Brown Tom 8K Other events

QuickLinks -- Click here to rapidly navigate through this document

SECURITIES AND EXCHANGE
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) August 14, 2003

Tom Brown, Inc.
(Exact name of registrant as specified in its charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	001-31308 (Commission File Number)	95-1949781 (I.R.S. Employer Identification No.)

555 Seventeenth Street, Suite 1850 Denver, Colorado (Address of Principal Executive Offices)		80202 (Zip Code)

(303) 260-5000 (Registrant's Telephone Number, Including Area Code)

Not Applicable (Former name, former address and former fiscal year, if changed since last report)

ITEM 5. OTHER EVENTS

On June 27, 2003, Tom Brown, Inc. ("Tom Brown") completed its acquisition of Matador Petroleum Corporation, a Texas corporation ("Matador"), for approximately $388 million in cash and assumed debt at closing. A Current Report on Form 8-K was filed on July 11, 2003 to report this transaction. Updated pro forma financial statements for the year ended December 31, 2002 and for the six months ended June 30, 2003 are included herein.

Tom Brown, Inc.

PRO FORMA FINANCIAL INFORMATION

On May 14, 2003, Tom Brown, Inc. ("Tom Brown" or the "Company") entered into an agreement to acquire all of the outstanding common stock of Matador Petroleum Corporation ("Matador"). Matador is an independent energy company based in Dallas, Texas engaged in oil and gas exploration, production, development and acquisition activities in the Southwestern United States. Approximately 85 percent of Matador's reserves are natural gas and Matador's primary focus has been the East Texas Basin and the Permian Basin of West Texas and Southeastern New Mexico.

Under the terms of the definitive merger agreement, the Matador shareholders received a net price of $17.53 per common share and all option holders received $17.53 per option share less the exercise price of the options. Tom Brown also assumed approximately $121 million in net debt at closing for an aggregate purchase price of $388 million. Transaction costs of approximately $6.0 million were incurred for investment banking, legal, accounting and other direct merger-related costs. In addition, $7.7 million was incurred for payments made to officers and employees of Matador pursuant to a change in control arrangement previously entered into by Matador and $1.3 million was incurred for payments made to Matador employees under the terms of a stock appreciation plan, which provided for payments in the event of a change in control of Matador.

In connection with the transaction, three officers of Matador entered into non-compete agreements with Tom Brown, for periods ranging from 3 to 21 months for aggregate consideration of $4.7 million.

The following unaudited pro forma condensed combined financial information shows the pro forma effect of the acquisition. The unaudited pro forma condensed combined financial information includes pro forma statements of operations for the year ended December 31, 2002 and for the six months ended June 30, 2003, which assume the acquisition occurred on January 1, 2002.

The unaudited pro forma condensed combined financial information has been prepared to provide an analysis of the financial effects of the acquisition. The pro forma information does not purport to represent what the results of operations of the combined company would have actually been had the acquisition in fact occurred on the date indicated, nor is it necessarily indicative of the future results of operations.

Tom Brown, Inc.

Unaudited Pro Forma Condensed Statement of Operations

Six Months Ended
June 30, 2003

			Tom Brown, Inc. Historical			Matador Historical			Pro Forma Adjustments (Note 3)			Pro Forma Combined Company
			(In thousands)
Revenues
	Gas and oil sales		$	158,960		$	58,775		$	—		$	217,735
	Gathering and processing			10,868			—			—			10,868
	Marketing and trading, net			22,648			—			—			22,648
	Other			9,495			58			—			9,553

