0001104659-14-037492.txt : 20140512 0001104659-14-037492.hdr.sgml : 20140512 20140512130951 ACCESSION NUMBER: 0001104659-14-037492 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20140331 FILED AS OF DATE: 20140512 DATE AS OF CHANGE: 20140512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARNWELL INDUSTRIES INC CENTRAL INDEX KEY: 0000010048 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 720496921 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05103 FILM NUMBER: 14832645 BUSINESS ADDRESS: STREET 1: 1100 ALAKEA ST. STREET 2: SUITE 2900 CITY: HONOLULU STATE: HI ZIP: 96813 BUSINESS PHONE: 808-531-8400 MAIL ADDRESS: STREET 1: 1100 ALAKEA ST. STREET 2: SUITE 2900 CITY: HONOLULU STATE: HI ZIP: 96813 FORMER COMPANY: FORMER CONFORMED NAME: BMA CORP/TN DATE OF NAME CHANGE: 19770324 FORMER COMPANY: FORMER CONFORMED NAME: BARNWELL OFFSHORE INC DATE OF NAME CHANGE: 19671101 10-Q 1 a14-9905_110q.htm 10-Q

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 March 31, 2014

 

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.                                                                                                                                             x 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).                                                                                            x 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  x

 

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

 

As of May 8, 2014 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 -
March 31, 2014 and September 30, 2013

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations -
three and six months ended March 31, 2014 and 2013

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss -
three and six months ended March 31, 2014 and 2013

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows -
six months ended March 31, 2014 and 2013

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Equity -
three months ended March 31, 2014 and 2013

 

7

 

 

 

 

 

 

 

Condensed Consolidated Statements of Equity -
six months ended March 31, 2014 and 2013

 

8

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

 

 

Item 2.

 

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

 

28

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

40

 

 

 

 

 

PART II.

 

OTHER INFORMATION:

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

41

 

 

 

 

 

Item 6.

 

Exhibits

 

42

 

 

 

 

 

 

 

Signature

 

43

 

 

 

 

 

 

 

Index to Exhibits

 

44

 



Table of Contents

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.                                     FINANCIAL STATEMENTS

 

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

March 31,

 

 

 

September 30,

 

 

 

2014

 

 

 

2013

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,163,000

 

 

 

$

7,828,000

 

Restricted cash

 

225,000

 

 

 

-       

 

Accounts receivable, net of allowance for doubtful accounts of:

 

 

 

 

 

 

 

$34,000 at March 31, 2014; $43,000 at September 30, 2013

 

4,408,000

 

 

 

3,287,000

 

Prepaid expenses

 

346,000

 

 

 

230,000

 

Real estate held for sale

 

5,448,000

 

 

 

5,448,000

 

Other current assets

 

900,000

 

 

 

2,234,000

 

 

 

 

 

 

 

 

 

Total current assets

 

18,490,000

 

 

 

19,027,000

 

 

 

 

 

 

 

 

 

Restricted cash, net of current portion

 

1,722,000

 

 

 

-       

 

 

 

 

 

 

 

 

 

Investments

 

7,258,000

 

 

 

2,381,000

 

 

 

 

 

 

 

 

 

Property and equipment

 

235,049,000

 

 

 

252,872,000

 

Accumulated depletion, depreciation, and amortization

 

(201,135,000

)

 

 

(211,566,000

)

 

 

 

 

 

 

 

 

Property and equipment, net

 

33,914,000

 

 

 

41,306,000

 

 

 

 

 

 

 

 

 

Total assets

 

$

61,384,000

 

 

 

$

62,714,000

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

3,679,000

 

 

 

$

4,415,000

 

Accrued capital expenditures

 

1,217,000

 

 

 

1,846,000

 

Accrued incentive and other compensation

 

1,109,000

 

 

 

1,652,000

 

Accrued operating and other expenses

 

2,933,000

 

 

 

2,670,000

 

Current portion of long-term debt

 

5,770,000

 

 

 

5,240,000

 

Other current liabilities

 

1,211,000

 

 

 

624,000

 

 

 

 

 

 

 

 

 

Total current liabilities

 

15,919,000

 

 

 

16,447,000

 

 

 

 

 

 

 

 

 

Long-term debt

 

14,100,000

 

 

 

11,400,000

 

 

 

 

 

 

 

 

 

Liability for retirement benefits

 

3,299,000

 

 

 

