-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HGqo5SlD+nmV8k1glwz8rMKGhaT/Vxotvc9KsZ6G8fTnEY09WscHnxNbWOySeOGI QbSYp9bFRvf4AaZw1uLgBg== 0000909334-96-000200.txt : 19961115 0000909334-96-000200.hdr.sgml : 19961115 ACCESSION NUMBER: 0000909334-96-000200 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEARD CO /OK CENTRAL INDEX KEY: 0000909992 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 730970298 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12396 FILM NUMBER: 96661668 BUSINESS ADDRESS: STREET 1: 5600 N MAY AVE STREET 2: STE 320 CITY: OKLAHOMA CITY STATE: OK ZIP: 73112 BUSINESS PHONE: 4058422333 MAIL ADDRESS: STREET 1: 5600 N MAY STREET 2: STE 320 CITY: OKLAHOMA CITY STATE: OK ZIP: 73112 FORMER COMPANY: FORMER CONFORMED NAME: BEARD INVESTMENT CO DATE OF NAME CHANGE: 19930730 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the period ended September 30, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 1-12396 THE BEARD COMPANY (Exact name of registrant as specified in its charter) Oklahoma 73-0970298 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Enterprize Plaza, Suite 320 5600 North May Avenue Oklahoma City, Oklahoma 73112 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (405) 842-2333 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the registrant's classes of common stock as of September 30, 1996. Common Stock $.001 par value - 2,794,074 THE BEARD COMPANY INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - September 30, 1996 (Unaudited) and December 31, 1995 Statements of Operations - Three Months and Nine Months ended September 30, 1996 and 1995 (Unaudited) Statements of Shareholders' Equity, Year ended December 31, 1995 and Nine Months ended September 30, 1996 (Unaudited) Statements of Cash Flows - Nine Months ended September 30, 1996 and 1995 (Unaudited) Notes to Financial Statements (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 2. Changes in Securities Item 6. Exhibits and Reports on Form 8-K Signatures THE BEARD COMPANY AND SUBSIDIARIES Financial Statements September 30, 1996 (Unaudited) and December 31, 1995 and for the Three Months and Nine Months Ended September 30, 1996, and 1995 (Unaudited) PART I FINANCIAL INFORMATION Item 1. Financial Statements THE BEARD COMPANY AND SUBSIDIARIES Balance Sheets September 30, 1996 (Unaudited) and December 31, 1995
September 30, December 31, Assets 1996 1995 ------------- ------------- Current assets: Cash and cash equivalents $ 105,000 $ 220,000 Accounts receivable, less allowance for doubtful receivables of $53,000 in 1996 and $43,000 in 1995 2,341,000 2,259,000 Inventories 2,047,000 2,282,000 Prepaid expense and other current assets 626,000 401,000 ------------ ------------ Total current assets 5,119,000 5,162,000 ------------ ------------ Investments and other assets 1,781,000 1,935,000 Property, plant and equipment, at cost 16,309,000 14,291,000 Less accumulated depreciation, depletion and amortization 7,827,000 7,133,000 ------------ ----------- Net property, plant and equipment 8,482,000 7,158,000 ------------ ----------- Intangible assets, at cost 4,277,000 3,795,000 Less accumulated amortization 3,513,000 3,435,000 ------------ ----------- Net intangible assets 764,000 360,000 ------------ ------------ $ 16,146,000 $ 14,615,000 ============ ============ Liabilities and Shareholders' Equity Current liabilities: Trade accounts payable $ 1,576,000 $ 1,354,000 Accrued expense and other liabilities 638,000 342,000 Short-term debt 641,000 957,000 Current maturities of long-term debt 618,000 520,000 ------------ ------------ Total current liabilities 3,473,000 3,173,000 ------------ ------------ Long-term debt less current maturities 2,306,000 1,454,000 Redeemable preferred stock of $100 stated value; 5,000,000 shares authorized; 90,156 shares issued and outstanding (note 2) 1,200,000 1,200,000 Minority interest in consolidated subsidiaries 145,000 0 Commitments and contingencies (note 2) 0 0 Common shareholders' equity: Common stock of $.001 par value per share; 10,000,000 shares authorized; 2,794,074 and 2,730,830 shares issued and outstanding in 1996 and 1995, respectively 3,000 3,000 Capital in excess of par value 41,619,000 41,446,000 Accumulated deficit (32,600,000) (32,661,000) ------------ ------------ Total common shareholders' equity 9,022,000 8,788,000 ------------ ------------ $ 16,146,000 $ 14,615,000 ============ ============
See accompanying notes to financial statements. THE BEARD COMPANY AND SUBSIDIARIES Statement of Operations (Unaudited)
