<PAGE>
May 12, 2000
Securities and Exchange Commission
450 Fifth St., N.W.
Judiciary Plaza
Washington, D.C. 20549-1004
Via Edgar Electronic Filing System
In Re: File Number 0-9219
------------------
Gentlemen:
Pursuant to regulations of the Securities and Exchange
Commission, submitted herewith for filing on behalf of Avoca, Incorporated
(the "Company") is the Company's Report on Form 10-QSB for the period ended
March 31, 2000.
This filing is being effected by direct transmission to the
Commission's EDGAR System.
Sincerely,
/s/ Robert C. Baird, Jr.
---------------------------------
Robert C. Baird, Jr.
Executive Vice President &
Principal Financial Officer
(504) 599-3069
RCB/drm
<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
---------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ---------------------------
Commission file number 0-9219
---------------------------------------------------------
AVOCA, INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Louisiana 72-0590868
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
228 St. Charles Avenue, Suite 838, New Orleans, Louisiana 70130
---------------------------------------------------------------
(Address of principal executive offices)
(504) 552-4720
--------------------------------------------------------------
(Issuer's telephone number)
--------------------------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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. Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 830,500 shares on May 1, 2000
-----------------------------------
Transitional Small Business Disclosure Former (check one); Yes No X
----- -----
An exhibit index is located at page 14 of this report.
Page 1 of 14
<PAGE>
AVOCA, INCORPORATED
-------------------
I N D E X
---------
Page No.
--------
Part I. Financial Information (Unaudited)
---------------------
Condensed Balance Sheet - March 31, 2000 4
Condensed Statements of Income
Three Months Ended March 31, 2000
and 1999 5
Condensed Statements of Cash Flows
Three Months Ended March 31, 2000
and 1999 6
Notes to Condensed Financial Statements 7
Management's Discussion and Analysis or
Plan of Operation 8-10
Part II. Other Information
-----------------
Legal Proceedings 11
Submission of Matters to a Vote of
Security Holders 11-12
Exhibits and Reports on Form 8-K 12
Signature 13
Page 2 of 14
<PAGE>
AVOCA, INCORPORATED
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Page 3 of 14
<PAGE>
<TABLE>
<CAPTION>
Avoca, Incorporated
Condensed Balance Sheet (Unaudited)
March 31, 2000
Assets
Current assets:
<S> <C>
Cash and cash equivalents $ 168,549
Short-term investments 1,087,577
Accounts receivable 107,234
Accrued interest receivable 29,912
Prepaid expenses 12,502
----------
Total current assets 1,405,774
Property and equipment, less accumulated depreciation and depletion 72,235
Other assets:
Long-term investments 1,239,727
Avoca Drainage Bonds, $415,000, in default -- at nominal amount 1
----------
$2,717,737
==========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 23,723
Income taxes payable 54,058
----------
Total current liabilities 77,781
Deferred income taxes 12,254
Shareholders' equity:
Common stock, no par value -- authorized, issued and outstanding
830,500 shares 94,483
Retained earnings 2,533,219
----------
Total shareholders' equity 2,627,702
----------
$2,717,737
==========
See accompanying notes
Page 4 of 14
</TABLE>
<PAGE>
Avoca, Incorporated
Condensed Statements of Income (Unaudited)
Three months ended
March 31
2000 1999
----------------------------
Revenue:
Royalties $ 316,599 $ 39,341
Less severance taxes 16,228 2,233
--------- --------
300,371 37,108
Interest income 34,707 31,808
Rental income 10 -
--------- --------
335,088 68,916
Expenses:
Legal and accounting services 24,806 10,212
Consultant fees 22,825 19,400
Geological and engineering fees 9,931 1,933
Insurance 6,510 6,285
Miscellaneous expenses 29,853 24,869
--------- --------
93,925 62,699
--------- --------
Income before income taxes 241,163 6,217
Income taxes 73,604 1,824
--------- --------
Net income $ 167,559 $ 4,393
========= ========
Net income per share $ 0.20 $ 0.01
========= ========
See accompanying notes
Page 5 of 14
<PAGE>
<TABLE>
<CAPTION>
Avoca, Incorporated
Condensed Statements of Cash Flows (Unaudited)
Three months ending
March 31
2000 1999
------------------------------------------
Operating activities
<S> <C> <C>
Net income $ 167,559 $ 4,393
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation expense 1,097 940