3,137,000

 

 

 

 

 

 

 

 

 

Asset retirement obligation

 

6,959,000

 

 

 

7,520,000

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

1,706,000

 

 

 

1,890,000

 

 

 

 

 

 

 

 

 

Total liabilities

 

41,983,000

 

 

 

40,394,000

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

8,445,060 issued at March 31, 2014 and September 30, 2013

 

4,223,000

 

 

 

4,223,000

 

Additional paid-in capital

 

1,299,000

 

 

 

1,289,000

 

Retained earnings

 

14,258,000

 

 

 

15,532,000

 

Accumulated other comprehensive income, net

 

1,306,000

 

 

 

2,991,000

 

Treasury stock, at cost:

 

 

 

 

 

 

 

167,900 shares at March 31, 2014 and September 30, 2013

 

(2,286,000

)

 

 

(2,286,000

)

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

18,800,000

 

 

 

21,749,000

 

Non-controlling interests

 

601,000

 

 

 

571,000

 

 

 

 

 

 

 

 

 

Total equity

 

19,401,000

 

 

 

22,320,000

 

 

 

 

 

 

 

 

 

Total liabilities and equity

 

$

61,384,000

 

 

 

$

62,714,000

 

 

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
March 31,

 

 

 

Six months ended
March 31,

 

 

 

 

2014

 

 

 

2013

 

 

 

2014

 

 

 

2013

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and natural gas

 

 

$

6,397,000

 

 

 

$

5,605,000

 

 

 

$

11,724,000

 

 

 

$

11,245,000

 

Contract drilling

 

 

1,318,000

 

 

 

703,000

 

 

 

2,927,000

 

 

 

1,420,000

 

Sale of interest in leasehold land, net

 

 

-       

 

 

 

282,000

 

 

 

120,000

 

 

 

282,000

 

Gas processing and other

 

 

118,000

 

 

 

179,000

 

 

 

263,000

 

 

 

373,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,833,000

 

 

 

6,769,000

 

 

 

15,034,000

 

 

 

13,320,000

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and natural gas operating

 

 

2,042,000

 

 

 

3,049,000

 

 

 

4,663,000

 

 

 

5,042,000

 

Contract drilling operating

 

 

1,089,000

 

 

 

653,000

 

 

 

2,401,000

 

 

 

1,261,000

 

General and administrative

 

 

2,301,000

 

 

 

2,107,000

 

 

 

4,157,000

 

 

 

4,249,000

 

Depletion, depreciation, and amortization

 

 

1,904,000

 

 

 

2,332,000

 

 

 

4,068,000

 

 

 

5,011,000

 

Reduction of carrying value of assets

 

 

-      

 

 

 

2,179,000

 

 

 

-      

 

 

 

4,506,000

 

Interest expense

 

 

192,000

 

 

 

144,000

 

 

 

355,000

 

 

 

296,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,528,000

 

 

 

10,464,000

 

 

 

15,644,000

 

 

 

20,365,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before equity in loss of affiliates and income taxes

 

 

305,000

 

 

 

(3,695,000

)

 

 

(610,000

)

 

 

(7,045,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in loss of affiliates

 

 

(116,000

)

 

 

      

 

 

 

(263,000

)

 

 

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

189,000

 

 

 

(3,695,000

)

 

 

(873,000

)

 

 

(7,045,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

 

513,000

 

 

 

(772,000

)

 

 

451,000

 

 

 

(1,336,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(324,000

)

 

 

(2,923,000

)

 

 

(1,324,000

)

 

 

(5,709,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Net (loss) earnings attributable to non-controlling interests

 

 

(39,000

)

 

 

21,000

 

 

 

(50,000

)

 

 

(19,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Barnwell Industries, Inc.

 

 

$

(285,000

)

 

 

$

(2,944,000

)

 

 

$

(1,274,000

)

 

 

$

(5,690,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

$

(0.03

)

 

 

$

(0.36

)

 

 

$

(0.15

)

 

 

$

(0.69

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

$

(0.03

)

 

 

$

(0.36

)

 

 

$

(0.15

)

 

 

$

(0.69

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Six months ended

 

 

March 31,

 

March 31,

 

 

 

2014

 

 

 

2013

 

 

 

2014

 

 

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

$

(324,000

)

 

 

$

(2,923,000

)

 

 

$

(1,324,000

)

 

 

$

(5,709,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of taxes of $0

 

