UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the period ended June 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-12396
THE BEARD COMPANY
(Exact name of registrant as specified in its charter)
Oklahoma 73-0970298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of July 31, 1998.
Common Stock $.001 par value - 2,565,739
<PAGE>
THE BEARD COMPANY
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets - June 30, 1998 (Unaudited) and
December 31, 1997
Statements of Operations - Three Months and Six Months
ended June 30, 1998 and 1997 (Unaudited)
Statements of Shareholders' Equity, Year ended
December 31, 1997 and Six Months ended
June 30, 1998 (Unaudited)
Statements of Cash Flows - Six Months ended
June 30, 1998 and 1997 (Unaudited)
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
THE BEARD COMPANY AND SUBSIDIARIES
Balance Sheets
June 30, 1998 (Unaudited) and December 31, 1997
<CAPTION>
June 30, December 31,
Assets 1998 1997
----------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,000,000 $ 13,955,000
Accounts receivable, less allowance for doubtful
receivables of $80,000 in 1998 and $75,000 in
1997 1,332,000 1,654,000
Other receivables (note 2) - 1,000,000
Inventories 374,000 227,000
Prepaid expense 126,000 84,000
Other assets 151,000 11,000
----------- ------------
Total current assets 8,983,000 16,931,000
Investments and other assets 1,725,000 1,580,000
Property, plant and equipment, at cost 34,006,000 6,247,000
Less accumulated depreciation, depletion
and amortization 4,768,000 4,300,000
----------- ------------
Net property, plant and equipment 29,238,000 1,947,000
Intangible assets, at cost 963,000 828,000
Less accumulated amortization 129,000 334,000
----------- ------------
Net intangible assets 834,000 494,000
----------- ------------
$40,780,000 $ 20,952,000
=========== ============
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable $ 401,000 $ 533,000
Accrued expenses (note 2) 1,025,000 892,000
Income taxes payable 354,000 541,000
Redeemable preferred stock purchase and redemption
obligation - 4,005,000
Other obligations (note 2) - 900,000
Current maturities of long-term debt 1,685,000 136,000
----------- ------------
Total current liabilities 3,465,000 7,007,000
Long-term debt, less current maturities 25,189,000 519,000
Minority interest in consolidated subsidiaries 128,000 104,000
Redeemable preferred stock of $100 stated value;
5,000,000 shares authorized; 27,838 shares
issued and outstanding (note 4) 889,000 889,000
Common shareholders' equity:
Common stock of $.001 par value per share;
10,000,000 shares authorized; 2,832,129
shares issued in 1998 and 1997 3,000 3,000
Capital in excess of par value 37,911,000 37,911,000
Accumulated deficit (25,286,000) (23,962,000)
Treasury stock, 303,890 shares, at cost (1,519,000) (1,519,000)
----------- ------------
Total common shareholders' equity 11,109,000 12,433,000
----------- ------------
Commitments and contingencies (note 7)
$40,780,000 $ 20,952,000
=========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Operations
(Unaudited)
<CAPTION>
For Three Months Ended For Six Months Ended
---------------------- ---------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Coal reclamation $ 631,000 $ - $ 631,000 $ -
Interstate travel facilities 1,022,000 - 1,307,000 -
Carbon dioxide 157,000 138,000 317,000 256,000
Environmental remediation - 13,000 - 13,000
Other 9,000 15,000 17,000 24,000
----------- ----------- ----------- -----------
1,819,000 166,000 2,272,000 293,000
Expenses:
Coal reclamation (exclusive of
depreciation, depletion and amortization
shown separately below) 228,000 30,000 263,000 61,000
Interstate travel facilities
(exclusive of depreciation, depletion
and amortization shown separately below) 842,000 - 1,066,000 -
Carbon dioxide (exclusive of depreciation,
depletion and amortization shown separately
below) 34,000 28,000 69,000 55,000
Environmental remediation (exclusive
of depreciation, and amortization
shown separately below) 53,000 44,000 77,000 48,000
Selling, general and administrative 802,000 265,000 1,239,000 554,000
Depreciation, depletion & amortization 70,000 13,000 96,000 26,000
Other, principally corporate 8,000 10,000 14,000 16,000
----------- ----------- ----------- -----------
2,037,000 390,000 2,824,000 760,000
Operating profit (loss):
Coal reclamation 281,000 (70,000) 212,000 (143,000)
Interstate travel facilities (159,000) - (196,000) -
Carbon dioxide 115,000 104,000 232,000 190,000
Environmental remediation (59,000) (20,000) (86,000) (47,000)
Other, principally corporate (396,000) (238,000) (714,000) (467,000)
----------- ----------- ----------- -----------
(218,000) (224,000) (552,000) (467,000)
Other income (expense):
Interest income 107,000 2,000 244,000 4,000
Interest expense (43,000) (36,000) (59,000) (71,000)
Gain (loss) on sale of assets (8,000) - 4,000 50,000
Equity in earnings of
unconsolidated affiliates 90,000 120,000 199,000 148,000
Minority interest in operations of
consolidated subsidiaries 54,000 - 53,000 -
Other (60,000) (51,000) (109,000) (76,000)
----------- ----------- ----------- -----------
Loss from continuing operations
before income taxes (78,000) (189,000) (220,000) (412,000)
Income taxes (note 6) (56,000) (17,000) (56,000) (17,000)
----------- ----------- ----------- -----------
Loss from continuing operations (134,000) (206,000) (276,000) (429,000)
Discontinued operations (note 2):
Earnings (loss) from discontinued operations (142,000) 227,000 (424,000) 26,000
Estimated loss from discontinuing
environmental services activities (624,000) - (624,000) -
----------- ----------- ----------- -----------
Earnings (loss) from discontinued operations (766,000) 227,000 (1,048,000) 26,000
----------- ----------- ----------- -----------
Net earnings (loss) $ (900,000) 21,000 (1,324,000) (403,000)
=========== =========== =========== ===========
Net earnings (loss) attributable to
common shareholders $ (900,000) 21,000 (1,324,000) (403,000)
=========== =========== =========== ===========
Net earnings (loss) per average common
share outstanding:
Basic and diluted:
Loss from continuing operations $ (0.05) $ (0.07) $ (0.11) $ (0.15)
Earnings (loss) from discontinued operations (0.31) 0.08 (0.41) 0.01
----------- ----------- ----------- -----------
Net earnings (loss) $ (0.36) $ 0.01 $ (0.52) $ (0.14)
=========== =========== =========== ===========
Weighted average common shares outstanding -
basic and diluted 2,528,000 2,799,000 2,528,000 2,799,000
=========== =========== =========== ===========
</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, 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 - (3,789,000) - - (3,789,000)
----------- ----------- ------------ ------------ -----------
Balance, December 31, 1997 3,000 37,911,000 (23,962,000) (1,519,000) 12,433,000
Net loss, six months ended June 30,
1998 (unaudited) - - ( 1,324,000) - (1,324,000)
----------- ----------- ------------ ------------ -----------
Balance, June 30, 1998 (unaudited) $ 3,000 $37,911,000 $(25,286,000) $ (1,519,000) $11,109,000
=========== =========== ============ ============ ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
<CAPTION>
For the Six Months Ended
-----------------------------
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Operating activities:
Cash received from customers $ 4,149,000 $ 10,493,000
Cash paid to suppliers and employees (5,085,000) (9,245,000)
Interest received 301,000 6,000
Interest paid (96,000) (199,000)
Taxes paid (244,000) -
------------ ------------
Net cash provided by (used in)
operating activities (975,000) 1,055,000
------------ ------------
Investing activities:
Acquisition of property, plant and equipment (1,441,000) (904,000)
Proceeds from sale of business 1,000,000 -
Proceeds from sale of assets 45,000 58,000
Purchase of minority interest (900,000) -
Acquisition of travel facilities,
net of cash acquired of $49,000 (763,000) -
Other (91,000) 22,000
------------ ------------
Net cash used in investing activities (2,150,000) (824,000)
------------ ------------
Financing activities:
Proceeds from line of credit and term notes 786,000 1,229,000
Payments on line of credit and short-term notes (611,000) (1,783,000)
Preferred stock repurchase (4,005,000) -
------------ ------------
Net cash used in financing activities (3,830,000) (554,000)
------------ ------------
Net decrease in cash and cash equivalents (6,955,000) (323,000)
Cash and cash equivalents at beginning of period 13,955,000 375,000
------------ ------------
Cash and cash equivalents at end of period $ 7,000,000 $ 52,000
============ ============
</TABLE>
<PAGE>
<TABLE>
THE BEARD COMPANY AND SUBSIDIARIES
Statement of Cash Flows
(Unaudited)
Reconciliation of Net loss to Net Cash Provided by (Used in) Operating
Activities
<CAPTION>
For the Six Months Ended
--------------------------------
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Net loss $ (1,324,000) $ (403,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 276,000 734,000
(Gain) loss on sale of assets 22,000 (53,000)
Equity in earnings of unconsolidated
affiliates (199,000) (148,000)
Loss from discontinued operations 624,000 -
Impairment of assets - 60,000
Interest and other costs recognized
on real estate project - 478,000
Minority interest in operations of
consolidated subsidiaries (157,000) (30,000)
Other 7,000 96,000
(Increase) decrease in accounts receivable,
prepaids and other current assets 274,000 (308,000)
Decrease in inventories 12,000 932,000
Decrease in accounts payable, accrued
expenses and other liabilities (510,000) (303,000)
------------ ------------
Net cash provided by (used in)
operating activities $ (975,000) $ 1,055,000
============ ============
Supplemental Schedule of Noncash Investing and Financing Activities:
Purchase of travel facilities through the
sale of a subsidiary's common stock $ 181,000 $ -
============ ============
Purchase of travel facilities through the
issuance of a debt obligation and assumption
of debt obligations $ 1,743,000 $ -
============ ============
Sale of inventory for a note receivable $ - $ 87,000
============ ============
Purchase of property, plant and equipment
through the issuance of debt obligations $ 24,652,000 $ -
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE BEARD COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(1) Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements and notes thereto
have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, certain
footnote disclosures normally prepared in accordance with
generally accepted accounting principles have been omitted.