Deferred taxes (127) (127)
Changes in operating assets and liabilities:
Operating assets 8,506 (7,082)
Operating liabilities 60,866 (2,883)
--------- -------
Net cash provided by (used in) operating activities 237,901 (4,759)
Investing activities
Purchase of investments (125,000) (165,000)
Maturity of investments - 160,498
Purchase of equipment - (625)
---------
Net cash used in investing activities (125,000) (5,127)
Financing activities
Dividends paid (705,925) (265,760)
--------- ---------
Net cash used in financing activities (705,925) (265,760)
Decrease in cash and cash equivalents (593,024) (275,646)
Cash and cash equivalents at beginning of period 761,573 315,376
--------- -------
Cash and cash equivalents at end of period $ 168,549 $ 39,730
========== ========
See accompanying notes
Page 6 of 14
</TABLE>
<PAGE>
Avoca, Incorporated
Notes to Condensed Financial Statements (Unaudited)
Three months ended March 31, 2000
1. Basis of Accounting
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions of Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all normal and recurring
adjustments and accruals considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual shareholders'
report incorporated by reference in the Form 10-KSB for the year ended December
31, 1999.
The Company considers its United States Government securities held with
a maturity of three months or less when purchased to be cash equivalents.
Page 7 of 14
<PAGE>
Item 2 - Management's Discussion and
Analysis or Plan of Operation
The unaudited condensed statements of income show that net income for
the first quarter of 2000 as compared with the first quarter of 1999 increased
from $4,393 to $167,559.
Total revenues, net of severance taxes, rose from $68,916 to $335,088
because of increased royalties received from The Meridian Resources &
Exploration Company on the C.M. Thibodaux No. 1 & No. 3 wells in the Ramos
Field, across Bayou Chene just north of the eastern end of Avoca Island. The No.
1 well was placed on production June 15, 1999 from the Operc 5 sand, went off
production June 25 due to the blowout of the C.M. Thibodaux No. 2 well and
returned to production August 24 after the successful plugging of the No. 2
well. The No. 3 well (a replacement for the No. 2 well) went on production from
the Operc B sand in early November 1999. The Company's net revenue interest in
both wells, which were responsible for 89% of the Company's first quarter of
fiscal 2000 royalty income, is approximately 2.87%. The No. 1 well currently
produces at the rate of 5,000 to 8,000 Mcf of gas per day, approximately 100
barrels of condensate per day and 100 gallons of natural gas liquids per day.
The No. 3 well currently produces approximately three times the rate of the No.
1 well. Meridian Resources has advised the Company that, in the second quarter
of this year, it plans to spud a well that will bottom hole in Section 47 on the
northeast end of Avoca Island. Meridian Resources further advises that it plans
to spud a well in the third quarter in Section 5 on the southwest part of the
island.
Burlington Resources Oil & Gas Company has completed the Conrad
Industries No. 1 well in the Wyandotte Field opposite the northern part of Avoca
Island. The well was tested at five million cubic feet of gas per day and very
low volumes of condensate. At present, this well is being
Page 8 of 14
<PAGE>
prepared for production and, according to the operator, Avoca's participation
in the unit will be approximately 25%.
From the second quarter of 1997 until the fourth quarter of 1999, the
Delta Operating Corporation (formerly Alliance Operating Company) Avoca No. 1
well, also in the Ramos Field, was responsible for virtually all of the
Company's royalty income. As compared with the first quarter of 1999, royalty
income net of severance taxes from the Avoca No. 1 well decreased $2,718 or
approximately 7% as a result of a 26% decline in production. The production
decline was partially offset by a 20% increase in the average sales price of
gas, from $2.02 per Mcf for the three months ending March 31, 1999 to $2.54 per
Mcf for the three months ended March 31, 2000. According to the well's operator,
an acid treatment to the well's producing formation is scheduled in the next
sixty days in an effort to improve production.
Interest income on U.S. Government and U.S. Government agency
securities increased slightly due to the availability of increased funds for
investment.