 

(921,000

)

 

 

(600,000

)

 

 

(1,701,000

)

 

 

(970,000

)

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

 

 

8,000

 

 

 

65,000

 

 

 

16,000

 

 

 

130,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive loss

 

 

(913,000

)

 

 

(535,000

)

 

 

(1,685,000

)

 

 

(840,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss

 

 

(1,237,000

)

 

 

(3,458,000

)

 

 

(3,009,000

)

 

 

(6,549,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Comprehensive (loss) earnings attributable to non-controlling interests

 

 

(39,000

)

 

 

21,000

 

 

 

(50,000

)

 

 

(19,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss attributable to Barnwell Industries, Inc.

 

 

$

(1,198,000

)

 

 

$

(3,479,000

)

 

 

$

(2,959,000

)

 

 

$

(6,530,000

)

 

See Notes to Condensed Consolidated Financial Statements

 

5



Table of Contents

 

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Six months ended

 

 

March 31,

 

 

2014

 

2013

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

 

$

(1,324,000

)

 

 

$

(5,709,000

)

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

 

 

 

 

 

 

 

 

Equity in loss of affiliates

 

 

263,000

 

 

 

-

 

Depletion, depreciation, and amortization

 

 

4,068,000

 

 

 

5,011,000

 

Reduction of carrying value of assets

 

 

-

 

 

 

4,506,000

 

Foreign exchange gain

 

 

(48,000

)

 

 

-

 

Retirement benefits expense

 

 

182,000

 

 

 

308,000

 

Accretion of asset retirement obligation

 

 

238,000

 

 

 

190,000

 

Deferred income tax benefit

 

 

(92,000

)

 

 

(1,680,000

)

Asset retirement obligation payments

 

 

(70,000

)

 

 

(133,000

)

Share-based compensation benefit

 

 

(190,000

)

 

 

(41,000

)

Retirement plan contributions

 

 

(3,000

)

 

 

(253,000

)

Sale of interest in leasehold land, net

 

 

(120,000

)

 

 

(282,000

)

Real estate held for sale

 

 

-

 

 

 

(139,000

)

Increase (decrease) from changes in current assets and liabilities

 

 

106,000

 

 

 

(270,000

)

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

 

3,010,000

 

 

 

1,508,000

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Payment to acquire interest in affiliates

 

 

(5,140,000

)

 

 

-

 

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

 

 

120,000

 

 

 

282,000

 

Proceeds from gas over bitumen royalty adjustments

 

 

8,000

 

 

 

24,000

 

Proceeds from sale of oil and natural gas assets

 

 

2,828,000

 

 

 

-

 

Capital expenditures - oil and natural gas

 

 

(2,700,000

)

 

 

(2,127,000

)

Capital expenditures - all other

 

 

(38,000

)

 

 

(2,000

)

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(4,922,000

)

 

 

(1,823,000

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from long-term debt borrowings

 

 

5,000,000

 

 

 

503,000

 

Repayments of long-term debt

 

 

(1,770,000

)

 

 

(757,000

)

Increase in restricted cash

 

 

(1,947,000

)

 

 

-

 

Contributions from non-controlling interests

 

 

80,000

 

 

 

115,000

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

 

1,363,000

 

 

 

(139,000

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(116,000

)

 

 

(75,000

)

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(665,000

)

 

 

(529,000

)

Cash and cash equivalents at beginning of period

 

 

7,828,000

 

 

 

8,845,000

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

 

$

7,163,000

 

 

 

$

8,316,000

 

 

See Notes to Condensed Consolidated Financial Statements

 

6



Table of Contents

 

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three months ended March 31, 2014 and 2013

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

 

 

 

 

 

 

 

Shares

 

Common

 

Paid-In

 

Retained

 

Comprehensive

 

Treasury

 

Non-controlling

 

Total

 

 

Outstanding

 

Stock

 

Capital

 

Earnings

 

Income

 

Stock

 

Interests

 

Equity

Balance at December 31, 2012

 

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,289,000

 

 

 

$

21,349,000

 

 

 

$

2,017,000

 

 

 

$

(2,286,000

)

 

 

$

497,000

 

 

 

$

27,089,000

 

Contributions from non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60,000

 

 

 

60,000

 

Net (loss) earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,944,000

)

 

 

 

 

 

 

 

 

 

 

21,000

 

 

 

(2,923,000

)