The accompanying financial statements and notes thereto
should be read in conjunction with the audited consolidated
financial statements and notes thereto included in Beard's 1997
annual report on Form 10-K.
The accompanying financial statements include the
accounts of The Beard Company and its wholly and majority-
owned subsidiaries in which The Beard Company has a
controlling financial interest ("Beard or the Company").
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, revenues or expenses of Cibola because Cibola's
assets are controlled by the minority common stockholders and
preferred stockholders of Cibola. The Company earned $63,000
and $128,000 for the three and six-month periods ended June 30,
1998, respectively, and $36,000 and $71,000 for the same
periods in 1997, of pretax income from its ownership interest in
Cibola.
The financial information included herein is unaudited;
however, such information reflects solely normal recurring
adjustments which are, in the opinion of management, necessary
for a fair statement of the results for the interim periods
presented.
The results of operations for the three and six-month
periods ended June 30, 1998, are not necessarily indicative of
the results to be expected for the full year.
The Company currently operates within four segments:
(1) the coal reclamation ("CR") Segment, consisting of coal
reclamation activities and services related to the Company's
patented Mulled Coal Technology (the "M/C Technology"), (2)
the interstate travel facilities ("ITF") Segment, consisting
of businesses, such as service stations, convenience stores,
restaurants and a truck wash, geared to the needs of the
interstate highway traveler, (3) the carbon dioxide ("CO2")
Segment, which consists of the production of CO2 gas, and
(4) the environmental remediation ("ER") Segment, consisting
of the remediation of creosote and polycyclic aromatic
hydrocarbon ("PAH") contamination. The Company also owns 40% of
a joint venture involved in the extraction, production and sale
of crude iodine.
The Company also operated in (i) the dry ice (solid CO2)
manufacturing and distribution business, included in the
CO2 Segment which was discontinued through sale in October
of 1997 and (ii) the environmental/resource recovery
("E/RR") Segment which the Company elected to restructure
pursuant to a plan adopted by the Company's Board of Directors
in August, 1998. (See note 2 below). The resource recovery
activities conducted by Beard Technologies, Inc. and its
affiliates now comprise the CR Segment of the Company. The
environmental remediation activities conducted by ISITOP, Inc.
now comprise the ER Segment. As discussed in note 2 below, the
Company's Board of Directors adopted a formal plan to
discontinue its other environmental services operations (the
"Other E/S Operations"), conducted principally by Whitetail
Services, Inc. ("Whitetail") and Horizontal Drilling
Technologies, Inc. ("HDT").
The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income,"
on January 1, 1998. SFAS No. 130 was effective for fiscal years
beginning after December 15, 1997. SFAS No. 130
establishes standards for reporting and display of
"comprehensive income" and its components in a set of financial
statements. It 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 with the same prominence as other financial
statements. The Company had no comprehensive income as defined
by SFAS No. 130 during the three and six-months ended June 30,
1998 and 1997, therefore, a statement of comprehensive income
has not been presented in the accompanying financial statements.
(2) Discontinued Operations
In August, 1998, the Company's Board of Director's
adopted a formal plan to restructure the E/RR Segment (see note
1) and to discontinue the Other E/S Operations. Accordingly, the
results of the Other E/S Operations have been reported as
discontinued for all periods presented in the accompanying
statements of operations. Revenues applicable to the
discontinued Other E/S Operations were $618,000 and
$1,583,000 for the three and six-month periods ended June
30, 1998, respectively, and $1,316,000 and $2,512,000 for the
three and six-month periods ended June 30, 1997,
respectively. Losses from the discontinued Other E/S Operations
were $142,000 and $424,000 for the three and six-month periods
ended June 30, 1998, respectively, and $57,000 and $220,000
for the same periods in 1997.
As of June 30, 1998, the significant assets related to the
Other E/S Operations consist primarily of equipment and accounts
receivable with a recorded value of $1,651,000. The
significant liabilities related to the Other E/S Operations
consist of trade accounts payables, accrued expenses and
long-term debt obligations totaling $661,000.
Included in the accompanying statements of operations for
the three and six-months ended June 30, 1998, is a $624,000
estimated loss expected from the discontinuation of the Other
E/S Operations. $534,000 of the loss represents the difference
in the estimated amounts to be received from disposing of the
Other E/S Operations' assets and the assets' recorded values as
of June 30, 1998. $455,000 of the loss represents anticipated
operating losses until disposal of such assets has been
completed. Offsetting the expected losses is a $365,000 gain
from early extinguishment of an obligation to the former sole
shareholder of HDT. The obligation was originally incurred by
the Company as a result of its acquisition of 80% of HDT's
outstanding common stock and was payable only from 80% of the
cash flows (prescribed under the Obligation Agreement) of HDT and
Whitetail. The gain represents the discounted obligation balance
as of June 30, 1998.
Subsequent to June 30, 1998, the Company has sold a
portion of the Other E/S Operations equipment for a total price
of $437,000. The Company anticipates disposing of the remaining
assets by June 30, 1999.
In October 1997, the Company sold the business and
substantially all of the assets of Carbonic Reserves, an
85%-owned subsidiary involved in the manufacturing and
distribution of solid CO2 ("solid CO2 segment") for cash of
$19,375,000 and the assumption of certain liabilities
valued at $2,813,000 (the "Asset Sale").
The gain on the Asset Sale was $11,014,000 (after
applicable income taxes of $522,000). Results of operations of
the solid CO2 segment have been reported as discontinued
operations for the three and six-month periods ended June 30,
1997 in the accompanying statements of operations. Revenues
applicable to the discontinued solid CO2 Segment operations were
$3,753,000 and $6,553,000 for the three and six-month periods
ended June 30, 1997, respectively. The earnings from the
discontinued solid CO2 segment were $284,000 and $246,000
for the three and six-month periods ended June 30, 1997,
respectively.
Pursuant to the closing of the Asset Sale, the Company
received $18,375,000 in cash. The remaining $1,000,000 cash
proceeds were held back (the "Holdback") to offset certain post
closing adjustments for a maximum of 150 days from the closing
date and was included in other receivables on the balance sheet
as of December 31, 1997. The Company received the entire
Holdback amount from the purchaser on March 12, 1998.
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 was included in other
current obligations on the balance sheet as of December 31, 1997
and reduced the related gain.
As of June 30, 1998, the solid CO2 segment had no
significant assets. The significant liabilities of the solid
CO2 segment consisted of accrued income and sales taxes of
$307,000 and approximately $155,000 of accrued bonuses and
employee severance compensation.
