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 March 31, 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 March 31, 1997.
Common Stock $.001 par value - 2,799,074
THE BEARD COMPANY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1997 (Unaudited) and December 31, 1996
Statements of Operations - Three Months ended March 31, 1997 and 1996
(Unaudited)
Statements of Shareholders' Equity, Year ended December 31, 1996
and Three Months ended March 31, 1997 (Unaudited)
Statements of Cash Flows - Three Months ended March 31, 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
March 31, 1997 (Unaudited) and December 31, 1996 and for the
Three Months Ended March 31, 1997, and 1996 (Unaudited)
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
THE BEARD COMPANY AND SUBSIDIARIES
Balance Sheets
March 31, 1997 (Unaudited) and December 31, 1996
March 31, December 31,
ASSETS 1997 1996
--------------- -------------
Current assets:
- --------------
Cash and cash equivalents $ 240,000 $ 375,000
Accounts receivable, less allowance for
doubtful receivables of $72,000 in 1997
and $71,000 in 1996 2,396,000 2,405,000
Inventories 998,000 2,003,000
Prepaid expense 452,000 442,000
Other assets 72,000 73,000
--------------- --------------
Total current assets 4,158,000 5,298,000
---------------- --------------
Investments and other assets 1,679,000 1,710,000
Property, plant and equipment, at cost 17,239,000 16,793,000
Less accumulated depreciation,
depletion and amortization 8,416,000 8,094,000
--------------- --------------
Net property, plant and equipment 8,823,000 8,699,000
--------------- --------------
Intangible assets, at cost 4,330,000 4,305,000
Less accumulated amortization 3,571,000 3,539,000
--------------- --------------
Net intangible assets 759,000 766,000
--------------- --------------
$ 15,419,000 $ 16,473,000
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
- -------------------
Trade accounts payable $ 1,575,000 $ 1,395,000
Accrued expense and other liabilities 426,000 609,000
Short-term debt - 639,000
Current maturities of long-term debt 776,000 910,000
-------------- ---------------
Total current liabilities 2,777,000 3,553,000
-------------- ---------------
Long-term debt less current maturities 3,067,000 2,911,000
Minority interest in consolidated
subsidiaries 143,000 153,000
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
Common shareholders' equity:
- ---------------------------
Common stock of $.001 par value per share;
10,000,000 shares authorized;
2,799,074 shares issued and outstanding
in 1997 and 1996 3,000 3,000
Capital in excess of par value 41,629,000 41,629,000
Accumulated deficit (33,400,000) (32,976,000)
--------------- --------------
Total common shareholders'
equity 8,232,000 8,656,000
--------------- --------------
Commitments and contingencies (note 8) $ 15,419,000 $ 16,473,000
=============== ==============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Operations
(Unaudited)
For the Three Months Ended
---------------------------------
March 31, March 31,
1997 1996
------------ ------------
Revenues:
Carbon dioxide $ 2,918,000 $ 2,779,000
Environmental/resource recovery 1,169,000 350,000
Other 35,000 17,000
------------ ------------
4,122,000 3,146,000
Expenses:
Carbon dioxide 2,053,000 2,064,000
Environmental/resource recovery 995,000 527,000
Selling, general and administrative 1,031,000 947,000
Depreciation, depletion and
amortization 361,000 302,000
Other 7,000 14,000
------------ ------------
4,447,000 3,854,000
Operating profit(loss):
Carbon dioxide 79,000 (86,000)
Environmental/resource recovery (175,000) (353,000)
Other (229,000) (269,000)
------------ ------------
(325,000) (708,000)
Other income (expense):
Interest income 3,000 2,000
Interest expense (88,000) (46,000)
Gain on sale of assets 53,000 12,000
Gain on take-or-pay contract settlement
(note 6) - 939,000
Other, including equity in net loss
of unconsolidated affiliates (77,000) (96,000)
Minority interest in operations of
consolidated subsidiaries 10,000 -
------------ ------------
Earnings (loss) from continuing operations
before income taxes (424,000) 103,000
Income taxes (note 7) - -
------------ ------------
Earnings (loss) from continuing operations $ (424,000) $ 103,000
Loss from discontinued real
estate operations (note 2) - (8,000)
------------ ------------
Net earnings (loss) $ (424,000) $ 95,000
============ ============
Net earnings (loss) attributable to common
shareholders $ (424,000) 95,000
============ ============
Earnings (loss) per common share and
common equivalent share (primary EPS)
(note 5):
Earnings (loss) from continuing
operations $ (0.15) $ 0.03
Loss from discontinued operations - -
Net earnings (loss) $ (0.15) $ 0.03
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, 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, three months ended March 31, 1997 - - (424,000) (424,000)
---------- ------------- -------------- --------------
Balance, March 31, 1997 $ 3,000 $ 41,629,000 $ (33,400,000) $ 8,232,000
========== ============= ============== ==============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
