<PAGE> 1
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 SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-3880
TOM BROWN, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-1949781
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. BOX 2608
500 EMPIRE PLAZA BLDG.
MIDLAND, TEXAS 79701
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
915-682-9715
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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. YES X NO _______
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 14, 1995.
<TABLE>
<CAPTION>
Class of Common Stock Outstanding at November 14, 1995
--------------------- --------------------------------
<S> <C>
$.10 PAR VALUE 20,175,902
</TABLE>
<PAGE> 2
TOM BROWN, INC. AND SUBSIDIARIES
QUARTERLY REPORT FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Part I. Financial Information (Unaudited):
Consolidated Balance Sheets,
September 30, 1995 and December 31, 1994 4
Consolidated Statements of Operations,
Three Months and Nine Months ended
September 30, 1995 and 1994 6
Consolidated Statements of Cash Flows,
Nine Months ended September 30, 1995 and 1994 7
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 17
Signature 18
</TABLE>
2
<PAGE> 3
TOM BROWN, INC.
P. O. Box 2608
500 Empire Plaza Bldg.
Midland, Texas 79701
______________________
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FORM 10-Q
_______________________
PART I OF TWO PARTS
FINANCIAL INFORMATION
3
<PAGE> 4
TOM BROWN, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1995 1994
------ ---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,671,000 $ 19,147,000
Accounts receivable, net of allowance
for doubtful accounts of $3,000 at
September 30, 1995 and $428,000 at
December 31, 1994 6,515,000 7,293,000
Accounts receivable -
Wind River-Pavillion, Inc. 549,000 1,038,000
Inventories 485,000 1,132,000
Other 271,000 178,000
------------- -------------
Total current assets 16,491,000 28,788,000
------------- -------------
Property and equipment, at cost:
Oil and gas properties, based on the
successful efforts accounting method 183,901,000 214,451,000
Other equipment 11,300,000 10,954,000
------------- -------------
195,201,000 225,405,000
Less: Accumulated depreciation
and depletion 110,063,000 139,217,000
------------- -------------
Net property and equipment 85,138,000 86,188,000
------------- -------------
Senior gas indexed notes 51,093,000 -
Deferred income taxes, net 13,170,000 -
Other assets, net 246,000 116,000
------------- -------------
$ 166,138,000 $ 115,092,000
============= =============
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
TOM BROWN, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
<TABLE>
<CAPTION>
September 30, December 31,
Liabilities and Stockholders' Equity 1995 1994
------------------------------------ ------------- -------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 8,551,000 $ 9,161,000
Accrued expenses 2,114,000 3,062,000
------------- -------------
Total current liabilities 10,665,000 12,223,000
------------- -------------
Commitments and contingencies
Long-term debt 46,000,000 -
Stockholders' equity:
Common stock, at $.10 par value.
Authorized 30,000,000 shares;
15,570,902 and 15,522,129 shares,
respectively. 1,557,000 1,552,000
Additional paid-in capital 177,646,000 177,350,000
Accumulated deficit (69,730,000) (76,033,000)
------------- -------------
Total stockholders' equity 109,473,000 102,869,000
------------- -------------
$ 166,138,000 $ 115,092,000
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
TOM BROWN, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months and Nine Months ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
September 30, September 30,
------------------------------ -----------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Gas and oil sales $ 4,920,000 $ 3,157,000 $15,041,000 $12,188,000
Marketing, gathering and
processing 2,792,000 1,562,000 10,772,000 9,095,000
Gain (loss) on sales of
properties 4,234,000 (21,000) 4,322,000 36,000
Other 136,000 336,000 537,000 991,000
----------- ----------- ----------- -----------
Total revenues 12,082,000 5,034,000 30,672,000 22,310,000
----------- ----------- ----------- -----------
Costs and expenses:
Gas and oil production 1,256,000 1,084,000 3,536,000 3,170,000
Taxes on gas and oil
production 467,000 353,000 1,515,000 1,477,000
Cost of gas sold 2,224,000 1,185,000 9,082,000 7,591,000
Exploration costs 1,062,000 72,000 3,010,000 405,000
Impairments of leasehold
costs 140,000 177,000 484,000 714,000
General and administrative 948,000 710,000 2,916,000 2,385,000
Option plan compensation 20,000 43,000 78,000 164,000
Depreciation, depletion
and amortization 2,669,000 1,609,000 7,375,000 5,117,000
Writedown of properties - - 8,368,000 -
Interest expense 951,000 - 978,000 22,000
----------- ----------- ----------- -----------
Total costs
and expenses 9,737,000 5,233,000 37,342,000 21,045,000
----------- ----------- ----------- -----------
Income (loss) before income
taxes 2,345,000 (199,000) (6,670,000) 1,265,000
Income tax provision:
Recognition of deferred
tax asset - - 13,967,000 -
Income tax expense 845,000 58,000 994,000 217,000