(3) Acquisitions; Operating Agreements
ITF Segment
On February 9, 1998, the Company, through a newly formed
subsidiary, Interstate Travel Facilities, Inc. ("ITF"), purchased
two travel facilities located along Interstate Highway I-40
in eastern Oklahoma for a cash consideration of $490,000.
Both travel facilities are geared toward the needs of
interstate highway travelers and each included a service
station, convenience store and a restaurant. The fair
value of identifiable tangible and intangible net assets
acquired approximated $628,000 on the acquisition date. The
excess of the fair value of the travel facilities' assets
acquired over the purchase price has been reallocated among the
long-lived assets acquired.
On February 27, 1998, ITF acquired two additional travel
facilities and an undeveloped parcel of land located along
Interstate Highway I-35 in central Oklahoma. These travel
facilities are also geared toward the needs of interstate highway
travelers. The first travel facility includes a service
station, convenience store and a restaurant. The second
travel facility includes a service station and a convenience
store. The purchase price consisted of cash of $322,000; a
fifteen-year, unsecured, 5.93% $544,000 promissory note,
valued at $407,000 (discounted using a 10% interest rate);
the assumption by ITF of three mortgage notes payable
approximating $1,336,000, owed by the former owner of the
facilities; and 20% of the Company's ownership in ITF, valued at
$181,000. The three notes assumed by ITF are secured by the
travel facilities' assets, bear interest at rates ranging from
9% to 10.5%, and mature from 2010 through 2013. The fair value
of identifiable tangible and intangible net assets acquired
approximated $1,489,000 on the acquisition date. The
$757,000 excess purchase price over the fair value of the assets
acquired has been recorded as goodwill and is being amortized on
a straight-line basis over 15 years.
On May 20, 1998, ITF acquired the assets of a truck wash
located along Interstate Highway I-44 in Tulsa, Oklahoma for
$699,000. The facility consists of two inside truck washing
bays. The Company financed $576,000 of the asset acquisition
with a fifteen-year, 8.5% promissory note. The note is
secured by the acquired assets. The fair value of the
identifiable tangible assets approximated $870,000 on the
acquisition date. The excess of the fair value of the assets
acquired over the purchase price has been reallocated among the
long-lived assets acquired.
CR Segment
On June 30, 1998, the Company, through a newly formed
subsidiary, Beard Mining, L.L.C. ("BMLLC"), acquired coal
fines extraction and beneficiation equipment ("the
Equipment") located at six coal slurry impoundment sites
for a total purchase price estimated to be $24,000,000. The
definitive purchase price cannot be ascertained until the seller
of the Equipment provides BMLLC with a final accounting of the
cost of certain components and installation of the Equipment.
BMLLC is financing the purchase with a loan which requires
principal payments of approximately $136,000 a month through
July 1, 1999, at which time the remaining balance becomes due.
The note is secured by the Equipment and bears interest at a
per annum rate of 8%. BMLLC and the noteholder have agreed
to discuss alternative permanent financing arrangements which
could involve either a long-term loan from a third party or
conversion to a third party leasing arrangement. BMLLC will
lease the Equipment to Beard Technologies, Inc. ("BTI"), which is
operating and maintaining the Equipment and six briquetting
plants for six limited liability companies (the "LLC's"), each
of which is a subsidiary of the noteholder. The noteholder has
released the Company and BTI in connection with any claim
resulting from the inaccuracy of any representation or
warranty made by BMLLC in any loan document, or BMLLC's breach
or failure to perform or satisfy any covenant, agreement,
obligation or condition in any loan document. The monthly lease
payments will equal the monthly payments due under the
promissory note (except the final balloon payment) and are
reimbursed costs by the LLC's under BTI's operating
agreements with the LLC's.
Concurrently with BMLLC's acquisition of the Equipment,
BTI entered into operating agreements with the LLC's to provide
services for which it is being compensated under a cost-plus
arrangement pursuant to which it will receive a minimum
profit of $100,000 per month so long as the contracts
remain in effect. The initial term of the operating agreements
expires on December 31, 1998, but will be automatically
extended for unlimited successive one year periods unless
terminated by either party at least 60 days prior to the
expiration of any such period or for cause. The Company has
guaranteed the performance of BTI's obligations under the
operating agreements, but the Company has no liability under
its guaranty unless BTI's failure to perform resulted from
BTI's gross negligence, willful misconduct, improper
handling or disbursement of funds, or failure to refund any
overpayment to BTI by any of the six LLC's. The operating
agreements provide that, solely for determining BTI's
compensation thereunder, the agreements are deemed to have been
effective April 1, 1998.
The above acquisitions have been accounted for by the
purchase method and accordingly, the results of operations of
the travel facilities and other acquired assets have been
included in the Company's financial statements from their
acquisition dates.
The Company currently has been unable to obtain historical
financial operating information relating to the acquired
travel facilities. The truck wash and coal fines extraction
and beneficiation equipment assets acquired were either not
operating or not commercially operating during a material portion
of the three and six-month periods ended June 30, 1998.
Accordingly, no pro forma financial information has been
reported in the accompanying financial statements.
(4) Redeemable 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. The Company's
1998 operations through June 30 were not sufficient to
begin the sharing of the consolidated net income.
Accordingly, one-third of future "consolidated net income"
will accrete directly to preferred stockholders and reduce
earnings per common share. To the extent that the
preferred stock is not redeemed by December 31, 2002, the shares
of preferred stock can be converted into shares of the
Company's common stock.
(5) Earnings (loss) Per Share
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 (loss) 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
periods presented.
(6) Income Taxes
In accordance with the provisions of the Statement of
Financial Accounting Standard No. 109, Accounting for Income
Taxes ("SFAS No. 109"), the Company's net deferred tax asset is
being carried at zero book value, which reflects the
uncertainties of the Company's utilization of the future net
deductible amounts. The provision for income taxes for the three
and six-month periods ended June 30, 1998 consists of
federal alternative minimum tax of $36,000 and state income tax
of $20,000. The Company provided $17,000 in alternative minimum
tax in the same periods in 1997. There was no provision for
regular federal income taxes for the three and six-month periods
in 1998 and 1997 due to the availability of net operating loss
and other carryforwards.
At June 30, 1998, the Company estimates that it had the
following income tax carryforwards available for future use
(in thousands):
Expiration
Date Amount
---------- ---------
Federal regular tax operating loss
carryforwards 2004-2010 $ 52,620
Investment tax credit carryforward 1998-2000 441
Tax depletion carryforward Indefinite 5,500
(7) 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 results of operations.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion focuses on material changes in the
Company's financial condition since December 31, 1997 and
results of operations for the quarter ended June 30, 1998
compared to the prior year second quarter and the six months
ended June 30, 1998 compared to the prior year six months.
Such discussion should be read in conjunction with the
Company's financial statements including the related footnotes.
In preparing the discussion and analysis, the Company has
presumed readers have read or have access to the discussion and
analysis of the prior year's results of operations, liquidity and
capital resources as contained in the Company's 1997 Form 10-K.
The Company currently operates within four segments: (1)
the coal reclamation ("CR") Segment, consisting of coal
reclamation activities and services related to the Company's
patented Mulled Coal Technology (the "M/C Technology"); (2)
the interstate travel facilities ("ITF") Segment, consisting
of businesses, such as service stations, convenience stores,
restaurants and a truck wash, geared to the needs of the
interstate highway traveler; (3) the carbon dioxide ("CO2")
Segment, which consists of the production of CO2 gas; and
(4) the environmental remediation ("ER") Segment, consisting
of the remediation of creosote and polycyclic aromatic
hydrocarbon ("PAH") contamination. The Company also has other
operations, including a 40% minority-ownership investment in a
joint venture for the extraction, production and sale of crude
iodine.
The Company also operated in (i) the dry ice (solid CO2)
manufacturing and distribution business, included in the CO2
Segment which was discontinued in October of 1997 and (ii)
the environmental/resource recovery ("E/RR") Segment which the
Company restructured pursuant to a plan adopted by the Company's
Board of Directors in August, 1998. The coal reclamation
activities conducted by Beard Technologies, Inc. and Beard
Mining, L.L.C. now comprise the CR Segment of the Company.
The environmental remediation activities conducted by ISITOP,
Inc. now comprise the ER Segment. As discussed in Note 2
to the financial statements, the Company's Board of Directors
adopted a formal plan in August, 1998 to discontinue the other
environmental services operations (the "Other E/S Operations")
conducted principally by Whitetail Services, Inc. and
Horizontal Drilling Technologies, Inc.
