<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 33-63225
4,000,000 SHARES
TOM BROWN, INC.
[TOM BROWN, INC. LOGO]
COMMON STOCK
($.10 PAR VALUE)
All 4,000,000 shares (the "Shares") of Common Stock, $.10 par value
("Common Stock"), are being sold by Tom Brown, Inc., a Delaware corporation (the
"Company").
The Common Stock is traded on The Nasdaq National Market under the symbol
"TMBR." On November 1, 1995, the last sale price of the Common Stock as reported
on the composite tape for issues listed on The Nasdaq National Market was $11.75
per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==========================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................. $11.00 $.58 $10.42
- -----------------------------------------------------------------------------------------------------------
Total(3)................................... $44,000,000 $2,320,000 $41,680,000
===========================================================================================================
</TABLE>
(1) See "Underwriting" for indemnification arrangements.
(2) Before deducting estimated expenses of $240,000 payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 600,000 shares of Common Stock at the Price to Public,
less the Underwriting Discounts and Commissions shown above, solely to
cover over-allotments, if any. If this option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $50,600,000, $2,668,000 and $47,932,000, respectively.
See "Underwriting."
The shares of Common Stock offered hereby are being offered by the several
Underwriters named herein, subject to prior sale and acceptance by the
Underwriters and subject to their right to reject any order in whole or in part.
It is expected that the Common Stock will be available for delivery on or about
November 7, 1995 at the offices of Schroder Wertheim & Co. Incorporated, New
York, New York.
SCHRODER WERTHEIM & CO.
HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED
PETRIE PARKMAN & CO.
SALOMON BROTHERS INC
November 2, 1995
<PAGE> 2
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY
OTHER THAN THE SECURITIES COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATES AS OF WHICH INFORMATION IS FURNISHED OR THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <S> <C>
Prospectus Summary.................. 3 Management.......................... 20
Risk Factors........................ 9 Description of Capital Stock........ 22
Use of Proceeds..................... 11 Underwriting........................ 24
Capitalization...................... 12 Legal Matters....................... 25
Price Range of Common Stock......... 13 Experts............................. 25
Dividends........................... 13 Available Information............... 25
Selected Consolidated Financial Incorporation of Certain Documents.. 26
Data.............................. 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 15
</TABLE>
------------------------
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMPANY'S COMMON STOCK ON THE NASDAQ
NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT
OF 1934. SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 3
TOM BROWN, INC.
CORE AREAS OF ACTIVITY
[MAP]
Immediately following the Table of Contents appearing on Page 2 of the
Prospectus is a two-page color foldout of four separate maps depicting the
Company's core areas of activity in the Wind River Basin of Wyoming and the Val
Verde Basin of Texas. The maps include state and county designations, subsurface
oil and gas formations, the Company's Wind River Gathering System, oil and gas
basins and prospects delineated by contrasting color, the Company's headquarters
designated by a star, the Company's exploration option acreage, producing
acreage and undeveloped acreage by contrasting color and a color-coded legend is
included for each core area of activity.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus or
incorporated by reference in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised.
THE COMPANY
GENERAL
Tom Brown, Inc. (together with its subsidiaries, the "Company") is
primarily engaged in the exploration for, and the development, production and
sale of, natural gas and oil in the United States. The Company's principal
exploration, development and production activities are conducted in the Wind
River Basin of central Wyoming, the Val Verde Basin of west Texas and the
Permian Basin of west Texas and southeastern New Mexico. These areas accounted
for approximately 92% of the Company's proved reserves as of December 31, 1994.
In addition, the Company is engaged in the gathering, processing and marketing
of natural gas. As of December 31, 1994, the Company's natural gas reserves were
approximately 180 billion cubic feet ("Bcf") and its oil reserves were
approximately 4.5 million barrels ("MMBbls").
The Company was incorporated in Nevada in 1931 and was reincorporated in
Delaware in April, 1987. The executive offices of the Company are located at 508
W. Wall St., 500 Empire Plaza, Midland, Texas 79701, and its telephone number is
(915) 682-9715.
BUSINESS STRATEGY
Since 1985, the Company's principal business strategy has been to obtain
and develop long-lived reserves (having a reserve life in excess of the industry
average of 10 years) in areas where the Company has knowledge and operations
expertise. Accordingly, the Company has primarily invested in natural gas-prone
basins which the Company believes will provide the opportunity to accumulate
significant reserves at attractive prices.
The principal benefits of the Company's strategy include the ability to:
o Increase reserves at lower-than-average costs;
o Acquire large tracts of contiguous acreage with high working
interests;
o Develop economies of scale in its operations; and
o Control development and marketing decisions relating to its
properties.
In pursuing its strategic goals, the Company focuses on the following
objectives:
Maintaining a strong balance sheet. The Company emphasizes maintaining a
strong balance sheet in order to enhance its operating and financial
flexibility. The Company will use proceeds from this offering to repay all of
its outstanding long-term debt.
Achieving critical mass in core areas. The Company has assembled
additional acreage since 1986 in natural gas-prone basins, primarily in the Wind
River Basin, where the Company can utilize its geological and technical
expertise and its control of operations for the further development and
expansion of these areas. The Company has approximately 49,000 gross developed
acres and has leases or options to lease approximately 728,000 gross undeveloped
acres in the Wind River Basin.
Increasing reserves. The Company replaced 544% of its production during
the period from January 1, 1992 through December 31, 1994. During this period,
the Company's proved reserves increased by approximately 93% to 207 billion
cubic feet of natural gas equivalents ("Bcfe").
Increasing production. The Company increased its average daily production
of natural gas and oil to 36.1 million cubic feet of natural gas equivalents
("MMcfe") for the six month period ended June 30, 1995, an increase of
approximately 98% as compared with the year ended December 31, 1992.
3
<PAGE> 5
Maintaining low finding and development costs. The Company achieved an
average finding and development cost of $0.30 per thousand cubic feet of natural
gas equivalents ("Mcfe") during the period from January 1, 1992 through December
31, 1994.
Enhancing gas marketing. Since 1991, the Company has strengthened its
ability to control and market its production by accumulating natural gas
gathering assets and increasing marketing efforts in its core areas of activity.
Increasing geographic focus. The Company has continued to divest its
properties that are not located in the Company's core areas of activity.
Making strategic acquisitions. The Company plans to continue to
selectively pursue acquisitions of gas and oil properties in its core areas of
activity and, in connection therewith, the Company from time to time will be
involved in evaluations of or discussions with potential acquisition candidates.
The consideration for any such acquisition might involve the payment of cash
and/or the issuance of equity or debt securities; however, the Company presently
has no agreements or commitments with respect to any such acquisition. See
"Recent Events -- Presidio."
Notwithstanding the Company's historical ability to implement the above
strategy, there can be no assurance that the Company will be able to continue to
successfully implement its strategy in the future.
AREAS OF ACTIVITY
Wind River Basin. The Wind River Basin is the major focus of the Company's
current and anticipated exploration and development activities and accounted for
approximately 65% of the Company's proved reserves as of December 31, 1994. The
Company's primary properties in this Basin are in the Muddy Ridge, Pavillion and
Frenchie Draw Fields, each of which the Company operates. Production in these
fields is primarily from the Fort Union and Mesa Verde formations at depths
ranging from 3,500 to 13,000 feet. Other prospective zones in these fields
include the deeper Cody, Frontier and Madison formations at depths ranging from
16,000 to 21,000 feet.
As of December 31, 1994, the Company's proved reserves in the Wind River
Basin were 132.5 Bcf of natural gas and 444 MBbls (thousands of barrels) of oil.
As of August 31, 1995, the Company operated 85 wells and had approximately
20,600 net developed and 457,300 net undeveloped acres in this Basin. The
following table reflects, as to each of the three fields, the Company's average
working interest, net proved reserves as of December 31, 1994, and the number of
gross producing wells and net daily production therefrom as of August 31, 1995.
