Edgar Filing: BARNWELL INDUSTRIES INC

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, 2010

[ ] 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 August 10, 2010 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

	Condensed Consolidated Balance Sheets - June 30, 2010 and September 30, 2009 (Unaudited)	3

	Condensed Consolidated Statements of Operations - three and nine months ended June 30, 2010 and 2009 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows - nine months ended June 30, 2010 and 2009 (Unaudited)	5

	Condensed Consolidated Statements of Equity and Comprehensive Loss - three months ended June 30, 2010 and 2009 (Unaudited)	6

	Condensed Consolidated Statements of Equity and Comprehensive Income (Loss) - nine months ended June 30, 2010 and 2009 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 4T.	Controls and Procedures	38

PART II.	OTHER INFORMATION:

Item 6.	Exhibits	38

	Signature	39

	Index to Exhibits	40

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,
	2010			2009
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	11,323,000		$	6,879,000
Restricted cash	371,000			-
Accounts receivable, net of allowance for doubtful accounts of:
$75,000 at June 30, 2010; $47,000 at September 30, 2009	3,946,000			3,978,000
Current taxes receivable	1,822,000			653,000
Prepaid expenses	882,000			1,403,000
Deferred income taxes	170,000			272,000
Real estate held for sale	13,629,000			13,585,000
Other current assets	742,000			591,000

TOTAL CURRENT ASSETS	32,885,000			27,361,000

INVESTMENT IN RESIDENTIAL PARCELS	3,800,000			4,598,000

INVESTMENT IN JOINT VENTURES	1,875,000			1,920,000

INVESTMENT IN LAND INTERESTS	538,000			538,000

PROPERTY AND EQUIPMENT	218,132,000			212,215,000
ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION	(168,925,000		)	(160,528,000		)
PROPERTY AND EQUIPMENT, NET	49,207,000			51,687,000

TOTAL ASSETS	$	88,305,000		$	86,104,000

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,962,000		$	3,277,000
Accrued capital expenditures	1,166,000			588,000
Accrued incentive plan costs	1,013,000			1,427,000
Other accrued compensation costs	577,000			546,000
Payable to joint interest owners	924,000			1,001,000
Income taxes payable	1,337,000			619,000
Current portion of long-term debt	13,500,000			14,335,000
Other current liabilities	3,466,000			2,212,000

TOTAL CURRENT LIABILITIES	23,945,000			24,005,000

LONG-TERM DEBT	13,000,000			16,665,000

LIABILITY FOR RETIREMENT BENEFITS	4,990,000			4,848,000

ASSET RETIREMENT OBLIGATION	4,785,000			4,508,000

DEFERRED INCOME TAXES	3,641,000			2,858,000

TOTAL LIABILITIES	50,361,000			52,884,000

EQUITY:
BARNWELL INDUSTRIES, INC. STOCKHOLDERS’ EQUITY:
Common stock, par value $0.50 per share; Authorized, 20,000,000 shares:
8,445,060 issued at June 30, 2010; 8,403,060 issued at September 30, 2009	4,223,000			4,202,000
Additional paid-in capital	1,289,000			1,227,000
Retained earnings	34,256,000			30,500,000
Accumulated other comprehensive loss, net	(827,000		)	(1,349,000		)
Treasury stock, at cost:
167,900 shares at June 30, 2010; 162,900 shares at September 30, 2009	(2,286,000		)	(2,262,000		)

TOTAL BARNWELL INDUSTRIES, INC. STOCKHOLDERS’ EQUITY	36,655,000			32,318,000
Non-controlling interests	1,289,000			902,000

TOTAL EQUITY	37,944,000			33,220,000

TOTAL LIABILITIES AND EQUITY	$	88,305,000		$	86,104,000

See Notes to Condensed Consolidated Financial Statements

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BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended						Nine months ended
	June 30,						June 30,
	2010			2009			2010		2009
Revenues:
Oil and natural gas	$	5,947,000		$	5,927,000		$	20,650,000	$	19,187,000
Contract drilling	1,599,000			1,420,000			4,882,000		3,643,000
Sale of interest in leasehold land, net	1,128,000			-			3,347,000		201,000
Sale of development rights, net	-			-			2,497,000		833,000
Gas processing and other	105,000			121,000			328,000		697,000

