UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the period ended June 30, 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.)
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 June 30, 1996.
Common Stock $.001 par value - 2,740,730
THE BEARD COMPANY
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheets - June 30, 1996 (Unaudited) and
December 31, 1995
Statements of Operations - Three Months and Six Months
ended June 30, 1996 and 1995 (Unaudited)
Statements of Shareholders' Equity, Year ended
December 31, 1995 and Six Months ended
June 30, 1996 (Unaudited)
Statements of Cash Flows - Six Months ended
June 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 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
THE BEARD COMPANY AND SUBSIDIARIES
Financial Statements
June 30, 1996 (Unaudited) and December 31, 1995 and for the
Three Months and Six Months Ended June 30, 1996, and 1995 (Unaudited)
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
THE BEARD COMPANY AND SUBSIDIARIES
Balance Sheets
June 30, 1996 (Unaudited) and December 31, 1995
June 30, December 31,
1996 1995
------------ ------------
Assets
Current assets:
Cash and cash equivalents $290,000 $220,000
Accounts receivable, less allowance for doubtful
receivables of $50,000 in 1996 and $43,000
in 1995 2,342,000 2,259,000
Inventories 2,891,000 2,282,000
Prepaid expense and other current assets 541,000 401,000
------------ ------------
Total current assets 6,064,000 5,162,000
------------ ------------
Investments and other assets 1,831,000 1,935,000
Property, plant and equipment, at cost 15,840,000 14,291,000
Less accumulated depreciation, depletion
and amortization 7,571,000 7,133,000
------------ ------------
Net property, plant and equipment 8,269,000 7,158,000
------------ ------------
Intangible assets, at cost 4,272,000 3,795,000
Less accumulated amortization 3,486,000 3,435,000
------------ ------------
Net intangible assets 786,000 360,000
------------ ------------
$16,950,000 $14,615,000
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable $1,862,000 $1,354,000
Accrued expense and other liabilities 536,000 342,000
Short-term debt 1,220,000 957,000
Current maturities of long-term debt 692,000 520,000
------------ ------------
Total current liabilities 4,310,000 3,173,000
------------ ------------
Long-term debt less current maturities 2,520,000 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 167,000 0
Commitments and contingencies (note 2) 0 0
Common shareholders' equity:
Common stock of $.001 par value per share;
10,000,000 shares authorized; 2,740,430
and 2,730,830 shares issued and outstanding
in 1996 and 1995, respectively 3,000 3,000
Capital in excess of par value 41,471,000 41,446,000
Accumulated deficit (32,721,000) (32,661,000)
------------ ------------
Total common shareholders' equity 8,753,000 8,788,000
------------ ------------
$16,950,000 $14,615,000
============ ============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Operations
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Revenues:
Carbon dioxide $3,553,000 $2,868,000 $6,332,000 $5,118,000
Environmental/resource recovery 708,000 659,000 1,058,000 1,308,000
Real estate development 0 726,000 0 1,350,000
Other 13,000 17,000 30,000 31,000
---------- ---------- ---------- ----------
4,274,000 4,270,000 7,420,000 7,807,000
Expenses:
Carbon dioxide 2,419,000 2,004,000 4,483,000 3,606,000
Environmental/resource recovery 603,000 521,000 1,130,000 1,068,000
Real estate development 0 687,000 0 1,277,000
Selling, general and administrative 1,093,000 938,000 2,047,000 1,809,000
Depreciation, depletion and
amortization 322,000 289,000 625,000 567,000
Other 8,000 20,000 22,000 41,000
---------- ---------- ---------- ----------
4,445,000 4,459,000 8,307,000 8,368,000
Operating profit (loss):
Carbon dioxide 246,000 139,000 160,000 110,000
Environmental/resource recovery (139,000) (81,000) (492,000) (193,000)
Real estate development (8,000) 26,000 (16,000) 52,000
Other (270,000) (273,000) (539,000) (530,000)
---------- ---------- ---------- ----------
(171,000) (189,000) (887,000) (561,000)
Other income (expense):
Interest income 4,000 13,000 6,000 16,000
Interest expense (52,000) (44,000) (98,000) (88,000)
Gain on sale of assets 74,000 136,000 86,000 188,000
Settlement of take-or-pay contract
(note 4) 0 0 939,000 0
Minority interest in operations of
consolidated subsidiaries (3,000) 0 (3,000) 0
Other, including unconsolidated
affiliates (7,000) 5,000 (103,000) (5,000)
---------- ---------- ---------- ----------
Loss before income taxes (155,000) (79,000) (60,000) (450,000)
Income taxes (note 5) 0 0 0 0
---------- ---------- ---------- ----------
Net loss ($155,000) ($79,000) ($60,000) ($450,000)
========== ========== ========== ==========
Net loss applicable to common
shareholders ($155,000) ($79,000) ($60,000) ($450,000)
========== ========== ========== ==========
Loss per common share and common
equivalent share (primary EPS) ($0.06) ($0.03) ($0.02) ($0.17)
========== ========== ========== ==========
Loss per common share assuming
maximum dilution (fully diluted EPS) ($0.06) ($0.03) ($0.02) ($0.17)
========== ========== ========== ==========
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 loss, six months ended June 30, 1996 0 0 (60,000) (60,000)
Issuance of 9,600 shares of common stock 0 25,000 0 25,000
------------ ------------ ------------ ------------
Balance June 30, 1996 (Unaudited) $ 3,000 $ 41,471,000 $(32,721,000) $ 8,753,000
