Table of Contents

 

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 quarterly period ended June 30, 2013

 

or

 

[   ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

Commission File Number 1-5103

 

 

BARNWELL INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

DELAWARE

 

72-0496921

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

1100 Alakea Street, Suite 2900, Honolulu, Hawaii

96813

 

 

(Address of principal executive offices)

(Zip code)

 

 

(808) 531-8400

(Registrant’s telephone number, including area code)

 

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.                                                                                                                                             S Yes     o No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                                                                                            S Yes     o No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

o

Accelerated filer o

Non-accelerated filer

o (Do not check if a smaller reporting company)

Smaller reporting company S

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                                                                                                                                 o Yes     S No

 

As of August 9, 2013 there were 8,277,160 shares of common stock, par value $0.50, outstanding.

 



Table of Contents

 

BARNWELL INDUSTRIES, INC.

AND SUBSIDIARIES

 

INDEX

 

 

 

PART I.

FINANCIAL INFORMATION:

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

 

Condensed Consolidated Balance Sheets -
June 30, 2013 and September 30, 2012

3

 

 

 

 

Condensed Consolidated Statements of Operations -
three and nine months ended June 30, 2013 and 2012

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss -
three and nine months ended June 30, 2013 and 2012

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows -
nine months ended June 30, 2013 and 2012

6

 

 

 

 

Condensed Consolidated Statements of Equity -
three months ended June 30, 2013 and 2012

7

 

 

 

 

Condensed Consolidated Statements of Equity -
nine months ended June 30, 2013 and 2012

8

 

 

 

 

Notes to Condensed Consolidated Financial Statements

9

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

 

 

 

Item 4.

Controls and Procedures

30

 

 

 

PART II.

OTHER INFORMATION:

 

 

 

 

Item 6.

Exhibits

31

 

 

 

 

Signature

32

 

 

 

 

Index to Exhibits

33

 



Table of Contents

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.                                     FINANCIAL STATEMENTS

 

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

June 30,

 

 

 

September 30,

 

 

 

2013

 

 

 

2012

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

9,115,000

 

 

 

$

8,845,000

 

Accounts receivable, net of allowance for doubtful accounts of:

 

 

 

 

 

 

 

$42,000 at June 30, 2013; $45,000 at September 30, 2012

 

2,929,000

 

 

 

3,600,000

 

Prepaid expenses

 

310,000

 

 

 

361,000

 

Real estate held for sale

 

5,448,000

 

 

 

5,309,000

 

Other current assets

 

1,159,000

 

 

 

770,000

 

 

 

 

 

 

 

 

 

Total current assets

 

18,961,000

 

 

 

18,885,000

 

 

 

 

 

 

 

 

 

Investments

 

2,381,000

 

 

 

2,381,000

 

 

 

 

 

 

 

 

 

Property and equipment

 

245,069,000

 

 

 

256,153,000

 

Accumulated depletion, depreciation, and amortization

 

(205,034,000

)

 

 

(207,529,000

)

Property and equipment, net

 

40,035,000

 

 

 

48,624,000

 

 

 

 

 

 

 

 

 

Total assets

 

$

61,377,000

 

 

 

$

69,890,000

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

3,420,000

 

 

 

$

2,680,000

 

Accrued capital expenditures

 

1,512,000

 

 

 

341,000

 

Accrued incentive and other compensation

 

1,467,000

 

 

 

1,593,000

 

Payable to joint interest owners

 

496,000

 

 

 

854,000

 

Current portion of long-term debt

 

4,772,000

 

 

 

5,764,000

 

Other current liabilities

 

3,543,000

 

 

 

3,083,000

 

 

 

 

 

 

 

 

 

Total current liabilities

 

15,210,000

 

 

 

14,315,000

 

 

 

 

 

 

 

 

 

Long-term debt

 

12,000,000

 

 

 

11,400,000

 

 

 

 

 

 

 

 

 

Liability for retirement benefits

 

5,130,000

 

 

 

5,114,000

 

 

 

 

 

 

 

 

 

Asset retirement obligation

 

5,416,000

 

 

 

5,629,000

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

1,960,000

 

 

 

3,307,000

 

 

 

 

 

 

 

 

 

Total liabilities

 

39,716,000

 

 

 

39,765,000

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Common stock, par value $0.50 per share; authorized, 20,000,000 shares:

 

 

 

 

 

 

 

