-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MWVhvZS8WVsw8gX2SvEW9cxmsrYhNqSO6aTDXal2cAioodDiD5Ux8wfcBW37YtF0 SBIFwP3nUcCSB/cDi3xPFw== 0000874992-96-000028.txt : 19961118 0000874992-96-000028.hdr.sgml : 19961118 ACCESSION NUMBER: 0000874992-96-000028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOX ENERGY CORP CENTRAL INDEX KEY: 0000874992 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 752369148 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11516 FILM NUMBER: 96664216 BUSINESS ADDRESS: STREET 1: 8201 PRESTON RD STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75225 BUSINESS PHONE: 2148908000 MAIL ADDRESS: STREET 1: 8201 PRESTON RD STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75225-6211 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-11516 BOX ENERGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 75-2369148 (State or other jurisdiction (I.R.S. employer identification no.) of incorporation or organization) 8201 Preston Road, Suite 600, Dallas, Texas 75225-6211 (Address of principal executive offices) (Zip code) (214) 890-8000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No There were 3,250,110 outstanding shares of Class A (Voting) Common Stock, $1 par value, on August 14, 1996. There were also 17,553,010 outstanding shares of Class B (Non-Voting) Common Stock, $1 par value, on such date. BOX ENERGY CORPORATION INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets as of September 30, 1996 and December 31, 1995 3 Condensed Statements of Income - Three Months Ended September 30, 1996 and 1995 4 Condensed Statements of Income - Nine Months Ended September 30, 1996 and 1995 5 Condensed Statements of Cash Flows - Nine Months Ended September 30, 1996 and 1995 6 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 18 Item 2. Changes in Securities 18 Item 3. Defaults upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 18 Item 6. Exhibits and Reports on Form 8-K 18 PART I. FINANCIAL INFORMATION Item 1. Financial Statements BOX ENERGY CORPORATION CONDENSED BALANCE SHEETS (In thousands, except share data) September 30, December 31, 1996 1995 ________ ________ ASSETS (Unaudited) Current assets Cash and cash equivalents $ 13,049 $ 21,644 Marketable securities - available for sale 28,622 24,757 Accounts receivable - oil and natural gas 6,266 8,048 Accounts receivable - other 529 606 Prepaid expenses and other current assets 1,419 663 ________ ________ Total current assets 49,885 55,718 ________ ________ Properties Oil and natural gas properties (successful- efforts method) 181,306 165,454 Other properties 3,215 3,096 Accumulated depreciation, depletion and amortization (106,628) (93,651) ________ ________ Total properties 77,893 74,899 ________ ________ Other assets Deferred income taxes (net of valuation allowance) 15,508 13,027 Deferred charges (net of accumulated amortization) 1,651 1,847 ________ ________ Total other assets 17,159 14,874 ________ ________ Total assets $ 144,937 $ 145,491 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 8,187 $ 4,829 Accrued interest payable 1,540 391 Accrued transportation payable - related party 230 289 Net Profits expense payable 2,188 2,858 ________ ________ Total current liabilities 12,145 8,367 ________ ________ Convertible subordinated notes payable 55,077 55,077 ________ ________ Total liabilities 67,222 63,444 ________ ________ Commitments and contingencies (Note 3) Stockholders' equity Common stock, $1.00 par value Class A (voting) - 15,000,000 shares authorized; 3,250,110 shares issued and outstanding 3,250 3,250 Class B (non-voting) - 30,000,000 shares authorized; 17,553,010 shares issued and outstanding 17,553 17,553 Additional paid-in capital 25,197 25,197 Retained earnings 32,010 36,204 Valuation allowance for marketable securities (295) (157) ________ ________ Total stockholders' equity 77,715 82,047 ________ ________ Total liabilities and stockholders' equity $ 144,937 $ 145,491 ======== ======== See accompanying Notes to Financial Statements. BOX ENERGY CORPORATION CONDENSED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) Three Months Ended September 30, 1996 1995 Revenues ________ ________ Oil Sales $ 4,505 $ 4,043 Natural gas sales 10,203 9,750 Other income 1,115 1,121 ________ ________ Total revenues 15,823 14,914 ________ ________ Costs and expenses Operating costs 1,544 1,318 Net Profits expense 2,182 3,174 Exploration expense 5,725 155 Depreciation, depletion and amortization 4,877 4,113 General and administrative expenses 3,418 2,218 Reorganization expense 1,934 - Interest and financing costs 1,231 1,245 ________ ________ Total costs and expenses 20,911 12,223 ________ ________ Income before income taxes (5,088) 2,691 Income tax expense (benefit) (1,950) 773 ________ ________ Net Income (loss) $ (3,138) $ 1,918 ======== ======== Primary income (loss) per share $ (0.15) $ 0.09 ======== ======== Weighted average shares of common stock and common stock equivalents outstanding 20,803 20,803 ======== ======== See accompanying Notes to Financial Statements. BOX ENERGY CORPORATION CONDENSED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) Nine Months Ended September 30, 1996 1995 _________ _________ Revenues Oil Sales $ 13,410 $ 9,875 Natural gas sales 35,863 28,405 Other income 3,484 3,704 _________ _________ Total revenues 52,757 41,984 _________ _________ Costs and expenses Operating costs 4,888 3,856 Net Profits expense 9,241 8,409 Exploration expense 17,878 3,901 Depreciation, depletion