; UST removal; construction; drilling and emergency response
services; and consulting and safety training services for the handling of
hazardous and non-hazardous materials and the removal and disposal of same.
Such services are furnished through Whitetail and its SQG Services Division.
(2) Through HDT the segment offers directional horizontal drilling services
which have numerous environmental applications and also provides a broad range
of services for utilities, municipalities, pipeline companies, environmental
service companies and telecommunication companies. (3) Through ISITOP the
segment believes it can demonstrate the capability to clean up manufacturing
and storage sites which have been contaminated by creosote materials. (4)
Through BTI the segment offers proprietary consulting technology and has the
capability to undertake large reclamation projects and the cleanup of slurry
pond recovery sites.
The E/RR Segment accounted for the following percentages of the Company's
consolidated revenues for each of the last three years.
Percent of
Consolidated
Revenues from
Fiscal Year Continuing
Ended Operations
12/31/97 90%
12/31/96 89%
12/31/95 92%
Market demand and competition. The environmental services industry is
highly competitive, and in such activities the E/RR Segment must compete
against major services companies, as well as a number of small independent
concerns. Competition is largely on the basis of customer service. Beard's
approach has been to seek out niches of opportunity where it perceives that
customers are not being adequately served, and then to provide services using
well-trained personnel at reasonable rates. The regulatory environment is
rapidly changing, at times creating new markets which the larger companies in
the industry do not recognize or have no desire to pursue, and thus creating
opportunities for smaller, aggressive entities such as Beard.
The environmental services entities provided their services to 108 customers
in 1997. Environmental services activities performed under subcontracts for 15
customers who were working for the State of Oklahoma Indemnity Fund (the
"Fund"), primarily for UST removal, accounted for 17%, and contracts for the
City of Wichita accounted for 16%, of the E/RR Segment's 1997 revenues.
However, the Company does not feel that the loss of any single customer would
have a material adverse effect on the Company and its subsidiaries as a whole.
The Fund normally pays for such work in 90 to 120 days, and the primary
contractors normally pay the subcontractors in 120 to 150 days for such
billings, resulting in extended payment terms for this type of activity.
The resource recovery business is also highly competitive and the E/RR
Segment is competing against much larger and better financed companies. Beard
has attempted to develop lower cost technology that will create a market
opportunity. Such attempts by Whitetail, BTI and ISITOP have been unsuccessful
to date.
Availability of raw materials. Materials used in the E/RR Segment, as well
as products purchased for resale, are available from a number of competitive
manufacturers.
Seasonality. The environmental services and resource recovery businesses
are both seasonal, as there is a tendency for field operations to be reduced in
bad weather. Seasonality normally affects the first quarter of the year, and
this tendency is compounded by the public sector's propensity to delay the
startup of environmental services contracts during such period.
Employees. As of December 31, 1997 the E/RR Segment employed 70 full time
and one part time employees.
Financial information. Financial information about the E/RR Segment is set
forth in the Company's Financial Statements. See Part II, Item 8---Financial
Statements and Supplementary Data.
CARBON DIOXIDE OPERATIONS
General. The Company's carbon dioxide (CO{2}) gas operations are conducted
by the parent company which owns working and overriding royalty interests in
two CO{2 }gas{ }producing units.
Carbon Dioxide (CO{2}) Properties
McElmo Dome. During 1983, the McElmo Dome Field in Montezuma and Dolores
Counties of Western Colorado was formed into a field-wide unit (the "Unit")
covering a 240,000-acre area which is producing CO{2} gas. Beard owns a
0.545610% working interest (0.471926% net revenue interest) and an overriding
royalty interest equivalent to a 0.092190% net revenue interest in the Unit,
giving it a total 0.564116% net revenue interest in the Unit.
Deliveries of CO{2} gas from the Unit are transported through a 502-mile
pipeline (the Cortez pipeline) to the Permian Basin oilfields in West Texas
where such gas is utilized primarily for tertiary oil recovery. Shell Western
E&P, Inc. ("SWEPI") is the operator of the Unit. There are 41 producing wells
in the Unit, ranging from 7,634 feet to 8,026 feet in depth. McElmo Dome and
Bravo Dome (see below) are believed to be the two largest producing CO{2}
fields in the world. The gas from McElmo is estimated to be approximately 97%
pure CO{2}.
In 1997 Beard sold 1,605,000 Mcf (thousand cubic feet) attributable to its
working and overriding royalty interest at an average price of $.31 per Mcf.
In 1996 Beard sold 1,695,000 Mcf attributable to its working and overriding
royalty interest at an average price of $.17 per Mcf. In 1995, Beard sold
1,095,000 Mcf attributable to its working and overriding royalty interest at an
average price of $.20 per Mcf. Beard was underproduced by 352,000 Mcf on the
sale of its share of McElmo Dome gas at year-end 1997.
In July of 1996 SWEPI advised the working interest owners that current
demand for McElmo Dome CO{2 }had increased from less than 600 million cubic
feet per day in 1995 to over 700 million cubic feet per day, and was expected
to increase to one billion cubic feet per day beginning in July of 1997. In
order to meet such demand SWEPI commenced a $36.1 million development program
in July of 1996 which is now targeted for completion in early 1998. Beard had
expended a total of $215,000 for its share of the development costs through
1997. 1997 CO{2} revenues at McElmo Dome increased to $503,000 in 1997 from
$292,000 in 1996 reflecting the ongoing development coupled with higher pricing
for CO{2}.
Bravo Dome. In addition to its reserves in the McElmo Dome Unit, Beard also
owns a very small working interest in the 1,000,000-acre Bravo Dome CO{2} Gas
Unit which is situated in Union, Harding and Quay Counties of northeastern New
Mexico. Beard acquired a 0.05863% working interest in this unit in 1987.
Beard is currently underproduced by 130,000 Mcf on the sale of its share of
Bravo Dome gas. Beard's CO{2} gas sales approximated $9,000 in both 1995 and
1996. The Company sold no CO{2} gas from Bravo Dome in 1997 due to temporary
overproduction, but expects to resume sales in 1998.
Amoco Production Company operates a CO{2} production plant in the middle of
the Bravo Dome Unit which was formed in 1979. There are 265 producing wells in
the Bravo Dome Unit, each being approximately 2,500 feet in depth. The gas is
extremely pure, being approximately 98% CO{2}.
Net CO{2} Production. The following table sets forth Beard's net CO{2}
production for each of the last three fiscal years:
Net CO{2}
Fiscal Year Production
Ended (MCF)
12/31/97 1,617,000
12/31/96 1,723,000
12/31/95 1,123,000
Average Sales Price and Production Cost. The following table sets forth
Beard's average sales price per unit of CO{2} produced and the average lifting
cost, lease operating expenses and production taxes, per unit of production for
the last three fiscal years:
Fiscal Year
Ended
-----------------------------------------------------
Average Sales Average Lifting
Fiscal Year Price Per Mcf Cost Per Mcf
Ended OF CO{2} OF CO{2}
12/31/97 $0.31 $0.06
12/31/96 $0.18 $0.06
12/31/95 $0.20 $0.09
Productive Wells and Acreage. Beard's principal CO{2} properties are held
through its ownership of working interests in oil and gas leases which produce
CO{2} gas. As of December 31, 1997, Beard held a working interest in a total
of 306 gross (0.25 net) CO{2} wells located in the continental United States.
The table below is a summary of such developed properties by state:
NUMBER OF WELLS
---------------
STATE GROSS NET
----- ----- ---
Colorado.......................... 41 0.224
New Mexico........................ 265 0.029
--- -----
306 0.253
=== =====
Employees. As of December 31, 1997 the CO{2} Segment had no employees.
Financial Information. Financial information about the Company's CO{2} gas
operations is contained in the Company's Financial Statements. See Part II,
Item 8---Financial Statements and Supplementary Data.
OTHER ACTIVITIES
Iodine. Beard is involved in the extraction, production and sale of crude
iodine through its 40% ownership of North American Brine Resources ("NABR"), a
joint venture with two Japanese partners. Beard is the managing partner. In
Kingfisher County, Oklahoma, the Company collects waste brine from wells
operated by third parties (the "Berkenbile Plant"). The Company receives a
payment for furnishing the brine to NABR for iodine extraction at the
Berkenbile Plant and for the subsequent disposal of the brine.
In Woodward County, Oklahoma, NABR operates a second iodine extraction plant
(the "Woodward Plant") which has roughly six times the production capacity of
the Berkenbile Plant. Brine is produced from wells owned by NABR and iodine is
extracted using the blowing-out process. The waste brine is then reinjected
into NABR-owned wells. The Woodward Plant is located in the Woodward Trench, a
narrow geologic formation found 6,000 to 10,000 feet below the surface, which
contains the world's highest concentration of iodine-bearing brine water.
Iodine is used in animal feed supplements, catalysts, inks and colorants,
pharmaceuticals, photographic equipment, sanitary and industrial disinfectants,
stabilizers and radiopaque media.
From 1990 to 1994 the worldwide price received for iodine decreased more
than 50% from its previous peak of approximately $18 per kilogram as a result
of increased production capacity in the United States and Chile. The price
bottomed out in mid-1994 at $7 per kilogram but has recovered to the point that
it averaged more than $19 per kilogram in 1997. The price is expected to be in
the $18 to $19 per kilogram range for the coming months.
Because of the severely depressed industry pricing conditions, NABR
determined to shut down the operations of the Woodward Plant for an indefinite
period of time until the oversupply situation was rectified. Accordingly, the
Woodward Plant shut down in June of 1993. By the third quarter of 1996 the
oversupply situation appeared to have corrected itself and the decision was
made to reactivate the Woodward Plant, which came back on stream in October of
1996. In January of 1997 NABR shipped the first 8,000 kilograms produced at
the plant since its reactivation. The total cost of reactivating the plant,
including the cost of drilling a new production well plus the additional
working capital required, was approximately $1.1 million. Such funds were
loaned to NABR by our Japanese partners. No capital distributions will be made
from the joint venture until the loan by the Japanese partners has been fully
repaid with interest. As of December 31, 1997 $576,000 of the loan remained to
be paid.
Other Assets. Beard also has a number of other assets and investments which
it intends to liquidate as opportunities materialize. Such assets consist
primarily of drilling rigs and equipment, land and improvements, real estate
limited partnerships in which the Company is a limited partner and
miscellaneous other investments. As excess funds become available from such
liquidations they will be utilized for working capital, reinvested in Beard's
ongoing business activities or redeployed into newly targeted opportunities.
Beard's recorded value for these other assets is less than or equal to their
estimated fair value.
Recent Activities
Interstate Travel Facilities, Inc. ("ITF") In February of 1998 the Company
formed a new subsidiary, Interstate Travel Facilities, Inc. ("ITF"), which
acquired five properties that will comprise the nucleus of a new line of
business geared to the needs of interstate highway travelers. The new
subsidiary is owned 80% by Beard and 20% by Toby B. Tindell ("Tindell") and his
wife. Tindell serves as President and Chief Executive Officer of ITF.
Three of the properties were purchased from the Tindells and Tindell
Enterprises, Inc. (the "Tindell Properties") effective as of the close of
business on February 28, 1998. Purchase price for the Tindell Properties
totaled $2,061,000, including ITF stock valued at $181,000, an ITF promissory
note for $544,000, and debt assumed by ITF totaling $1,336,000. Tindell has an
option to acquire an additional 30% of ITF after the company has attained a net
worth of $4,400,000. The Tindell Properties are all situated along Interstate
Highway I-35 ("I-35") in the northern part of the Oklahoma City Metroplex. It
is anticipated that I-35 will become the major north-south highway connecting
Mexico, the United States and Canada as a result of the North American Free
Trade Agreement.
One of the Tindell Properties, located at the Seward Road East exit, will be
known as "Rodeo Corner" since this exit serves as the main entrance to the Lazy
E Arena. This property was purchased by Tindell Enterprises, Inc. in December
1997. Renovation of this location commenced in January 1998 and was completed in
March of 1998. Rodeo Corner contains a service station, convenience store and
restaurant. The Lazy E Arena, built in 1984, is regarded as the world's
premier western entertainment facility, and is home to more than 25
championship events each year. The Arena accommodates more than 1,000,000
visitors per year. The theme for Rodeo Corner will be based upon rodeo type
events, and it will also serve northbound I-35 travelers.
The second Tindell Property ("Waterloo I"), located at the Waterloo Road
East exit, was completely renovated by the Tindells last year, and contains a
service station and convenience store. Waterloo I will focus on nearby Lake
Arcadia, the City of Edmond and northbound I-35 travelers. This exit also
serves as the south entrance to the Lazy E Arena. The third of the Tindell
Properties ("Waterloo II"), located at the Waterloo Road West exit, is
presently undeveloped. Waterloo II will, when developed, cater to City of
Edmond patrons as well as southbound I-35 travelers.
The other two properties were purchased by ITF in early February from
Stuckey's Management Group, L.L.C., a Georgia limited liability company (the
"Stuckey Properties") for a cash consideration totaling $490,000, which
included $90,000 of inventory. The Stuckey Properties are both situated along
Interstate Highway I-40 ("I-40") in the eastern part of Oklahoma. I-40 is one
of the principal east-west transportation corridors in the United States.
The first of the Stuckey Properties is situated at Exit 262 North near
Checotah, Oklahoma (the "Checotah" facility). Renovation is currently underway
at Checotah, which includes a service station, convenience store and small
restaurant. Because of its proximity to Lake Eufaula and Fountainhead State
Park, Checotah's theme will be on fishing, camping, boating and other
recreational activities in the surrounding area, and it will also cater to
westbound I-40 travelers.
The other Stuckey Property is situated at Exit 212 South near Cromwell,
Oklahoma (the "Cromwell" facility). Renovation of Cromwell, which also
includes a service station, convenience store and small restaurant, is expected
to start within 60 days. Although a final decision has not yet been made, it
is anticipated that a recreational vehicle ("R/V") parking area may be added at
Cromwell, in which case the focus will be on the traveler with the R/V as well
as eastbound I-40 travelers.
Upon completion of the renovations described above, ITF expects to have
approximately $4 million invested in the five properties. The business plan
calls for up to $2 million of such amount to be financed by bank debt.
Office and Other Leases. Beard leases office space in Oklahoma City,
Oklahoma, aggregating 5,817 square feet under a lease expiring September 30,
2000, at a current annual rental of $55,625. In addition, Beard's subsidiaries
lease space at a number of locations as required to serve their respective
needs.
Employees. As of December 31, 1997, Beard employed 77 full time and three
part time employees in all of its operations, including seven full time
employees and two part time employees on the corporate staff.
(d) Financial information about foreign and domestic operations and export
sales.
See Item 1(c) for a description of foreign and domestic operations and
export sales.
Item 2. Properties.
See Item 1(c) for a description of properties.
Item 3. Legal Proceedings.
Neither Beard nor any of its subsidiaries are engaged in any litigation or
governmental proceedings which Beard believes will have a material adverse
effect upon the results of operations or financial condition of any of such
companies.
Item 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of the fiscal year covered by this report, Beard
submitted to its shareholders a Proxy Statement for its annual meeting of such
shareholders which was held on October 10, 1997. A number of matters were
considered and voted upon at the meeting. Including the preferred shares,
there were 3,281,518 votes eligible to be cast at the meeting.
At the meeting the shareholders approved the sale of substantially all of
the assets of Carbonic Reserves pursuant to an Asset Purchase Agreement.
2,477,254 (75.49%) shares voted for approval; 11,107 (0.34%) shares voted
against approval; and 2,131 (0.06%) shares abstained.
The approval of the merger of The Beard Company into The New Beard Company
pursuant to the Agreement and Plan of Merger was approved by 2,477,815 (75.51%)
of the shares voted for approval, with 10,962 (0.33%) shares voting against and
1,715 (0.05%) shares abstaining.
Allan R. Hallock and Ford C. Price each received 2,789,596 votes (85.01%)
for their election to serve three-year terms as directors of the Company;
10,765 (0.33%) of the votes were withheld for each.
In addition to Messrs. Hallock and Price, the following serve as directors
of Beard until the annual meeting of shareholders held in the year indicated.
TERM
DIRECTOR EXPIRING
-------- --------
Harlon E. Martin, Jr. 1998
Herb Mee, Jr. 1998
W. M. Beard 1999
Michael E. Carr *
_________
*Elected to serve by the preferred shareholders until his successor has been
duly elected and qualified.
The approval of a proposal to amend The Beard Company Deferred Stock
Compensation Plan to increase the number of common shares authorized for
issuance thereunder from 50,000 to 100,000 received 2,780,194 (84.72%) votes
for and 14,612 (0.45%) votes against, with 5,555 (0.17%) votes abstaining.
The approval of the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for fiscal year 1997 received 2,797,562 (85.25%) votes
for, and 723 (0.02%) votes against, with 2,076 (0.06%) votes abstaining.
_________
All percentage figures shown above represent the respective percentage of
the 3,281,518 votes entitled to be cast at the meeting.
Item 4a. Executive Officers and Significant Employees of the Company.
The table below sets forth the age, positions with the Company and the year
in which each person first became an executive officer or significant employee
of the Company. All positions are held with the Company unless otherwise
indicated, and such persons are part of the corporate staff serving the Company
and all of its subsidiaries unless otherwise indicated.
EXECUTIVE OFFICER
OR SIGNIFICANT
EMPLOYEE OF BEARD
NAME POSITION OR BEARD OIL SINCE AGE
---- ---------- ------------------ ---
W. M. Beard Chairman of the Board and
Chief Executive Officer{AB} June 1969 69
Herb Mee, Jr. President & Chief Financial Officer{AB} November 1973 69
Marc A. Messner President - Whitetail Services,
Inc. and Horizontal Drilling
Technologies, Inc.{CE} February 1997 36
Philip R. Jamison President - Beard Technologies,
Inc.{DE} February 1997 59
Toby R. Tindell President & CEO - Interstate
Travel Facilities, Inc.{DE} February 1998 39
Jack A. Martine Controller and Chief Accounting
Officer October 1996 48
Rebecca G. Witcher Secretary and Treasurer{B} July 1997 38
_______________
{A} Director of the Company.
{B} Trustee of certain assets of the Company's 401(k) Trust.
{C} Devotes all of his time to these two subsidiaries.
{D} Devotes all of his time to this subsidiary.
{E} Indicated entities are subsidiaries of the Registrant.
Information concerning the executive officers and certain significant
employees of the Company is set forth below:
W. M. Beard has served Beard as its Chairman of the Board and Chief Executive
Officer since December 1992. He previously served as Beard's President and
Chief Executive Officer from the Company's incorporation in October 1974 until
January 1985. He has served Beard Oil as its Chairman of the Board and Chief
Executive Officer since its incorporation. He has also served as a director of
Beard and Beard Oil since their incorporation. Mr. Beard has been actively
involved since 1952 in all management phases of Beard and Beard Oil from their
inception, and as a partner of their predecessor company.
Herb Mee, Jr. has served as Beard's President since October 1989 and as its
Chief Financial Officer since June 1993. He has served as Beard Oil's
President since its incorporation, and as its Chief Financial Officer since
June 1993. He has also served as a director of Beard and Beard Oil since their
incorporation. Mr. Mee served as President of Woods Corporation, a New York
Stock Exchange diversified holding company, from 1968 to 1972 and as its Chief
Executive Officer from 1970 to 1972.
Marc A. Messner has served as President of Horizontal Drilling Technologies,
Inc. ("HDT") since he and another person founded the company in July 1993. He
was elected President of Whitetail Services, Inc. in November 1996. Mr.
Messner has been associated with the environmental services industry since
1989, last serving as a project manager for a large national environmental
consulting firm before leaving to start HDT.
Philip R. Jamison has served as President of Beard Technologies, Inc. since
August 1994. Mr. Jamison has been associated with the coal industry since
1960, working in various positions. From 1972 to 1977 he served as Vice
President Operations for International Carbon and Minerals and as President and
CEO of all its coal producing subsidiaries. From 1979 to 1988 he served as CEO
of four small companies which were engaged in the production and sale of coal.
From 1993 to 1995 he served as a consultant to Energy International, Inc.
("EI") in its development of the Mulled Coal technology and installed and
operated the process at an Alabama coal preparation plant in connection with
EI's performance of a contract for the Department of Energy.
Toby R. Tindell has served as President and CEO of Interstate Travel
Facilities, Inc. ("ITF") since February 1998. He served as President of
Tindell Enterprises, Inc., owner and operator of two convenience stores
properties, from December 1996 until their purchase by ITF in February 1998.
Prior to that he had been involved in a number of other businesses for more
than 15 years.
Jack A. Martine was elected as Controller, Chief Accounting Officer and Tax
Manager of Beard in October 1996. Mr. Martine served as tax manager for Beard
Oil from June 1989 until October 1993 at which time he joined Sensor Oil & Gas,
Inc. in a similar capacity. Mr. Martine is a certified public accountant.
Rebecca G. Witcher has served as Corporate Secretary of the Company and Beard
Oil since October 1993, and has served as Treasurer of such companies since
July 1997.
All executive officers serve at the pleasure of the Board of Directors.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
(a) Market information.
The Company's common stock trades on the American Stock Exchange ("ASE")
under the ticker symbol BOC. The following table sets forth the high and low
sales price for the Company's common stock, as reflected in the ASE monthly
detail reports, for each full quarterly period within the two most recent
fiscal years.
1997 HIGH LOW
---- ---- ---
Fourth quarter $ 5-1/2 $ 4-1/8
Third quarter 5-9/16 4-1/2
Second quarter 6-1/4 3-5/8
First quarter 4-3/8 3
1996 HIGH LOW
---- ---- ---
Fourth quarter $ 2-7/8 $ 2-1/2
Third quarter 3-1/4 2-3/4
Second quarter 3-1/4 2-1/4
First quarter 2-3/8 2-1/8
(b) Holders.
As of February 28, 1998 the Company had 547 record holders of common stock.
(c) Dividends.
To date, the Company has not paid any cash dividends. The payment of cash
dividends in the future will be subject to the financial condition, capital
requirements and earnings of the Company. The Company intends to employ its
earnings, if any, primarily in its E/RR and interstate travel activities and
does not expect to pay cash dividends for the foreseeable future. The
redemption provisions of the Beard preferred stock limit the Company's ability
to pay cash dividends. (See "Business-General development of business").
