UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(Mark One)
ü | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF | |
| THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF | ||
| THE SECURITIES EXCHANGE ACT OF 1934 |
Commission fileFile No. 0-16741
COMSTOCK RESOURCES, INC.NEVADA 94-1667468(State or other jurisdiction of
incorporation or organization)94-1667468
(I.R.S. Employer(Identification Number)
5300 Town and Country Blvd., Suite 500, Frisco, Texas 75034
(Address of principal executive offices)
Telephone No.:(972) 668-8800
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| üNo | |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes |X| üNo | |
The number of shares outstanding of the registrant'sregistrant’s common stock, par value $.50, as of November 10, 2003May 7, 2004 was 33,669,561.34,678,862.
COMSTOCK RESOURCES, INC.
QUARTERLY REPORT
For The Quarter Ended September 30, 2003
INDEX
| | Page | |||||||
| 2003 | 4 | |||||||
| — Three Months ended March 31, 2004 and | 5 | |||||||
| March 31, 2004 | 6 | |||||||
| 7 | ||||||||
| 8 | ||||||||
| and Results of Operations | ||||||||
| 17 | ||||||||
| 18 | ||||||||
| Second Supplemental Indenture | ||||||||
| Amendment No. 2 to 1999 Long-Term Incentive Plan | ||||||||
| Amendment No. 1 to Credit Agreement | ||||||||
| Awareness Letter of Ernst & Young LLP | ||||||||
| Section 302 Certification of CEO | ||||||||
| Section 302 Certification of CFO | ||||||||
| Section 906 Certification of CEO | ||||||||
| Section 906 Certification of CFO | ||||||||
2
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETSASSETSSeptember 30,
2003December 31,
2002(Unaudited) (In thousands) Cash and Cash Equivalents $ 5,772 $ 1,682 Accounts Receivable: Oil and gas sales 37,645 30,135 Joint interest operations 4,480 5,407 Other Current Assets 2,465 2,678 Total current assets 50,362 39,902 Property and Equipment: Unevaluated oil and gas properties 17,834 14,880 Oil and gas properties, successful efforts method 1,017,917 961,562 Other 3,705 2,570 Accumulated depreciation, depletion and amortization (355,632 ) (314,804 ) Net property and equipment 683,824 664,208 Derivatives -- 3 Other Assets 6,329 6,940 $ 740,515 $ 711,053 LIABILITIES AND STOCKHOLDERS' EQUITY Current Portion of Long-Term Debt $ 1,012 $ 270 Accounts Payable and Accrued Expenses 53,441 49,470 Derivatives 34 57 Total current liabilities 54,487 49,797 Long-Term Debt, less current portion 311,002 366,002 Deferred Taxes Payable 79,430 52,577 Reserve for Future Abandonment Costs 15,493 16,677 Convertible Preferred Stock -- 17,573 Stockholders' Equity: Common stock--$0.50 par, 50,000,000 shares authorized, �� 33,667,561 and 28,919,561 shares outstanding at September 30, 2003 and December 31, 2002, respectively 16,834 14,460 Additional paid-in capital 155,159 133,828 Retained earnings 109,380 61,663 Deferred compensation-restricted stock grants (1,248 ) (1,487 ) Accumulated other comprehensive loss (22 ) (37 ) Total stockholders' equity 280,103 208,427 $ 740,515 $ 711,053
| March 31, | December 31, | |||||||
| 2004 | 2003 | |||||||
| (In thousands) | ||||||||
ASSETS | ||||||||
| Cash and Cash Equivalents | $ | 2,463 | $ | 5,343 | ||||
| Accounts Receivable: | ||||||||
| Oil and gas sales | 26,825 | 36,468 | ||||||
| Joint interest operations | 10,023 | 9,524 | ||||||
| Other Current Assets | 3,932 | 4,802 | ||||||
| Total current assets | 43,243 | 56,137 | ||||||
| Property and Equipment: | ||||||||
| Unevaluated oil and gas properties | 19,358 | 18,075 | ||||||
| Oil and gas properties, successful efforts method | 1,086,948 | 1,052,564 | ||||||
| Other | 4,031 | 4,047 | ||||||
| Accumulated depreciation, depletion and amortization | (391,551 | ) | (376,000 | ) | ||||
| Net property and equipment | 718,786 | 698,686 | ||||||
| Other Assets | 8,011 | 6,133 | ||||||
| $ | 770,040 | $ | 760,956 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Portion of Long-Term Debt | $ | 233 | $ | 623 | ||||
| Accounts Payable and Accrued Expenses | 38,033 | 63,874 | ||||||
| Total current liabilities | 38,266 | 64,497 | ||||||
| Long-Term Debt, less current portion | 339,300 | 306,000 | ||||||
| Deferred Taxes Payable | 78,823 | 81,629 | ||||||
| Reserve for Future Abandonment Costs | 19,652 | 19,174 | ||||||
| Stockholders’ Equity: | ||||||||
| Common stock—$0.50 par, 50,000,000 shares authorized, 34,678,862 and 34,308,861 shares outstanding at March 31, 2004 and December 31, 2003, respectively | 17,339 | 17,154 | ||||||
| Additional paid-in capital | 161,603 | 166,242 | ||||||
| Retained earnings | 115,057 | 115,032 | ||||||
| Deferred compensation-restricted stock grants | — | (8,772 | ) | |||||
| Total stockholders’ equity | 293,998 | 289,656 | ||||||
| $ | 770,040 | $ | 760,956 | |||||
The accompanying notes are an integral part of these statements.
4
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 | 2002 | 2003 | 2002 | |||||||||||
| (In thousands, except per share amounts) | ||||||||||||||
| Oil and gas sales | $ | 56,866 | $ | 35,550 | $ | 182,603 | $ | 100,044 | ||||||
| Operating expenses: | ||||||||||||||
| Oil and gas operating | 11,812 | 7,944 | 33,708 | 24,526 | ||||||||||
| Exploration | 1,225 | 411 | 3,366 | 3,392 | ||||||||||
| Depreciation, depletion and amortization | 15,163 | 12,866 | 44,867 | 39,791 | ||||||||||
| General and administrative, net | 1,508 | 935 | 4,983 | 2,942 | ||||||||||
| Total operating expenses | 29,708 | 22,156 | 86,924 | 70,651 | ||||||||||
| Income from operations | 27,158 | 13,394 | 95,679 | 29,393 | ||||||||||
| Other income (expenses): | ||||||||||||||
| Interest income | 16 | 72 | 59 | 90 | ||||||||||
| Interest expense | (7,370 | ) | (8,205 | ) | (22,648 | ) | (23,307 | ) | ||||||
| Loss from derivatives | -- | (126 | ) | (3 | ) | (2,294 | ) | |||||||
| Other income | 73 | 56 | 167 | 237 | ||||||||||
| (7,281 | ) | (8,203 | ) | (22,425 | ) | (25,274 | ) | |||||||
| Income from continuing operations | ||||||||||||||
| before income taxes | 19,877 | 5,191 | 73,254 | 4,119 | ||||||||||
| Provision for income taxes | (6,957 | ) | (1,817 | ) | (25,639 | ) | (1,442 | ) | ||||||
| Net income from continuing operations | 12,920 | 3,374 | 47,615 | 2,677 | ||||||||||
| Discontinued operations including loss on | ||||||||||||||
| disposal, net of income taxes | -- | 57 | -- | (1,072 | ) | |||||||||
| Cumulative effect of change in accounting principle | -- | -- | 675 | -- | ||||||||||
| Net income | 12,920 | 3,431 | 48,290 | 1,605 | ||||||||||
| Preferred stock dividends | -- | (404 | ) | (573 | ) | (1,199 | ) | |||||||
| Net income attributable to common stock | $ | 12,920 | $ | 3,027 | $ | 47,717 | $ | 406 | ||||||
| Basic net income per share: | ||||||||||||||
| From continuing operations | $ | 0.38 | $ | 0.10 | $ | 1.50 | $ | 0.05 | ||||||
| Discontinued operations | -- | -- | -- | (0.04 | ) | |||||||||
| Cumulative effect of change in accounting principle | -- | -- | 0.02 | -- | ||||||||||
| $ | 0.38 | $ | 0.10 | $ | 1.52 | $ | 0.01 | |||||||
| Diluted net income per share: | ||||||||||||||
| From continuing operations | $ | 0.36 | $ | 0.10 | $ | 1.36 | 0.05 | |||||||
| Discontinued operations | -- | -- | -- | (0.04 | ) | |||||||||
| Cumulative effect of change in accounting principle | -- | -- | 0.02 | -- | ||||||||||
| $ | 0.36 | $ | 0.10 | $ | 1.38 | 0.01 | ||||||||
| Weighted average common and common stock | ||||||||||||||
| equivalent shares outstanding: | ||||||||||||||
| Basic | 33,562 | 28,835 | 31,336 | 28,731 | ||||||||||
| Diluted | 35,398 | 33,755 | 34,964 | 29,433 | ||||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2004 | 2003 | |||||||
| (In thousands, except | ||||||||
| per share amounts) | ||||||||
| Oil and gas sales | $ | 60,761 | $ | 68,576 | ||||
| Operating expenses: | ||||||||
| Oil and gas operating | 12,650 | 11,365 | ||||||
| Exploration | 3,382 | 1,636 | ||||||
| Depreciation, depletion and amortization | 15,809 | 14,887 | ||||||
| General and administrative, net | 3,090 | 1,528 | ||||||
| Total operating expenses | 34,931 | 29,416 | ||||||
| Income from operations | 25,830 | 39,160 | ||||||
| Other income (expenses): | ||||||||
| Other income | 39 | 47 | ||||||
| Interest income | 16 | 20 | ||||||
| Interest expense | (6,265 | ) | (7,608 | ) | ||||
| Loss on early extinguishment of debt | (19,581 | ) | — | |||||
| Total other expenses | (25,791 | ) | (7,541 | ) | ||||
| Income before income taxes and cumulative effect of change in accounting principle | 39 | 31,619 | ||||||
| Provision for income taxes | (14 | ) | (11,067 | ) | ||||
| Income before cumulative effect of change in accounting principle | 25 | 20,552 | ||||||
| Cumulative effect of change in accounting principle, net of income taxes | — | 675 | ||||||
| Net income | 25 | 21,227 | ||||||
| Preferred stock dividends | — | (395 | ) | |||||
| Net income attributable to common stock | $ | 25 | $ | 20,832 | ||||
| Net income per share before cumulative effect of change in accounting principle: | ||||||||
| Basic | $ | 0.00 | $ | 0.70 | ||||
| Diluted | $ | 0.00 | $ | 0.60 | ||||
| Net income per share: | ||||||||
| Basic | $ | 0.00 | $ | 0.72 | ||||
| Diluted | $ | 0.00 | $ | 0.62 | ||||
| Weighted average common and common stock equivalent shares outstanding: | ||||||||
| Basic | 33,843 | 28,923 | ||||||
| Diluted | 35,570 | 34,475 | ||||||
The accompanying notes are an integral part of these statements.
