UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 13, 1997
THE BEARD COMPANY
(Exact name of registrant as specified in its charter)
OKLAHOMA 0-12396 73-0970298
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
ENTERPRISE PLAZA
5600 N. MAY AVENUE, SUITE 320
OKLAHOMA CITY, OKLAHOMA 73112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 842-2333
N/A
(Former name or former address, if changed since last report)
ITEM 2. DISPOSITION OF ASSETS.
The Beard Company (the "Company") owns 85% of the outstanding common
stock of Carbonic Reserves ("Carbonics") and Clifford H. Collen ("Collen") (the
Company and Collen are collectively referred to as the "Shareholders") owns 15%.
In addition, and prior to the transaction, the Company owned 14,859 shares of
Carbonics' redeemable preferred stock, $1,000 redemption value per share, which
constituted all of the issued and outstanding preferred stock of Carbonics. The
proceeds, described below, were used by Carbonics to repay intercompany obliga-
tions and to redeem its outstanding preferred stock with the balance paid as a
dividend to the Company to be used to commercially develop existing assets. The
Company received $18.375 million, described below, plus $670,000 cash of
Carbonics not purchased by the buyer. Collen is the president and chief execu-
tive officer, and is a director of Carbonics, but he is neither an officer
nor a director of the Company.
On October 13, 1997 Carbonics sold to Airgas Carbonic Reserves, Inc.,
("Airgas") substantially all of Carbonics' operating assets used in the
production and distribution of dry ice including, but not limited to:
(1) the tangible assets of Carbonics, all accounts receivable, notes
receivable, deposits, prepaid expenses, fixed assets, real property and in-
tangible properties;
(2) all contract rights, causes of action, claims, refunds and demands of
whatever nature;
(3) all books and records relating to the business of Carbonics (except
minute books and stock record books);
(4) all rights of Carbonics in and to all of its trademarks and trade
names, including without limitation, the name "Carbonic Reserves," and all
intellectual property information of Carbonics; and
(5) all of Carbonics' intangibles and goodwill.
Excluded from the assets sold were cash and cash equivalents, notes
receivable from the Company and affiliates and tax refunds for periods prior to
the closing date.
In consideration for the assets sold, Carbonics received cash at closing
in the amount of $18.375 million. In addition, 150 days after the closing date
Carbonics will receive an additional amount equal to the difference between $1
million and the sum of (i) uncollected accounts receivable in excess of
Carbonics' allowance for bad debts, (ii) the amount, if any, by which notes
payable to third parties which are assumed by Airgas exceed the increase in the
value of fixed assets between December 31, 1996 and closing, and (iii) any
other indemnity claims that arise during the 150 day period. Also, Airgas
assumed liabilities of Carbonics for (i) trade accounts payable and accrued
expenses incurred in the ordinary course of business (other than those
specifically excluded), (ii) notes payable to third parties as reflected on
Carbonics' December 31, 1996 balance sheet and those incurred thereafter in the
ordinary course and in a manner consistent with past practice, and (iii) the
obligations of future performance under the contracts and liabilities being
assumed under the agreement, to the extent such liabilities have arisen in the
ordinary course of Carbonics' business. Airgas did not assume any liabilities
for employee matters, including payroll taxes; debt or other balances payable
to the Shareholders or other related parties; tax liabilities of Carbonics or
the Shareholders; or environmental liabilities.
There is no affiliation between the Company, Carbonics or Airgas.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Businesses Acquired.
-------------------------------------------
Not applicable.
(b) Pro Forma Financial Information.