Item 6. Selected Financial Data.
The following financial data are an integral part of, and should be read in
conjunction with, the financial statements and notes thereto. Information
concerning significant trends in the financial condition and results of
operations is contained in Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 21 through 27 of this report.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of operations data:
Operating revenues from
continuing operations $ 5,808 $ 3,376 $ 3,306 $ 3,469 $ 4,394
Interest income 183 12 13 13 9
Interest expense (246) (141) (9) (19) (6)
Earnings (loss) from
continuing operations (2,428) (1,675) (965) 310 (249)
Earnings (loss) from
discontinued operations 11,442<F1> 1,360<F2> 562 407 (11,827)<F3>
Gain on debt restructuring - - - - 46,928
Net earnings (loss) 9,014 (315) (403) 717 34,852
Net earnings (loss) attributable to
common shareholders 5,225 (315) (454) 659 34,852
Net earnings (loss) from continuing
operations per share<F4>:
(basic EPS) (0.86) (0.60) (0.36) 0.10 (0.12)
(diluted EPS) (0.86) (0.60) (0.36) 0.08 (0.12)
Net earnings (loss) per share<F4>):
(basic EPS) 1.86 (0.11) (0.17) 0.25 16.51
(diluted EPS) 1.86 (0.11) (0.17) 0.21 16.51
Balance sheet data:
Working capital 9,924 1,745 1,989 2,427 1,765
Total assets 20,952 16,473 14,615 13,856 14,966
Long-term debt (excluding
current maturities) 519 2,911 1,454 982 1,137
Redeemable preferred stock 889 1,200 1,200 1,200 1,200
Total common shareholders'
equity 12,433 8,656 8,788 9,066 8,407
___________
<FN>
<F1> Beard sold the business and substantially all of the assets of Carbonic
Reserves, an 85%-owned subsidiary, in 1997 with the results of such
operations, including the 1997 gain on sale, reported as discontinued
operations in 1997 and for all prior years. (See note 2 of notes to
financial statements).
<F2> In January 1997 Beard adopted a plan to dispose of the assets of its real
estate construction and development segment. The results of the segment,
including an estimated loss on disposition, were reported as discontinued
operations in 1996 and for all prior periods. (See note 2 of notes to
financial statements).
<F3> As a result of the Restructure in 1993, Beard divested substantially all
of the oil and gas assets of Beard Oil and the oil and gas operations were
reported as discontinued operations in 1993.
<F4> The Company adopted the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings Per
Share," in the fourth quarter of 1997 as required by the Statement.
The Company restated earnings per share for all prior periods presented.
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion addresses the significant factors affecting the
results of operations, financial condition, liquidity and capital resources of
the Company. Such discussion should be read in conjunction with the Company's
financial statements including the related notes and the Company's selected
financial information.
Overview
GENERAL. The Company operates within two major industry segments: (1) the
environmental/resource recovery segment (the "E/RR Segment"), consisting of
environmental services and resource recovery activities; and (2) the carbon
dioxide segment (the "CO{2} Segment"), comprised of the production of CO{2}
gas. The Company also operated in the dry ice (solid CO{2}) manufacturing and
distribution business, included in the CO{2} Segment, and in the real estate
construction and development segment which were discontinued in October and
January 1997, respectively. The Company also has other operations, including
(i) a minority-owned investment in a joint venture for the extraction,
production and sale of crude iodine and (ii) various assets and investments
that the Company has been liquidating as opportunities have materialized.
The Company's continuing operations reflect losses of $2,428,000, $1,675,000
and $965,000 in 1997, 1996 and 1995, respectively. In January of 1997 the
Company discontinued its real estate construction and development activities
because of a sharp slowdown in sales activity. In October of 1997 the Company
sold the business and substantially all of the assets involved in the
manufacture and sale of dry ice (solid CO{2}), taking advantage of an extremely
favorable offer which it had received for the business. The Company is now
focusing its attention on the E/RR Segment where it hopes to achieve a
turnaround in operating results. In addition, Beard is looking at new
investment opportunities which it believes have greater potential for growth
and profitability. The results from continuing operations exclude earnings of
$11,442,000, $1,360,000, and $562,000 in 1997, 1996 and 1995 from such
discontinued operations.
The results of operations for 1997 showed a decline in the operating margins
of the E/RR Segment which is now the Company's largest segment. A significant
increase in revenues, as a result of continued expansion in this segment, was
more than offset by increased expenses resulting in a $475,000 decline in
operating margins for 1997 compared to 1996. The increased expenses were the
result of (i) additional personnel costs due to the expanded workforce required
to generate additional revenues, coupled with (ii) higher than anticipated
costs for materials used, equipment rentals and insurance. The cost of these
items significantly exceeded the bid cost for such items on several of the
larger projects bid by the E/RR Segment. Additionally, forecasted undiscounted
future net cash flows exceeded the carrying value of certain long-lived assets
of a subsidiary in the E/RR Segment resulting in impairment losses of $114,000.
The CO{2} Segment showed an $84,000 improvement in operating margins in 1997
compared to 1996 principally as the result of higher prices for CO{2}. The
primary reason for the decline in the operating margins of other corporate
operations was an impairment loss of $171,000 in the value of certain real
estate assets.
1996 results of operations also reflected disappointing results in the E/RR
Segment where a decline in revenues in the first half of the year resulted in a
sharp decline in operating margins for 1996 compared to 1995. The acquisition
of Horizontal Drilling Technologies, Inc. ("HDT") in May of 1996 partially
ameliorated the revenue decline but was of little assistance in making up the
decline in margins. The operating margins of the CO{2} Segment posted an
$85,000 increase in operating margins for 1996 compared to 1995.
1995 results of operations reflected significant improvement in the
operating margins of the CO{2} Segment. This improvement was largely offset by
disappointing results in the E/RR Segment where an increase in overhead costs
due to business expansion contributed to a higher operating loss in 1995 than
in the previous year. 1995 benefited from a $194,000 gain on the sale of
various assets, principally drilling rigs and related equipment.
Liquidity and capital resources
CAPITAL INVESTMENTS. The Company's capital investment programs have
required more cash than has been generated from operations during the past
three years. Cash flows provided by (used in) operations during 1997, 1996 and
1995 were $96,000, $924,000, and $(414,000), respectively, while capital
additions from continuing operations were $701,000, $1,221,000, and $361,000
respectively, as indicated in the table below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Environmental/resource recovery $550,000 $1,138,000 $339,000
Carbon dioxide 147,000 68,000 -
Other 4,000 15,000 22,000
-------- ---------- --------
Total $701,000 $1,221,000 $361,000
======== ========== ========
</TABLE>
Capital additions in the discontinued solid CO{2} segment were $934,000,
$1,910,000 and $1,265,000 for 1997, 1996 and 1995, respectively. Seller-
provided financing and other debt obligations provided $86,000, $889,000, and
$487,000 of the funds for such capital investments in 1997, 1996, and 1995,
respectively.
Capital investments over the three year period totaled $6,392,000 of which
$4,109,000 was invested in the CO{2} Segment where it was utilized in the dry
ice operations of Carbonics. Investments made in this segment replaced
equipment acquired during the expansion of activities in the early 1990's.
This equipment was partially depreciated at the time of acquisition and had
reached a fully-depreciated status. Additional investments were made to
upgrade Carbonics' production capacity and quality specifications, and increase
production efficiencies and revenue capabilities in order to facilitate its
strategy of increasing its market share.
The Company's 1998 capital expenditure budget has been increased to
$8,000,000 as a result of the Company's entry into the interstate travel
business. Presently anticipated capital expenditures include (i) $4,165,000
for the E/RR Segment, (ii) $50,000 for the CO{2} Segment, and (iii) $3,785,000
for the interstate travel facilities segment (the "ITF Segment"). See Recent
Developments. $3,800,000 of the estimated total is speculative since it is
targeted for expenditure on a Mulled Coal recovery plant on which negotiations
are currently in progress.
Liquidity. The sale of the Carbonic Reserves in October of 1997 has
provided the Company with significant liquid resources. Future cash flows and
availability of credit are subject to a number of variables, including
continuing private and governmental demand for environmental services, and
continuing demand for CO{2} gas and for the services provided by the Company's
interstate travel facilities. The Company anticipates that its current
resources, future cash flows and enhanced availability of credit due to the
significant improvement in the Company's balance sheet will enable it to meet
its planned operating costs and capital spending requirements.
Working capital for 1997 increased $8,179,000 over 1996. The sale of
Carbonic Reserves infused the Company with $19,375,000 in cash and cash
equivalents and receivables. The Company used a portion of these funds to
purchase treasury stock for $1,519,000 in November 1997. In addition,
$3,215,000 of bank debt and credit lines were eliminated, including $1,387,000
assumed by Airgas and $1,828,000 retired directly by the Company from the sale
proceeds. Certain obligations accruing due to the sale, such as the mandatory
redemption of preferred stock of $3,100,000, the purchase of the minority
shareholder's ownership in Carbonic Reserves for $900,000, accrued bonuses and
employee severance compensation totaling $400,000, and $522,000 of state and
federal income taxes payable, collectively increased current liabilities and
reduced the increase in working capital for 1997.
Selected liquidity highlights for the Company for the past three years are
summarized below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash and cash equivalents $ 13,955,000 $ 375,000 $ 220,000
Accounts and other receivables, net 2,654,000 2,405,000 2,259,000
Inventories 227,000 2,003,000 2,282,000
Trade accounts payable 533,000 1,395,000 1,354,000
Short-term debt - 639,000 957,000
Current maturities of long-term debt 136,000 910,000 520,000
Long-term debt 519,000 2,911,000 1,454,000
Working capital 9,924,000 1,745,000 1,989,000
Current ratio 2.42 to 1 1.49 to 1 1.63 to 1
Net cash provided by (used in)
operations before changes in
current assets and liabilities (487,000) 688,000 315,000
Net cash provided by (used in)
operations 96,000 924,000 (414,000)
</TABLE>
In 1997, the Company generated a positive cash flow of $13,580,000. Con-
tributing to this increase was the $96,000 provided by operations. The Company's
cash flows from operations for the year were heavily dependent on its discon-
tinued dry ice and real estate construction and development segments. Positive
cash flows in these discontinued segments, however, were offset by negative cash
flows in the E/RR Segment and other segments. In 1997, the E/RR Segment experi-
enced higher than anticipated costs of materials, labor, contracted services,
equipment rental and insurance, resulting in a negative operating cash flow.
Other corporate activities also generated cash outflows from operations as the
Company pursued additional business opportunities. (See "Results of operations-
Other activities" below).
The Company's investing activities provided cash of $17,582,000 in 1997.
This was due primarily to the sale of the dry ice business in October 1997.
The Company's financing activities utilized cash flows of $4,098,000 in
1997. This resulted mainly from the paydown of bank debt, lines of credit and
term notes and the purchase, in November 1997, of the treasury stock.
At year-end 1997 the Company had $486,000 of credit available under the
parent company's $650,000 bank line of credit. The Company's other credit
lines were retired. The Company believes that available cash, cash flows from
future operations, and available borrowings under its existing line of credit
will be adequate to meet the Company's liquidity needs, including anticipated
requirements for working capital, capital expenditures and debt repayment. The
Company intends to arrange additional lines of credit during the remainder of
1998, taking advantage of its current strong balance sheet position.
Effect of Reorganization on Liquidity. 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. As of December 31, 1997, the Company accrued $4,004,000 for the
repurchase of 47,729 shares of preferred stock and the subsequent redemption of
14,589 shares of preferred stock from the sole remaining preferred shareholder.
The repurchase was effected by the Company in January of 1998 and the
redemption was effected in March of 1998. See "The 1993 Restructure---
Mandatory Redemptions of Beard Preferred Stock."
Results of operations
General. The period of 1995-1997 was a time of transition for the Company.
Following the Restructure in 1993, the Company shifted its focus to the
management of its non-oil and gas investments. During this period the Company
divested itself of its real estate construction and development activities in
January 1997 and sold its dry ice manufacturing and distribution business in
October 1997. As a result, the corporate staff can now devote more attention
to the management of the E/RR Segment where a significant improvement in
operating results is needed. The CO{2} Segment's operating results have
reflected healthy improvement due to development drilling at McElmo Dome and
increases in market demand and prices for CO{2}. In addition, the Company
continues to pursue niches of opportunity which it perceives to have good
potential for growth and profitability, while liquidating assets no longer in
line with the Company's strategic objectives. Operating profit (loss) for the
Company's remaining principal segments for the three years was as set forth
below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Operating profit (loss):
Environmental/resource recovery $(1,232,000) $(757,000) $(325,000)
Carbon dioxide 268,000 184,000 99,000
----------- --------- ---------
Subtotal (964,000) (573,000) (226,000)
Other - principally corporate (1,188,000) (1,032,000) (992,000)
----------- --------- ---------
Total $(2,152,000) $(1,605,000) $(1,218,000)
=========== =========== ===========
</TABLE>
Following is a discussion of results of operations for the three-year period
ended December 31, 1997.
Environmental/resource recovery. Following the 1993 Restructure the Company
redirected the activities of its oilfield services subsidiaries to focus upon
environmental services activities. Another subsidiary is focusing on the
commercial development of the Company's proprietary coal technology. HDT,
which utilizes trenchless technology for environmental remediation purposes,
was acquired in 1996. Another subsidiary was added in 1997 which utilizes a
chemical for which it is the sole U.S. licensee of a process for the
remediation of creosote.
Collectively, this group of companies provides a wide range of environmental
services and resource recovery activities. Revenues for this segment increased
$2,238,000 to $5,247,000 in 1997. 1996 revenues decreased $17,000 to
$3,009,000 from $3,026,000 in 1995. The increase in 1997 was the result of the
completion of several large drilling and water main replacement projects and
the full years' impact of HDT which was purchased in May 1996. The 1996
decrease was caused primarily by a severe decline in revenues during the first
half of the year resulting from the suspension of several contracts by a state
agency. The first half decline was largely offset by revenues generated by HDT
during the last half of the year. Operating losses for 1997 were $1,232,000
compared to $757,000 in 1996. This was the result of higher than anticipated
increases in costs of materials used, labor, contracted services, equipment
rental and insurance and an impairment in the carrying value of certain long-
lived assets of $114,000. The $432,000 decline in operating losses from
$325,000 in 1995 to $757,000 in 1996 was due primarily to the decline in
revenues mentioned above.
The proprietary Mulled Coal technology retained by Beard Technologies, Inc.
("BTI") at the time of the EI sale generated $139,000 in revenue and $13,000 of
the segment's operating loss during 1995. Following the completion of the DOE
contract in the first quarter of 1996 BTI spent the remainder of the year
determining the best way to market its new technology. As a result, BTI
generated operating losses for the remainder of the year which adversely
affected the E/RR Segment's operating results. BTI generated no revenue in
1997. The Company has engaged a consultant to assist in developing a marketing
strategy for the technology.
Carbon dioxide. The sole component of revenues for this segment is the sale
of CO{2 }gas from the working and overriding royalty interests of the Company's
two carbon dioxide producing units in Colorado and New Mexico. Operating
revenues in this segment were $503,000, $301,000 and $209,000 in 1997, 1996 and
1995, respectively, with the increases reflecting the development project in
the McElmo Dome field in New Mexico, coupled with higher pricing as a result of
increased demand for CO{2}.
Results of operations for the CO{2} Segment reflected an operating profit of
$268,000 for 1997, $184,000 for 1996 and $99,000 for 1995. CO{2} net sales
volumes were 1,617,000, 1,723,000 and 1,123,000 in 1997, 1996 and 1995,
respectively. Sales volumes actually increased in 1997 compared to 1996 but
adjustments by the operator to volumes reported for prior periods resulted in a
net reduction of 106,000 Mcf to the Company's interest. The 600,000 Mcf
increase in sales volume for 1996 compared to 1995 was due primarily to the
development program which was begun in 1996 by the operator of the McElmo Dome
field in New Mexico. The increase in operating profits in 1997 compared to
1996 was the result of an increase from $0.18 per Mcf in 1996 to $0.31 in 1997
in the average prices received for the CO{2}. The average price received in
1996 dropped slightly from the $0.20 received in 1995.
Other activities. Other activities include general and corporate
operations, as well as assets unrelated to the Company's principal lines of
business or held for investment. These activities generated operating losses
of $1,188,000 in 1997, $1,032,000 in 1996, and $992,000 in 1995. A decrease in
revenues generated by the corporate group and an increase in legal expenses
associated with negotiating a settlement with preferred stockholders were the
main factors contributing to the increased loss in 1995. A higher level of
general and administrative expenses also impacted the bottom line in 1996 as
the Company continued to pursue additional business opportunities. This trend
continued in 1997 as general and administrative expenses remained at the higher
1996 level as management continued to explore other investment options while
pursuing the sale of Carbonic Reserves. In 1997, the parent company also
incurred an impairment loss of $171,000 relating to underutilized land
remaining from the 1993 Restructure.
The Company has an equity investment (40%) in North American Brine Resources
("NABR"), a joint venture for the extraction, production and sale of crude
iodine. In the second half of 1996 NABR determined to reactivate its Woodward
Plant (with iodine priced in the $17-18/kilogram range), which had been shut
down since mid-1993 due to severely depressed iodine prices (bottomed at $7/
kilogram in mid-1994). Beard's share of NABR's 1996 operating loss was
approximately $43,000 compared to $13,000 in 1995. The Company benefited in
1997 from the decision to reactivate the Woodward Plant as its share of NABR's
operating income was $104,000.
Although the Company owns 80% of the common stock of Cibola Corporation
("Cibola"), it does not have financial control of this gas marketing
subsidiary. Cibola, formed in May of 1996, contributed $185,000 and $99,000 of
pre-tax net income to the Company for fiscal years 1997 and 1996, respectively,
pursuant to a tax sharing agreement.
Depreciation, depletion and amortization. The Company's depreciation,
depletion and amortization expenses increased 45% in 1997 over 1996's expense
and 51% in 1996 over 1995's expense. These increases were a consequence of the
higher depreciable base which resulted from the expansions and capital
expenditures made within the E/RR and CO{2} Segments. The acquisition of HDT
in May of 1996 also contributed to the increased DD&A in 1996 and 1997.
Other income or expenses, including impairment. In 1997, the Company
recognized $328,000 for impairments to the carrying values of investments and
other assets. In 1996 and 1995, the Company recognized other expenses of
$180,000 and $102,000, respectively, consisting of impairments of the carrying
value of certain assets held for investment, as well as $51,000 of expenses in
1995 incurred in evaluating investments that did not materialize. In 1995,
these expenses were offset by the recognition of $220,000 of income received
from an escrow related to a previous reorganization.
Selling, general and administrative expenses. Selling, general and
administrative expenses ("SG&A") increased to $2.3 million in 1997 from $1.9
million in 1996 and $1.7 million in 1995. SG&A expense incurred by the E/RR
Segment during 1997, which represents 50% of SG&A costs, increased by $300,000
over 1996 and by $122,000 in 1996 over the amounts for 1995. As a percentage
of the E/RR Segment's revenues, these expenses rose from 24.8% in 1995 to 28.6%
in 1996 but fell to 22.4% in 1997. Other corporate SG&A increased from
$944,000 in 1995 to $1,028,000 in 1996 to $1,167,000 in 1997 as the Company
incurred expenses in connection with (i) the pursuit of investment
opportunities which failed to materialize, and (ii) the Merger.
Interest expense. Net interest expense has increased steadily from $9,000
in 1995 to $141,000 in 1996 and to $246,000 in 1997. Such increases reflect
the higher level of debt incurred by the E/RR Segment to fund equipment
acquisitions and by corporate operations to meet working capital needs.
Gain on sale of assets. In 1997, the gain on the sale of assets of $13,000
reflected proceeds from the sale of certain assets that are in the process of
being liquidated, principally drilling rigs and related equipment and the
building formerly occupied by one of the E/RR Segment subsidiaries. These
activities generated gains of $165,000 in 1996 and $194,000 in 1995.
Income taxes. The Company has approximately $59.7 million of net operating
loss carryforwards, investment tax credits, and depletion carryforwards to
reduce future income taxes. Based on the Company's historical results of
operations, it is not likely that the Company will be able to realize the
benefit of its net operating loss carryforwards and investment tax credit
carryforwards before they begin to expire in 2004 and 1998, respectively. At
December 31, 1997 and 1996, the Company has not reflected as a deferred tax
asset any future benefit it may realize as a result of its tax credits and loss
carryforwards. Future regular taxable income of the Company will be
effectively sheltered from tax as a result of the Company's substantial tax
credits and loss carryforwards. Continuing operations for 1997 reflect
alternative minimum taxes of $40,000. It is anticipated that the Company will
continue to incur minor alternative minimum tax in the future, despite the
Company's carryforwards and credits.
Discontinued operations. In October of 1997 the Company sold the business
and substantially all of the assets (excluding cash and cash equivalents, notes
receivable from the Company or related parties and deferred tax assets) of
Carbonic Reserves, an 85%-owned subsidiary engaged in the manufacture of solid
CO{2} ("solid CO{2} segment") for cash of $19,375,000 and the assumption of
certain liabilities valued at $2,813,000. The assumed liabilities included
trade accounts payable and current and long-term debt obligations (excluding
tax liabilities, employee related liabilities and indebtedness to the Company
or related parties). The gain on the sale was $11,014,000 after deducting
income taxes of $522,000. As of December 31, 1997, the significant assets of
the solid CO{2} segment consist of cash of $125,000 and a $1,000,000 receivable
from the purchaser of the business. The Company received the $1,000,000 on
March 12, 1998. The significant liabilities of the solid CO{2} segment
consisted of a $900,000 obligation to purchase the minority shareholder's stock
and $400,000 of accrued bonuses and employee severance compensation. Revenues
applicable to the discontinued operations of Carbonic Reserves were
$11,071,000, $13,307,000 and $11,706,000 in 1997, 1996 and 1995, respectively.
Earnings from the discontinued solid CO{2} segment were $428,000, $1,535,000
and $487,000, in 1997, 1996 and 1995, respectively.