	8,779,000			7,468,000			31,704,000		24,561,000
Costs and expenses:
Oil and natural gas operating	2,659,000			2,140,000			7,518,000		7,036,000
Contract drilling operating	1,819,000			1,070,000			4,203,000		3,187,000
General and administrative	1,591,000			2,086,000			6,001,000		6,073,000
Depreciation, depletion, and amortization	2,163,000			2,636,000			6,817,000		9,184,000
Reduction of carrying value of assets	-			4,260,000			798,000		26,348,000
Bad debt (recovery) expense	-			(129,000		)	-		465,000
Interest expense, net	326,000			247,000			906,000		601,000

	8,558,000			12,310,000			26,243,000		52,894,000

Earnings (loss) before income taxes	221,000			(4,842,000		)	5,461,000		(28,333,000		)

Income tax (benefit) provision	(282,000		)	(1,567,000		)	852,000		(8,630,000		)

NET EARNINGS (LOSS)	503,000			(3,275,000		)	4,609,000		(19,703,000		)

Less: Net earnings (loss) attributable to non-controlling interests	189,000			(40,000		)	853,000		105,000

NET EARNINGS (LOSS) ATTRIBUTABLE TO BARNWELL INDUSTRIES, INC.	$	314,000		$	(3,235,000	)	$	3,756,000	$	(19,808,000	)

BASIC NET EARNINGS (LOSS) PER COMMON SHARE ATTRIBUTABLE TO BARNWELL INDUSTRIES, INC. STOCKHOLDERS	$	0.04		$	(0.39	)	$	0.45	$	(2.40	)

DILUTED NET EARNINGS (LOSS) PER COMMON SHARE ATTRIBUTABLE TO BARNWELL INDUSTRIES, INC. STOCKHOLDERS	$	0.04		$	(0.39	)	$	0.45	$	(2.40	)

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
BASIC	8,277,160			8,240,160			8,272,732		8,240,539
DILUTED	8,277,160			8,240,160			8,272,732		8,240,539

See Notes to Condensed Consolidated Financial Statements

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BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine months ended
	June 30,
	2010			2009
Cash flows from operating activities:
Net earnings (loss)	$	4,609,000		$	(19,703,000	)
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion, and amortization	6,817,000			9,184,000
Reduction of carrying value of assets	798,000			26,348,000
Deferred income tax expense (benefit)	867,000			(8,362,000		)
Retirement benefits expense	599,000			378,000
Accretion of asset retirement obligation	236,000			202,000
Bad debt expense	-			465,000
Asset retirement obligation payments	(56,000		)	(128,000		)
Share-based compensation benefit	(89,000		)	(370,000		)
Retirement plan contributions	(256,000		)	(4,000		)
Sale of interest in leasehold land, net	(3,347,000		)	(201,000		)
Sale of development rights, net	(2,497,000		)	(833,000		)
Additions to real estate held for sale	(44,000		)	(4,338,000		)
Decrease from changes in current assets and liabilities	(738,000		)	(7,074,000		)

Net cash provided by (used in) operating activities	6,899,000			(4,436,000		)

Cash flows from investing activities:
Proceeds from sale of development rights, net of fees paid	2,497,000			833,000
Proceeds from sale of interest in leasehold land, net of fees paid	3,347,000			201,000
Proceeds from sale of oil and natural gas properties	733,000			-
Proceeds from gas over bitumen royalty adjustments	97,000			162,000
Return of capital distribution from joint venture	45,000			-
Refund of deposits on residential parcels	-			200,000
Investment in joint ventures	-			(164,000		)
Capital expenditures - oil and natural gas	(2,900,000		)	(7,494,000		)
Capital expenditures - all other	(1,038,000		)	(19,000		)

Net cash provided by (used in) investing activities	2,781,000			(6,281,000		)

Cash flows from financing activities:
Proceeds from long-term debt borrowings	-			6,093,000
Repayments of long-term debt	(4,500,000		)	(603,000		)
Contributions from non-controlling interests	781,000			31,000
Proceeds from exercise of stock options	59,000			-
Purchases of common stock for treasury	-			(97,000		)
Payment of loan commitment fees	(104,000		)	(60,000		)
Distributions to non-controlling interests	(1,247,000		)	(181,000		)

Net cash (used in) provided by financing activities	(5,011,000		)	5,183,000

Effect of exchange rate changes on cash and cash equivalents	(225,000		)	(639,000		)

Net increase (decrease) in cash and cash equivalents	4,444,000			(6,173,000		)
Cash and cash equivalents at beginning of period	6,879,000			13,618,000