-----------------------------------
March 31, 1997 March 31, 1996
-------------- --------------
Operating activities:
Cash received from customers $ 5,332,000 $ 3,361,000
Cash paid to suppliers and employees (4,426,000) (3,812,000)
Cash received from settlement of
take-or-pay contract - 539,000
Interest received 3,000 1,000
Interest paid (136,000) (47,000)
----------- -----------
Net cash provided by operating
activities 773,000 42,000
----------- -----------
Investing Activities:
Acquisition of property, plant
and equipment (369,000) (341,000)
Proceeds from sale of assets 55,000 149,000
Other investments 16,000 (8,000)
----------- -----------
Net cash used in investing
activities (298,000) (200,000)
----------- -----------
Financing Activities:
Proceeds from line of credit and
term notes 985,000 1,085,000
Payments on line of credit and
short-term notes (1,595,000) (891,000)
Proceeds from issuance of stock - 10,000
----------- -----------
Net cash provided by (used in)
financing activities (610,000) 204,000
----------- -----------
Net increase (decrease) in cash and
cash equivalents (135,000) 46,000
Cash and cash equivalents at beginning
of period 375,000 220,000
----------- -----------
Cash and cash equivalents at end of
period $ 240,000 $ 266,000
=========== ===========
Continued
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
Reconciliation of Net earnings (loss) to Net Cash Provided by Operating
- ----------------------------------------------------------------------
Activities
- ----------
For the Three Months Ended
-----------------------------------
March 31, 1997 March 31, 1996
-------------- --------------
Net earnings (loss) $ (424,000) $ 95,000
Adjustments to reconcile net earnings
(loss) to net cash provided by operating
activities:
Depreciation, depletion and amortization 361,000 303,000
Gain on sale of assets (53,000) (12,000)
Receipt of equipment as part of
settlement of take-or-pay contract - (400,000)
Interest and other costs (capitalized)
recognized on real estate project 464,000 (30,000)
Other, including minority interest in
consolidated subsidiaries 83,000 99,000
------------ -------------
Net cash provided by operations
before changes in current assets
and liabilities 431,000 55,000
(Increase) decrease in accounts
receivable, prepaids and other
current assets (3,000) 53,000
(Increase) decrease in inventories 541,000 (258,000)
Increase (decrease) in accounts
payable, accrued expenses and other
liabilities (196,000) 192,000
------------ -------------
Net cash provided by operating
activities $ 773,000 $ 42,000
============ =============
Supplemental Schedule of Noncash Investing and Financing Activities
- -------------------------------------------------------------------
Purchase of property, plant and equipment
and intangible assets through issuance
of debt obligations $ - $ 99,000
============ =============
Receipt of equipment as part of
settlement of take-or-pay contract $ - $ 400,000
============ =============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Notes to Financial Statements
March 31, 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
10K.
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 manage-
ment, necessary for a fair statement of the results for the interim periods
presented.
The results of operations for the three-month period ended March 31, 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 carbon
dioxide ("CO2") segment, comprised of (a) the manufacture and distribution
of dry ice (solid CO2) and (b) the production of CO2; and (2) the en-
vironmental/resource recovery ("E/RR") segment, consisting of environmental
services and resource recovery activities. The Company also operated
in the real estate ("R/E") segment, consisting of real estate construction
and development, which was discontinued in January, 1997. 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
asset's recorded values as of December 31, 1996.
Results of operations of the R/E segment for the three months ended March
31, 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 three months ended March 31, 1997, the Company disposed of real
estate construction and development assets for $1,196,000 which approximated
the Company's estimated disposition values of these assets.
As of March 31, 1997, the significant assets of the R/E segment included two
speculative homes valued at approximately $574,000.
(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, 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 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
the Company's common stock subsequent to the acquisition. 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 March 31, 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.
(5) EARNINGS (LOSS) PER SHARE
Loss per common share for the three-month period ended March 31, 1997, has
been computed by dividing the loss by the weighted average number of common
shares outstanding during the quarter. Common share equivalents and any
potentially dilutive securities outstanding were not considered in the March
31, 1997, calculations, as the effects would have been antidilutive.
