SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ending March 31, 1996 Commission File #0-5704
-------------- -----------------------
MAYNARD OIL COMPANY
-------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-1362284
------------------------- -------------------
(State or other jurisdic- (IRS Employer
tion of incorporation) Identification No.)
8080 N. Central Expressway, Suite 660, Dallas, Texas 75206
-------------------------------------------------------------------------
Registrant's telephone number, including area code: (214) 891-8880
--------------
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes / X / No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 7, 1996.
4,889,795 shares of common stock, par value $0.10
-------------------------------------------------------------------------
MAYNARD OIL COMPANY AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedules
Page
Part I. Financial Information
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995
Consolidated Statements of Operations
Three Months ended March 31, 1996 and 1995
Consolidated Statements of Shareholders' Equity
Three Months ended March 31, 1996
Consolidated Statements of Cash Flows
Three Months ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Signatures
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,733,514 $ 6,138,903
Accounts receivable, trade 4,154,021 3,297,933
Other current assets 439,611 465,426
------------ ------------
Total current assets 12,327,146 9,902,262
------------ ------------
Property and equipment, at cost:
Oil and gas properties, successful
efforts method 111,852,212 111,473,388
Other property and equipment 514,905 507,953
------------ ------------
112,367,117 111,981,341
Less accumulated depreciation and
amortization (51,448,040) (49,045,024)
------------ ------------
Net property and equipment 60,919,077 62,936,317
------------ ------------
$ 73,246,223 $ 72,838,579
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 5,000,000 $ 4,812,500
Accounts payable 4,098,527 4,126,013
Accrued expenses 1,153,592 920,653
Income taxes payable 454,695 412,695
------------ ------------
Total current liabilities 10,706,814 10,271,861
------------ ------------
Deferred income taxes 2,292,510 2,212,510
Long-term debt 20,000,000 21,250,000
Shareholders' equity:
Preferred stock of $.50 par value.
Authorized 1,000,000 shares; none
issued -- --
Common stock of $.10 par value.
Authorized 20,000,000 shares;
4,889,870 and 4,889,970 shares
issued and outstanding 488,987 488,997
Additional paid-in capital 18,831,138 18,831,138
Retained earnings 20,926,774 19,784,073
------------ ------------
Total shareholders' equity 40,246,899 39,104,208
------------ ------------
Contingencies and commitments $ 73,246,223 $ 72,838,579
============ ============
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Consolidated Statement of Operations
<CAPTION>
Three Months ended March 31,
1996 1995
<S> <C> <C>
Revenues:
Oil and gas sales $7,266,765 $4,230,329
Interest and other 64,316 114,980
Gain on sale of assets 661 146,178
---------- ----------
7,331,742 4,491,487
---------- ----------
Costs and expenses:
Operating expenses 2,471,241 1,795,475
Exploration, dry holes
and abandonments 100,748 76,854
General and administrative 256,487 250,330
Depreciation and amortization 2,425,774 1,455,907
Interest 454,038 129,332
---------- ----------
5,708,288 3,707,898
---------- ----------
Income before income taxes 1,623,454 783,589
Income tax expense 480,000 200,000
---------- ----------
Net income $1,143,454 $ 583,589
========== ==========
Weighted average number of common
shares outstanding 4,889,951 4,891,379
========== ==========
Net income per common share $ .23 $ .12
===== =====
</TABLE>
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Three Months Ended March 31, 1996
(Unaudited)
<CAPTION>
Additional
Common Stock Paid-in
---------------- Capital Retained
Shares Amount Amount Earnings Total
------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1995 4,889,970 $488,997 $18,831,138 $19,784,073 $39,104,208
Net income -- -- -- 1,143,454 1,143,454
Purchase of
common stock (100) (10) -- (753) (763)
--------- -------- ----------- ----------- -----------
Balance at
March 31, 1996 4,889,870 $488,987 $18,831,138 $20,926,774 $40,246,899
========= ======== =========== =========== ===========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<CAPTION>