These production rates reflect the Company's voluntary production curtailments
of approximately 25% in the Muddy Ridge and Pavillion Fields due to prevailing
weak natural gas prices.
<TABLE>
<CAPTION>
NET DAILY
NET PROVED RESERVES PRODUCTION
AVERAGE AS OF AS OF
WORKING DECEMBER 31, 1994 NUMBER OF GROSS AUGUST 31, 1995
FIELD INTEREST (BCFE) PRODUCING WELLS (MMCFE)
----- --------- ------------------- --------------- ---------------
<S> <C> <C> <C> <C>
Muddy Ridge........................ 60% 38.2 15 6.7
Pavillion.......................... 45% 77.6 24 8.6
Frenchie Draw...................... 40% 19.3 12 3.4
----- -- ----
135.1 51 18.7
</TABLE>
During 1994 and the first six months of 1995, the Company's capital
expenditures in this Basin, excluding amounts paid to acquire unproved
properties, were approximately $8.0 million and $3.0 million, respectively. In
addition to three development wells drilled and completed in the current year,
the Company intends to drill one exploratory well on its Pavillion North
prospect prior to December 31, 1995. The Company currently plans to spend
approximately $5.0 million during 1996 to drill 12 wells (five development and
seven exploratory) in the Wind River Basin.
4
<PAGE> 6
The Company has approximately 49,000 gross developed acres and has leases
or options to lease approximately 728,000 gross undeveloped acres in the Wind
River Basin as to which the Company's working interest is, or upon exercise of
options will be, 60%. The Company's interest in the leases and options to lease
are subject to the Company performing certain 3-D seismic operations and
drilling certain exploratory wells. The Company has developed two significant
exploration plays on this acreage, both of which it plans to test within the
next year. One of these plays is located in the western part of this acreage and
the Company intends to test a number of prospects which it believes may contain
oil in the Tensleep and Phosphoria formations at depths of 2,000 to 10,000 feet.
The Company has also identified a number of prospects in the central part of
this acreage which it believes may contain gas in the same formations which are
productive in the Muddy Ridge and Pavillion Fields. In addition, the Company is
in the process of identifying additional exploration prospects on this same
acreage.
Val Verde Basin. The Val Verde Basin accounted for approximately 18% of
the Company's proved reserves as of December 31, 1994. Since its entry into the
Val Verde Basin in 1993, the Company has participated in the drilling of 33
wells in the area. The Company holds a 50% working interest in approximately
51,500 gross acres in this Basin. As of August 31, 1995, the Company held an
interest in 20 wells which were producing in excess of 37 million cubic feet of
natural gas ("MMcf") per day and 1,200 barrels ("Bbls") of oil per day.
Production is from the Wolfcamp, Thrusted Penn Sand and Thrusted Strawn
formations at depths ranging from 5,000 to 12,000 feet. As of December 31, 1994,
the Company's proved reserves in the Val Verde Basin were 26.4 Bcf of natural
gas and 1.8 MMBbls of oil. For the year ended December 31, 1994, the Company
added oil reserves of approximately 1.4 MMBbls and natural gas reserves of
approximately 18 Bcf through discoveries of proved reserves in this Basin.
During 1994 and the first six months of 1995, the Company's capital expenditures
in this Basin, excluding amounts paid to acquire unproved properties, were
approximately $11 million and $10 million, respectively. The Company
participated in the drilling of 16 wells during the current year, 10 of which
were completed and two of which are being completed. The Company intends to
participate in the drilling of up to three additional development wells prior to
December 31, 1995. The Company currently plans to spend approximately $9.0
million during 1996 to drill 15 development wells in the Val Verde Basin.
Permian Basin. The Permian Basin contains the most significant oil
reserves of the Company and accounted for approximately 9% of the Company's
proved reserves as of December 31, 1994. The Company's primary properties in the
Permian Basin are located in the Spraberry Field. As of August 31, 1995, the
Company operated 129 wells and had approximately 27,900 net developed and 1,100
net undeveloped acres in this Basin. As of December 31, 1994, the Company's
proved reserves in this Basin were 7.2 Bcf of natural gas and 2.0 MMBbls of oil.
GAS GATHERING AND MARKETING
The Company's wholly-owned subsidiary, Retex Gathering Company, Inc.
("Retex"), is engaged in the gathering, processing and marketing of natural gas
produced by the Company and third parties. The primary activities of Retex are
conducted in the Wind River Basin through a joint venture with a subsidiary of
KN Energy, Inc. The Company has a 40.5% net interest in the joint venture.
Following its formation in 1993, the joint venture purchased 110 miles of
existing gas gathering lines and related field facilities in this Basin (the
"Wind River Gathering System"), strengthening the Company's ability to control
its production in the area. Since the joint venture's acquisition of the Wind
River Gathering System in 1993, additional compression and gathering facilities
have been installed which have increased the throughput capacity serving the
Muddy Ridge and Pavillion Fields to approximately 60 MMcf of natural gas per
day.
5
<PAGE> 7
RECENT EVENTS
Presidio. In May 1995, the Company announced that it was interested in
acquiring Presidio Oil Company ("Presidio"), a public company engaged in the
exploration for, and development and production of, oil and natural gas
primarily in the Rocky Mountain area. The Company also announced that, based on
publicly available information and various assumptions relating to Presidio's
oil and gas reserves and subject to further review of Presidio's operations and
oil and gas properties and subject to other contingencies, it was willing to pay
up to $200 million to acquire Presidio. As a strategic part of its efforts to
acquire Presidio and for investment purposes, in June 1995 the Company purchased
approximately $56 million of the $100 million outstanding principal amount of
Presidio's Senior Gas Indexed Notes due 2002 ("GINs") for approximately $51
million. The purchase of the GINs was funded by borrowing $51 million. Presidio
was unable to meet the interest payment on the GINs due on May 15, 1995 and was
therefore in default under the terms of the GINs. In August 1995, Presidio
announced that it was commencing an auction process in order to find a buyer for
its assets or outstanding capital stock. Following such announcement, the
Company entered into a confidentiality agreement with Presidio and conducted a
review of Presidio's operations and oil and gas properties. Thereafter, the
Company submitted a proposal to acquire Presidio for a combination of cash and
securities having an aggregate value less than the maximum amount the Company
previously announced it may be willing to pay to acquire Presidio. Presidio is
currently evaluating the Company's proposal as well as other proposals that the
Company believes Presidio received in connection with its auction process and
Presidio has announced that it expects to pursue negotiations for a sale of its
assets and debt restructuring on or about November 15, 1995. The Company's
proposed acquisition of Presidio is subject to a number of significant
contingencies, and the Company cannot predict whether it will be successful in
its efforts to acquire Presidio or, if successful, the actual amount or form of
consideration that the Company would pay in connection therewith or the timing
of any such event. See "Risk Factors -- Investment in Presidio."
Credit Agreement. In September 1995, the Company and three banks entered
into a Credit Agreement (the "Credit Agreement") providing for a three-year, $65
million unsecured revolving credit facility ("Credit Facility"). The Company
borrowed $51 million under the Credit Facility to repay all of the indebtedness
incurred in connection with the purchase of the GINs. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity."
Sale of Arkoma Assets. As part of its strategy to focus on its core
geographic areas, in September 1995 the Company sold its properties in the
Arkoma Basin in western Arkansas for $9.0 million. As a result of this sale, the
Company realized an after-tax book gain of $3.0 million. During the first six
months of 1995, net daily production from these properties averaged 3.9 MMcf.
Proceeds from the sale of these properties were used to repay a portion of the
Company's outstanding indebtedness under the Credit Facility.
