Edgar Filing: BARNWELL INDUSTRIES INC

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, 2009

o 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).

o 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, 2009 there were 8,240,160 shares of common stock, par value $0.50, outstanding.

BARNWELL INDUSTRIES, INC.

AND SUBSIDIARIES

INDEX

PART I.	FINANCIAL INFORMATION:

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets - March 31, 2009 and September 30, 2008 (Unaudited)	3

	Condensed Consolidated Statements of Operations - three and six months ended March 31, 2009 and 2008 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows - six months ended March 31, 2009 and 2008 (Unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive (Loss) Income - three months ended March 31, 2009 and 2008 (Unaudited)	6

	Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive (Loss) Income - six months ended March 31, 2009 and 2008 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 4T.	Controls and Procedures	41

PART II.	OTHER INFORMATION:

Item 1A.	Risk Factors	42

Item 4.	Submission of Matters to a Vote of Security Holders	42

Item 6.	Exhibits	43

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31,				September 30,
	2009				2008
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	7,188,000			$	13,618,000
Accounts receivable, net of allowance for doubtful accounts of: $863,000 at March 31, 2009 and $1,078,000 at September 30, 2008		4,137,000				7,524,000
Deferred income taxes		888,000				2,134,000
Current taxes receivable		975,000				975,000
Other current assets		992,000				1,411,000

TOTAL CURRENT ASSETS		14,180,000				25,662,000

DEPOSITS ON RESIDENTIAL PARCELS		-				200,000

RESIDENTIAL LOTS UNDER DEVELOPMENT		12,203,000				8,876,000

INVESTMENT IN RESIDENTIAL PARCELS		4,681,000				4,708,000

INVESTMENT IN JOINT VENTURES		2,853,000				2,776,000

INVESTMENT IN LAND INTERESTS		1,450,000				1,450,000

PROPERTY AND EQUIPMENT		180,680,000				207,672,000
ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION		(129,084,000		)		(118,982,000		)
PROPERTY AND EQUIPMENT, NET		51,596,000				88,690,000

TOTAL ASSETS		$	86,963,000			$	132,362,000

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	4,113,000			$	6,516,000
Accrued capital expenditures		1,245,000				3,071,000
Accrued liabilities		3,592,000				7,514,000
Payable to joint interest owners		719,000				1,581,000
Income taxes payable		129,000				3,506,000
Other current liabilities		453,000				645,000

TOTAL CURRENT LIABILITIES		10,251,000				22,833,000

LONG-TERM DEBT		30,028,000				26,217,000

LIABILITY FOR RETIREMENT BENEFITS		2,221,000				2,041,000

ASSET RETIREMENT OBLIGATION		3,868,000				4,565,000

DEFERRED INCOME TAXES		1,560,000				14,375,000

MINORITY INTEREST		1,046,000				1,067,000

STOCKHOLDERS’ EQUITY:
Common stock, par value $0.50 per share; Authorized, 20,000,000 shares: 8,403,060 issued at March 31, 2009 and September 30, 2008		4,202,000				4,202,000
Additional paid-in capital		1,227,000				1,222,000
Retained earnings		38,289,000				54,862,000
Accumulated other comprehensive (loss) income, net		(3,467,000		)		3,143,000
Treasury stock, at cost: 162,900 shares at March 31, 2009; 150,200 shares at September 30, 2008		(2,262,000		)		(2,165,000		)

TOTAL STOCKHOLDERS’ EQUITY		37,989,000				61,264,000

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	86,963,000			$	132,362,000

See Notes to Condensed Consolidated Financial Statements

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended								Six months ended
	March 31,								March 31,
	2009				2008				2009				2008
Revenues:
Oil and natural gas		$	5,549,000			$	11,503,000			$	13,260,000			$	21,593,000
Contract drilling		1,089,000				2,383,000				2,223,000				4,593,000
Sale of interest in leasehold land, net		201,000				201,000				201,000				709,000
Sale of development rights, net		-				-				833,000				2,497,000
Gas processing and other		332,000				220,000				576,000				575,000

		7,171,000				14,307,000				17,093,000				29,967,000
Costs and expenses:
Oil and natural gas operating		2,478,000				2,551,000				4,896,000				4,932,000
Contract drilling operating		976,000				1,956,000				2,117,000				3,777,000
General and administrative		2,043,000				3,208,000				3,987,000				6,283,000
Bad debt expense		594,000				-				594,000				-
Depreciation, depletion, and amortization		3,180,000				3,636,000				6,548,000				7,379,000
Reduction of carrying value of oil and natural gas properties		22,088,000				-				22,088,000				-
Interest expense, net		124,000				255,000				354,000				577,000
Minority interest in earnings (losses)		5,000				(24,000		)		145,000				559,000