5
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
| Common Stock | Additional Paid-In Capital | Retained Earnings | Deferred Compensation- Restricted Stock Grants | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands) | ||||||||||||||||||||
| Balance at December 31, 2002 | $ | 14,460 | $ | 133,828 | $ | 61,663 | $ | (1,487 | ) | $ | (37 | ) | $ | 208,427 | ||||||
| Restricted stock grants | -- | -- | -- | 239 | -- | 239 | ||||||||||||||
| Value of warrants issued for | ||||||||||||||||||||
| exploration prospects, net of taxes | -- | 3,253 | -- | -- | -- | 3,253 | ||||||||||||||
| Exercise of stock options | 177 | 2,702 | -- | -- | -- | 2,879 | ||||||||||||||
| Conversion of preferred stock | 2,197 | 15,376 | -- | -- | -- | 17,573 | ||||||||||||||
| Preferred stock dividends | -- | -- | (573 | ) | -- | -- | (573 | ) | ||||||||||||
| Comprehensive income: | ||||||||||||||||||||
| Net income | -- | -- | 48,290 | -- | -- | 48,290 | ||||||||||||||
| Unrealized hedge income | -- | -- | -- | -- | 15 | 15 | ||||||||||||||
| Comprehensive income | -- | -- | -- | -- | -- | 48,305 | ||||||||||||||
| Balance at September 30, 2003 | $ | 16,834 | $ | 155,159 | $ | 109,380 | $ | (1,248 | ) | $ | (22 | ) | $ | 280,103 | ||||||
| Deferred | ||||||||||||||||||||
| Additional | Compensation— | |||||||||||||||||||
| Common | Paid-In | Retained | Restricted | |||||||||||||||||
| Stock | Capital | Earnings | Stock Grants | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Balance at December 31, 2003 | $ | 17,154 | $ | 166,242 | $ | 115,032 | $ | (8,772 | ) | $ | 289,656 | |||||||||
| Adoption of SFAS 123 | — | (8,772 | ) | — | 8,772 | — | ||||||||||||||
| Stock based compensation | — | 1,222 | — | — | 1,222 | |||||||||||||||
| Exercise of stock options | 185 | 2,911 | — | — | 3,096 | |||||||||||||||
| Net income | — | — | 25 | — | 25 | |||||||||||||||
| Balance at March 31, 2004 | $ | 17,339 | $ | 161,603 | $ | 115,057 | $ | — | $ | 293,999 | ||||||||||
The accompanying notes are an integral part of these statements.
6
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)Nine Months Ended
September 30,2003 2002 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 48,290 $ 1,605 Adjustments to reconcile net income to net cash provided by operating activities: Compensation paid in common stock 239 178 Dry hole costs 2,248 3,392 Depreciation, depletion and amortization 44,867 39,791 Debt issuance costs amortization 900 920 Deferred income taxes 25,639 1,442 Unrealized gains from derivatives -- (189 ) Non-cash effect of discontinued operations, net -- 1,395 Cumulative effect of change in accounting principle (675 ) -- 121,508 48,534 Increase in accounts receivable (6,583 ) (563 ) Decrease in other current assets 213 5,099 Increase in accounts payable and accrued expenses 3,971 1,147 Net cash provided by operating activities 119,109 54,217 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of properties -- 3,478 Capital expenditures and acquisitions (62,159 ) (57,784 ) Net cash used for operating activities (62,159 ) (54,306 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings 16,401 20,736 Proceeds from issuance of senior notes -- 75,000 Debt issuance costs -- (2,262 ) Proceeds from issuance of common stock 1,971 992 Principal payments on debt (70,659 ) (95,726 ) Dividends paid on preferred stock (573 ) (1,199 ) Net cash used for financing activities (52,860 ) (2,459 ) Net increase (decrease) in cash and cash equivalents 4,090 (2,548 ) Cash and cash equivalents, beginning of period 1,682 6,122 Cash and cash equivalents, end of period $ 5,772 $ 3,574
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2004 | 2003 | |||||||
| (In thousands) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 25 | $ | 21,227 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Dry hole costs | 2,554 | 1,028 | ||||||
| Depreciation, depletion and amortization | 15,809 | 14,887 | ||||||
| Stock based compensation | 1,222 | 60 | ||||||
| Unrealized gains from derivatives | — | 3 | ||||||
| Debt issuance costs amortization | 277 | 300 | ||||||
| Loss on early extinguishment of debt | 19,581 | — | ||||||
| Cumulative effect of change in accounting principle, net of income taxes | — | (675 | ) | |||||
| Deferred income taxes | (1,986 | ) | 11,067 | |||||
| 37,482 | 47,897 | |||||||
| (Increase) decrease in accounts receivable | 9,144 | (20,009 | ) | |||||
| (Increase) decrease in other current assets | 870 | (2,218 | ) | |||||
| Increase (decrease) in accounts payable and accrued expenses | (27,095 | ) | 6,630 | |||||
| Net cash provided by operating activities | 20,401 | 32,300 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Capital expenditures and acquisitions | (37,985 | ) | (16,455 | ) | ||||
| Net cash used for operating activities | (37,985 | ) | (16,455 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Borrowings | 148,000 | 8,000 | ||||||
| Proceeds from issuance of senior notes | 175,000 | — | ||||||
| Debt issuance costs | (5,881 | ) | — | |||||
| Principal payments on debt | (304,691 | ) | (23,205 | ) | ||||
| Proceeds from issuance of common stock | 2,276 | 296 | ||||||
| Dividends paid on preferred stock | — | (395 | ) | |||||
| Net cash used for financing activities | 14,704 | (15,304 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | (2,880 | ) | 541 | |||||
| Cash and cash equivalents, beginning of period | 5,343 | 1,682 | ||||||
| Cash and cash equivalents, end of period | $ | 2,463 | $ | 2,223 | ||||
The accompanying notes are an integral part of these statements.
7
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004
(Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES —
Basis of Presentation
In management’s opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position of Comstock Resources, Inc. and subsidiaries (“Comstock”) as of September 30, 2003March 31, 2004 and the related results of operations for the three months and nine months ended September 30, 2003 and 2002 and cash flows for the ninethree months ended September 30, 2003March 31, 2004 and 2002.2003.
