FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal quarter ended August 31, 1995 or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-6814
U.S. ENERGY CORP.
(Exact Name of Registrant as Specified in its Charter)
Wyoming 83-0205516
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
877 North 8th West, Riverton, WY 82501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(307) 856-9271
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
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
State the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at October 13, 1995
Common stock, $.01 par value 6,343,465 Shares
U.S. ENERGY CORP.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Condensed Consolidated Balance Sheets
August 31, 1995 and May 31, 1995. . . . . . . . . 3-4
Condensed Consolidated Statements of Operations
Three Months Ended August 31, 1995 and 1994 . . . 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 1995 and 1994 . . 6-7
Notes to Condensed Consolidated Financial Statements. 8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . 9-11
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 11
ITEM 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 11
Signatures. . . . . . . . . . . . . . . . . . . . . 12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Balance Sheets
ASSETS
August 31, May 31,
1995 1995
----------- ----------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash $ 804,500 $ 551,300
Accounts receivable
Trade 1,503,300 1,484,100
Related parties 385,300 231,600
Inventory 1,420,200 1,567,300
Current portion long-term
notes receivables 38,000 74,400
Other 109,000 149,300
------------ ------------
TOTAL CURRENT ASSETS 4,260,300 4,058,000
------------ ------------
INVESTMENTS AND ADVANCES
Affiliates 3,157,500 3,244,600
Restricted 7,757,400 7,757,400
------------ ------------
10,914,900 11,002,000
PROPERTIES AND EQUIPMENT 27,614,300 27,200,200
Less accumulated depreciation,
depletion and amortization (9,908,600) (9,700,800)
------------ ------------
17,705,700 17,499,400
OTHER ASSETS:
Accounts and notes receivable:
Real estate and other 927,700 945,700
Affiliates and related parties 25,000 25,000
Employees 545,800 505,100
Buildings and improvements
held for sale 7,500 7,500
Deferred compensation, long-term 2,000 5,100
Deposits and other 117,200 117,200
------------ ------------
1,625,200 1,605,600
------------ ------------
$34,506,100 $34,165,000
------------ ------------
------------ ------------
See notes to condensed consolidated financial statements.
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Balance Sheets
LIABILITIES AND SHAREHOLDERS' EQUITY
August 31, May 31,
1995 1995
---------- ----------
(Unaudited) (Unaudited)
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 942,100 $ 2,276,100
Line of credit 172,000 1,527,000
Current portion of long-term debt 378,400 232,900
------------ ------------
TOTAL CURRENT LIABILITIES 1,492,500 4,036,000
LONG-TERM DEBT (See Note 4) 1,168,300 928,500
RECLAMATION LIABILITY (See Note 5) 3,951,800 3,951,800
OTHER ACCRUED LIABILITIES (See Note 5) 10,722,200 10,818,700
DEFERRED TAX LIABILITY 214,000 183,300
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 599,000 708,200
Common stock, 187,817
shares forfeitable 1,370,100 1,370,100
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value;
authorized, 100,000 shares;
none issued or outstanding -- --
Common stock, $.01 par value;
authorized, 20,000,000 shares;
issued, 6,208,562 and 5,262,794 60,600 52,500
Additional paid-in capital 21,463,100 18,629,000
Retained earnings (deficit) (3,278,800) (3,256,400)
Treasury stock, 769,943
shares, at cost (2,242,400) (2,242,400)
Unallocated ESOP contribution (1,014,300) (1,014,300)
------------ ------------
14,988,200 12,168,400
------------ ------------
$34,506,100 $34,165,000
------------ ------------
------------ ------------
See notes to condensed consolidated financial statements.