----------- ----------- ----------- -----------
Net income (loss) $ 1,500,000 $ (257,000) $ 6,303,000 $ 1,048,000
=========== =========== =========== ===========
Weighted average number of
common shares outstanding 16,153,277 15,461,099 16,131,345 15,452,016
=========== =========== =========== ===========
Net income (loss) per common
share $ .09 $ (.02) $ .39 $ .07
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
TOM BROWN, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Nine Months ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Nine Months ended
September 30,
--------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,303,000 $ 1,048,000
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation, depletion and amortization 7,375,000 5,117,000
(Gain) on sales of assets (4,322,000) (36,000)
Option plan compensation 78,000 164,000
Exploration costs 3,010,000 405,000
Impairments of leasehold costs 484,000 714,000
Writedown of properties 8,368,000 -
Deferred tax asset recognition (13,170,000) -
Changes in operating assets and
liabilities:
Decrease in accounts receivable 1,065,000 1,955,000
Decrease (increase) in inventories 647,000 (92,000)
Decrease in other current assets (93,000) (75,000)
Increase (decrease) in accounts
payable (610,000) 1,328,000
Decrease in accrued expenses (114,000) (3,000)
Decrease (increase) in other
non-current assets (130,000) 2,000
----------- -----------
Net cash provided by operating activities $ 8,891,000 $10,527,000
----------- -----------
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
TOM BROWN, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Nine Months ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Nine Months ended
September 30,
---------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from investing activities:
Proceeds from sales of assets $ 9,118,000 $ 247,000
Capital and exploration expenditures (23,652,000) (14,071,000)
Purchase of notes (51,093,000) -
------------ ------------
Net cash used in investing activities (65,627,000) (13,824,000)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 54,600,000 -
Repayments of long-term debt (8,600,000)
Proceeds from exercise of stock options 260,000 277,000
------------ ------------
Net cash provided by (used in) financing
activities 46,260,000 277,000
------------ ------------
Net decrease in cash and cash equivalents (10,476,000) (3,020,000)
------------ ------------
Cash and cash equivalents at beginning
of period 19,147,000 28,503,000
------------ ------------
Cash and cash equivalents at end of period $ 8,671,000 $ 25,483,000
============ ============
Cash paid during the period for:
Interest $ 752,000 $ 114,000
Taxes 48,000 10,000
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE> 9
TOM BROWN, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three Months and Nine Months ended September 30, 1995 and 1994
(Unaudited)
(1) During interim periods, Tom Brown, Inc. follows the accounting policies set
forth in its Annual Report to Stockholders and its Report on Form 10-K filed
with the Securities and Exchange Commission. Users of financial information
produced for interim periods are encouraged to refer to the footnotes contained
in the Annual Report to Stockholders when reviewing interim financial results.
In the opinion of management, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments necessary for a fair presentation. Certain reclassifications have
been made to amounts reported in previous periods to conform to the 1995
presentation.
(2) Debt
On September 14, 1995, the Company entered into a Credit Agreement and
borrowed $51 million under its $65 million Credit Facility. The bank debt was
incurred primarily to refinance the Company's $51 million demand note issued by
the Company to one of the bank lenders in June 1995 to fund the purchase of
Senior Gas Indexed Notes due 2002 ("GINs") of Presidio Oil Company
("Presidio"). The Credit Facility matures in September 1998. Borrowings under
the Credit Facility are unsecured and bear interest, at the election of the
Company, at a rate equal to (i) the greater of the agent bank's prime rate or
the federal funds effective rate plus 0.50% or (ii) the agent bank's eurodollar
rate plus a margin ranging from 0.75% to 1.00%. On September 30, 1995, $46
million was outstanding under the Credit Facility, after giving effect to the
Company's repayment of a portion of the original indebtedness with proceeds
from the sale of the Company's Arkoma properties. See Note 5. The interest
rate on $41 million of such borrowings was 6.825%, and 8.75% on $5.0 million of
such borrowings. Interest on amounts outstanding under the Credit Facility is
due on the last day of each month in the case of loans bearing interest at the
prime rate or federal funds rate. In the case of loans bearing interest at the
eurodollar rate, interest payments are due on the last day of each applicable
interest period of one, two or three-month periods, as selected by the Company
at the time of borrowing or, in the case of six-month interest periods if
selected by the Company, interest payments are due on the last day of each
three-month period.