The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted accounting principlesin the United States have been omitted pursuant to those rules and regulations, although Comstock believes that the disclosures made are adequate to make the information presented not misleading. These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in Comstock’s Annual Report on Form 10-K for the year ended December 31, 2002.2003.
The results of operations for the three months and nine months ended September 30, 2003March 31, 2004 are not necessarily an indication of the results expectedforexpected for the full year.
Reclassifications
Certain reclassifications have been made to prior periods’ financial statements to conform to the current presentation.
Supplementary Information With Respect to the Consolidated Statements of Cash Flows —-
| For the Three Months | ||||||||
| Ended March 31, | ||||||||
| 2004 | 2003 | |||||||
| (In thousands) | ||||||||
| Cash Payments - | ||||||||
| Interest payments | $ | 8,016 | $ | 1,307 | ||||
| Income tax payments | $ | 2,700 | $ | — | ||||
| Noncash Investing and Financing Activities - | ||||||||
| Value of warrants issued under exploration agreement | $ | — | $ | 1,251 | ||||
| For the Nine Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2003 | 2002 | |||||||
| (In thousands) | ||||||||
| Cash Payments - | ||||||||
| Interest payments | $ | 15,815 | $ | 15,192 | ||||
| Income tax payments | -- | -- | ||||||
| Noncash Investing and Financing Activities - | ||||||||
| Value of warrants issued | ||||||||
| under exploration agreement | $ | 5,004 | $ | 836 | ||||
Income Taxes
Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates.
8
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Earnings Per Share
Basic earnings per share is determined without the effect of any outstanding potentially dilutive stock options or other convertible securities and diluted earnings per share is determined with the effect of outstanding stock options and other convertible securities that are potentially dilutive. Basic and diluted earnings per share for the three months ended March 31, 2004 and nine months ended September 30, 2003, and 2002 were determined as follows:
| Three Months Ended March 31, | ||||||||||||||||||||||||
| 2004 | 2003 | |||||||||||||||||||||||
| Per | Per | |||||||||||||||||||||||
| Income | Shares | Share | Income | Shares | Share | |||||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||||||||
Basic Earnings Per Share: | ||||||||||||||||||||||||
| Net Income Before Cumulative Effect of Change in Accounting Principle | $ | 25 | 33,843 | $ | 20,552 | 28,923 | ||||||||||||||||||
| Less Preferred Stock Dividends | — | — | (395 | ) | — | |||||||||||||||||||
| Net Income Available to Common Stockholders Before Cumulative Effect of Change in Accounting Principle | 25 | 33,843 | $ | 0.00 | 20,157 | 28,923 | $ | 0.70 | ||||||||||||||||
| Cumulative Effect of Change in Accounting Principle, net of Income Taxes | — | 33,843 | — | 675 | 28,923 | 0.02 | ||||||||||||||||||
| Net Income Available to Common Stockholders | $ | 25 | 33,843 | $ | 0.00 | $ | 20,832 | 28,923 | $ | 0.72 | ||||||||||||||
Diluted Earnings Per Share: | ||||||||||||||||||||||||
| Net Income Before Cumulative Effect of Change in Accounting Principle | $ | 25 | 33,843 | $ | 20,552 | 28,923 | ||||||||||||||||||
| Effect of Dilutive Securities: | ||||||||||||||||||||||||
| Stock, Grants and Options | — | 1,727 | — | 1,159 | ||||||||||||||||||||
| Convertible Preferred Stock | — | — | — | 4,393 | ||||||||||||||||||||
| Net Income Available to Common Stockholders With Assumed Conversions Before Cumulative Effect of Change in Accounting Principle | 25 | 35,570 | $ | 0.00 | 20,552 | 34,475 | $ | 0.60 | ||||||||||||||||
| Cumulative Effect of Change in Accounting Principle, net of Income Taxes | — | 35,570 | — | 675 | 34,475 | 0.02 | ||||||||||||||||||
| Net Income Available to Common Stockholders | $ | 25 | 35,570 | $ | 0.00 | $ | 21,227 | 34,475 | $ | 0.62 | ||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 | 2002 | |||||||||||||||||||
| Income (loss) | Shares | Per Share | Income (loss) | Shares | Per Share | |||||||||||||||
| (In thousands except per share data) | ||||||||||||||||||||
| Basic Earnings Per Share: | ||||||||||||||||||||
| Income from Continuing Operations | $ | 12,920 | 33,562 | $ | 3,374 | 28,835 | ||||||||||||||
| Less Preferred Stock Dividends | -- | -- | (404 | ) | -- | |||||||||||||||
| Net Income from Continuing Operations | ||||||||||||||||||||
| Available to Common Stockholders | 12,920 | 33,562 | $ | 0.38 | 2,970 | 28,835 | $ | 0.10 | ||||||||||||
| Income from Discontinued Operations | -- | 33,562 | -- | 57 | 28,835 | -- | ||||||||||||||
| Net Income Available to Common | ||||||||||||||||||||
| Stockholders | $ | 12,920 | 33,562 | $ | 0.38 | $ | 3,027 | 28,835 | $ | 0.10 | ||||||||||
| Diluted Earnings Per Share: | ||||||||||||||||||||
| Income from Continuing Operations | $ | 12,920 | 33,562 | $ | 3,374 | 28,835 | ||||||||||||||
| Effect of Dilutive Securities: | ||||||||||||||||||||
| Stock Options | -- | 1,836 | -- | 527 | ||||||||||||||||
| Convertible Preferred Stock | -- | -- | -- | 4,393 | ||||||||||||||||
| Net Income from Continuing Operations | ||||||||||||||||||||
| Available to Common Stockholders | ||||||||||||||||||||
| With Assumed Conversions | 12,920 | 35,398 | $ | 0.36 | 3,374 | 33,755 | $ | 0.10 | ||||||||||||
| Income from Discontinued Operations | -- | 35,398 | -- | 57 | 33,755 | -- | ||||||||||||||
| Net Income Available to Common | ||||||||||||||||||||
| Stockholders | $ | 12,920 | 35,398 | $ | 0.36 | $ | 3,431 | 33,755 | $ | 0.10 | ||||||||||
9
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
| Nine Months Ended September 30, | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 | 2002 | |||||||||||||||||||
| Income (loss) | Shares | Per Share | Income (loss) | Shares | Per Share | |||||||||||||||
| (In thousands except per share data) | ||||||||||||||||||||
| Basic Earnings Per Share: | ||||||||||||||||||||
| Income from Continuing Operations | $ | 47,615 | 31,336 | $ | 2,677 | 28,731 | ||||||||||||||
| Less Preferred Stock Dividends | (573 | ) | -- | (1,199 | ) | -- | ||||||||||||||
| Net Income from Continuing Operations | ||||||||||||||||||||
| Available to Common Stockholders | 47,042 | 31,336 | $ | 1.50 | 1,478 | 28,731 | $ | 0.05 | ||||||||||||
| Loss from Discontinued Operations | -- | 31,336 | -- | (1,072 | ) | 28,731 | (0.04 | ) | ||||||||||||
| Cumulative effect of change in accounting principle | 675 | 31,336 | $ | 0.02 | -- | 28,731 | -- | |||||||||||||
| Net Income Available to Common | ||||||||||||||||||||
| Stockholders | $ | 47,717 | 31,336 | $ | 1.52 | $ | 406 | 28,731 | $ | 0.01 | ||||||||||
| Diluted Earnings Per Share: | ||||||||||||||||||||
| Income from Continuing Operations | $ | 47,615 | 31,336 | $ | 2,677 | 28,731 | ||||||||||||||
| Effect of Dilutive Securities: | ||||||||||||||||||||
| Stock Options | -- | 1,531 | -- | 702 | ||||||||||||||||
| Convertible Preferred Stock | -- | 2,097 | (1,199 | ) | -- | |||||||||||||||
| Net Income from Continuing Operations | ||||||||||||||||||||
| Available to Common Stockholders | ||||||||||||||||||||
| With Assumed Conversions | 47,615 | 34,964 | $ | 1.36 | 1,478 | 29,433 | $ | 0.05 | ||||||||||||
| Cumulative effect of change in accounting principle | 675 | 34,964 | 0.02 | (1,072 | ) | 29,433 | (0.04 | ) | ||||||||||||
| Net Income Available to Common | ||||||||||||||||||||
| Stockholders | $ | 48,290 | 34,964 | $ | 1.38 | $ | 406 | 29,433 | $ | 0.01 | ||||||||||
Stock Options(Continued)
Stock Based Compensation
Prior to January 1, 2004, Comstock appliesaccounted for employee stock based compensation using the intrinsic value-basedvalue method of accounting prescribed byin Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,”Employees” (“APB 25”) and related interpretations, in accounting. Under the intrinsic method, compensation cost for its incentive plan stock options. As such, compensation expense would be recorded onoptions is measured as the excess, if any, of the fair value of the Company’s common stock at the date of the grant only ifover the current market priceamount an employee must pay to acquire the common stock. Effective January 1, 2004, the Company changed its method of accounting for employee stock based compensation to the underlying stock exceeded the exercise price.preferable fair value based method prescribed in Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,”Stock Based Compensation” (“SFAS 123”) established accounting. Under the fair value based method, compensation cost is measured at the grant date based on the fair value of the award and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS 123, Comstock has elected to continue to applyis recognized over the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS 123.