6
<PAGE> 8
SUMMARY PRODUCTION, PRICE AND COST DATA
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- -------------------
1992 1993 1994 1994 1995
------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Production:
Natural gas (MMcf)............................................ 4,393 7,157 7,347 3,924 5,330
Oil (MBbls)................................................... 377 317 276 143 200
Total (MMcfe)............................................. 6,655 9,059 9,003 4,782 6,530
Average daily production (MMcfe).............................. 18.2 24.8 24.7 26.4 36.1
Average sales prices:
Natural gas (per thousands of cubic feet) (per Mcf)........... $ 1.81 $ 1.76 $ 1.62 $ 1.74 $ 1.25
Oil (per Bbl)................................................. 19.19 16.91 15.73 15.36 17.18
Average costs (per Mcfe):
Production costs(1)........................................... $ 1.06 $ 0.77 $ 0.67 $ 0.67 $ 0.51
Finding and development costs(2).............................. 0.21 0.30 0.35
COSTS INCURRED (IN THOUSANDS):
Property acquisitions........................................... $ 5,209 $ 2,372 $ 1,754 $ 11 $ 34
Development..................................................... 1,866 5,818 17,797 7,632 13,545
Exploration..................................................... 190 1,825 3,177 1,233 2,816
------- -------- -------- ------- --------
Total..................................................... $ 7,265 $ 10,015 $ 22,728 $ 8,876 $ 16,395
======= ======== ======== ======= ========
</TABLE>
- ---------------
(1) Includes lease operating expenses and production taxes.
(2) Determined by (a) property acquisition, exploration and development costs,
divided by (b) reserve purchases, additions and net revisions.
SUMMARY RESERVE INFORMATION
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
NATURAL GAS AND OIL PROPERTIES:
Net Proved Reserves:
Natural gas (MMcf)....................................................... 104,955 130,995 180,306
Oil (MBbls).............................................................. 3,803 3,300 4,522
---------- ---------- ----------
Total (MMcfe)........................................................ 127,773 150,795 207,438
Natural gas reserves as a percentage of proved reserves.................... 82% 87% 87%
Proved developed reserves (MMcfe).......................................... 90,551 100,295 131,323
Proved reserves to production ratio........................................ 19:1 17:1 23:1
Present value of future net revenues before income taxes discounted at 10%
($ thousands)............................................................ $ 73,666 $ 105,752 $ 124,942
</TABLE>
7
<PAGE> 9
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The summary consolidated financial information set forth below should be
read in conjunction with the financial statements of the Company and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus or incorporated by reference
in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- -------------------
1992 1993 1994 1994 1995
------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Operating revenues.................... $18,597 $28,708 $29,071 $17,276 $18,590
Production costs(1)................... 7,065 6,973 5,999 3,210 3,328
General and administrative
expense............................ 2,599 3,047 3,339 1,675 1,968
Option plan compensation expense...... 1,250 2,879 207 121 58
Depreciation, depletion and
amortization....................... 6,626 7,280 7,288 3,508 4,706
Writedown of properties............... -- -- -- -- 8,368
Interest expense...................... 465 319 20 22 27
Income (loss) before income
taxes.............................. (2,703) (1,979) 102 1,464 (9,015)
Income tax (expense) benefit.......... (284) (339) (262) (159) 13,818
Net income (loss)..................... (2,987) (2,318) (160) 1,305 4,803
Net income (loss) per common
share.............................. (.40) (.19) (.01) .08 .29
Weighted average number of common
shares outstanding................. 7,515 11,898 15,464 15,448 16,312(2)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1995
------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 6,415 $ 10,415
Working capital..................................................... 7,846 11,846
Total assets........................................................ 166,607 164,607
Long-term debt...................................................... 51,000 4,560
Stockholders' equity................................................ 107,801 152,241
</TABLE>
- ---------------
(1) Includes lease operating expenses and production taxes.
(2) Includes common stock equivalents as applicable.
(3) As adjusted to reflect (a) the offering of shares of Common Stock hereby and
the application of the estimated net proceeds therefrom to repay outstanding
indebtedness under the Credit Facility and (b) the sale in September 1995 of
all of the Company's interests in the Arkoma Basin and the application of
the proceeds therefrom to repay a portion of the outstanding indebtedness
under the Credit Facility.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 4,000,000 shares
Common Stock outstanding after the
Offering................................... 19,571,529 shares
Use of Proceeds.............................. To repay outstanding indebtedness under the
Credit Facility
Nasdaq National Market Symbol................ TMBR
</TABLE>
8
<PAGE> 10
RISK FACTORS
Prospective purchasers of the shares of Common Stock offered hereby should
carefully consider, together with other information in this Prospectus, the
following factors that affect the Company.
VOLATILITY OF GAS AND OIL PRICES
The Company's revenues, profitability and future rate of growth are
substantially dependent upon prevailing prices for natural gas and oil. Natural
gas and oil prices can be extremely volatile and in recent years have been
depressed by excess total domestic and imported supplies. Prices are also
affected by actions of state and local agencies, the United States and foreign
governments and international cartels. These external factors and the volatile
nature of the energy markets make it difficult to estimate future prices of
natural gas and oil. Any substantial or extended decline in the price of natural
gas would have a material adverse effect on the Company's financial condition
and results of operations, including reduced cash flow and borrowing capacity.
All of these factors are beyond the control of the Company. When natural gas
prices are deemed by the Company to be too low, the Company may curtail
production from certain wells, which restricts the Company's cash flow; the
Company currently is curtailing approximately 25% of its production from the
Muddy Ridge and Pavillion Fields in the Wind River Basin. Sales of natural gas
and oil are seasonal in nature, leading to substantial differences in cash flow
at various times throughout the year. The marketability of the Company's
production depends in part upon the availability, proximity and capacity of
natural gas gathering systems, pipelines and processing facilities. Federal and
state regulation of natural gas and oil production and transportation, general
economic conditions, changes in supply and changes in demand all could adversely
affect the Company's ability to produce and market its natural gas and oil. If
market factors were to change dramatically, the financial impact on the Company
could be substantial. The availability of markets and the volatility of product
prices are beyond the control of the Company and thus represent a significant
risk.
GENERAL RISKS OF NATURAL GAS AND OIL OPERATIONS
The Company competes in areas of natural gas and oil exploration,
development and transportation with other companies, many of which have
substantially larger financial and other resources. The natural gas and oil
business also involves a variety of risks, including the risks of operating
hazards such as fires, explosions, cratering, blow-outs and encountering
formations with abnormal pressures, the occurrence of any of which could result
in losses to the Company. The operations of the Company's natural gas gathering
systems will involve certain risks, including explosions and environmental
hazards caused by pipeline leaks and ruptures. Drilling for natural gas and oil
involves a high degree of risk, and is marked by unprofitable efforts, not only
from dry holes but from wells that, though productive, do not produce natural
gas and oil in sufficient quantities to return a profit on the amounts expended.
The Company maintains insurance against some, but not all, of these risks in
amounts that management believes to be reasonable in accordance with customary
industry practices. The occurrence of a significant event, however, that is not
fully insured could have a material adverse effect on the Company's financial
position.
INVESTMENT IN PRESIDIO
In June 1995, the Company purchased $56 million principal amount of the
outstanding GINs for approximately $51 million. The carrying value of this
investment, which was financed through bank indebtedness, constituted
approximately 31% of the Company's total assets as of June 30, 1995. Although
management believes its investment in the GINs is a strategic part of its
efforts to gain control of Presidio, there can be no assurances as to when, if
ever, such control will be attained. A failure to gain control could result in
the Company not recovering its initial investment in the GINs. In addition, the
value of the Company's investment in the GINs may be adversely affected by the
results of operations and financial condition of Presidio, which is dependent in
large part on the prices Presidio realizes for its oil and gas production, as
well as the ultimate outcome of Presidio's efforts to restructure its
outstanding indebtedness or to be acquired by another party and the timing
thereof. There is not currently an active trading market for the GINs, and the
Company may experience difficulty in selling the GINs if it desires to do so at
some future time.
9
<PAGE> 11
The GINs have been categorized as available for sale in accordance with
Statement of Financial Accounting Standards No. 115 for financial reporting
purposes, and the Company's investment in the GINs was valued at historical cost
on the Company's balance sheet at June 30, 1995. The Company will be required to
adjust the carrying value of its investment in the GINs at the end of each
quarter based on the fair market value, if determinable, of the GINs at such
time and, in connection therewith, the Company will record a credit or charge to
stockholders' equity for such period based on any adjustment to such carrying
value. The fair market value of the GINs at the end of any period will be
determined by reference to available market trading prices or, if market trading
prices are not readily available, by the reasonable judgment of the Company.