(3) Senior Gas Indexed Notes
On May 31, 1995, the Company announced that it had written to Presidio Oil
Company in order to propose a business combination between the two companies.
On June 28, 1995, the Company purchased approximately $56 million principal
amount of the outstanding $100 million principal amount of GINs of Presidio for
approximately $51 million, including accrued interest. Presidio was unable to
meet the interest payment on the GINs due on May 15, 1995 and is therefore in
default under terms of the GINs. The purchase of the GINs was funded by the
$51 million demand note.
The GINs have been categorized as available for sale in accordance with
Statement of Financial Accounting Standards No. 115 and recorded at historical
cost which approximates fair market value.
9
<PAGE> 10
TOM BROWN, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Stock Offering
In November, the Company completed a public stock offering of 4,600,000
shares at $11.00. Net proceeds to the Company were $47.7 million, $46.0
million of which was used to repay all of the Company's outstanding bank debt
and $1.7 million of which will be used for general corporate purposes.
Assuming the stock offering and subsequent repayment of debt had occurred
January 1, 1995, net income per common share for the three and nine months
ended September 30, 1995 would be $.10 and $.33, respectively.
(5) Writedown of Properties
The Company recorded a charge against earnings in the amount of $8,368,000
due to the early adoption of Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-lived Assets...", which generally
requires a separate assessment for potential impairment of each of the
Company's producing property cost centers, in contrast to the Company's prior
policy of evaluating the producing property accounts for impairment in total.
The $8.4 million charge reduced the carrying value of a portion of the
Company's non-core properties to their estimated fair values, which management
has determined to be the discounted future net cash flows of the properties.
(6) Property Sale
In September, the Company sold all of its assets in the Arkoma Basin for
$9.0 million and, accordingly, recorded a net gain of $4.3 million in the third
quarter. The Arkoma Basin was no longer considered one of the Company's core
areas of operation, and the sale will allow further concentration on the Wind
River and Val Verde Basins.
(7) Income Taxes
In 1992, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (the
"Statement"). The Statement was adopted by the Company effective as of January
1, 1993. The Statement requires a balance sheet approach to the calculation of
deferred income taxes. The Statement provides for, among other things, the
recognition of deferred tax assets under certain circumstances. The Company
has significant net operating loss carryforwards and, therefore, calculated a
net deferred tax asset upon adoption of the Statement. However, due to the
Company's history of net operating losses, a valuation allowance was recorded
equal to the amount of the net deferred tax asset.
Based on recent additions to the Company's oil and gas reserves and the
resulting increases in anticipated future income and the absence of significant
option plan compensation charges to future income, the Company now expects to
realize a major portion of the future benefit of its net operating loss
carryforwards prior to their expiration. Accordingly, that portion of the
valuation allowance was reversed in the first quarter. A valuation allowance
of approximately $10.0 million will be retained against the Company's deferred
tax assets, primarily because the Company's investment tax credit carryforwards
are still not expected to be realized in future periods.
10
<PAGE> 11
TOM BROWN, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Temporary differences and carryforwards which gave rise to significant
portions of deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Net operating loss carryforwards.................... $ 23,586,000 $ 24,397,000
Gas and oil acquisition, exploration and development
costs deducted for tax purposes in excess of book.. (9,889,000) (12,734,000)
Investment tax credit carryforwards................. 6,183,000 6,183,000
Option plan compensation............................ 1,501,000 1,474,000
Other............................................... 1,649,000 1,649,000
------------ ------------
Net deferred tax asset............................ 23,030,000 20,969,000
Valuation allowance................................. (9,860,000) (20,969,000)
------------ ------------
Recognized net deferred tax asset................. $ 13,170,000 $ -
============ ============
</TABLE>
At September 30, 1995, the Company had investment tax credit carryforwards
of approximately $6.2 million and net operating loss carryforwards of
approximately $69.0 million. The carryforwards will expire between 1995 and
2004. Additionally, the Company has approximately $3.7 million of statutory
depletion carryforwards and $.25 million of AMT credit carryforwards that may
be carried forward indefinitely.