For the Three Months Ended For the Nine Months Ended ----------------------------- ----------------------------- September 30, September 30, September 30, September 30, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Revenues: Carbon dioxide $ 4,053,000 $ 3,620,000 $ 10,385,000 $ 8,738,000 Environmental/resource recovery 806,000 752,000 1,864,000 2,060,000 Real estate development 1,083,000 599,000 1,083,000 1,949,000 Other 21,000 18,000 51,000 49,000 ------------ ------------ ------------ ------------ 5,963,000 4,989,000 13,383,000 12,796,000 Expenses: Carbon dioxide 2,615,000 2,598,000 7,098,000 6,204,000 Environmental/resource recovery 657,000 581,000 1,787,000 1,649,000 Real estate development 1,043,000 549,000 1,043,000 1,826,000 Selling, general and administrative 1,163,000 881,000 3,210,000 2,690,000 Depreciation, depletion and amortization 347,000 298,000 972,000 865,000 Other 19,000 47,000 41,000 88,000 ------------ ------------ ------------ ------------ 5,844,000 4,954,000 14,151,000 13,322,000 Operating profit (loss): Carbon dioxide 508,000 320,000 668,000 430,000 Environmental/resource recovery (162,000) (70,000) (654,000) (263,000) Real estate development 30,000 38,000 14,000 90,000 Other (257,000) (253,000) (796,000) (783,000) ------------ ------------ ------------ ------------ 119,000 35,000 (768,000) (526,000) Other income (expense): Interest income 4,000 2,000 10,000 18,000 Interest expense (74,000) (53,000) (172,000) (141,000) Gain on sale of assets 54,000 8,000 140,000 196,000 Settlement of take-or-pay contract (note 4) 0 0 939,000 0 Minority interest in operations of consolidated subsidiaries 16,000 0 13,000 0 Other, including unconsolidated affiliates 2,000 128,000 (101,000) 123,000 ------------ ------------ ------------ ------------ Earnings (loss) before income taxes 121,000 120,000 61,000 (330,000) Income taxes (note 4) 0 0 0 0 ------------ ------------ ------------ ------------ Net earnings (loss) $ 121,000 $ 120,000 $ 61,000 $ (330,000) ============ ============ ============ ============ Net earnings (loss) applicable to common shareholders $ 121,000 $ 120,000 $ 61,000 $ (330,000) ============ ============ ============ ============ Earnings (loss) per common share and common equivalent share (primary EPS) (note 3) $ 0.04 $ 0.04 $ 0.02 $ (0.12) ============ ============ ============ ============ Earnings (loss) per common share assuming maximum dilution (fully diluted EPS) (note 3) $ 0.04 $ 0.04 $ 0.02 $ (0.12) ============ ============ ============ ============
See accompanying notes to financial statements. THE BEARD COMPANY AND SUBSIDIARIES Statements of Shareholders' Equity
Total Capital in Common Common Excess of Accumulated Shareholders' Stock Par Value Deficit Equity ---------- ------------ ------------ ------------ Balance December 31, 1994 $ 3,000 $ 41,321,000 $(32,258,000) $ 9,066,000 Net loss, year ended December 31, 1995 0 0 (403,000) (403,000) Accretion of discount on preferred stock 0 (51,000) 0 (51,000) Issuance of 78,700 shares of common stock 0 176,000 0 176,000 ---------- ------------ ------------ ------------ Balance December 31, 1995 $ 3,000 $ 41,446,000 $(32,661,000) $ 8,788,000 Net earnings, nine months ended September 30, 1996 0 0 61,000 61,000 Issuance of 63,244 shares of common stock 0 173,000 0 173,000 ---------- ------------ ------------ ------------ Balance September 30, 1996 (Unaudited) $ 3,000 $ 41,619,000 $(32,600,000) $ 9,022,000 ========== ============ ============ ============
See accompanying notes to financial statements. THE BEARD COMPANY AND SUBSIDARIES Statements of Cash Flows Increase (Decrease) in Cash and Cash Equivalents (Unaudited)
For the Nine Months Ended ------------------------------- September 30, September 30, 1996 1995 ------------ ------------ Operating activities: Cash received from customers $ 14,101,000 $ 12,351,000 Cash paid to suppliers and employees (12,682,000) (12,344,000) Interest received 8,000 16,000 Interest paid (278,000) (216,000) ------------ ------------ Net cash provided by (used in) operating activities 1,149,000 (193,000) ------------ ------------ Investing activities: Acquisition of property, plant, equipment (1,380,000) (770,000) Proceeds from sale of assets 319,000 308,000 Other Investments 20,000 (247,000) ------------ ------------ Net cash used in investing activities (1,041,000) (709,000) ------------ ------------ Financing activities: Proceeds from lines of credit and term notes 2,784,000 2,581,000 Payments on lines of credit and term notes (3,032,000) (1,936,000) Proceeds from issuance of stock 25,000 0 Preferred stock redemption 0 (58,000) ------------ ------------ Net cash provided by (used in) financing activities (223,000) 587,000 ------------ ------------ Net decrease in cash and cash equivalents (115,000) (315,000) Cash and cash equivalents at beginning of period 220,000 566,000 ------------ ------------ Cash and cash equivalents at end of period $105,000 $251,000 ============ ============ Reconciliation of Net earnings (loss) to Net Cash Provided by (Used in) Operating Activities Net earnings (loss) $ 61,000 $ (330,000) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating Activities: Depreciation, depletion and amortization 972,000 865,000 Gain on sale of assets (140,000) (196,000) Net costs capitalized (recognized) on real estate project (13,000) 67,000 Receipt of