-----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, PYjFI+Dk3KfDQBdpCtzmGub5Q8uCDJFGWRs1ETzBhrtYzSEFtbdPkP0tDGub/8vE V1PnpvrQ5knDpngADUWf/Q== 0000909334-97-000252.txt : 19971114 0000909334-97-000252.hdr.sgml : 19971114 ACCESSION NUMBER: 0000909334-97-000252 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NONE 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: SEC FILE NUMBER: 001-12396 FILM NUMBER: 97714793 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 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 September 30, 1997 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 September 30, 1997. Common Stock $.001 par value - 2,824,629 THE BEARD COMPANY INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - September 30, 1997 (Unaudited) and December 31, 1996 Statements of Operations - Three Months and Nine Months ended September 30, 1997 and 1996 (Unaudited) Statements of Shareholders' Equity, Year ended December 31, 1996 and Nine Months ended September 30, 1997 (Unaudited) Statements of Cash Flows - Nine Months ended September 30, 1997 and 1996 (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, 1997 (Unaudited) and December 31, 1996 and for the Three Months and Nine Months Ended September 30, 1997, and 1996 (Unaudited) PART I FINANCIAL INFORMATION Item 1. Financial Statements
THE BEARD COMPANY AND SUBSIDIARIES Balance Sheets September 30, 1997 (Unaudited) and December 31, 1996 September 30, December 31, Assets 1997 1996 ------------- ------------- Current assets: Cash and cash equivalents $ 729,000 $ 375,000 Accounts receivable, less allowance for doubtful receivables of $62,000 in 1997 and $53,000 in 1996 2,987,000 2,405,000 Inventories 671,000 2,003,000 Prepaid expense 277,000 442,000 Other assets 110,000 73,000 ------------- ------------- Total current assets 4,774,000 5,298,000 ------------- ------------- Investments and other assets 1,698,000 1,710,000 Property, plant and equipment, at cost 18,233,000 16,793,000 Less accumulated depreciation, depletion and amortization 9,072,000 8,094,000 ------------ ------------- Net property, plant and equipment 9,161,000 8,699,000 ------------ ------------- Intangible assets, at cost 4,409,000 4,305,000 Less accumulated amortization 3,640,000 3,539,000 ------------ ------------- Net intangible assets 769,000 766,000 ------------ ------------- $ 16,402,000 $ 16,473,000 ============ ============= Liabilities and Shareholders' Equity Current liabilities: Trade accounts payable $ 1,946,000 $ 1,395,000 Accrued expense and other liabilities 581,000 609,000 Short-term debt - 639,000 Current maturities of long-term debt 916,000 910,000 ------------- ------------ Total current liabilities 3,443,000 3,553,000 ------------- ------------ Long-term debt less current maturities 3,408,000 2,911,000 Redeemable preferred stock of $100 stated value; 5,000,000 shares authorized; 90,156 shares issued and outstanding (note 4) 1,200,000 1,200,000 Minority interest in consolidated subsidiaries 88,000 153,000 Common shareholders' equity: Common stock of $.001 par value per share; 10,000,000 shares authorized; 2,824,629 and 2,794,074 shares issued and outstanding in 1997 and 1996, respectively 3,000 3,000 Capital in excess of par value 41,685,000 41,629,000 Accumulated deficit (33,425,000) (32,976,000) ------------- ------------ Total common shareholders' equity 8,263,000 8,656,000 ------------- ------------ Commitments and contingencies (note 8) $ 16,402,000 $ 16,473,000 ============= ============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES Statements of Operations (Unaudited) For the Three Months For the Nine Months Ended Ended ----------------------- ---------------------- September September September September 30, 1997 30, 1996 30, 1997 30, 1996 ----------- ---------- ---------- ---------- Revenues: Environmental/resource recovery $ 1,557,000 $ 810,000 $4,081,000 $1,868,000 Carbon dioxide 122,000 73,000 378,000 225,000 Other 12,000 17,000 36,000 47,000 ----------- ---------- ---------- ---------- 1,691,000 900,000 4,495,000 2,140,000 Expenses: Environmental/resource recovery (exclusive of depreciation, depletion and amortization shown separately below) 1,394,000 657,000 3,528,000 1,787,000 Carbon dioxide (exclusive of depreciation, depletion and amortization shown separately below) 26,000 18,000 80,000 67,000 Selling, general and administrative 523,000 485,000 1,539,000 1,335,000 Depreciation, depletion and amortization 117,000 85,000 318,000 203,000 Other 7,000 19,000 23,000 41,000 ----------- ---------- ---------- ---------- 2,067,000 1,264,000 5,488,000 3,433,000 Operating profit (loss): Environmental/resource recovery (238,000) (162,000) (578,000) (654,000) Carbon dioxide 90,000 55,000 280,000 157,000 Other (228,000) (257,000) (695,000) (796,000) ----------- ---------- ---------- ---------- (376,000) (364,000) (993,000) (1,293,000) Other income (expense): Interest income 1,000 1,000 6,000 4,000 Interest expense (77,000) (44,000) (198,000) (80,000) Gain on sale of assets 1,000 47,000 51,000 140,000 Minority interest in operations of consolidated subsidiaries 35,000 16,000 65,000 13,000 Other, including unconsolidated affiliates 21,000 2,000 33,000 (101,000) ----------- ---------- ---------- ---------- Loss before income taxes (395,000) (342,000) (1,036,000) (1,317,000) Income taxes (note 7) (28,000) - (45,000) - ----------- ---------- ---------- ---------- Loss from continuing operations (423,000) (342,000) (1,081,000) (1,317,000) Earnings from discontinued dry ice and real estate