		Total revenues		201,971			58,833			—		$	260,804

Costs and expenses
	Gas and oil production			16,690			5,898			—			22,588
	Taxes on gas and oil production			13,623			4,052			—			17,675
	Trading			21,590			—			—			21,590
	Gathering and processing costs			4,071			—			—			4,071
	Cost of drilling operations			6,031			—			—			6,031
	Exploration costs			10,679			—			844	(c)		11,523
	Impairments of leasehold costs			2,963			—			294	(e)		3,257
	General and administrative			10,650			7,703			1,286	(c)		19,639
	Depreciation, depletion, and amortization			44,570			12,444			2,439	(d)		59,453
	Accretion			588			196			—			784
	Bad debt			252			—			—			252
	Amortization of non-compete agreements			—			—			1,076	(f)		1,076
	Interest expense and other			5,818			2,373			8,493	(b)		16,684

		Total costs and expenses		137,525			32,666			14,432			184,623

Income before income taxes and cumulative effect of change in accounting principle				64,446			26,167			(14,432	)		76,181
Income tax provision				(22,293	)		(8,998	)		5,051	(a)		(26,240	)

Income before cumulative effect of change in accounting principle			$	42,153		$	17,169		$	(9,381	)	$	49,941

Weighted average number of common shares outstanding				40,487									40,487

Net income before cumulative effect of change in accounting principle—per common share			$	1.04								$	1.23

See Notes in Unaudited Pro Forma Condensed Combined Financial Statements.

Tom Brown, Inc.
Unaudited Pro Forma Condensed Statement of Operations

Year Ended
December 31, 2002

			Tom Brown, Inc. Historical			Matador Historical			Pro Forma Adjustments (Note 3)			Pro Forma Combined Company
			(In thousands)
Revenues
	Gas and oil sales		$	194,276		$	59,936		$	—		$	254,212
	Gathering and processing			20,467			—			—			20,467
	Marketing and trading, net			5,276			—			—			5,276
	Drilling			14,347			—			—			14,347
	Gain on sale of property			4,114			—			—			4,114
	Cash paid on derivatives			(2,061	)		—			—			(2,061	)
	Change in derivative fair value			(345	)		—			—			(345	)
	Loss on marketable security			(600	)		—			—			(600	)
	Interest income and other			171			268			—			439

		Total revenues		235,645			60,204			—			295,849

Costs and expenses
	Gas and oil production			32,151			8,586			—			40,737
	Taxes on gas and oil production			16,621			4,940			—			21,561
	Gathering and processing costs			6,918			—			—			6,918
	Cost of drilling operations			13,763			—			—			13,763
	Exploration costs			22,824			—			3,493	(c)		26,317
	Impairments of leasehold costs			5,564			—			588	(e)		6,152
	General and administrative			18,413			6,550			2,375	(c)		27,338
	Depreciation, depletion, and amortization			91,307			20,766			4,666	(d)		116,739
	Bad debt			5,222			—			—			5,222
	Amortization of non-compete agreements			—			—			3,176	(f)		3,176
	Interest expense and other			9,726			3,202			16,988	(b)		29,916

		Total costs and expenses		222,509			44,044			31,286			297,839

Income (loss) before income taxes and cumulative effect of change in accounting principle				13,136			16,160			(31,286	)		(1,990	)
Income tax (provision) benefit				(3,210	)		(5,828	)		10,950	(a)		1,912

Income (loss) before cumulative effect of change in accounting principle			$	9,926		$	10,332		$	(20,336	)	$	(78	)

Weighted average number of common shares outstanding				40,327									40,327

Income (Loss) before cumulative effect of change in accounting principle—per common share			$	0.25								$	—

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

Tom Brown, Inc.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

(1) BASIS OF PRESENTATION

The accompanying unaudited pro forma condensed combined statements of operations present the pro forma effects of the acquisition as though the acquisition occurred on January 1, 2002.

(2) METHOD OF ACCOUNTING FOR THE ACQUISITION

Tom Brown will account for the acquisition using the purchase method of accounting for business combinations. Under this method of accounting, Tom Brown is deemed to be the acquirer for accounting purposes. Matador's assets and liabilities have been revalued under the purchase method of accounting and recorded at their estimated fair values in conjunction with the merger.