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
August 31,
---------------------------
1995 1994
REVENUES: ----------- -----------
Mineral sales and option $ 2,174,300 $ --
Construction contract revenues 1,627,100 596,500
Oil sales 41,600 43,600
Recreational product sales 1,257,000 1,157,400
Commercial revenues 303,300 201,500
Gain from restructuring
mining properties agreements -- 41,300
Gain on sale of assets 16,600 391,000
Interest 23,900 22,700
Management and other fees 221,500 198,000
----------- -----------
5,665,300 2,652,000
----------- -----------
COSTS AND EXPENSES:
Costs of mineral sales 1,824,300 --
Mineral operations 61,600 410,500
Construction costs 1,206,400 598,400
Cost of recreation products 662,800 645,500
Abandoned gas leases 328,700 --
General and administrative 847,900 900,300
Commercial operations 538,200 518,200
Oil production 17,500 14,000
Loss on sale of investments -- 13,500
Interest 89,100 47,100
------------ ------------
5,576,500 3,148,000
------------ ------------
INCOME (LOSS) BEFORE
EQUITY INCOME OF AFFILIATE
AND PROVISION FOR INCOME TAXES 88,800 (496,000)
MINORITY INTEREST IN (GAIN)
LOSS OF CONSOLIDATED SUBSIDIARIES (35,600) 139,200
EQUITY IN LOSS OF AFFILIATES - NET (75,600) (96,400)
------------ ------------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (22,400) (453,200)
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET INCOME (LOSS) $ (22,400) $ (453,200)
------------ ------------
------------ ------------
NET INCOME (LOSS)
PER SHARE (see Note 6) $ * $ (.09)
------------ ------------
------------ ------------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,728,784 4,809,473
------------ ------------
------------ ------------
*Less than $.01 per share.
See notes to condensed consolidated financial statements.
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
August 31,
--------------------------
1995 1994
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ (22,400) $ (453,200)
Adjustments to reconcile
net income to net cash used
in operating activities:
Minority interest in (gain) loss
of consolidated subsidiaries 35,600 (139,200)
Depreciation, depletion
and amortization 208,000 206,700
Abandoned mineral leases 328,700 --
Equity in (gain) loss of affiliates 75,600 96,400
Loss on sale of investments -- 13,400
(Gain) Loss on sale assets (16,600) 5,700
Other -- (2,000)
Net changes in components
of working capital (1,397,100) (635,000)
Change in deferred income taxes 30,700 (119,800)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (757,500) (1,027,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in note receivable 13,700 (118,600)
Investments in affiliates (133,300) (191,800)
Purchase of property and equipment (103,800) (32,600)
Proceeds from sale of investments -- 32,800
Proceeds from sale of assets 21,300 257,700
Development of gas properties (16,900) (15,000)
Development of mining properties (113,800) (87,900)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (332,800) (155,400)
CASH FLOWS FROM FINANCING ACTIVITIES:
Private placement of common stock 2,842,200 --
Payment on long-term debt (1,589,000) (63,700)
Additions to long-term debt 90,300 681,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,343,500 617,300
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 253,200 (565,100)
(Continued)
See notes to condensed consolidated financial statements.
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
August 31,
--------------------------
1995 1994
----------- -----------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 551,300 1,181,700
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 804,500 $ 616,600
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES:
Income tax paid $ 2,500 $ 70,000
----------- -----------
----------- -----------
Interest paid $ 89,100 $ 47,100
----------- -----------
----------- -----------
See notes to condensed consolidated financial statements.
U.S. ENERGY CORP. AND AFFILIATES
Notes to Condensed Consolidated Financial Statements
1) The Condensed Consolidated Balance Sheet as of August 31,
1995, the Condensed Consolidated Statements of Operations for the
three months ended August 31, 1995 and 1994, and the Condensed
Consolidated Statements of Cash Flows for the three months ended
August 31, 1995 and 1994, have been prepared by the Registrant
without audit. The Condensed Consolidated Balance Sheet as of May
31, 1995, has been taken from the audited financial statements
included in the Registrant's Annual Report on Form 10-K for the
period then ended. In the opinion of the Registrant, the
accompanying financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position of Registrant as of August 31, 1995
and May 31, 1995, the results of operations for the three months
ended August 31, 1995 and 1994, and the cash flows for the three
months then ended.
2) Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these financial statements be read
in conjunction with the Registrant's May 31, 1995 Form 10-K. The
results of operations for the periods ended August 31, 1995 and
1994 are not necessarily indicative of the operating results for
the full year.
3) The consolidated financial statements of the Registrant
include 100% of the accounts of USECB Joint Venture (USECB) which
is owned 50% by the Registrant and 50% by the Registrant's
subsidiary, Crested Corp. (Crested). The consolidated financial
statements also reflect 100% of the accounts of its majority-owned
subsidiaries: The Brunton Company (100%), Energx Ltd. (90%),
Crested (51.9%), USECC Gold Limited Liability Company (100%),
Plateau Resources Limited (100%) and Four Nines Gold, Inc. (50.9%)
All material intercompany profits and balances have been
eliminated.