As previously noted, the Company discontinued its real estate construction
and development activities in January of 1997 in order to focus its attention
on other segments which are considered to have greater potential for growth and
profitability. During 1996 the Company sold three homes in The Oaks
development adjacent to the Oak Tree Golf Club in Edmond, Oklahoma, compared to
six sold in 1995. As of December 31, 1997, the Company had sold all of the
real estate construction and development assets (the "Assets") with the
exception of one speculative home. Revenues applicable to these operations
were $1,083,000 and $1,949,000 in 1996 and 1995, respectively. Earnings from
the discontinued real estate construction and development segment were $5,000
and $75,000 in 1996 and 1995, respectively.
The Company estimated and accrued $180,000 at December 31, 1996,
representing the difference in the estimated amounts to be received from
disposing of the Assets and the Assets' recorded value at December 31, 1996.
During 1997, the Company sold $1,534,000 of the real estate construction and
development assets, which approximated the amounts the Company estimated it
would receive from selling such assets. Operating results of the discontinued
operations through the date of sale of the remaining asset are not expected to
be significant.
Forward looking statements. The previous discussions include statements
that are not purely historical and are "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, including statements regarding the Company's expectations, hopes, beliefs,
intentions and strategies regarding the future. The Company's actual results
could differ materially from its expectations discussed herein.
Impact of Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income ("SFAS
No. 130"). SFAS No. 130 is effective for both interim and annual periods
beginning after December 15, 1997. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. The statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed in
equal prominence with other financial statements. The Company will adopt SFAS
No. 130 in 1998. Management of the Company does not expect that adoption of
SFAS No. 130 will have a material impact on the Company's financial position or
results of operations.
In June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segment of an Enterprise and Related Information," was
issued by the Financial Accounting Standards Board. SFAS No. 131 is effective
for periods beginning after December 15, 1997. SFAS No. 131 requires a public
company to report financial and descriptive information about its reportable
segments which are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. The Company will adopt SFAS No. 131 in 1998 but has not, as yet,
determined its reportable segments under SFAS No. 131.
Impact of Year 2000 Issue
Companies that use computers face an issue as the year 2000 draws near. The
problem is due to a common programming practice of using only two digits to
represent a year. Without proper modification, for example, many programs may
interpret the year 2000 as the year 1900. During the year 1998, the Company
will install the proper commercial software releases and upgrades to its
hardware, as necessary, to become year 2000 compliant. The Company anticipates
that these expenses will not be material.
Item 8. Financial Statements and Supplementary Data
The Beard Company and Subsidiaries
Index to Financial Statements
Forming a Part of Form 10-K Annual Report
to the Securities and Exchange Commission
Page
Number
Independent Auditors' Report
Financial Statements:
Balance Sheets, December 31, 1997 and 1996
Statements of Operations, Years ended December 31, 1997, 1996 and 1995
Statements of Shareholders' Equity, Years ended December 31, 1997, 1996 and
1995
Statements of Cash Flows, Years ended December 31, 1997, 1996 and 1995
Notes to Financial Statements, December 31, 1997, 1996 and 1995
Certain financial statement schedules are omitted as inapplicable or not
required, or the required information is shown in the financial statements or
in the notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
The Beard Company:
We have audited the financial statements of The Beard Company and subsidiaries
as listed in the accompanying index. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Beard Company and
subsidiaries at December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the years in the three-year period ended
December 31, 1997, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
March 12, 1998
<PAGE>
<TABLE>
THE BEARD COMPANY AND SUBSIDIARIES
Balance Sheets
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 13,955,000 $ 375,000
Accounts receivable, less allowance
for doubtful receivables of $75,000
in 1997 and $71,000 in 1996 1,654,000 2,405,000
Other receivables (note 2) 1,000,000 -
Inventories 227,000 2,003,000
Prepaid expenses 84,000 442,000
Other assets 11,000 73,000
----------- -----------
Total current assets 16,931,000 5,298,000
Investments and other assets 1,580,000 1,710,000
Property, plant and equipment, at cost 6,247,000 16,793,000
Less accumulated depreciation, depletion
and amortization 4,300,000 8,094,000
----------- -----------
Net property, plant and equipment
(note 5) 1,947,000 8,699,000
Intangible assets, at cost 828,000 4,305,000
Less accumulated amortization 334,000 3,539,000
----------- -----------
Net intangible assets (note 6) 494,000 766,000
----------- -----------
$ 20,952,000 $ 16,473,000
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable $ 533,000 $ 1,395,000
Accrued expenses (note 2) 892,000 609,000
Income taxes payable (note 11) 541,000 -
Redeemable preferred stock purchase and
redemption obligation (note 4) 4,005,000 -
Other obligations (note 2) 900,000 -
Current maturities of long-term
debt (note 8) 136,000 910,000
Short-term debt (note 7) - 639,000
----------- -----------
Total current liabilities 7,007,000 3,553,000
----------- -----------
Long-term debt less current maturities
(note 8) 519,000 2,911,000
Minority interest in consolidated
subsidiaries 104,000 153,000
Redeemable preferred stock of $100
stated value; 5,000,000 shares
authorized; 27,838 and 90,156
shares issued and outstanding in
1997 and 1996, respectively (notes 1
and 4) 889,000 1,200,000
Common shareholders' equity:
Common stock of $.001 par value per
share; 10,000,000 shares authorized;
2,832,129 and 2,799,074 shares issued
in 1997 and 1996, respectively 3,000 3,000
Capital in excess of par value 37,911,000 41,629,000
Accumulated deficit (23,962,000) (32,976,000)
Treasury stock, 303,890 shares, at cost
(note 1) (1,519,000) -
----------- -----------
Total common shareholders' equity 12,433,000 8,656,000
----------- -----------
Commitments and contingencies (notes 4,
10, 14 and 15) $ 20,952,000 $ 16,473,000
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Operations
Year Ended December 31,
-----------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Environmental/resource recovery $ 5,247,000 $ 3,009,000 $ 3,026,000
Carbon dioxide 503,000 301,000 209,000
Other 58,000 66,000 71,000
----------- ----------- -----------
5,808,000 3,376,000 3,306,000
Expenses:
Environmental/resource recovery
(exclusive of depreciation
depletion and amortization
shown separately below) 4,749,000 2,642,000 2,420,000
Carbon dioxide (exclusive of
depreciation, depletion and
amortization shown separately
below) 103,000 97,000 101,000
Selling, general and adminis-
trative 2,345,000 1,864,000 1,705,000
Depreciation, depletion and
amortization 435,000 301,000 200,000
Impairment of long-lived assets
(notes 1and 17) 285,000 - -
Other 43,000 77,000 98,000
----------- ------------ -----------
7,960,000 4,981,000 4,524,000
Operating profit (loss):
Environmental/resource recovery (1,232,000) (757,000) (325,000)
Carbon dioxide 268,000 184,000 99,000
Other, principally corporate (1,188,000) (1,032,000) (992,000)
----------- ----------- -----------
(2,152,000) (1,605,000) (1,218,000)
Other income (expense):
Interest income 183,000 12,000 13,000
Interest expense (246,000) (141,000) (9,000)
Equity in net earnings (loss) of
unconsolidated affiliates 274,000 56,000 (13,000)
Gain on sale of assets 13,000 165,000 194,000
Impairment of investments and
other assets (notes 1 and 17) (328,000) (180,000) (102,000)
Minority interest in operations of
consolidated subsidiaries 49,000 13,000 -
Other (181,000) 5,000 170,000
----------- ----------- -----------
Loss from continuing operations
before income taxes (2,388,000) (1,675,000) (965,000)
Income taxes from continuing
operations (note 11) (40,000) - -
----------- ----------- -----------
Loss from continuing operations (2,428,000) (1,675,000) (965,000)
Discontinued operations (note 2):
Earnings from discontinued
operations (less applicable
income taxes of $33,000 in 1997) 428,000 1,540,000 562,000
Loss from discontinuing real
estate construction and
development activities - (180,000) -
Gain on sale of dry ice manu-
facturing and distribution
business (less applicable in-
come taxes of $522,000) 11,014,000 - -
----------- ----------- -----------
Earnings from discontinued
operations 11,442,000 1,360,000 562,000
----------- ----------- -----------
Net earnings (loss) $ 9,014,000 $ (315,000) (403,000)
=========== =========== ===========
Net earnings (loss) attributable
to common shareholders
(note 4) $ 5,225,000 $ (315,000) $ (454,000)
=========== =========== ===========
Net earnings (loss) per average
common share outstanding:
Basic and diluted:
Loss from continuing opera-
tions $ (0.86) $ (0.60) $ (0.36)
Earnings from discontinued
operations 2.72 0.49 0.19
----------- ----------- -----------
Net earnings (loss) $ 1.86 $ (0.11) $ (0.17)
=========== =========== ===========
Weighted average common shares
outstanding - basic and diluted 2,808,000 2,756,000 2,662,000
=========== =========== ===========
</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 Treasury Shareholders'
Stock Par Value Deficit Stock Equity
------------ ------------ ------------- ------------ ------------
<S> <C> <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 - - (403,000) - (403,000)
Accretion of preferred stock - (51,000) - - (51,000)
Issuance of 78,700 shares of
common stock - 176,000 - - 176,000
------------ ------------ ------------- ------------ ------------
Balance, December 31, 1995 3,000 41,446,000 ( 32,661,000) - 8,788,000
Net loss, year ended December 31, 1996 - - (315,000) - (315,000)
Issuance of 68,244 shares of
common stock - 183,000 - - 183,000
------------ ------------ ------------- ------------ ------------
Balance, December 31, 1996 3,000 41,629,000 ( 32,976,000) - 8,656,000
Net earnings, year ended December 31, 1997 - - 9,014,000 - 9,014,000
Issuance of 33,055 shares of common stock - 71,000 - - 71,000
Purchase of 303,890 shares of common stock - - - (1,519,000) (1,519,000)
Accretion of preferred stock (note 4) - (3,789,000) - - (3,789,000)
------------ ------------ ------------- ------------ ------------
Balance, December 31, 1997 $ 3,000 $ 37,911,000 $ (23,962,000) $ (1,519,000) $ 12,433,000
============ ============ ============= ============ ============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
Year Ended December 31,
-----------------------
1997 1996 1995
<S> <C> <C> <C>
Operating activities:
Cash received from customers $ 17,189,000 $ 17,763,000 $ 16,564,000
Cash paid to suppliers and employees (16,736,000) (17,045,000) (16,741,000)
Cash received from settlement of
take-or-pay contract - 539,000 -
Interest received 83,000 15,000 28,000
Interest paid (386,000) (348,000) (265,000)
Taxes paid (54,000) - -
----------- ----------- -----------
Net cash provided by (used in)
operating activities 96,000 924,000 (414,000)
----------- ----------- -----------
Investing activities:
Acquisition of property, plant and
equipment (1,301,000) (1,765,000) (1,035,000)
Proceeds from sale of business 18,777,000 434,000 317,000
Proceeds from escrowed or restricted
cash - - 220,000
Other investments 106,000 128,000 (397,000)
----------- ----------- -----------
Net cash provided by (used in)
investing activities 17,582,000 (1,203,000) (895,000)
----------- ----------- -----------
Financing activities:
Proceeds from line of credit and
term notes 1,764,000 3,728,000 3,195,000
Payments on line of credit and
term notes (4,302,000) (3,331,000) (2,351,000)
Purchase of treasury stock (1,519,000) - -
Proceeds from issuance of common stock 71,000 45,000 176,000
Other (112,000) (8,000) (57,000)
----------- ----------- -----------
Net cash provided by (used in)
financing activities (4,098,000) 434,000 963,000
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 13,580,000 155,000 (346,000)
Cash and cash equivalents at beginning
of year 375,000 220,000 566,000
----------- ----------- -----------
Cash and cash equivalents at end of
year $ 13,955,000 $ 375,000 $ 220,000
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
Reconciliation of Net earnings (loss) to Net cash provided by (used in)
operating activities
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Net earnings (loss) $ 9,014,000 $ (315,000) $ (403,000)
Adjustments to reconcile net
earnings (loss) to net cash
provided by (used in)
operating activities:
Loss from discontinuing operations - 180,000 -
Depreciation, depletion and
amortization 1,297,000 1,313,000 1,158,000
Gain on sale of assets (11,549,000) (171,000) (423,000)
Provision for uncollectible
accounts and notes 113,000 28,000 54,000
Impairment of investments and
other assets 328,000 180,000 102,000
Impairment of long-lived assets 285,000 - -
Gain on take-or-pay contract
settlement - (400,000) -
Equity in net (income) loss of
unconsolidated affiliates (274,000) (56,000) 13,000
Minority interest of consolidated
subsidiaries (49,000) (13,000) -
Interest and other costs (capitalized)
recognized on real estate project 357,000 (94,000) (81,000)
Other (9,000) 36,000 (105,000)
Increase in accounts receivable,
other receivables, prepaid
expenses and other current assets (1,022,000) (114,000) (266,000)
(Increase) decrease in inventories 1,069,000 134,000 (221,000)
Increase (decrease) in trade
accounts payables, accrued
expenses and other liabilities 536,000 216,000 (242,000)
----------- ----------- ------------
Net cash provided by (used in)
operating activities $ 96,000 $ 924,000 $ (414,000)
============ =========== ============
Supplemental Schedule of Noncash
Investing and Financing Activities
Purchase of property, plant and
equipment and intangible assets
through issuance of debt
obligations $ 86,000 889,000 487,000
============ =========== ============
Purchase of business for note
payable subsequently converted
to common stock $ - 138,000 -
============ =========== ============
Accounts payable, accrued expenses
and other debt obligations assumed
by the purchaser from the sale
of the dry ice manufacturing and
distribution business $ 2,813,000 - -
============ =========== ============
Holdback receivable from the sale
of dry ice manufacturing and
distribution business $ 1,000,000 - -
============ =========== ============
Stock purchase obligation resulting
from the sale of dry ice manu-
facturing and distribution
business $ 900,000 - -
============ =========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE BEARD COMPANY AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies
The Beard Company's ("Beard" or the "Company") accounting policies reflect
industry practices and conform to generally accepted accounting principles.
The more significant of such policies are briefly described below.
Nature of Business
The Company currently operates within two major industry segments: (1) the
environmental/resource recovery ("E/RR") segment, consisting of environmental
services and resource recovery activities, and (2) the carbon dioxide ("CO{2}")
segment, which consists of the production of CO{2} gas. The Company also
operated in the dry ice (solid CO{2}) manufacturing and distribution business,
included in the CO{2} Segment, and in the real estate construction and
development segment which were discontinued in October and January 1997,
respectively. The Company also has other operations, including a minority-owned
investment in a joint venture for the extraction, production and sale of crude
iodine.
Principles of Consolidation and Basis of Presentation
The accompanying financial statements include the accounts of the Company and
its wholly and majority owned subsidiaries and those subsidiaries in which the
Company has a controlling financial interest. All significant intercompany
transactions have been eliminated in the accompanying financial statements.
The Company owns 80% of the outstanding common stock of Cibola Corporation, a
natural gas marketing company, but does not consolidate the assets,
liabilities, or revenues or expenses of Cibola because Cibola's assets are
controlled by the minority common stockholders and preferred stockholders of
Cibola. The Company earned $185,000 and $99,000 of pretax income from its
ownership interest of Cibola in 1997 and 1996, respectively.
Cash and Cash Equivalents
Cash equivalents of $13,181,000 at December 31, 1997, consist of investments in
short-term commercial paper whose remaining terms at date of purchase are less
than 90 days. There were no cash equivalents at December 31, 1996.
Inventories
As of December 31, 1997, inventories represent the net realizable value of one
speculative home remaining from the real estate construction and development
segment which was discontinued in January 1997 (see note 2 below). As of
December 31, 1996, inventories represented the net realizable value of the real
estate construction and development project and the cost of CO{2} tunnel
freezers constructed by a subsidiary of the Company in the CO{2} segment. At
December 31, 1996, the CO{2} tunnel freezers were carried on a specific cost
basis, not exceeding net realizable value. The CO{2} tunnel freezers were sold
in October 1997 as part of the sale of the Company's dry ice manufacturing and
distribution business (see note 2 below).
Costs associated with the acquisition, development and construction of the real
estate project were capitalized in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 67, "Accounting for Costs and Initial Rental
Operations of Real Estate Projects." Accordingly, during 1996 and 1995,
general and administrative costs that related directly to the project of
$30,000 and $162,000, respectively, were capitalized as inventory costs, and at
December 31, 1997 and 1996, inventories included approximately $24,000 and
$209,000, respectively, of such costs. The Company also capitalized interest
costs during the construction phase of the project and in 1996 and 1995,
capitalized interest costs of $94,000 and $81,000, respectively. As previously
discussed, the Company discontinued its real estate construction and
development segment in January 1997 and therefore did not incur any costs
related to the real estate construction and development project during 1997.
Investments
Investments are accounted for principally by the use of the equity method, and
consist primarily of a 40% interest in North American Brine Resources ("NABR"),
a joint venture which extracts iodine from saltwater brine, and 10% to 32%
interests in certain real estate limited partnerships for which the Company
does not serve as general partner. The summarized financial position and
operating results of NABR for each of the three years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Current assets $ 938,000 $ 778,000 $ 245,000
Noncurrent assets 3,350,000 3,746,000 3,749,000
Current liabilities 751,000 580,000 122,000
Noncurrent liabilities - 540,000 -
----------- ----------- -----------
Venture equity $ 3,537,000 $ 3,404,000 $ 3,872,000
=========== =========== ===========
Net sales 2,638,000 263,000 282,000
Gross margin 606,000 102,000 102,000
Net income (loss) $ 133,000 $ (468,000) $ (264,000)
=========== =========== ===========
</TABLE>
The Company's carrying value of its investment in NABR on December 31, 1997,
was approximately $1,143,000, or $272,000 less than its 40% ownership in the
underlying equity of NABR. In 1992 and 1994, the Company recorded $529,000 and
$408,000, respectively, of economic impairment of its investment in NABR due to
the closure of NABR's larger iodine plant and low iodine prices. NABR did not
record economic impairment of its assets at the venture level. Beard is
amortizing the difference between the carrying amount of its investment in NABR
and its share of NABR's recorded equity based on the expected useful life of
the iodine plant and certain maintenance costs incurred by NABR during the
closure period. As a result of higher iodine prices, the closed iodine plant
was reopened in late 1996. Beard amortized $51,000, $144,000 and $92,000 of
the difference between the carrying amount of its investment in NABR and its
share of NABR's recorded equity in 1997, 1996 and 1995, respectively.
The Company's equity in other investees' operations and net assets is not
material to the Company's results of operations or financial position. The
Company recorded provisions totaling $152,000, $180,000 and $30,000 in 1997,
1996 and 1995, respectively, for economic impairment of an unsecured note with
a face value of $362,000 held by the Company in a research and development
entity.
The Company also recorded a provision of $176,000 in 1997 for economic
impairment of certain notes and other investments.
Property, Plant and Equipment
Property, plant and equipment are depreciated by use of the straight-line
method using estimated asset lives of 3 to 20 years. Depreciation, depletion
and amortization of properties producing CO{2} are computed by the units-of-
production method using estimates of unrecovered proved developed CO{2}
reserves.
The Company charges maintenance and repairs directly to expense as incurred
while betterments and renewals are generally capitalized. When property is
retired or otherwise disposed of, the cost and applicable accumulated
depreciation, depletion and amortization are removed from the respective
accounts and the resulting gain or loss is reflected in operations.
Intangible Assets
Identifiable intangible assets, comprised primarily of acquired customer lists,
covenants not to compete, and patents, are amortized on a straight-line basis
over their respective estimated useful lives, ranging from five to 17 years.
The excess of acquisition cost over the fair value of net assets acquired
(goodwill) is amortized on a straight-line basis over the expected periods to
be benefited, generally, ten years. Intangible assets are evaluated
periodically, and if conditions warrant, an impairment valuation allowance is
provided. The Company assesses recoverability of its intangible assets under
the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed Of."
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and Assets to be Disposed Of," on January 1,
1996. This Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. Adoption of this statement did not have a material impact on
the Company's 1996 financial position, results of operations, or liquidity.
The operating trends of a subsidiary included in the Company's E/RR segment
indicated that the undiscounted future net cash flows from the subsidiary would
be less than the carrying value of its long-lived assets. Accordingly, in the
fourth quarter of 1997, the Company recognized an impairment loss of $114,000.
The Company also recorded an impairment loss of $171,000 in the fourth quarter
of 1997 related to underutilized land owned by the Company. As a result of the
1993 Restructure (see note 4), the Company retained certain land which was once
utilized as oil and gas drilling and servicing supply yards. The supply yards
have been inactive since the Company's 1993 Restructure.
The impairment losses are a result of differences between carrying value and
the estimated fair value (based on appraised and quoted replacement values) of
the long-lived assets.
Fair value of financial instruments
The carrying amounts of the Company's cash and cash equivalents, accounts
receivable, other current assets, trade accounts payables, accrued expenses,
redeemable preferred stock purchase and redemption obligation and short-term
debt approximate fair value because of the short maturity of those instruments.
At December 31, 1997 and 1996, the fair value of the long-term debt was not
significantly different than the carrying value of that debt. Redeemable
preferred stock is carried at its estimated fair value.
Use of estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Treasury Stock
In November 1997, the Company repurchased 303,890 shares of its common stock
for approximately $1,519,000. The Company holds repurchased stock as treasury
stock.
Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation expense was recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation," which permits entities to recognize
as expense over the vesting period the fair value of all stock-based awards on
the date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro forma
net earnings and pro forma earnings per share disclosures for employee stock
option grants made in 1995 and future years as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has elected to continue
to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
Mandatorily Redeemable Preferred Stock
The Company's preferred stock is accounted for at fair value. The excess of the
estimated redeemable value over the fair value at the date of issuance is
accreted over the redemption term. The carrying value of the preferred stock
is increased annually for the estimated accretion with a corresponding
reduction of capital in excess of par value of common stock. The accretion of
carrying value decreases net income or increases net loss for purposes of
calculating net income (loss) attributable to common shareholders.