8,445,060 issued at June 30, 2013 and September 30, 2012

 

4,223,000

 

 

 

4,223,000

 

Additional paid-in capital

 

1,289,000

 

 

 

1,289,000

 

Retained earnings

 

17,180,000

 

 

 

24,095,000

 

Accumulated other comprehensive income, net

 

679,000

 

 

 

2,322,000

 

Treasury stock, at cost:

 

 

 

 

 

 

 

167,900 shares at June 30, 2013 and September 30, 2012

 

(2,286,000

)

 

 

(2,286,000

)

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

21,085,000

 

 

 

29,643,000

 

Non-controlling interests

 

576,000

 

 

 

482,000

 

 

 

 

 

 

 

 

 

Total equity

 

21,661,000

 

 

 

30,125,000

 

 

 

 

 

 

 

 

 

Total liabilities and equity

 

$

61,377,000

 

 

 

$

69,890,000

 

 

See Notes to Condensed Consolidated Financial Statements

 

3



Table of Contents

 

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three months ended

 

 

 

Nine months ended

 

 

 

June 30,

 

 

 

June 30,

 

 

 

2013

 

 

 

2012

 

 

 

2013

 

 

 

2012

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and natural gas

 

$

4,774,000

 

 

 

$

4,940,000

 

 

 

$

16,019,000

 

 

 

$

19,137,000

 

Contract drilling

 

248,000

 

 

 

1,212,000

 

 

 

1,668,000

 

 

 

1,918,000

 

Sale of interest in leasehold land, net

 

-

 

 

 

129,000

 

 

 

282,000

 

 

 

482,000

 

Residential real estate

 

-

 

 

 

5,975,000

 

 

 

-

 

 

 

5,975,000

 

Gas processing and other

 

160,000

 

 

 

102,000

 

 

 

533,000

 

 

 

514,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,182,000

 

 

 

12,358,000

 

 

 

18,502,000

 

 

 

28,026,000

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and natural gas operating

 

2,406,000

 

 

 

2,442,000

 

 

 

7,448,000

 

 

 

7,975,000

 

Contract drilling operating

 

367,000

 

 

 

1,056,000

 

 

 

1,628,000

 

 

 

2,153,000

 

Residential real estate

 

-

 

 

 

5,990,000

 

 

 

-

 

 

 

5,990,000

 

General and administrative

 

2,105,000

 

 

 

1,877,000

 

 

 

6,354,000

 

 

 

6,090,000

 

Depletion, depreciation, and amortization

 

1,372,000

 

 

 

2,456,000

 

 

 

6,383,000

 

 

 

8,171,000

 

Reduction of carrying value of assets

 

-

 

 

 

-

 

 

 

4,506,000

 

 

 

1,854,000

 

Interest expense

 

146,000

 

 

 

200,000

 

 

 

442,000

 

 

 

638,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,396,000

 

 

 

14,021,000

 

 

 

26,761,000

 

 

 

32,871,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(1,214,000

)

 

 

(1,663,000

)

 

 

(8,259,000

)

 

 

(4,845,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

51,000

 

 

 

(262,000

)

 

 

(1,285,000

)

 

 

225,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

(1,265,000

)

 

 

(1,401,000

)

 

 

(6,974,000

)

 

 

(5,070,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Net loss attributable to non-controlling interests

 

(40,000

)

 

 

(35,000

)

 

 

(59,000

)

 

 

(441,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Barnwell Industries, Inc.

 

$

(1,225,000

)

 

 

$

(1,366,000

)

 

 

$

(6,915,000

)

 

 

$

(4,629,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net loss per common share attributable to Barnwell Industries, Inc. stockholders

 

$

(0.15

)

 

 

$

(0.17

)

 

 

$

(0.84

)

 

 

$

(0.56

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net loss per common share attributable to Barnwell Industries, Inc. stockholders

 

$

(0.15

)

 

 

$

(0.17

)

 

 

$

(0.84

)

 

 

$

(0.56

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

8,277,160

 

 

 

8,277,160

 

 

 

8,277,160

 

 

 

8,277,160

 

Diluted

 

8,277,160

 

 

 

8,277,160

 

 

 

8,277,160

 

 

 

8,277,160

 

 

See Notes to Condensed Consolidated Financial Statements

 

4



Table of Contents

 

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 

 

 

Three months ended

 

 

 

Nine months ended

 

 

 

June 30,

 

 

 

June 30,

 

 

 