Foreign currency translation adjustments, net of taxes of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(600,000

)

 

 

 

 

 

 

 

 

 

 

(600,000

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

65,000

 

 

 

 

 

 

 

 

 

 

 

65,000

 

Balance at 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2013

 

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,291,000

 

 

 

$

14,543,000

 

 

 

$

2,219,000

 

 

 

$

(2,286,000

)

 

 

$

624,000

 

 

 

$

20,614,000

 

Contributions from non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,000

 

 

 

16,000

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(285,000

)

 

 

 

 

 

 

 

 

 

 

(39,000

)

 

 

(324,000

)

Share-based compensation

 

 

 

 

 

 

 

 

 

 

8,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,000

 

Foreign currency translation adjustments, net of taxes of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(921,000

)

 

 

 

 

 

 

 

 

 

 

(921,000

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,000

 

 

 

 

 

 

 

 

 

 

 

8,000

 

Balance at March 31, 2014

 

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,299,000

 

 

 

$

14,258,000

 

 

 

$

1,306,000

 

 

 

$

(2,286,000

)

 

 

$

601,000

 

 

 

$

19,401,000

 

 

 

 

See Notes to Condensed Consolidated Financial Statements

 

7



Table of Contents

 

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Six months ended March 31, 2014 and 2013

(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, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

115,000

 

 

 

115,000

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,690,000

)

 

 

 

 

 

 

 

 

 

 

(19,000

)

 

 

(5,709,000

)

Foreign currency translation adjustments, net of taxes of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(970,000

)

 

 

 

 

 

 

 

 

 

 

(970,000

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

130,000

 

 

 

 

 

 

 

 

 

 

 

130,000

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2013

 

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,289,000

 

 

 

$

15,532,000

 

 

 

$

2,991,000

 

 

 

$

(2,286,000

)

 

 

$

571,000

 

 

 

$

22,320,000

 

Contributions from non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80,000

 

 

 

80,000

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,274,000

)

 

 

 

 

 

 

 

 

 

 

(50,000

)

 

 

(1,324,000

)

Share-based compensation

 

 

 

 

 

 

 

 

 

 

10,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,000

 

Foreign currency translation adjustments, net of taxes of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,701,000

)

 

 

 

 

 

 

 

 

 

 

(1,701,000

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,000

 

 

 

 

 

 

 

 

 

 

 

16,000

 

Balance at March 31, 2014

 

 

8,277,160

 

 

 

$

4,223,000

 

 

 

$

1,299,000

 

 

 

$

14,258,000

 

 

 

$

1,306,000

 

 

 

$

(2,286,000

)

 

 

$

601,000

 

 

 

$

19,401,000

 

 

 

 

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), a 75%-owned land investment partnership (KD Kona 2013 LLLP) and two 80%-owned joint ventures (Kaupulehu 2007, LLLP and Kaupulehu Investors, LLC). All significant intercompany accounts and transactions have been eliminated.

 

Barnwell’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in variable interest entities (“VIE”) in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method.

 

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, 2013 Annual Report on Form 10-K. The Condensed Consolidated Balance Sheet as of September 30, 2013 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 March 31, 2014, results of operations, comprehensive loss, and equity for the three and six months ended March 31, 2014 and 2013, and cash flows for the six months ended March 31, 2014 and 2013, have been made. The results of operations for the period ended March 31, 2014 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.

 

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Table of Contents

 

Significant Accounting Policies

 

Other than as set forth below, there have been no changes to Barnwell’s significant accounting policies as 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.

 

Restricted Cash

 

Restricted cash consists of deposits for interest reserve and collateral for our land investment loan.

 

Equity Method Investments

 

Affiliated companies, which are limited partnerships or similar entities, in which Barnwell holds more than a 3% to 5% ownership interest, are accounted for as equity method investments. Equity method investment adjustments include Barnwell’s proportionate share of investee income or loss, adjustments to recognize certain differences between Barnwell’s carrying value and Barnwell’s equity in net assets of the investee at the date of investment, impairments and other adjustments required by the equity method. Gain or losses are realized when such investments are sold.