10
The following table illustrates the effect on net income if the fair-value-based method had been applied to all outstanding stock options in eachaward vesting period. The fair value of each option grantaward is estimated onas of the date of grant using the Black-Scholes optionoptions pricing model. Under the modified prospective transition method selected by Comstock as described in Statement of Financial Accounting Standards No. 148, “Accounting for Stock Based Compensation - Transition and Disclosure,” stock based compensation expense recognized for the three months ended March 31, 2004, is the same as that which would have been recognized had the fair value method of SFAS 123 been applied from its original effective date. During the three months ended March 31, 2004, the Company recorded $1.2 million in stock based compensation expense in general and administrative expenses.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 | 2002 | 2003 | 2002 | |||||||||||
| (In thousands) | ||||||||||||||
| Net income, as reported | $ | 12,920 | $ | 3,027 | $ | 47,717 | $ | 406 | ||||||
| Add stock-based employee compensation expense | ||||||||||||||
| included in reported net income, net of tax | 78 | 39 | 155 | 116 | ||||||||||
| Deduct total stock-based employee compensation | ||||||||||||||
| expense determined under fair-value-based | ||||||||||||||
| method for all rewards, net of tax | (463 | ) | (211 | ) | (1,360 | ) | (818 | ) | ||||||
| Pro forma net income (loss) | $ | 12,535 | $ | 2,855 | $ | 46,512 | $ | (296 | ) | |||||
| Basic earnings per share: As Reported | $ | 0.38 | $ | 0.10 | $ | 1.52 | $ | 0.01 | ||||||
| Pro Forma | $ | 0.37 | $ | 0.10 | $ | 1.48 | $ | (0.01 | ) | |||||
| Diluted earnings per share: As Reported | $ | 0.36 | $ | 0.10 | $ | 1.38 | $ | 0.01 | ||||||
| Pro Forma | $ | 0.35 | $ | 0.10 | $ | 1.35 | $ | (0.01 | ) | |||||
In accordance with the modified prospective transition method, results for years prior to 2004 have not been restated. For the three months ended March 31, 2003, the Company accounted for stock based compensation for employees under APB 25 and related interpretations, under which no compensation cost was recognized for employee stock options. If compensation costs had been determined in accordance with SFAS 123, the Company’s net income and net earnings per share would approximate the following pro forma amounts: For the Three Months Ended March 31, 2003 (In thousands, except per share amounts) Net income, as reported $ 20,832 Add stock based employee compensation expense included in reported net income, net of income taxes 39 Deduct total stock based employee compensation expense determined under fair-value-based method for all rewards, net of income taxes (447 )
Pro forma net income $ 20,424
Basic earnings per share: As Reported $ 0.72
Pro forma $ 0.71
Diluted earnings per share: As Reported $ 0.62
Pro forma $ 0.60
10
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Derivative Instruments and Hedging Activities
Comstock periodically uses swaps, floors and collars to hedge oil and natural gas prices.prices and interest rates. Swaps are settled monthly based on differences between the prices specified in the instruments and the settlement prices of futures contracts quoted on the New York Mercantile Exchange.contracts. Generally, when the applicable settlement price is less than the price specified in the contract, Comstock receives a settlement from the counterpartycounter party based on the difference multiplied by the volume or amounts hedged. Similarly, when the applicable settlement price exceeds the price specified in the contract, Comstock pays the counterpartycounter party based on the difference. Comstock generally receives a settlement from the counterpartycounter party for floors when the applicable settlement price is less than the price specified in the contract, which is based on the difference multiplied by the volumes amounts hedged. For collars, generally Comstock receives a settlement from the counterpartycounter party when the settlement price is below the floor and pays a settlement to the counterpartycounter party when the settlement price exceeds the cap. No settlement occurs when the settlement price falls between the floor and cap.
The following table sets out theComstock had no derivative financial instrumentinstruments outstanding at September 30, 2003 which is held for naturalas of March 31, 2004 and had none of its oil and gas price risk management:
| Period Beginning | Period Ending | Volume (MMBtu) | Type of Instrument | Floor Price |
|---|---|---|---|---|
| October 1, 2003 | December 31, 2003 | 562,500 | Floor | $2.00 |
11
Comstock periodically enters into interest rate swap agreements to hedge the impact of interest rate changes on itsproduction or floating rate long-term debt. As a result of certain hedging transaction for interest rates, Comstock has realizeddebt hedged during the following losses which were included in interest expense:three months ended March 31, 2004.
| Nine Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2003 | 2002 | |||||||
| (In thousands) | ||||||||
| Realized Losses | $ | 72 | $ | 218 | ||||
As of September 30, 2003, Comstock had an interest rate swap agreement covering $25.0 million of its floating rate debtdate in place during the three months ended March 31, 2003 which fixed the LIBOR rate at 1.7%resulted in a realized loss of $14,000 which was included in interest expense for the period January 2003 through Decemberthree months ended March 31, 2003. Comstock has designated this position as a hedge. The change in fair value of this instrument resulted in unrealized after tax income of $15,000, which was recognized in other comprehensive income.
New Accounting Standards
In August 2001, the Financial Accounting Standards Board (the “FASB”) issuedAsset Retirement Obligations
Comstock adopted Statement of Financial Accounting Standards No. 143, (“SFAS 143”) “Accounting for Asset Retirement Obligations,” which Comstock adopted effectiveObligations” (“SFAS 143”), on January 1, 2003. This statement requiresrequired Comstock to record a liability in the period in which an asset retirement obligation (“ARO”) is incurred, in an amount equal to the discounted estimated fair value of the obligation. Also, upon initial recognition of the liability, Comstock capitalized additional asset cost equal to the amount of the liability.obligation that is capitalized. Thereafter, each quarter, this liability is accreted up to the final retirement cost.
The adoption of SFAS 143 on January 1, 2003 resulted in a cumulative effect adjustment to record (i) a $3.7 million decrease in the carrying value of oil and gas properties, (ii) a $3.3 million decrease in accumulated depletion, depreciation and amortization, and (iii) a $1.5 million decrease in reserve for future abandonment, and (iv) a gain of $0.7 million,$675,000, net of tax,income taxes, which was reflected as athe cumulative effect of a change in accounting change. The following table shows pro forma net income and basic and diluted earnings per share as if Comstock had adopted SFAS 143 as of January 1, 2002:principle.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2002 | 2002 | |||||||
| (In thousands, except per share amounts) | ||||||||
| As Reported: | ||||||||
| Net income attributable to common stock | $ | 3,027 | $ | 406 | ||||
| Basic net income per common share | $ | 0.10 | $ | 0.01 | ||||
| Diluted net income per common share | $ | 0.10 | $ | 0.01 | ||||
| Pro Forma: | ||||||||
| Net income attributable to common stock | $ | 2,991 | $ | 1,311 | ||||
| Basic net income per common share | $ | 0.10 | $ | 0.05 | ||||
| Diluted net income per common share | $ | 0.10 | $ | 0.04 | ||||
12
Comstock’s primary asset retirement obligations relate to future plugging and abandonment expenses on its oil and gas properties and related facilities disposal. As of September 30, 2003,March 31, 2004, Comstock had $1.5$1.6 million held in an escrow account from which funds are released only for reimbursement of plugging and abandonment expenses on certain offshore oil and gas properties. This amount is included in Other Assets in the consolidated balance sheet. The following table summarizes the changes in Comstock’s total estimated liability fromduring the amount recorded upon adoption of SFAS 143 on January 1, 2003 through September 30, 2003:
| (In thousands) | |||||
|---|---|---|---|---|---|
| Future abandonment liability on January 1, 2003 | $ | 15,201 | |||
| Accretion expense | 558 | ||||
| Reduction in liability | (266 | ) | |||
| Future abandonment liability on September 30, 2003 | $ | 15,493 | |||
In June 2002, the FASB issued Statement of Financial Accounting Standards 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”). This statement establishes accounting and reporting standards that are effective for exit or disposal activities beginning after Decemberthree months ended March 31, 2002 which require that a liability be recognized for an exit or disposal activity when that liability is incurred. The adoption of SFAS 146 had no effect on Comstock’s financial statements.2004:
| For the Three Months | ||||||||
| Ended March 31, | ||||||||
| 2004 | 2003 | |||||||
| (In thousands) | ||||||||
| Future abandonment liability — beginning of period | $ | 19,174 | $ | 16,677 | ||||
| Cumulative effect adjustment | — | (1,476 | ) | |||||
| Accretion expense | 231 | 184 | ||||||
| New wells placed on production | 247 | 51 | ||||||
| Future abandonment liability — end of period | $ | 19,652 | $ | 15,436 | ||||
In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123.” This Statement amends No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements. Certain of the disclosure modifications are included in the notes to these consolidated financial statements.11
In January 2003, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirement for Guarantees, including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires an entity to recognize a liability for the obligations it has undertaken in issuing a guarantee. This liability would be recorded at the inception of a guarantee and would be measured at fair value. Certain guarantees are excluded from the measurement and disclosure provisions while certain other guarantees are excluded from the measurement provisions of the interpretation. The adoption of the statement on January 1, 2003 had no effect on Comstock’s financial statements.