Material changes in financial condition - June 30, 1998 as
compared with December 31, 1997.
The following table reflects changes in the Company's
financial condition during the periods indicated:
June 30, December 31, Increase
1998 1997 (Decrease)
---------- ------------ -----------
Cash and cash equivalents $7,000,000 $13,955,000 $(6,955,000)
Working capital $5,518,000 $ 9,924,000 $(4,406,000)
Current ratio 2.59 to 1 2.42 to 1
During the first six months of 1998, the Company reduced
its working capital by $4.4 million from $9.9 million as of
December 31, 1997. The decrease was attributable, in part, to
the Company, through a subsidiary, acquiring four travel
facilities, an undeveloped parcel of land, and a truck wash,
the purchase price of which included cash payments of $935,000.
See further discussion of the travel facilities' acquisition
below. The Company also used cash to acquire property,
plant and equipment of $1,318,000 during the six months,
which included replacing assets as well as remodelling three of
its newly acquired travel facilities. The remaining reduction in
working capital is a direct result of operating losses
recognized by the Company's discontinued Other E/S Operations for
the first six months of 1998. See further discussion of results
of operations below.
In the first six months of 1998 the Company paid
$4,005,000 to repurchase and redeem 62,318 shares of its
mandatorily redeemable preferred stock. The Company recorded the
estimated repurchase and redemption as a redeemable preferred
stock purchase obligation as of December 31, 1997. The Company
also paid $900,000 to purchase the common shares of Carbonic
Reserves not owned by the Company and $190,000 in accrued bonus
and employee severance compensation, which were recorded as other
obligations and accrued expenses as of December 31, 1997. Such
payments were made pursuant to the terms of the agreement to
sell the business of Carbonic Reserves. On March 12, 1998,
the Company received $1,000,000 of the sales price of
Carbonic Reserves which had been held back by the purchaser for a
period of 150 days after the closing of the sale. See note 2
to the financial statements. These amounts accounted for 91% of
the $6,955,000 reduction in cash and cash equivalents from
December 31, 1997 to June 30, 1998.
In February of 1998, the Company, through an 80% owned
subsidiary, Interstate Travel Facilities, Inc. ("ITF"), acquired
four travel facilities and a parcel of land located along
Interstate Highway I-40 in eastern Oklahoma, and Interstate
Highway I-35 in central Oklahoma. The travel facilities are
geared to the needs of interstate highway travelers. Three of
the travel facilities include a service station, convenience
store and a restaurant. The fourth travel facility includes a
service station and a convenience store. The purchase price
of the travel facilities consisted of cash of $812,000, the
issuance of debt valued at $407,000, the assumption of
three mortgage notes payable approximating $1,336,000, owed by
the former owner of the travel facilities, and 20% of the
Company's ownership in ITF, valued at $181,000. In May of
1998, ITF acquired the assets of a truck wash along Interstate
Highway I-44 in Tulsa, Oklahoma. The purchase price of $699,000
was financed by a cash payment of $123,000 and a promissory
note payable of $576,000. See note 3 to the financial
statements.
On June 30, 1998, the Company, through a newly formed
subsidiary, Beard Mining, L.L.C. ("BMLLC"), acquired coal
fines extraction and beneficiation equipment ("the
Equipment") located at six coal slurry impoundment sites for
a total purchase price estimated to be $24,000,000. The definitive
purchase price cannot be ascertained until the seller of the
Equipment provides BMLLC with a final accounting of the cost
of certain components and installation of the Equipment. BMLLC is
financing the purchase with a loan which requires principal
payments of approximately $136,000 a month through July 1,
1999, at which time the remaining balance becomes due. The note
is secured by the Equipment and bears interest at a per annum
rate of 8%. BMLLC and the noteholder have agreed to
discuss alternative permanent financing arrangements which could
involve either a long-term loan from a third party or conversion
to a third party leasing arrangement. BMLLC will lease the
Equipment to Beard Technologies, Inc. ("BTI"), which is operating
and maintaining the Equipment and six briquetting plants for
six limited liability companies (the "LLC's"), each of which
is a subsidiary of the noteholder. The noteholder has released
the Company and BTI in connection with any claim resulting
from the inaccuracy of any representation or warranty made by
BMLLC in any loan document, or BMLLC's breach or failure to
perform or satisfy any covenant, agreement, obligation or
condition in any loan document. The monthly lease payments will
equal the monthly payments due under the promissory note
(except the final balloon payment) and are reimbursed costs by
the LLC's under BTI's operating agreements with the LLC's.
The following segments made capital additions of
approximately $27,847,000 during the first six months of 1998,
as reflected in the table below:
Coal reclamation $ 24,011,000
Interstate travel facilities 3,722,000
Carbon dioxide 14,000
Environmental remediation -
Other 100,000
--------------
$ 27,847,000
==============
The Company financed $25,643,000 of the above capital
expenditures for the six months by issuing debt, assuming
debt and issuing stock of a subsidiary. See note 3 to the
financial statements.
The Company's cash reserves, cash flow and credit lines will
be adequate to fund the $875,000 of capital expenditures
projected for the Company for the last six months of the year.
The Company anticipates spending $500,000 on a coal fines
plant in China which will utilize the Company's patented Mulled
Coal technology during this period. Negotiations are currently
in progress in connection with this project. The other $375,000
will be spent in the ITF Segment as the renovations of the
travel facilities and truck wash are completed.
The Company's decision to discontinue the Other E/S
Operations will have a beneficial impact on future operations and
liquidity since the Company will no longer be faced with the
necessity of funding the losses generated by such operations
(see note 2 to the financial statements). The coal plant
operating agreements entered into by BTI, which will
generate monthly operating profits of at least $100,000 to
this subsidiary, have put BTI on an entirely new footing going
forward and have positioned it to move forward aggressively to
pursue the commercial development of its patented Mulled Coal
technology both domestically and overseas (see note 3).
The sale of Carbonic Reserves in October of 1997 has
continued to provide 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 coal reclamation and
environmental remediation services, continuing demand for CO2
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.
Through the period ending December 31, 2002, the
Company's liquidity will be reduced to the extent it is required
to redeem any of the Beard preferred stock pursuant to the
mandatory redemption provisions. See note 4 to the accompanying
financial statements.
Material changes in results of operations - Quarter ended June
30, 1998 as compared with the Quarter ended June 30, 1997.
The loss for the quarter ended June 30, 1998 was $900,000,
compared to income of $21,000 for the second quarter of the prior
year. The CR Segment reported a $351,000 increase in operating
profit for the quarter as BTI began billing for services for
the operation of six coal beneficiation and briquetting plants
in the second quarter of 1998 under terms of its contracts
with a large midwestern utility company. The CO2 Segment also
had an $11,000 increase in its operating margin due to
continued improvement in revenue from its interests in the
McElmo Dome field. These improvements were offset by an
operating loss in the interstate travel facilities segment of
$159,000 as a result of ongoing renovations at three of its
travel facilities and minor renovations at its newly acquired
truck wash. The ER Segment also experienced an increase in
operating losses of $39,000 primarily as a result of expanded
activities in seeking contracts for its PAH technology. There
was a $158,000 increase in operating losses for the three months
ended June 30, 1998 compared to the same period in 1997 in
"Other", primarily corporate activities of the Company, due
principally to an increase in and a change in allocation of
certain benefit expenses among members of the consolidated
group. As a result, the operating loss in the second quarter of
1998 was virtually the same as that in the same period in 1997.
Operating results of the Company's four segments are
reflected below:
1998 1997
---- ----
Operating profit (loss):
Coal reclamation $ 281,000 $ (70,000)
Interstate travel facilities (159,000) -
Carbon dioxide 115,000 104,000
Environmental remediation (59,000) (20,000)
---------- ----------
Subtotal 178,000 14,000
Other (396,000) (238,000)
---------- ----------
Total $ (218,000) $(224,000)
========== ==========
Coal reclamation
Second quarter 1998 operations reflected an operating profit
of $281,000 compared to a $70,000 loss for the 1997 second
quarter. Starting in April of 1998, Beard Technologies, Inc.