operations, net of taxes of $11,000 and $19,000 for the three and nine-months ended September 30, 1997 (notes 2 and 7) 377,000 463,000 632,000 1,378,000 ----------- ---------- ---------- ---------- Net earnings (loss) $ (46,000) $ 121,000 $ (449,000) $ 61,000 =========== ========== ========== ========== Net earnings (loss) applicable to common shareholders $ (46,000) $ 121,000 $ (449,000) $ 61,000 =========== ========== ========== ========== Earnings (loss) per common share and common equivalent share (primary EPS) (note 5) Loss from continuing operations $ (0.15) $ (0.12) $ (0.39) $ (0.47) Earnings from discontinued operations 0.13 0.16 0.23 0.49 Earnings (loss) (0.02) 0.04 (0.16) 0.02 Earnings (loss) per common share assuming maximum dilution (fully diluted EPS) (note 5) Loss from continuing operations $ (0.15) $ (0.10) $ (0.39) $ (0.40) Earnings from discontinued operations 0.13 0.14 0.23 0.42 Earnings (loss) (0.02) 0.04 (0.16) 0.02
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES Statements of Shareholders' Equity (Unaudited) Total Capital in Common Common Excess of Accumulated Shareholders' Stock Par Value Deficit Equity ----------- ------------ ------------ ------------ Balance, December 31, 1995 $ 3,000 $ 41,446,000 $(32,661,000) $ 8,788,000 Net loss, year ended December 31, 1996 - - (315,000) (315,000) Issuance of 68,244 shares of common stock - 183,000 - 183,000 ----------- ------------ ------------ ------------ Balance, December 31, 1996 3,000 41,629,000 (32,976,000) 8,656,000 Net loss, nine months ended September 30, 1997 - - (449,000) (449,000) Issuance of 25,555 shares of common stock - 56,000 - 56,000 ----------- ------------ ------------ ------------ Balance, September 30, 1997 (unaudited) $ 3,000 $ 41,685,000 $(33,425,000) $ 8,263,000 =========== ============ ============ ============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES Statements of Cash Flows (Unaudited) For the Nine Months Ended ------------------------------ September 30, September 30, 1997 1996 -------------- -------------- Operating activities: Cash received from customers $ 16,053,000 $ 13,562,000 Cash paid to suppliers and employees (14,306,000) (12,682,000) Cash received from settlement of take-or-pay contract - 539,000 Interest received 6,000 8,000 Interest paid (277,000) (278,000) -------------- -------------- Net cash provided by operating activities 1,476,000 1,149,000 -------------- -------------- Investing activities: Acquisition of property, plant and equipment (1,138,000) (1,380,000) Proceeds from sale of assets 81,000 319,000 Other investments 82,000 20,000 -------------- -------------- Net cash used in investing activities (975,000) (1,041,000) -------------- -------------- Financing activities: Proceeds from lines of credit and term notes 1,729,000 2,784,000 Payments on lines of credit and term notes (1,916,000) (3,032,000) Proceeds from issuance of stock 40,000 25,000 -------------- -------------- Net cash used in financing activities (147,000) (223,000) -------------- -------------- Net increase (decrease) in cash and cash equivalents 354,000 (115,000) Cash and cash equivalents at beginning of period 375,000 220,000 -------------- -------------- Cash and cash equivalents at end of period $ 729,000 $ 105,000 ============== ==============
THE BEARD COMPANY AND SUBSIDIARIES Statements of Cash Flows (Unaudited) Reconciliation of Net earnings (loss) to Net Cash Provided by (Used in) Operating Activities For the Nine Months Ended ------------------------- September 30, September 30, 1997 1996 -------------- ------------- Net earnings (loss) $ (449,000) $ 61,000 Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation, depletion and amortization 1,133,000 972,000 Provision for impairment of assets 90,000 150,000 Gain on sale of assets (62,000) (140,000) Interest and other costs (capitalized) recognized on real estate project 359,000 (13,000) Gain on take-or-pay contract settlement - (400,000) Equity in net (income) loss of unconsoli- dated affiliates (199,000) (49,000) Other, including minority interest in con- solidated subsidiaries (11,000) (5,000) Increase in accounts receivable, prepaids and other current assets from operating activities (476,000) (117,000) Decrease in inventories from operating activities 1,065,000 248,000 Increase in accounts payable and accrued expenses from operating activities 26,000 442,000 ------------- ------------ Net cash provided by operating activities $ 1,476,000 $ 1,149,000 ============= ============ Supplemental Schedule of Noncash Investing and Financing Activities Purchase of property, plant and equipment and intangible assets through issuance of debt obligations $ 67,000 $ 1,040,000 ============= ============ Receipt of property, plant and equipment as part of settlement of take-or-pay contract $ - $ 400,000 ============= ============ Payment of note payable through issuance of 50,000 shares of common stock $ - $ 138,000 ============= ============ Sale of property for a note receivable $ 87,000 $ 104,000 ============= ============