NET LOSSES
For the years ended December 31, 1992, 1993 and 1994, the Company recorded
net losses of $3.0 million, $2.3 million and $0.2 million, respectively. These
losses include depreciation, depletion and amortization expense for each of such
periods of $6.6 million, $7.3 million and $7.3 million, respectively. Although
the Company recorded net income of $4.8 million for the six months ended June
30, 1995, no assurances can be given that the Company will not experience
additional losses in the future.
ESTIMATES OF PROVED RESERVES AND FUTURE NET REVENUES
This Prospectus contains estimates of the Company's natural gas and oil
reserves and the future net revenues therefrom prepared by the Company's
independent petroleum engineers. See "Business and Properties -- Reserves" and
Note 9 of Notes to Consolidated Financial Statements in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 (the "1994
10-K"). These estimates are based on various assumptions and, therefore, are
inherently imprecise. Actual future production, reserves, taxes, development
expenditures, operating expenses and quantities of recoverable natural gas and
oil reserves may vary substantially from those assumed in the estimates. In
addition, the Company's proved reserves may be subject to downward or upward
revision, based upon production history, results of future exploration and
development, prevailing natural gas and oil prices and other factors.
GOVERNMENT REGULATION AND ENVIRONMENTAL RISKS
The Company's business is regulated by certain federal, state and local
laws and regulations relating to the development, production, marketing and
transmission of natural gas and oil, as well as environmental and safety
matters. Certain of these laws and regulations have adversely affected the
Company's operations in the past, and there is no assurance that laws and
regulations enacted in the future will not adversely affect the Company's
exploration for, and the production and marketing of, natural gas and oil. See
"Business and Properties -- Regulation" in the 1994 10-K.
NO DIVIDENDS
The Company has never declared or paid any cash dividends to holders of
Common Stock and has no present intention to pay cash dividends to holders of
the Common Stock in the future. Under the terms of its Credit Agreement, the
Company is prohibited from paying cash dividends without the written consent of
the banks. Although the proceeds from this offering will be used to repay all
amounts presently outstanding under the Credit Facility, the Company intends to
maintain the Credit Facility and, consequently, will be prohibited from paying
dividends without the banks' prior written consent.
ANTI-TAKEOVER PROVISIONS
The ability of the Company's Board of Directors to authorize the issuance
of shares of preferred stock, the Company's Rights Plan, the Company's
Certificate of Incorporation and certain provisions of the Delaware General
Corporation Law may tend to deter unsolicited tender offers and make it
difficult to change control of the Company and replace incumbent management and
also may limit the liability of directors. See "Description of Capital Stock."
10
<PAGE> 12
USE OF PROCEEDS
The net proceeds to be received by the Company from this offering will be
$41.4 million. The proceeds will be used to repay outstanding indebtedness under
the Credit Facility ($46 million as of October 31, 1995). The Company borrowed
$51 million under the Credit Facility in September 1995 to refinance
indebtedness incurred in June 1995 when the Company acquired approximately $56
million principal amount of GINs issued by Presidio. See "Recent
Events -- Presidio." In September 1995, the Company used approximately $5.0
million of the proceeds from the sale of the Arkoma properties to reduce its
indebtedness from $51 million to $46 million. 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 October 31, 1995, the interest rate on
$41 million of outstanding borrowings was 6.625%, and 8.75% on an additional
$5.0 million of outstanding borrowings. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Capital Resources
and Liquidity." The Credit Facility matures in September 1998.
Following the application of the net proceeds from the offering made hereby
to repay indebtedness outstanding under the Credit Facility, the Company will
have approximately $60.4 million of available borrowing capacity under the
Credit Facility. The Company may incur additional debt subsequent to this
offering as its future business needs require.
11
<PAGE> 13
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of June 30, 1995, and as adjusted to reflect (i) the Company's
issuance and sale of the 4,000,000 shares of Common Stock offered hereby and the
application of the net proceeds of $41.4 million therefrom as described in "Use
of Proceeds", and (ii) the sale of the Company's interests in the Arkoma Basin
and the application of proceeds therefrom in September 1995 to repay a portion
of the outstanding indebtedness under the Credit Facility. The table should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements appearing
elsewhere in this Prospectus or incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1995
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.................................. $ 6,415 $ 10,415
======== ========
Long-term debt............................................. 51,000 4,560
-------- --------
Stockholders' Equity:
Common Stock, $.10 par value per share; 30,000,000 shares
authorized; 15,537,529 shares issued and outstanding;
19,537,529 shares issued and outstanding, as
adjusted(2)........................................... 1,554 1,954
Additional paid-in capital............................... 177,477 218,517
Accumulated deficit...................................... (71,230) (68,230)
-------- --------
Total stockholders' equity....................... 107,801 152,241
-------- --------
Total capitalization............................. $158,801 $156,801
======== ========
</TABLE>
- ---------------
(1) As adjusted to reflect (a) the offering of the shares of Common Stock hereby
and the application of the estimated net proceeds therefrom to repay
outstanding indebtedness under the Credit Facility and (b) the sale of all
of the Company's interests in the Arkoma Basin.
(2) Does not include 1,566,850 shares of Common Stock issuable upon exercise of
outstanding stock options.
12
<PAGE> 14
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded in the over-the-counter market and
quoted on The Nasdaq National Market under the symbol "TMBR." The following
table sets forth, on a per share basis for the periods indicated, the range of
high and low closing bid prices of the Common Stock as reported by The Nasdaq
National Market during the periods shown.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal 1993
First Quarter.......................................................... $14.250 $ 6.750
Second Quarter......................................................... 14.250 11.875
Third Quarter.......................................................... 17.500 13.500
Fourth Quarter......................................................... 16.500 10.500
Fiscal 1994
First Quarter.......................................................... $12.875 $11.000
Second Quarter......................................................... 16.375 11.125
Third Quarter.......................................................... 16.000 11.125
Fourth Quarter......................................................... 13.750 9.375
Fiscal 1995
First Quarter.......................................................... $15.125 $10.625
Second Quarter......................................................... 15.375 13.625
Third Quarter.......................................................... 15.375 13.125
Fourth Quarter (through November 1, 1995).............................. 14.000 11.000
</TABLE>
On November 1, 1995, the last sale price for the Common Stock as reported
by The Nasdaq National Market was $11.75 per share.
DIVIDENDS
The Company has never declared or paid any cash dividends to the holders of
Common Stock and has no present intention to pay cash dividends to the holders
of Common Stock in the future. Under the terms of the Credit Agreement, the
Company is prohibited from paying cash dividends to the holders of Common Stock
without the written consent of the banks.