-------------------------------
The following pro forma financial statements are included in this Form 8-K:
Unaudited Pro Forma Condensed Balance Sheet as of June 30, 1997
Unaudited Pro Forma Condensed Statement of Operations for the Six Months
Ended June 30, 1997
Unaudited Pro Forma Condensed Statement of Operations for the Year Ended
December 31, 1996
Notes to Unaudited Pro Forma Financial Statements
PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements (the
"Pro Forma Financial Statements ") of Beard are based upon and should be read
in conjunction with the historical financial statements of Beard which are
included in Beard's Annual Report on Form 10K/A for the year ended December 31,
1996 and Form 10Q/A for the three months and six months ended June 30, 1997
which are incorporated by reference to the Proxy Statement filed on September
11, 1997. The Unaudited Pro Forma Condensed Balance Sheet is presented as if the
Asset Sale had occurred on June 30, 1997. The Unaudited Pro Forma Condensed
Statements of Operations for the year ended December 31, 1996 and for the six
months ended June 30, 1997 reflect the operations of Carbonics as discontinued
operations and give effect to the Asset Sale as if it had occurred at the
beginning of each respective period.
The unaudited pro forma condensed financial statements are intended for
informational purposes only, have been prepared based on assumptions set forth
in the accompanying notes, and are not necessarily indicative of the financial
condition or results of operations had the Asset Sale occurred as of the dates
indicated and are not intended to be indicative of future results of
operations. Any differences between assumptions used to prepare the Pro Forma
Financial Statements and the amounts to be received or disposed of at
consummation of the Asset Sale are not expected to be material to the
accompanying Pro Forma Financial Statements.
THE BEARD COMPANY AND SUBSIDIARIES
Pro Forma Condensed Balance Sheet June 30, 1997
(In thousands)
(UNAUDITED)
BEARD BEARD
ASSETS HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Current assets:
Cash and cash equivalents $ 52 $ 19,375 (a) $ 19,427
Accounts receivable, net 2,803 (1,570) (a) 1,233
Other current assets 1,098 (769) (a) 329
-------- -------- --------
Total current assets 3,953 17,036 20,989
Investments and other assets 1,675 (42) (a) 1,633
Property, plant and equipment, net 9,225 (6,784) (a) 2,441
Intangible assets, net 803 (288) (a) 515
-------- -------- --------
$ 15,656 $ 9,922 $ 25,578
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable and other
liabilities $ 2,122 $(1,264) (a) $ 2,536
428 (b)
1,250 (c)
Current maturities of long-term debt 921 (400) (a) 521
-------- ------- --------
Total current liabilities 3,043 14 3,057
Long-term debt less current maturities 3,037 (1,043) (a) 1,994
Minority interest in consolidated subsidiaries 123 - 123
Redeemable preferred stock 1,200 3,500 (d) 4,700
Total common shareholders' equity 8,253 12,629 (a) 15,704
(428) (b)
(1,250) (c)
(3,500) (d)
-------- ------- --------
$ 15,656 $ 9,922 $ 25,578
======== ======= ========
See accompanying notes to unaudited pro forma condensed financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Pro Forma Condensed Statement of Operations
Six Months Ended June 30, 1997
(In thousands)
(UNAUDITED)
BEARD BEARD
HISTORICAL ADJUSTMENTS PRO
FORMA
---------- ----------- ---------
REVENUES:
Carbon dioxide $6,809 $(6,553) (e) $ 256
Environmental/resource recovery 2,421 - 2,421
Other 127 - 127
------ ------- ------
9,357 (6,553) 2,804
EXPENSES:
Carbon dioxide (exclusive of depreciation,
depletion and amortization shown separately below) 4,554 (4,500) (e) 54
Environmental/resource recovery (exclusive of depreciation,
depletion and amortization shown separately below) 2,134 - 2,134
Selling, general and administrative 2,212 (1,196) (e) 1,016
Depreciation, depletion and amortization 734 (533) (e) 201
Other 16 - 16
------ ------- ------
9,650 (6,229) 3,421
OPERATING PROFIT (LOSS):
Carbon dioxide 514 (324) (e) 190
Environmental/resource recovery (340) - (340)
Other (467) - (467)
------ ------- ------
(293) (324) (617)
OTHER INCOME (EXPENSE):
Interest expense (187) 66 (e) (121)
Other 102 (5) (e) 97
------ ------- ------
Loss from continuing operations before income taxes (378) (263) (641)
Income taxes from continuing operations (25) 8 (e) (17)
------ ------- ------