See accompanying notes to financial statements. THE BEARD COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS September 30, 1997 and 1996 (Unaudited) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying consolidated 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 consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in Beard's 1996 annual report on Form 10-K. The accompanying consolidated financial statements include the accounts of The Beard Company and its wholly and majority-owned subsidiaries ("Beard" or the "Company"). 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, 1997, are not necessarily indicative of the results to be expected for the full year. The Company operates within two major industry segments: (1) the environmental/resource recovery ("E/RR") Segment, consisting of environmental services and resource recovery activities, and (2) the carbon dioxide ("CO{2}") Segment, comprised of the production of CO{2}. The Company's real estate ("R/E") Segment, consisting of real estate construction and development, was discontinued in January, 1997. In addition, the Company sold, in October of 1997, substantially all of the operating assets of its subsidiary engaged in the manufacture and distribution of dry ice (solid CO{2}). See Note 2 below. 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) DISCONTINUED OPERATIONS In January 1997, the Company approved a formal plan to dispose of the assets of its R/E Segment. The Company estimated that it would incur a loss of $180,000 from discontinuing real estate construction and development activities. The loss was recorded in the fourth quarter of 1996 and represented the difference in the estimated amounts to be received from disposing of the real estate construction and development assets and the assets' recorded values as of December 31, 1996. Results of operations of the R/E Segment for the three and nine months ended September 30, 1996, have been restated as discontinued operations in the accompanying statements of operations. Operating results of the discontinued operations through the date of sale of all remaining assets are not expected to be significant. During the nine months ended September 30, 1997, the Company disposed of certain real estate construction and development assets for $1,534,000 which approximated the Company's estimated disposition values of those assets. As of September 30, 1997, the significant remaining asset of the R/E Segment consisted of one speculative home which the Company expects to dispose of by December 31, 1997 at its September 30, 1997 recorded value. In August 1997, the Company entered into an agreement to sell substantially all of the assets of Carbonic Reserves (an 85% owned subsidiary of Beard in the CO{2} Segment) for cash OF $19.4 million and the assumption of certain liabilities. The sale was closed on October 13, 1997 and resulted in a gain of approximately $11.3 million. The operations of Carbonic Reserves have been presented as discontinued in the statements of operations for all periods presented. As of November 12, 1997, the Company has paid down all but approximately $769,000 of the Company's outstanding indebtedness. The Company expects to use the remaining proceeds to provide working capital to exploit the Company's remaining assets. See Note 4 below. As a result of this sale, the Company's continuing operations now include (A) several subsidiaries engaged in environmental services and resource recovery activities and (B) its directly owned CO{2} production activities, consisting of (i) its working and overriding royalty interests in a CO{2} producing unit in Colorado, and (ii) working interests in a producing CO{2} unit in New Mexico and a shut-in CO{2} gas well in south central Utah. Revenues applicable to discontinued operations of Carbonic Reserves were $4,061,000, $10,614,000, $3,980,000, and $10,160,000 for the three and nine- month periods ended September 30, 1997 and 1996, respectively. (3) ACQUISITION On May 21, 1996, the Company acquired 80% of the outstanding common stock of Horizontal Drilling Technologies, Inc. ("HDT") for $482,000. HDT utilizes trenchless technology and specializes in directional drilling for utility, underground cable and environmental remediation projects. The purchase price consisted of a non-interest bearing contingent payment obligation valued at $301,000, a non-interest bearing $150,000 note, convertible at the option of the holder into common stock of the Company, and 20% of the Company's ownership, valued at $44,000, in an existing subsidiary involved in environmental/resource recovery operations. The contingent payment obligation is payable only from 80% of specified cash flows of HDT and the existing environmental/resource recovery subsidiary and was recorded based upon its estimated present value. The non-interest bearing note was also recorded at its present value and was converted into 50,000 shares of the Company's common stock on July 1, 1996. The conversion rate used was the Company's July 1, 1996 closing price of $3.00. The fair value of the net identifiable assets of HDT approximated $143,000 on the acquisition date. The excess of the purchase price over the fair value of the net identifiable assets acquired has been recorded as goodwill and is being amortized on a straight-line basis over ten years. The acquisition has been accounted for by the purchase method and accordingly, the results of operations of HDT prior to May 21, 1996, are not included in the Company's consolidated 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 operations through September 30, 1997, 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. The Company has entered into an Agreement to purchase 303,890 shares of its common stock and 47,729 shares of its preferred stock from several parties. Closing of the purchase will take place in November 1997 and January 1998 with a total repurchase price of $4,160,590. In addition, the Company anticipates redeeming $1.459 million (14,590 shares) of the Company's pre- ferred stock in the first quarter of 1998 as a result of the gain realized from the Asset Sale. (5) EARNINGS (LOSS) PER SHARE Primary earnings per common share for the three and nine-month periods ended September 30, 1996 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 stock 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 three and nine-month periods ended September 30, 1997, 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 (loss) per share in the Company's statements of operations:
For the Three Months Ended For the Nine Months Ended -------------------------- ------------------------- September September September September 30, 1997 30, 1996 30, 1997 30, 1996 --------- --------- --------- --------- Primary EPS: Weighted average common shares outstanding 2,805,306 2,756,752 2,801,174 2,743,067 Options considered to be common stock equivalents - 42,155 - 39,196 --------- --------- --------- --------- 2,805,306 2,798,907 2,801,174 2,782,263 ========= ========= ========= ========= Fully diluted EPS: Weighted average common shares outstanding 2,805,306 2,756,752 2,801,174 2,743,067 Options considered to be common stock equivalents - 42,155 - 39,196 Conversion of preferred stock - 462,445 - 462,445 --------- --------- --------- --------- 2,805,306 3,261,352 2,801,174 3,244,708 ========= ========= ========= =========
(6) SETTLEMENT OF TAKE-OR-PAY CONTRACT In February 1996, the Company negotiated a settlement of a take-or-pay contract under which a customer was obligated to purchase certain volumes of liquid CO{2}. As a result of the settlement, the Company received $539,000 of cash and a CO{2} vapor recovery system with an estimated fair value of $400,000 and the Company released the party of its contractual obligation to purchase the contracted liquid CO{2} volumes. The Company realized a gain of $939,000 related to this settlement. (7) INCOME TAXES In accordance with the provisions of the Statement of Financial Accounting Standards 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 net deductible timing differences. There is no provision for regular federal income taxes in 1997 or 1996 due to the availability of net operating losses and other carryforwards. The provision in the statements of operations for the three and nine-month periods ending September 30, 1997 consists of $11,000 and $19,000 in state income tax and $28,000 and $45,000 in federal alternative minimum tax, respectively. At September 30, 1997, 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 $ 65,212 Investment tax credit carryforward 1997-2000 679 Tax depletion carryforward Indefinite 5,500 --------- Total $ 71,391 =========
(8) 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, 1996 and results of operations for the quarter ended September 30, 1997 compared to the prior year third quarter and the nine months ended September 30, 1997 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 1996 Form 10-K. The Company operates within two major industry segments: (1) the environ- mental/resource recovery ("E/RR") Segment, consisting of environmental services and resource recovery activities, and (2) the carbon dioxide ("CO{2}") Segment involving the production of CO{2}. As more fully explained below, on October 13, 1997, the Company closed the sale of substantially all of the operating assets of Carbonic Reserves ("the Asset Sale"), its 85% owned subsidiary engaged in dry ice manufacturing and distribution, leaving the Company's CO{2} production interests as the remaining component of this segment. The operations of Carbonic Reserves have been presented as dis- continued for all periods presented. See Note 2 to the financial statements. The Company also has other operations, including (i) a minority- owned investment in a joint venture for the extraction, production and sale of crude iodine, and (ii) various assets and investments which the Company has been liquidating as opportunities have materialized, including the assets of the Company's former real estate construction and development ("R/E") Segment, the operations of which were discontinued in January, 1997. See Note 2 to the financial statements. MATERIAL CHANGES IN FINANCIAL CONDITION - SEPTEMBER 30, 1997 AS COMPARED WITH DECEMBER 31, 1996. The following table reflects some of the changes in the Company's financial condition during the periods indicated:
SEPTEMBER 30, DECEMBER 31, INCREASE 1997 1996 (DECREASE) ------------- ------------ ---------- Cash and cash equivalents $ 729,000 $ 375,000 $354,000 Working capital $1,331,000 $1,745,000 $(414,000) Current ratio 1.39 to 1 1.49 to 1
The Company's ability to generate working capital from operations during the first nine months of 1997 was adversely affected by seasonality during the first three months of the year. The first quarter is normally a poor one for the dry ice business, and cold and/or rainy weather also normally causes a slowdown of sales in the environmental services portion of the E/RR Segment. As previously mentioned, the Company has discontinued the R/E Segment and the sale of substantially all of its assets in this segment during the first nine months of 1997 provided cash of $1,304,000 and working capital of $449,000. The proceeds from the sale were used to pay down the short-term debt associated with the construction cost of these assets. Despite the seasonal decline, however, net working capital generated by the above sale and by operations as a result of increased activity in the E/RR Segment for the first nine