============ ============ ============ ============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
For the Six Months Ended
June 30, 1996 June 30, 1995
------------- -------------
Operating activities:
Cash received from customers $8,040,000 $7,551,000
Cash paid to suppliers and employees (7,805,000) (8,134,000)
Interest received 4,000 15,000
Interest paid (140,000) (145,000)
------------- -------------
Net cash provided by (used in) operating
activities 99,000 (713,000)
------------- -------------
Investing activities:
Acquisition of property, plant and equipment (813,000) (447,000)
Proceeds from sale of assets 241,000 286,000
Other investments 33,000 (202,000)
------------- -------------
Net cash used in investing activities (539,000) (363,000)
------------- -------------
Financing activities:
Proceeds from line of credit and term notes 2,263,000 1,926,000
Payments on line of credit and term notes (1,778,000) (1,190,000)
Proceeds from issuance of stock 25,000 (58,000)
------------- -------------
Net cash provided by financing activities 510,000 678,000
------------- -------------
Net increase (decrease) in cash and cash equivalents 70,000 (398,000)
Cash and cash equivalents at beginning of period 220,000 566,000
------------- -------------
Cash and cash equivalents at end of period $290,000 $168,000
============= =============
Reconciliation of Net loss to Net Cash Provided by
(used in) Operating Activities
Net loss ($60,000) ($450,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 625,000 567,000
Gain on sale of assets (86,000) (188,000)
Net interest capitalized on real estate project (66,000) 63,000
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 110,000 12,000
------------- -------------
Net cash provided by operations before changes
in current assets and liabilities 123,000 4,000
Increase in accounts receivable, prepaids and other
current assets from operating activities (53,000) (295,000)
Increase in inventories from operating activities (543,000) (109,000)
Increase (decrease) in accounts payable and accrued
expenses from operating activities 572,000 (313,000)
------------- -------------
Net cash provided by (used in) operating activities $99,000 ($713,000)
============= =============
Supplemental Schedule of Noncash Investing and Financing Activities
Purchase of property, plant and equipment and
intangible assets through issuance of debt
obligations $1,013,027 $472,000
============= =============
Receipt of property, plant, and equipment as part of
settlement of take-or-pay contract $400,000 $0
============= =============
Sale of property for a note receivable $0 $104,000
============= =============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Notes to Financial Statements
June 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 six month periods ended
June 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 June 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) Loss per common share for the three and six-month periods ending June
30, 1996 and 1995, has been computed by dividing the loss by the
weighted average number of common shares outstanding during each
period. Common share equivalents and any potentially dilutive securities
outstanding were not considered in the calculations, as the effects
would have been antidilutive.
(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 carry-
forwards.
At June 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 $ 76,600
Investment tax credit carryforward 1996-2000 1,200
Tax depletion carryforward Indefinite 5,500
--------
Total $ 83,300
========
(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.
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 June 30, 1996 compared to the prior year second quarter
and the six months ended June 30, 1996 compared to the prior year six months.
Such discussion should be read in conjunction with the Company's financial
statements including the related footnotes.
In preparing the discussion and analysis, the Company has presumed
readers have read or have access to the discussion and analysis of the
prior year's results of operations, liquidity and capital resources as
contained in the Company's 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 - June 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:
June 30, December 31, Increase
1996 1995 (Decrease)
----------- ------------ ----------
Cash and cash equivalents $ 290,000 $ 220,000 $70,000
Working capital $ 1,754,000 $1,989,000 $(235,000)
Current ratio 1.41 to 1 1.63 to 1
The Company's ability to generate working capital from operations during
the first six months of 1996 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 R/E Segment and the environmental services portion
of the E/RR Segment. Due to a seasonal decline in these Segments in the
first quarter, operations for the first six months of 1996 utilized working
capital of $416,000 before 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 $1,836,000 were made by the following
Segments in property, plant and equipment during the first six months of 1996,
as reflected in the table on the following page:
Carbon dioxide $1,156,000
Environmental/resource recovery 680,000
----------
$1,836,000
==========
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 $660,000 projected for the last six 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 June 30, 1996 as
compared with the Quarter ended June 30, 1995.