Cash and cash equivalents at end of period	$	11,323,000		$	7,445,000

See Notes to Condensed Consolidated Financial Statements

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BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE LOSS

Three months ended June 30, 2010 and 2009

(Unaudited)


																	Accumulated
						Additional											Other
	Shares		Common			Paid-In			Comprehensive				Retained				Comprehensive				Treasury				Non-controlling				Total
	Outstanding		Stock			Capital			Loss				Earnings				Loss				Stock				Interests				Equity

Balance at March 31, 2009		8,240,160		$	4,202,000		$	1,227,000						$	38,289,000			$	(3,467,000	)		$	(2,262,000	)		$	1,046,000		$	39,035,000

Contributions from non-controlling interests																										16,000			16,000

Comprehensive loss:
Net loss										$	(3,275,000	)		(3,235,000		)										(40,000		)	(3,275,000		)
Other comprehensive income:
Foreign currency translation adjustments, net of $154,000 of taxes										2,850,000								2,850,000											2,850,000
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										(402,000		)
Comprehensive loss attributable to non-controlling interests										40,000
Comprehensive loss attributable to Barnwell Industries, Inc.										$	(362,000	)

At June 30, 2009		8,240,160		$	4,202,000		$	1,227,000						$	35,054,000			$	(594,000	)		$	(2,262,000	)		$	1,022,000		$	38,649,000


Balance at March 31, 2010		8,277,160		$	4,223,000		$	1,289,000						$	33,942,000			$	815,000			$	(2,286,000	)		$	776,000		$	38,759,000

Contributions from non-controlling interests																										653,000			653,000

Distributions to non-controlling interests																										(329,000		)	(329,000		)

Comprehensive loss:
Net earnings										$	503,000			314,000												189,000			503,000
Other comprehensive loss – foreign currency translation adjustments, net of $0 tax benefit										(1,709,000		)						(1,709,000		)									(1,709,000		)
Other comprehensive income – retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0										67,000								67,000											67,000
Total comprehensive loss										(1,139,000		)
Comprehensive income attributable to non-controlling interests										(189,000		)
Comprehensive loss attributable to Barnwell Industries, Inc.										$	(1,328,000	)

At June 30, 2010		8,277,160		$	4,223,000		$	1,289,000						$	34,256,000			$	(827,000	)		$	(2,286,000	)		$	1,289,000		$	37,944,000

See Notes to Condensed Consolidated Financial Statements

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BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME (LOSS)

Nine months ended June 30, 2010 and 2009

(Unaudited)

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

Balance at September 30, 2008	8,252,860		$	4,202,000	$	1,222,000				$	54,862,000		$	3,143,000		$	(2,165,000	)	$	1,067,000		$	62,331,000

Share-based compensation costs					5,000																	5,000

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

Contributions from non-controlling interests																			31,000			31,000

Distributions to non-controlling interests																			(181,000		)	(181,000		)

Comprehensive loss:
Net loss							$	(19,703,000	)	(19,808,000		)							105,000			(19,703,000		)
Other comprehensive loss – foreign currency translation adjustments, net of $2,924,000 tax benefit							(3,807,000		)				(3,807,000		)							(3,807,000		)
Other comprehensive income – retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of $36,000 of taxes							70,000						70,000									70,000
Total comprehensive loss							(23,440,000		)
Comprehensive income attributable to non-controlling interests							(105,000		)
Comprehensive loss attributable to Barnwell Industries, Inc.							$	(23,545,000	)

At June 30, 2009	8,240,160		$	4,202,000	$	1,227,000				$	35,054,000		$	(594,000	)	$	(2,262,000	)	$	1,022,000		$	38,649,000


Balance at September 30, 2009	8,240,160		$	4,202,000	$	1,227,000				$	30,500,000		$	(1,349,000	)	$	(2,262,000	)	$	902,000		$	33,220,000

Exercise of stock options - 42,000 shares, net of 5,000 shares tendered and placed in treasury	37,000		21,000		62,000											(24,000		)				59,000

Contributions from non-controlling interests																			781,000			781,000

Distributions to non-controlling interests																			(1,247,000		)	(1,247,000		)

Comprehensive income:
Net earnings							$	4,609,000		3,756,000									853,000			4,609,000
Other comprehensive income:
Foreign currency translation adjustments, net of taxes of $0							321,000						321,000									321,000
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0							201,000						201,000</