and amortization 13,058 10,335 General and administrative expenses 8,683 6,270 Reorganization cost 1,934 723 Interest and financing costs 3,676 3,625 _________ _________ Total costs and expenses 59,358 37,119 _________ _________ Income before income taxes (6,601) 4,865 Income tax expense (benefit) (2,407) 1,372 _________ _________ Net Income (loss) $ (4,194) $ 3,493 ========= ========= Primary earnings (loss) per share $ (0.20) $ 0.17 ========= ========= Weighted average shares of common stock and common stock equivalents outstanding 20,807 20,803 ========= ========= See accompanying Notes to Financial Statements. BOX ENERGY CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended September 30, 1996 1995 ________ ________ Cash flow from operations Cash received from customers for oil and natural gas sales $ 51,055 $ 36,470 Cash received from other sources 1,753 815 Cash received from interest income 1,827 1,524 Cash paid to suppliers and employees (15,614) (12,240) Cash paid to Net Profits interest owner (9,911) (8,371) Cash paid for income taxes - (80) Cash paid for interest and financing expense (2,331) (2,353) ________ ________ Net cash flow from operations 26,779 15,765 ________ ________ Cash flow from investments Payments for capital expenditures (31,290) (15,892) Sales and maturities of marketable securities 17,020 - Investment in marketable securities (21,186) - Proceeds from sale of property 82 1,190 ________ ________ Net cash flow used for investments (35,374) (14,702) ________ ________ Net (decrease) increase in cash and cash equivalents ( 8,595) 1,063 Cash and cash equivalents at beginning of period 21,644 17,496 ________ ________ Cash and cash equivalents at end of period $ 13,049 $ 18,559 ======== ======== Reconciliation of net income (loss) to net cash flow from operations: Net income (loss) $ (4,194) $ 3,493 Depreciation, depletion and amortization 13,058 10,335 Amortization of deferred charges 196 189 Amortization of premium on marketable securities 13 11 Dry hole and impaired property costs 15,226 1,194 (Gain) loss on sale of assets 6 (1,004) Deferred income tax expense (benefit) (2,407) 1,292 (Increase) decrease in accounts receivable 1,859 (2,182) Decrease (increase) in prepaid expenses and other current assets (756) 126 Increase (decrease) in accounts payable and accrued expenses 4,448 2,273 (Decrease) increase in Net Profits expense payable (670) 38 ________ ________ Net cash flow from operations $ 26,779 $ 15,765 ======== ======== See accompanying Notes to Financial Statements. BOX ENERGY CORPORATION NOTES TO FINANCIAL STATEMENTS September 30, 1996 Note 1. Accounting Policies and Basis of Presentation These financial statements include the accounts of Box Energy Corporation, a Delaware corporation (the "Company"). Formed in 1991, the Company was inactive until it acquired all of the assets and liabilities of OKC Limited Partnership (the "Predecessor Partnership") on April 15, 1992 in exchange for the common stock of the Company, which stock was distributed to the general partners, limited partners and other unitholders of the Predecessor Partnership (the "Corporate Conversion"). The Corporate Conversion was accounted for in a manner similar to a pooling of interests as the unitholders of the Predecessor Partnership received an equivalent equity interest in the Company. Accordingly, the assets and liabilities were recorded at the historical cost of the Predecessor Partnership, except for a deferred income tax asset that resulted from an increase in the federal income tax basis of the Company's assets because of the Corporate Conversion. The financial statements have been prepared according to the instructions to Form 10-Q and, therefore, may not include all disclosures required in financial statements prepared in conformity with generally accepted accounting principles. Financial information provided in this report reflects all transactions and adjustments that are, in the opinion of management, necessary for a fair statement of results of operations and financial position for the interim periods presented. All adjustments are of a normal recurring nature. The condensed balance sheet as of December 31, 1995 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. These financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 1995, which were included in the Company's 1995 Annual Report to Shareholders. Certain reclassifications for prior periods have been made to conform with the presentation of the current period. The results of operations of the Company for the three and nine months ended September 30, 1996 are not necessarily indicative of the results for the full year 1996. No material changes in the significant accounting policies or details of accounts were made during the interim periods presented, except as described below regarding Marketable Securities, Common Stock and Employee Severance Agreements. Marketable Securities The Company held $24.8 million of United States Treasury Notes ("Treasury Notes") at December 31, 1995. Marketable securities of $28.6 million held at September 30, 1996 consisted of the following investments: Treasury Notes, Federal Agency debt securities, foreign government debt securities and high-grade corporation debt securities in the amounts of $13.5 million, $4.4 million, $1.6 million and $9.1 million, respectively. The marketable securities will mature as follows: $1.5 million within one year and $27.1 million between one and five years. Treasury