In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 requires an entity to consolidate a variable interest entity if it is designated as the primary beneficiary of that entity even if the entity does not have a majority of voting interests. A variable interest entity is generally defined as an entity whose equity is unable to finance its activities or where the owners of the entity lack the risk and rewards of ownership. The provisions of FIN 46 apply at inception for any entity created after January 31, 2003. For an entity created before February 1, 2003, the provisions of this interpretation must be applied at the beginning of the first interim or annual period beginning after September 15, 2003. Comstock is not the primary beneficiary of any variable interest entities, and accordingly, the adoption of FIN 46 is not expected to have a material effect on the Comtock’s financial statements when adopted.
13
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
Comstock has been made aware of an issue that has arisen in the industry regarding the application of certain provisions of Statement of Financial Accounting Standards No. 141, “Business Combinations,” (“SFAS 141”) and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” (“SFAS 142”) to companies in the extractive industries, including oil and gas exploration and production companies. The issue is whether the provisions of SFAS 141 and SFAS 142 require companies to classify costs associated with mineral rights, including both proved and unproved lease acquisition costs, as intangible assets on the balance sheet, apart from other capitalized oil and gas property costs. Historically, Comstock has included oil and gas lease acquisition costs as a component of oil and gas properties. Also under consideration is whether SFAS 142 requires companies to provide additional disclosures prescribed by SFAS 142 for intangible assets for costs associated with mineral rights. In the event it is determined that costs associated with mineral rights are required to be classified as intangible assets, a substantial portion of Comstock’s capitalized oil and gas property costs would be separately classified on our balance sheet as intangible assets. The reclassification of these amounts would not affect the method in which such costs are amortized or the manner in which Comstock assesses impairment of capitalized costs. As a result net income would not be affected by the reclassification if it were to occur.(Continued)
(2) LONG-TERM DEBT —
| (2) | LONG-TERM DEBT — |
As of September 30, 2003,At March 31, 2004, Comstock’s long-term debt was comprised of the following:
| (In thousands) | ||||
| Revolving Bank Credit Facility | $ | 142,000 | ||
| 6 7/8% Senior Notes due 2012 | 175,000 | |||
| 11 1/4% Senior Notes due 2007 | 22,300 | |||
| Other | 233 | |||
| 339,533 | ||||
| Less current portion | (233 | ) | ||
| $ | 339,300 | |||
| (In thousands) | |||||
|---|---|---|---|---|---|
| Revolving Bank Credit Facility | $ | 91,000 | |||
| 11 1/4% Senior Notes due 2007 | 220,000 | ||||
| Other | 1,014 | ||||
| 312,014 | |||||
| Less current portion | (1,012 | ) | |||
| $ | 311,002 | ||||
Comstock’sComstock had $220.0 million in principal amount of 11 1/4% Senior Notes due 2007 (the “1999 Notes”) outstanding on January 1, 2004. Pursuant to a tender offer, on February 25, 2004 Comstock repurchased $197.7 million in principal amount of the 1999 Notes for $212.2 million plus accrued interest. On May 1, 2004, the Company redeemed the remaining $22.3 million in principal amount of the 1999 Notes outstanding for $23.6 million plus accrued interest. The early extinguishment of the 1999 Notes resulted in a loss of $19.6 million in the three months ended March 31, 2004 which was comprised of the premium paid for repurchase of the 1999 Notes together with the write-off of unamortized debt issuance costs related to the 1999 Notes.
In connection with the repurchase of the 1999 Notes, Comstock sold $175.0 million of its senior notes in an underwritten public offering. The new senior notes are due March 1, 2012 and bear interest at 6 7/8%, which is payable semiannually on March 1 and September 1, commencing September 1, 2004. The notes are unsecured obligations of the Company and are currently guaranteed by all of its subsidiaries.
On February 25, 2004, Comstock also entered into a new $400.0 million bank credit facility consistswith Bank of Montreal, as the administrative agent. The new credit facility is a $350.0 million three-yearfour-year revolving credit commitment providedthat matures on February 25, 2008. Borrowings under the new credit facility are limited to a borrowing base that was set at $300.0 million upon the retirement of the 1999 Notes. Borrowings under the new credit facility were used to refinance amounts outstanding under the prior bank credit facility and to fund the repurchase of the 1999 Notes.
Indebtedness under the new credit facility is secured by a syndicatesubstantially all of banks for which Toronto Dominion (Texas), Inc. serves as administrative agent.Comstock’s and its subsidiaries’ assets and is guaranteed by all of the subsidiaries. The new credit facility is subject to borrowing base availability, which iswill be redetermined semiannually based on the banks’ estimates of the future net cash flows of Comstock’sthe Company’s oil and natural gas properties. The borrowing base may be affected by the performance of Comstock’s properties and changes in oil and natural gas prices. The determination of the borrowing base is at September 30, 2003 was $260.0 million. The revolvingthe sole discretion of the administrative agent and the bank group. Borrowings under the new credit line bearsfacility bear interest, based on the utilization of the borrowing base, at theComstock’s option of Comstock at either (i)(1) LIBOR plus 1.5%1.25% to 2.375%1.75% or (ii)(2) the base rate (which is the higher of the prime rate or the federal funds rate) plus 0.5%0% to 1.375%0.5%. A commitment fee of 0.375% is payable on the unused borrowing base. The facility matures on January 2, 2005. Indebtedness under the bank credit facility is secured by substantially all of Comstock’s assets. The banknew credit facility contains covenants that, among other things, restrict the payment of cash dividends, limit the amount of consolidated debt that Comstock may incur and limit Comstock’sthe Company’s ability to make certain loans and investments. FinancialThe only financial covenants includeare the maintenance of a current ratio maintenance of tangible net worth and maintenance of an interest coverage ratio. Comstocka minimum tangible net worth. The Company was in compliance with all thethese covenants during the three months ended September 30, 2003.as of March 31, 2004.
Comstock issued $150.0 million in aggregate principal amount of 11¼% Senior Notes due in 2007 (the “Notes”) on April 29, 1999. Interest on the Notes is payable semiannually on May 1 and November 1, commencing on November 1, 1999. The Notes are unsecured obligations of Comstock. Comstock repurchased $5.0 million of the Notes in July 2001. The Notes can be redeemed beginning on May 1, 2004. On March 7, 2002, Comstock closed on a private placement of an additional $75.0 million of the Notes at a net price of 97.25% after placements agents’ discount. As a result of this transaction, $220.0 million of the aggregate principal amount of the Notes are outstanding. The net proceeds of the $75.0 million Notes placement were used to reduce amounts outstanding under the bank credit facility.12
14
(3)DISCONTINUED OPERATIONS —
In April and July 2002, Comstock sold certain marginal oil and gas properties for cash proceeds of $3.5 million plus forgiveness of certain accounts payable related to the properties. The properties sold include various interests in nonoperated properties in Nueces, Hardeman, Montague and Wharton counties in Texas. The results of operations of these sold properties, including the losses on disposal, have been presented as discontinued operations in the accompanying consolidated statements of operations.