13
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS SIX MONTHS
ENDED YEARS ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
------------ --------------------------------------------- -------------------
1990(1) 1991 1992 1993 1994 1994 1995
------------ ------- ------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA(2):
Total revenues............................ $ 15,317 $18,928 $18,597 $ 28,708 $ 29,071 $ 17,276 $ 18,590
Costs and expenses:
Gas and oil production.................. 5,247 7,134 5,676 4,899 4,130 2,086 2,280
Taxes on gas and oil production......... 1,363 1,405 1,389 2,074 1,869 1,124 1,048
Cost of gas sold........................ 413 1,347 2,838 8,287 10,022 6,406 6,858
Exploration costs....................... 908 846 190 440 1,184 333 1,948
Impairments of leasehold costs.......... 381 284 267 1,462 910 537 344
General and administrative.............. 2,099 2,703 2,599 3,047 3,339 1,675 1,968
Option plan compensation................ -- -- 1,250 2,879 207 121 58
Depreciation, depletion and
amortization.......................... 5,933 10,592 (3) 6,626 7,280 7,288 3,508 4,706
Writedown of properties................. -- -- -- -- -- -- 8,368
Interest expense........................ 995 1,117 465 319 20 22 27
---------- ------- ------- -------- -------- -------- --------
Total costs and expenses.......... 17,339 25,428 21,300 30,687 28,969 15,812 27,605
---------- ------- ------- -------- -------- -------- --------
Income (loss) before income taxes......... (2,022) (6,500) (2,703) (1,979) 102 1,464 (9,015)
Income tax provision:
Recognition of deferred tax asset....... -- -- -- -- -- -- 13,967
Income tax expense...................... (36) (36) (284) (339) (262) (159) (149)
---------- ------- ------- -------- -------- -------- --------
Net income (loss)......................... $ (2,058) $(6,536) $(2,987) $ (2,318) $ (160) $ 1,305 $ 4,803
========== ======= ======= ======== ======== ======== ========
Weighted average number of common shares
outstanding............................. 7,510 (4) 7,503 (4) 7,515 (4) 11,898 15,464 15,448 16,312
Net income (loss) per common share........ $ (0.27) $ (0.87) $ (0.40) $ (0.19) $ (0.01) $ 0.08 $ 0.29
CONSOLIDATED BALANCE SHEET DATA AT PERIOD
END:
Cash and cash equivalents................. $ 1,891 $ 962 $ 1,095 $ 28,503 $ 19,147 $ 26,896 $ 6,415
Total assets.............................. 94,988 82,078 76,866 108,084 115,092 110,492 166,607
Working capital........................... (411) 1,584 3,388 30,372 16,565 27,457 7,846
Long-term debt............................ 11,500 12,500 9,650 -- -- -- 51,000
Stockholders' equity...................... 71,366 64,818 62,540 102,376 102,869 103,876 107,801
</TABLE>
- ---------------
(1) In May 1990, the Company changed its fiscal year end from March 31 to
December 31.
(2) Certain reclassifications have been made to amounts reported in previous
years to conform to the 1995 presentation.
(3) In February 1992, the Company sold certain non-strategic gas and oil
properties in the Williston Basin of North Dakota and Montana for
approximately $7.0 million. In the fourth quarter of 1991, the Company
recognized a $3.4 million writedown of such properties to net realizable
value.
(4) Weighted average number of common shares outstanding does not include 4.4
million shares of Common Stock issued in June 1993 upon conversion of
preferred stock.
14
<PAGE> 16
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
The following table sets forth certain operating information of the Company
for the periods presented.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- -------------------
1992 1993 1994 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues (in thousands):
Natural gas sales...................... $ 7,948 $12,399 $11,451 $ 6,835 $ 6,686
Crude oil sales........................ 7,234 5,360 4,341 2,196 3,435
Marketing, gathering and processing.... 3,352 10,387 11,876 7,533 7,980
Other.................................. 63 562 1,403 712 489
------- ------- ------- ------- -------
Total revenues................. $18,597 $28,708 $29,071 $17,276 $18,590
======= ======= ======= ======= =======
Net income (loss) (in thousands): $(2,987) $(2,318) $ (160) $ 1,305 $ 4,803
Natural gas production (MMcf)............ 4,393 7,157 7,347 3,924 5,330
Crude oil production (MBbls)............. 377 317 276 143 200
Average natural gas sales price
($/Mcf)................................ $ 1.81 $ 1.76 $ 1.62 $ 1.74 $ 1.25
Average crude oil sales price ($/Bbl).... $ 19.19 $ 16.91 $ 15.73 $ 15.36 $ 17.18
Average production costs ($/Mcfe)........ $ 1.06 $ 0.77 $ 0.67 $ 0.67 $ 0.51
</TABLE>
REVENUES
During the six month period ended June 30, 1995, revenues from natural gas
and oil production increased $1.1 million to $10.1 million compared to the same
period in 1994. An increase in natural gas sales volumes of 36% increased
revenues by approximately $1.8 million. A decrease in average natural gas prices
received by the Company from $1.74 per Mcf to $1.25 per Mcf decreased revenues
by approximately $1.9 million. An increase in oil sales volumes of 40% increased
revenues by approximately $1.0 million for the six months ended June 30, 1995.
An increase in the average crude oil sales price from $15.36 per Bbl to $17.18
per Bbl increased revenues by approximately $0.2 million for the six months
ended June 30, 1995.
The increase in gas and oil sales volumes for the six months ended June 30,
1995 as compared to the same period in 1994 was due primarily to increased
production in the Company's Val Verde Basin properties.
Marketing, gathering and processing revenues increased $0.4 million for the
six month period ended June 30, 1995 as a result of the increased activity in
the Company's natural gas marketing operations and increased revenues from the
Company's interest in the Wind River Gathering System.
During 1994, revenues from gas and oil production decreased $2.0 million to
$15.8 million as compared to the same period in 1993. A decrease in average gas
prices received by the Company from $1.76 per Mcf to $1.62 per Mcf decreased
revenues by approximately $1.0 million. A decrease in average oil prices from
$16.91 per Bbl to $15.73 per Bbl decreased revenue approximately $0.4 million.
The decrease in oil sales volumes of 13% reduced revenues by approximately $0.6
million for 1994. Gas sales volumes remained relatively constant.
The decrease in oil sales volumes for the year ended December 31, 1994 as
compared to the same period in 1993 was due primarily to property sales
completed throughout 1993 and 1994. Natural gas sales volumes
15
<PAGE> 17
remained constant as the Company increased its deliverability through its
development drilling in 1994 but curtailed greater portions of its production
due to low natural gas prices.
Marketing, gathering and processing revenues increased 14% in 1994 compared
to 1993 due to a full year of revenue in 1994 from the Company's interest in the
Wind River Gathering System which was acquired in June 1993.
Interest income and other revenues increased approximately $0.8 million due
to interest income from excess cash retained from the Company's June 1993 Common
Stock offering.
During 1993, revenues from gas and oil production increased $2.6 million to
$17.8 million as compared to the same period in 1992. A decrease in average gas
prices received by the Company from $1.81 per Mcf to $1.76 per Mcf decreased
revenues by approximately $0.2 million. A decrease in the average oil price from
$19.19 per Bbl to $16.91 per Bbl decreased revenues by approximately $0.9
million. An increase in natural gas volumes of 63% increased revenues by
approximately $4.7 million. The decrease to oil sales volumes of 16% reduced
revenues by approximately $1.0 million for 1993.
The decrease in oil sales volumes for the year ended December 31, 1993 as
compared to the same period in 1992 was due primarily to property sales
completed during the first quarter of 1992. The increase in natural gas sales
volumes for 1993 as compared to 1992 was attributable to the Company's decision
to increase production from the Wind River Basin of Wyoming, which, until late
1992, had been under a self-imposed curtailment. Contributing to the decision to
increase production were reduced transportation tariffs in certain key market
areas and a general increase in demand for natural gas.
Marketing, gathering and processing revenues increased 210% in 1993
compared to 1992 due to the start up in October 1992 of Retex, the Company's
marketing subsidiary.
COSTS AND EXPENSES
Costs and expenses for the six months ended June 30, 1995 increased to
$27.6 million from $15.8 million for 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 certain of the Company's properties to their
estimated fair values, which properties were not part of the Company's Wind
River Basin or Val Verde Basin properties. Natural gas and oil production
expense increased $0.2 million as a result of the addition of several wells in
the Val Verde Basin. Although gas and oil sales increased, taxes on gas and oil
production remained relatively unchanged as lower-taxed production from Texas
accounted for the increased sales.
Compared to the first six months of 1994, cost of sales increased as higher
volumes of gas were purchased by the Company's marketing subsidiary during the
six months ended June 30, 1995. Exploration costs increased $1.6 million during
the six months ended June 30, 1995, as a result of 3-D seismic costs on the
Company's exploration efforts in the Wind River Basin. Compared to the first six
months of 1994, general and administrative expenses increased $0.3 million
during the six months ended June 30, 1995, due to additional costs to explore
and develop the Company's Wind River Basin and Val Verde Basin. Depreciation,
depletion and amortization increased 34% during the six months ended June 30,
1995, due to the additional production from the Company's Val Verde Basin
properties.