Earnings (Loss) Per Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." SFAS No. 128
revised the previous calculation methods and presentations of earnings (loss)
per share. The statement requires that all prior period earnings (loss) per
share data be restated. The Company adopted SFAS No. 128 in the fourth quarter
of 1997 as required by the statement. The effect of adopting SFAS No. 128 was
not material to the Company's prior periods' earnings (loss) per share data.
Under the provision of SFAS No. 128, basic earnings (loss) per share data is
computed by dividing income available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted earnings
per share reflects the potential dilution that could occur if the Company's
outstanding stock options were exercised (calculated using the treasury method)
and if the Company's preferred stock were converted to common stock.
Diluted earnings (loss) per share in the statements of operations exclude
potential common shares issuable upon conversion of redeemable preferred stock
or exercise of stock options as a result of losses from continuing operations
for all years presented. Net earnings (loss) for 1997 have been reduced by
one-third of "consolidated net income" which accretes directly to the
mandatorily redeemable preferred shareholders. For purposes of earnings per
share, such accretion reduced earnings from discontinued operations which
resulted from the gain on sale of the business and substantially all of the
assets of Carbonic Reserves.
Reclassifications
Certain 1996 and 1995 balances have been reclassified to conform to the 1997
presentation.
(2) Discontinued Operations
On October 13, 1997, the Company sold the business and substantially all of the
assets (excluding cash and cash equivalents, notes receivable from the Company
or related parties and deferred tax assets) of Carbonic Reserves, an 85%-owned
subsidiary involved in the manufacturing and distribution of solid CO{2}
("solid CO{2} segment") for cash of $19,375,000 and the assumption of certain
liabilities valued at $2,813,000 (the "Asset Sale"). The assumed liabilities
included trade accounts payable and current and long-term debt obligations
(excluding tax liabilities, employee related liabilities and indebtedness to
the Company or related parties).
The gain on the Asset Sale was $11,014,000 (after applicable income taxes of
$522,000). Results of operations of the solid CO{2} segment have been reported
as discontinued operations for all years presented in the accompanying
statements of operations. Revenues applicable to the discontinued operations
were $11,071,000, $13,307,000 and $11,706,000 in 1997, 1996 and 1995,
respectively. Earnings from the discontinued solid CO{2} segment were
$428,000, $1,535,000 and $487,000, in 1997, 1996 and 1995, respectively.
Pursuant to the closing of the Asset Sale, the Company received $18,375,000 in
cash. The remaining $1,000,000 cash proceeds have been held back (the
"Holdback") to offset certain post closing adjustments for a maximum of 150
days from the closing date. The Company received the entire Holdback amount
from the purchaser on March 12, 1998. The Holdback amount is included in other
receivables on the balance sheet.
Concurrent with the Asset Sale, the Company agreed to purchase the Carbonic
Reserves minority shareholder's common stock for $900,000, which was paid by
the Company in January 1998. The stock purchase obligation is included in
other current obligations on the balance sheet and has reduced the related
gain.
As of December 31, 1997, the significant assets of the solid CO{2} segment
consist of cash of $125,000 and the $1,000,000 Holdback receivable. The
significant liabilities of the solid CO{2} segment consist of the $900,000
stock purchase obligation, discussed above, and approximately $400,000 of
accrued bonuses and employee severance compensation.
In January 1997, the Company adopted a formal plan to dispose of the assets of
its real estate construction and development segment. The real estate
construction and development segment's results of operations have been reported
as discontinued operations in the accompanying statements of operations for the
years ended December 31, 1996 and 1995, respectively. Revenues applicable to
such discontinued operations were $1,083,000 and $1,949,000 in 1996 and 1995,
respectively. Earnings from the discontinued real estate construction and
development segment were $5,000 and $75,000 in 1996 and 1995, respectively.
In 1996, the Company recorded a loss of $180,000 from discontinuing its real
estate construction and development activities which represented the difference
in the estimated amounts to be received from disposing of the real estate
construction and development assets and the assets' recorded values as of
December 31, 1996. During 1997, the Company sold $1,534,000 of the real estate
construction and development assets, which approximated amounts the Company
estimated to be received from selling those assets.
As of December 31, 1997, the remaining asset of the real estate construction
and development segment consisted of one speculative home valued at
approximately $219,000. The Company expects to dispose of this asset in the
near future at its December 31, 1997, recorded value. As of December 31, 1996,
the real estate construction and development assets were recorded at their
estimated disposition value of $1,753,000.
Operating results of the discontinued operations through the date of sale of
the remaining assets are not expected to be significant.
(3) Acquisition
On May 21, 1996, the Company acquired 80% of the outstanding common stock of
Horizontal Drilling Technologies, Inc. ("HDT") for $482,000. HDT utilizes
trenchless technology and specializes in directional drilling for utility,
underground cable and environmental remediation projects. The purchase price
consisted of a non-interest bearing contingent payment obligation valued at
$301,000 (see note 8 below), a non-interest bearing $150,000 note, convertible
at the option of the holder into common stock of the Company, and 20% of the
Company's ownership, valued at $44,000, in an existing subsidiary involved in
environmental/resource recovery operations. The non-interest bearing note was
converted into 50,000 shares of the Company's common stock on July 1, 1996.
The conversion rate used was the Company's July 1, 1996 closing stock price of
$3.00. The fair value of the net identifiable assets of HDT approximated
$143,000 on the acquisition date. The excess of the purchase price over the
fair value of the net identifiable assets acquired has been recorded as
goodwill and is being amortized on a straight-line basis over ten years. The
acquisition has been accounted for by the purchase method and accordingly, the
results of operations of HDT have been included in the Company's financial
statements from May 21, 1996.
Had the Company acquired HDT as of January 1, 1995, revenues, loss from
continuing operations, net loss and related per share amounts on a pro forma
basis for 1996 and 1995 would not have been materially different than 1996 and
1995 amounts reported in the accompanying statements of operations.
(4) Redeemable Preferred Stock
As a result of a restructure (the "Restructure") effected in October of 1993
with four institutional lenders (the "Institutions"): (a) substantially all of
the oil and gas assets of Beard's subsidiary, Beard Oil Company ("Beard Oil")
were sold to a company owned by the Institutions; (b) $101,498,000 of long-term
debt and other obligations were effectively eliminated; and (c) the
Institutions received 25% of Beard's then outstanding common stock and
$9,125,000 stated value (91,250 shares, or 100%) of Beard's then outstanding
preferred stock.
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
Restructure agreements. Accordingly, one-third of future "consolidated net
income" will accrete directly to the preferred stockholder and reduce earnings
per common share. Each share of Beard preferred stock which has not previously
been redeemed may be converted into 5.129425 shares of Beard common stock after
December 31, 2002. Fractional shares will not be issued, and cash will be paid
in redemption thereof.
In January of 1997 three of the four Institutions sold their common and
preferred shares to five individuals. These individuals (the "Sellers")
thereafter sold such shares to the Company (the "Repurchase"). Repurchase of
the common (303,890 shares) was effected by the Company in November of 1997 and
repurchase of the preferred (47,729 shares) was effected in January of 1998.
$1,641,000 of the purchase price was used to repurchase 16,411 sellers'
preferred shares at par value ($100 per share). This portion of the purchase
price was in lieu of the Sellers' share of a redemption from one-third of 1997
net income (as defined) (the "Redemption"). The 1997 Redemption amount was
agreed upon by all of the preferred shareholders at an established value of
$3,100,000. The Sellers' remaining 31,318 preferred shares were purchased for
$1,000,000 or $31.93 per share. The Company paid the Sellers $95,000 for the
Repurchase of the preferred shares in November 1997 and is obligated to redeem
14,589 of the remaining preferred shares for $1,459,000 in March 1998.
The Company has given effect to the Repurchase and Redemption on its December
31, 1997, balance sheet by reducing the mandatorily redeemable preferred stock
balance and presenting the obligations as a current obligation. As of December
31, 1997, the remaining redeemable preferred stock is recorded at its estimated
fair value of $889,000 or $31.93 per share and has an aggregate redemption
value of approximately $2,784,000. At December 31, 1996 the fair value of the
preferred stock was estimated to be approximately $1,200,000 with an aggregate
redemption value of approximately $9,015,600. During 1997 the Company recorded
$3,789,000 in accretion of the preferred stock as a result of the increase in
value of the preferred stock as evidenced by the Repurchase and Redemption.
As a result of the Repurchase and Redemption, the Company has reduced its
outstanding common shares from 2,832,129 to 2,528,239 (net of treasury shares)
and its outstanding preferred shares from 90,156 to 27,838. The sole remaining
Institution holds 11.68% of the voting power of Beard through its ownership of
common stock and an additional 5.35% through its holdings of preferred stock,
for a total of 17.03% of the total outstanding voting stock of the Company.
Prior to the Repurchase, the preferred holders had elected a director who
continues to serve on Beard's six-member Board of Directors.
(5) Property, Plant and Equipment
<TABLE>
Property, plant and equipment are summarized as follows:
<CAPTION>
December 31,
------------
1997 1996
---- ----
<S> <C> <C>
Carbon dioxide:
Buildings, machinery and equipment $ - $ 9,639,000
Proved properties, projects in
progress, and unproved properties 2,958,000 2,811,000
Other depreciable assets - 942,000
Land - 64,000
------------- ------------
2,958,000 13,456,000
------------- ------------
Environmental/resource recovery:
Buildings, machinery and equipment 1,991,000 1,779,000
Other depreciable assets 621,000 547,000
Land - 150,000
------------- ------------
2,612,000 2,476,000
------------- ------------
Other corporate assets:
Other depreciable assets 427,000 436,000
Land 250,000 425,000
------------- ------------
677,000 861,000
------------- ------------
$ 6,247,000 $ 16,793,000
============= ============
</TABLE>
<TABLE>
Accumulated depreciation, depletion and amortization and valuation allowances
are summarized as follows:
<CAPTION>
December 31,
------------
1997 1996
---- ----
<S> <C> <C>
Carbon dioxide:
Buildings, machinery and equipment $ - $ 3,637,000
Proved properties, projects in
progress, and unproved properties 2,518,000 2,476,000
Other depreciable assets - 595,000
----------- -----------
2,518,000 6,708,000
----------- -----------
Environmental/resource recovery:
Buildings, machinery and equipment 871,000 547,000
Other depreciable assets 404,000 339,000
----------- -----------
1,275,000 886,000
----------- -----------
Other corporate depreciable assets: 507,000 500,000
----------- -----------
$ 4,300,000 $ 8,094,000
=========== ===========
</TABLE>
(6) Intangible Assets
Intangible assets are summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
<S> <C> <C>
Carbon dioxide:
Covenants not to compete $ - $ 1,728,000
Acquired customer lists - 943,000
Costs in excess of fair value of
net assets acquired - 561,000
Other intangible assets,
including patents 88,000 397,000
----------- -----------
88,000 3,629,000
Other intangible assets, principally
goodwill 740,000 676,000
----------- -----------
$ 828,000 $ 4,305,000
=========== ===========
</TABLE>
Accumulated amortization is as follows:
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
<S> <C> <C>
Carbon dioxide:
Covenants not to compete $ - $ 1,728,000
Acquired customer lists - 921,000
Costs in excess of fair value
of net assets acquired - 351,000
Other intangible assets,
including patents 88,000 354,000
----------- -----------
88,000 3,354,000
Other intangible assets,
principally goodwill 246,000 185,000
----------- -----------
$ 334,000 $ 3,539,000
=========== ===========
</TABLE>
Short-term Debt
Short-term debt is as follows:
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
<S> <C> <C>
Real estate construction and development $ - $ 639,000
============ ===========
</TABLE>
Secured short-term notes payable to banks in connection with the Company's real
estate construction and development project were paid off in March 1997. The
interest rate was 10.0% as of December 31, 1996.
(8) Long-term Debt
Long-term debt is as follows:
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
<S> <C> <C>
Environmental/resource recovery (a) $ 305,000 $ 1,156,000
Carbon dioxide (b) - 1,479,000
Corporate and other (c) 350,000 1,186,000
----------- -----------
$ 655,000 $ 3,821,000
=========== ===========
</TABLE>
(a) Borrowings outstanding in the Company's E/RR segment include $305,000 and
$874,000 at December 31, 1997 and 1996, respectively, of various notes
payable which are collateralized by property, plant and equipment with an
approximate net book value of $314,000 at December 31, 1997. Payments
are generally due monthly with interest rates ranging from 6.0% to 16.6%,
with approximate weighted average interest rates of 9.5% and 9.5% as of
December 31, 1997 and 1996, respectively. The various notes payable
mature through October 2001.
Included in the E/RR segment's long-term debt at December 31, 1996 were
$282,000 of borrowings under a line of credit bearing interest at 1/2%
above the national prime lending rate, which was 8.25%. The borrowings
were paid off in October, 1997.
(b) Borrowings outstanding as of December 31, 1996 in the Company's solid
CO{2} segment included various notes payable of $379,000, with interest
rates ranging from 6.75% to 14.5%, with an approximate weighted average
interest rate of 8.5%. These notes were assumed in the Asset Sale
discussed in note 2.
Also, included in the solid CO{2} segment's long-term debt at December
31, 1996 was $1,100,000 of borrowings under a line of credit bearing
interest at 1% above the national prime lending rate which approximated
8.25%. $250,000 of the line of credit was due December 31, 1997 with the
remainder due April 30, 1998. The debt was assumed by the purchaser in
the Asset Sale discussed in note 2.
(c) Borrowings outstanding for corporate and other operations at December 31,
1996 included $680,000 due to affiliates of the Company's Chairman of the
Board of Directors. The loans were originally made in 1995, were
extended in 1996, and extended again in February 1997 to February 1999.
The loans were paid off in October, 1997. All of the loans bore interest
at a rate of 10% per annum.
Included in corporate and other operations' long-term debt at December 31,
1996 were $205,000 of borrowings under a $500,000 line of credit which
matures on June 30, 1998, with interest at 1% above the national prime
lending rate which was 8.25%. The loans were paid off in October, 1997.
Long-term debt of corporate and other operations also includes a
discounted $350,000 and $301,000 contingent payment obligation payable as
of December 31, 1997 and 1996, respectively, to the former sole
shareholder of HDT, resulting from the Company's acquisition of 80% of
HDT's outstanding common stock. The contingent payment obligation is
payable only from 80% of the cash flows (prescribed under the contingent
payment obligation agreement) of HDT and another subsidiary of the
Company in the E/RR segment. The maximum amount payable under the
contingent payment obligation is $483,000. The Company discounted the
maximum contingent payment obligation over its estimated repayment term
of ten years using a 10% interest rate. In 1997, the Company recorded
$49,000 of interest expense accretion on the contingent obligation
payable.
The annual maturities of long-term debt at December 31, 1997 are $136,000
for 1998, $130,000 for 1999, $101,000 for 2000, $90,000 for 2001, and
$38,000 in 2002.
At December 31, 1997, the Company had $486,000 of credit available under
a $650,000 bank line of credit. The line of credit matures on June 30,
1998 and bears interest on outstanding amounts at the national prime
lending rate which was 8.5% at December 31, 1997. At December 31, 1997,
the Company had utilized $164,000 of this line for a letter of credit
issued as collateral on bonds posted by an insurance carrier for a
subsidiary in the E/RR segment. See note 14 below.
(9) Settlement of Take-or-Pay Contract
During 1996, the Company negotiated a settlement of a take-or-pay contract
under which a customer was obligated to purchase certain volumes of liquid
CO{2}. As a result of the settlement, the Company received cash of $539,000 and
a CO{2} vapor recovery system with an estimated fair value of $400,000 and the
Company released the party of its contractual obligation to purchase the
contracted liquid CO{2} volumes. The Company realized a gain of $939,000 in
1996 relating to this settlement which is included in the results from
discontinued operations.
(10) Operating Leases
Noncancelable operating leases relate principally to office space, vehicles and
operating equipment. Future minimum payments under such leases as of December
31, 1997 are summarized as follows:
1998 $138,000
1999 124,000
2000 76,000
--------
$338,000
========
Rent expense under operating leases aggregated $889,000 in 1997, $594,000 in
1996 and $644,000 in 1995.
(11) Income Taxes
The primary differences between the carrying values of the Company's assets for
financial and tax purposes result from the accounting methods used for
impairment of assets, depletion, depreciation and amortization of property and
equipment and debt restructuring.
As of December 31, 1997 and 1996, the Company's net deferred tax assets, before
valuation allowances, approximated $23,370,000 and $28,182,000, respectively.
Based on the results of the Company's operations, management does not believe
that it is more likely than not that the Company will be able to realize the
benefit of the net operating loss carryforwards and other deductions and
credits before expiration. The Company has fully allowed for the tax deferred
assets through a valuation allowance. In order to fully realize the net
deferred tax assets, before consideration of the valuation allowance, the
Company would need to generate future taxable income of approximately
$61,000,000 prior to expiration of the net operating loss carryforwards which
will begin to expire in 2004 and investment tax credits which will expire from
1998 through 2000.
The 1997 income tax expense resulted from federal alternative minimum taxes of
$287,000 and regular state income taxes of $308,000. No regular current income
tax expense was provided in the three years ended December 31, 1997 due to the
availability for regular income tax reporting of net operating loss and
depletion and investment tax credit carryforwards.
The changes in the net deferred tax assets and valuation allowance were as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
Deferred Deferred
January 1, Expense December 31, Expense December 31,
1996 (Benefit) 1996 (Benefit) 1997
---------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C>
Deferred tax liability $ (60) $ 130 $ (190) $ (27) $ (163)
Deferred tax asset 32,999 4,627 28,372 4,839 23,533
--------- --------- --------- -------- ---------
Net deferred tax asset $ 32,939 $ 4,757 $ 28,182 $ 4,812 $ 23,370
Less valuation allowance 32,939 4,757 28,182 4,812 23,370
--------- --------- --------- -------- ---------
Deferred tax asset less
valuation allowance $ - $ - $ - $ - $ -
========= ========= ========= ======== =========
</TABLE>
At December 31, 1997, the Company had Federal regular tax operating loss
carryforwards of approximately $53.8 million that expire from 2004 to 2010,
investment tax credit carryforwards of approximately $441,000 that expire from
1998 to 2000, and tax depletion carryforwards of approximately $5.5 million.
These carryforwards may be limited if the Company undergoes a significant
ownership change. The decrease in the deferred tax asset in 1996 relates to
the utilization of Federal regular tax operating loss carryforwards to offset
taxable income resulting from capital transactions between the Company and its
carbon dioxide subsidiary and changes in estimates.
(12) Employee Benefit Plan
Employees of the Company participate in a defined contribution plan with
features under Section 401(k) of the Internal Revenue Code. The purpose of the
Plan is to provide retirement, disability and death benefits for all full-time
employees of the Company who meet certain service requirements. The Plan
allows voluntary "savings" contributions up to a maximum of 15%, and the
Company or its subsidiaries matches 100% of each employee's contribution up to
5% of such employee's compensation. Benefits payable under the plan are
limited to the amount of plan assets allocable to the account of each plan
participant. The Company retains the right to modify, amend or terminate the
plan at any time. During 1997, 1996 and 1995, the Company and its eligible
subsidiaries made matching contributions of $150,000, $134,000, and $116,000,
respectively, to the plan.
(13) Stock Option Plans
The Company has reserved 175,000 shares of its common stock for issuance to key
management, professional employees and directors under The Beard Company 1993
Stock Option Plan (the "1993 Plan") adopted in August 1993. The 1993 Plan is
administered by the Compensation and Stock Option Committee (the "Committee")
of the Board of Directors. The option price is determined by the Committee but
cannot be less than the fair market value of the common stock of the Company at
the date of grant for incentive stock options and 75% of fair market value of
the common stock for non-qualified options. All options have ten-year terms
and become exercisable one year after the date of grant at the rate of 25% each
year until fully exercisable. Directors who are not key management employees
of the Company or subsidiaries of the Company shall only be eligible to be
granted non-qualified stock options. At December 31, 1997, there were 17,500
additional shares available for grant under the Plan.
The per share weighted-average fair value of stock options granted during 1997
and 1996 was $2.67 and $1.66, respectively, on the dates of grant using the
Black-Scholes option pricing model with the following assumptions: no expected
dividend yield; risk-free interest rate of 7.04% and 6.73% for 1997 and 1996,
respectively; expected life of ten years; and expected volatility of 39% for
options granted in 1997 and 1996. No options were granted in 1995.
The Company applies APB Opinion No. 25 in accounting for its stock options and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
the net earnings (loss) and net earnings (loss) per common share would not have
been materially different than the 1997 or 1996 amounts, respectively,
reflected in the accompanying statements of operations.
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
Number of Weighted-Average
Shares Exercise Price
--------- ----------------
<S> <C> <C>
Balance at December 31, 1994 145,000 $2.01
Granted - -
Exercised - -
Forfeited - -
Expired - -
------- -----
Balance at December 31, 1995 145,000 $2.01
Granted 12,500 2.63
Exercised (5,000) 2.00
Forfeited (5,000) 2.00
Expired - -
------- -----
Balance at December 31, 1996 147,500 $2.06
Granted 5,000 4.38
Exercised (27,500) 2.00
Forfeited - -
Expired - -
------- -----
Balance at December 31, 1997 125,000 $2.17
======= =====
</TABLE>
At December 31, 1997, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $2.00 - $4.38 and seven
years, respectively.
At December 31, 1997 and 1996, the number of options exercisable was 91,250 and
67,500 respectively, and the weighted-average exercise price of those options
was $2.03 and $2.01, respectively.
(14) Commitments and Contingencies
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 future results of
operations.
As of December 31, 1997, an affiliate of the Company's Chairman of the Board of
Directors had issued a guarantee for a $164,000 stand-by letter of credit,
backed by a note of the Company, issued as collateral on bonds posted by an
insurance carrier for a subsidiary in the E/RR segment. The Company
indemnified the affiliate against any loss from providing such guaranty, and
agreed to pay 10% interest to the affiliate while the guaranty remained in
place. On February 24, 1998, the affiliate was relieved of the guaranty. The
letter of credit expired on March 24, 1998 and was renewed thru March 24, 1999.