2013

 

 

 

2012

 

 

 

2013

 

 

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,265,000

)

 

 

$

(1,401,000

)

 

 

$

(6,974,000

)

 

 

$

(5,070,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of taxes of $0

 

(867,000

)

 

 

(713,000

)

 

 

(1,837,000

)

 

 

731,000

 

Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0

 

64,000

 

 

 

65,000

 

 

 

194,000

 

 

 

194,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive (loss) income

 

(803,000

)

 

 

(648,000

)

 

 

(1,643,000

)

 

 

925,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss

 

(2,068,000

)

 

 

(2,049,000

)

 

 

(8,617,000

)

 

 

(4,145,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Comprehensive loss attributable to non-controlling interests

 

(40,000

)

 

 

(35,000

)

 

 

(59,000

)

 

 

(441,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss attributable to Barnwell Industries, Inc.

 

$

(2,028,000

)

 

 

$

(2,014,000

)

 

 

$

(8,558,000

)

 

 

$

(3,704,000

)

 

See Notes to Condensed Consolidated Financial Statements

 

5



Table of Contents

 

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Nine months ended

 

June 30,

 

 

2013

 

 

 

2012

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

 

$

(6,974,000

)

 

 

$

(5,070,000

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

Depletion, depreciation, and amortization

 

6,383,000

 

 

 

8,171,000

 

Reduction of carrying value of assets

 

4,506,000

 

 

 

1,854,000

 

Retirement benefits expense

 

463,000

 

 

 

546,000

 

Accretion of asset retirement obligation

 

283,000

 

 

 

261,000

 

Gain on sale of drilling equipment

 

-

 

 

 

(40,000

)

Deferred income tax benefit

 

(1,220,000

)

 

 

(18,000

)

Asset retirement obligation payments

 

(174,000

)

 

 

(313,000

)

Share-based compensation benefit

 

(118,000

)

 

 

(192,000

)

Retirement plan contributions

 

(253,000

)

 

 

(674,000

)

Sale of interest in leasehold land, net

 

(282,000

)

 

 

(482,000

)

Real estate held for sale

 

(139,000

)

 

 

5,578,000

 

Increase from changes in current assets and liabilities

 

1,389,000

 

 

 

1,009,000

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

3,864,000

 

 

 

10,630,000

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Proceeds from sale of interest in leasehold land, net of fees paid

 

282,000

 

 

 

482,000

 

Proceeds from gas over bitumen royalty adjustments

 

39,000

 

 

 

48,000

 

Proceeds from sale of drilling equipment, net

 

-

 

 

 

59,000

 

Capital expenditures - oil and natural gas

 

(3,549,000

)

 

 

(5,170,000

)

Capital expenditures - all other

 

(2,000

)

 

 

(103,000

)

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

(3,230,000

)

 

 

(4,684,000

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from long-term debt borrowings

 

503,000

 

 

 

-

 

Repayments of long-term debt

 

(888,000

)

 

 

(6,354,000

)

Contributions from non-controlling interests

 

153,000

 

 

 

320,000

 

Distributions to non-controlling interests

 

-

 

 

 

(29,000

)

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

(232,000

)

 

 

(6,063,000

)

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(132,000

)

 

 

2,000

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

270,000

 

 

 

(115,000

)

Cash and cash equivalents at beginning of period

 

8,845,000

 

 

 

9,834,000

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

9,115,000

 

 

 

$

9,719,000

 

 

See Notes to Condensed Consolidated Financial Statements

 

6



Table of Contents

 

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three months ended June 30, 2013 and 2012

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

Common

 

 

 

Paid-In

 

 

 

Retained

 

 

 

Comprehensive

 

 

 

Treasury

 

 

 

Non-controlling

 

 

 

Total

 

 

 

Outstanding

 

 

 

Stock

 

 

 

Capital

 

 

 

Earnings

 

 

 

Income

 

 

 

Stock

 

 

 

Interests

 

 

 

Equity

 

Balance at March 31, 2012

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,289,000

 

 

 

$

30,968,000

 

 

 

$

1,863,000

 

 

 

$

(2,286,000

)

 

 

$

801,000

 

 

 

$

36,858,000

 

Contributions from non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80,000

 

 

 

80,000

 

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,000

)

 

 

(29,000

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,366,000

)

 

 

 

 

 

 

 

 

 

 

(35,000

)

 

 

(1,401,000

)