11
<PAGE> 12
TOM BROWN, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The factors which most significantly affect the Company's results of
operations are (1) the sales prices of natural gas and crude oil, (2) the level
of total sales volumes and (3) the level and success of exploration and
development activity.
Selected Operating Data
<TABLE>
<CAPTION>
Three Months Nine Months
ended ended
September 30, September 30,
----------------------- ---------------------
1995 1994 1995 1994
------- -------- ------- --------
<S> <C> <C> <C> <C>
Revenues (in thousands):
Natural gas sales................. $ 3,315 $ 2,120 $10,001 $ 8,955
Crude oil sales................... 1,605 1,037 5,040 3,233
Marketing, gathering and
processing.................... 2,792 1,562 10,772 9,095
Gain (loss) on sales of
properties.................... 4,234 (21) 4,322 36
Other............................. 136 336 537 991
------- ------- ------- -------
Total revenues....... $12,082 $ 5,034 $30,672 $22,310
======= ======= ======= =======
Net income (loss) (in thousands)...... $ 1,500 $ (257) $ 6,303 $ 1,048
======= ======= ======= =======
Natural gas production (MMcf)......... 2,540 1,378 7,870 5,302
Crude oil production (MBbls).......... 100 63 300 206
Average natural gas sales
price ($/Mcf)..................... $ 1.31 $ 1.54 $ 1.27 $ 1.69
Average crude oil sales
price ($/Bbl)..................... $ 16.05 $ 16.46 $ 16.80 $ 15.69
</TABLE>
Revenues
During the three-month period ended September 30, 1995, revenues from
natural gas and oil production increased $1.7 million to $4.9 million compared
to the same period in 1994. An increase in natural gas sales volumes of 84%
increased revenues by approximately $1.5 million; however, a decrease in average
natural gas prices received by the Company from $1.54 per Mcf to $1.31 per Mcf
decreased revenues by approximately $.3 million. An increase in oil sales
volumes of 59% increased revenues by approximately $.6 million for the three
months ended September 30, 1995. A decrease in the average crude oil sales
prices from $16.46 to $16.05 per barrel decreased revenues $.1 million.
During the nine-month period ended September 30, 1995, revenues from natural
gas and oil production increased $2.9 million to $15 million compared to the
same period in 1994. An increase in natural gas sales volumes of 48% increased
revenues by approximately $3.3 million. A decrease in average natural gas
prices received by the Company from $1.69 per Mcf to $1.27 per Mcf decreased
revenues by approximately $2.2_ million. An increase in oil sales volumes of
46% increased revenues by approximately $1.6 million for the nine months ended
September 30, 1995. An increase in the average
12
<PAGE> 13
TOM BROWN, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
crude oil sales price from $15.69 per Bbl to $16.80 per Bbl increased revenues
by approximately $.2 million for the nine months ended September 30, 1995.
The increase in gas and oil sales volumes for the three months and nine
months ended September 30, 1995 as compared to the same periods in 1994 is due
primarily to increased production in the Company's Val Verde Basin of Texas.
Marketing, gathering and processing revenues increased $1.2 million and $1.7
million for the three and nine-month periods ended September 30, 1995,
respectively, as a result of the increased activity in the Company's natural
gas marketing operations and increased revenues from the Company's Wind River
pipeline in Wyoming.
The Company recorded a net gain on sales of properties of $4.3 million in
the third quarter due to the sale of its Arkoma Basin assets.
Costs and Expenses
Costs and expenses for the three months ended September 30, 1995 increased
approximately 86% to $9.7 million as compared to the same period in 1994.
Natural gas and oil production expense increased $.2 million as a result of the
addition of several wells in the Val Verde Basin. Taxes on gas and oil
production increased $.1 million due to increased sales volumes in the Val
Verde Basin.