Primary earnings per common share for the three-month period ended March 31,
1996, were 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 the effect of shares issuable upon exercise of incentive
and non-qualified stock options using the treasury stock method. Fully
diluted earnings per share include the potential dilution of the earnings
available to common stockholders as if the preferred stock was converted to
common stock. The calculation includes the weighted average number of
shares of common shares outstanding, the common stock equivalents, and the
common shares that would result from the conversion of the preferred shares.
The table on the following page 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 statement of operations:
THE BEARD COMPANY AND SUBSIDIARIES
Notes to Financial Statements
March 31, 1997 and 1996
(Unaudited)
For the Three Months Ended
--------------------------------
March 31, March 31,
1997 1996
--------- ---------
Primary EPS:
Weighted average of common
shares outstanding 2,799,074 2,734,094
Options considered to be
common stock equivalents - 17,752
--------- ---------
2,799,074 2,751,846
========= =========
(6) SETTLEMENT OF TAKE-OR-PAY CONTRACT
In February 1996, the Company negotiated a settlement of a take-or-pay con-
tract under which a customer was obligated to purchase certain volumes of
liquid CO2. As a result of the settlement, the Company received $539,000
of cash and assets with an estimated fair value of $400,000 and the Company
released the party of its contractual obligation to purchase the contracted
liquid CO2 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
Standard No. 109, Accounting for Income Taxes ("SFAS No. 109"), the
Company's net deferred tax asset is being carried at zero book value, which
reflects the uncertainties of the Company's utilization of the net
deductible timing differences. There is no provision for income taxes in
1997 or 1996 due to the availability of net operating losses and other
carryforwards.
At March 31, 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 carry-
forwards 2001-2011 $ 67,388
Investment tax credit carryforward 1997-2000 679
Tax depletion carryforward Indefinite 5,500
---------- ----------
Total $ 73,567
==========
(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.
(9) CHANGE IN CONTROL COMPENSATION AGREEMENTS
In January 1997, the Company's dry ice subsidiary entered into Change of
Control Compensation agreements with its President and two other employees.
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 opera-
tions for the quarter ended March 31, 1997 compared to the prior year
first quarter. 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
carbon dioxide ("CO2") Segment, comprised of (a) the manufacture and
distribution of dry ice (solid CO2) and (b) the production of CO2; and
(2) the environmental/resource recovery ("E/RR") Segment, consisting of
environmental services and resource recovery activities. 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 - MARCH 31, 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:
March 31, December 31, Increase
1997 1996 (Decrease)
--------- ------------ --------
Cash and cash equivalents $ 240,000 $ 375,000 $(135,000)
Working capital $1,381,000 $1,745,000 $(364,000)
Current ratio 1.50 to 1 1.49 to 1
The Company's ability to generate working capital from operations during the
first quarter of 1997 was adversely affected by operating losses from the E/RR
Segment and the low sales volumes of the CO2 Segment. The Company's core
operations are affected by seasonality. 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/resource recovery
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
quarter provided cash of $996,000 and working capital of $220,000. 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 operations for the first three months
of 1997 amounted to $431,000, a strong improvement over the $55,000 generated in
the 1996 quarter.
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 the price and demand for
dry ice, a continuing source of economical CO2, and continuing private and
governmental demand for environmental services. Despite these uncertainties,
the Company anticipates that its cash flow from operations and continuing
availability of credit on a basis similar to that experienced to date will be
sufficient to meet its planned operating costs and capital spending require-
ments.
Additional capital expenditures of $369,000 were made by the following
Segments in property, plant and equipment during the first three months of
1997:
Carbon dioxide $272,000
Environmental/resource recovery 59,000
Other 38,000
--------
$369,000
========
The CO2 Segment's line of credit will be sufficient to fund its presently
foreseeable capital expenditure requirements, including the $713,000 projected
for the last nine months of 1997. The Company's other credit lines and cash
flow will be adequate to fund the $449,000 of capital expenditures projected for
the rest of the Company for the last nine months of the year.
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 MARCH 31, 1997 AS
COMPARED WITH THE QUARTER ENDED MARCH 31, 1996.
The loss for the first quarter of 1997 was $424,000, compared to earnings
of $95,000 for the same time period in 1996. There was a significant
improvement in operating margins across the board; the CO2 Segment improved by
$165,000, the E/RR Segment by $178,000, and Other by $40,000. As a
result, the operating loss for the current quarter decreased 54% to $325,000
versus $708,000 a year ago. The first quarter of 1996 was favorably
impacted by a $939,000 gain from the settlement of a take-or-pay contract in
the CO2 Segment.