property, plant and equipment as part of settlement of take-or-pay contract (400,000) 0 Other, including minority interest in consolidated subsidiaries 96,000 118,000 ------------ ------------ Working capital provided by operations 576,000 524,000 Increase in accounts receivable, prepaids and other current assets from operating activities (117,000) (618,000) (Increase) decrease in inventories from operating activities 248,000 (101,000) Increase in accounts payable and accrued expenses from operating activities 442,000 2,000 ------------ ------------ Net cash provided by (used in) operating activities $ 1,149,000 $ (193,000) ============ ============ Supplemental Schedule of Noncash Investing and Financing Activities Purchase of property, plant and equipment and intangible assets through issuance of debt obligations $ 1,040,000 $ 598,000 ============ ============ Receipt of property, plant and equipment as part of settlement of take-or-pay contract $ 400,000 $ 0 ============ ============ Payment of note payable through issuance of 50,000 shares of common stock $ 138,000 $ 0 ============ ============ Sale of property for a note receivable $ 0 $ 104,000 ============ ============
See accompanying notes to financial statements. THE BEARD COMPANY AND SUBSIDARIES Notes to Financial Statements September 30, 1996 and 1995 (Unaudited) (1) The accompanying consolidated financial statements include the accounts of The Beard Company and its wholly and majority-owned subsidiaries. All significant intercompany transactions have been eliminated. The financial information included herein is unaudited; however, such information reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations for the three and nine-month periods ended September 30, 1996 are not necessarily indicative of the results to be expected for the full year. The Company operates within three major industry Segments: (1) the carbon dioxide ("CO2") Segment, comprised of (a) the manufacture and distribution of dry ice (solid CO2) and (b) the production of CO2; (2) the environmental/resource recovery ("E/RR") Segment, consisting of environmental services and resource recovery activities; and (3) the real estate ("R/E") Segment, consisting of real estate construction and development. The Company also has other operations, including a minority-owned investment in a joint venture for the extraction, production and sale of crude iodine. (2) The Company's preferred stock is mandatorily redeemable through December 31, 2002 from one-third of Beard's "consolidated net income" as defined. Accordingly, one-third of future "consolidated net income" will accrete directly to preferred stockholders and reduce earnings per common share. The Company's operations through September 30, 1996, were not sufficient to begin the sharing of the consolidated net income. To the extent that the preferred stock is not redeemed by December 31, 2002, the shares of preferred stock can be converted into shares of the Company's common stock. (3) Primary earnings per common share for the nine-month period ended September 30, 1996 and the three-month periods ended September 30, 1996 and 1995, are computed by dividing net earnings available to common shareholders by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Common stock equivalents include shares issuable upon exercise of incentive and non-qualified stock options using the treasury stock method. Fully diluted earnings per share for the periods listed above include the potential dilution of the earnings available to common stockholders as if the preferred stock was converted to common stock. The calculation includes the weighted average number of shares of common shares outstanding, the common stock equivalents, and the common shares that would result from the conversion of the preferred shares. The calculation of loss per common share for the nine-month period ended September 30, 1995, does not include common equivalent shares or potentially dilutive securities outstanding, as the effect would be antidilutive. The following table contains the components of the common share and common equivalent share amounts used in the calculation of earnings per share in the Company's statement of operations:
For the Three Months Ended For the Nine Months Ended September 30, September 30, September 30, September 30 1996 1995 1996 1995 ------------ ------------ ------------ ----------- Primary EPS: Weighted average common shares outstanding 2,756,752 2,652,130 2,743,067 2,652,130 Options considered to be common stock equivalents 42,155 23,364 39,196 0 ------------ ------------ ------------ ----------- 2,798,907 2,675,494 2,782,263 2,652,130 ============ ============ ============ =========== Fully diluted EPS: Weighted average common shares outstanding 2,756,752 2,652,130 2,743,067 2,652,130 Options considered to be comon stock equivalents 42,155 23,364 39,196 0 Conversion of preferred stock 462,445 462,445 462,445 * ------------ ------------ ------------ ----------- 3,261,352 3,137,939 3,244,708 2,652,130 ============ ============ ============ ===========