The Company recognized in the first quarter of 1995 a net deferred tax
asset in the amount of approximately $14 million 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 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.
16
<PAGE> 18
Accordingly, that portion of the valuation allowance was reversed in the first
quarter. A valuation allowance of approximately $10 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.
Costs and expenses for 1994 decreased 6% to $29 million as compared to
1993. Gas and oil production expenses decreased $0.8 million which reflects the
Company's disposition of certain high-cost oil producing properties in 1994.
Taxes on gas and oil production decreased $0.2 million as a result of decreased
oil production levels. Cost of gas sold increased 21% in 1994 compared to 1993
reflecting a higher volume of gas purchased in 1993 by Retex. Exploration costs
increased $0.7 million as a result of exploratory 3-D seismic costs in 1994.
Impairments of leasehold costs decreased $0.6 million as a result of the
writedown of an uneconomic oil producing property in 1993 due to lower year-end
oil prices. General and administrative expenses increased $0.3 million primarily
as a result of increases in insurance and salaries. Interest expense decreased
$0.3 million as a result of the Company's debt repayment in June 1993.
Costs and expenses for 1993 increased 44% to $30.7 million as compared to
1992. Depreciation, depletion and amortization expense increased primarily as a
result of increased natural gas production and lower year-end reserve estimates
for certain oil producing properties caused in part by low year-end oil prices.
Gas and oil production expenses decreased $0.8 million which reflect the
Company's disposition of certain high-cost oil producing properties in 1992.
Taxes on gas and oil production increased $0.7 million as a result of increased
natural gas production levels. Cost of gas sold increased 192% in 1993 compared
to 1992 due to the start up in October 1992 of Retex. Exploration costs
increased $0.3 million as a result of increased exploratory activity in 1993.
Impairments of leasehold costs increased $1.2 million as a result of the write
off of certain non-strategic leases and the writedown of an uneconomic oil
producing property due to low year end oil prices. General and administrative
expenses increased $0.4 million as a result of increases in professional fees,
insurance and salaries.
The Company recorded non-cash option plan compensation expense of $0.2
million, $2.9 million and $1.3 million in 1994, 1993 and 1992, respectively,
under certain stock option and phantom stock option plans due to an increase in
the market value of the Common Stock over the exercise prices of such options.
Compensation expense related to the option plans is based on the ratably vested
portion of the difference between the exercise prices and the market value of
the Common Stock. Certain changes to the option plans during 1993 eliminated the
need to recognize option plan compensation expense, except for some minor
vesting of previously incurred expense. The Company expects future non-cash
option plan compensation expense to total approximately $0.1 million, which will
be recognized over the remaining vesting period of the options (approximately
two years).
The Company incurred a tax liability in the amount of $24,000, $129,000 and
$134,000 in 1994, 1993 and 1992, respectively, as a result of the application of
the alternate minimum tax rules as provided under the Internal Revenue Code. The
Company has not paid, prior to the year ended December 31, 1990, Federal income
taxes for the past six years due to its net operating loss carryforwards. At
December 31, 1994, such carryforwards for tax purposes were approximately $71.8
million.
CAPITAL RESOURCES AND LIQUIDITY
The Company continues to operate under the strategy of maintaining a strong
balance sheet, adding value by increasing the Company's reserve base and
presence in significant natural gas areas, and further developing the ability to
control and market the Company's production.
On May 31, 1995, the Company announced that it had written to Presidio in
order to propose a business combination between the two companies. On June 28,
1995, the Company purchased approximately $56 million of the $100 million
principal amount outstanding of the GINs 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 in accordance with the
terms of the GINs. The purchase of the GINs was funded by a $51 million bank
note. See "Recent Events -- Presidio" and "Risk Factors."
17
<PAGE> 19
On September 14, 1995, the Company entered into the 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 the
GINs. 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 October 31, 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 "Recent Events -- Sale of Arkoma
Assets." The interest rate on $41 million of such borrowings was 6.625%, 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.
Following the application of the net proceeds from the offering made hereby
to repay indebtedness outstanding under the Credit Facility, the Company will
have $4.6 million outstanding under the Credit Facility and approximately $60.4
million of available borrowing capacity under the Credit Facility. The Company
may incur additional debt subsequent to this offering as its future business
needs require.
The Company's capital expenditures for the years ended December 31, 1994,
1993 and 1992 and the six month periods ended June 30, 1995 and June 30, 1994
were approximately $23 million, $12.3 million, $7.4 million, $14.9 million and
$8.3 million, respectively. The increase during 1993 as compared to 1992 was
primarily the result of additional drilling in certain of the Company's
principal natural gas areas and the acquisition of an interest in a pipeline and
related facilities. The increase during 1994 as compared to 1993 was due
primarily to the development drilling program in the Val Verde Basin where
approximately $11 million was incurred. The capital expenditures for the six
months ended June 30, 1995 include approximately $13.3 million in further
development of the Company's Wind River and Val Verde Basin properties.
The level of capital expenditures by the Company will vary in future
periods depending on energy market conditions and other related economic
factors. The Company has no material long-term capital expenditure commitments.
Consequently, the Company is able to adjust the level of its expenditures as
circumstances warrant.
In June 1993, the Company completed a Common Stock offering. The total
number of shares offered was 5,200,000 shares of Common Stock of which the
Company offered 3,000,000 shares and Prudential Insurance Company of America
offered 2,200,000 shares. The shares were sold at $12.00 per share and the
Company's proceeds, net of an underwriting discount of $1,890,000, were
$34,110,000. A portion of these proceeds was used to repay all of the Company's
debt outstanding under its debt agreement. In July 1993, a portion of the
over-allotment option was exercised which allowed for the issuance of an
additional 394,500 shares of Common Stock by the Company. Net proceeds from the
over-allotment were $4,485,000. In connection with this offering, all of the
outstanding Preferred Stock of the Company was converted to Common Stock.
Also in June 1993, a joint venture between a wholly-owned subsidiary of the
Company and a subsidiary of KN Energy, Inc. acquired the Wind River Gathering
System. The Company paid approximately $2.0 million for its 40.5% net interest.
The pipeline and related facilities have further complemented the Company's
ability to market its natural gas production from the Wind River Basin.
In September 1993, the Company acquired a 50% working interest in
approximately 58,000 net acres in the Val Verde Basin for approximately $1.6
million. The acreage purchase was in connection with the Company's successful
exploratory well completed on contiguous acreage in September 1993. The total
net acreage position held in this Basin is approximately 65,000 acres, of which
the Company owns a 50% interest. The Company had drilled or participated in the
drilling of 33 wells in this area as of June 30, 1995.
18
<PAGE> 20
Historically, the Company has funded capital expenditures and working
capital requirements with both internally-generated cash and borrowings. Net
cash provided by operating activities was $7.6 million for 1994, $9.7 million
for 1993, $3.1 million for 1992, $6.1 million for the six month period ended
June 30, 1995 and $6.6 million for the six month period ended June 30, 1994. Net
cash and cash equivalents decreased $9.4 million for 1994, increased $27.4
million for 1993, increased $0.1 million for 1992, decreased $12.7 million for
the six month period ended June 30, 1995 and decreased $1.6 million for the six
month period ended June 30, 1994.
The Company continues to pursue opportunities that will add value by
increasing its reserve base and presence in significant natural gas-prone basins
and further developing the Company's ability to control and market production of
natural gas. The Common Stock offering in June 1993 and the resulting
elimination of all debt served to strengthen the Company's balance sheet. As the
Company continues to evaluate potential acquisitions and property development
opportunities, it will benefit from its cash position, financing flexibility and
the leverage potential of the Company's overall capital structure.