The loss for the quarter ended June 30, 1996 was $155,000, compared to
a loss of $79,000 for the second quarter of the prior year. An improvement
in operating margins for the 1996 quarter was more than 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 second quarter.
The current quarter resulted in an $18,000 improvement over the operating
loss recorded in the year earlier quarter. Although there were revenue gains
in the CO2 and E/RR Segments, this increase was offset by a decrease in revenue
from the R/E Segment.
Operating results of the Company's three Segments are reflected below:
1996 1995
---- ----
Operating profit (loss):
Carbon dioxide $246,000 $139,000
Environmental/resource recovery (139,000) (81,000)
Real estate (8,000) 26,000
-------- --------
Subtotal 99,000 84,000
Other (270,000) (273,000)
-------- --------
Total (171,000) (189,000)
======== ========
The "Other" in the above table reflects primarily general and corporate
activities, as well as other activities and investments of the Company.
Carbon dioxide
Second quarter 1996 operations reflected an operating gain of $246,000
compared to a $139,000 gain for the 1995 second 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 $198,000
in the 1996 second quarter versus an operating profit of $116,000 in 1995.
Revenues from this Segment totaled $3,553,000 for the 1996 second quarter,
a 24% increase over last year's first quarter. The factors contributing to
this improvement included increases in the volume of dry ice sales, in
the sales of equipment, 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.
Environmental/resource recovery
The E/RR Segment generated a larger operating loss in the second quarter
of 1996 as compared with the same period in 1995. The Segment reflected a 7%
increase in revenues, which resulted primarily from the increased activity
of the environmental services companies, as well as by the acquisition of
HDT during the 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 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 results from the sale of zero lot-line homes were hampered by a
decline in sales, as no homes were sold in the second quarter of 1996, as
compared to two homes sold in the second quarter of 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. The Company expects to sell three homes during
the third quarter. As of June 30, 1996, 19 of the original 62 lots remain to
be developed. 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 smaller operating loss for the second quarter of 1995
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 $1,093,000 from $938,000 in the 1995 second
quarter. SG&A expenses incurred by the CO2 Segment during the second quarter
of 1996, which represent 58% of the total SG&A costs, increased by $146,000
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 second quarter of 1996 had an increase in DD&A expense of $33,000,
reflecting additions to property, plant and equipment made during the past
year.
Other income and expenses
Other income and expenses totaled $16,000 for the second quarter of 1996,
down sharply from the $110,000 recorded for such items in the same period of
1995. The decrease was due primarily to a decrease in the gain on sale of
assets of $62,000, as well as a $30,000 impairment provision recorded
against the carrying value of the Company's interest in certain investments,
during the current quarter.
Material changes in results of operations - Six months ended June 30, 1996
as compared with the Six months ended June 30, 1995.
The loss for the six months ended June 30, 1996 was $60,000, compared
to a loss of $450,000 for the first six months of the prior year. The first
half 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
$299,000 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 $ 160,000 $ 110,000
Environmental/resource recovery (492,000) (193,000)
Real estate (16,000) 52,000
----------- -----------
Subtotal (348,000) (31,000)
Other (539,000) (530,000)
----------- -----------
Total $ (887,000) $ (561,000)
=========== ===========
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 six months of 1996 resulted in an operating
profit of $160,000 compared to a $110,000 operating profit for the 1995
first half. 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 six 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 $58,000
in the 1996 first half versus an operating profit of $84,000 in the
comparable 1995 period.
Revenues from this Segment totaled $6,332,000 for the first six months
of 1996, a 24% 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 equipment, 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.
Environmental/resource recovery
A significant decline in revenues generated by the E/RR Segment led
to a decline in operating margins in the first six 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 in the first three
months of the year, 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 intends to pursue the commercial development of this
technology during the remainder of 1996.
Real estate construction and development
The results from the sale of zero lot-line homes were hampered by a
decline in sales, as no homes were sold in the first six months of 1996, as
compared to four 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. The Company expects to sell three homes during
the third quarter. As of June 30, 1996, 19 of the original 62 lots remain
to be developed. 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 half 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 half of 1996 increased to $2,047,000 from $1,809,000 in the 1995
six months. SG&A expenses incurred by the CO2 Segment during the first half
of 1996, which represent 58% of the total SG&A costs, increased by
$252,000 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 half of 1996 had an increase in DD&A expense of $58,000,
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 six
months of 1996 increased significantly compared to the same period in 1995.