* The results would be antidilutive. As such, no additional shares are considered. (4) During February 1996, the Company settled a take-or-pay agreement under which a customer was obligated to purchase certain volumes of liquid CO2. The Company received $539,000 of cash and assets valued at $400,000 and recognized a gain of approximately $939,000. (5) In accordance with the provisions of the Statement of Financial Accounting Standard No. 109, Accounting for Income Taxes ("SFAS No. 109"), the Company's deferred tax asset is carried at zero book value, reflecting the uncertainties of the Company's utilization of the net deductible timing differences. There is no provision for income taxes in 1996 or 1995 due to the availability of net operating losses and other carryforwards. At September 30, 1996, the Company estimates that it had the following income tax carryforwards available for both income tax and financial reporting purposes (in thousands):
Expiration Date Amount ----------- -------- Federal regular tax operating loss carryforwards 2001-2010 $ 66,900 Investment tax credit carryforward 1996-2000 1,200 Tax depletion carryforward Indefinite 5,500 -------- Total $ 73,600 ========
(6) In the normal course of business various actions and claims have been brought or asserted against the Company. Management does not consider them to be material to the Company's financial position, liquidity or results of operations. THE BEARD COMPANY AND SUBSIDARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion focuses on material changes in the Company's financial condition since December 31, 1995 and results of operations for the quarter ended September 30, 1996 compared to the prior year third quarter and the nine months ended September 30, 1996 compared to the prior year nine months. Such discussion should be read in conjunction with the Company's financial statements including the related footnotes. In preparing the discussion and analysis, the Company has presumed readers have read or have access to the discussion and analysis of the prior year's results of operations, liquidity and capital resources as contained in the Company's 1995 Form 10-K. The Company operates within three major industry Segments: (1) the carbon dioxide ("CO2") Segment, comprised of (a) the manufacture and distribution of dry ice (solid CO2) and (b) the production of CO2; (2) the environmental/ resource recovery ("E/RR") Segment, consisting of environmental services and resource recovery activities, and (3) the real estate ("R/E") Segment, consisting of real estate construction and development. Material changes in financial condition - September 30, 1996 as compared with December 31, 1995. The following table reflects some of the changes in the Company's financial condition during the periods indicated:
September 30, December 31, Increase 1996 1995 (Decrease) ------------- ------------ ---------- Cash and cash equivalents $ 105,000 $ 220,000 $ (115,000) Working capital $1,646,000 $1,989,000 $ (343,000) Current ratio 1.47 to 1 1.63 to 1
The Company's ability to generate working capital from operations during the first nine months of 1996 was affected by a slowdown in sales in the E/RR and R/E Segments during the first six months of the year. In spite of the slowdown experienced early in the year in these Segments, operations for the first nine months of 1996 generated working capital of $37,000 excluding the impact of the $539,000 cash portion of the settlement of the take-or-pay agreement. The settlement of the take-or-pay agreement by the Company's dry ice subsidiary, Carbonic Reserves ("Carbonics"), in February 1996 infused $539,000 of cash into Carbonics. The infusion of this cash plus $400,000 of equipment resulted in the addition of $939,000 of pre-tax income. The settlement enabled Carbonics to pay down bank debt and trade payables. Offsetting this improvement in working capital was the increase in debt resulting from the acquisition in May 1996 of Horizontal Drilling Technologies, Inc. ("HDT"), an environmental services subsidiary. In addition to the proceeds from the take-or-pay settlement, the Company has been able to satisfy its liquidity needs through its working capital and borrowing arrangements. Future cash flows and availability of credit are subject to a number of variables, including the price and demand for dry ice, a continuing source of economical CO2, continuing private and governmental demand for environmental services and continuing demand for residential real estate. Despite these uncertainties, the Company anticipates that its cash flow from operations and continued availability of credit on a basis similar to that experienced to date will be sufficient to meet its planned operating costs and capital spending requirements. Additional capital expenditures of $2,398,000 were made by the following Segments in property, plant and equipment during the first nine months of 1996, as reflected in the table on the following page: Carbon dioxide $1,598,000 Environmental/resource recovery 800,000 ---------- $2,398,000 ==========