 

Investments in equity method investees are evaluated for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amounts of the assets exceed their respective fair values, additional impairment tests are performed to measure the amounts of the impairment losses, if any. When an impairment test demonstrates that the fair value of an investment is less than its carrying value, management will determine whether the impairment is either temporary or other-than-temporary. Examples of factors which may be indicative of an other-than-temporary impairment include (a) the length of time and extent to which fair value has been less than carrying value, (b) the financial condition and near-term prospects of the investee, and (c) the intent and ability to retain the investment in the investee for a period of time sufficient to allow for any anticipated recovery in fair value. If the decline in fair value is determined by management to be other-than-temporary, the carrying value of the investment is written down to its estimated fair value as of the balance sheet date of the reporting period in which the assessment is made.

 

Variable Interest Entities

 

The consolidation of VIEs is required when an enterprise has a controlling financial interest and is therefore the VIE’s primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The determination of whether an entity is a VIE and, if so, whether the Company is primary beneficiary, may require significant judgment.

 

Barnwell analyzes its unconsolidated affiliates in which it has an investment to determine whether the unconsolidated entities are VIEs and, if so, whether the Company is the primary beneficiary. This analysis includes a qualitative review based on an evaluation of the design of the entity, its organizational structure, including decision making ability and financial agreements, as well as a quantitative review. At March 31, 2014, our unconsolidated affiliates that have been determined to be VIEs are accounted under the equity method because we do not have a controlling financial interest and are therefore not the VIE’s primary beneficiary (see Note 5).

 

10



Table of Contents

 

Recent Accounting Pronouncements

 

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” This update requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The Company adopted the provisions of this ASU effective October 1, 2013. The adoption of this ASU impacted the presentation of Barnwell’s accumulated other comprehensive income footnote disclosures.

 

 

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 837,250 and 777,250 shares of common stock were excluded from the computation of diluted shares for the three and six months ended March 31, 2014 and 2013, 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 March 31, 2014

 

 

 

 

Net Loss

 

 

Shares

 

 

Per-Share

 

 

 

 

 

(Numerator)

 

 

(Denominator)

 

 

Amount

 

 

Basic net loss per share

 

 

$

(285,000

)

 

 

8,277,160

 

 

 

$

(0.03

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities - common stock options

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net loss per share

 

 

$

(285,000

)

 

 

8,277,160

 

 

 

$

(0.03

)

 

 

11



Table of Contents

 

 

 

 

Six months ended March 31, 2014

 

 

 

 

Net Loss

 

 

Shares

 

 

Per-Share

 

 

 

 

 

(Numerator)

 

 

(Denominator)

 

 

Amount

 

 

Basic net loss per share

 

 

$

(1,274,000

)

 

 

8,277,160

 

 

 

$

(0.15

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities - common stock options

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net loss per share

 

 

$

(1,274,000

)

 

 

8,277,160

 

 

 

$

(0.15

)

 

 

 

 

 

Three months ended March 31, 2013

 

 

 

 

Net Loss

 

 

Shares

 

 

Per-Share

 

 

 

 

 

(Numerator)

 

 

(Denominator)

 

 

Amount

 

 

Basic net loss per share

 

 

$

(2,944,000

)

 

 

8,277,160

 

 

 

$

(0.36

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities - common stock options

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net loss per share

 

 

$

(2,944,000

)

 

 

8,277,160

 

 

 

$

(0.36

)

 

 

 

 

 

Six months ended March 31, 2013

 

 

 

 

Net Loss

 

 

Shares

 

 

Per-Share

 

 

 

 

 

(Numerator)

 

 

(Denominator)

 

 

Amount

 

 

Basic net loss per share

 

 

$

(5,690,000

)

 

 

8,277,160

 

 

 

$

(0.69

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities - common stock options

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net loss per share

 

 

$

(5,690,000

)

 

 

8,277,160

 

 

 

$

(0.69

)

 

 

 

3.                                    SHARE-BASED PAYMENTS

 

The Company’s share-based compensation benefit and related income tax effects are as follows:

 

 

 

Three months ended

 

 

Six months ended

 

 

 

 

March 31,

 

 

March 31,

 

 

 

 

 

2014

 

 

 

2013

 

 

 

2014

 

 

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation benefit

 

 

$

(15,000

)

 

 

$

(9,000

)

 

 

$

(190,000

)

 

 

$

(41,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax effect

 

 

$

-       

 

 

 

$

-       

 

 

 

$

-       

 

 

 

$

-       

 

 

 

Share-based compensation benefit recognized in losses for the three and six months ended March 31, 2014 and 2013 are reflected in “General and administrative” expenses in the Condensed Consolidated Statements of Operations. There was no impact on income taxes for the three and six months ended March 31, 2014 and 2013 due to a full valuation allowance on the related deferred tax asset.