("BTI") began billing for its services in connection with the
operation of certain coal fines projects in Kentucky, Ohio, and
West Virginia. (See discussion of operating agreements in
"Material Changes in Financial Condition" and note 3 to the
financial statements). BTI has been retained as an independent
contractor to dredge, excavate, recover, remove and extract mine
waste contained in coal slurry impoundments at six sites in
the above states. The projects involve the recovery of
particles of coal that are a wasted by-product of previous coal
mining, and the chemical processing of those particles to create
briquettes for sale into existing coal markets. All of the
segments' $631,000 in revenues for the six months ended June 30,
1998, were billed in the second quarter of 1998. The segment
had no revenues for the quarter ended June 30, 1997. The
segment incurred $228,000 of operating expenses and $120,000 of
SG&A expenses in the second quarter of 1998 compared to
$30,000 of operating expenses and $38,000 of SG&A expenses for
the same period in 1997 as BTI expanded its staffing and scope of
operations to meet the demands of the contracts. Approximately
$24,000 of the SG&A expenses were non-reimbursable legal
costs incurred in connection with the coal fines
agreements.
Interstate travel facilities
The second quarter of 1998 was the first full quarter
for the ITF Segment as the initial four properties were
acquired in February, 1998. Revenues for the segment were
$1,022,000 for the three months ended June 30, 1998. Three
of the four travel facilities underwent extensive
renovations and remodeling during all or a part of the second
quarter of 1998. After its acquisition in May, 1998, the
newly acquired truck wash also began some minor refurbishing.
This had a negative impact on revenues as those facilities were
not fully operational for the entire quarter. In addition, the
truck wash reflected normal startup losses of a new
operation. The segment incurred $842,000 of operating costs
and $284,000 of SG&A expenses during the second quarter of 1998.
Carbon dioxide
Second quarter 1998 operations reflected an operating
profit of $115,000 compared to a $104,000 profit for the 1997
second quarter. The sole component of revenues for this
segment is the sale of CO2 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 increased $19,000 or 14% to $157,000 for the
second quarter of 1998 compared to $138,000 for the same period
in 1997. This increase was due to increased production of
569,000 MCF of CO2 gas in the second quarter of 1998 compared to
production of 421,000 MCF in the same period in 1997. The
production increase was due to the development program in the
McElmo Dome field in Colorado which was begun in 1996 and is
now winding down. The segment experienced increases in operating
costs, also attributable to the development program, of $6,000
for the second quarter of 1998 compared to the same period in
1997.
Environmental remediation
The ER Segment generated a larger operating loss in the
second quarter of 1998 as compared with the same period in 1997.
The segment recorded no revenues in the second quarter of
1998 compared to $13,000 in the same period of 1997. The 1997
revenues were the result of the segment's first field test of
its chemical process. Since that time personnel employed in the
segment have been involved in expanding the market for the
process and the chemical product involved by demonstrating the
benefits of the process to potential customers. The segment has
hired a consultant who had been heavily involved in the
marketing process and who, subsequent to the end of the quarter,
has joined the staff full time. The additional costs
associated with the increased effort has led to an increase in
operating expenses of approximately $9,000, and an increase
of SG&A expenses of $17,000 for the second quarter of 1998
compared to the same period in 1997.
Other activities
Other operations, consisting principally of general and
corporate activities, generated a $158,000 larger operating
loss for the second quarter of 1998 than the same period of
last year. The primary reason for the increase in the loss is
due to an increase in and a change in allocating certain
benefit expenses among various members of the consolidated
group. Certain medical expenses were previously billed to
the various subsidiaries and the practice was not continued
for the second quarter of 1998.
Selling, general and administrative expenses
The Company's selling, general and administrative expenses
("SG&A") in the current quarter increased to $802,000 from
$265,000 in the 1997 second quarter. The new ITF Segment
accounted for $284,000, or 53%, of the $537,000 increase.
The CR Segment had an increase in SG&A expenses of $82,000
due to increased staffing and administrative expenses and
legal costs incurred to meet the demands of the contracts
relating to the coal projects in the Appalachian region of
the country. The ER Segment incurred increased SG&A
expenses of $17,000 for the second quarter of 1998 compared to
1997 as a result of its increased efforts to market its
technology and products. Other operations incurred
approximately $181,000 more in SG&A for the second quarter of
1998 compared to the same period in 1997 as a result of the
change in allocating benefit expenses among members of the group.
Depreciation, depletion and amortization expenses
The second quarter of 1998 reported an increase in DD&A
expense of $57,000, reflecting additions to property, plant and
equipment made since June 30, 1997, primarily in the new ITF
Segment.
Other income and expenses
Other income and expenses netted to a total income of
$140,000 for the second quarter of 1998, up sharply from the
$35,000 in income recorded for such items in the same period of
1997. Interest income was up $105,000 for the second quarter of
1998 compared to the same period in 1997 reflecting the income
from investments in commercial paper of cash realized from the
sale of the assets of Carbonic Reserves. Interest expense was up
$7,000 as a result of the increase in debt associated with
the acquisition of the travel facilities during the first six
months of 1998. The Company's ITF subsidiary is 80% owned. The
minority shareholder's share of the net loss of the subsidiary
was $54,000 for the second quarter of 1998. The subsidiary did
not commence operations until February, 1998. The decline in
other expenses included a reduction in impairments of other
assets in the amount of $30,000 for the second quarter of 1998
compared to the same period in 1997. The Company's equity in
the earnings of unconsolidated affiliates, including a joint
venture for the extraction, production and sale of crude
iodine and an investment in a natural gas marketing company,
was $90,000 for the second quarter of 1998 compared to $120,000
for the same period in 1997.
Income taxes
The Company provided for federal alternative minimum tax
expense of $36,000 and state income tax expense of $20,000 for
the second quarter of 1998 compared to $17,000 in state income
tax expense in the same period in 1997. The Company has not
provided for regular federal income taxes due to the availability
of net operating loss and other carryforwards. The state income
provision for 1998 relates to profitable operations begun by the
CR Segment in new states in the second quarter of 1998.
Discontinued operations
In October of 1997 the Company sold the business and
substantially all of the assets of Carbonic Reserves, an
85%-owned subsidiary engaged in the manufacture and distribution
of solid CO2 for cash of $19,375,000 and the assumption of
certain liabilities valued at $2,813,000. The gain on the
sale was $11,014,000 after deducting income taxes of $522,000.
Revenues applicable to and the earnings from the discontinued
operations of Carbonic Reserves were $3,753,000 and $284,000,
respectively, for the second quarter of 1997.
In August of 1998, the Company's Board of Directors
adopted a formal plan to dispose of the Other E/S Operations.
The Company estimated that it will incur a loss of $624,000
from discontinuing such activities. The entire loss was recorded
in the second quarter of 1998 and represented the difference
between the estimated amounts to be received from disposing of
the assets involved and the assets' recorded values as of June
30, 1998 and certain estimated costs of operations pending
disposal of the assets. Such losses were partially offset by a
$365,000 gain recognized by the Company from the extinguishment
of debt resulting from the discontinuance of the Other E/S
Operations. Revenues applicable to discontinued operations were
$618,000 and $1,316,000 for the three months ended June 30,
1998 and 1997, respectively. Losses applicable to discontinued
E/S Operations were $142,000 and $57,000 for the three
months ended June 30, 1998 and 1997, respectively.
Material changes in results of operations - Six months ended
June 30, 1998 as compared with the Six months ended June 30,
1997.
The loss for the six months ended June 30, 1998 was
$1,324,000, compared to a loss of $403,000 for the first six
months of the prior year. $1,048,000 of the loss for the first
half of 1998 related to discontinued operations. Continuing
operations posted a net loss of $276,000 after taxes of $56,000
compared to a loss of $429,000 after taxes of $17,000 for the
same period in 1997.
Operating results of the Company's four segments are
reflected below:
1998 1997
------------ ------------
Operating profit (loss):
Coal reclamation $ 212,000 $ (143,000)
Interstate travel facilities (196,000) -
Carbon dioxide 232,000 190,000
Environmental remediation (86,000) (47,000)
------------ ------------
Subtotal 162,000 -
Other (714,000) (467,000)
------------ ------------
Total $ (552,000) $ (467,000)
============ ============
The "Other" in the above table reflects primarily
general and corporate activities of the Company.