Included in the above are $570,000 of additions financed through the issuance of seller-financed notes. The Company's working capital, the CO2 Segment's line of credit, and equipment financing arrangements currently being negotiated are expected to be sufficient to fund the current and presently foreseeable capital expenditure requirements, including the $410,000 projected for the last three months of 1996. Through the period ending December 31, 2002, the Company's liquidity will be reduced to the extent it is required to redeem any of the Beard preferred stock pursuant to the mandatory redemption provisions. See Note 2 to the accompanying financial statements. Material changes in results of operations - Quarter ended September 30, 1996 as compared with the Quarter ended September 30, 1995. The income for the quarter ended September 30, 1996 was $121,000, compared to income of $120,000 for the third quarter of the prior year. An improvement in operating margins for the 1996 quarter was offset by a decrease in the positive net effect of other income and expenses generated in the current quarter as compared to the prior year's third quarter. The current quarter resulted in an $84,000 improvement over the operating income recorded in the year earlier quarter. There were revenue gains in all Segments; however, improved operating margins in the CO2 Segment were partially offset by lower margins in the other two Segments. Operating results of the Company's three Segments are reflected below:
1996 1995 -------- -------- Operating profit (loss): Carbon dioxide $508,000 $320,000 Environmental/resource recovery (162,000) (70,000) Real estate 30,000 38,000 -------- -------- Subtotal 376,000 288,000 Other (257,000) (253,000) -------- -------- Total $119,000 $35,000 ======== ========
The "Other" in the above table reflects primarily general and corporate activities, as well as other activities and investments of the Company. Carbon dioxide Third quarter 1996 operations reflected an operating profit of $508,000 compared to a $320,000 profit for the 1995 third quarter. The primary component of revenues for this Segment is dry ice sales which are seasonal with the downturn occurring from December through February, while the brisk sales period occurs from June through August and then again in October. The dry ice component of this Segment generated an operating profit of $452,000 in the 1996 third quarter versus an operating profit of $286,000 in 1995. Revenues from this Segment totaled $4,053,000 for the 1996 third quarter, a 12% increase over last year's third quarter. The factors contributing to this improvement included increases in the volume of dry ice sales, in the sales of dry ice equipment constructed for sale, and in the Company's allocated share of sales from its working interest in a producing CO2 unit. This improvement in revenues was somewhat offset by increases in expenses associated with advertising and sales, insurance, and an incentive-sales arrangement for employees. Revenues and operating profit would have increased by an additional $76,000 if the Company had not settled the take-or-pay agreement early in 1996. Environmental/resource recovery The E/RR Segment generated a larger operating loss in the third quarter of 1996 as compared with the same period in 1995. The Segment reflected a 7% increase in revenues, which resulted primarily from the acquisition of HDT during the second quarter. This increase was offset somewhat, however, by a decline in the revenues generated by resource recovery activities due to the completion in February 1996 of a contract with the U. S. Department of Energy involving activities related to the Company's patented Mulled Coal technology. Management has been pursuing and will continue to pursue the commercial development of this technology during the remainder of 1996. The costs of pursuing this development, as well as increased operating expenses related to the Company's environmental services activities, offset the increased revenues and resulted in the decline in operating margins. Real estate construction and development The Segment sold three homes in the third quarter of 1996 as compared to two homes sold in the same quarter of 1995. The higher costs associated with these homes resulted in approximately the same operating profit for the third quarter of 1996 as compared to the same quarter in 1995. The Company expects the slower sales for the year to continue due to a variety of factors, including market hesitation following a change in ownership in late 1994 of the two country clubs adjacent and in close proximity to the Company's development. Additional inventory of custom homes