In addition, the Company was contingently liable for other outstanding letters
of credit totaling approximately $82,000 and $68,000 at December 31, 1997 and
1996, respectively. $14,000 of the letters of credit expire on April 18, 1998,
$18,000 expires on October 5, 1998, and $50,000 expires on March 24, 1999.
(15) Subsequent Event
In February 1998, the Company, through a newly-formed subsidiary, Interstate
Travel Facilities, Inc. ("ITF"), acquired five businesses in central and
eastern Oklahoma geared toward the needs of interstate highway travelers. The
purchase price for the businesses totaled approximately $2,551,000. The
purchase price for three of the businesses was comprised of a 15-year,
unsecured 5.93% promissory note from ITF in the amount of $544,000, the
assumption of certain of the businesses' debt obligations by ITF in the amount
of $1,336,000, and 20% of the common stock of ITF valued at $181,000. The
remaining two businesses were purchased for a cash consideration of $490,000.
Three of the businesses contain a service station, convenience store and a
restaurant. The fourth contains a service station and a convenience store and
the fifth is presently undeveloped. After renovations and development on three
of the businesses are completed, ITF expects to have approximately $4 million
invested in the five businesses.
(16) Business Segment Information
The Company operates principally within two industry segments: (1)
environmental/resource recovery ("E/RR"); and (2) the production of carbon
dioxide ("CO{2}") gas.
The Company's operations of the E/RR segment are conducted through three 80%-
owned subsidiaries, a financially controlled subsidiary headquartered in
Oklahoma City, Oklahoma, as well as a wholly-owned subsidiary headquartered in
Pittsburgh, Pennsylvania. The Company's CO{2} operations are comprised of its
ownership in two CO{2} producing units located in southwestern Colorado and
eastern New Mexico.
The Company operates principally in only one geographic area, the United
States. Thus, all of its segment operations are domestic and it has no
significant export sales.
During 1997, one customer accounted for 16% of the E/RR segments sales. No
other customer accounted for more than 10% of total sales during 1997. No
customer accounted for more than 10% of total sales during 1996 and 1995.
The Company and its subsidiaries grant credit, in the normal course of
business, to various entities within the industries they serve. Generally, no
collateral or other security is required of its customers. The Company and its
subsidiaries perform ongoing credit evaluations of its customers and maintain
allowances for potential bad debt losses.
Sales to unaffiliated customers, identifiable assets, depreciation, depletion
and amortization and additions to property, plant and equipment by industry
segment are presented in thousands of dollars:
<TABLE>
<CAPTION>
Environmental/ Corporate
Resource Carbon And Consolidated
Recovery Dioxide Other Company
------------- ------- --------- ------------
<S> <C> <C> <C> <C>
1997
Sales to unaffiliated customers $ 5,247 $503 $ 58 $5,808
Operating profit (loss) (1,118) 268 (1,017) (1,867)
Depreciation, depletion and
amortization 392 25 18 435
Identifiable assets 3,546 535 16,871 20,952
Additions to property, plant
and equipment 550 147 905 1,602
1996
Sales to unaffiliated customers 3,009 301 66 3,376
Operating profit (loss) (757) 184 (1,032) (1,605)
Depreciation, depletion and
amortization 267 18 16 301
Identifiable assets 3,268 863 12,342 16,473
Additions to property, plant
and equipment 1,138 68 1,925 3,131
1995
Sales to unaffiliated customers 3,026 209 71 3,306
Operating profit (loss) (325) 99 (992) (1,218)
Depreciation, depletion and
amortization 171 8 21 200
Identifiable assets 1,790 336 12,489 14,615
Additions to property, plant
and equipment 339 - 1,287 1,626
</TABLE>
Identifiable assets and additions to property, plant and equipment for
corporate and other operations include amounts related to discontinued real
estate construction and development activities and the solid CO{2} business.
In June 1997, Statement of Financial Accounting Standards No. 131, "Disclosures
about Segment of an Enterprise and Related Information," was issued by the
Financial Accounting Standards Board. SFAS No. 131 is effective for periods
beginning after December 15, 1997. SFAS No. 131 requires a public company to
report financial and descriptive information about its reportable segments
which are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. The Company will adopt SFAS No. 131 in 1998 but has not, as yet,
determined its reportable segments under SFAS No. 131.
(17) Fourth Quarter Adjustments
In the fourth quarter of 1997, the Company recorded economic impairment losses
on long-lived assets and unsecured notes and other investments totaling
$285,000 and $238,000, respectively. The net effect of the fourth quarter
adjustments was to decrease net earnings by $523,000.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information regarding directors of the registrant will be contained
in the definitive proxy statement which will be filed pursuant to Regulation
14A with the Commission not later than 120 days after the end of the fiscal
year covered by this Form 10-K, and the information to be contained therein is
incorporated herein by reference.
The information regarding executive officers of the registrant has been
furnished in a separate item captioned "Executive Officers and Significant
Employees of the Company" and included as Item 4a in Part I of this report at
pages 17 through 18.
Item 11. Executive Compensation.
The information regarding executive compensation will be contained in the
definitive proxy statement which will be filed pursuant to Regulation 14A with
the Commission not later than 120 days after the end of the fiscal year covered
by this Form 10-K, and the information to be contained therein is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information regarding security ownership of certain beneficial owners
and management will be contained in the definitive proxy statement which will
be filed pursuant to Regulation 14A with the Commission not later than 120 days
after the end of the fiscal year covered by this Form 10-K, and the information
to be contained therein is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information regarding transactions with management and others will be
contained in the definitive proxy statement which will be filed pursuant to
Regulation 14A with the Commission not later than 120 days after the end of the
fiscal year covered by this Form 10-K, and the information to be contained
therein is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements. Reference is made to the Index to Financial
Statements and Financial Statement Schedules appearing at Item 8
on Page 28 of the report.
2. Financial Statement Schedules:
a. Required financial statements (including independent auditors'
report thereon) of North American Brine Resources, a 40%-owned
investee of Beard, are incorporated by reference from the
Company's 1996 Form 10-K/A.
b. Schedule II --- Valuation and Qualifying Accounts
3. Exhibits. The following exhibits are filed with this Form 10-K
and are identified by the numbers indicated:
2 Plan of acquisition, reorganization, arrangement, liquidation or succession:
2(a) Agreement and Plan of Reorganization by and among Registrant, Beard Oil
Company ("Beard Oil") and New Beard, Inc., dated as of July 12, 1993 (see
Addendum A to Part I, which is incorporated herein by reference; schedules
to the Agreement have been omitted). (This Exhibit has been previously
filed as Exhibit 3(b), filed on July 27, 1993 to Registrant's Registration
Statement on Form S-4, File No. 33-66598, and same is incorporated by
reference).
2(b) Agreement and Plan of Merger by and between The Beard Company and The New
Beard Company, dated as of September 16, 1997. (This Exhibit has been
previously filed as Exhibit B to Registrant's Proxy Statement filed on
September 12, 1997, and same is incorporated by reference).
2(c) Certificate of Merger merging The Beard Company into The New Beard Company
as filed with with the Secretary of State of Oklahoma on November 26, 1997.
(This Exhibit has been previously filed as Exhibit 2.1 to Registrant's
Form 8-K, filed on December 8, 1997, and same is incorporated by
reference).
2(d) Asset Purchase Agreement by and among Registrant, Toby B. Tindell, Cristie
R. Tindell and Interstate Travel Facilities, Inc., dated as of February
27, 1998. (This Exhibit has been previously filed as Exhibit 2, to
Registrant's Form 8-K, filed on March 16, 1998, and same is
incorporated by reference).
3(i) Certificate of Incorporation of The New Beard Company as filed with the
Secretary of State of Oklahoma on September 11, 1997. (This Exhibit has
been previously filed as Exhibit C to Registrant's Proxy Statement filed
on September 12, 1997, and same is incorporated by reference).
3(ii)Registrant's By-Laws as currently in effect.
4 Instruments defining the rights of security holders:
4(a) Agreement of Sale and Purchase by and between Beard Oil and Sensor Oil
& Gas, Inc. ("Sensor"). (This Exhibit has been previously filed as Adden-
dum B to Amendment No. 1, filed on September 3, 1993 to Registrant's
Registration Statement on Form S-4, File No. 33-66598, and same is
incorporated by reference).
4(b) Certificate of Designations, Powers, Preferences and Relative, Partici-
pating, Option and Other Special Rights, and the Qualifications, Limita-
tions or Restrictions Thereof of the Series A Convertible Voting Preferred
Stock of the Registrant. (This Exhibit has been previously filed as Ex-
hibit 3(c) to Amendment No. 2, filed on September 17, 1993 to Registrant's
Registration Statement on Form S-4, File No. 33-66598, and same is incorpo-
rated by reference).
4(c) Settlement Agreement, with Certificate of Amendment attached thereto, by
and among Registrant, Beard Oil, New York Life Insurance Company, New York
Life Insurance and Annuity Company, John Hancock Mutual Life Insurance
Company, Memorial Drive Trust and Sensor, dated as of April 13, 1995. (This
Exhibit has been previously filed as Exhibit 4(g) to Registrant's Form 10-K
for the period ended December 31, 1994 and same is incorporated by refer-
ence).
4(d) Amended and Restated Loan Agreement by and among Registrant, Carbonic
Reserves ("Carbonics") and Liberty Bank & Trust Company of Oklahoma City,
N.A., dated as of October 31, 1996. (This Exhibit has been previously filed
as Exhibit 4(l) to Registrant's Form 10-K for the period ended December 31,
1996, filed on April 1, 1997, and same is incorporated by reference).
4(e) Letter Agreement for Construction Guidance Line of Credit between
Registrant d/b/a The Oaks Venture and Liberty, dated effective March
21, 1996. (This Exhibit has been previously filed as Exhibit 4(t) to
Registrant's Form 10-Q for the period ended March 31, 1996, filed on
May 3, 1996, and same is incorporated by reference).
4(f) Promissory Note from Registrant to the Trustees of the William M. Beard
and Lu Beard 1988 Charitable Unitrust (the "Trustees") dated September
20, 1995. (This Exhibit has been previously filed as Exhibit 4(o) to
Registrant's Form 10-K for the period ended December 31, 1995, filed on
April 1, 1996, and same is incorporated by reference).
4(g) Extension and Renewal Promissory Note from Registrant to the Trustees
dated March 31, 1996. (This Exhibit has been previously filed as Exhibit
4(u) to Registrant's Form 10-Q for the period ended March 31, 1996,
filed on May 3, 1996, and same is incorporated by reference).
4(h) Amended and Restated Renewal Promissory Note from Registrant to the
Trustees dated October 11, 1996. (This Exhibit has been previously
filed as Exhibit 4(q) to Registrant's Form 10-K for the period ended
December 31, 1996, filed on April 1, 1997, and same is incorporated by
reference).
4(i) Amended and Restated Renewal Promissory Note from Registrant to the
Trustees dated February 17, 1997. (This Exhibit has been previously
filed as Exhibit 4(r) to Registrant's Form 10-K for the period ended
December 31, 1996, filed on April 1, 1997, and same is incorporated by
reference).
4(j) Promissory Note from Registrant to the Trustee of the William M. Beard
Irrevocable Trust "B" (the "B Trust") dated December 27, 1995. (This
Exhibit has been previously filed as Exhibit 4(p) to Registrant's Form
10-K for the period ended December 31, 1995, filed on April 1, 1996, and
same is incorporated by reference).
4(k) Extension and Renewal Promissory Note from Registrant to the B Trust dated
March 31, 1996. (This Exhibit has been previously filed as Exhibit 4(v)
to Registrant's Form 10-Q for the period ended March 31, 1996, filed on
May 3, 1996, and same is incorporated by reference).
4(l) Amended and Restated Renewal Promissory Note from Registrant to the B
Trust dated February 17, 1997. (This Exhibit has been previously filed
as Exhibit 4(u) to Registrant's Form 10-K for the period ended December
31, 1996, filed on April 1, 1997, and same is incorporated by reference).
4(m) Promissory Note from Registrant to the Trustee of the William M. Beard
Irrevocable Trust "C" (the "C" Trust") dated December 27, 1995. (This
Exhibit has been previously filed as Exhibit 4(q) to Registrant's Form
10-K for the period ended December 31, 1995, filed on April 1, 1996, and
same is incorporated by reference).
4(n) Extension and Renewal Promissory Note from Registrant to the C Trust dated
March 31, 1996. (This Exhibit has been previously filed as Exhibit 4(u)
to Registrant's Form 10-K for the period ended December 31, 1996, filed
on April 1, 1997, and same is incorporated by reference).
4(o) Amended and Restated Renewal Promissory Note from Registrant to the C
Trust dated February 17, 1997. (This Exhibit has been previously filed
as Exhibit 4(x) to Registrant's Form 10-K for the period ended December
31, 1996, filed on April 1, 1997, and same is incorporated by reference).
4(p) Promissory Note from Registrant to the Trustees dated March 7, 1997. (This
Exhibit has been previously filed as Exhibit 4(y) to Registrant's Form
10-Q for the period ended March 31, 1997, filed on May 14, 1997, and same
is incorporated by reference).
10 Material contracts:
10(a) The Beard Company 1993 Stock Option Plan dated August 27, 1993. (This
Exhibit has previously been filed as Exhibit 10(f) to Amendment No. 1,
filed on September 3, 1993 to Registrant's Registration Statement on
Form S-4, File No. 33-66598, and same is incorporated by reference).*
10(b) The Beard Company 1994 Phantom Stock Units Plan adopted November 1, 1994.
(This Exhibit has been previously filed as Exhibit 10(h) to Registrant's
Form 10-K for the period ended December 31, 1994, filed on April 17,
1995, and same is incorporated by reference).*
10(c) Stockholders' Agreement made as of January 27, 1993 by and among
Registrant, Carbonics and Clifford Collen, Jr. ("Collen"). (This Exhibit
has been previously filed as Exhibit 10(i) to Registrant's Form 10-K
for the period ended December 31, 1994, filed on April 17, 1995, and same
is incorporated by reference).*
10(d) Stock Purchase Agreement dated as of December 15, 1991 by and among
Registrant (formerly known as Beard Investment Company), Carbonics and
Collen. (This Exhibit has been previously filed as Exhibit 10.9 of
Item 14(a) to Beard Oil's Form 8, Amendment No. 1, Form 10-K for the
fiscal year ended December 31, 1991 and same is incorporated herein by
reference).*
10(e) Conversion Agreement dated as of January 31, 1995 by and among Registrant,
Carbonics and Collen. (This Exhibit has been previously filed as Exhibit
10(k) to Registrant's Form 10-K for the period ended December 31, 1994,
filed on April 17, 1995, and same is incorporated herein by reference).*
10(f) Employment Agreement dated April 3, 1995 by and among Registrant,
Carbonics, Collen and Beard Oil. (This Exhibit has been previously filed
as Exhibit 10(l) to Registrant's Form 10-K for the period ended December
31, 1994, filed on April 17, 1995, and same is incorporated herein by
reference).*
10(g) The Beard Company Deferred Stock Compensation Plan. (This Exhibit has been
previously filed as Exhibit 10(k) to Registrant's Form 10-K for the period
ended December 31, 1995, filed on April 1, 1996, and same is incorporated
by reference).*
10(h) Form of Change in Control Compensation Agreement dated as of January 24,
1997, by and between Carbonics and three employees. (This Exhibit has been
previously filed as Exhibit 10(l) to Registrant's Form 10-Q for the
period ended March 31, 1997, filed on May 14, 1997, and same is incorpo-
rated by reference).*
10(i) Nonqualified Stock Option Agreement by and between Richard D. Neely and
ISITOP, Inc. ("ISITOP"), dated April 1, 1997.*
10(j) Nonqualified Stock Option Agreement by and between Jerry S. Neely and
ISITOP, dated April 1, 1997.*
10(k) Asset Purchase Agreement by and among Airgas Carbonic Reserves, Inc.
("Airgas"), and Registrant, Carbonics, and Collen. (This Exhibit has
been previously filed as Exhibit A, filed on September 11, 1997 to
Registrant's Proxy Statement dated September 12, 1997, and same is
incorporated by reference).
10(l) Letter Agreement dated August 15, 1997 by and among Collen, Carbonics,
Beard Oil and Registrant. (This Exhibit has been previously filed as
Exhibit 10(m) to Registrant's Form 10-Q for the period ended September
30, 1997, filed on November 13, 1997, and same is incorporated by refer-
ence).*
10(m) Letter Agreement dated October 8, 1997 by and among Randy D. Thacker,
Carbonics and Registrant. (This Exhibit has been previously filed as
Exhibit 10(n) to Registrant's Form 10-Q for the period ended September
30, 1997, filed on November 13, 1997, and same is incorporated by
reference).*
10(n) Nonqualified Stock Option Agreement by and between Toby Tindell and
Interstate Travel Facilities, Inc., dated February 27, 1998.*
10(o) Subscription Agreement by and between Cibola Corporation ("Cibola") and
Registrant, dated April 10, 1996. (This Exhibit has been previously filed
as Exhibit 10.1 to Registrant's Form 10-Q for the period ended June 30,
1996, filed on August 14, 1996, and same is incorporated by reference).
10(p) Nonrecourse Secured Promissory Note from Registrant to Cibola, dated
April 10, 1966. (This Exhibit has been previously filed as Exhibit 10.2
to Registrant's Form 10-Q for the period ended June 30, 1996, filed
on August 14, 1996, and same is incorporated by reference).
10(q) Security Agreement by and among Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996. (This Exhibit has been previously
filed as Exhibit 10.3 to Registrant's Form 10-Q for the period ended
June 30, 1996, filed on August 14, 1996, and same is incorporated by
reference).
10(r) Tax Sharing Agreement by and among Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996. (This Exhibit has been previously
filed as Exhibit 10.4 to Registrant's Form 10-Q for the period ended
June 30, 1996, filed on August 14, 1996, and same is incorporated by
reference).
10(s) Compensation Agreement by and between Registrant and the Trustees dated
April 17, 1997.
10(t) Indemnity Agreement by and between Registrant and the Trustees dated April
17, 1997.
11 Statement re computation of per share earnings.
21 Subsidiaries of the Registrant.
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
_____
*Compensatory plan or arrangement.
The Company will furnish to any shareholder a copy of any of the above exhibits
upon the payment of $.25 per page. Any request should be sent to The Beard
Company, Enterprise Plaza, Suite 320, 5600 North May Avenue, Oklahoma City,
Oklahoma 73112.
(b) Two reports on Form 8-K were filed during the last quarter of the period
covered by this report.
On October 28, 1997 the Company reported the sale by the Company
and the other shareholder of Carbonic Reserves ("Carbonics"), Registrant's
85%-owned dry ice subsidiary, of substantially all of its operating assets
used in the dry ice business for a cash consideration of $19.375 million plus
the assumption by the purchaser of certain liabilities totaling approximately
$2.7 million. The sale was closed effective as of 12:01 a.m. on October 13,
1997. Proceeds of the asset sale were used by Carbonics to repay intercom-
pany obligations and redeem its outstanding preferred stock, with the balance
paid as dividends to the Company to be used to commercially develop existing
assets.
The first report was dated as of October 13, 1997, which was the date of
the earliest event reported, and filed on October 28, 1997.
On November 26, 1997 the Company filed a Certificate of Merger with the
Oklahoma Secretary of State to effectuate the reincorporation of the Company.
The reincorporation was accomplished by merging The Beard Company with and
into The New Beard Company ("NBC"), a newly formed, wholly-owned Oklahoma
subsidiary of The Beard Company for the sole purpose of including certain
restrictions on the transfer of the Company's common and preferred stock in the
Certificate of Incorporation of NBC to prevent the loss of certain net operat-
ing loss carryforwards. Immediately after the merger, NBC was renamed "The
Beard Company" and now conducts business as the successor company.
The merger, pursuant to an Agreement and Plan of Merger, was approved by
the stockholders of the Company at a meeting held on October 10, 1997. The
report on Form 8-K was dated and filed December 8, 1997, with the earliest
event reported on November 26, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
DATE: March 25, 1998 By HERB MEE, JR.
Herb Mee, Jr., President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated below.
SIGNATURE TITLE DATE
By W.M. BEARD Chief Executive Officer March 25, 1998
W.M. Beard
By HERB MEE, JR. President and Chief March 25, 1998
Herb Mee, Jr. Financial Officer
By JACK A. MARTINE Controller and March 25, 1998
Jack A. Martine Chief Accounting Officer
By W.M. BEARD Chairman of the Board March 25, 1998
W.M. Beard
By HERB MEE, JR. Director March 25, 1998
Herb Mee, Jr.
By ALLAN R. HALLOCK Director March 25, 1998
Allan R. Hallock
By HARLON E. MARTIN, JR. Director March 25, 1998
Harlon E. Martin, Jr.
By FORD C. PRICE Director March 25, 1998
Ford C. Price
By MICHAEL E. CARR Director March 25, 1998
Michael E. Carr
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
No. Description Method of filing
___ ----------- -----------------
<S> <C> <C>
2 Plan of acquisition, reorganization, Incorporated by reference
arrangement, liquidation or succession:
2(a) Agreement and Plan of Reorganization Incorporated by reference
by and among Registrant, Beard Oil
Company ("Beard Oil") and New Beard,
Inc., dated as of July 12, 1993.
2(b) Agreement and Plan of Merger by and Incorporated by reference
between The Beard Company and The
New Beard Company, dated as of
September 16, 1997.
2(c) Certificate of Merger merging The Beard Incorporated by reference
Company into The New Beard Company
as filed with with the Secretary of State
of Oklahoma on November 26, 1997.
2(d) Asset Purchase Agreement by and Incorporated by reference
among Registrant, Toby B. Tindell,
Cristie R. Tindell and Interstate Travel
Facilities, Inc.,dated as of February
27, 1998.
3(i) Certificate of Incorporation of The New Incorporated by reference
Beard Company as filed with the
Secretary of State of Oklahoma on
September 11, 1997.
3(ii) Registrant's By-Laws as currently in Filed herewith electronically
effect.
4 Instruments defining the rights of security
holders:
4(a) Agreement of Sale and Purchase by Incorporated by reference
and between Beard Oil and Sensor Oil &
Gas, Inc. ("Sensor").