Cost of gas sold increased $1.0 million as higher volumes of gas were
purchased by the Company's marketing subsidiary during the three months ended
September 30, 1995. Exploration costs increased $1.0 million as a result of
an exploratory dry hole in South Texas. General and administrative expenses
increased $.2 million due to additional costs to explore and develop the
Company's Wind River Basin and Val Verde Basin. Depreciation, depletion and
amortization increased $1.1 million due to the addition of the Val Verde Basin
wells. Interest expense increased $1.0 million due to the outstanding balance
on the Company's credit arrangement.
Costs and expenses for the nine months ended September 30, 1995 increased
$16.3 million to $37.3 million compared to the same period in 1994, primarily
as a result of an $8.4 million writedown of non-strategic properties due to the
early adoption of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-lived Assets...", which generally
requires a separate assessment for potential impairment of each of the
Company's producing property cost centers, in contrast to the Company's prior
policy of evaluating the producing property accounts for impairment in total.
The $8.4 million charge reduced the carrying value of a portion of the
Company's non-core properties to their estimated fair values.
Gas and oil production expenses, taxes on gas and oil production and
depreciation, depletion and amortization expense increased $.4 million, $.1
million and $2.3 million, respectively, for the first nine months of 1995
compared to the same period in 1994 due to the addition of the Val Verde Basin
wells. Cost of gas sold increased $1.5 million due to higher volumes of gas
purchased by the Company's marketing subsidiary and due to increased sales from
the Company's Wind River pipeline. Exploration costs increased $2.6 million
due to the drilling of two exploratory dry
13
<PAGE> 14
TOM BROWN, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
holes in South Texas. General and administrative expenses increased $.5
million due to increased activity in the Wind River and Val Verde Basins.
Interest expense increased $1.0 million due to borrowings under the Company's
credit arrangement.
The Company recognized in the first quarter of 1995 a net deferred tax asset
in the amount of $13,967,000 and corresponding credit to deferred income tax
expense. Deferred tax assets (related primarily to the Company's net operating
loss and investment tax credit carryforwards) were initially recorded in 1993,
but these tax assets had been reserved entirely by a valuation allowance up
until 1995. Based on recent additions to the Company's oil and gas reserves,
the resulting increases in anticipated future income and the absence of
significant option plan compensation charges to future income, the Company now
expects to realize a major portion of the future benefit of its net operating
loss carryforwards prior to their expiration. Accordingly, that portion of the
valuation allowance was reversed in the first quarter. A valuation allowance
of approximately $10.0 million will be retained against the Company's deferred
tax assets, primarily because the Company's investment tax credit carryforwards
are still not expected to be realized in future periods. The deferred tax
assets and related valuation allowance will be monitored for potential
adjustments as future events so indicate, although management does not expect
such adjustments to be significant in the near term.
Capital Expenditures: Liquidity
On September 14, 1995, the Company entered into a Credit Agreement and
borrowed $51 million under its $65 million Credit Facility. The bank debt was
incurred primarily to refinance the Company's $51 million demand note issued by
the Company to one of the bank lenders in June 1995 to fund the purchase of
Senior Gas Indexed Notes due 2002 ("GINs") of Presidio Oil Company
("Presidio"). The Credit Facility matures in September 1998. Borrowings under
the Credit Facility are unsecured and bear interest, at the election of the
Company, at a rate equal to (i) the greater of the agent bank's prime rate or
the federal funds effective rate plus 0.50% or (ii) the agent bank's eurodollar
rate plus a margin ranging from 0.75% to 1.00%. On September 30, 1995, $46
million was outstanding under the Credit Facility, after giving effect to the
Company's repayment of a portion of the original indebtedness with proceeds
from the sale of the Company's Arkoma properties. The interest rate on $41
million of such borrowings was 6.825%, and 8.75% on $5.0 million of such
borrowings. Interest on amounts outstanding under the Credit Facility is due
on the last day of each month in the case of loans bearing interest at the
prime rate or federal funds rate and, in the case of loans bearing interest at
the eurodollar rate, interest payments are due on the last day of each
applicable interest period of one, two or three-month periods, as selected by
the Company at the time of borrowing or, in the case of six-month periods if
selected by the Company, interest payments are due on the last day of each
three-month period.
In November, the Company completed a public stock offering of 4,600,000
shares at $11.00. Net proceeds to the Company were $47.7 million, $46.0
million of which was used to repay all of the Company's outstanding bank debt
and $1.7 million of which will be used for general corporate purposes.
