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 June 30, 1996 Commission File #0-5704
MAYNARD OIL COMPANY
(Exact name of registrant as specified in its charter)
Delaware 75-1362284
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(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 August 5, 1996.
4,889,680 shares of common stock, par value $0.10
MAYNARD OIL COMPANY AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedules
Part I. Financial Information
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
Consolidated Statements of Operations
Six Months and Three Months ended
June 30, 1996 and 1995
Consolidated Statements of Shareholders' Equity
Six Months ended June 30, 1996
Consolidated Statements of Cash Flows
Six Months ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information and Reports on Form 8-K
Item 4. Submission of Matters to a Vote of
Security Holders
Signatures
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $11,420,739 $ 6,138,903
Accounts receivable, trade 4,502,974 3,297,933
Other current assets 395,528 465,426
Total current assets 16,319,241 9,902,262
Property and equipment, at cost:
Oil and gas properties, successful
efforts method 111,159,533 111,473,388
Other property and equipment 514,881 507,953
111,674,414 111,981,341
Less accumulated depreciation and
amortization (53,400,367) (49,045,024)
Net property and equipment 58,274,047 62,936,317
$74,593,288 $72,838,579
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 5,000,000 $ 4,812,500
Accounts payable 4,540,280 4,126,013
Accrued expenses 1,241,951 920,653
Income taxes payable 983,596 412,695
Total current liabilities 11,765,827 10,271,861
Deferred income taxes 2,012,510 2,212,510
Long-term debt 18,750,000 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;
4,889,720 and 4,889,970 shares
issued and outstanding 488,972 488,997
Additional paid-in capital 18,831,138 18,831,138
Retained earnings 22,744,841 19,784,073
Total shareholders' equity 42,064,951 39,104,208
Contingencies and commitments $74,593,288 $72,838,579
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations
<CAPTION>
Six Months ended Three Months ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $14,875,602 $10,104,163 $ 7,608,837 $ 5,873,834
Interest and other 232,372 238,083 168,056 123,103
Gain (loss) on sale
of assets 481,244 140,401 480,583 (5,777)
15,589,218 10,482,647 8,257,476 5,991,160
Costs and expenses:
Operating expenses 5,026,735 4,018,963 2,555,494 2,223,488
Exploration, dry holes
and abandoments 185,667 106,981 84,919 30,127
General and administrative 521,406 434,815 264,919 184,485
Depreciation and
amortization 4,728,290 3,234,907 2,302,516 1,779,000
Interest and other 914,486 440,032 460,448 310,700
11,376,584 8,235,698 5,668,296 4,527,800
Income before income
taxes 4,212,634 2,246,949 2,589,180 1,463,360
Income tax expense 1,250,000 550,000 770,000 350,000
Net income $ 2,962,634 $ 1,696,949 $ 1,819,180 $1,113,360
Weighted average number of
common shares outstanding 4,889,851 4,891,252 4,889,747 4,891,132
Net income (loss) per
common share $ .61 $ .35 $ .37 $ .23
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Six Months Ended June 30, 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 -- -- -- 2,962,634 2,962,634
Purchase of
common stock (250) (25) -- (1,866) (1,891)
Balance at
June 30, 1996 4,889,720 $488,972 $18,831,138 $22,744,841 $42,064,951
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<CAPTION>
Six Months Ended June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $2,962,634 $1,696,949
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,728,290 3,234,907
Deferred income taxes (200,000) 150,000
Dry holes and abandonments 170,349 84,388
Current year costs of dry holes and
abandonments (80,641) (84,388)
(Gain) on disposition of assets (481,244) (140,401)
(Increase) decrease in current assets:
Accounts receivable (1,205,041) (1,003,556)
Inventories (142) 41,019
Prepaid expenses and other current assets 70,040 141,684
Increase (decrease) in current liabilities:
Accounts payable 414,267 2,308,940
Accrued expenses 321,298 468,429
Income taxes payable 570,901 404,369
Net cash provided by
operating activities 7,270,711 7,302,340
Cash flows from investing activities:
Proceeds from disposition of assets 1,393,989 297,610
Additions to property and equipment (1,068,473) (13,001,180)
Net cash provided (used) by
investing activities 325,516 (12,703,570)
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- 9,500,000
Purchase of common stock (1,891) (5,514)
Principal payments on long-term debt (2,312,500) (875,000)
Net cash provided (used) by
financing activities (2,314,391) 8,619,486
Net increase (decrease) in cash and cash
equivalents 5,281,836 3,218,256
Cash and cash equivalents at beginning of year 6,138,903 5,836,389
Cash and cash equivalents at end of period $11,420,739 $ 9,054,645
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 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 June 30, 1996 and December 31, 1995, the
results of operations for the six months ended June 30, 1996 and 1995
and changes in cash and cash equivalents for the six months ended
June 30, 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 six months ended June 30, 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 (loss) per common share is based on the weighted average
number of shares outstanding in each period, which was 4,889,720 and
4,890,442 shares at June 30, 1996 and 1995, respectively. The
difference between primary and fully diluted earnings per share,
which assumes the exercise of stock options, is not significant.