Foreign currency translation adjustments, net of taxes of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(713,000

)

 

 

 

 

 

 

 

 

 

 

(713,000

)

Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

65,000

 

 

 

 

 

 

 

 

 

 

 

65,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2012

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,289,000

 

 

 

$

29,602,000

 

 

 

$

1,215,000

 

 

 

$

(2,286,000

)

 

 

$

817,000

 

 

 

$

34,860,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2013

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,289,000

 

 

 

$

18,405,000

 

 

 

$

1,482,000

 

 

 

$

(2,286,000

)

 

 

$

578,000

 

 

 

$

23,691,000

 

Contributions from non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38,000

 

 

 

38,000

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,225,000

)

 

 

 

 

 

 

 

 

 

 

(40,000

)

 

 

(1,265,000

)

Foreign currency translation adjustments, net of taxes of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(867,000

)

 

 

 

 

 

 

 

 

 

 

(867,000

)

Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

64,000

 

 

 

 

 

 

 

 

 

 

 

64,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2013

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,289,000

 

 

 

$

17,180,000

 

 

 

$

679,000

 

 

 

$

(2,286,000

)

 

 

$

576,000

 

 

 

$

21,661,000

 

 

See Notes to Condensed Consolidated Financial Statements

 

7



Table of Contents

 

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Nine months ended June 30, 2013 and 2012

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

Common

 

 

 

Paid-In

 

 

 

Retained

 

 

 

Comprehensive

 

 

 

Treasury

 

 

 

Non-controlling

 

 

 

Total

 

 

 

Outstanding

 

 

 

Stock

 

 

 

Capital

 

 

 

Earnings

 

 

 

Income

 

 

 

Stock

 

 

 

Interests

 

 

 

Equity

 

Balance at September 30, 2011

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,289,000

 

 

 

$

34,231,000

 

 

 

$

290,000

 

 

 

$

(2,286,000

)

 

 

$

967,000

 

 

 

$

38,714,000

 

Contributions from non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

320,000

 

 

 

320,000

 

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,000

)

 

 

(29,000

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,629,000

)

 

 

 

 

 

 

 

 

 

 

(441,000

)

 

 

(5,070,000

)

Foreign currency translation adjustments, net of taxes of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

731,000

 

 

 

 

 

 

 

 

 

 

 

731,000

 

Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

194,000

 

 

 

 

 

 

 

 

 

 

 

194,000

 

Balance at June 30, 2012

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,289,000

 

 

 

$

29,602,000

 

 

 

$

1,215,000

 

 

 

$

(2,286,000

)

 

 

$

817,000

 

 

 

$

34,860,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2012

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,289,000

 

 

 

$

24,095,000

 

 

 

$

2,322,000

 

 

 

$

(2,286,000

)

 

 

$

482,000

 

 

 

$

30,125,000

 

Contributions from non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

153,000

 

 

 

153,000

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,915,000

)

 

 

 

 

 

 

 

 

 

 

(59,000

)

 

 

(6,974,000

)

Foreign currency translation adjustments, net of taxes of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,837,000

)

 

 

 

 

 

 

 

 

 

 

(1,837,000

)

Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

194,000

 

 

 

 

 

 

 

 

 

 

 

194,000

 

Balance at June 30, 2013

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,289,000

 

 

 

$

17,180,000

 

 

 

$

679,000

 

 

 

$

(2,286,000

)

 

 

$

576,000

 

 

 

$

21,661,000

 

 

See Notes to Condensed Consolidated Financial Statements

 

8



Table of Contents

 

BARNWELL INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.                                    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of Barnwell Industries, Inc. and all majority-owned subsidiaries (collectively referred to herein as “Barnwell,” “we,” “our,” “us,” or the “Company”), including a 77.6%-owned land investment general partnership (Kaupulehu Developments) and two 80%-owned joint ventures (Kaupulehu 2007, LLLP and Kaupulehu Investors, LLC). All significant intercompany accounts and transactions have been eliminated.

 

Unless otherwise indicated, all references to “dollars” in this Form 10-Q are to U.S. dollars.

 

Unaudited Interim Financial Information

 

The accompanying unaudited condensed consolidated financial statements and notes have been prepared by Barnwell in accordance with the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in Barnwell’s September 30, 2012 Annual Report on Form 10-K. The Condensed Consolidated Balance Sheet as of September 30, 2012 has been derived from audited consolidated financial statements.