Coal reclamation
Operations for the first six months of 1998 resulted in an
operating profit of $212,000 compared to a $143,000 loss for the
same period in 1997. As noted previously, BTI began billing,
effective April 1, 1998, for its services pertaining to the
operation of six coal projects in the eastern United States. All
of BTI's $631,000 in revenues for the six-month period in 1998
were billed in the second quarter. BTI had no billings for
the same period in 1997. BTI incurred $263,000 of operating
costs in the six-month period ending June 30, 1998, compared to
$61,000 for the same period in 1997. The increase was due
to increased staffing and increased expenditures for
chemicals and supplies to operate the plants at the several
sites.
Interstate travel facilities
The segment incurred $196,000 in operating losses during the
first six months of 1998. The principal operating assets were
acquired in February and May of 1998; accordingly, the Company
did not recognize operations for the full six months of 1998.
ITF also renovated three of the four travel facilities during
this period which reduced the facilities' hours of full
operation and negatively impacted ITF's profitability for the six
month period. ITF recorded revenues of $1,307,000 during the
period. Operating expenses of $1,066,000, SG&A expenses of
$372,000, and depreciation and amortization expenses of $65,000
resulted in the operating loss.
Carbon dioxide
Operations for the first six months of 1998 resulted in an
operating profit of $232,000 compared to a $190,000 operating
profit for the 1997 first half. The sole component of revenues
for this segment is the sale of CO2 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 increased $61,000 or 24% to $317,000 for the
first six months of 1998 compared to $256,000 for the same
period in 1997. This increase was due to increased production of
1,133,000 MCF of CO2 gas in the first six months of 1998 compared
to production of 887,000 MCF in the same period in 1997. The
production increase was due to the development program in the
McElmo Dome field in Colorado which was begun in 1996 and is
now winding down.
Environmental remediation
The ER Segment's operating loss increased $39,000 for
the first six months of 1998 as compared to the same period
in 1997. The segment recorded no revenues in the first half of
1998 compared to $13,000 in the same period of 1997. The 1997
revenues were the result of the first field test of its
chemical process. Since that time personnel employed in the
segment have been involved in expanding the market for the
process and the chemical product involved by demonstrating the
benefits of the process to potential customers. The segment has
hired a consultant who, subsequent to the end of the quarter,
has joined the staff full time and who has been heavily involved
in the marketing process. The additional costs associated with
the increased marketing efforts has led to an increase in
operating expenses of approximately $29,000 for the six months
of 1998 compared to the same period in 1997.
Other activities
Other operations, consisting principally of general and
corporate activities, generated a $247,000 increase in operating
loss for the first half of 1998 as compared to the same period
last year. The primary reason for the increased loss was an
increase in and a change in allocating certain benefit expenses
among various members of the consolidated group. Certain
medical expenses were previously billed to the various
subsidiaries in the consolidated group and the practice was not
continued for the first six months of 1998. Additionally, the
segment has incurred higher travel costs as it seeks to promote
other segments' technologies to new customers and to seek
new investment opportunities.
Selling, general and administrative expenses
The Company's selling, general and administrative expenses
("SG&A") in the first half of 1998 increased to $1,239,000 from
$554,000 in the 1997 six months. The acquisition of ITF
resulted in $372,000, or 54%, of the $685,000 increase. The
CR Segment had an increase in SG&A expenses of $71,000 due to
increased staffing and operations to meet the demands of the
contracts relating to the coal projects in the Appalachian
region of the United States. Other operations incurred
approximately $242,000 more in SG&A for the second quarter
of 1998 compared to the same period in 1997 primarily as a result
of the change in allocating benefit expenses among members of
the group.
Depreciation, depletion and amortization expenses
The first half of 1998 reported an increase in DD&A
expense of $70,000, reflecting additions to property, plant and
equipment made since June 30, 1997, primarily in the ITF and CO2
segments.
Other income and expenses
The other income and expenses for the first six months of
1998 netted to a total income of $332,000 compared to $55,000 in
net income for the same period in 1997. Interest income was up
$240,000 for the for the first half of 1998 compared to the
same period in 1997 reflecting the income from investments in
commercial paper of cash realized from the sale of the
assets of Carbonic Reserves. Interest expense was down $12,000
also as a result of the decreased levels of debt outstanding
during the six-month period ended June 30, 1998 compared to the
same period in 1997. The Company's ITF subsidiary is 80%
owned. The minority shareholder's share of the net loss the
subsidiary was $53,000 for the six-month period ended June 30,
1998. The subsidiary did not commence operations until February,
1998. The Company's equity in the earnings of unconsolidated
affiliates was up $51,000 for the first six months of 1998
compared to the same period in 1997. The joint venture engaged
in the production and sale of crude iodine, in which the
Company has a 40% interest, contributed an additional $19,000
in income for the period and the Company's investment in a
natural gas marketing company contributed an additional $41,000
in income for the first half of 1998. Offsetting these
increases was a decline of $46,000 in the gain on sale of assets
for the first half of 1998 compared to the first half of 1997.
Income taxes
The Company provided for federal alternative minimum tax
expense of $36,000 and state income tax expense of $20,000 for
the first half of 1998 compared to $17,000 in state income tax
expense in the same period in 1997. The Company has not provided
for regular federal income taxes due to the availability of net
operating loss and other carryforwards. The state income tax
provision for 1998 relates to profitable operations begun by the
CR Segment in new states in the second quarter of 1998.
Discontinued operations
In October of 1997 the Company sold the business and
substantially all of the assets of Carbonic Reserves, an 85%-
owned subsidiary engaged in the manufacture and distribution of
solid CO2 for cash of $19,375,000 and the assumption of certain
liabilities valued at $2,813,000. The gain on the sale was
$11,014,000 after deducting income taxes of $522,000. Revenues
applicable to and the earnings from the discontinued operations
of Carbonic Reserves were $6,553,000 and $246,000, respectively,
for the first half of 1997.
In August of 1998, the Company's Board of Directors adopted
a formal plan to dispose of the Other E/S Operations. The
Company estimated that it will incur a loss of $624,000 from
discontinuing such activities. The entire loss was recorded in
the second quarter of 1998 and represented the difference between
the estimated amounts to be received from disposing of the assets
involved and the assets' recorded values as of June 30, 1998 and
certain estimated costs of operations pending disposal of the
assets. This loss was partially offset by a $365,000 gain
recognized by the Company from the extinguishment of debt
resulting from the discontinuance of the Other E/S Operations.
Revenues applicable to discontinued operations were $1,583,000
and $2,512,000 for the six months ended June 30, 1998 and 1997,
respectively. Losses applicable to discontinued E/S Operations
were $424,000 and $220,000 for the six months ended June 30, 1998
and 1997, respectively.
Impact of Recently Issued Accounting Standards Not Yet
Adopted
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No.133 establishes accounting and reporting
standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for
hedging activities. It requires an entity to recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair
value. If certain conditions are met, a derivative may be
specifically designated as a hedge. The accounting for changes
in the fair value of a derivative (that is, gains and
losses) depends on the intended use of the derivative
and the resulting designation. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning after June 15,
1999. It is expected that the Company will adopt the
provisions of SFAS No. 133 as of January 1, 2000. If the
provisions of SFAS No. 133 were to be applied as of June 30,
1998, it would not have a material impact on the Company's
financial position as of such date, or the results of operations
for the six month period then ended.
In April 1998, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 98-5, "Reporting
on the Costs of Start-up Activities." SOP 98-5 establishes
reporting standards for start-up and organization costs. It
broadly defines start-up activities and requires an entity to
expense costs of start-up activities and organization costs as
they are incurred. SOP 98-5 is effective for financial
statements issued for fiscal years beginning after December 15,
1998. The Company will adopt the provisions of SOP 98-5 as of
January 1, 1999. The Company does not expect the adoption of the
provisions of SOP 98-5 to have a material impact on the Company's
future financial position or results of operations.
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 requires that an enterprise report
certain information about the revenues that it derives from
each of its products and services (or groups of similar products
and services) and about the countries in which it earns
revenues and holds assets, regardless of how the enterprise is
organized. SFAS No. 131 is effective for financial statements
issued for fiscal years beginning after December 15, 1997.
The Company will report the required information beginning
with its financial statements for the fiscal year ending December
31, 1998.
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.
PART II. OTHER INFORMATION.
Item 2. Changes in Securities.
The Company's preferred stock is mandatorily redeemable through December
31, 2002 from one-third of Beard's "consolidated net income" as defined in
the instrument governing the rights of the preferred stockholders.
Accordingly, one-third of future "consolidated net income" will accrete
directly to preferred stockholders and reduce earnings per common share.