14
<PAGE> 15
TOM BROWN, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The Company's capital expenditures for the three and nine-month periods
ended September 30, 1995 were approximately $7.3 million and $22.2 million,
respectively, as compared to $5.4 million and $14.1 million, respectively, in
the same periods in 1994. The capital expenditures for the three and
nine-month periods ended September 30, 1995 includes approximately $4.8 million
and approximately $19.7 million, respectively, in further development of the
Company's Wind River and Val Verde Basins.
The Company has historically funded capital expenditures and working capital
requirements with internally generated cash and borrowings. During the
nine-month period ended September 30, 1995, net cash provided by operating
activities was $8.9 million as compared to $10.5 million for the same period of
1994.
15
<PAGE> 16
TOM BROWN, INC.
P. O. Box 2608
500 Empire Plaza Bldg.
Midland, Texas 79701
__________________________
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FORM 10-Q
__________________________
PART II OF TWO PARTS
OTHER INFORMATION
16
<PAGE> 17
TOM BROWN, INC. AND SUBSIDIARIES
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Description
-------- -----------
Exhibit No. 27 Financial Data Schedule
(b) Reports on Form 8-K
On September 14, 1995, the Registrant filed Form 8-K announcing that
it had entered into a bank Credit Agreement and borrowed $51 million
from its bank lenders. The bank debt was incurred primarily to
refinance the Company's $51 million demand note issued by the
Company to one of the bank lenders in June, 1995. The proceeds of
the June, 1995 demand note were used by the Company to make open
market purchases of approximately $56 million principal amount of
the outstanding $100 million principal amount of Senior Gas Indexed
Notes due 2002 issued by Presidio Oil Company. The Credit Agreement
provides for a $65 million revolving credit facility (the "Credit
Facility") maturing in September, 1998. Borrowings under the Credit
Facility are unsecured and bear interest, at the election of the
Company, at a rate equal to (i) the greater of the agent bank's
prime rate or the federal funds effective rate plus 1/2 of 1% or
(ii) the agent bank's eurodollar rate plus a margin ranging from
.75% to 1.00%. On September 25, 1995, $46 million was outstanding
under the Credit Agreement, after giving effect to the Company's
repayment of a portion of the original indebtedness with proceeds
from the sale of gas properties. The interest rate on $41 million
of outstanding borrowings was 6.825%, and 8.75% on an additional $5
million of outstanding borrowings. Interest on amounts outstanding
under the Credit Facility is due on the last day of each month in
the case of loans bearing interest at the prime rate or federal
funds rate and, in the case of loans bearing interest at the
eurodollar rate, interest payments are due on the last day of each
applicable interest period of one, two, three or six months, as
selected by the Company at the time of borrowing.
As described in Note 4 to Notes to Consolidated Financial
Statements, the Company repaid all of its outstanding bank debt on
November 13, 1995.
17
<PAGE> 18
TOM BROWN, INC. AND SUBSIDIARIES
OTHER INFORMATION
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.
TOM BROWN, INC.
-----------------------------
(Registrant)
November 14, 1995 /s/ Kim Harris
- ------------------ -----------------------------
Date Kim Harris
Controller
(Mr. Harris is the Chief Financial Officer
and is duly authorized to sign on behalf
of the Registrant)
18
<PAGE> 19
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 8,671
<SECURITIES> 0
<RECEIVABLES> 7,067
<ALLOWANCES> 3
<INVENTORY> 485
<CURRENT-ASSETS> 16,491
<PP&E> 195,201
<DEPRECIATION> 110,063
<TOTAL-ASSETS> 166,138
<CURRENT-LIABILITIES> 10,665
<BONDS> 0
<COMMON> 1,557
0
0
<OTHER-SE> 107,916
<TOTAL-LIABILITY-AND-EQUITY> 166,138
<SALES> 15,041
<TOTAL-REVENUES> 30,672
<CGS> 14,133
<TOTAL-COSTS> 37,342
<OTHER-EXPENSES> 2,994
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 978
<INCOME-PRETAX> (6,670)
<INCOME-TAX> (12,973)
<INCOME-CONTINUING> 6,303
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,303
<EPS-PRIMARY> .39
<EPS-DILUTED> 0
</TABLE>