 

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at June 30, 2013, results of operations, comprehensive loss, and equity for the three and nine months ended June 30, 2013 and 2012, and cash flows for the nine months ended June 30, 2013 and 2012, have been made. The results of operations for the period ended June 30, 2013 are not necessarily indicative of the operating results for the full year.

 

Use of Estimates

 

The preparation of the financial statements in conformity with U.S. GAAP requires management of Barnwell to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ significantly from those estimates.

 

Significant Accounting Policies

 

Barnwell’s significant accounting policies are described in the Notes to Consolidated Financial Statements included in Item 8 of the Company’s most recently filed Annual Report on Form 10-K.

 

9



Table of Contents

 

2.                                    LOSS PER COMMON SHARE

 

Basic earnings (loss) per share excludes dilution and is computed by dividing net earnings (loss) attributable to Barnwell stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share includes the potentially dilutive effect of outstanding common stock options, to the extent their inclusion would be dilutive. Potentially dilutive shares are excluded from the computation of diluted earnings (loss) per share if their effect is anti-dilutive.

 

Potentially dilutive shares consist of the common shares issuable upon the exercise of outstanding stock options (both vested and non-vested) using the treasury stock method. Options to purchase 777,250 and 815,375 shares of common stock were excluded from the computation of diluted shares for the three and nine months ended June 30, 2013 and 2012, respectively, as their inclusion would have been antidilutive due to the net loss attributable to Barnwell stockholders.

 

Reconciliations between net loss attributable to Barnwell stockholders and common shares outstanding of the basic and diluted net loss per share computations are detailed in the following tables:

 

 

 

Three months ended June 30, 2013

 

 

Net Loss

 

Shares

 

Per-Share

 

 

(Numerator)

 

(Denominator)

 

Amount

Basic net loss per share

 

 

$

(1,225,000

)

 

 

8,277,160

 

 

 

$

(0.15

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities - common stock options

 

 

-       

 

 

 

-       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net loss per share

 

 

$

(1,225,000

)

 

 

8,277,160

 

 

 

$

(0.15

)

 

 

 

Nine months ended June 30, 2013

 

 

Net Loss

 

Shares

 

Per-Share

 

 

(Numerator)

 

(Denominator)

 

Amount

Basic net loss per share

 

 

$

(6,915,000

)

 

 

8,277,160

 

 

 

$

(0.84

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities - common stock options

 

 

-       

 

 

 

-       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net loss per share

 

 

$

(6,915,000

)

 

 

8,277,160

 

 

 

$

(0.84

)

 

 

 

Three months ended June 30, 2012

 

 

Net Loss

 

Shares

 

Per-Share

 

 

(Numerator)

 

(Denominator)

 

Amount

Basic net loss per share

 

 

$

(1,366,000

)

 

 

8,277,160

 

 

 

$

(0.17

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities - common stock options

 

 

-       

 

 

 

-       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net loss per share

 

 

$

(1,366,000

)

 

 

8,277,160

 

 

 

$

(0.17

)

 

 

 

Nine months ended June 30, 2012

 

 

Net Loss

 

Shares

 

Per-Share

 

 

(Numerator)

 

(Denominator)

 

Amount

Basic net loss per share

 

 

$

(4,629,000

)

 

 

8,277,160

 

 

 

$

(0.56

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities - common stock options

 

 

-       

 

 

 

-       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net loss per share

 

 

$

(4,629,000

)

 

 

8,277,160

 

 

 

$

(0.56

)

 

10



Table of Contents

 

3.         REAL ESTATE HELD FOR SALE

 

Kaupulehu 2007 currently owns one luxury residence that is available for sale in the Lot 4A Increment I area located in the North Kona District of the island of Hawaii, north of Hualalai Resort at Historic Ka’upulehu, between the Queen Kaahumanu Highway and the Pacific Ocean.

 

In April 2012, Kaupulehu 2007 entered into a contract to sell one of the luxury residences at a price below carrying value. Accordingly, during the quarter ended March 31, 2012, Barnwell recorded a $1,854,000 reduction in the carrying value of real estate held for sale to reflect this decline in the estimated market value. The sale of the residence closed during the quarter ended June 30, 2012 for $5,975,000 for a nominal loss. No reduction in the carrying value was necessary during the three and nine months ended June 30, 2013.