As compared with the first quarter of 1999, total expenses increased
$31,226 or approximately 50%. Of the $14,594 increase in legal and accounting
services, $9,236 was attributable to legal fees thus far expended in the lawsuit
described under Part II, Item 1 of this report, incorporated herein by
reference. Additional legal expenses were incurred in the first quarter of 2000
relative to a unitization proceeding on the Burlington Conrad Industries No. 1
well previously discussed. Consultant fees increased primarily because of
additional compensation earned by the company's manager. The $7,998 increase in
geological and engineering fees was attributable to increased mineral activity
requiring additional services of our geologists.
The change in income tax expense for the three months ended March 31,
2000 resulted from an increase in taxable income for the first quarter of 2000
as compared to the first quarter of 1999.
Page 9 of 14
<PAGE>
The Company's continued liquidity is evidenced by the fact that
approximately 92% of its assets, as measured by book value, are cash and U.S.
Government and U.S. Government agency securities.
In addition to interest income and the leasing of hunting rights, the
Company customarily derives essentially all of its other income from bonuses,
delay rentals and royalties under oil, gas and mineral leases of its Avoca
Island acreage. The Company's business is passive and all capital requirements
for exploration, development and production of the Company's mineral resources
are funded by its lessees.
Page 10 of 14
<PAGE>
Part II - OTHER INFORMATION
Item 3 - Legal Proceedings
As noted in the Company's 10-KSB report for 199, Avoca, Incorporated on
December 29, 1999 filed in the 16th Judicial District Court for the Parish of
St. Mary (Docket No. 105195) a lawsuit to evict a former lessee, Ernest
Singleton, from a small parcel of land (less than 10 acres) located in the
northeast part of Avoca Island. The parcel is included in The Meridian Resource
& Exploration, Inc.'s 647.504 acre unit for the C. M. Thibodaux Nos. 1 and 3
wells.
The defendant, individually and on behalf of numerous other heirs of
John Singleton, has filed a Reconventional Demand and Petition in Nullity
asserting ownership of the parcel (and other lands not claimed by the Company)
on the ground that a 1970 court judgment which recognized the Company's title to
the disputed area is a nullity.
The Company has responded with peremptory exceptions of prescription
and res judicata, which are pending before the court. Item 4 - Submission of
Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on March 16,
1999. Management's proposal to fix at five the number of directors to be elected
for the ensuing year was approved by the following vote:
For Against Abstain Broker Nonvotes
------- ------- ------- ---------------
704,324 12 595 -0-
Page 11 of 14
<PAGE>
Messrs. Baird, Fox, Lyman, Powell and Tucker were elected directors for
the ensuing year by the following vote:
Withhold
For Vote Broker Nonvotes
------- -------- ---------------
Robert C. Baird, Jr. 704,574 357 -0-
Richard W. Fox 704,764 167 -0-
Guy C. Lyman, Jr. 704,564 367 -0-
M. Cleland Powell, III 704,564 367 -0-
J. Scott Tucker 704,774 157 -0-
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-B:
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K
Reports on Form 8-K: No reports have been filed during the
quarter for which this report is filed.
Page 12 of 14
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AVOCA, INCORPORATED
-------------------
Registrant
May 2, 2000 /s/Robert C. Baird, Jr.
-----------------------------------------
Robert C. Baird, Jr.
President and Principal Financial Officer
Page 13 of 14
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
27 Financial Data Schedule
Page 14 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 168,549
<SECURITIES> 2,327,304
<RECEIVABLES> 137,146
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,405,774
<PP&E> 72,235
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,717,737
<CURRENT-LIABILITIES> 77,781
<BONDS> 0
<COMMON> 94,483
0
0
<OTHER-SE> 2,533,219
<TOTAL-LIABILITY-AND-EQUITY> 2,717,737
<SALES> 300,371
<TOTAL-REVENUES> 335,088
<CGS> 0
<TOTAL-COSTS> 16,228
<OTHER-EXPENSES> 93,925
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 241,163
<INCOME-TAX> 73,604
<INCOME-CONTINUING> 167,559
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167,559
<EPS-BASIC> .20
<EPS-DILUTED> .20
</TABLE>