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<PAGE>
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 six
months ended June 30, 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):
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
Current $1,450 $400 $1,050 $350
Deferred (benefit) (200) 150 (280) --
$1,250 $550 $ 770 $350
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
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
The Company reported net income of $2,962,634, or sixty-one cents per
share, on revenues of $15,589,218 for the six months ended June 30, 1996
compared with net income of $1,696,949, or thirty-five cents per share, on
revenues of $10,482,647 for the same period a year ago. Earnings for the
1996 period were favorably impacted by the results of operations on the
property acquisition consummated during December, 1995 and by the gain of
$481,000 resulting from a property sale. Oil volumes rose 163,542 barrels
during the current period with 84% of the increase coming from the newly
acquired properties. Oil pricing increases also helped current period
results; the average price received during the 1995 period was $17.43
compared to $19.72 per barrel during the 1996 period, a 13% increase. Gas
volumes remained almost constant during the current period, while gas
prices improved thirty-nine cents per thousand cubic feet of gas sold
(mcf), or a 25% increase.
On a dollar basis, operating expenses reflected an increase of
$1,007,772. However, when converted to a net equivalent barrel basis
("NEB", conversion of 6 mcf equal to 1 NEB), the amounts are virtually
unchanged - $5.93 per NEB during 1996 compared to $5.86 per NEB in 1995.
Exploration costs, which include dry holes and abandonments, climbed
74% between the two six month periods. During the first quarter of 1996,
the Company impaired a portion of its undeveloped leasehold associated
with its three-dimensional seismic programs and during the second quarter
of 1996, the Company drilled an exploratory dry hole, while the prior
period included only the results of a dry hole.
General and administrative expenses rose 20% to reflect the accrual
of employee phantom stock options relating to an increase in the Company's<PAGE>
common stock price from $6.75 per share at the beginning of the year to
$8.25 per share at June 30, 1996.
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 $4.72 per NEB in 1995 to
$5.58 per NEB in 1996, an 18% increase.
Interest expense increased from $440,032 in the 1995 period to
$914,486 in the current year period, reflecting the increase in bank debt
from $15,625,000 a year ago to $23,750,000 currently.
Quarter Ended June 30, 1996 Compared with Quarter Ended June 30, 1995
For the quarter ended June 30, 1996, the Company earned $1,819,180,
or thirty-seven cents per share, compared with net income of $1,113,360,
or twenty-three cents per share, for the same quarter a year ago. The
current quarter s results improved because of the operating results
related to the prior year property acquisition and the proceeds received
from a property sale discussed above.
Liquidity and Capital Resources
The Company ended its first six months of 1996 with working capital
of approximately $4,553,000 compared to working capital of approximately
$3,561,000 a year ago. The improvement in working capital is attributable
to the proceeds received from the property sale mentioned above. 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 or further property acquisitions.
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on May 21, 1996.
(b) Not applicable.
(c) 1. Set forth below is the tabulation of the votes on each
nominee for election of a director:
WITHOLD
NAME FOR AUTHORITY
Ralph E. Graham 4,507,425 6,889
Robert B. McDermott 4,507,425 6,889
James G. Maynard 4,507,425 6,889
2. Not applicable.
(b) Not applicable.
ITEM 6. Exhibit and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities and 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: August 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,421
<SECURITIES> 0
<RECEIVABLES> 4,553
<ALLOWANCES> 50
<INVENTORY> 285
<CURRENT-ASSETS> 16,319
<PP&E> 111,674
<DEPRECIATION> 53,400
<TOTAL-ASSETS> 74,593
<CURRENT-LIABILITIES> 11,766
<BONDS> 0
0
0
<COMMON> 489
<OTHER-SE> 41,576
<TOTAL-LIABILITY-AND-EQUITY> 74,593
<SALES> 14,876
<TOTAL-REVENUES> 15,589
<CGS> 5,027
<TOTAL-COSTS> 11,377
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 914
<INCOME-PRETAX> 4,213
<INCOME-TAX> 1,250
<INCOME-CONTINUING> 2,963
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,963
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.61
</TABLE>