Three Months Ended March 31,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $1,143,454 $ 583,589
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,425,774 1,455,907
Deferred income taxes 80,000 150,000
Dry holes and abandonments 95,627 66,839
Current year costs of dry holes and
abandonments (5,918) (66,839)
(Gain) on sale of assets (661) (146,178)
(Increase) decrease in current assets:
Accounts receivable (856,088) (396,604)
Prepaid expenses and other current assets 25,815 72,788
Increase (decrease) in current liabilities:
Accounts payable (27,486) 183,491
Accrued expenses 232,939 176,502
Income taxes payable 42,000 50,000
---------- ----------
Net cash provided by operating
activities 3,155,456 2,129,495
---------- ----------
Cash flows from investing activities:
Proceeds from disposition of assets 10,031 303,386
Additions to property and equipment (507,613) (10,847,916)
---------- ---------
Net cash used by investing
activities (497,582) (10,544,530)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- 9,500,000
Principal payments on long-term debt (1,062,500) (437,500)
Purchase of common stock (763) --
---------- ----------
Net cash provided (used) by
financing activities (1,063,263) 9,062,500
---------- ----------
Net increase in cash and cash equivalents 1,594,611 647,465
Cash and cash equivalents at beginning of year 6,138,903 5,836,389
---------- ----------
Cash and cash equivalents at end of period $7,733,514 $6,483,854
========== ==========
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996
1. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of all recurring
adjustments, necessary to present fairly the Company's financial position
as of March 31, 1996 and December 31, 1995, the results of operations for
the three months ended March 31, 1996 and 1995 and changes in cash and
cash equivalents for the three months ended March 31, 1996 and 1995.
The accounting policies followed by the Company are set forth in Note 1
to the Company's financial statements in the 1995 Annual Report to
Shareholders.
2. Net income for the three months ended March 31, 1996 is not necessarily
indicative of the results of the operations of Maynard Oil Company and
Subsidiaries for the year ending December 31, 1996, and is subject to
audit adjustments at year-end.
3. Net income per common share is based on the weighted average number of
shares outstanding in each period, which was 4,889,951 and 4,891,379
shares at March 31, 1996 and 1995, respectively.
4. In March 1995, the Financial Accounting Standards Board ( FASB ) issued
Statement of Financial Accounting Standards ( SFAS ) No. 121, Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of. This statement requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. No. 121
establishes guidelines for determining recoverability based on future
net cash flows from the use of the asset and for the measurement of the
impairment loss. Impairment loss under SFAS 121 is calculated as the
difference between the carrying amount of the asset and its fair value.
Any impairment loss is recorded in the period in which the recognition
criteria are first applied and met.
Under the successful efforts method of accounting for oil and gas
operations, the Company periodically assessed its proved properties for
impairments by comparing the aggregate net book carrying amount of all
proved properties with their aggregate future net cash flows. At
December 31, 1995, the future net cash flows of these proved properties
was $86.47 million as compared to the net book carrying amount of $62.67
million. The new statement requires the impairment review be performed
at the lowest level of asset groupings for which there are identifiable
cash flows. In the case of the Company, this results in a field by field
impairment review.
The Company adopted SFAS 121 on January 1, 1996 recognizing a $57,000
impairment loss which is included in depreciation and amortization
expense on the Consolidated Statement of Operations for the three months
ended March 31, 1996. The loss was recorded as the difference between
the asset book carrying amounts and future cash flow projections, giving
consideration to recent prices, pricing trends, probable and possible
reserve recoveries, and discount rates. These projections represent the
Company s best estimate of fair value based on the information available.