		31,488,000				11,582,000				40,729,000				23,507,000

(Loss) earnings before income taxes		(24,317,000		)		2,725,000				(23,636,000		)		6,460,000

Income tax (benefit) provision		(7,320,000		)		1,040,000				(7,063,000		)		1,456,000

NET (LOSS) EARNINGS		$	(16,997,000	)		$	1,685,000			$	(16,573,000	)		$	5,004,000

BASIC NET (LOSS) EARNINGS PER COMMON SHARE		$	(2.06	)		$	0.20			$	(2.01	)		$	0.61

DILUTED NET (LOSS) EARNINGS PER COMMON SHARE		$	(2.06	)		$	0.20			$	(2.01	)		$	0.59

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
BASIC		8,240,160				8,245,086				8,240,729				8,228,811
DILUTED		8,240,160				8,424,153				8,240,729				8,462,332

See Notes to Condensed Consolidated Financial Statements

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended
	March 31,
	2009				2008
Cash flows from operating activities:
Net (loss) earnings		$	(16,573,000	)		$	5,004,000
Adjustments to reconcile net (loss) earnings to net cash (used in) provided by operating activities:
Reduction of carrying value of oil and natural gas properties		22,088,000				-
Depreciation, depletion, and amortization		6,548,000				7,379,000
Bad debt expense		594,000				-
Retirement benefits expense		251,000				239,000
Minority interest in earnings		145,000				559,000
Accretion of asset retirement obligation		132,000				137,000
Asset retirement obligation payments		(128,000		)		(84,000		)
Share-based compensation benefit		(416,000		)		(669,000		)
Sale of interest in leasehold land, net		(201,000		)		(709,000		)
Sale of development rights, net		(833,000		)		(2,497,000		)
Deferred income tax benefit		(6,784,000		)		(1,378,000		)
Additions to residential lots under development		(3,635,000		)		(1,344,000		)
Decrease from changes in current assets and liabilities		(5,515,000		)		(2,440,000		)

Net cash (used in) provided by operating activities		(4,327,000		)		4,197,000

Cash flows from investing activities:
Proceeds from sale of development rights, net of fees paid		833,000				2,497,000
Proceeds from sale of interest in leasehold land, net of fees paid		201,000				709,000
Refund of deposits on residential parcels		200,000				-
Proceeds from gas over bitumen royalty adjustments		116,000				114,000
Investment in joint ventures		(77,000		)		-
Capital expenditures - oil and natural gas		(6,237,000		)		(6,840,000		)
Capital expenditures - all other		(12,000		)		(519,000		)
Additions to investment in residential parcels		-				(261,000		)

Net cash used in investing activities		(4,976,000		)		(4,300,000		)

Cash flows from financing activities:
Proceeds from long-term debt borrowings		4,445,000				1,327,000
Repayments of long-term debt		(603,000		)		(54,000		)
Contributions from minority interest partner		15,000				-
Proceeds from exercise of stock options		-				145,000
Payment of dividends		-				(824,000		)
Payment of loan commitment fee		(60,000		)		(100,000		)
Purchases of common stock for treasury		(97,000		)		(1,596,000		)
Distributions to minority interest partners		(181,000		)		(653,000		)

Net cash provided by (used in) financing activities		3,519,000				(1,755,000		)

Effect of exchange rate changes on cash and cash equivalents		(646,000		)		(62,000		)

Net decrease in cash and cash equivalents		(6,430,000		)		(1,920,000		)
Cash and cash equivalents at beginning of period		13,618,000				10,107,000

Cash and cash equivalents at end of period		$	7,188,000			$	8,187,000

See Notes to Condensed Consolidated Financial Statements

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE (LOSS) INCOME

Three months ended March 31, 2009 and 2008

(Unaudited)


																	Accumulated
						Additional											Other								Total
	Shares		Common			Paid-In			Comprehensive				Retained				Comprehensive				Treasury				Stockholders’
	Outstanding		Stock			Capital			(Loss) Income				Earnings				(Loss) Income				Stock				Equity

Balance at December 31, 2007		8,196,460		$	4,160,000		$	889,000						$	47,895,000			$	5,250,000			$	(1,869,000	)		$	56,325,000

Exercise of stock options, 73,000 shares		73,000		37,000			107,000																			144,000

Share-based compensation costs							7,000																			7,000

Dividends declared, $0.05 per share														(412,000		)										(412,000		)

Comprehensive income:
Net earnings										$	1,685,000			1,685,000												1,685,000
Other comprehensive loss - foreign currency translation adjustments, net of $834,000 of tax benefit										(1,463,000		)						(1,463,000		)						(1,463,000		)
Other comprehensive income - retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of $15,000 of taxes										28,000								28,000								28,000
Total comprehensive income										$	250,000