 

4.                                    INVESTMENTS

 

A summary of Barnwell’s investments as of June 30, 2013 and September 30, 2012 is as follows:

 

Investment in two residential parcels

 

$

2,331,000

 

Investment in land interest – Lot 4C

 

50,000

 

 

 

 

 

Total investments

 

$

2,381,000

 

 

Investment in two residential parcels

 

Kaupulehu 2007 owns two residential parcels in the Lot 4A Increment I area located in the North Kona District of the island of Hawaii, north of Hualalai Resort at Historic Ka’upulehu, between the Queen Kaahumanu Highway and the Pacific Ocean.

 

Lot 4C

 

Kaupulehu Developments holds an interest in Lot 4C, an area of approximately 1,000 acres of vacant leasehold land zoned conservation located adjacent to Lot 4A.

 

There is no assurance that the required land use reclassification and rezoning from regulatory agencies will be obtained or that the necessary development terms and agreements will be successfully negotiated for Lot 4C.

 

11



Table of Contents

 

5.                                    LONG-TERM DEBT

 

A summary of Barnwell’s long-term debt is as follows:

 

 

 

June 30,

 

September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Canadian revolving credit facility

 

 

$

12,000,000

 

 

 

$

12,000,000

 

 

Real estate loan

 

 

4,772,000

 

 

 

5,164,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,772,000

 

 

 

17,164,000

 

 

Less: current portion

 

 

(4,772,000

)

 

 

(5,764,000

)

 

 

 

 

 

 

 

 

 

 

 

Total long-term debt

 

 

$

12,000,000

 

 

 

$

11,400,000

 

 

 

Canadian revolving credit facility

 

In March 2013, Barnwell’s credit facility at Royal Bank of Canada was renewed through April 2014 for $20,000,000 Canadian dollars, unchanged from the prior year amount, or US$19,026,000 at the June 30, 2013 exchange rate. Unused credit available under this facility was US$7,026,000 and the interest rate on the facility was 2.70% at June 30, 2013.

 

The renewed facility is available in U.S. dollars at the London Interbank Offer Rate plus 2.50%, at the Royal Bank of Canada’s U.S. base rate plus 1.50%, or in Canadian dollars at the Royal Bank of Canada’s prime rate plus 1.50%. A standby fee of 0.625% per annum is charged on the unused facility balance. Under the financing agreement, the facility is reviewed annually, with the next review planned for April 2014. Subject to that review, the facility may be renewed for one year with no required debt repayments or converted to a two-year term loan by the bank. If the facility is converted to a two-year term loan, Barnwell has agreed to the following repayment schedule of the then outstanding loan balance: first year of the term period – 20% (5% per quarter), and in the second year of the term period – 80% (5% per quarter for the first three quarters and 65% in the final quarter). Based on the terms of this agreement, if Royal Bank of Canada were to convert the facility to a two-year term loan upon its next review in April 2014, Barnwell would be obligated to make quarterly principal and interest repayments beginning in July 2014. As no debt repayments will be required on or before June 30, 2014, the entire outstanding loan balance at June 30, 2013 is classified as long-term debt.

 

Real estate loan

 

Barnwell, together with its real estate joint venture, Kaupulehu 2007, has a non-revolving real estate loan with a Hawaii bank. Principal and interest are paid monthly and are determined based on a loan amortization schedule. The monthly payment will change as a result of an annual change in the interest rate, the sale of a house or the sale of a residential parcel. The interest rate adjusts each April for the remaining term of the loan to the lender’s then prevailing interest rate for similarly priced commercial mortgage loans or a floating rate equal to the lender’s base rate. The interest rate at June 30, 2013 was 3.53%. Any unpaid principal balance and accrued interest will be due and payable on April 1, 2018.

 

The loan is collateralized by, among other things, a first mortgage on Kaupulehu 2007’s lots together with all improvements thereon. Kaupulehu 2007 will be required to make a principal payment upon the sale of a house or a residential parcel in the amount of the net sales proceeds of the house or residential parcel; the loan agreement defines net sales proceeds as the gross sales proceeds for the house or residential parcel, less reasonable commissions and normal closing costs.

 

12



Table of Contents

 

The loan agreement contains provisions requiring us to maintain compliance with certain covenants including a consolidated debt service coverage ratio and a consolidated total liabilities to tangible net worth ratio. As of June 30, 2013, we were in compliance with the loan covenants.

 

The home collateralizing the loan is currently available for sale; therefore, the entire balance outstanding at June 30, 2013 under the term loan has been classified as a current liability.