4(b) Certificate of Designations, Powers, Incorporated by reference
Preferences and Relative, Participating,
Option and Other Special Rights, and the
Qualifications, Limitations or
Restrictions Thereof of the Series A
Convertible Voting Preferred Stock of
the Registrant.
4(c) Settlement Agreement, with Certificate Incorporated by reference
of Amendment attached thereto, by and
among Registrant, Beard Oil, New York
Life Insurance Company, New York Life
Insurance and Annuity Company, John
Hancock Mutual Life Insurance Company,
Memorial Drive Trust and Sensor,
dated as of April 13, 1995.
4(d) Amended and Restated Loan Agreement Incorporated by reference
by and among Registrant, Carbonic
Reserves ("Carbonics") and Liberty
Bank & Trust Company of Oklahoma City,
N.A., dated as of October 31, 1996.
4(e) Letter Agreement for Construction Incorporated by reference
Guidance Line of Credit between
Registrant d/b/a The Oaks Venture and
Liberty, dated effective March 21, 1996.
4(f) Promissory Note from Registrant to Incorporated by reference
the Trustees of the William M. Beard
and Lu Beard 1988 Charitable Unitrust
(the "Trustees") dated September 20,
1995.
4(g) Extension and Renewal Promissory Note Incorporated by reference
from Registrant to the Trustees dated
March 31, 1996.
4(h) Amended and Restated Renewal Incorporated by reference
Promissory Note from Registrant to the
Trustees dated October 11, 1996.
4(i) Amended and Restated Renewal Incorporated by reference
Promissory Note from Registrant to the
Trustees dated February 17, 1997.
4(j) Promissory Note from Registrant to the Incorporated by reference
Trustee of the William M. Beard
Irrevocable Trust "B" (the "B Trust")
dated December 27, 1995.
4(k) Extension and Renewal Promissory Incorporated by reference
Note from Registrant to the B Trust dated
March 31, 1996.
4(l) Amended and Restated Renewal Incorporated by reference
Promissory Note from Registrant to the B
Trust dated February 17, 1997.
4(m) Promissory Note from Registrant to the Incorporated by reference
Trustee of the William M. Beard
Irrevocable Trust "C" (the "C" Trust")
dated December 27, 1995.
4(n) Extension and Renewal Promissory Note Incorporated by reference
from Registrant to the C Trust dated
March 31, 1996.
4(o) Amended and Restated Renewal Incorporated by reference
Promissory Note from Registrant to the C
Trust dated February 17, 1997.
4(p) Promissory Note from Registrant to Incorporated by reference
the Trustees dated March 7, 1997.
10 Material contracts:
10(a) The Beard Company 1993 Stock Option Incorporated by reference
Plan dated August 27, 1993.
10(b) The Beard Company 1994 Phantom Incorporated by reference
Stock Units Plan adopted November 1,
1994.
10(c) Stockholders' Agreement made as of Incorporated by reference
January 27, 1993 by and among
Registrant, Carbonics and Clifford
Collen, Jr. ("Collen").
10(d) Stock Purchase Agreement dated as of Incorporated by reference
December 15, 1991 by and among
Registrant (formerly known as Beard
Investment Company), Carbonics and
Collen.
10(e) Conversion Agreement dated as of Incorporated by reference
January 31, 1995 by and among
Registrant, Carbonics and Collen.
10(f) Employment Agreement dated April 3, Incorporated by reference
1995 by and among Registrant,
Carbonics, Collen and Beard Oil.
10(g) The Beard Company Deferred Stock Incorporated by reference
Compensation Plan.
10(h) Form of Change in Control Incorporated by reference
Compensation Agreement dated as of
January 24, 1997, by and between
Carbonics and three employees.
10(i) Nonqualified Stock Option Agreement Filed herewith electronically
by and between Richard D. Neely and
ISITOP, Inc. ("ISITOP"), dated April 1,
1997.
10(j) Nonqualified Stock Option Agreement Filed herewith electronically
by and between Jerry S. Neely and
ISITOP, dated April 1, 1997.
10(k) Asset Purchase Agreement by and Incorporated by reference
among Airgas Carbonic Reserves, Inc.
("Airgas"), and Registrant, Carbonics,
and Collen.
10(l) Letter Agreement dated August 15, Incorporated by reference
1997 by and among Collen, Carbonics,
Beard Oil and Registrant.
10(m) Letter Agreement dated October 8, Incorporated by reference
1997 by and among Randy D. Thacker,
Carbonics and Registrant.
10(n) Nonqualified Stock Option Agreement Filed herewith electronically
by and between Toby Tindell and
Interstate Travel Facilities, Inc., dated
February 27, 1998.
10(o) Subscription Agreement by and Incorporated by reference
between Cibola Corporation ("Cibola")
and Registrant, dated April 10, 1996.
10(p) Nonrecourse Secured Promissory Note Incorporated by reference
from Registrant to Cibola, dated April
10, 1966.
10(q) Security Agreement by and among Incorporated by reference
Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996.
10(r) Tax Sharing Agreement by and among Incorporated by reference
Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996.
10(s) Compensation Agreement by and Filed herewith electronically
between Registrant and the Trustees
dated April 17, 1997.
10(t) Indemnity Agreement by and between Filed herewith electronically
Registrant and the Trustees dated April
17, 1997.
11 Statement re computation of per share Filed herewith electronically
earnings.
21 Subsidiaries of the Registrant. Filed herewith electronically
23 Consent of KPMG Peat Marwick LLP Filed herewith electronically
27 Financial Data Schedule Filed herewith electronically
</TABLE>
EXHIBIT 3(ii)
BYLAWS
OF
THE BEARD COMPANY
November 26, 1997
PAGE
Article I - Stockholders' Meetings 1
Section 1 - Annual Meeting 1
Section 2 - Special Meetings 1
Section 3 - Notice of Meetings 1
Section 4 - Quorum 2
Section 5 - Voting 2
Section 6 - List of Stockholders 2
Section 7 - Action by Written Consent of Stockholders 3
Section 8 - Nomination of Directors 3
Article II - Directors 3
Section 1 - Powers 3
Section 2 - Number and Vacancies 3
Section 3 - Term of Office 4
Section 4 - Place of Meetings 4
Section 5 - Regular Meetings 4
Section 6 - Special Meetings 4
Section 7 - Quorum 4
Section 8 - Presence at Meeting 5
Section 9 - Action Without Meeting 5
Section 10- Committees of the Board 5
Section 11- Compensation 5
Section 12- Advisory Directors 5
Article III - Officers and Employees 6
Section 1 - Election 6
Section 2 - Term, Removal and Vacancies 6
Section 3 - Bonding 6
Section 4 - Chairman of the Board 6
Section 5 - Chief Executive Officer 6
Section 6 - President 7
Section 7 - Vice Presidents 7
Section 8 - Secretary 8
Section 9 - Treasurer 8
Section 10- Divisional Officers 8
Article IV - Stock Certificates and Transfer Books 8
Section 1 - Certificates 8
Section 2 - Facsimile Signatures 9
Section 3 - Record Ownership 9
Section 4 - Lost Certificates 9
Section 5 - Transfer Agent and Registrar 9
Section 6 - Transfer of Stock 9
Section 7 - Fixing Date for Determination of Share-
holders of Record 10
Article V - Dividends 11
Section 1 - Declaration and Payment 11
Section 2 - Reserves 11
Article VI - General Provisions 11
Section 1 - Offices 11
Section 2 - Seal 12
Section 3 - Fiscal Year 12
Section 4 - Inspection of Books 12
Section 5 - Reliance on Records 12
Section 6 - Annual Report 12
Section 7 - Voting of Stock 12
Section 8 - Waiver of Notice 13
Article VII - Indemnification of Officers,
Directors, Employees and Agents 13
Article VIII - Interested Directors 15
Article IX - Amendments 15
<PAGE>
BYLAWS
OF
THE BEARD COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
SECTION 1. ANNUAL MEETING. The annual meeting of stockholders for the
election of directors and the transaction of such other business as may
properly come before the meeting shall be held at 10:00 a.m. on the first
Thursday in June of each year or at such other time as shall be determined
by the board of directors. The meeting shall be held at the principal
offices of the Corporation or at such other place as shall be determined by
a majority of the directors.
SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders may be
called by the board of directors, or by the president, and shall be held at
such places, within or without the State of Oklahoma, as may be specified
in the call of any meeting. Further, the president, or in his absence, the
secretary, shall call a special meeting at the request in writing of
stockholders owning not less than one-third (1/3) in amount of the entire
capital stock of the Corporation issued and outstanding and entitled to
vote; provided, that such request states the purpose or purposes for the
proposed meeting.
SECTION 3. NOTICE OF MEETINGS. Written notice of every meeting of
stockholders stating the place, day, hour and purposes thereof, shall,
except when otherwise required by law, be mailed at least ten (10) but not
more than sixty (60) days prior to the meeting to each stockholder of
record entitled to vote thereat; provided that such notice may be waived in
writing, signed by the person entitled to notice either before or after the
time stated therein. Neither the business to be transacted at nor the
purpose of any meeting need be specified in such written waiver of notice.
Any meeting at which a quorum of stockholders is present, in
person or by proxy, may adjourn from time to time until its business is
completed. At the adjourned meeting, the Corporation may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at
the meeting. Otherwise, no notice need be given.
Written notice shall be deemed to be delivered when deposited in
the United States mail, addressed to the stockholder at his address as it
appears on the stock transfer books of the Corporation, with postage
thereon prepaid, or when sent by pre-paid telegram to such address.
SECTION 4. QUORUM. The holders of a majority of the shares of stock
issued and outstanding and entitled to vote, present in person or by proxy,
shall, except as otherwise provided by law, constitute a quorum for the
transaction of business at all meetings of the stockholders. If at any
meeting a quorum is not present, the chairman of the meeting or the holders
of the majority of the shares of stock present or represented may adjourn
the meeting from time to time. At the adjourned meeting the Corporation
may transact any business which might have been transacted at the original
meeting. The stockholders present or represented at a duly called or held
meeting at which a quorum is present may continue to transact business
until adjournment notwithstanding the withdrawal of enough stockholders to
leave less than a quorum.
SECTION 5. VOTING. Each stockholder shall at every meeting of
stockholders be entitled to one vote, in person or by proxy, for each share
of stock having voting power held by such stockholder, but no proxy shall
be voted on after three years from its date unless the proxy provides for a
longer period. No vote upon any matter need be by ballot unless demanded
by the holders of at least twenty (20%) percent of the shares represented
and entitled to vote at the meeting. All elections and questions other
than the election of directors shall be decided by a majority of the votes
cast, except as otherwise required by the laws of Oklahoma. The election
of directors shall be decided by a plurality of the votes cast.
SECTION 6. LIST OF STOCKHOLDERS. At least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of
each stockholder, and the number of shares registered in the name of each
stockholder, shall be prepared by the secretary. Such list shall be open
to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting,
or, if not specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who
is present. The original or duplicate stock ledger shall be the only
evidence as to who are stockholders entitled to examine the stock ledger,
the list required by this section or the books of the Corporation, or to
vote in person or by proxy at any meeting of stockholders.
SECTION 7. ACTION BY WRITTEN CONSENT OF STOCKHOLDERS. Any action required
or permitted to be taken at a meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by all of the
holders of outstanding shares of the Corporation entitled to vote with
respect to the subject matter thereof.
SECTION 8. NOMINATION OF DIRECTORS. Nomination of election to the board
of directors may be made by the board of directors or by any stockholder of
any outstanding class of capital stock of the Corporation entitled to vote
for the election of directors. Nominations, other than those made by or on
behalf of the existing management of the Corporation, shall be made in
writing and shall be delivered or mailed to the president or to the
secretary of the Corporation not less than four days nor more than fifty
days prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than twenty-one days notice of
the meeting is given to stockholders, such nominations shall be mailed or
delivered to the chairman of the board, president or secretary of the
Corporation not later than the close of business on the seventh day
following the day on which the notice of the meeting was mailed.
Nominations, not made in accordance herewith may be disregarded by the
chairman of the meeting; and upon his instructions, the judges of the
election may disregard all votes cast for each such nominee.
ARTICLE II
DIRECTORS
SECTION 1. POWERS. The business of the Corporation shall be managed by
its board of directors, which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or these bylaws directed or required to
be exercised or done by the stockholders.
SECTION 2. NUMBER AND VACANCIES. The number of directors which shall
constitute the entire board shall not be less than three nor more than
nine. Subject to the provisions of the certificate of incorporation, this
Section 2 and Section 3 hereof, the number of directors from time to time
may be altered but in no event, to less than three (except as may be
permitted by law) by resolution adopted by a vote of two-thirds of the
entire board of directors, or at the annual meeting of stockholders by the
affirmative approval of the holders of sixty-six and two-thirds percent
(66 2/3%) of the outstanding stock entitled to vote. No reduction in the
number of directors shall have the effect of removing any director from
office prior to the expiration of his term. Whenever a vacancy in the
number of directors shall occur, until such vacancy is filled the
continuing director or directors, regardless of their number, shall have
all the powers granted to the directors and shall discharge all the duties
imposed upon the directors. As used herein, the "entire board" shall mean
the total number of directors which the Corporation would have if there
were no vacancies. The term "majority of the directors" whenever used
herein shall mean more than one-half of the entire board when the entire
board is composed of three or more directors, and shall mean one director
if the entire board is only one at the time; both directors if only two
directors are the entire board at the time. A director shall not be
required to be a stockholder of the Company in order to serve in such
capacity.
SECTION 3. TERM OF OFFICE. Directors shall be elected to hold office for
three-year terms expiring at the next succeeding annual meeting and until
their successors are duly elected and have qualified.
SECTION 4. PLACE OF MEETINGS. Board meetings may be held at such places,
within or without the State of Oklahoma, as stated in these bylaws or as
the board may from time to time determine or as may be specified in the
call of any meetings.
SECTION 5. REGULAR MEETINGS. The regular annual meeting of the board
shall be held without call or notice immediately after and at the same
general place as the annual meeting of the stockholders, for the purpose of
electing officers and transacting any other business that may properly come
before the meeting. Additional regular meetings of the board may be held
without call or notice at such place and at such time as shall be fixed by
resolution of the board but in the absence of such resolution, shall be
held upon call by the president or a majority of directors.
SECTION 6. SPECIAL MEETINGS. Special meetings of the board may be called
by the chairman of the board or the president or by a majority of the
directors then in office. Notice of special meetings shall either be
mailed by the secretary to each director at least three days before the
meeting or shall be given personally or telegraphed or sent by facsimile
transmission to each director at least two days before the meeting. Such
notice shall set forth the time and place of such meeting, but need not,
unless otherwise required by law, state the purposes of the meeting. A
majority of the directors present at any meeting may adjourn the meeting
from time to time without notice other than announcement at the meeting.
SECTION 7. QUORUM. A majority of the total number of directors shall
constitute a quorum for the transaction of business at any meeting of the
board; provided, however, that if there are vacancies on the board of
directors, a majority of the remaining directors shall constitute a quorum
which in no case shall be less than one-third of the total number of
directors. If at any meeting a quorum is not present, a majority of the
directors present may adjourn the meeting from time to time without notice
other than announcement at the meeting until a quorum is present.
SECTION 8. PRESENCE AT MEETING. Members of the board of directors may
participate in a meeting of such board by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation
shall be deemed presence in person at such meeting.
SECTION 9. ACTION WITHOUT MEETING. Any action required or permitted to be
taken at any meeting of the board of directors, or of any committee
thereof, may be taken without a meeting if all members of the board or such
committee, as the case may be, consent thereto in writing, and such written
consent is filed with the minutes of the proceedings of the board or such
committee.
SECTION 10. COMMITTEES OF THE BOARD. The board of directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each such committee to consist of one or more of the directors
of the Corporation and shall have such name or names as may be determined
from time to time by resolution adopted by the board. The board may
designate one or more directors as alternate members of any committee who
may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution,
shall have and may exercise the powers of the board of directors in the
management of the business and affairs of the Corporation, and generally
perform such duties and exercise such powers as may be directed or
delegated by the board of directors from time to time, and, furthermore,
may authorize the seal of the Corporation to be affixed to all papers which
may require it. In the absence or disqualification of any member of such
committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the board to
act at the meeting in the place of such absent or disqualified member.
Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board.
SECTION 11. COMPENSATION. Each director shall be reimbursed for
reasonable expenses incurred in attending any meeting of the board or of
any committee of which such director shall be a member. The board may by
resolution allow reasonable fees to some or all of the directors for
attendance at any board or committee meeting. No such payment shall
preclude any directors from serving the Corporation in any other capacity
and receiving compensation therefor.
SECTION 12. ADVISORY DIRECTORS. The board of directors may appoint
individuals who may but need not be directors, officers, or employees of
the Corporation to serve as members of an advisory board of directors of
the Corporation and may fix fees or compensation for attendance at meetings
of any such advisory boards. The members of any such advisory board may
adopt and from time to time may amend rules and regulations for the conduct
of their meetings and shall keep minutes which shall be submitted to the
board of directors of the Corporation. The term of office of any member of
the advisory board of directors shall be at the pleasure of the board of
directors and shall expire the day of the annual meeting of the
stockholders of the Corporation. The function of any such advisory board
of directors shall be to advise with respect to the affairs of the
Corporation.
ARTICLE III
OFFICERS AND EMPLOYEES
SECTION 1. ELECTION. At the regular annual meeting of the board, there
shall be elected a president, one or more vice presidents (who may be
designated by different classes), a secretary and an assistant secretary.
The board may from time to time elect a chairman of the board or appoint
other officers. No officer except the president need be a director. Two
or more offices may be held by the same person, except that the offices of
president and secretary or president and vice president shall not be held
by the same person.
SECTION 2. TERM, REMOVAL AND VACANCIES. All officers shall serve at the
pleasure of the board. Any officer elected or appointed by the board may
be removed at any time by the board whenever in its judgment the best
interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. A vacancy in any office shall be filled by the board of
directors.
SECTION 3. BONDING. The board may, in its discretion, require any officer
to give the Corporation a bond in a sum and with one or more sureties
satisfactory to the board for the faithful performance of his duties and
for the restoration to the Corporation, in the case of death, resignation,
retirement or removal from office, of all books, papers, vouchers, money
and other property of whatever kind in his possession under his control
belonging to the Corporation.
SECTION 4. CHAIRMAN OF THE BOARD. The chairman of the board, if one has
been elected, shall preside at all meetings of the board, stockholders and
committees of which he is a member. He shall have such powers and perform
such duties as may be authorized by the board of directors.
SECTION 5. CHIEF EXECUTIVE OFFICER. If the board of directors has elected
a chairman of the board, it may designate the chairman of the board as the
chief executive officer of the Corporation. If no chairman of the board
has been elected, or in his absence or inability to act, or if no such
designation has been made by the board of directors, the president shall be
the chief executive officer of the Corporation. The chief executive
officer shall (i) have the overall supervision of the business of the
Corporation and shall direct the affairs and policies of the Corporation,
subject to any directions which may be given by the board of directors,
(ii) shall have authority to designate the duties and powers of officers
and delegate special powers and duties to specified officers, so long as
such designations shall not be inconsistent with the statutes, these bylaws
or action of the board of directors, and shall in general have all other
powers and shall perform all other duties incident to the chief executive
officer of a corporation and such other powers and duties as may be
prescribed by the board of directors from time to time.
SECTION 6. PRESIDENT. If the board of directors has elected a chairman of
the board and designated such officer as the chief executive officer of the
Corporation, the president shall serve as chief operating officer and be
subject to the control of the board of directors and the chairman of the
board. He shall have such powers and perform such duties as from time to
time may be assigned to him by the board of directors or the chairman of
the board. If the board of directors has not elected a chairman of the
board, or if one has been elected and has not been designated the chief
executive officer of the Corporation, then the president shall be the chief
executive officer of the Corporation with the powers and duties provided in
Article III, Section 5, of these bylaws. In any event, the president shall
have the power to execute, and shall execute, bonds, deeds, mortgages,
extensions, agreements, modification of mortgage agreements, leases and
contracts or other instruments of the Corporation except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors or by the president to some other officer or agent of the
Corporation. The president may sign with the secretary or an assistant
secretary, certificates for shares of stock of the Corporation, the
issuance of which shall have been duly authorized by the board of
directors, and shall vote, or give a proxy to any other person to vote, all
shares of the stock of any other corporation standing in the name of the
Corporation. The president, in general, shall have all other powers and
shall perform all other duties as may be prescribed by the board of
directors from time to time.
SECTION 7. VICE PRESIDENTS. A vice president shall perform such duties as
may from time to time be assigned to him by the board or by the chairman or
the president. In the absence or inability to act of the president, the
vice president (or if there is more than one vice president, in the order
designated by the board and, absent such designation, in the order of their
first election to that office) shall perform the duties and discharge the
responsibilities of the president.
SECTION 8. SECRETARY. The secretary shall be the keeper of the corporate
seal and corporate records, and shall give notice of, attend, and record
minutes of meetings of stockholders and directors. He shall see that the
seal is affixed to all documents, the execution of which on behalf of the
Corporation under its seal is duly authorized in accordance with the
provisions of these bylaws. He shall, in general, perform all duties
incident to the office of secretary and such other duties as may be
assigned to him by the board or by the president. The assistant
secretaries, if any, shall have such duties as shall be delegated to them
by the secretary and, in the absence of the secretary, the senior of them
present shall discharge the duties of the secretary.
SECTION 9. TREASURER. The treasurer shall be responsible for (i) the
custody and safekeeping of all of the funds and securities of the
Corporation, (ii) the receipt and deposit of all moneys paid to the
Corporation, (iii) where necessary or appropriate, the endorsement for
collection on behalf of the Corporation of all checks, drafts, notes and
other obligations payable to the Corporation, (iv) the disbursement of
funds of the Corporation under such rules as the board may from time to
time adopt, (v) maintaining the general books of account of the
Corporation, and (vi) the performance of such further duties as are
incident to the office of treasurer or as may be assigned to him by the
board or by the president. The assistant treasurers, if any, shall have
such duties as shall be delegated to them by the treasurer, and in the
absence of the treasurer, the senior one of them present shall discharge
the duties of the treasurer.