19
<PAGE> 21
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Donald L. Evans............... 49 Chairman of the Board of Directors,
President and Chief Executive Officer
Peter R. Scherer.............. 39 Executive Vice President
Thomas E. Klauss.............. 52 Vice President - Exploration South
Christopher E. Mullen......... 35 Vice President - Exploration North
Clifford C. Drescher.......... 43 Vice President - Production
Richard B. Porter............. 40 Vice President - Land
R. Kim Harris................. 39 Controller
B. Jack Reed.................. 46 Treasurer
James M. Alsup................ 58 Secretary
Thomas C. Brown............... 68 Director
William R. Granberry(1)....... 52 Director
Henry Groppe(1)............... 69 Director
Edward W. LeBaron, Jr.(2)..... 65 Director
James B. Wallace(2)........... 66 Director
Robert H. Whilden, Jr.(1)..... 60 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Directors of the Company serve until the annual meeting of stockholders to
be held in May 1996, and until their successors in office are elected and
qualified. Each officer is appointed annually by the Company's Board of
Directors to serve at the Board's discretion and until his successor in office
is elected and qualified.
Messrs. Evans, Scherer, Klauss, Drescher, Harris and Reed have been
employed by the Company in their present positions for more than five years,
except that Mr. Scherer was promoted from Vice President to Executive Vice
President in 1990. Mr. Drescher was promoted from Operations Engineer to Vice
President - Production in 1991. Mr. Klauss was promoted to Vice
President - Exploration South in 1995, and Mr. Evans was elected Chairman of the
Board in 1990 to succeed Mr. Brown who had previously served in that capacity.
Mr. Mullen has been employed by the Company since September 1994. He served
as Geologist-Rocky Mountain Division from September 1994 to September 1995 and
as Vice President - Exploration North from September 1995 to the present. Mr.
Mullen was a Petroleum Geologist with Unocal Corporation from 1987 to September
1994.
Mr. Porter has been employed by the Company since April 1994. He served as
Landman - Rocky Mountain Division from April 1994 to September 1995 and as Vice
President - Land from September 1995 to the present. Mr. Porter was Resource
Manager with Paragon Ranch Corporation from 1984 to January 1994.
Mr. Alsup has been a shareholder in the law firm of Lynch, Chappell & Alsup
in Midland, Texas for more than the past five years.
Mr. Brown is also a director of Weatherford International Incorporated and
has served as Chairman of the Board of Directors of TMBR/Sharp Drilling, Inc.
for the last five years.
Mr. Evans is also a director of TMBR/Sharp Drilling, Inc.
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<PAGE> 22
Mr. Granberry has been Chairman of the Board of Directors and Chief
Executive Officer of Mineral Development, Inc. ("MDI") since August 1994, and
President of MDI since October 1994. Previously, he was Vice President of PG&E
Resources Company from May 1989 to July 1994.
Mr. Groppe has been an oil and gas consultant with Groppe, Long & Littell
since 1955.
Mr. LeBaron has served as Chairman of the Board of Directors of Pacific
Casino Management, Inc. since June 1994 and is a retired partner in the law firm
of Pillsbury, Madison and Sutro in Sacramento, California, with which he has
been associated with since April 1989.
Mr. Wallace was an officer, director and stockholder of BWAB Incorporated
from 1980 to 1992. Mr. Wallace has been a partner in Brownlie, Wallace,
Armstrong and Bander Exploration, a partnership, since 1992. Each of BWAB
Incorporated and Brownlie, Wallace, Armstrong and Bander were and are engaged in
oil and gas exploration and production with principal offices in Denver,
Colorado.
Mr. Whilden has been a partner in the law firm of Vinson & Elkins L.L.P. in
Houston, Texas, for more than the past five years.
There are no family relationships between any of the Directors or executive
officers of the Company.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee, of which Messrs. Wallace and LeBaron constitute the present
members, has the responsibility of recommending the employment of the Company's
independent auditors, and reviews with management and the independent auditors
the Company's financial statements, basic accounting and financial policies and
practices, audit scope and competency of control personnel. The Compensation
Committee, which consists of Messrs. Granberry, Groppe and Whilden, reviews and
recommends to the Board of Directors the compensation and promotion of officers
of the Company, the terms of any proposed employee benefit arrangements and the
making of awards under such arrangements. Members of the Compensation Committee
are not required to abstain from voting in respect of compensation paid or
awards granted to them.
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<PAGE> 23
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 2,500,000 shares of
preferred stock, $.10 par value per share, and 30,000,000 shares of common
stock, $.10 par value per share (the "Common Stock"). As of October 31, 1995,
15,571,529 shares of Common Stock were outstanding and no shares of preferred
stock were outstanding. All of the shares of Common Stock of the Company offered
hereby will be, when issued and sold, legally issued, fully paid and
non-assessable.
COMMON STOCK
Subject to the prior rights of shares of preferred stock that might be
outstanding from time to time, the shares of Common Stock of the Company: (1)
are entitled to such dividends as may be declared by the Board of Directors out
of funds legally available therefor (subject to limitations set forth in the
Credit Agreement); (2) are entitled to one vote per share and have no cumulative
voting rights; (3) have no preemptive or conversion rights; (4) are not subject
to, or entitled to the benefits of, any redemption or sinking fund provision;
and (5) are entitled upon liquidation to receive the assets of the Company
remaining after the payment of corporate debts and the satisfaction of the
liquidation preferences of preferred stock.
As discussed in "Dividends," the Company has never declared or paid any
cash dividends and does not anticipate the payment of any cash dividends on the
Common Stock in the foreseeable future. Under the terms of its Credit Agreement,
the Company is prohibited from paying cash dividends on the Common Stock without
the written consent of its lenders.
The Company's Rights Plan provides that a preferred stock purchase right is
associated with each share of Common Stock. See "-- Stockholder Rights Plan."
The Common Stock is quoted on The Nasdaq National Market under the symbol
"TMBR." The Transfer Agent and Registrar for the Common Stock is First National
Bank of Boston, Boston, Massachusetts.
PREFERRED STOCK
The Board of Directors is empowered, without approval of the stockholders,
to cause additional shares of preferred stock to be issued in one or more
series, with the number of shares of each series and the rights, preferences and
limitations of each series to be determined by it. Among the specific matters
that may be determined by the Board of Directors are the rate of dividends,
redemption and conversion prices, terms and amounts payable in the event of
liquidation and voting rights. Issuance of shares of preferred stock could
involve dilution of the equity of the holders of Common Stock and further
restrict the rights of such stockholders to receive dividends. Although the
Company has no present intention to issue any shares of preferred stock, the
issuance of such shares in the future could be used to discourage an unsolicited
acquisition proposal.
STOCKHOLDER RIGHTS PLAN
On March 1, 1991, the Board of Directors adopted a Rights Plan designed to
help assure that all stockholders receive fair and equal treatment in the event
of a hostile attempt to take over the Company and to help guard against abusive
takeover tactics. The Board of Directors declared a dividend of one preferred
share purchase right (a "Right") for each outstanding share of Common Stock. The
dividend was distributed on March 15, 1991 to the stockholders of record on that
date. Each Right entitles the registered holder to purchase, for a $20.00 per
share exercise price, in lieu of preferred shares, shares of Common Stock or
other securities of the Company (or, under certain circumstances, of the
acquiring person) worth twice the per share exercise price of the Right.
The Rights will be exercisable only if a person or group acquires 20% or
more of the Company's Common Stock or announces a tender offer which would
result in ownership by a person or group of 20% or more of the Common Stock. The
date on which the above occurs is to be known as the "Distribution Date."
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<PAGE> 24
The Rights are not exercisable until the Distribution Date. The Rights will
expire on March 15, 2001, unless extended or redeemed earlier by the Company.
At the time the Rights dividend was declared, the Board of Directors
further authorized the issuance of one Right with respect to each share of
Common Stock that shall become outstanding between March 15, 1991 and the
earlier of the Distribution Date or the expiration or redemption of the Rights.
Until the Distribution Date occurs, the certificates representing shares of
Common Stock also evidence the Rights. Following the Distribution Date, the
Rights will be evidenced by separate certificates.
