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, 1999 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, 1999.
4,883,502 shares of common stock, par value $0.10
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MAYNARD OIL COMPANY AND SUBSIDIARY
Index to Consolidated Financial Statements and Schedules
Page
Part I. Financial Information
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998 3
Consolidated Statements of Operations
Three Months ended March 31, 1999 and 1998 4
Consolidated Statements of Shareholders' Equity
Three Months ended March 31, 1999 5
Consolidated Statements of Cash Flows
Three Months ended March 31, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Signatures 11
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MAYNARD OIL COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
March 31, December 31,
1999 1998
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 20,702,737 $ 20,889,742
Accounts receivable, trade 2,383,819 2,568,807
Income taxes receivable 987,587 977,587
Other current assets 492,468 478,680
------------- -------------
Total current assets 24,566,611 24,914,816
------------- -------------
Property and equipment, at cost:
Oil and gas properties, successful
efforts method 107,380,610 107,292,314
Other property and equipment 460,475 460,475
------------- -------------
107,841,085 107,752,789
Less accumulated depreciation and
amortization (74,514,041) (72,985,138)
------------- -------------
Net property and equipment 33,327,044 34,767,651
------------- -------------
Deferred income taxes 711,000 681,000
------------- -------------
$ 58,604,655 $ 60,363,467
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 5,000,000 $ 5,000,000
Accounts payable 1,815,970 2,583,357
Accrued expenses 1,188,056 842,368
Income taxes payable 40,799 40,799
------------- -------------
Total current liabilities 8,044,825 8,466,524
------------- -------------
Long-term debt 5,000,000 6,250,000
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;
4,883,502 and 4,884,597 shares
issued and outstanding 488,350 488,460
Additional paid-in capital 18,831,138 18,831,138
Retained earnings 26,240,342 26,327,345
------------- -------------
Total shareholders' equity 45,559,830 45,646,943
------------- -------------
Contingencies and commitments $ 58,604,655 $ 60,363,467
============= =============
See accompanying Notes to Consolidated Financial Statements.
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MAYNARD OIL COMPANY AND SUBSIDIARY
Consolidated Statement of Operations
Three Months ended March 31,
1999 1998
Revenues:
Oil and gas sales and royalties $ 3,435,148 $ 4,689,874
Interest and other 246,968 337,966
Gain on disposition of assets -- 2,420
----------- -----------
3,682,116 5,030,260
----------- -----------
Costs and expenses:
Operating expenses 1,792,373 2,316,884
Exploration, dry holes
and abandonments 8,178 15,951
General and administrative 289,932 319,913
Depreciation and amortization 1,537,915 1,791,958
Interest and other 171,280 272,719
----------- -----------
3,799,678 4,717,425
----------- -----------
Income (loss) before income taxes (117,562) 312,835
----------- -----------
Income tax expense (benefit) (40,000) 105,000
----------- -----------
Net income (loss) $ (77,562) $ 207,835
=========== ===========
Weighted average number of common shares
outstanding 4,884,082 4,889,442
=========== ===========
Net income (loss) per common share $ (.02) $ .04
(basic and diluted) =========== ===========
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<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARY
Consolidated Statements of Shareholders' Equity
Three Months Ended March 31, 1999
(Unaudited)
<CAPTION>
Additional
Common Stock Paid-in
Capital Retained
Shares Amount Amount Earnings Total
<S> <C> <C> <C> <C> <C>
Balance at December 31,1998 4,884,597 $ 488,460 $ 18,831,138 $ 26,327,345 $ 45,646,943
Net (loss) -- -- -- (77,562) (77,562)
Purchase and retirement
of common stock (1,095) (110) -- (9,441) (9,551)
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1999 4,883,502 $ 488,350 $ 18,831,138 $ 26,240,342 $ 45,559,830
============ ============ ============ ============ ============
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows
<CAPTION>
Three Months Ended March 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (77,562) $ 207,835
Adjustments to reconcile net income (loss)to
net cash provided by operating activities:
Depreciation and amortization 1,537,915 1,791,958
Deferred income taxes (30,000) 25,000
Exploration, dry holes and abandonments 4,905 6,300
Current year costs of dry holes and
abandonments (1,900) (6,300)
(Gain) on disposition of assets -- (2,420)
(Increase) decrease in current assets:
Accounts receivable 184,988 402,875
Income taxes receivable (10,000) --
Other current assets (13,788) (49,435)
Increase (decrease) in current liabilities:
Accounts payable (767,387) (669,904)
Accrued expenses 345,688 250,291
Income taxes payable -- --
------------ ------------
Net cash provided by operating
activities 1,172,859 1,956,200
------------ ------------
Cash flows from investing activities:
Proceeds from disposition of assets -- 11,962
Additions to property and equipment (100,313) (431,495)
------------ ------------
Net cash provided (used) by
investing activities (100,313) (419,533)
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt (1,250,000) (1,250,000)
Purchase of common stock (9,551) (845)
------------ ------------
Net cash provided (used) by
financing activities (1,259,551) (1,250,845)
------------ ------------
Net increase (decrease) in cash and cash
equivalents (187,005) 285,822
Cash and cash equivalents at beginning of year 20,889,742 24,584,288
------------ ------------
Cash and cash equivalents at end of period $ 20,702,737 $ 24,870,110
============ ============
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
MAYNARD OIL COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999
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, 1999 and December 31, 1998, the results of operations for
the three months ended March 31, 1999 and 1998 and changes in cash and cash
equivalents for the three months ended March 31, 1999 and 1998.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's financial statements in the 1998 Annual Report to
Shareholders.