SECTION 10. DIVISIONAL OFFICERS. The board may from time to time appoint
officers of various divisions of the Corporation. Divisional officers
shall not by virtue of such appointment become officers of the Corporation.
Subject to the direction of the president of the Corporation, the president
of a division shall have general charge, control and supervision of all the
business operations of his division, and the other divisional officers
shall have such duties and authority as may be prescribed by the president
of the division.
ARTICLE IV
STOCK CERTIFICATES AND TRANSFER BOOKS
SECTION 1. CERTIFICATES. Every stockholder shall be entitled to have a
certificate in such form as the board shall from time to time approve,
signed by, or in the name of the Corporation by (i) the chairman of the
board, if any, the president or any vice president and (ii) the treasurer,
or assistant treasurer, or the secretary or an assistant secretary,
certifying the number of shares owned by him in the Corporation. During
the time in which the Corporation is authorized to issue more than one
class of stock or more than one series of any class, there shall be set
forth on the face or back of each certificate issued a statement that the
Corporation will furnish without charge to each stockholder who so
requests, the designations, preferences and relative, participating, option
or other special rights of each class of stock or series thereof of the
Corporation and the qualifications, limitations or restrictions of such
preferences and/or rights.
SECTION 2. FACSIMILE SIGNATURES. Where a certificate is countersigned (i)
by a transfer agent other than the Corporation or its employee, or (ii) by
the registrar other than the Corporation or its employee, the signatures of
any of the officers named in Section 1 of this Article IV may be
facsimiles. In case any officer who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of
issue.
SECTION 3. RECORD OWNERSHIP. A record of the name and address of the
holder of each certificate, the number of shares represented thereby, and
the date of issue thereof shall be made on the Corporation's books. The
Corporation shall be entitled to treat the holder of record of any share or
shares of stock as the holder in fact thereof, and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in any
share on the part of any other person, whether or not it shall have express
or other notice thereof, except as required by the laws of Oklahoma.
SECTION 4. LOST CERTIFICATES. Any person claiming a stock certificate in
lieu of one lost, stolen, mutilated or destroyed shall give the Corporation
an affidavit as to his ownership of the certificate and of the facts which
go to prove its loss, theft, mutilation or destruction. He shall also, if
required by the board, give the Corporation a bond, in such form as may be
approved by the board, sufficient to indemnify the Corporation against any
claim that may be made against it on account of the alleged loss or theft
of the certificate or the issuance of a new certificate.
SECTION 5. TRANSFER AGENT AND REGISTRAR. The Corporation shall maintain
one or more transfer offices or agencies, each in charge of a transfer
agent designated by the board, where the shares of stock of the Corporation
shall be transferable. The Corporation shall also maintain one or more
registry offices, each in charge of a registrar designated by the board,
wherein such shares of stock shall be registered. To the extent authorized
by the board, the same entity may serve both as a transfer agent and
registrar.
SECTION 6. TRANSFER OF STOCK. Transfer of shares shall, except as
provided in Section 4 of this Article IV, be made on the books of the
Corporation only by direction of the person named in the certificate or his
attorney, lawfully constituted in writing, and only upon surrender for
cancellation of the certificate therefor, duly endorsed or accompanied by a
written assignment of the shares evidenced thereby.
SECTION 7. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action,
the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record is
adopted by the board of directors, and which record date shall not be
more than sixty nor less than ten days before the date of such
meeting nor more than sixty days prior to the time for such other
action as hereinbefore described. If no record date is fixed by the
board of directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is
held. If no record date is fixed by the board of directors for any
other such purpose, the record date shall be at the close of business
on the day on which the board of directors adopts the resolution
relating thereto.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting,
the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date
is adopted by the board of directors, and which date shall not be
more than ten days after the date upon which the resolution fixing
the record date is adopted by the board of directors. If no record
date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in
writing without a meeting, when no prior action by the board of
directors is required by law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to
be taken is delivered to the Corporation by delivery to its
registered office in the State of Oklahoma, its principal place of
business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall
be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the board of
directors and prior action by the board of directors is required by
law, the record date for determining stockholders entitled to consent
to Corporation action in writing without a meeting shall be at the
close of business on the day on which the board of directors adopts
the resolution taking such prior action.
ARTICLE V
DIVIDENDS
SECTION 1. DECLARATION AND PAYMENT. Dividends upon the capital stock of
the Corporation, subject to the provisions of the certification of
incorporation, if any, may be declared by the board at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of
the certificate of incorporation.
SECTION 2. RESERVES. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum
or sums as the board from time to time, in its discretion, deems proper as
a reserve or reserves to meeting contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation,
or for such other purpose as the board shall deem conducive to the interest
of the Corporation, and the board may modify or abolish any such reserve in
the manner in which it was created.
ARTICLE VI
GENERAL PROVISIONS
SECTION 1. OFFICES. The principal office of the Corporation shall be
located at Enterprise Plaza, Suite 320, 5600 North May Avenue, Oklahoma
City, Oklahoma 73112, or at such other place as the board may determine.
The Corporation may have such other offices as the board may from time to
time determine. The registered office of the Corporation required by
Oklahoma Central Corporation Act to be maintained in the State of Oklahoma
shall be, in addition to, and not in lieu of, the principal office in any
other state, and to the address of the registered office and the
designation of the registered agent may be changed from time to time by the
board.
SECTION 2. SEAL. The corporate seal shall have inscribed thereon the name
of the Corporation and the words "Corporate Seal, Oklahoma." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be the
year ending December 31 of each year, or such other year as designated by
the board.
SECTION 4. INSPECTION OF BOOKS. Subject to laws of the State of Oklahoma,
the directors shall determine from time to time whether, and, if allowed,
when and under what conditions and regulations the accounts and books of
the Corporation (except such as may by statute be specifically open to
inspection) or any of them, shall be open to the inspection of the
stockholders, and the stockholders rights in this respect are and shall be
restricted and limited accordingly.
SECTION 5. RELIANCE ON RECORDS. Each director and officer shall in the
performance of his duties be fully protected in relying in good faith upon
the books of account or reports made to the Corporation by any of its
officials, or by an independent certified public accountant, or by an
appraiser selected with reasonable care by the board, or in relying in good
faith upon other records of the Corporation.
SECTION 6. ANNUAL REPORT. The board shall publish and submit to the
stockholders annually a summary of the consolidated income of the
Corporation and its consolidated subsidiaries for the previous fiscal year
and a full or condensed consolidated balance sheet of the Corporation and
its consolidated subsidiaries at the end of the previous fiscal year.
SECTION 7. VOTING OF STOCK. Unless otherwise ordered by the board, the
chairman of the board, if any, the president or any vice president shall
have full power and authority, in the name and on behalf of the
Corporation, to attend, act and vote at any meeting of stockholders of any
company in which the Corporation may hold shares of stock, and at any such
meeting shall possess and may exercise any and all rights and powers
incident to the ownership of such shares and which, as the holder thereof,
the Corporation might possess and exercise if personally present, and may
exercise such power and authority through the execution of proxies or may
delegate such power and authority to any other officer, agent or employee
of the Corporation.
SECTION 8. WAIVER OF NOTICE. Whenever any notice is required to be given,
a waiver thereof in writing, signed by the person or persons entitled to
the notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE VII
Indemnification of Officers, Directors,
EMPLOYEES AND AGENTS
(a) RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he
or she, or a person of whom he or she is the legal representative, is or
was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including employee benefit plans, whether the basis of such
proceeding is alleged action on an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Oklahoma General Corporation Act, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than the law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by such person in
connection therewith, and such indemnification shall continue as to a
person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and
administrators; PROVIDED, HOWEVER, that, except as provided in paragraph
(b) hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated
by such person only if such proceeding (or part thereof) was authorized by
the board of directors of the Corporation. The right to indemnification
conferred in this Section shall be a contract right and shall include the
right to be paid by the Corporation the expenses incurred in defending any
such proceeding in advance of its final disposition; PROVIDED, HOWEVER,
that, if the Oklahoma General Corporation Act requires the payment of such
expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or
is rendered by such person while a director of officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that
such director or officer is not entitled to be indemnified under this
Section or otherwise. The Corporation may, by action of its board of
directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) RIGHT OF CLAIMANT TO BRING SUIT. It a claim under paragraph
(a) of this Section is not paid in full by the Corporation within thirty
days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the
required undertaking, if any, is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which
make it permissible under the Oklahoma General Corporation Act for the
Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its board of directors, independent
legal counsel, or its stockholders) to have made a determination prior to
the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable
standard of conduct set forth in the Oklahoma General Corporation Act, nor
an actual determination by the Corporation (including its board of
directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met
the applicable standard of conduct.
(c) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of
its final disposition conferred in this Section shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, by-law, agreement,
vote of stockholders or disinterested directors or otherwise.
(d) INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust
or other enterprise against any such expense, liability or loss, whether or
not the Corporation would have the power to indemnify such person against
such expense, liability or loss under the Oklahoma General Corporation Act.
ARTICLE VIII
INTERESTED DIRECTORS
(a) No contract or transaction between the Corporation and one
or more of its directors or officers, or between the Corporation and any
other corporation, partnership, association, or other organization in which
one or more of its directors or officers are directors or officers, or have
a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the board or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such
purposes if:
(1) The material facts as to his interest and as to the
contract or transaction are disclosed or are known to the board of
directors or the committee, and the board or committee in good faith
authorizes the contract or transaction by a vote sufficient for such
purpose without counting the vote of the interested director or directors;
or
(2) The material facts as to his interest and as to the
contract or transaction are disclosed or are known to the shareholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith to vote of the stockholders; or
(3) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by the
board of directors or the stockholders.
(b) Interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a
committee thereof, which authorizes the contract or transaction.
ARTICLE IX
AMENDMENTS
These bylaws may be altered, amended or repaired or new bylaws
may be adopted by the stockholders at any regular or special meeting (or by
written consent in lieu thereof by the shareholders having the minimum
number of votes that would be necessary to authorize such action at a
meeting) of the stockholders or by the board of directors at any regular or
special meeting (or by unanimous written consent in lieu thereof), subject
however to the power of the stockholders to adopt, amend or repeal the
same.
EXHIBIT 10(i)
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (the "Option Agreement"),
made as of this 1st day of April, 1997, by and between Richard D. Neely
(the "Participant"), and ISITOP, Inc. (the "Company"):
W I T N E S S E T H:
WHEREAS, the Participant is a key management employee of the Company,
its parent or any subsidiary of the Company, and it is important to the
Company that the Participant be encouraged to remain in the employ of the
Company, its parent or any subsidiary of the Company; and
WHEREAS, in recognition of such facts, the Company desires to provide
to the Participant an opportunity to purchase shares of the common stock of
the Company, as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for good and valuable consideration, the Participant and the
Company hereby agree as follows:
1. GRANT OF STOCK OPTION. The Company hereby grants to the
Participant a stock option (the "Stock Option") to purchase all or any part
of an aggregate of one thousand eight hundred seventy-five (1,875) shares
of its Common Stock, par value $1.00, (the "Stock") as set forth below,
under and subject to the terms and conditions of this Option Agreement.
The purchase price for each share to be purchased hereunder shall be six
dollars and forty cents ($6.40) (the "Option Price").
2. TIMES OF EXERCISE OF STOCK OPTION. The Participant shall be
eligible to exercise his Stock Option only after the Company has repaid The
Beard Company ("Beard") for all advances made by Beard to the Company
pursuant to the Subscription Agreement attached as Exhibit "B" plus any
accrued interest and Beard's initial $32,000 investment in the Company (the
"Exercise Event"). In addition, the conditions of Section 8 hereof must be
satisfied before the Participant shall be eligible to exercise his Stock
Options. If the Participant's employment with the Company (or its parent
or of any one or more of the subsidiaries of the Company) remains full-time
and continuous at all times prior to the Exercise Event, then the
Participant shall be entitled, subject to the applicable provisions of this
Option Agreement having been satisfied, to exercise on or after the
Exercise Event, on a cumulative basis, the number of shares of Stock set
forth in the foregoing Section 1.
3. TERM OF STOCK OPTION. Stock Options shall be granted on the
following terms and conditions. Stock Options shall only be granted to key
management employees, directors or key professional employees of the
Company, its parent or any subsidiary of the Company. No Stock Option
shall be exercisable more than ten (10) years from the date of grant.
Subject to such limitations, the Committee shall have the discretion to fix
the period ("Option Period") during which Stock Options may be exercised.
Provided, notwithstanding anything in this Option Agreement to the
contrary, if the employment of the Participant is terminated for "Cause"
prior to the expiration of the Option Period, to the extent any Stock
Options under this Option Agreement have not been previously exercised,
such Stock Options shall automatically and immediately expire as of the
date of such termination of employment, regardless of the extent to which
it would have been otherwise exercisable at such time. For purposes of
this Option Agreement, termination of the Participant's employment by the
Company for Cause shall mean termination for one of the following reasons:
(i) the conviction of the Participant of a felony by a federal or state
court of competent jurisdiction; (ii) an act or acts of dishonesty taken by
the Participant and intended to result in substantial personal enrichment
for the Participant at the expense of the Company; or (iii) the
Participant's willful breach or habitual neglect of the duties which he is
required to perform under the Employment Agreement between the Company and
the Participant.
4. NONTRANSFERABILITY OF STOCK OPTIONS. Except as otherwise herein
provided, any Stock Option granted shall not be transferable otherwise than
by will or the laws of descent and distribution, and the Stock Option may
be exercised only by him. More particularly (but without limiting the
generality of the foregoing), the Stock Option may not be assigned,
transferred (except as provided above), pledged or hypothecated in any way,
shall not be assignable by operation of law and shall not be subject to
execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of the Stock Option
contrary to the provisions hereof shall be null and void and without
effect.
5. EMPLOYMENT. So long as the Participant shall continue to be a
full-time and continuous employee of the Company, its parent or one or more
of the subsidiaries of the Company, any Stock Option granted to him shall
not be affected by any change of duties or position. Nothing in this
Option Agreement shall confer upon the Participant any right to continue in
the employ of the Company, its parent or any of the subsidiaries of the
Company, or interfere in any way with the right of the Company, its parent
or any of the subsidiaries of the Company to terminate such Participant's
employment at any time.
6. SPECIAL RULES WITH RESPECT TO STOCK OPTIONS. With respect to
Stock Options granted hereunder, the following special rules shall apply:
(a) ACCELERATION OF OTHERWISE UNEXERCISABLE STOCK OPTIONS ON
RETIREMENT, DEATH, DISABILITY OR OTHER SPECIAL CIRCUMSTANCES. The
Committee, in its sole discretion, may permit (i) a Participant who
terminates employment due to retirement, (ii) a Participant who terminates
employment due to a disability, (iii) the personal representative of a
deceased Participant, or (iv) any other Participant who terminates
employment upon the occurrence of special circumstances (as determined by
the Committee) to purchase all or any part of the shares subject to Stock
Option on the date of the Participant's retirement, disability, death, or
as the Committee otherwise so determines, notwithstanding that all
installments, if any, had not accrued on such date.
(b) NUMBER OF STOCK OPTIONS GRANTED. Participants may be
granted more than one Stock Option. In making any such determination, the
Committee shall obtain the advice and recommendation of the officers of the
Company, its parent, or a subsidiary of the Company which have supervisory
authority over such Participants. Further, the granting of a Stock Option
under this Option Agreement shall not affect any outstanding Stock Option
previously granted to a Participant under the Plan.
(c) ASSUMPTION OF OUTSTANDING STOCK OPTIONS. To the extent
permitted by the applicable provisions of the Code, any successor to the
Company succeeding to, or assigned the business of, the Company as the
result of or in connection with a corporate merger, consolidation,
combination, reorganization or liquidation transaction shall assume Stock
Options outstanding under this Option Agreement or issue new Stock Options
in place of such outstanding Stock Options. Provided, such assumption of
outstanding Stock Options is to be made on a fair and equivalent basis in
accordance with the applicable provisions of Section 424(a) of the Code;
provided, further, in no event will such assumption result in a
modification of any Stock Option as defined in Section 424(h) of the Code.
(d) ADJUSTMENTS UNDER CHANGES IN CAPITALIZATION. The aggregate
number of shares of Stock under Stock Options granted under this Option
Agreement, the Option Price and the total number of shares of Stock which
may be purchased by a Participant on exercise of the Stock Option shall be
appropriately adjusted or modified by the Committee to reflect any
recapitalization, stock split, merger, consolidation, reorganization,
combination, liquidation, stock dividend or similar transaction involving
the Company. Provided, any such adjustment shall be made in such a manner
as to not constitute a modification as defined in Section 424(h) of the
Code.
7. METHOD OF EXERCISING STOCK OPTION.
(a) PROCEDURES FOR EXERCISE. The manner of exercising the Stock
Option herein granted shall be by written notice to the Secretary or
Personnel Manager of the Company prior to the date the Stock Option, or
part thereof, is to be exercised, and in any event prior to the expiration
of the Option Period. Such notice shall state the election to exercise the
Stock Option and the number of shares of Stock with respect to that portion
of the Stock Option being exercised, and shall be signed by the person or
persons so exercising the Stock Option.
(b) FORM OF PAYMENT. Payment for shares of Stock purchased
under this Option Agreement shall be made in full and in cash or by check,
Stock of the Company or a combination thereof, at the time of exercise of
the Stock Options as a condition thereof, and no loan or advance shall be
made by the Company for the purpose of financing, in whole or in part, the
purchase of Stock. In the event that common stock of the Company is
utilized as consideration for the purchase of Stock upon the exercise of a
Stock Option, then, such common stock shall be valued at "fair market
value". For all purposes of effecting the exercise of a Stock Option, the
date on which the Participant gives the notice of exercise to the Company
will be the date he becomes bound contractually to take and pay for the
shares of Stock underlying the Stock Option. The Committee may also adopt
such other procedures which it desires for the payment of the purchase
price upon the exercise of a Stock Option which are not inconsistent with
the applicable provisions of the Code which relate to Stock Options.
(c) PAYMENT OF WITHHOLDING TAXES. No exercise of any Stock
Option shall be permitted nor shall any Stock be issued to the Participant
until the Company receives full payment for the Stock purchased which shall
include any required state and federal withholding taxes. Further, upon
the exercise of any Stock Option, the Participant may direct the Company to
retain from the shares of Stock to be issued upon exercise of the Stock
Option that number of initial shares of Stock (based on fair market value)
that would be necessary to satisfy the requirements for withholding any
amounts of taxes due upon the exercise of such Stock Option.
8. SECURITIES LAW RESTRICTIONS. Stock Options shall be exercised
and Stock issued only upon compliance with the Securities Act of 1933, as
amended (the "Act"), and any other applicable securities law, or pursuant
to an exemption therefrom.
9. SHAREHOLDER RIGHTS. The Participant shall have no rights as a
shareholder with respect to any shares of Stock subject to a Stock Option
prior to the purchase of such shares of Stock by exercise of the Stock
Option.
10. NOTICES. All notices or other communications relating to the
Plan and this Option Agreement as it relates to the Participant shall be in
writing and shall be mailed (U.S. Mail) by the Company to the Participant
at the then current address as maintained by the Company or such other
address as the Participant may advise the Company in writing.
IN WITNESS WHEREOF, the Company has caused this Option Agreement
to be duly executed by its officers thereunto duly authorized, and the
Participant has hereunto set his hand and seal, all on the day and year
first above written.
ISITOP, INC., an Oklahoma corporation
By LLOYD A. KIRK
Lloyd A. Kirk, Vice President
"COMPANY"
RICHARD D. NEELY
Richard D. Neely, an individual
"PARTICIPANT"
EXHIBIT 10(j)
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (the "Option Agreement"),
made as of this 1st day of April, 1997, by and between Jerry S. Neely (the
"Participant"), and ISITOP, Inc. (the "Company"):
W I T N E S S E T H:
WHEREAS, the Participant is a key management employee of the Company,
its parent or any subsidiary of the Company, and it is important to the
Company that the Participant be encouraged to remain in the employ of the
Company, its parent or any subsidiary of the Company; and
WHEREAS, in recognition of such facts, the Company desires to provide
to the Participant an opportunity to purchase shares of the common stock of
the Company, as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for good and valuable consideration, the Participant and the
Company hereby agree as follows:
1. GRANT OF STOCK OPTION. The Company hereby grants to the
Participant a stock option (the "Stock Option") to purchase all or any part
of an aggregate of one thousand eight hundred seventy-five (1,875) shares
of its Common Stock, par value $1.00, (the "Stock") as set forth below,
under and subject to the terms and conditions of this Option Agreement.
The purchase price for each share to be purchased hereunder shall be six
dollars and forty cents ($6.40) (the "Option Price").
2. TIMES OF EXERCISE OF STOCK OPTION. The Participant shall be
eligible to exercise his Stock Option only after the Company has repaid The
Beard Company ("Beard") for all advances made by Beard to the Company
pursuant to the Subscription Agreement attached as Exhibit "B" plus any
accrued interest and Beard's initial $32,000 investment in the Company (the
"Exercise Event"). In addition, the conditions of Section 8 hereof must be
satisfied before the Participant shall be eligible to exercise his Stock
Option. If the Participant's employment with the Company (or its parent or
of any one or more of the subsidiaries of the Company) remains full-time
and continuous at all times prior to the Exercise Event, then the
Participant shall be entitled, subject to the applicable provisions of this
Option Agreement having been satisfied, to exercise on or after the
applicable Exercise Event, on a cumulative basis, the number of shares of
Stock set forth in the foregoing Section 1.
3. TERM OF STOCK OPTION. Stock Options shall be granted on the
following terms and conditions. Stock Options shall only be granted to key
management employees, directors or key professional employees of the
Company, its parent or any subsidiary of the Company. No Stock Option
shall be exercisable more than ten (10) years from the date of grant.
Subject to such limitations, the Committee shall have the discretion to fix
the period ("Option Period") during which Stock Options may be exercised.