The provisions described above may tend to deter any potential unsolicited
tender offers or other efforts to obtain control of the Company that are not
approved by the Board of Directors and thereby deprive the stockholders of
opportunities to sell shares of Common Stock at prices higher than the
prevailing market price. On the other hand, these provisions will tend to assure
continuity of management and corporate policies and to induce any person seeking
control of the Company or a business combination with the Company to negotiate
on terms acceptable to the then elected Board of Directors.
DELAWARE ANTI-TAKEOVER LAW
Under Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" between a Delaware
corporation whose stock generally is publicly traded or held of record by more
than 2,000 stockholders and an "interested stockholder" are prohibited for a
three-year period following the date such stockholder became an interested
stockholder, unless (1) the corporation has elected in its certificate of
incorporation not to be governed by the Delaware anti-takeover law (the Company
has not made such an election), (2) the business combination was approved by the
board of directors of the corporation before the other party to the business
combination became an interested stockholder, (3) upon consummation of the
transaction that made it an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
commencement of the transaction (excluding voting stock owned by directors who
are also officers or held in employee benefit plans in which the employees do
not have a confidential right to tender or vote stock held by the plan) or (4)
the business combination was approved by the board of directors of the
corporation and ratified by 66 2/3% of the voting stock which the interested
stockholder did not own. The three-year prohibition also does not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of certain extraordinary transactions involving
the corporation and a person who had not been an interested stockholder with the
approval of a majority of the corporation's directors. The term "business
combination" is defined generally to include mergers or consolidations between a
Delaware corporation and an "interested stockholder," transactions with an
"interested stockholder" involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an interested
stockholder's percentage ownership of stock. The term "interested stockholder"
is defined generally as those stockholders who become beneficial owners of 15%
or more of a Delaware corporation's voting stock.
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<PAGE> 25
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriters named below, for whom Schroder Wertheim & Co.
Incorporated, Howard, Weil, Labouisse, Friedrichs Incorporated, Petrie Parkman &
Co., Inc. and Salomon Brothers Inc are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company the
number of shares of Common Stock set forth below opposite their respective
names:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Schroder Wertheim & Co. Incorporated................................. 712,500
Howard, Weil, Labouisse, Friedrichs Incorporated..................... 712,500
Petrie Parkman & Co., Inc............................................ 712,500
Salomon Brothers Inc ................................................ 712,500
CS First Boston Corporation.......................................... 100,000
Donaldson, Lufkin & Jenrette Securities Corporation.................. 100,000
Lehman Brothers Inc. ................................................ 100,000
Morgan Stanley & Co. Incorporated.................................... 100,000
Oppenheimer & Co., Inc. ............................................. 100,000
Prudential Securities Incorporated................................... 100,000
Smith Barney Inc. ................................................... 100,000
Advest, Inc. ........................................................ 50,000
First Albany Corporation............................................. 50,000
Jefferies & Company, Inc. ........................................... 50,000
Rauscher Pierce Refsnes, Inc. ....................................... 50,000
Raymond James & Associates, Inc. .................................... 50,000
Simmons & Company International...................................... 50,000
Huberman Financial, Inc. ............................................ 30,000
Johnson Rice & Company L.L.C. ....................................... 30,000
Sanders Morris Mundy Inc. ........................................... 30,000
Wm Smith Securities Incorporated..................................... 30,000
Southcoast Capital Corporation....................................... 30,000
---------
Total...................................................... 4,000,000
=========
</TABLE>
The Underwriting Agreement provides that the several Underwriters will be
obligated to purchase all of the shares of Common Stock being offered (other
than the shares covered by the over-allotment option), if any are purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the price to the
public set forth on the cover page of this Prospectus and to certain dealers at
such price, less a concession not in excess of $0.34 per share. The Underwriters
may allow, and such dealers may reallow, a discount of not in excess of $0.10
per share to certain other dealers. After this offering to the public, the price
to the public, concession and discount to dealers may be changed by the
Underwriters.
The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus, to purchase up to 600,000 additional
shares of Common Stock at the public offering price set forth less underwriting
discounts and commissions on the cover page hereof. The Underwriters may
exercise this option, in whole or in part, solely for the purpose of covering
over-allotments, if any, made in the sale of the Common Stock offered hereby.
In connection with the offering, certain Underwriters may engage in passive
market making transactions in the Common Stock on The Nasdaq National Market
immediately prior to the commencement of sales in the offering made hereby, in
accordance with Rule 10b-6A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Passive market making consists of displaying bids
on The Nasdaq National
24
<PAGE> 26
Market limited by the bid prices of independent market makers and purchases
limited by such prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited to a specified percentage of the
passive market maker's average daily trading volume in the Common Stock during a
specified prior period and must be discontinued when such limit is reached.
Passive market making may stabilize the market price of the Common Stock at a
level above that which might otherwise prevail and, if commenced, may be
discontinued at any time.
The Company and its executive officers and directors have agreed not to
offer to sell, sell, grant any option to purchase or otherwise dispose of any
shares of any capital stock of the Company (or securities convertible into, or
exchange for, capital stock of the Company), directly or indirectly, for a
period of 180 days after the date of this Prospectus, without the prior written
consent of Schroder Wertheim & Co. Incorporated, except for grants of stock
options under the Company's stock option plans and issuance of stock upon
exercise of such options, and except for shares of capital stock issued by the
Company in connection with the acquisition of assets or capital stock of any
company engaged in the oil and gas business.
Certain of the underwriters have performed investment banking services for
the Company for which they received customary compensation.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act").
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Vinson & Elkins L.L.P., 1001 Fannin, Houston, Texas 77002. Robert H.
Whilden, Jr., a partner in the firm of Vinson & Elkins L.L.P., is a Director of
the Company. See "Management -- Compensation of Directors" in the Company's 1995
Proxy Statement, which has been incorporated herein by reference, for a
description of stock options held by Mr. Whilden. Certain legal matters will be
passed upon for the Underwriters by Andrews & Kurth L.L.P., 4200 Texas Commerce
Tower, Houston, Texas 77002.
EXPERTS
The consolidated financial statements and schedules included or
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement, to the extent and for the periods indicated in their report, have
been audited by Arthur Andersen LLP, independent public accountants, and are
included herein in reliance upon the authority of said firm as experts in giving
said report.
The estimated reserve evaluations and related calculations of Williamson
Petroleum Consultants, Inc. incorporated by reference into this Prospectus have
been included herein in reliance upon the authority of said firm as experts in
petroleum engineering.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith the Company files reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information are
available for inspection and copying at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and at the regional offices of the Commission
located at 7 World Trade Center, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60601. Copies of such materials can also
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at the prescribed rates.
The Company's Common Stock is traded on The Nasdaq National Market and, as a
result, the periodic reports, proxy statements and other information filed by
the Company with the Commission can be inspected at the offices of The Nasdaq
Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
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<PAGE> 27
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement, including the exhibits filed as a part thereof and
otherwise incorporated therein.
Statements contained in this Prospectus or in any document incorporated by
reference in this Prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference:
(A) Annual Report filed on Form 10-K for the fiscal year ended December
31, 1994 (File No. 0-3880);
(B) Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1995 and June 30, 1995;
(C) Proxy Statement for Annual Meeting of Stockholders held May 17, 1995;
and
(D) Form 8-K Report dated September 27, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the shares of Common Stock hereunder shall be
deemed incorporated by reference in this Prospectus and shall be deemed to be a
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed incorporated herein by reference shall be
deemed to be modified or superseded for all purposes to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document which also is, or is deemed to be, incorporated by reference in this
Prospectus modifies or supersedes such statement.
The Company undertakes to provide without charge to each person to whom a
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information which have been or may be incorporated in this
Prospectus by reference but not delivered herewith, except for certain exhibits
to such documents. Requests for such information should be directed to
Treasurer, Tom Brown, Inc., 500 Empire Plaza Building, 508 West Wall Street,
Midland, Texas, 79701, telephone number (915) 682-9715.
26