As previously mentioned, the Company benefited in the first six 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 $102,000, as well as
a $120,000 impairment provision recorded against the carrying value of the
Company's interest in certain investments.
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 accom-
panying financial statements.
Item 4. Submission of Matters to a Vote of Security Holders.
Commencing on May 3, 1996, proxies were solicited on behalf of the Board
of Directors of the Company in connection with the Company's Annual Meeting
of Stockholders.
(a) This annual meeting was held on June 3, 1996.
(b) The business of the meeting included the election of W. M. Beard
and W. R. Plugge to serve as directors for three year terms or
until their successors have been elected and qualified.
In addition, the following persons continue to serve as directors for
terms expiring on the dates indicated or until their successors have been
elected and qualified:
Allan R. Hallock (1997) Ford C. Price (1997)
Herb Mee, Jr. (1998)
In addition to the above, Michael E. Carr, elected in 1994 to serve as
a director by the preferred stockholders, will continue to serve until his
successor has been elected and qualified.
The table below sets forth the voting for election of directors:
Votes Votes Votes Broker
Name of Nominee For Against Withheld Abstentions Non-Votes
--------------- --- ------- -------- ----------- ---------
W. M. Beard 3,041,175 -0- 3,080 -0- -0-
W. R. Plugge 3,041,160 -0- 3,095 -0- -0-
(c) The business of the meeting also included a proposal to approve
The Beard Company Deferred Stock Compensation Plan which was adopted
by the Board of Directors in October 1995 subject to stockholder
approval. The table below sets forth the voting for such proposal:
Votes Votes Broker
For Against Abstentions Non-Votes
--- ------- ----------- ---------
3,014,975 22,300 6,980 -0-
(d) At the meeting the stockholders also voted to approve the
appointment of KPMG Peat Marwick LLP as independent
certified public accountants for fiscal 1996.
Votes Votes Votes Broker
For Against Withheld Abstentions Non-Votes
--- ------- -------- ----------- ---------
3,024,986 15,142 -0- 4,127 -0-
________
(1) 3,044,255 votes (95.20% of those eligible) were cast at the meeting,
including 2,581,810 votes (94.39%) by the common stockholders and 462,445 votes
(100,00%) by the preferred stockholders.
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:
4.1 Third Amendment to Loan Agreement by and among Registrant,
Carbonic Reserves ("Carbonics") and Liberty Bank and Trust
Company of Oklahoma City, N.A. ("Liberty"), dated effective
April 30, 1996.
4.2 Renewal Promissory Note from Registrant to Liberty, dated
April 30, 1996.
10.1 Subscription Agreement by and between Cibola Corporation
("Cibola") and Registrant, dated April 10, 1996.
10.2 Nonrecourse Secured Promissory Note from Registrant to Cibola,
dated April 10, 1996.
10.3 Security Agreement by and between Cibola and Registrant, dated
April 10, 1996.
10.4 Tax Sharing Agreement by and among Registrant, Cibola and the
Cibola shareholders, dated April 10, 1996.
10.5 Call Option Agreement by and among Registrant and the Cibola
shareholders, dated April 10, 1996.
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: August 9, 1996
Herb Mee, Jr.
President and Chief Financial Officer
CINDY JANKA
Date: August 9, 1996
Cindy Janka
Controller and
Chief Accounting Officer
INDEX TO EXHIBITS
Exhibit
No.
4.1 Third Amendment to Loan Agreement Filed herewith electronically
by and among Registrant, Carbonic
Reserves ("Carbonics") and Liberty
Bank and Trust Company of Oklahoma
City, N.A. ("Liberty"), dated
effective April 30, 1996
4.2 Renewal Promissory Note from Filed herewith electronically
Registrant to Liberty, dated
April 30, 1996
10.1 Subscription Agreement by and Filed herewith electronically
between Cibola Corporation ("Cibola")
and Registrant, dated April 10,
1996
10.2 Nonrecourse Secured Promissory Note Filed herewith electronically
from Registrant to Cibola, dated
April 10, 1996
10.3 Security Agreement by and between Filed herewith electronically
Cibola and Registrant, dated April
10, 1996
10.4 Tax Sharing Agreement by and among Filed herewith electronically
Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996
10.5 Call Option Agreement by and among Filed herewith electronically
Registrant and the Cibola share-
holders, dated April 10, 1996
27 Financial Data Schedule Filed herewith electronically