(3) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION

The unaudited pro forma condensed combined statements of operations include the following adjustments:

(a): The income tax provision was adjusted for the tax effect of the pro forma adjustments.
(b): Interest expense increased as a result of Tom Brown borrowing approximately $280 million in conjunction with the acquisition. Of this amount, $155 million was advanced from a recently negotiated senior subordinated credit facility and the balance of the funding was provided under a new revolving credit facility. Bank fees of $7.1 million were incurred to obtain these new loan facilities. Pro forma interest expense has been adjusted to include amortization of the loan fees attributable to the amounts borrowed to complete the acquisition.
(c): Adjustments were required to expense certain items under the successful efforts method of accounting utilized by Tom Brown that were previously capitalized by Matador under the full cost method of accounting. These costs were principally associated with exploratory dry holes, delay rentals and seismic costs. Matador also previously capitalized as development cost a portion of its internal costs associated with geological and geophysical staff which are expensed under the successful efforts accounting.
(d): The increase in the cost basis assigned to Matador's gas and oil properties resulted in an increase in depreciation, depletion and amortization expense.
(e): A provision was recognized for leasehold abandonments and expirations based upon the undeveloped leasehold position of Matador. These amounts had previously been capitalized under the full cost method of accounting.
(f): Three officers of Matador entered into non-compete agreements with Tom Brown in conjunction with the transaction. One contract covered a 21 month period in exchange for $3.8 million, a portion of which was paid at closing and a portion of which is payable over the term of the contract. The other two contracts were for terms of three months in exchange for $0.5 million each which was paid at closing. A pro forma adjustment has been recorded to reflect the expense associated with these contracts over the terms of the agreements assuming the agreements were entered into on January 1, 2002.

(4) APPLICATION OF RECENTLY ISSUED ACCOUNTING STANDARDS ON INTANGIBLE ASSETS.

The Company has been made aware of an issue that has arisen in the industry regarding the application of certain provisions of SFAS No. 141, "Business Combinations," and SFAS No. 142,

"Goodwill and Other Intangible Assets," to companies in the extractive industries, including oil and gas companies. The issue is whether the provisions of SFAS No. 141 and SFAS No. 142 require registrants to classify costs associated with mineral rights, including both proved and unproved lease acquisition costs, as intangible assets in the balance sheet, apart from other capitalized oil and gas property costs.

Historically, Tom Brown and Matador have included oil and gas lease acquisition costs as a component of oil and gas properties. Also under consideration is whether SFAS No. 142 requires registrants to provide additional disclosures prescribed by SFAS No. 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 Tom Brown's capitalized oil and gas property costs and a substantial portion of the acquisition costs attributable to the Matador properties acquired would be separately classified in the Company's balance sheet as intangible assets.

The reclassification of these amounts would not effect the method in which such costs are amortized or the manner in which the Company assesses impairment of capitalized costs. As a result, net income would not be affected by the reclassification.

(5) SUPPLEMENTAL PRO FORMA INFORMATION REGARDING OIL AND GAS OPERATIONS

The following pro forma supplemental information regarding oil and gas operations is presented pursuant to the disclosure requirements of SFAS No. 69, "Disclosures About Oil and Gas Producing Activities."

Pro Forma Costs Incurred

The following tables reflect the costs incurred in oil and gas producing property acquisition, exploration and development activities of Tom Brown, Matador and the combined company on a pro forma basis for the year ended December 31, 2002.

			Total						United States						Canada
			Tom Brown		Matador		Combined		Tom Brown		Matador		Combined		Tom Brown
			(In thousands)
Costs incurred
	Proved property acquisition costs		$	15,878	$	3,389	$	19,267	$	15,878	$	3,389	$	19,267	$	—
	Unproved property acquisition costs			9,015		—		9,015		7,601		—		7,601		1,414
	Exploration costs			35,035		7,558		42,593		32,482		7,558		40,040		2,553
	Development costs			94,567		65,137		159,704		85,319		65,137		150,456		9,248

		Total	$	154,495	$	76,084	$	230,579	$	141,280	$	76,084	$	217,364	$	13,215

The following tables set forth the changes in the net quantities of natural gas, oil and natural gas liquids reserves of Tom Brown, Matador and the combined company on a pro forma basis for the year ended December 31, 2002.