5. The provision for income taxes consists of the following (thousands of
dollars):
Three Months Ended
March 31
------------------
1996 1995
---- ----
Federal:
Current $ 400 $ 50
Deferred (benefit) 80 150
$ 480 $ 200
6. Certain reclassification of 1995 accounts have been made to conform to
the 1996 presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Quarter Ended March 31, 1996 Compared to Quarter Ended March 31, 1995
---------------------------------------------------------------------
The Company reported net income of $1,143,454, or twenty-three cents per
share, on revenues of $7,331,742 for the quarter ended March 31, 1996
compared with net income of $583,589, or twelve cents per share, on revenues
of $4,491,487 for the same quarter a year ago. Results for the first quarter
of 1996 were favorably impacted by operations on the two producing property
acquisitions completed in 1995. Oil volumes rose 114,227 barrels during this
first quarter with 94% of the increase coming from these new properties. Oil
pricing increases also helped the current period results; the average price
received during the 1995 quarter was $16.70 compared to $18.51 per barrel
during the 1996 quarter, an 11% increase. Gas volumes and pricing also
improved over a year ago, rising 234,893 thousand cubic feet (mcf) and
twenty-three cents per mcf.
The other two revenue categories reflected declines from a year ago.
Interest income dropped 44% as the Company utilized a portion of its cash to
acquire properties, and the gain on the sale of assets fell almost 100% as no
producing properties were disposed of during 1996.
On a dollar basis, operating expenses reflected an increase of $675,766.
However, when converted to a net equivalent barrel basis ( NEB , conversion
of 6 mcf equal to 1 NEB), the amounts actually reflect a reduction from 1995
levels - $5.54 per NEB during 1996 compared to $6.14 per NEB in 1995.
During 1995 this category included workover expenses on properties acquired
in late 1994 which were not recurring during the current period.
Exploration costs, which include dry holes and abandonments, climbed 31%
from the first quarter of 1995 to the first quarter of 1996 as the Company
impaired a portion of its undeveloped leasehold associated with its three-
dimensional seismic programs.
Depreciation and amortization expense, which includes an impairment of
$57,000 related to the adoption of SFAS 121 (see Note 4 to the Consolidated
Financial Statements), rose from $4.98 per NEB in 1995 to $5.44 per NEB in
1996, a 7% increase.
Interest expense increased from $129,332 in the 1995 quarter to $454,038
in the current year period, reflecting the increase in bank debt from
$16,062,500 a year ago to $25,000,000 currently.
Liquidity and Capital Resources
-------------------------------
The Company ended its first quarter with working capital of
approximately $1,620,000 and a current ratio of 1.2 to 1, compared to working
capital of approximately $3,606,000 and a current ratio of 1.6 to 1 a year
ago. The decline in working capital between the current quarter and a year
ago, $1,986,000, was related to the acquisition of producing properties for
cash and additional bank financing during the first and fourth quarters of
1995. At March 31, 1996 the Company's total debt was $25,000,000. The
Company believes that it has sufficient cash being generated from operating
activities, or additional borrowing capacity, to fund its planned development
and exploratory work.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule, filed herewith.
(b) No reports were filed on Form 8-K since the last report.
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.
MAYNARD OIL COMPANY
By: /s/ Glenn R. Moore
--------------------------------
Glenn R. Moore
President
By: /s/ Kenneth W. Hatcher
---------------------------------
Kenneth W. Hatcher
Vice President of Finance
Dated: May 10, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,734
<SECURITIES> 0
<RECEIVABLES> 4,197
<ALLOWANCES> 43
<INVENTORY> 0
<CURRENT-ASSETS> 12,327
<PP&E> 112,367
<DEPRECIATION> 51,448
<TOTAL-ASSETS> 73,246
<CURRENT-LIABILITIES> 10,707
<BONDS> 0
0
0
<COMMON> 489
<OTHER-SE> 39,758
<TOTAL-LIABILITY-AND-EQUITY> 73,246
<SALES> 7,267
<TOTAL-REVENUES> 7,332
<CGS> 2,471
<TOTAL-COSTS> 5,708
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 454
<INCOME-PRETAX> 1,623
<INCOME-TAX> 1,143
<INCOME-CONTINUING> 1,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,143
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