(4)CONVERTIBLE PREFERRED STOCK —
On December 31, 2002, Comstock had 1,757,310 shares of convertible preferred stock (the “Series 1999 Preferred Stock”) outstanding. The Series 1999 Preferred Stock accrued dividends at an annual rate of 9% which were payable quarterly in cash or Comstock had the option to issue shares of common stock. Each share of the Series 1999 Preferred Stock was convertible, at the option of the holder, into 2.5 shares of common stock. In April and June of 2003, the holders of the Series 1999 Preferred Stock converted their preferred shares into 4,393,275 shares of common stock. This conversion reduced Comstock’s annual preferred stock dividend requirement by $1.6 million and increased common stockholders’ equity by $17.6 million.
15
INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
To the Board of Directors of Comstock Resources, Inc:
We have reviewed the accompanying consolidated balance sheet, statement of operations, stockholders’ equity, and cash flow statement of Comstock Resources, Inc. and subsidiaries (a Nevada corporation) (the Company) as of September 30, 2003,March 31, 2004, and the related consolidated statements of operations for the three-month and nine-month periods then ended and stockholders’ equity and cash flows for the nine-month period then ended. These financial statements are the responsibility of the Company’s management. The interim consolidated balance sheetfinancial statements of Comstock Resources, Inc. for the year ended Decemberand subsidiaries as of March 31, 2002, was audited by other accountants whose report (dated March 19, 2003) stated that the balance sheet was presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States. The related consolidated statements of operations of Comstock Resources, Inc.2003, and for the three-month and nine-month periods ended September 30, 2002, and the consolidated statement of cash flows for the nine monthsperiod then ended were reviewed by other accountants whose report (dated NovemberMay 7, 2002)2003) stated that they were unawarenot aware of any material modifications that should be made to those statements for them to be in conformity with accounting principles generally accepted in the United States.
We have conducted our reviewreviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements at September 30, 2003,March 31, 2004, and for the three-month and nine-month periodsperiod then ended for them to be in conformity with accounting principles generally accepted in the United States.
/s/As discussed in Note 1 to the accompanying interim consolidated financial statements, on January 1, 2004, the Company adopted Statement of Financial Accounting Standards No. 148, “Accounting for Stock Based Compensation - Transition and Disclosure.”
| /s/ Ernst & Young LLP | ||
| Dallas, Texas May 5, 2004 |
Dallas, TexasNovember 5, 200313
16
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements that involve risks and uncertainties that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those anticipated in our forward-looking statements due to many factors.
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this report and in our annual report filed on Form 10-K for the year ended December 31, 2002.2003.
Results of Operations
The following table reflects certain summary operating data for the periods presented:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2004 | 2003 | |||||||
Net Production Data: | ||||||||
| Oil (Mbbls) | 396 | 415 | ||||||
| Natural gas (MMcf) | 8,322 | 8,346 | ||||||
| Natural gas equivalent (Mmcfe) | 10,696 | 10,838 | ||||||
Average Sales Price: | ||||||||
| Oil (per Bbl) | $ | 34.69 | $ | 33.75 | ||||
| Natural gas (per Mcf) | 5.65 | 6.54 | ||||||
| Average equivalent price (per Mcfe) | 5.68 | 6.33 | ||||||
Expenses ($ per Mcfe): | ||||||||
| Oil and gas operating(1) | $ | 1.18 | $ | 1.05 | ||||
| General and administrative | 0.29 | 0.14 | ||||||
| Depreciation, depletion and amortization(2) | 1.45 | 1.35 | ||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 | 2002 | 2003 | 2002 | |||||||||||
| Net Production Data: | ||||||||||||||
| Oil (Mbbls) | 377 | 296 | 1,174 | 972 | ||||||||||
| Natural gas (MMcf) | 9,080 | 8,297 | 25,912 | 25,053 | ||||||||||
| Natural gas equivalent (Mmcfe) | 11,343 | 10,071 | 32,954 | 30,884 | ||||||||||
| Average Sales Price: | ||||||||||||||
| Oil (per Bbl) | $ | 29.50 | $ | 27.30 | $ | 30.79 | $ | 24.16 | ||||||
| Natural gas (per Mcf) | 5.04 | 3.31 | 5.65 | 3.06 | ||||||||||
| Average equivalent price (per Mcfe) | 5.01 | 3.53 | 5.54 | 3.24 | ||||||||||
| Expenses ($ per Mcfe): | ||||||||||||||
| Oil and gas operating(1) | $ | 1.04 | $ | 0.79 | $ | 1.02 | $ | 0.79 | ||||||
| General and administrative | 0.13 | 0.09 | 0.15 | 0.10 | ||||||||||
| Depreciation, depletion and amortization(2) | 1.33 | 1.26 | 1.35 | 1.28 | ||||||||||
| Cash Margin ($ per Mcfe)(3) | $ | 3.84 | $ | 2.65 | $ | 4.37 | $ | 2.35 | ||||||
| __________ | ||||||||||||||
| (1) | Includes lease operating costs and production and ad valorem taxes. |
| (2) | Represents depreciation, depletion and amortization of oil and gas properties only. |
Revenues —-
Our oil and gas sales increased $21.3decreased $7.8 million (60%(11%) in the thirdfirst quarter of 2004 to $60.8 million, from $68.6 million in the first quarter of 2003, due primarily to $56.9 million, from $35.6 million in 2002‘s third quarter due to higherlower natural gas and crude oil prices and increaseda slight decrease in our oil and gas production. Our average realized natural gas price increaseddecreased by 52%14% and our average realized crude oil price increased by 8%3% in the thirdfirst quarter of 20032004 as compared to 2002.2003. Our production in the thirdfirst quarter of 2003 increased2004 decreased by 13% over production in the third quarter of 2002. For the nine months of 2003, our oil and gas sales increased $82.6 million (83%) to $182.6 million from $100.0 million for the nine months ended September 30, 2002. The increase is primarily attributable to higher realized natural gas prices, which increased by 85% in 2003, and higher realized crude oil prices, which increased by 27% in 2003. In the first nine months of 2003, production on an equivalent basis, increased by 7%1% from production in the same period in 2002.first quarter of 2003.
17
Costs and Expenses —-
Our oil and gas operating expenses, including production taxes, increased $3.9$1.3 million (49%(11%) to $11.8$12.7 million in the thirdfirst quarter of 20032004 from $7.9$11.4 million in the thirdfirst quarter of 2002.2003. Oil and gas operating expenses per equivalent Mcf produced increased $0.25 (32%$0.13 (12%) to $1.04$1.18 in the thirdfirst quarter of 20032004 from $0.79$1.05 in the thirdfirst quarter of 2002.2003. The increase in operating expenses is primarily related to the 13% increase in production and higher production and ad valorem taxes resulting from the significantly higher oil and gas prices in 2003. Oil and gasadditional fixed operating costs for the nine months ended September 30, 2003 increased $9.2 million (37%)relating to $33.7 million from $24.5 million for the nine months ended September 30, 2002. Oil and gas operating expenses per equivalent Mcf produced increased $0.23 to $1.02 for nine months ended September 30, 2003 from $0.79 for the same periodour Ship Shoal 113 Unit in 2002. The increase is also primarily due to the 7% higher production and the increased production and ad valorem taxes resulting from of the significantly higher oil and gas priceswhich we acquired an additional working interest in late 2003.
14
In the thirdfirst quarter of 2003,2004, we had a $1.2$3.4 million in exploration expense as compared to a $0.4$1.6 million in 2002‘s third quarter.the first quarter of 2003. The provision in the thirdfirst quarter of 20032004 primarily relates to twothree exploratory dry holes drilled in South Texasthe first quarter, as well as costs related to acquisition of seismic data. For the nine months ended September 30, 2003, we had exploration expense totaling $3.4 million as compared to $3.4 million in the same period in 2002. The 2003 provision primarily relates to four exploratory dry holes and expenditures relating to the acquisition of seismic data in 2003.
Depreciation, depletion and amortization (“DD&A”) increased $2.3$0.9 million (18%(6%) to $15.2$15.8 million in the thirdfirst quarter of 2004 from $14.9 million in the first quarter of 2003 from $12.9 million in the third quarter of 2002 due to the 13% increase in our production and a 6%an increase in our average amortizationDD&A rate. Our DD&A per equivalent Mcf produced increased by $0.07$0.10 to $ 1.33 for the three months ended September 30, 2003 from $1.26$1.45 for the quarter ended September 30, 2002. For the nine months ended September 30, 2003, DD&A increased $5.1 million (13%) to $44.9 millionMarch 31, 2004 from $39.8 million for the nine months ended September 30, 2002. The increase is due to the 7% increase in our production and our higher average amortization rate. DD&A per equivalent Mcf increased by $0.07 to $1.35 for the nine monthsquarter ended September 30, 2003 from $1.28 for the nine months ended September 30, 2002.March 31, 2003.