		Total						United States						Canada
Natural Gas		Tom Brown		Matador		Combined		Tom Brown		Matador		Combined		Tom Brown
		(Mmcf)
Proved reserves:
Estimated reserves at December 31, 2001		641,579		168,027		809,606		582,052		168,027		750,079		59,527
	Revisions of previous estimates	10,913		(13,593	)	(2,680	)	8,304		(13,593	)	(5,289	)	2,609
	Purchases of minerals in place	15,661		3,414		19,075		15,661		3,414		19,075		—
	Extensions and discoveries	84,373		95,444		179,817		79,582		95,444		175,026		4,791
	Sales of minerals in place	(6,332	)	—		(6,332	)	(6,322	)	—		(6,322	)	—
	Production	(72,167	)	(15,130	)	(87,297	)	(65,781	)	(15,130	)	(80,911	)	(6,386	)

Estimated reserves at December 31, 2002		674,027		238,162		912,189		613,496		238,162		851,658		60,541

Proved developed reserves:
	December 31, 2002	507,422		133,614		641,036		481,183		133,614		614,797		56,239

		Total						United States						Canada
Oil		Tom Brown		Matador		Combined		Tom Brown		Matador		Combined		Tom Brown
		(Mbbls)
Proved reserves:
Estimated reserves at December 31, 2001		6,647		5,929		12,576		5,469		5,929		11,398		1,178
	Revisions of previous estimates	898		(535	)	363		580		(535	)	45		318
	Purchases of minerals in place	34		40		74		34		40		74		—
	Extensions and discoveries	451		2,451		2,902		193		2,451		2,644		258
	Sales of minerals in place	(1,162	)	—		(1,162	)	(1,162	)	—		(1,162	)	—
	Production	(843	)	(648	)	(1,491	)	(623	)	(648	)	(1,271	)	(220	)

Estimated reserves at December 31, 2002		6,025		7,237		13,262		4,491		7,237		11,728		1,534

Proved developed reserves:
	December 31, 2002	4,551		5,352		9,903		3,299		5,352		8,651		1,252

		Total					United States					Canada
Natural Gas Liquids		Tom Brown		Matador	Combined		Tom Brown		Matador	Combined		Tom Brown
		(Mbbls)
Proved reserves:
Estimated reserves at December 31, 2001		8,360		—	8,360		6,634		—	6,634		1,726
	Revisions of previous estimates	(628	)	—	(628	)	(956	)	—	(956	)	328
	Purchases of minerals in place	—		—	—		—		—	—		—
	Extensions and discoveries	305		—	305		186		—	186		119
	Sales of minerals in place	—		—	—		—		—	—		—
	Production	(1,382	)	—	(1,382	)	(1,189	)	—	(1,189	)	(193	)

Estimated reserves at December 31, 2002		6,655		—	6,655		4,675		—	4,675		1,980

Proved developed reserves:
	December 31, 2002	5,825		—	5,825		4,002		—	4,002		1,823

The following tables set forth the standardized measure of discounted future net cash flows relating to proved oil, natural gas and natural gas liquids reserves for Tom Brown, Matador and the combined company on a pro forma basis as of December 31, 2002.