Loss from continuing operations (403) 255 (658)
Earnings from discontinued operations
(less applicable income taxes of $8) - 255 (f) 255
------ ------- ------
Net loss $ (403) $ - $ (403)
====== ======= ======
Net loss per common share:
Loss from continuing operations $(0.14) $(0.23)
Earnings from discontinued operations - 0.09
------ ------
Net loss $(0.14) $(0.14)
====== ======
Weighted average common shares outstanding 2,799,000 2,799,000
========= =========
See accompanying notes to unaudited pro forma condensed financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Pro Forma Condensed Statement of Operations
Year Ended December 31, 1996
(In thousands)
(UNAUDITED)
BEARD BEARD
HISTORICAL ADJUSTMENTS PRO
FORMA
---------- ----------- ---------
REVENUES:
Carbon dioxide $ 13,608 $(13,307) (e) $ 301
Environmental/resource recovery 3,009 - 3,009
Other 66 - 66
--------- -------- -------
16,683 (13,307) 3,376
EXPENSES:
Carbon dioxide (exclusive of depreciation,
depletion and amortization shown
separately below) 9,478 (9,381) (e) 97
Environmental/resource recovery (exclusive
of depreciation, depletion and amortization shown
separately below) 2,642 - 2,642
Selling, general and administrative 4,079 (2,215) (e) 1,864
Depreciation, depletion and amortization 1,309 (1,008) (e) 301
Other 77 - 77
--------- -------- -------
17,585 (12,604) 4,981
OPERATING PROFIT (LOSS):
Carbon dioxide 887 (703) (e) 184
Environmental/resource recovery (757) - (757)
Other, principally corporate (1,032) - (1,032)
--------- -------- -------
(902) (703) (1,605)
OTHER INCOME (EXPENSE):
Interest expense (259) 118 (e) (141)
Gain on sale of assets 171 (6) (e) 165
Gain on take-or-pay contract settlement 939 (939) (e) -
Other (89) (5) (e) (94)
--------- -------- -------
Loss from continuing operations before income taxes (140) (1,535) (1,675)
Income taxes from continuing operations - - -
--------- -------- -------
Loss from continuing operations (140) (1,535) (1,675)
Earnings(loss) from discontinued operations (175) 1,535 (f) 1,360
--------- -------- -------
Net loss $ (315) $ - $ (315)
========= ======== =======
Net loss per common share:
Loss from continuing operations $ (0.05) $ (0.61)
Earnings (loss) from discontinued operations (0.06) 0.50
--------- -------
Net loss $ (0.11) $ (0.11)
========= =======
Weighted average common shares outstanding 2,756,000 2,756,000
========= =========
See accompanying notes to unaudited pro forma condensed financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(a) Pursuant to the Agreement, Airgas is purchasing substantially all of
the assets (excluding cash and cash equivalents, notes receivable from Beard or
related parties, and deferred tax assets) of Carbonics, an 85%-owned subsidiary
of Beard, and will assume certain liabilities of Carbonics as stated on its
December 31, 1996 financial statements or incurred in the ordinary course of
business thereafter (excluding any tax liabilities, employee related
liabilities, indebtedness to Beard or related parties, or environmental
liabilities of Carbonics).
Accordingly, the following adjustments have been made to Beard's
historical June 30, 1997 balance sheet to reflect the sale of the assets as if
the sale had occurred on June 30, 1997 as follows (in thousands):
Cash proceeds $19,375
Liabilities to be assumed:
Trade accounts payable 1,264
Current maturities of long-term debt 400
Long-term debt 1,043
-------
Total sales price 22,082
Accounts receivable, net (1,570)
Other current assets (769)
Investments and other assets (42)
Property, plant and equipment, net (6,784)
Intangible assets, net (288)
-------
Proceeds greater than costs $12,629
=======
The Agreement provides that $1 million of the purchase price (the
"Holdback") will be held back for a maximum of 150 days after closing of the
transaction. The Holdback is subject to offset for (i) any accounts receivable
that have not been collected within 120 days after the closing to the extent
such receivables exceed the amount of the allowance for uncollectible accounts
on Carbonics' balance sheet, (ii) the amount by which notes payable to third
parties at closing exceeds the amount of such notes on December 31, 1996, to
the extent such excess is greater than the increase in the value of fixed
assets during such period; and (iii) any indemnity claims as defined in the
Agreement. Beard expects little, if any, of such amount will be ultimately
held back.