Provided, notwithstanding anything in this Option Agreement to the
contrary, if the employment of the Participant is terminated for "Cause"
prior to the expiration of the Option Period, to the extent any Stock
Options under this Option Agreement have not been previously exercised,
such Stock Options shall automatically and immediately expire as of the
date of such termination of employment, regardless of the extent to which
it would have been otherwise exercisable at such time. For purposes of
this Option Agreement, termination of the Participant's employment by the
Company for Cause shall mean termination for one of the following reasons:
(i) the conviction of the Participant of a felony by a federal or state
court of competent jurisdiction; (ii) an act or acts of dishonesty taken by
the Participant and intended to result in substantial personal enrichment
of the Participant at the expense of the Company; or (iii) the
Participant's willful breach or habitual neglect of the duties which he is
required to perform under the Employment Agreement between the Company and
the Participant.
4. NONTRANSFERABILITY OF STOCK OPTIONS. Except as otherwise herein
provided, any Stock Option granted shall not be transferable otherwise than
by will or the laws of descent and distribution, and the Stock Option may
be exercised only by him. More particularly (but without limiting the
generality of the foregoing), the Stock Option may not be assigned,
transferred (except as provided above), pledged or hypothecated in any way,
shall not be assignable by operation of law and shall not be subject to
execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of the Stock Option
contrary to the provisions hereof shall be null and void and without
effect.
5. EMPLOYMENT. So long as the Participant shall continue to be a
full-time and continuous employee of the Company, its parent or one or more
of the subsidiaries of the Company, any Stock Option granted to him shall
not be affected by any change of duties or position. Nothing in this
Option Agreement shall confer upon the Participant any right to continue in
the employ of the Company, its parent or any of the subsidiaries of the
Company, or interfere in any way with the right of the Company, its parent
or any of the subsidiaries of the Company to terminate such Participant's
employment at any time.
6. SPECIAL RULES WITH RESPECT TO STOCK OPTIONS. With respect to
Stock Options granted hereunder, the following special rules shall apply:
(a) ACCELERATION OF OTHERWISE UNEXERCISABLE STOCK OPTIONS ON
RETIREMENT, DEATH, DISABILITY OR OTHER SPECIAL CIRCUMSTANCES. The
Committee, in its sole discretion, may permit (i) a Participant who
terminates employment due to retirement, (ii) a Participant who terminates
employment due to a disability, (iii) the personal representative of a
deceased Participant, or (iv) any other Participant who terminates
employment upon the occurrence of special circumstances (as determined by
the Committee) to purchase all or any part of the shares subject to Stock
Option on the date of the Participant's retirement, disability, death, or
as the Committee otherwise so determines, notwithstanding that all
installments, if any, had not accrued on such date.
(b) NUMBER OF STOCK OPTIONS GRANTED. Participants may be
granted more than one Stock Option. In making any such determination, the
Committee shall obtain the advice and recommendation of the officers of the
Company, its parent, or a subsidiary of the Company which have supervisory
authority over such Participants. Further, the granting of a Stock Option
under this Option Agreement shall not affect any outstanding Stock Option
previously granted to a Participant under the Plan.
(c) ASSUMPTION OF OUTSTANDING STOCK OPTIONS. To the extent
permitted by the applicable provisions of the Code, any successor to the
Company succeeding to, or assigned the business of, the Company as the
result of or in connection with a corporate merger, consolidation,
combination, reorganization or liquidation transaction shall assume Stock
Options outstanding under this Option Agreement or issue new Stock Options
in place of such outstanding Stock Options. Provided, such assumption of
outstanding Stock Options is to be made on a fair and equivalent basis in
accordance with the applicable provisions of Section 424(a) of the Code;
provided, further, in no event will such assumption result in a
modification of any Stock Option as defined in Section 424(h) of the Code.
(d) ADJUSTMENTS UNDER CHANGES IN CAPITALIZATION. The aggregate
number of shares of Stock under Stock Options granted under this Option
Agreement, the Option Price and the total number of shares of Stock which
may be purchased by a Participant on exercise of the Stock Option shall be
appropriately adjusted or modified by the Committee to reflect any
recapitalization, stock split, merger, consolidation, reorganization,
combination, liquidation, stock dividend or similar transaction involving
the Company. Provided, any such adjustment shall be made in such a manner
as to not constitute a modification as defined in Section 424(h) of the
Code.
7. METHOD OF EXERCISING STOCK OPTION.
(a) PROCEDURES FOR EXERCISE. The manner of exercising the Stock
Option herein granted shall be by written notice to the Secretary or
Personnel Manager of the Company prior to the date the Stock Option, or
part thereof, is to be exercised, and in any event prior to the expiration
of the Option Period. Such notice shall state the election to exercise the
Stock Option and the number of shares of Stock with respect to that portion
of the Stock Option being exercised, and shall be signed by the person or
persons so exercising the Stock Option.
(b) FORM OF PAYMENT. Payment for shares of Stock purchased
under this Option Agreement shall be made in full and in cash or by check,
Stock of the Company or a combination thereof, at the time of exercise of
the Stock Options as a condition thereof, and no loan or advance shall be
made by the Company for the purpose of financing, in whole or in part, the
purchase of Stock. In the event that common stock of the Company is
utilized as consideration for the purchase of Stock upon the exercise of a
Stock Option, then, such common stock shall be valued at "fair market
value". For all purposes of effecting the exercise of a Stock Option, the
date on which the Participant gives the notice of exercise to the Company
will be the date he becomes bound contractually to take and pay for the
shares of Stock underlying the Stock Option. The Committee may also adopt
such other procedures which it desires for the payment of the purchase
price upon the exercise of a Stock Option which are not inconsistent with
the applicable provisions of the Code which relate to Stock Options.
(c) PAYMENT OF WITHHOLDING TAXES. No exercise of any Stock
Option shall be permitted nor shall any Stock be issued to the Participant
until the Company receives full payment for the Stock purchased which shall
include any required state and federal withholding taxes. Further, upon
the exercise of any Stock Option, the Participant may direct the Company to
retain from the shares of Stock to be issued upon exercise of the Stock
Option that number of initial shares of Stock (based on fair market value)
that would be necessary to satisfy the requirements for withholding any
amounts of taxes due upon the exercise of such Stock Option.
8. SECURITIES LAW RESTRICTIONS. Stock Options shall be exercised
and Stock issued only upon compliance with the Securities Act of 1933, as
amended (the "Act"), and any other applicable securities law, or pursuant
to an exemption therefrom.
9. SHAREHOLDER RIGHTS. The Participant shall have no rights as a
shareholder with respect to any shares of Stock subject to a Stock Option
prior to the purchase of such shares of Stock by exercise of the Stock
Option.
10. NOTICES. All notices or other communications relating to the
Plan and this Option Agreement as it relates to the Participant shall be in
writing and shall be mailed (U.S. Mail) by the Company to the Participant
at the then current address as maintained by the Company or such other
address as the Participant may advise the Company in writing.
IN WITNESS WHEREOF, the Company has caused this Option Agreement
to be duly executed by its officers thereunto duly authorized, and the
Participant has hereunto set his hand and seal, all on the day and year
first above written.
ISITOP, INC., an Oklahoma corporation
By LLOYD A. KIRK
Lloyd A. Kirk, Vice President
"COMPANY"
JERRY S. NEELY
Jerry S. Neely, an individual
"PARTICIPANT"
EXHIBIT 10(n)
INTERSTATE TRAVEL FACILITIES, INC.
______________________________
NONQUALIFIED STOCK OPTION AGREEMENT
Name: Toby Tindell Grant Date: February 27, 1998
Percent of Stock
Shares Subject to Option Exercisable
Option: 18,750 100%
Expiration Date: February 26, 2008
Option Price: $29.00
<PAGE>
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (the "Option Agreement"), made
as of the grant date set forth on the cover page of this Option Agreement (the
"Cover Page") by and between Toby Tindell ("Tindell") and INTERSTATE TRAVEL
FACILITIES, INC. (the "Company").
W I T N E S S E T H:
WHEREAS, Tindell is an executive officer of the Company, and it is
important to the Company that Tindell be encouraged to remain as an executive
officer of the Company; and
WHEREAS, in recognition of such facts, the Company desires to provide to
Tindell an opportunity to purchase shares of the common stock of the Company,
as hereinafter.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for good and valuable consideration, Tindell and the Company hereby
agree as follows:
SECTION 1. GRANT OF STOCK OPTION. The Company hereby grants to Tindell a
nonqualified stock option (the "Stock Option") to purchase all or any part of
the number of shares of its voting common stock, par value $1.00 (the "Stock")
set forth on the Cover Page, under and subject to the terms and conditions of
this Option Agreement. The purchase price for each share to be purchased
hereunder shall be the option price set forth on the Cover Page (the "Option
Price").
SECTION 2. TIMES OF EXERCISE OF STOCK OPTION. After, and only after, the
conditions of Section 6 hereof have been satisfied and Tindell and the Company
have executed a mutually satisfactory buy/sell agreement, Tindell shall be
eligible to exercise the Stock Option after the first to occur of (i) the
Company attaining a net worth of not less than $4,400,000 (net worth being
determined by subtracting liabilities from assets as reflected on the Company's
balance sheet prepared in accordance with generally accepted accounting
principles), or (ii) the merger or consolidation of the Company with or into
another entity (whether or not the Company is a surviving entity), the sale of
all or substantially all of the assets of the Company or the dissolution,
termination of existence or liquidation of the Company.
SECTION 3. TERM OF STOCK OPTION. The Stock Option shall expire at the
close of business on the expiration date set forth on the Cover Page, and may
not be exercised after such expiration date.
SECTION 4. TRANSFERABILITY OF STOCK OPTION.
(a) GENERAL. Except as provided in Section 4(b) hereof, the Stock
Option shall not be transferable otherwise than by will or the laws of descent
and distribution, and the Stock Option may be exercised, during the lifetime of
Tindell, only by Tindell. More particularly (but without limiting the
generality of the foregoing), the Stock Option may not be assigned, transferred
(except as provided above and in Section 4(b) hereof), pledged or hypothecated
in any way, shall not be assignable by operation of law and shall not be
subject to execution, attachment, or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Stock
Option contrary to the provisions hereof shall be null and void and without
effect.
(b) LIMITED TRANSFERABILITY OF OPTION. The Stock Option may be
transferred by Tindell to (i) the ex-spouse of Tindell pursuant to the terms of
a domestic relations order, (ii) the spouse, children or grandchildren of
Tindell ("Immediate Family Members"), (iii) a trust or trusts for the exclusive
benefit of such Immediate Family Members, or (iv) a partnership in which such
Immediate Family Members are the only partners; provided that there may be no
consideration for any such transfer and subsequent transfers of transferred
Stock Option shall be prohibited except those in accordance with Section 4(a)
hereof. Following transfer, any such Stock Option shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of this Section 4(b) the term "Tindell"
shall be deemed to refer to the transferee. No transfer pursuant to this
Section 4(b) shall be effective to bind the Company unless the Company shall
have been furnished with written notice of such transfer together with such
other documents regarding the transfer as the Company shall request.
SECTION 5. METHOD OF EXERCISING STOCK OPTION.
(a) PROCEDURES FOR EXERCISE. The manner of exercising the Stock
Option herein granted shall be by written notice to the Secretary of the
Company at the time the Stock Option, or part thereof, is to be exercised, and
in any event prior to the expiration of the Stock Option. Such notice shall
state the election to exercise the Stock Option, the number of shares of Stock
to be purchased upon exercise, and the form of payment to be used, and shall be
signed by the person so exercising the Stock Option.
(b) FORM OF PAYMENT. Payment in full for shares of Stock purchased
under this Option Agreement shall accompany Tindell's notice of exercise,
together with payment for any applicable withholding taxes. Payment shall be
made (i) in cash or by check, draft or money order payable to the order of the
Company, (ii) by delivering Stock or other equity securities of the Company
having a Fair Market Value on the date of payment equal to the amount of the
Option Price, (iii) by assigning that certain Promissory Note of the Company
issued in favor of Tindell of even date herewith to the Company or (iv) a
combination thereof. For all purposes of effecting the exercise of the Stock
Option, the date on which Tindell gives the notice of exercise to the Company,
together with payment for the shares of Stock being purchased and any
applicable withholding taxes, shall be the "date of exercise." If a notice of
exercise and payment are delivered at different times, the date of exercise
shall be the date the Company first has in its possession both the notice and
full payment as provided herein.
(c) FURTHER INFORMATION. In the event the Stock Option is
exercised, pursuant to the foregoing provisions of this Section 5, by any
person other than Tindell due to the transfer of the Stock Option in accordance
with Section 4 hereof, such notice shall also be accompanied by appropriate
proof of the right of such person to exercise the Stock Option. The notice so
required shall be given by personal delivery or facsimile to the Secretary of
the Company or by registered or certified mail, addressed to the Company at
Enterprise Plaza, Suite 320, 5600 North May Avenue, Oklahoma City, Oklahoma
73112, and it shall be deemed to have been given when it is so personally
delivered, upon facsimile confirmation or when it is deposited in the United
States mail in an envelope addressed to the Company, as aforesaid, properly
stamped for delivery as a registered or certified letter.
SECTION 6. SECURITIES LAW RESTRICTIONS. The Stock Option shall be
exercised and Stock issued only upon compliance with the Securities Act of
1933, as amended (the "Act"), and any other applicable securities law, or
pursuant to an exemption therefrom. If deemed necessary by the Company to
comply with the Act or any applicable laws or regulations relating to the sale
of securities, Tindell, at the time of exercise and as a condition imposed by
the Company, shall represent, warrant and agree that the shares of Stock
subject to the Stock Option are being purchased for investment and not with any
present intention to resell the same and without a view to distribution, and
Tindell shall, upon the request of the Company, execute and deliver to the
Company an agreement to such effect. Tindell acknowledges that any stock
certificate representing Stock purchased under such circumstances will be
issued with a restricted securities legend.
SECTION 7. NOTICES. All notices or other communications relating to this
Option Agreement as it relates to Tindell shall be in writing and shall be
delivered personally or mailed (U.S. Mail) by the Company to Tindell at the
then current address as maintained by the Company or such other address as
Tindell may advise the Company in writing.
IN WITNESS WHEREOF, the parties have executed this Option Agreement as of
the day and year first above written.
INTERSTATE TRAVEL FACILITIES, INC., an
Oklahoma corporation
By HERB MEE, JR.
Herb Mee, Jr., Vice President - Finance
"COMPANY"
TOBY TINDELL
Toby Tindell
EXHIBIT 10(s)
COMPENSATION AGREEMENT
THIS COMPENSATION AGREEMENT (the "Agreement"), entered into
between THE BEARD COMPANY (the "Company") and the WILLIAM M. BEARD AND LU
BEARD 1988 CHARITABLE UNITRUST (the "Trust"), dated as of the 17th day of
April, 1997.
W I T N E S S E T H
WHEREAS, on February 24, 1997, the Company executed a promissory note
(the "Note") by which it promised to pay $164,201.80 plus interest to Liberty
Bank & Trust Company of Oklahoma, N.A. (the "Lender").
WHEREAS, the Lender issued an irrevocable standby letter of credit
(the "ISLOC") in consideration for the Company's execution of the Note.
WHEREAS, the ISLOC was necessary to support a performance bond on be-
half of the Company or one of its subsidiaries.
WHEREAS, the Trust executed a guaranty agreement (the "Guaranty"), by
which the Trust guaranteed and promised to pay the Lender the indebtedness of
the Company arising from the Note.
WHEREAS, the Guaranty by the Trust provides a substantial benefit to
the Company.
NOW, THEREFORE, in consideration of the premises and mutual promises
and covenants herein contained, the Company agrees to pay the Trust ten percent
(10%) of the principal amount of the Note, payable semi-annually, until the
Trust is released from the Guaranty by Lender. Such interest shall accrue
from February 24, 1997. The Company further agrees that in the event the
Company defaults on the Note and the Trust is called upon to make payments
to the Lender pursuant to the Guaranty, the Company will pay the Trust ten per-
cent (10%) per annum of the payments made to the Lender by the Trust, payable
semi-annually, until the Trust is fully repaid by the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
THE BEARD COMPANY
"COMPANY" By: HERB MEE, JR.
Herb Mee, Jr., President
WILLIAM M. BEARD AND LU BEARD
1988 CHARITABLE UNITRUST
"TRUST" By: WILLIAM M. BEARD
William M. Beard, Trustee
By: LU BEARD
Lu Beard, Trustee
EXHIBIT 10(t)
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") entered into between
THE BEARD COMPANY (the "Company") and the WILLIAM M. BEARD AND LU BEARD
1988 CHARITABLE UNITRUST (the "Trust"), dated as of the 17th day of April,
1997.
W I T N E S S T H
WHEREAS, on February 24, 1997, the Company executed a promissory
note (the "Note") by which it promised to pay $164,201.80 in principal plus
interest to the order of Liberty Bank & Trust Company of Oklahoma City,
N.A. (the "Lender").
WHEREAS, on February 24, 1997, the Trust executed a guaranty
agreement (the "Guaranty") by which the Trust guaranteed and promised to
pay the Lender the indebtedness of the Company represented by the Note.
NOW THEREFORE, in consideration of the premises and mutual
covenants herein contained, the Trust and the Company agree as follows:
1. INDEMNIFICATION. The Company hereby agrees that in the
event the Trust is required to pay the Note or any part thereof, the
Company in consideration of the Trust having made the Guaranty, will
indemnify and hold harmless the Trust for the full amount of such payment
made by the Trust, together with any legal fees, expenses, and other costs
incidental to the enforcement of liability of the Guaranty against the
Trust.
2. LIMITATION ON INDEMNIFICATION. The above described
indemnification shall not extend to or indemnify and hold the Trust
harmless with respect to the failure of the Trust to perform its
obligations pursuant to the Guaranty.
3. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the terms of the laws of the State of
Oklahoma.
4. BINDING EFFECT. This Agreement shall be binding upon the
parties hereto, and their respective successors and assigns.
5. COUNTERPARTS. This agreement may be executed in a number of
identical counterparts, each of which shall be deemed an original for all
purposes, but all of which taken together shall form but one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
"COMPANY" THE BEARD COMPANY
By HERB MEE, JR.
Herb Mee, Jr., President
"TRUST" WILLIAM M. BEARD AND LU BEARD 1988
CHARITABLE UNITRUST
By WILLIAM M. BEARD
William M. Beard, Trustee
By LU BEARD
Lu Beard, Trustee
The Beard Company
Computation of Earnings (Loss) Per Share
Year Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
Basic and Diluted Earnings (Loss)
Per Share:
Loss from continuing operations
per statement of operations $ (2,428,000) $ (1,675,000) $ (965,000)
============ ============ ===========
Net earnings (loss) per statement
of operations 9,014,000 (315,000) (403,000)
Less accretion of redeemable
preferred stock (3,789,000) - (51,000)
------------ ------------ -----------
Net earnings (loss) attributable
to common shareholders per
statement of operations $ 5,225,000 $ (315,000) $ (454,000)
============ ============ ===========
Weighted average common shares
outstanding 2,808,000 2,756,000 2,662,000
============ ============ ===========
Basic and diluted earnings
(loss) per share:
Loss from continuing operations $ (0.86) $ (0.60) $ (0.36)
============ ============ ===========
Net Earnings (loss) $ 1.86 $ (0.11) $ (0.17)
============ ============ ===========
SUBSIDIARIES
The following is a list of the Company's consolidated subsidiaries as of
December 31, 1997:
Percent of
Voting Securites
Subsidiary State of Organization Owned
- ---------- --------------------- ----------------
The Beard Company (1) Oklahoma Registrant
Beard Oil Company Delaware 100%
Beard Oilfield Service
and Supply Co. (2) Oklahoma 100%
Beard Technologies, Inc. Oklahoma 100%
BSK, Inc. (2) Oklahoma 100%
Carbonic Reserves (2) Nevada 100%
Carbonic Technology
Services, Inc. (2) Texas 100%
Crescent Well Service,
Inc. (2) Oklahoma 100%
Horizontal Drilling
Technologies, Inc. Kansas 80%
ISITOP, Inc. Oklahoma 80%
Reid Supply Company (2) Nevada 100%
The Oaks Venture, Inc. (2) Oklahoma 100%
Whitetail Services, Inc. Delaware 80%
______________
(1) The consolidated financial statements of the Company include accounts of
Registrant and the subsidiaries controlled by the Registrant.
(2) Inactive subsidiary.
(3) Excludes 80%-owned Cibola Corporation. Registrant does not have financial
control of this subsidiary.
(4) Excludes 80%-owned Interstate Travel Facilities, Inc. organized on February
9, 1998.
INDEPENDENT AUDITORS' CONSENT
AND REPORT ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors and Stockholders
The Beard Company:
The audits referred to in our report dated March 12, 1998, included financial
statement Schedule II for each of the years in the three-year period ended
December 31, 1997, included in the annual report Form 10-K for the year ended
December 31, 1997. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits. In our opinion, such finan-
cial statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the in-
formation set forth therein.
We consent to incorporation by reference in the Registration Statements
(No. 33-87110, 33-98482, and 333-06757) on Form S-8 of The Beard Company of
our report dated March 12, 1998, relating to the balance sheets of The Beard
Company and subsidiaries as of December 31, 1997 and 1996, and the related
statements of operations, stockholders' equity and cash flows for each of
the years in the three-year period ended December 31, 1997, which report
appears in the December 31, 1997, annual report on Form 10-K of The Beard
Company.
KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 13,955
<SECURITIES> 0
<RECEIVABLES> 2,654
<ALLOWANCES> (75)
<INVENTORY> 227
<CURRENT-ASSETS> 16,931
<PP&E> 6,247
<DEPRECIATION> (4,300)
<TOTAL-ASSETS> 20,952
<CURRENT-LIABILITIES> 7,007
<BONDS> 0
889
0
<COMMON> 3
<OTHER-SE> 12,430
<TOTAL-LIABILITY-AND-EQUITY> 20,952
<SALES> 0
<TOTAL-REVENUES> 5,808
<CGS> 0
<TOTAL-COSTS> 7,675
<OTHER-EXPENSES> 338
<LOSS-PROVISION> (613)
<INTEREST-EXPENSE> 246
<INCOME-PRETAX> (2,388)
<INCOME-TAX> 40
<INCOME-CONTINUING> (2,428)
<DISCONTINUED> 11,442
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,014
<EPS-PRIMARY> 1.86
<EPS-DILUTED> 1.86
</TABLE>