has been financed primarily from the Segment's credit line. Any remaining cash requirement will be funded from the proceeds of home sales. It is anticipated that only a small portion of the cash flow from the development will continue to be reinvested in custom homes during the remaining life of the project, and no more speculative homes are planned. As of September 30, 1996, 19 of the original 62 lots remain to be developed and three speculative homes are unsold. The majority of the cash flow generated by the real estate development will be used to repay debt, redeployed as working capital by the Company or used for general corporate purposes. Other activities Other operations, consisting mostly of general and corporate activities, generated a slightly larger operating loss for the third quarter of 1996 than the same period of last year. Selling, general and administrative expenses The Company's selling, general and administrative expenses ("SG&A") in the current quarter increased to $1,163,000 from $881,000 in the 1995 third quarter. SG&A expenses incurred by the CO2 Segment during the third quarter of 1996, which represent 58% of the total SG&A costs, increased by $208,000 over the same period last year. This increase was associated with an increase in expenses related to Carbonics' advertising and sales expenses, insurance, and an incentive sales arrangement for employees. Depreciation, depletion and amortization expenses The third quarter of 1996 had an increase in DD&A expense of $49,000, reflecting additions to property, plant and equipment made during the past year. Other income and expenses Other income and expenses resulted in a gain of $2,000 for the third quarter of 1996, down sharply from the $85,000 gain recorded for such items in the same period of 1995. The decrease was due primarily to the fact that the third quarter of 1995 included recognition of $220,000 of income related to a previous reorganization. The third quarter of 1996 included an increase in interest expense of $21,000 as well as a $30,000 impairment provision recorded against the carrying value of the Company's interest in certain investments. Such items were offset by a $46,000 gain on sale of assets. Material changes in results of operations - Nine months ended September 30, 1996 as compared with the Nine months ended September 30, 1995. The income for the nine months ended September 30, 1996 was $61,000, compared to a loss of $330,000 for the first nine months of the prior year. The first three quarters of 1996 benefited from a settlement of the take-or-pay agreement in the CO2 Segment. The $939,000 recorded from the settlement more than offset the overall decline in operating margins which resulted primarily from a $391,000 decrease in the operating margin of the E/RR Segment. Operating results of the Company's three Segments are reflected below:
1996 1995 ------------ ----------- Operating profit (loss): Carbon dioxide $ 668,000 $ 430,000 Environmental/resource recovery (654,000) (263,000) Real estate 14,000 90,000 ------------ ----------- Subtotal 28,000 257,000 Other (796,000) (783,000) ------------ ----------- Total $ (768,000) $ (526,000) ============ ===========
The "Other" in the above table reflects primarily general and corporate activities, as well as other activities and investments of the Company. Carbon dioxide Operations for the first nine months of 1996 resulted in an operating profit of $668,000 compared to a $430,000 operating profit for the 1995 first nine months. The primary component of revenues for this Segment is dry ice sales sales which are seasonal with the downturn occurring from December through February, while the brisk sales period occurs from June through August and then again in October. The nine months operating results of both 1996 and 1995 reflect the normal downturn in the sales cycle at the first of the year. The dry ice component of this Segment generated an operating profit of $510,000 in the 1996 first nine months versus an operating profit of $370,000 in the comparable 1995 period. Revenues from this Segment totaled $10,385,000 for the first nine months of 1996, a 19% increase over the same period last year. The factors contributing to this improvement included increases in the volume of dry ice sales, in the sales of dry ice equipment constructed for sale, and in the Company's allocated share of sales from its working interest in a producing CO2 unit. This improvement in revenues was somewhat offset by increases in expenses associated with advertising and sales, insurance, and an incentive- sales arrangement for employees. Revenues and operating profit for 1996 would have increased by an additional $220,000 if the Company had not settled the take-or-pay agreement early in 1996. Environmental/resource recovery A significant decline in revenues generated by the E/RR Segment in the first six months of the year led to a decline in operating margins in the