(b) For income tax purposes, the consummation of the Asset Sale will
result in taxable income to Beard. The sale of assets to Airgas will result in
a taxable gain equivalent to the difference between the fair market value of
the assets transferred and the tax basis of those assets. In addition, the
assumption by Airgas of certain liabilities will result in taxable income
equivalent to the total liabilities assumed by Airgas. Beard's net operating
loss carryforwards will offset such taxable income. Accordingly, Beard expects
that (i) there will be no federal income tax liability; (ii) there will be
alternative minimum tax liability; and (iii) there will be state income tax
liabilities resulting from the Asset Sale. Pro Forma adjustment (b) reflects
estimated state income taxes of approximately $213,000 of Carbonics and federal
alternative minimum tax of Beard of approximately $215,000 as a result of the
Asset Sale.
(c) Reflects the accrual of (i) $1 million to Collen for his 15% common
stock ownership in Carbonics plus bonuses and termination fees due, (ii)
$200,000 to other key employees of Carbonics and (iii) $50,000 to cover costs
related to the Proxy Statement.
(d) Reflects the expected redemption in March of 1998 of approximately
$3,500,000 of Beard mandatorily redeemable preferred stock primarily as a
result of the gain to Beard on the Asset Sale. Assuming a redemption in such
amount there would be 55,156 shares of Beard preferred stock outstanding. The
Beard preferred stock as of December 31, 1996 had a redemption value of
$9,015,586 and is mandatorily redeemable from one-third of Beard's consolidated
net income. To the extent not redeemed by December 31, 2002, the Beard
preferred stock would be convertible by the holders thereof into as much as
14.09% of the common stock of Beard on a fully diluted basis on January 1,
2003. For purposes of the pro forma presentation, the Beard preferred stock
has been recorded at the estimated fair value at December 31, 1996, plus the
estimated redemption amount of $3,500,000 expected to be paid in March of 1998.
(e) Reflects the elimination of operations of Carbonics for the year
ended December 31, 1996, and for the six months ended June 30, 1997.
(f) Reflects the reclassification of the results of operations of
Carbonics as discontinued operations for each period.
(g) The unaudited pro forma condensed balance sheet includes, and the
unaudited pro forma condensed statements of operations exclude the gain from
the Asset Sale, estimated to be $12,200,000, and the accretion in the carrying
value of the Beard mandatorily redeemable preferred stock of $3,500,000 ($1.27
per share for the six months ended June 30, 1997, and $1.27 per share for the
year ended December 31, 1996, increase in the net loss or decrease in the net
income per share attributable to common shareholders), reflecting the one-third
of consolidated net income that accretes directly to preferred shareholders,
and the one-time charges of $1,250,000 for Collen's 15% common stock ownership
in Carbonics, bonuses, termination fees and transaction costs. The gain, the
dilutive effect of the accretion in the carrying value of the Beard mandatorily
redeemable preferred stock and the one-time charges will be included in Beard's
consolidated financial statements for the year ending December 31, 1997.
(c) Exhibits.
--------
The following exhibit is filed with this Form 8-K and is identified by
the number indicated:
Exhibit No.
- ----------
2(a) Asset Purchase Agreement by and among Airgas Carbonic Reserves,
Inc. ("Airgas" or "Purchaser"), and The Beard Company ("the Company"),
Carbonic Reserves ("Carbonics" or "Seller"), and Clifford H. Collen,
Jr. ("Collen"). The Company and Collen are referred to collectively
as the "Shareholders." (This Exhibit has been previously filed as
Exhibit A, filed on September 11, 1997 to Registrant's Proxy State-
ment dated September 12, 1997, and same is incorporated by reference).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
THE BEARD COMPANY
(Registrant)
By HERB MEE, JR.
Dated: October 28, 1997 Herb Mee, Jr., President