At March 31, 2008		8,269,460		$	4,197,000		$	1,003,000						$	49,168,000			$	3,815,000			$	(1,869,000	)		$	56,314,000

Balance at December 31, 2008		8,240,160		$	4,202,000		$	1,227,000						$	55,286,000			$	(3,080,000	)		$	(2,262,000	)		$	55,373,000

Comprehensive loss:
Net loss										$	(16,997,000	)		(16,997,000		)										(16,997,000		)
Other comprehensive loss - foreign currency translation adjustments, net of $901,000 of tax benefit										(410,000		)						(410,000		)						(410,000		)
Other comprehensive income - retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of $12,000 of taxes										23,000								23,000								23,000

Total comprehensive loss										$	(17,384,000	)

At March 31, 2009		8,240,160		$	4,202,000		$	1,227,000						$	38,289,000			$	(3,467,000	)		$	(2,262,000	)		$	37,989,000

See Notes to Condensed Consolidated Financial Statements

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE (LOSS) INCOME

Six months ended March 31, 2009 and 2008

(Unaudited)


																		Accumulated
							Additional											Other								Total
	Shares			Common			Paid-In			Comprehensive				Retained				Comprehensive				Treasury				Stockholders’
	Outstanding			Stock			Capital			(Loss) Income				Earnings				(Loss) Income				Stock				Equity

Balance at September 30, 2007		8,268,160			$	4,140,000		$	738,000						$	44,988,000			$	4,933,000			$	(195,000	)		$	54,604,000

Exercise of stock options, 113,000 shares net of 5,200 shares tendered and placed in treasury		107,800			57,000			166,000															(78,000		)		145,000

Share-based compensation costs								21,000																			21,000

Tax benefit from employee stock option transactions								78,000																			78,000

Purchases of 106,500 common shares for treasury		(106,500	)																				(1,596,000		)		(1,596,000		)

Dividends declared, $0.10 per share															(824,000		)										(824,000		)

Comprehensive income:
Net earnings											$	5,004,000			5,004,000												5,004,000
Other comprehensive loss - foreign currency translation adjustments, net of $659,000 of tax benefit											(1,174,000		)						(1,174,000		)						(1,174,000		)
Other comprehensive income - retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of $29,000 of taxes											56,000								56,000								56,000
Total comprehensive income											$	3,886,000

At March 31, 2008		8,269,460			$	4,197,000		$	1,003,000						$	49,168,000			$	3,815,000			$	(1,869,000	)		$	56,314,000

Balance at September 30, 2008		8,252,860			$	4,202,000		$	1,222,000						$	54,862,000			$	3,143,000			$	(2,165,000	)		$	61,264,000

Share-based compensation costs								5,000																			5,000

Purchases of 12,700 common shares for treasury		(12,700	)																				(97,000		)		(97,000		)

Comprehensive loss:
Net loss											$	(16,573,000	)		(16,573,000		)										(16,573,000		)
Other comprehensive loss - foreign currency translation adjustments, net of $3,078,000 of tax benefit											(6,657,000		)						(6,657,000		)						(6,657,000		)
Other comprehensive income - retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of $24,000 of taxes											47,000								47,000								47,000

Total comprehensive loss											$	(23,183,000	)

At March 31, 2009		8,240,160			$	4,202,000		$	1,227,000						$	38,289,000			$	(3,467,000	)		$	(2,262,000	)		$	37,989,000

See Notes to Condensed Consolidated Financial Statements

BARNWELL INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

Basis of Consolidation

The condensed consolidated financial statements include the accounts of Barnwell Industries, Inc. and all majority-owned subsidiaries, including an indirect 77.6%-owned land investment general partnership and two 80%-owned joint ventures (collectively referred to herein as “Barnwell,” “we,” “our,” “us,” or the “Company”). All significant intercompany accounts and transactions have been eliminated. Investments in companies over which Barnwell has the ability to exercise significant influence, but not control, are accounted for using 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 Condensed Consolidated Balance Sheet as of March 31, 2009, the Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2009 and 2008, the Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2009 and 2008, and the Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive (Loss) Income for the three and six months ended March 31, 2009 and 2008 have been prepared by Barnwell and are unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2009 and for all periods presented have been made. The Condensed Consolidated Balance Sheet as of September 30, 2008 has been derived from audited consolidated financial statements.

Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in Barnwell’s September 30, 2008 Annual Report on Form 10-K. The results of operations for the period ended March 31, 2009 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. generally accepted accounting principles 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.