first nine months of 1996 as compared to the same period in 1995. This decline in revenues was primarily caused by a slow down in the environmental services industry, as governmental demand for environmental services declined pending resolution of administrative problems relating to the Oklahoma Corporation Commission Indemnity Fund. Also contributing to the decline in revenue was the completion in February 1996 of a contract involving the resource recovery activities related to the Company's patented Mulled Coal technology. Management will continue to pursue the commercial development of this technology during the remainder of 1996. Real estate construction and development Results from the sale of zero lot-line homes were hampered by a decline in sales, as three homes were sold in the first nine months of 1996, as compared to six homes sold in the same period in 1995. The decline in sales can be attributed to a variety of factors, including market hesitation following a change in ownership in late 1994 of the two country clubs adjacent and in close proximity to the Company's development. Additional inventory of custom homes has been financed primarily from the Segment's credit line. Any remaining cash requirement will be funded from the proceeds of home sales. It is anticipated that only a small portion of the cash flow from the development will continue to be reinvested in custom homes during the remaining life of the project, and no more speculative homes are planned. As of September 30, 1996, 19 of the original 62 lots remain to be developed and three speculative homes are unsold. The majority of the cash flow generated by the real estate development will be used to repay debt, redeployed as working capital by the Company or used for general corporate purposes. Other activities Other operations, consisting mostly of general and corporate activities, generated a slightly greater operating loss for the first nine months of 1996 as compared to the same period last year. Selling, general and administrative expenses The Company's selling, general and administrative expenses ("SG&A") in the first nine months of 1996 increased to $3,210,000 from $2,690,000 in the comparable 1995 period. SG&A expenses incurred by the CO2 Segment during the first nine months of 1996, which represent 58% of the total SG&A costs, increased by $460,000 over the same period last year. This increase was associated with increases in expenses related to advertising and sales, insurance, and an incentive-sales arrangement for employees. Depreciation, depletion and amortization expenses The first nine months of 1996 had an increase in DD&A expense of $107,000, reflecting additions to property, plant and equipment made during the past year. Other income and expenses The positive net effect of other income and expenses for the first nine months of 1996 increased significantly compared to the same period in 1995. As previously mentioned, the Company benefited in the first nine months of 1996 from the settlement of a take-or-pay agreement in the CO2 Segment. This settlement resulted in a gain of $939,000. This gain was partially offset by a decrease in the gain on sale of assets of $56,000, as well as a $150,000 impairment provision recorded against the carrying value of the Company's interest in certain investments and the recognition, in the third quarter of 1995, of $220,000 of income received from a previous reorganization. PART II. OTHER INFORMATION. Item 2. Changes in Securities. The Company's preferred stock is mandatorily redeemable through December 31, 2002 from one-third of Beard's "consolidated net income" as defined in the instrument governing the rights of the preferred stockholders. Accordingly, one-third of future "consolidated net income" will accrete directly to preferred stockholders and reduce earnings per common share. As a result of these redemption requirements, the payment of any dividends to the common stockholders in the near future is very unlikely. See Note 2 to the accompanying financial statements. Item 6. Exhibits and Reports on Form 8-K: (a) The following exhibits are filed with this Form 10-Q and are identified by the numbers indicated: 27 Financial Data Schedules. (b) No reports on Form 8-K were filed during the period covered by this report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE BEARD COMPANY (Registrant) HERB MEE, JR. (Date) November 11, 1996 Herb Mee, Jr., President and Chief Financial Officer JACK A. MARTINE (Date) November 11, 1996 Jack A. Martine, Controller and Chief Accounting Officer EXHIBIT INDEX
Exhibit No. Method of Filing - ----------- ---------------- 27 Financial Data Schedule Filed herewith electronically
EX-27 2
5 1,000 9-MOS DEC-31-1996 SEP-30-1996 105 0 2,394 (53) 2,047 5,119 16,309 (7,827) 16,146 3,473 0 1,200 0 3 9,019 16,146 11,468 13,383 8,141 14,151 (1,165) 164 172 61 0 61 0 0 0 61 0.02 0.02
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