As a result of these redemption requirements, the payment of any dividends
to the common stockholders in the near future is very unlikely. See Note 4
to the accompanying financial statements.
Item 4. Submission of Matters to a Vote of Security Holders.
Commencing on April 30, 1998, proxies were solicited on behalf of the
Board of Directors of the Company in connection with the Company's Annual
Meeting of Stockholders.
(a) This annual meeting was held on June 4, 1998(1).
(b) The business of the meeting included the election of Harlon E.
Martin, Jr. and Herb Mee, Jr. to serve as directors for three year terms or
until their successors have been elected and qualified.
In addition, the following persons continue to serve as directors for
terms expiring on the dates indicated or until their successors have been
elected and qualified:
W. M. Beard (1999) Allan R. Hallock (2000) Ford C. Price (2000)
In addition to the above, Michael E. Carr, elected in 1994 to serve as a
director by the preferred stockholders, will continue to serve until his
successor has been elected and qualified.
The table below sets forth the voting for election of directors:
Broker
Votes Votes Votes ---------
Name of Nominee For Against Withheld Abstentions Non-Votes
- --------------- --------- ------- -------- ----------- ---------
Harlon E. Martin, Jr. 2,418,591 -0- 5,661 -0- 246,779
Herb Mee, Jr. 2,418,492 -0- 5,760 -0- 246,779
(c) The business of the meeting also included a proposal to approve an
Amendment to The Beard Company 1993 Stock Option Plan which was adopted by
the Board of Directors in April 1998 subject to stockholder approval. The
table below sets forth the voting for such proposal:
Votes Votes Broker
For Against Abstentions Non-Votes
----- ------- ---------- ---------
2,356,054 67,243 955 246,779
(d) At the meeting the stockholders also voted to approve the appointment
of KPMG Peat Marwick LLP as independent certified public accountants for
fiscal 1998.
Broker
Votes Votes Votes ------
For Against Withheld Abstentions Non-Votes
--------- ------- -------- ----------- ---------
2,416,460 4,716 -0- 3,076 246,779
________
(1) 2,424,252 votes (90.76% of those eligible) were cast at the
meeting, including 2,281,460 of 2,528,239 eligible votes (90.24%) by the
common stockholders and 142,792 of 142,792 eligible votes (100.00%) by the
preferred stockholders.
Item 5. Other Information
Discretionary Voting of Proxies at Annual Meeting. The Company will
exercise discretionary authority to vote proxies at the Company's next
annual meeting of shareholders on any shareholder proposal for which the
shareholder has not requested inclusion in the Company's proxy statement
unless the shareholder notifies the Company of the proposal and the share-
holder's intention to present the proposal from the floor of the meeting
not later than March 16, 1999.
Item 6. Exhibits and Reports on Form 8-K:
(a) The following exhibits are filed with this Form 10-Q and are identified
by the numbers indicated:
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 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 incorpo-
rated by reference).
2(d) Asset Purchase Agreement by and among Airgas Carbonic Reserves, Inc.
("Airgas"), and Registrant, Carbonic Reserves ("Carbonics"), and
Clifford H. Collen, Jr. ("Collen"). (This Exhibit has been pre-
viously filed as Exhibit A, filed on September 11, 1997 to
Registrant's Proxy Statement dated September 12, 1997, and same
is incorporated by reference).
2(e) Asset Purchase Agreement by and among Registrant, Toby B. Tindell,
Cristie R. Tindell and Interstate Travel Facilities, Inc. ("ITF"),
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. (This Exhibit has
been previously filed as Exhibit 3(ii) to Registrant's Form 10-K for
the period ended December 31, 1997, filed on March 31, 1998, and same
is incorporated herein by reference).
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 Addendum
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,
Limitations or Restrictions Thereof of the Series A Convertible Voting
Preferred Stock of the Registrant. (This Exhibit has been previously
filed as Exhibit 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 incorporated 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 reference).
10 Material contracts:
10(a) Amendment No. One to The Beard Company 1993 Stock Option Plan dated
August 27, 1993, as amended June 4, 1998 (The Amended Plan supersedes
the original Plan adopted on August 27, 1993. This Exhibit has pre-
viously been filed as Exhibit A, filed on April 30, 1998 to Registrant's
Proxy Statement dated April 30, 1998, 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 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 incorporated by reference).*
10(i) Nonqualified Stock Option Agreement by and between Richard D. Neely and
ISITOP, Inc. ("ISITOP"), dated April 1, 1997. (This Exhibit has
been previously filed as Exhibit 10(i) to Registrant's Form 10-K for
the period ended December 31, 1997, filed on March 31, 1998, and same is
incorporated herein by reference).*
10(j) Nonqualified Stock Option Agreement by and between Jerry S. Neely and
ISITOP, dated April 1, 1997. (This Exhibit has been previously filed as
Exhibit 10(j) to Registrant's Form 10-K for the period ended December 31,
1997, filed on March 31, 1998, and same is incorporated herein by
reference).*
10(k) 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
reference).*
10(l) 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(m) Nonqualified Stock Option Agreement by and between Toby Tindell and ITF,
dated February 27, 1998. (This Exhibit has been previously filed as
Exhibit 10(n) to Registrant's Form 10-K for the period ended December
31, 1997, filed on March 31, 1998, and same is incorporated herein by
reference).*
10(n) 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(o) Nonrecourse Secured Promissory Note from Registrant to Cibola, dated
April 10, 1996. (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(p) 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(q) 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(r) Compensation Agreement by and between Registrant and the Trustees of the
William M. Beard and Lu Beard 1988 Charitable Unitrust (the "Trustees")
dated April 17, 1997. (This Exhibit has been previously filed as
Exhibit 10(s) to Registrant's Form 10-K for the period ended December
31, 1997, filed on March 31, 1998, and same is incorporated herein by
reference).
10(s) Indemnity Agreement by and between Registrant and the Trustees dated
April 17, 1997. (This Exhibit has been previously filed as Exhibit
10(t) to Registrant's Form 10-K for the period ended December 31, 1997,
filed on March 31, 1998, and same is incorporated herein by reference).
10(t) Coal Fines Extraction and Beneficiation Agreement among CRC NO. 1 LLC,
CRC NO. 2 LLC, CRC NO. 3 LLC, CRC NO. 4 LLC, CRC NO. 5 LLC, CRC NO. 6
LLC, (the "Six LLC's") and Beard Technologies, Inc. ("BTI"), dated as of
June 24, 1998.
10(u) Operation and Maintenance Agreement among the Six LLC's and BTI, dated
as of June 24, 1998. (This Exhibit has been previously filed as
Exhibit 10.1 to Registrant's Form 8-K, filed on July 15, 1998, and
same is incorporated herein by reference).
10(v) Guaranty Agreement among Registrant and the Six LLC's, dated as of
June 24, 1998. (This Exhibit has been previously filed as Exhibit
10.3 to Registrant's Form 8-K, filed on July 15, 1998, and same
is incorporated herein by reference).
10(w) Guaranty Agreement between MCNIC Pipeline & Processing Company ("MCNIC")
and BTI, dated as of June 24, 1998. (This Exhibit has been previously
filed as Exhibit 10.4 to Registrant's Form 8-K, filed on July 15, 1998,
and same is incorporated herein by reference).
10(x) Loan Agreement between MCNIC and Beard Mining, L.L.C. ("BMLLC"), dated
as of June 24, 1998. (This Exhibit has been previously filed as
Exhibit 10.5 to Registrant's Form 8-K, filed on July 15, 1998, and same
is incorporated herein by reference).
10(y) Promissory Note from BMLLC to MCNIC, dated as of June 24, 1998. This
Exhibit has been previously filed as Exhibit 10.6 to Registrant's
Form 8-K, filed on July 15, 1998, and same is incorporated herein by
reference).
11 Statement re computation of per share earnings.
27 Financial Data Schedule
- ---------------
* Compensatory plan or arrangement.
(b) One report on Form 8-K was filed during the period covered
by this report.
The registrant filed an 8-K dated July 15, 1998, including Item 2,
Acquisition of Assets; Item 5, Other Events; and Item 7, Exhibits and Pro
Forma Financial Information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(Registrant) THE BEARD COMPANY
HERB MEE, JR.
(Date) August 14, 1998 Herb Mee, Jr., President and
Chief Financial Officer
(Date) August 14, 1998 JACK A. MARTINE
Jack A. Martine, Controller and
Chief Accounting Officer
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
No. Description Method of Filing
<S> <C> <C>
2(a) Agreement and Plan of Reorgani- Incorporated herein
zation by and among Registrant, by reference
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).