Operating results of the Company's two Segments are reflected below:
1997 1996
---- ----
OPERATING PROFIT (LOSS):
Carbon dioxide $79,000 $(86,000)
Environmental/resource
recovery (175,000) (353,000)
---------- ----------
Subtotal (96,000) (439,000)
Other (229,000) (269,000)
---------- ----------
(325,000) (708,000)
========== ==========
The "Other" in the above table reflects primarily general and corporate
activities, as well as other activities and investments of the Company.
CARBON DIOXIDE
First quarter 1997 operations reflected an operating profit of $79,000
compared to an $86,000 loss for the 1996 first 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 operating loss
for the dry ice component of this Segment decreased to $6,000 in 1997 from
$141,000 in 1996 as a result of increased sales and lower operating costs.
Revenues from this Segment totaled $2,918,000 for the 1997 first quarter, a
5% 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 par-
tially offset by increases in expenses associated with advertising and sales,
insurance, and an incentive-sales arrangement for employees.
ENVIRONMENTAL/RESOURCE RECOVERY
A significant increase in revenues generated by the E/RR Segment led to a
sharply reduced operating loss by this Segment in the first quarter of 1997 as
compared to the same period in 1996. This increase in revenue was primarily
caused by an increase in environmental services activity and the operation of
the Horizontal Drilling rigs acquired in the acquisition of Horizontal Drilling
Technologies, Inc. ("HDT") in May, 1996 (see Note 3 to the Financial
Statements). This increase was offset somewhat, however, by a decline in the
revenues generated by resource recovery activities due to the completion in
February 1996 of a contract with the U. S. Department of Energy 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 1997.
OTHER ACTIVITIES
Other operations, consisting primarily of general and corporate
activities, generated a slightly smaller operating loss for the first quarter
of 1997 as compared to the same period last year. A slight decrease in the
revenues generated by the corporate group was more than offset by a larger
decrease in corporate overhead expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company's selling, general and administrative expenses ("SG&A") in the
current quarter increased to $1,031,000 from $947,000 in the 1996 first
quarter. This resulted primarily from an increase in the SG&A of the E/RR
Segment as a result of including the operations of HDT (see Note 3 to the
Financial Statements) which added $94,000 to SG&A.
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSES
The first quarter of 1997 had a minor increase in DD&A expense of $59,000,
reflecting additions to property, plant and equipment made during the past
year.
OTHER INCOME AND EXPENSES
The other income and expenses for the first quarter of 1997 netted to a
$99,000 loss compared to $811,000 net income for the same period in 1996. As
previously mentioned, the Company benefited in the first quarter of 1996 from
the settlement of a take-or-pay contract in the CO2 Segment. This settle-
ment resulted in a gain of $939,000. The Company realized a gain of
$53,000 on the sale of assets during the first quarter of 1997 compared to
$12,000 for the same period in 1996.
DISCONTINUED OPERATIONS
As previously noted, 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 these homes is under contract for closing on May 30, 1997.
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
Stock Purchase Agreement. Accordingly, one-third of future "consolidated net
income" will accrete directly to preferred stockholders and reduce earnings per
common share. As a result of these redemption requirements, the payment of any
dividends to the common stockholders in the near future is very unlikely. See
Note 2 to the accompanying financial statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed with this Form 10-Q and are identified
by the numbers indicated:
4 Promissory Note from Registrant to the Trustees of the William M.
Beard and Lu Beard 1988 Charitable Unitrust, dated March 7, 1997.
10 Form of Change in Control Compensation Agreement dated as of
January 24, 1997, by and between Carbonic Reserves and three em-
ployees.
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) May 13, 1997 Herb Mee, Jr., President and
Chief Financial Officer
JACK A. MARTINE
(Date) May 13, 1997 Jack A. Martine, Controller and
Chief Accounting Officer
THE BEARD COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
Forming a part of Form 10-Q Quarterly Report
to the U.S. Securities and Exchange Commission
Exhibit
Number Brief Description Method of filing
- ------- ----------------- ----------------
4 Promissory Note from Registrant
to the Trustees of the William M.
Beard and Lu Beard 1988 Charitable
Unitrust, dated March 7, 1997 Filed herewith electronically
10 Form of Change of Control Com-
pensation Agreement dated as of
January 24, 1997, by and between
Carbonic Reserves and three
employees Filed herewith electronically
27 Financial Data Schedule Filed herewith electronically