General and administrative expenses, which are reported net of overhead reimbursements, increased by $1.6 million to $3.1 million for the first quarter of 2004 as compared to general and administrative expenses of $1.5 million for the thirdfirst quarter of 2003 were 61% higher than general and administrative expenses of $0.9 million for2003. The increase was primarily related to the thirdstock based compensation expense that we recorded in the first quarter of 2002. For the first nine months2004 of 2003, general and administrative expenses increased to $5.0$1.2 million resulting from $2.9 millionour adoption of a fair value-based method of accounting for the nine months ended September 30, 2002. The increases are due primarily to the opening of an offshore operations office in Houston, Texas as well as an increase in personnel costs in 2003.employee stock based compensation including employee stock options on January 1, 2004.
Interest expense decreased $0.8$1.3 million (10%(18%) to $7.4$6.3 million for the thirdfirst quarter of 20032004 from $8.2$7.6 million in the thirdfirst quarter of 2002.2003. The decrease is due to a reduction in the average borrowings outstanding under our credit facility of $103.9$110.6 million during the thirdfirst quarter of 20032004 as compared to $163.3$149.3 million outstanding during the thirdfirst quarter of 2002.2003. The average interest rate on the outstanding borrowings under the credit facility also decreased to 2.9%2.6% in the thirdfirst quarter of 20032004 as compared to 3.6%3.2% in the thirdfirst quarter of 2002. Interest expense2003.
We reported a net income of $25,000 for the ninethree months ended September 30, 2003 decreased $0.7 million (3%) to $22.6 million from $23.3 million for the nine months ended September 30, 2002. The decrease is attributable to a decrease in interest related to our bank credit facility which was partially offset by the issuance of the additional 11¼% Senior Notes in March 2002. Our average outstanding borrowings under the bank credit facility decreased to $128.1 million in the nine months ended September 30, 200331, 2004, as compared to $176.5 million in the same period in 2002. The average interest rate under the bank credit facilty also decreased to 3.1% in the first nine months of 2003 as compared to 3.8% in the first nine months of 2002.
We reported net income of $12.9$21.2 million for the three months ended September 30, 2003, as compared toMarch 31, 2003. The net income of $3.0 million for the three months ended September 30, 2002. Net income per share for the thirdfirst quarter of 20032004 was $0.36$0.00 on weighted average diluted shares outstanding of 35.435.6 million as compared to $0.10$0.62 for the thirdfirst quarter of 20022003 on weighted average diluted shares outstanding of 33.834.6 million. NetThe first quarter 2004 results include a charge of $19.6 million ($12.5 million after income for the nine months ended September 30, 2003 was $47.7 million, as compared to net income of $0.4 million for the nine months ended September 30, 2002. Net income per common share for the nine months ended September 30, 2003 was $1.38 as compared to net income of $0.01 for the nine months ended September 30, 2002.
18
Net income for the nine months ended September 30, 2003 included $0.7 million in income ($0.02taxes or 35¢ per share) relatedrelating to the cumulative effectearly retirement of a change in our accounting for future abandonment cost for our oil and gas properties.11¼% Senior Notes due 2007.
In 2002, we sold certain marginal oil and gas properties. The operating results of these properties in 2002 including the loss on disposal of $1.1 million ($0.04 per share) have been reflected as discontinued operations.
Critical Accounting Policies
The information included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in our annual report filed on Form 10-K for the year ended December 31, 20022003 is incorporated herein by reference. There have been no material changes to our accounting policies during the ninethree months ended September 30, 2003March 31, 2004 with the exception of theour adoption of SFAS 143a fair value-based method of accounting for stock based compensation including employee stock options as discussed in Note 1 to the accompanying financial statements.
Liquidity and Capital Resources
Funding for our activities has historically been provided by our operating cash flow, debt or equity financings or asset dispositions. For the ninethree months ended September 30, 2003,March 31, 2004, our net cash flow provided by operating activities totaled $119.1$20.4 million and we had total borrowingsreceived proceeds of $16.4 million.$175.0 million from a public offering of eight-year senior notes and borrowed $148.0 million under a new four-year bank credit facility.
Our primary needs for capital, in addition to funding our ongoing operations, relate to the acquisition, development and exploration of our oil and gas properties and the repayment of our debt. In the first nine monthsquarter of 2003,2004, we incurred capital expenditures of $62.2$38.0 million primarily for our development and exploration activities and we made principal paymentsretired $304.7 million of $70.7 million to reduce our outstandinglong-term debt.
15
The following table summarizes our capital expenditure activity for the ninethree months ended September 30, 2003March 31, 2004 and 2002:2003:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2004 | 2003 | |||||||
| (In thousands) | ||||||||
| Acquisitions | $ | 715 | $ | — | ||||
| Leasehold costs | 1,418 | 1,209 | ||||||
| Development drilling | 21,010 | 2,917 | ||||||
| Exploratory drilling | 7,852 | 10,723 | ||||||
| Offshore production facilities | 2,148 | 147 | ||||||
| Workovers and recompilations | 4,828 | 1,275 | ||||||
| Other | 14 | 184 | ||||||
| $ | 37,985 | $ | 16,455 | |||||
| Nine Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2003 | 2002 | |||||||
| (In thousands) | ||||||||
| Acquisitions | $ | 684 | $ | 1,758 | ||||
| Leasehold costs | 4,140 | 7,238 | ||||||
| Development drilling | 15,097 | 16,040 | ||||||
| Exploratory drilling | 29,399 | 22,838 | ||||||
| Offshore production facilities | 3,258 | 3,560 | ||||||
| Workovers and recompletions | 7,977 | 6,222 | ||||||
| Other | $ | 1,604 | 128 | |||||
| $ | 62,159 | $ | 57,784 | |||||
The timing of most of our capital expenditures is discretionary because we have no material long-term capital expenditure commitments. Consequently, we have a significant degree of flexibility to adjust the level of our capital expenditures as circumstances warrant. We spent $60.6$37.3 million and $57.7$16.3 million on development and exploration activities in the ninethree months ended September 30,March 31, 2004 and 2003, and 2002, respectively. We have budgeted approximately $100.0$110.0 million for development and exploration projects in 2003.2004. We expect to use internally generated cash flow to fund our development and exploration activity.
19
We do not have a specific acquisition budget for 20032004 since the timing and size of acquisitions are not predictable. We intend to use borrowings under our bank credit facility, or other debt or equity financings to the extent available, to finance significant acquisitions. The availability and attractiveness of these sources of financing will depend upon a number of factors, some of which will relate to our financial condition and performance and some of which will be beyond our control, such as prevailing interest rates, oil and natural gas prices and other market conditions.
We had $220.0 million in principal amount of our 11¼% Senior Notes due 2007 (the “1999 Notes”) outstanding on January 1, 2004. Pursuant to a tender offer, on February 25, 2004 we repurchased $197.7 million in principal amount of the 1999 Notes for $212.2 million plus accrued interest. On December 17, 2001,May 1, 2004, we redeemed the remaining $22.3 million in principal amount of the 1999 Notes outstanding for $23.6 million plus accrued interest. The early extinguishment of the 1999 Notes resulted in a loss of $19.6 million in the first quarter which was comprised of the premium paid for repurchase the of 1999 Notes together with the write-off of unamortized debt issuance costs related to the 1999 Notes.
In connection with the repurchase of the 1999 Notes, we sold $175.0 million of senior notes in an underwritten public offering. The new senior notes are due March 1, 2012 and bear interest at 6 7/8%, which is payable semiannually on March 1 and September 1, commencing September 1, 2004. The notes are unsecured obligations and are currently guaranteed by all of our subsidiaries.
On February 25, 2004, we also entered into a new three year $350.0$400.0 million revolvingbank credit facility with Toronto Dominion (Texas), Inc.Bank of Montreal, as the administrative agent. The new credit facility is a four-year revolving credit commitment that matures on February 25, 2008. Borrowings under the new credit facility are limited to a borrowing base that was set at $300.0 million upon the retirement of the 1999 Notes. Borrowings under the new credit facility were used to refinance amounts outstanding under our prior bank credit facility and to fund the repurchase of the 1999 Notes.