months of 1997 amounted to $861,000, compared to $576,000 generated in the first nine months of 1996. In addition to the proceeds from the sale of assets in the R/E Segment, 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 continuing private and governmental demand for environmental services. Because of the sale in October of 1997 of substantially all of the operating assets of Carbonic Reserves, the Company anticipates that its cash flow from operations will be more than adequate to meet its planned operating costs and capital spending requirements for some period of time. Capital additions of $1,494,000 were made by the following segments in property, plant and equipment during the first nine months of 1997, as reflected in the table below: Environmental/resource recovery $ 453,000 Carbon dioxide, including Carbonic Reserves 1,041,000 ---------- $1,494,000 ========== Included in the above are $356,000 of additions financed through the issuance of seller-financed notes. The Company's working capital is expected to be more than adequate to fund the current and presently foreseeable capital expenditure requirements, including the $1,550,000 projected for the last three months of 1997. On October 13, 1997, the Company closed the sale of substantially all of its dry ice manufacturing and distribution assets for cash of $19.4 million and the assumption of certain liabilities. The Company recognized a gain from the Asset Sale of approximately $11.3 million. As of November 10, 1997, the Company had paid off a significant portion of its indebtedness. The Company has entered into an Agreement to purchase 303,890 shares of its common stock and 47,729 shares of its preferred stock from several parties. Closing of the pur- chase will take place in November 1997 and January 1998 with a total repurchase price of $4,160,590. In addition, the Company anticipates redeeming $1.459 million (14,590 shares) of the Company's preferred stock in the first quarter of 1998 as a result of the gain realized from the Asset Sale. The Company expects to use the remaining proceeds to provide working capital to exploit the Company's remaining assets. See Notes 2 and 4 to the accompanying financial statements. 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 SEPTEMBER 30, 1997 AS COMPARED WITH THE QUARTER ENDED SEPTEMBER 30, 1996. The loss for the quarter ended September 30, 1997 was $46,000, compared to income of $121,000 for the third quarter of the prior year. The current quarter resulted in a $12,000 decline over the operating income recorded in the year earlier quarter. There were revenue gains in both the CO{2} and the E/RR Segments; however, the improved operating margin in the CO{2} Segment was more than offset by lower margins in the E/RR Segment and "Other" caused by greater operating expenses. Operating results of the Company's two segments are reflected below:
1997 1996 ----------- ------------ OPERATING PROFIT (LOSS): Environmental/resource recovery $ (238,000) $ (162,000) Carbon dioxide 90,000 55,000 ----------- ------------ Subtotal (148,000) (107,000) Other (228,000) (257,000) ----------- ------------ TOTAL $ (376,000) $ (364,000) =========== ============
The "Other" in the above table reflects primarily general and corporate activities, as well as other activities and investments of the Company. ENVIRONMENTAL/RESOURCE RECOVERY The E/RR Segment generated a $76,000 larger operating loss in the third quarter of 1997 compared to the same period in 1996. The segment reflected a 47% increase in revenues as a result of the completion of several large drilling and water main projects. Management of the Company has been pursuing and will continue to pursue the commercial development of its patented Mulled Coal technology. 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. CARBON DIOXIDE Third quarter 1997 operations reflected an operating profit of $90,000 compared to a $55,000 profit for the 1996 third quarter. Revenues from this segment for the third quarter ended September 30, 1997 approximated $122,000, a 67% increase over last year's third quarter. The primary factor contributing to this improvement was additional CO{2} sales resulting from a develop- ment program which began in July of 1996 to meet increased demand for the CO{2} produced from one of the fields in which the Company has small working and overriding royalty interests. OTHER ACTIVITIES Other operations, consisting mostly of general and corporate activities, generated a slightly smaller operating loss for the third quarter of 1997 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 $523,000 from $485,000 in the 1996 third quarter. SG&A expenses incurred by the E/RR Segment during the third quarter of 1997, which represent 55% of the total SG&A costs, increased by $53,000 over the same period last year. This increase was associated with an increase in expenses related to increases in the cost of health benefits for employees in this segment. DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSES The third quarter of 1997 had an increase in DD&A expense of $32,000, reflecting additions to property, plant and equipment made during the past year. OTHER INCOME AND EXPENSES Other income and expenses resulted in a loss of $19,000 for the third quarter of 1997, down from the $22,000 gain recorded for such items in the same period of 1996. The decrease was due, in part, to the fact that the third quarter of 1997 included an increase in interest expense of $33,000 over the same period in 1996. The third