2. Net income for the three months ended March 31, 1999 is not necessarily
indicative of the results of the operations of Maynard Oil Company and
Subsidiary for the year ending December 31, 1999, 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 4,884,082 and 4,889,442 shares
at March 31, 1999 and 1998, respectively.
4. The provision for income taxes consists of the following (thousands of
dollars):
Three Months Ended
March 31
1999 1998
---- ----
Federal:
Current $ (10) $ 80
Deferred (30) 25
----- ------
$ (40) $ 105
===== ======
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Quarter Ended March 31, 1999 Compared to Quarter Ended March 31, 1998
The Company reported a net loss of $77,562, or a loss of two cents per
share, on revenues of $3,682,116 for the quarter ended March 31, 1999 compared
with net income of $207,835, or earnings of four cents per share, on revenues of
$5,030,260 for the same quarter a year ago. Results for the first quarter of
1999 were adversely affected by lower revenues. Oil and gas revenues declined
$1,254,726, or almost 27% between the first quarter of 1999 and the first
quarter a year ago, primarily due to lower prices received for its hydrocarbon
products. Oil prices declined an average of $2.95 per barrel from $14.39 to
$11.44 per barrel, and gas prices fell from $2.24 per mcf to $1.90 per mcf.
Lower production volumes also contributed to reduced revenues for the current
quarter with oil volumes falling in excess of 9% and gas volumes approximately
8% as the Company restricted production from certain properties in anticipation
of rising prices. Interest income was approximately $91,000 less during the
first quarter of 1999 due to a decrease in the Company's cash balance of
approximately $4,167,000 over the past year and the resulting amount of cash
available for investment.
Lower revenues were offset by reduced lease operating expense and
interest costs as well as lower depreciation and amortization expense. Lease
operating costs fell from $7.01 per net equivalent barrel (NEB) during the 1998
quarter to $5.97 per NEB currently due to cost saving measures in field
operations and lower severance taxes. Interest expense was approximately
$101,000 less than the corresponding quarter a year ago due to scheduled note
payments and the resulting lower
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<PAGE>
principal balance outstanding. Depreciation and amortization expense decreased
from $5.42 per NEB during the first quarter of 1998 to $5.12 per NEB in the
current quarter due to a lower amount of net book value remaining after the 1998
non-cash impairment charge to oil and gas properties of $8,700,000.
An additional tax benefit of $40,000 was recognized during the
first quarter of 1999 to reflect the impact of continued low product
prices during the first two months of the current quarter.
Liquidity and Capital Resources
The Company ended the first quarter of 1999 with working capital of
approximately $16,521,000 and a current ratio of 3.05 to 1, compared to working
capital of approximately $17,855,000 and a current ratio of 2.70 to 1 a year
ago. The decrease in working capital between the current quarter and the same
period a year ago, $1,334,000, is attributable to the reduction in cash
generated from normal operating activities. At March 31, 1999 the Company's
total debt was $10,000,000. The Company believes that it has sufficient cash on
hand, or additional borrowing capacity, to fund its planned development,
exploratory and acquisition activities.
Year 2000 Issues
The Company's Year 2000 Readiness Team is continuing to monitor and
evaluate information obtained from vendors, suppliers, customers, and other
significant business relationships with regard to the potential impact of the
century change on the Company's operations. To date, the Company has not
received information suggesting the Company is vulnerable to potential Year 2000
failures by these parties. Testing of the Company's financial systems are
continuing and should be completed by September 30, 1999. The costs associated
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<PAGE>
with assessing Year 2000 readiness and related systems upgrades have been funded
from cash flow from operations and have not been material.
Given the complexity of the Year 2000 issue, there can be no assurance
that the Company will be able to address these problems without costs and
uncertainties that might affect future financial results or cause reported
financial information not to necessarily be indicative of future operating
results or future financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
None
PART II
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter.
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<PAGE>
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: May 14, 1999
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 20,703
<SECURITIES> 0
<RECEIVABLES> 2,437
<ALLOWANCES> 53
<INVENTORY> 245
<CURRENT-ASSETS> 24,567
<PP&E> 107,841
<DEPRECIATION> 74,514
<TOTAL-ASSETS> 58,605
<CURRENT-LIABILITIES> 8,045
<BONDS> 0
0
0
<COMMON> 488
<OTHER-SE> 45,072
<TOTAL-LIABILITY-AND-EQUITY> 58,605
<SALES> 3,435
<TOTAL-REVENUES> 3,682
<CGS> 1,792
<TOTAL-COSTS> 3,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 171
<INCOME-PRETAX> (118)
<INCOME-TAX> (40)
<INCOME-CONTINUING> (78)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