 

6.                                    RETIREMENT PLANS

 

Barnwell sponsors a noncontributory defined benefit pension plan (“Pension Plan”) covering substantially all of its U.S. employees. Additionally, Barnwell sponsors a Supplemental Employee Retirement Plan (“SERP”), a noncontributory supplemental retirement benefit plan which covers certain current and former employees of Barnwell for amounts exceeding the limits allowed under the Pension Plan, and a postretirement medical insurance benefits plan (“Postretirement Medical”) covering eligible U.S. employees.

 

The following tables detail the components of net periodic benefit cost for Barnwell’s retirement plans:

 

 

 

Pension Plan

 

SERP

 

Postretirement Medical

 

 

Three months ended June 30,

 

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

Service cost

 

 

$

68,000

 

 

 

$

76,000

 

 

 

$

13,000

 

 

 

$

12,000

 

 

 

$

4,000

 

 

 

$

3,000

 

Interest cost

 

 

75,000

 

 

 

81,000

 

 

 

15,000

 

 

 

15,000

 

 

 

12,000

 

 

 

12,000

 

Expected return on plan assets

 

 

(96,000

)

 

 

(82,000

)

 

 

-       

 

 

 

-       

 

 

 

-       

 

 

 

-      

 

Amortization of prior service cost (credit)

 

 

1,000

 

 

 

1,000

 

 

 

(1,000

)

 

 

-       

 

 

 

34,000

 

 

 

34,000

 

Amortization of net actuarial loss (gain)

 

 

25,000

 

 

 

28,000

 

 

 

5,000

 

 

 

4,000

 

 

 

-       

 

 

 

(2,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net periodic benefit cost

 

 

$

73,000

 

 

 

$

104,000

 

 

 

$

32,000

 

 

 

$

31,000

 

 

 

$

50,000

 

 

 

$

47,000

 

 

 

 

Pension Plan

 

SERP

 

Postretirement Medical

 

 

Nine months ended June 30,

 

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

Service cost

 

 

$

204,000

 

 

 

$

227,000

 

 

 

$

39,000

 

 

 

$

37,000

 

 

 

$

11,000

 

 

 

$

9,000

 

Interest cost

 

 

224,000

 

 

 

242,000

 

 

 

44,000

 

 

 

46,000

 

 

 

37,000

 

 

 

37,000

 

Expected return on plan assets

 

 

(290,000

)

 

 

(246,000

)

 

 

-        

 

 

 

-       

 

 

 

-       

 

 

 

-      

 

Amortization of prior service cost (credit)

 

 

4,000

 

 

 

4,000

 

 

 

(4,000

)

 

 

-       

 

 

 

102,000

 

 

 

102,000

 

Amortization of net actuarial loss (gain)

 

 

77,000

 

 

 

84,000

 

 

 

15,000

 

 

 

12,000

 

 

 

-       

 

 

 

(8,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net periodic benefit cost

 

 

$

219,000

 

 

 

$

311,000

 

 

 

$

94,000

 

 

 

$

95,000

 

 

 

$

150,000

 

 

 

$

140,000

 

 

13



Table of Contents

 

Barnwell contributed $250,000 to the Pension Plan during the nine months ended June 30, 2013 and does not expect to make any further contributions during the remainder of fiscal 2013. The SERP and Postretirement Medical plans are unfunded, and Barnwell will fund benefits when payments are made. Barnwell does not expect to make any benefit payments under the Postretirement Medical plan during fiscal 2013 and expected payments under the SERP for fiscal 2013 are not material. Fluctuations in actual equity market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefits costs and contributions in future periods.

 

7.                                    INCOME TAXES

 

The components of loss before income taxes, after adjusting the loss for non-controlling interests, are as follows:

 

 

 

Three months ended

 

Nine months ended

 

 

June 30,

 

June 30,

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

United States

 

 

$

(1,428,000

)

 

 

$

(939,000

)

 

 

$

(3,730,000

)

 

 

$

(5,241,000

)

Canada

 

 

254,000

 

 

 

(689,000

)

 

 

(4,470,000

)

 

 

837,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(1,174,000

)

 

 

$

(1,628,000

)

 

 

$

(8,200,000

)

 

 

$

(4,404,000

)

 

The components of the income tax provision (benefit) are as follows:

 

 

 

Three months ended

 

Nine months ended

 

 

June 30,

 

June 30,

 

 

2013

 

2012