Indebtedness under the new bank credit facility is secured by substantially all of our assets.and our subsidiaries’ assets and is guaranteed by all of our subsidiaries. The revolvingnew credit linefacility is subject to borrowing base availability,
16
which will be redetermined semiannually based on the banks’ estimates of the future net cash flows of our oil and natural gas properties. The current borrowing base is $260.0 million. The borrowing base may be affected by the performance of our properties and changes in oil and natural gas prices. The determination of the borrowing base is at the sole discretion of the administrative agent and the bank group. The revolvingBorrowings under the new credit line bearsfacility bear interest, based on the utilization of the borrowing base, at our option at either (i)(1) LIBOR plus 1.5%1.25% to 2.375%1.75% or (ii)(2) the base rate (which is the higher of the prime rate or the federal funds rate) plus 0.5%0% to 1.375%0.5%. A commitment fee of 0.375% is payable on the unused borrowing base. The banknew credit facility matures on January 2, 2005 and contains covenants that, among other things, restrict our ability to paythe payment of cash dividends, limit the amount of our consolidated debt that we may incur and limit our ability to make certain loans and investments. FinancialThe only financial covenants includeare the maintenance of a current ratio maintenance of tangible net worth and maintenance of an interest coverage ratio.
Ona minimum tangible net worth. We were in compliance with these covenants as of March 7, 2002, we closed the sale in a private placement of an additional $75.0 million of our 11¼% Senior Notes due 2007 (the “Notes”) at a net price of 97.25% after the placements agents’ discount. As a result of this transaction, $220.0 million of aggregate principal amount of the Notes are outstanding. The net proceeds of the $75.0 million placement were used to reduce amounts outstanding under our bank credit facility.
In April and June 2003, our holders of the Series 1999 Preferred Stock converted their preferred shares into 4,393,275 shares of our common stock. This conversion reduced our annual preferred stock dividend requirement by $1.6 million and increased our common stockholders’ equity by $17.6 million.31, 2004.
We believe that our cash flow from operations and our available borrowings under the newour bank credit facility will be sufficient to fund our operations and future growth as contemplated under our current business plan. However, if our plans or assumptions change or if our assumptions prove to be inaccurate, we may be required to seek additional capital. We cannot provide any assurance that we will be able to obtain such capital, or if such capital is available, that we will be able to obtain it on terms acceptable to us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Oil and Natural Gas Prices
Our financial condition, results of operations and capital resources are highly dependent upon the prevailing market prices of oil and natural gas. These commodity prices are subject to wide fluctuations and market uncertainties due to a variety of factors, some of which are beyond our control. Factors influencing oil and natural gas prices include the level of global demand for crude oil, the foreign supply of oil and natural gas, the establishment of and compliance with production quotas by oil exporting countries, weather conditions that determine the demand for natural gas, the price and availability of alternative fuels and overall economic conditions. It is impossible to predict future oil and natural gas prices with any degree of certainty. Sustained weakness in oil and natural gas prices may adversely affect our financial condition and results of operations, and may also reduce the amount of oil and natural gas reserves that we can produce economically. Any reduction in our oil and natural gas reserves, including reductions due to price fluctuations, can have an adverse effect on our ability to obtain capital for our exploration and development activities. Similarly, any improvements in oil and natural gas prices can have a favorable impact on our financial condition, results of operations and capital resources. Based on our oil and natural gas production in the ninethree months ended September 30, 2003,March 31, 2004, a $1.00 change in the price per barrel of oil would have resulted in a change in our cash flow for such period by approximately $1.1$0.4 million and a $1.00 change in the price per Mcf of natural gas would have changed our cash flow by approximately $25.0$8.0 million.
20
We periodically use hedging transactions with respect to a portion of our oil and natural gas production to mitigate our exposure to price changes. While the use of these hedging arrangements limits the downside risk of price declines, such use may also limit any benefits that may be derived from price increases. We use swaps, floors and collars to hedge oil and natural gas prices. Swaps are settled monthly based on differences between the prices specified in the instruments and the settlement prices of futures contracts quoted on the New York Mercantile Exchange. Generally, when the applicable settlement price is less than the price specified in the contract, we receive a settlement from the counterpartycounter party based on the difference multiplied by the volume hedged. Similarly, when the applicable settlement price exceeds the price specified in the contract, we pay the counterpartycounter party based on the difference. We generally receive a settlement from the counterpartycounter party for floors when the applicable settlement price is less than the price specified in the contract, which is based on the difference multiplied by the volumes hedged. For collars, we generally receive a
17
settlement from the counterpartycounter party when the settlement price is below the floor and pay a settlement to the counterpartycounter party when the settlement price exceeds the cap. No settlement occurs when the settlement price falls between the floor and cap. None of our oil and gas production was hedged in the period ended March 31, 2004 or 2003.
The following table sets out the derivative financial instrument outstanding at September 30, 2003 which is held for natural gas price risk management:
| Period Beginning | Period Ending | Volume (MMBtu) | Type of Instrument | Floor Price |
|---|---|---|---|---|
| October 1, 2003 | December 31, 2003 | 562,500 | Floor | $2.00 |
Interest Rates
At September 30, 2003,March 31, 2004, we had long-term debt of $311.0$339.3 million. Of this amount, $220.0$175.0 million bears interest at a fixed rate of 6 7/8% and $22.3 million carried an interest rate of 11¼%. We had $91.0$142.0 million outstanding under our revolving bank credit facility, which is subject to floating market rates of interest. Borrowings under the bank credit facility bear interest at a fluctuating rate that is linked to LIBOR or the corporate base rate, at our option. Any increases in these interest rates can have an adverse impact on our results of operations and cash flow. In December 2002, we entered into an interest rate swap agreement to hedge the impact of interest rate changes on $25.0 million of our floating rate debt beginning on January 2003 and expiring in December 2003. As a result of this interest rate swap, we realized a loss of $72,000 in the first nine months of 2003. The fair value of this interest rate derivative financial instrument was a liability of $34,000 at September 30, 2003.
ITEM 4. CONTROLS AND PROCEDURES
As of September 30, 2003,March 31, 2004, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2003March 31, 2004 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by itus under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed by us is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
There were no changes in our internal controls over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the quarter ended September 30, 2003,March 31, 2004, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
2118
PART II — OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
| a. | Exhibits | |||||||||
| 4.1* | Second Supplemental Indenture dated as of March 11, 2004 between Comstock, the Guarantors and The Bank of New York Trust Company, N.A., Trustee for the 6 7/8% Notes due 2012. | |||||||||
| 10.1*# | Amendment No. 2 dated April 7, 2004 to the Comstock Resources, Inc. 1999 Long- term Incentive Plan. | |||||||||
| 10.2* | Amendment No. 1 dated March 31, 2004 to the Credit Agreement, dated as of February 25, 2004, by and among Comstock, as borrower, each lender from time to time party thereto, Bank of Montreal, as administrative agent and issuing bank. | |||||||||
| 15.1* | Awareness Letter of Ernst & Young LLP. | |||||||||
| 31.1* | Section 302 Certification of the Chief Executive Officer. | |||||||||
| 31.2* | Section 302 Certification of the Chief Financial Officer. | |||||||||
| 32.1* | Certification for the Chief Executive Officer as required by Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||||
| 32.2* | Certification for the Chief Financial Officer as required by Section 906 of the Sarbanes-Oxley Act of 2002. |
| * | |||||
| # | Management contract or compensatory plan document. |
| b. | Reports on Form 8-K |
Form 8-K Reports filed subsequent to June 30, 2003 are as follows:
| Form 8-K Reports filed subsequent to December 31, 2003 are as follows: | ||||||||||||
| Date | Item | Description | ||||
| January 28, 2004 | 12 | |||||
| 12 | December 31, 2003 and capital expenditure budget for 2004. | |||||
| February 17, 2004 | 12 | Financial results for the three months and year ended December 31, 2003. | ||||
| February 24, 2004 | 5 | Tender offer for 11 1/4% Senior Notes due 2007 and sale of 6 7/8% Senior Notes due 2012. | ||||
| May 4, 2004 | 5 | Repurchase of remaining 11 1/4% Senior Notes due 2007. | ||||
| May 4, 2004 | 12 | Financial results for the three months ended March 31, 2004. |
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| COMSTOCK RESOURCES, INC. | ||||||||
| Date | May 7, 2004 | /s/M. JAY ALLISON | ||||||
| M. Jay Allison, Chairman, President and Chief | ||||||||
| Executive Officer | ||||||||
| Date | May 7, 2004 | /s/ROLAND O. BURNS | ||||||
| Roland , Senior Vice President, | ||||||||
| Chief Financial Officer, Secretary, and Treasurer | ||||||||
| (Principal Financial and Accounting Officer) |
2220