4) Debt as of August 31, 1995 consists of two property loans
totaling $266,600; various equipment and other loans totaling
$59,600, and debt attributable to consolidated affiliates of
$871,500 on Brunton and $759,600 on Four Nines Gold. Certain
inter-affiliate loans were eliminated during consolidation.
5) Accrued reclamation obligations of $3,951,800 are the
Registrant's share of a reclamation liability at the Crooks Gap
Mining District and the full obligation at the Shootaring Uranium
Mill. The reclamation work may be performed over several years.
In addition, Plateau has recorded additional obligations of
$10,722,200, for the estimated holding and maintenance costs needed
until the mill is placed in service or decommissioning begins.
6) Net income (loss) per share is computed using the
weighted average number of common shares outstanding during each
period. The dilutive effect of stock options is not included in
the computation, as it is not material.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following is management's discussion and analysis of
significant factors which have affected the Registrant's liquidity,
capital resources and results of operations during the period
included in the accompanying financial statements.
Liquidity and Capital Resources
Working capital increased during the three months ended August
31, 1995 by $2,745,800 to working capital of $2,767,800. Cash and
cash equivalents increased by $253,200 to $804,500 during the
period ended August 31, 1995. This increase was as a result of
financing activities.
In June and July 1995, the Registrant sold 812,432 restricted
common shares in a private placement for net proceeds of $2,842,200
($4.00 per share). The Registrant intends to register these shares
with the SEC in the second quarter of 1995 under the Securities Act
of 1933. In connection with this private placement, warrants to
purchase 81,243 common shares at $4.80 per share were issued to the
selling agent. These warrants are exercisable through July 28,
2000.
The Registrant utilized $332,800 in its investing activities
during the three months ended August 31, 1995. This was primarily
as a result of the Registrant and its subsidiary Crested funding
Sheep Mountain Partners ("SMP"), Plateau Resources Limited
("Plateau"), Energx, Ltd. ("Energx") and the Sutter Gold Mining
Company ("SGMC"). As the Registrant and Crested provide various
services for GMMV and SMP, the non-affiliated participants are
invoiced for their proportionate share of the approved operating
costs. GMMV is current on its reimbursements to the Registrant and
Crested for all the operating costs. Due to disputes existing
between the SMP partners, the Registrant and Crested have not been
reimbursed for care and maintenance costs expended on the SMP
mineral properties since the spring of 1991.
Other changes in working capital were decreases in accounts
payable and accrued expenses of $1,334,000 and lines of credit of
$1,355,000. This was offset partially by an increase in the
current portion of long-term debt of $145,500. The Registrant and
Crested have a line of credit for $1,000,000 as of August 31, 1995.
Brunton, a consolidated affiliate, has $172,000 outstanding on its
line of credit. The Registrant and Crested had utilized $325,000
of the credit facility as of report date.
The primary requirements for the Registrant's working capital
continue to be the funding of on-going administrative expenses, the
mine and mill development and holding costs of SGMC; holding costs
of Plateau; development of gas properties of Energx; uranium (U3O8)
delivery costs, and property holding costs of SMP. As a result of
the disputes between the SMP partners, the Registrant and Crested
have been delivering certain of their respective portions of the
U3O8 concentrates required to fill various delivery requirements on
long-term U3O8 contracts with domestic utilities. Currently,
Nukem/CRIC have made most the SMP deliveries of U3O8. It is not
known how long this arrangement will continue. The capital
requirements to fill the Registrant's and Crested's portion of the
remaining commitments in fiscal 1996 will depend on the spot market
price of uranium and is also dependent on the outcome of the
arbitration proceedings involving Nukem/CRIC.
The primary source of the Registrant's capital resources for
the remainder of fiscal 1996, will be (i) cash on hand; (ii) sale
of equity or interests in investment properties; (iii) sale of
equipment; (iv) resolution of pending litigations/arbitration;
(v) sale of royalties or interests in mineral properties;
(vi) proceeds from the sale of uranium under the SMP contracts,
(vii) and borrowings from financial institutions. Fees from oil
production, rentals of various real estate holdings and equipment,
aircraft chartering and the sale of aviation fuel will also provide
cash. Additional working capital to that on hand at
August 31, 1995, will be required to hold and maintain existing
mineral properties, permitting, the construction of a gold
processing mill, and mine development of SGMC and the development
of Plateau and its associated properties and administration costs.