2(b) Agreement and Plan of Merger Incorporated herein
by and between The Beard Company by reference
and The New Beard Company,
dated as of September 16, 1997.
2(c) Certificate of Merger merging Incorporated herein
The Beard Company into The by reference
New Beard Company as filed
with the Secretary of State
of Oklahoma on November 26,
1997.
2(d) Asset Purchase Agreement by Incorporated herein
and among Airgas Carbonic by reference
Reserves,Inc. ("Airgas"),
and Registrant, Carbonic
Reserves ("Carbonics"),
and Clifford H. Collen.
2(e) Asset Purchase Agreement Incorporated herein
by and among Registrant, by reference
Toby B. Tindell, Cristie R.
Tindell and Interstate
Travel Facilities, Inc.
("ITF"), dated as of
February 27, 1998.
3(i) Certificate of Incorporation Incorporated herein
of The New Beard Company by reference
as filed with the Secretary
of State of Oklahoma on
September 11, 1997.
3(ii) Registrant's By-Laws as Incorporated herein
currently in effect. by reference
4(a) Agreement of Sale and Incorporated herein
Purchase by and between by reference
Beard Oil and Sensor Oil
& Gas, Inc. ("Sensor").
4(b) Certificate of Designations, Incorporated herein
Powers, Preferences and by reference
Relative, Participating,
Option and Other Special
Rights, and the Qualifi-
cations, Limitations Re-
strictions Thereof of the
Series A Convertible Voting
Preferred Stock of the
Registrant.
4(c) Settlement Agreement, with Incorporated herein
Certificate of Amendment by reference
attached thereto, by and
among Registrant, Beard Oil,
New York Life Insurance
Company, New York Insurance
and Annuity Company, John
Hancock Mutual Life
Insurance Company, Memorial
Drive Trust and Sensor,
dated as of April 13, 1995.
10(a) Amendment No. One to The Incorporated herein
Beard Company 1993 Stock by reference
Option Plan dated August 27,
1993, as amended June 4, 1998
(The Amended Plan supersedes
he original Plan adopted on
August 27, 1993.
10(b) The Beard Company 1994 Incorporated herein
Phantom Stock Units Plan by reference
adopted November 1, 1994.
10(c) Stockholders' Agreement Incorporated herein
made as of January 27, by reference
1993 by and among Registrant,
Carbonics and Collen.
10(d) Stock Purchase Agreement Incorporated herein
dated as of December 15, by reference
1991 by and among Registrant
(formerly known as Beard
Investment Company),
Carbonics and Collen.
10(e) Conversion Agreement dated Incorporated herein
as of January 31, 1995 by reference
by and among Registrant,
Carbonics and Collen.
10(f) Employment Agreement Incorporated herein
dated April 3, 1995 by by reference
and among Registrant,
Carbonics, Collen and
Beard Oil.
10(g) The Beard Company Deferred Incorporated herein
Stock Compensation Plan. by reference
10(h) Form of Change in Control Incorporated herein
Compensation Agreement by reference
dated as of January 24, 1997,
by and between Carbonics
and three employees.
10(i) Nonqualified Stock Option Incorporated herein
Agreement by and between by reference
Richard D. Neely and
ISITOP, Inc. ("ISITOP"),
dated April 1,1997.
10(j) Nonqualified Stock Option Incorporated herein
Agreement by and between by reference
Jerry S. Neely and ISITOP,
dated April 1, 1997.
10(k) Letter Agreement dated Incorporated herein
August 15, 1997 by and by reference
among Collen, Carbonics,
Beard Oil and Registrant.
10(l) Letter Agreement dated Incorporated herein
October 8, 1997 by and by reference
among Randy D. Thacker,
Carbonics and Registrant.
10(m) Nonqualified Stock Option Incorporated herein
Agreement by and between by reference
Toby Tindell and ITF,dated
February 27, 1998.
10(n) Subscription Agreement by Incorporated herein
and between Cibola Corporation by reference
("Cibola") and Registrant,
dated April 10, 1996.
10(o) Nonrecourse Secured Promissory Incorporated herein
Note from Registrant to Tax by reference
Sharing Agreement by and among
Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996.
10(p) Security Agreement by and among Incorporated herein
Registrant, Cibola and the Cibola by reference
shareholders, dated April 10, 1996.
10(q) Tax Sharing Agreement by and among Incorporated herein
Registrant, Cibola and the Cibola by reference
shareholders, dated April 10, 1996.
10(r) Compensation Agreement by and Incorporated herein
between Registrant and the by reference
Trustees of the William M. Beard
and Lu Beard 1988 Charitable
Unitrust (the "Trustees") dated
April 17, 1997.
10(s) Indemnity Agreement by and Incorporated herein
between Registrant and the by reference
Trustees dated April 17, 1997.
10(t) Coal Fines Extraction and Incorporated herein
Beneficiation Agreement among by reference
CRC NO. 1 LLC, CRC NO. 2 LLC,
CRC NO. 3 LLC, CRC NO. 4 LLC,
CRC NO. 5 LLC, CRC NO. 6 LLC,
(the "Six LLC's") and Beard
Technologies, Inc. ("BTI"),
dated as of June 24, 1998.
10(u) Operation and Maintenance Incorporated herein
Agreement among the Six by reference
LLC's and BTI, dated as of
June 24, 1998.
10(v) Guaranty Agreement among Incorporated herein
Registrant and the Six LLC's, by reference
dated as of June 24, 1998.
10(w) Guaranty Agreement between Incorporated herein
MCNIC Pipeline & Processing by reference
Company ("MCNIC") and BTI,
dated as of June 24, 1998.
10(x) Loan Agreement between MCNIC Incorporated herein
and Beard Mining, L.L.C. ("BMLLC"), by reference
dated as of June 24, 1998.
10(y) Promissory Note from BMLLC to Incorporated herein
MCNIC, dated as of June 24, by reference
1998.
11 Statement re computation of per Filed herewith
share earnings. electronically
27 Financial Data Schedule Filed herewith
electronically
</TABLE>
<TABLE>
THE BEARD COMPANY
COMPUTATION OF LOSS PER SHARE
<CAPTION>
For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic and Diluted Earnings (Loss) Per Share:
Loss from continuing
per statement of operations $ (134,000) $ (206,000) $ (276,000) $ (429,000)
============ ============ ============ ============
Earnings (loss) from discontinued
operations $ (766,000) $ 227,000 $ (1,048,000) $ 26,000
============ ============ ============ ============
Net earnings (loss) per statement
of operations $ 900,000 $ 21,000 $ (1,324,000) $ (403,000)
============= ============ ============ ============
Net earnings (loss) attributable
to common shareholders per
statement of operations $ (900,000) $ 21,000 $ (1,324,000 $ (403,000)
============ ============ ============ ============
Weighted average common shares outstanding:
Basic and diluted 2,528,000 2,799,000 2,528,000 2,799,000
============ ============ ============ ============
Net earnings (loss) per average common share outstanding:
Basic and diluted
Loss from continuing $ (0.05) $ (0.07) $ (0.11) $ (0.15)
Earnings (loss) from discontinued
operations (0.31) 0.08 (0.41) 0.01
----------- ----------- ----------- -----------
Net earnings (loss) $ (0.36) $ 0.01 $ (0.52) $ (0.14)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 7,000
<SECURITIES> 0
<RECEIVABLES> 1,412
<ALLOWANCES> (80)
<INVENTORY> 374
<CURRENT-ASSETS> 8,983
<PP&E> 34,006
<DEPRECIATION> (4,768)
<TOTAL-ASSETS> 40,780
<CURRENT-LIABILITIES> 3,465
<BONDS> 0
889
0
<COMMON> 3
<OTHER-SE> 11,106
<TOTAL-LIABILITY-AND-EQUITY> 40,780
<SALES> 1,022
<TOTAL-REVENUES> 2,272
<CGS> 1,066
<TOTAL-COSTS> 2,824
<OTHER-EXPENSES> (500)
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 59
<INCOME-PRETAX> (220)
<INCOME-TAX> (56)
<INCOME-CONTINUING> (276)
<DISCONTINUED> (1,048)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,324)
<EPS-PRIMARY> (0.52)
<EPS-DILUTED> (0.52)
</TABLE>