quarter of 1997 also showed a decrease in the gain on sale of assets of $46,000 compared to the third quarter of 1996. Such items were offset by a $38,000 increase in income from other items and the minority interest in the operations of consolidated subsidiaries. DISCONTINUED OPERATIONS As previously discussed, the Company discontinued its real estate construction and development activities in January of 1997 in order to focus its attention on other segments which are considered to have greater potential for growth and profitability. As discussed in Note 2 to the Financial Statements, the Company recognized the estimated loss of disposing of the R/E Segment's assets in the fourth quarter of 1996. In the first quarter of 1997, the Company sold all of the R/E Segment's assets, except for two completed speculative homes, for $1,196,000. One of the two homes was sold during the second quarter of 1997 for $338,000. The Company expects to dispose of the remaining speculative home by December 31, 1997. On October 13, 1997, the Company closed the sale of substantially all of its dry ice manufacturing and distribution assets for cash of $19.4 million and the assumption of certain liabilities. The Company recognized a gain from the Asset Sale of approximately $11.3 million. As of November 10, 1997, the Company had paid off a significant portion of its indebtedness. The Company has entered into an Agreement to purchase 303,890 shares of its common stock and 47,729 shares of its preferred stock from several parties. Closing of the purchase will take place in November 1997 and January 1998 with a total repur- chase price of $4,160,590. In addition, the Company anticipates redeeming $1.459 million (14,590 shares) of the Company's preferred stock in the first quarter of 1998 as a result of the gain realized from the Asset Sale. The Company expects to use the remaining proceeds to provide working capital to exploit the Company's remaining assets. See Notes 2 and 4 to the accompanying financial statements. MATERIAL CHANGES IN RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1996. The loss for the nine months ended September 30, 1997 was $449,000, compared to income of $61,000 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 CO{2} Segment in the amount of $939,000. This income, along with the other results of operations for Carbonic Reserves and the R/E Segment, have been presented as discontinued operations for all periods presented. Increased revenues in all segments were more than offset by increases in operating, SG&A and other expense classifications resulting in a loss for the first nine months of 1997. Operating results of the Company's two segments are reflected below:
1997 1996 ------------- ----------- Operating profit (loss): Environmental/resource recovery $ (578,000) $ (654,000) Carbon dioxide 280,000 157,000 ------------- ----------- Subtotal (298,000) (497,000) Other (695,000) (796,000) ------------- ----------- TOTAL $ (993,000) $(1,293,000) ============= ===========
The "Other" in the above table reflects primarily general and corporate activities, as well as other activities and investments of the Company. ENVIRONMENTAL/RESOURCE RECOVERY A significant increase in revenues generated by the E/RR Segment in the first nine months of the year led to a $76,000 improvement in operating margins as compared to the same period in 1996. This increase in revenues was primarily caused by the completion of several large drilling and water main replacement projects and the full nine months impact of Horizontal Drilling Technologies, Inc. ("HDT"), resulting from Beard's purchase of 80% of HDT'S common stock (the "HDT acquisition") in May 1996. The revenue increase was partially offset by the increased operating costs related to the Company's other environmental services activities and by the development costs associated with the Company's patented Mulled Coal technology. Management of the Company will continue to pursue the commercial development of this technology. CARBON DIOXIDE Operations for the first nine months of 1997 resulted in an operating profit of $280,000 compared to a $157,000 operating profit for the 1996 first nine months. The sole component of revenue for this segment is now the revenue from the Company's small working and overriding royalty interests in two producing CO{2} units located in Colorado and New Mexico. The nine months operating results of 1997 compared to 1996 reflect the increased revenue resulting from the development project begun in 1996 on one of the properties. Revenues from this segment totaled $378,000 for the first nine months of 1997, a 68% increase over the same period last year. This improvement in revenues was partially offset by increases in expenses associated with the development program. OTHER ACTIVITIES Other operations, consisting mostly of general and corporate activities, generated a $101,000 smaller operating loss for the first nine months of 1997 as compared to the same period last year. The principal reason for the smaller loss is the result of a change in the method of allocating expenses for health benefits among members of the consolidated group whereby the other members now bear a larger share of the expected costs for health insurance. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES The Company's selling, general and administrative expenses ("SG&A") in the first nine months of 1997 increased to $1,539,000 from $1,335,000 in the comparable 1996 period. SG&A expenses incurred by the E/RR Segment during the first nine months of 1997, which represent 55% of the total SG&A costs, increased by $296,000 over the same period last year. The effect of the HDT acquisition accounted for $173,000 or 58% of this increase. Other members of the segment incurred increases in SG&A costs as a result of increased operating activity. DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSES The first nine months of 1997 had an increase in DD&A expense of $115,000, reflecting additions to property, plant and equipment made during the past year. OTHER INCOME AND EXPENSES The negative net effect of other income and expenses for the first nine months of 1997 increased slightly compared to the same period in 1996. Interest expense increased $118,000 for the first nine months of 1997 compared to the same period in 1996 as a result of increased borrowings to meet working capital needs in the E/RR Segment and other operations. The first nine months of 1997 realized $89,000 less gain on the sale of assets compared to the first nine months of 1996. Other items included a $60,000 smaller impairment provision in 1997, compared to the first nine months of 1996, recorded against the carrying value of the Company's interest in certain investments and a $149,000 improvement in the earnings of its unconsolidated affiliates for the same period. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED In February, 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share." SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997, and restatement of prior-period earnings per share data is required. The new standard will not apply to Beard's financial statements until the fourth quarter of 1997. SFAS No. 128 revises the current calculation methods and presentation of primary and fully diluted earnings per share. Beard has reviewed the requirements of SFAS No. 128 and has concluded that they will not have a material effect on the calculation of Beard's historical earnings (loss) per share data. 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 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: Exhibit Description - ------- ----------- 10(M) Letter Agreement dated August 15, 1997 by and among Clifford H. Collen, Jr., Carbonic Reserves, Beard Oil Company and Registrant. 10(N) Letter Agreement dated October 8, 1997 by and among Randy D. Thacker, Carbonic Reserves, and Registrant. 27 Financial Data Schedule (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. (Registrant) THE BEARD COMPANY HERB MEE, JR. (Date) November 12, 1997 ___________________________________ Herb Mee, Jr., President and Chief Financial Officer JACK A. MARTINE (Date) November 12, 1997 ___________________________________ Jack A. Martine, Controller and Chief Accounting Officer EXHIBIT INDEX
Exhibit No. Description Method of Filing - ----------- ----------- ---------------- 10(M) Letter Agreement dated August 15, Filed herewith electronically 1997 by and among Clifford H. Collen, Jr., Carbonic Reserves, Beard Oil Company and Registrant 10(N) Letter Agreement dated October Filed herewith electronically 8, 1997 by and among Randy D. Thacker, Carbonic Reserves, and Registrant 27 Financial Data Schedule Filed herewith electronically
EX-10 2 EXHIBIT 10(M) THE BEARD COMPANY Enterprise Plaza, Suite 320 5600 North May Avenue Oklahoma City, Oklahoma 73112 Fax (405) 842-9901 (405) 842-2333 August 15, 1997 Mr. Clifford H. Collen, Jr. c/o Carbonic Reserves 4754 Shavano Oak, Suite 102 San Antonio, TX 78249 Re: Agreement in Connection with the Sale of the Assets of Carbonic Reserves ("Carbonics") Dear Buddy: Within the next few days we expect to execute an Asset Purchase Agreement (the "Agreement") by and between Airgas Carbonic Reserves, Inc. (" Airgas") as Purchaser, Carbonics as Seller, and The Beard Company ("Beard") and you as Shareholders which calls for the sale of substantially all of the assets of Carbonics (the "Sale") to Airgas. The Agreement also calls for the execution by you at Closing of (i) an employment agreement and (ii) a non-competition and confidentiality agreement (the "Non-Compete") with Airgas. In connection with the employment agreement you will become an employee of Airgas on October 1, 1997, and in connection with the Non-Compete you will receive a total consideration of $500,000 from Airgas. In order to facilitate the Sale, release you from your present obligations to Carbonics and make your services available to Airgas, it is hereby agreed among you, Carbonics, Beard and Beard Oil Company ("Beard Oil") as follows: (1) On January 2, 1998, Carbonics will purchase the 24,000 shares of common stock, par value $0.10 per share, of Carbonics which you own for a cash con- sideration of Nine Hundred Thousand Dollars ($900,000). Such amount will be paid to you by wire transfer or other immediately-available funds. The obliga- tion for this purchase may, if desired, be assumed by Beard. In addition, Carbonics (or Beard) will pay you interest on such funds from the date funds are received by Carbonics following Closing until January 2, 1998, at the rate of 5.5% per annum. (E.g., if funds are received on September 30, 1997, you will receive $12,747.95 interest = $900,000 x 5.5% x 94/365). (2) On January 2, 1998, Carbonics shall pay to you in a lump sum the $100,000 termination payment called for in Paragraph 4.02 of the Conversion Agreement dated as of the 31st day of January, 1995, by and among Beard, Carbonics and you. The obligation for this payment may, if desired, be assumed by Beard. In addition, Carbonics (or Beard) will pay you interest on such funds from the date funds are received by Carbonics following Closing until January 2, 1998, at the rate of 5.5% per annum. (E.g., if funds are received on September 30, 1997, you will receive $1,416.44 interest = $100,000 x 5.5% x 94/365). (3) Simultaneously with the Closing of the Sale to Airgas and the sale of your shares to Carbonics, all of the existing contracts among you, Carbonics, Beard and Beard Oil (with the exception of the $100,000 obligation to you set forth in paragraph (2) above) will be terminated and have no further force and effect, including (i) any obligations by Carbonics pursuant to that certain Change in Control Compensation Agreement dated as of the 24th day of January, 1997, by and between you and Carbonics; (ii) any obligations by you, Carbonics, Beard or Beard Oil in connection with the Employment Agreement dated April 3, 1995, by and among such parties; and (iii) any obligations by you, Carbonics, or Beard in connection with that certain Stockholders' Agreement dated January 27, 1993, and that certain Conversion Agreement entered into as of January 31, 1995, by and among such parties. (4) The parties have agreed that following the termination of the Employ- ment Agreement as provided in paragraph (3) above, neither Carbonics, Beard nor Beard Oil shall have any further obligation to pay the Key-Employee Bonus provided in Section 3.06 of the Employment Agreement. Carbonics will set aside a bonus pool of Two Hundred Thousand Dollars ($200,000) which will be utilized as determined by the Board of Directors of Carbonics to pay bonuses to other Carbonics employees and to settle any obligations Carbonics may have under its Change of Control Compensation Agreements (the " Compensation Agreements") with Randy D. Thacker and Kenneth E. Shewbert. The payment of such bonuses and any obligations which may arise under the Compensation Agreements shall be solely the obligations of Carbonics, and you shall have no obligations therefor. Any such obligations may be assumed by Beard. This Agreement, upon acceptance by the parties, shall be binding upon and inure to the benefit of all of the parties hereto and their respective successors and assigns. Sincerely, THE BEARD COMPANY HERB MEE, JR. Herb Mee, Jr., President ACCEPTED AND AGREED TO AS OF THE 18th DAY OF AUGUST, 1997: CARBONIC RESERVES By: CLIFFORD H. COLLEN, JR. Clifford H. Collen, Jr., President BEARD OIL COMPANY By: HERB MEE, JR. Herb Mee, Jr., President CLIFFORD H. COLLEN, JR. Clifford H. Collen, Jr. EX-10 3 EXHIBIT 10(N) THE BEARD COMPANY Enterprise Plaza, Suite 320 5600 North May Avenue Oklahoma City, Oklahoma 73112 Fax (405) 842-9901 (405) 842-2333 October 8, 1997 Mr. Randy D. Thacker C/o Carbonic Reserves 4754 Shavano Oak, Suite 102 San Antonio, TX 78249 Re: Agreement in Connection with the Sale of the Assets of Carbonic Reserves ("Carbonics") Dear Randy: As you know, within the next few days we expect to close the sale of substantially all of the assets of Carbonics (the "Sale") to Airgas Carbonic Reserves, Inc. ("Airgas"). You have advise us that you have decided not to accept Airgas's employment offer but have instead accepted an offer to serve as a consultant to them for a period of time. Since your agreement with Airgas does not exactly fit with the termination provisions set forth in that certain Change in Control Compensation Agreement (the "Agreement") dated as of the 24th day of January, 1997, by and between you and Carbonics, we have mutually agreed to terminate such Agreement and, in lieu thereof, have agreed to the following: (1) On or before the endo of the month following the closing of the Sale, Carbonics shall pay you the sum of $64,000. The obligation for this payment may, if desired, be assumed by The Beard Company (" Beard"). (2) On January 2, 1998, Carbonics shall pay you the sum of $90,000. The obligation for this payment may, if desired, be assumed by Beard. (3) Beard has agreed that, upon the closing of the Sale, the ISO Option previously granted to you to purchase 7,500 shares of common stock under the Beard Company 1993 Stock Option Plan will become fully vested and exercisable at the price of $2.00 per share. (4) Your Group Health coverage under Beard's Group Health (SUBSIDIARY: Carbonic Reserves) coverage will be continued under Cobra for a period of up to 18 months at your election and your sole cost and expense upon submittal of the specified monthly payment premiums when due. (4) You will make yourself availabel to provide consultation services to Carbonics and/or Beard for a period of two (2) years following the Sale. (5) Any obligations by Carbonics pursuant to that certain Change in Control Compensation Agreement dated as of the 24th day of January, 1997, by and between you and Carbonics are hereby terminated and of no further force and effect. This Agreement, upon acceptance by the parties, shall be binding upon and inure to the benefit of all of the parties hereto and their respective successors and assigns. Sincerely, THE BEARD COMPANY HERB MEE, JR. Herb Mee, Jr., President ACCEPTED AND AGREED TO AS OF THE 9th DAY OF OCTOBER, 1997: CARBONIC RESERVES By: HERB MEE, JR. Herb Mee, Jr., Vice President RANDY D. THACKER Randy D. Thacker EX-27 4
5 0000909992 THE BEARD COMPANY 1,000 9-MOS DEC-31-1997 SEP-30-1997 729 0 3,049 (62) 671 4,774 18,233 (9,072) 16,402 3,443 0 1,200 0 3 8,260 16,402 378 4,495 0 5,488 (176) 112 198 (1,036) 45 45 632 0 0 (449) (0.16) (0.16)
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