The Registrant and Crested are currently seeking a joint venture
partner and/or other means of financing the construction of the
SGMC gold processing mill and mine development. The funding of SMP
care and maintenance costs may require additional funding,
depending on the outcome of the SMP arbitration. The Registrant
and Crested sought rescission of the SMP Partnership Agreement as
well as damages from Nukem/CRIC in U.S. District Court. In
February 1994, the parties to the litigation agreed to a consensual
binding arbitration on claims accruing after the formation of the
SMP partnership. The arbitration hearings have concluded, and it
is anticipated that the Arbitration Panel will enter its award
some time during third quarter of fiscal 1996.
Results of Operations
Three Months Ended August 31, 1995 Compared to Three Months Ended
August 31, 1994
Revenues for the period ended August 31, 1995 increased by
$3,013,300 primarily due to mineral sales and a mineral option and
construction contract revenues.
Revenues from mineral sales and option increased by
$2,174,300. There were no similar U3O8 deliveries or option
activities for the same period in the prior year.
Construction operation revenues for the three months ended
August 31, 1995 increased by $1,030,600 from profitable contracts
awarded late in fiscal 1995 to the Registrant's subsidiary Four
Nines Gold, Inc. ("FNG").
Recreational product sales and commercial revenues increased
by $99,600 and $101,800, respectively, primarily as a result modest
growth in these operations. This trend is anticipated to continue
throughout fiscal 1996.
The costs of mineral sales increased by $1,824,300 for which
there were no corresponding costs during the same period in fiscal
1995. Cost and expenses associated with mineral operations
decreased primarily as a result of a decrease in legal costs in
connection with the SMP arbitration. The cost of construction
activities was higher as a result of increased contract work. The
commercial operations, and general and administrative expenses
remained relatively constant.
Operations for the three months ended August 31, 1995 resulted
in a pre-tax gain of $88,800 before equity in loss of affiliates
and minority interest in gain of consolidated subsidiaries of
$75,600 and $35,600, respectively as compared to a loss of $496,000
before equity in income of affiliates and minority interest in loss
of consolidated subsidiaries of $96,400 and $139,200, respectively
during the same period of the previous year. After recognizing
equity losses, the Registrant recognized a net loss of $22,400
compared to a loss of $453,200 for the comparative period of the
previous year.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The information called for in this Item 1 has been previously
reported in the Registrant's Form 10-K (Item 3)for the fiscal year
ended May 31, 1995. In the pending arbitration proceedings
involving Sheep Mountain Partners, the Registrant, Crested and
Nukem, Inc./CRIC, evidentiary hearings were completed on May 31,
1995. Proposed findings of fact and conclusions of law; proposed
order and award; briefs of law, and responses to the other's
submittals were all filed by September 23, 1995. The arbitration
panel concluded that at least 90 days from the last filing would be
required before any order and award will be issued. However, the
panel reserved the right to extend that period should it become
necessary.
The case of Illinois Power Company ("IPC") vs. the Registrant
et al in the U.S. District Court for the Central District of
Illinois, was settled in June 1995 by amending the original uranium
concentrate supply contract. The amendment provides for the sale
of 486,443 pounds U3O8 to be delivered by Sheep Mountain Partners
to IPC in 1995, 1996 and 1997. The first delivery was made on June
30, 1995. Sales proceeds are being held in escrow, with other
escrowed funds to be paid as ordered by the arbitrators in the
Sheep Mountain Partners arbitration proceedings referred to above.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. There were no Reports filed on Form
8-K during the quarter ended August 31, 1995.
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.
U.S. ENERGY CORP.
(Registrant)
Date: October 6, 1995 By: s/ John L. Larsen
------------------------------
JOHN L. LARSEN,
Chief Executive Officer
Date: October 6, 1995 By: s/ Robert Scott Lorimer
------------------------------
ROBERT SCOTT LORIMER,
Principal Financial Officer
and Chief Accounting Officer