 

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Table of Contents

 

As of March 31, 2014, there was $103,000 of total unrecognized compensation cost related to nonvested share options. That cost is expected to be recognized over 3.7 years. The weighted-average grant date fair value of employee options granted during the six months ended March 31, 2014 was $2.04 (no options were granted during the three months ended March 31, 2014 or during the three and six months ended March 31, 2013).

 

Equity-classified Awards

 

In December 2013, Barnwell granted non-qualified options with an exercise price equal to the closing market price of Barnwell’s stock on the date of grant, that vest annually over four years of continuous service, and that expire ten years from the date of grant.

 

The following assumptions were used in estimating fair value for equity-classified share options in the six months ended March 31, 2014:

 

Expected volatility

55.6%

Expected dividends

0.0%

Expected term (in years)

10

Risk-free interest rate

3.0%

Expected forfeitures

None

 

The application of alternative assumptions could produce significantly different estimates of the fair value of share-based compensation, and consequently, the related costs reported in the Condensed Consolidated Statements of Operations.

 

A summary of the activity in Barnwell’s equity-classified share options from October 1, 2013 through March 31, 2014 is presented below:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

Remaining

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

Contractual

 

 

 

Aggregate

 

 

 

 

 

 

 

 

Exercise

 

 

 

Term

 

 

 

Intrinsic

 

Options

 

Shares

 

Price

 

 

(in years)

 

 

 

Value

 

Outstanding at October 1, 2013

 

 

60,000

 

 

 

$

8.62

 

 

 

 

 

 

 

 

 

Granted

 

 

30,000

 

 

 

3.01

 

 

 

 

 

 

 

 

 

Exercised

 

 

-   

 

 

 

 

 

 

 

 

 

 

 

 

 

Expired/Forfeited

 

 

-   

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2014

 

 

90,000

 

 

 

$

6.75

 

 

 

 

3.7

 

 

 

 

$

-       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at March 31, 2014

 

 

60,000

 

 

 

$

8.62

 

 

 

 

0.7

 

 

 

 

$

-       

 

 

Total share-based compensation expense for equity-classified awards vested in the three and six months ended March 31, 2014 was $8,000 and $10,000, respectively. There was no share-based compensation expense for equity-classified awards in the prior year periods.

 

13



Table of Contents

 

Liability-classified Awards

 

In December 2013, Barnwell granted non-qualified options with an exercise price equal to the closing market price of Barnwell’s stock on the date of grant, that vest annually over four years of continuous service, and that expire ten years from the date of grant. The non-qualified options have stock appreciation rights features that permit the holder to receive stock, cash or a combination thereof equal to the amount by which the fair market value, at the time of exercise of the option, exceeds the option price.

 

The following assumptions were used in estimating fair value for all liability-classified share options outstanding:

 

 

 

Six months ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Expected volatility range

 

41.7% to 61.7%

 

50.6% to 64.4%

 

Weighted-average volatility

 

54.4%

 

60.4%

 

Expected dividends

 

0.0%

 

0.0%

 

Expected term (in years)

 

0.7 to 9.7

 

1.7 to 6.7

 

Risk-free interest rate

 

0.1% to 2.7%

 

0.3% to 1.2%

 

Expected forfeitures

 

None

 

None

 

 

The application of alternative assumptions could produce significantly different estimates of the fair value of share-based compensation, and consequently, the related costs reported in the Condensed Consolidated Statements of Operations.

 

A summary of the activity in Barnwell’s liability-classified share options from October 1, 2013 through March 31, 2014 is presented below:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

Remaining

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

Contractual

 

 

 

Aggregate

 

 

 

 

 

 

 

 

Exercise

 

 

 

Term

 

 

 

Intrinsic

 

Options

 

Shares

 

Price

 

 

(in years)

 

 

 

Value

 

Outstanding at October 1, 2013

 

 

717,250

 

 

 

$

8.37

 

 

 

 

 

 

 

 

 

Granted

 

 

30,000

 

 

 

3.01

 

 

 

 

 

 

 

 

 

Exercised

 

 

-       

 

 

 

 

 

 

 

 

 

 

 

 

 

Expired/Forfeited

 

 

-       

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2014

 

 

747,250

 

 

 

$

8.15

 

 

 

 

4.1