																			Canada
	Total									United States									Canada
	Total									United States									Tom Brown
	Tom Brown			Matador			Combined			Tom Brown			Matador			Combined			Tom Brown
	(In thousands)
Future cash flows	$	2,570,168		$	1,279,885		$	3,850,053		$	2,243,751		$	1,279,885		$	3,523,636		$	326,417
Future production costs		(799,637	)		(279,350	)		(1,078,987	)		(732,739	)		(279,350	)		(1,012,089	)		(66,898	)
Future development costs		(186,363	)		(107,251	)		(293,614	)		(175,085	)		(107,251	)		(282,336	)		(11,278	)

Future net cash flows before tax		1,584,168			893,284			2,477,452			1,335,927			893,284			2,229,211			248,241
Future income taxes		(451,706	)		(233,146	)		(684,852	)		(367,271	)		(233,146	)		(600,417	)		(84,435	)

Future net cash flows after tax		1,132,462			660,138			1,792,600			968,656			660,138			1,628,794			163,806
Annual discount at 10%		(468,454	)		(345,690	)		(814,144	)		(405,487	)		(345,690	)		(751,177	)		(62,967	)

Standardized measure of discounted future net cash flows	$	664,008		$	314,448		$	978,456		$	563,169		$	314,448		$	877,619		$	100,839

Discounted future net cash flows before income taxes	$	883,353		$	426,114		$	1,309,467		$	744,608		$	426,114		$	1,170,722		$	138,745

The following table includes the components of the changes in the standardized measure of discounted future net cash flows of Tom Brown, Matador and the combined company on a pro forma basis for the year ended December 31, 2002

																			Canada
	Total									United States									Canada
	Total									United States									Tom Brown
	Tom Brown			Matador			Combined			Tom Brown			Matador			Combined			Tom Brown
	(In thousands)
Gas and oil sales, net production costs(1)	$	(145,504	)	$	(46,410	)	$	(191,914	)	$	(122,574	)	$	(46,410	)	$	(168,984	)	$	(22,930	)
Net changes in anticipated prices and production costs		325,690			147,841			473,531			265,587			147,841			413,428			60,103
Extension and discoveries, less related costs		112,018			152,612			264,630			95,798			152,612			248,410			16,220
Changes in estimated future development costs		(1,813	)		—			(1,813	)		2,752			—			2,752			(4,565	)
Previously estimated development costs incurred		39,406			20,853			60,259			37,124			20,853			57,977			2,282
Net change in income taxes		(170,753	)		(79,847	)		(250,600	)		(140,036	)		(79,847	)		(219,883	)		(30,717	)
Purchases of minerals in place		16,970			6,173			23,143			16,970			6,173			23,143			—
Sales of minerals in place		(11,383	)		—			(11,383	)		(11,383	)		—			(11,383	)		—
Accretion of discount		50,128			15,856			65,984			42,990			15,856			58,846			7,138
Revision of quantity estimates		19,147			(25,474	)		(6,327	)		7,586			(25,474	)		(17,888	)		11,561
Changes in production rates and other		(22,594	)		(3,059	)		(25,653	)		(20,148	)		(3,059	)		(23,207	)		(2,446	)

Change in Standardized Measure	$	211,312		$	188,545		$	399,857		$	174,666		$	188,545		$	363,211		$	36,646

(1): Net of hedging revenue for Tom Brown of $0.2 million on production in the United States and a $0.2 million hedging loss on Canadian production.

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 hereunto duly authorized.

Date: August 14, 2003	TOM BROWN, INC.

	By:	/s/ DANIEL G. BLANCHARD Daniel G. Blanchard Executive Vice President and Chief Financial Officer (Principal Financial Officer)

	By:	/s/ RICHARD L. SATRE Richard L. Satre Controller (Principal Accounting Officer)

QuickLinks

ITEM 5. OTHER EVENTS

Tom Brown, Inc. PRO FORMA FINANCIAL INFORMATION
Tom Brown, Inc. Unaudited Pro Forma Condensed Statement of Operations Six Months Ended June 30, 2003
Tom Brown, Inc. Unaudited Pro Forma Condensed Statement of Operations Year Ended December 31, 2002
Tom Brown, Inc. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
SIGNATURES

Brown Tom Inactive 8-KOther events