Notes with a par value of $10.0 million matured August 15, 1996 and the proceeds were held as cash and cash equivalents at September 30, 1996. Common Stock On May 2, 1996 the United States Court of Appeals for the Fifth Circuit ("Fifth Circuit") issued its opinion in the Griffin, et al. v. Box, et al. litigation (the "Griffin" case) ordering a new trial and resolving certain other issues. See Note 3. Commitments and Contingencies - Griffin Cases. On June 20, 1996, the Board of Directors authorized the engagement of an outside law firm to determine whether the issuance of shares of the Company in the Corporate Conversion as Class B (Non-Voting) Common Stock, rather than Class A (Voting) Common Stock, to certain holders was in accordance with the Fifth Circuit's opinion in the Griffin Case. The law firm engaged an independent accounting firm to assist in the examination, and on August 9, 1996, both firms issued a preliminary report (the "Report") to the Board of Directors. The Board of Directors will carefully consider the Report and other information and seek the advice of the Company's outside counsel to determine whether the issuance of certain shares of the Company's capital stock in the Corporate Conversion as Class B (Non- Voting) Common Stock was in accordance with the Fifth Circuit opinion in the Griffin Case or otherwise legally appropriate and defensible and will take whatever action, if any, that it deems proper in respect thereof. Employee Severance Agreements The Company entered into severance agreements with its employees in December 1995. The severance agreements require certain payments to employees upon termination of employment, in certain instances, during a period of two years after a change in control (as defined in the severance agreements). Terminations providing severance benefits include terminations by the Company other than for cause (as defined in the severance agreements) or by the employee following a change in control and upon the occurrence of certain events adversely affecting the employee's employment. A change in control is defined in the severance agreements as the acquisition of 25% or more of the combined voting power of the then outstanding Class A (Voting) Common Stock, the cessation of membership of more than one-third of the eight members of the Board of Directors of the Company on August 16, 1995, a merger, consolidation or reorganization of the Company, a plan of complete liquidation or dissolution of the Company or an agreement to sell or otherwise dispose of substantially all of the assets of the Company. On July 30, 1996, certain of the Company's Directors were replaced by written consent of the holders of more than a majority of the Company's Class A (voting) Common Stock. As a result, a change in control, as defined in the severance agreements, occurred as the Company's new Board of Directors included only two of the eight members of the Board of Directors in office on August 16, 1995. In applicable situations, the severance agreements provide for cash payment to the terminated employee equal to the sum of: (1) all accrued, unpaid compensation and a pro-rata bonus, (2) severance pay ranging from six to eighteen months of the employee's base salary and (3) an amount equal to the actuarial present value, as of the date of termination, of three years' hypothetical additional benefits under the Company's pension plan; provided, however, the former employee retains all vested benefits under the Company's pension plan; and any other qualified pension or profit-sharing plans. In addition, in applicable situations, the severance agreements provide for the continuation of life, disability, medical, dental and hospitalization insurance for six to eighteen months (however, the severance agreements entered into with employees other than officers and executives provide that, in applicable situations, the employee may elect to receive the cash equivalent of such insurance benefits) and for the lapsing of all restrictions on and full vesting of any outstanding incentive awards, including stock options granted to the employee. The Company's Incentive Plan provides that options granted thereunder must be exercised only during the continuance of the optionee's employment by the Company, except in cases of retirement, death or disability. Accordingly, any options remaining unexercised when an employee's employment is terminated for any other reason expire at the time of termination. The severance agreements remain in effect with respect to applicable terminations through July 30, 1998. The total estimated cost under the severance agreements, if all severance agreements became effective, is $5.4 million. As of September 30, 1996, five executive officers (including the Chief Executive Officer, Executive Vice President, Chief Financial Officer, General Counsel and Chief Accounting Officer) and seven other employees (including the Director of Investor Relations) were dismissed, reached agreements to terminate employment or were notified of their impending termination. Amounts totaling $1.9 million, which include severance pay, related legal fees and estimated life, disability, medical, dental and hospitalization benefits for the above terminated employees, were charged to reorganization expense for the period ending September 30, 1996. As of that date, the Company had paid $542,000 of the accrued amounts. Note 2. Related Party Transactions Box Brothers Holding Company ("Box Brothers") owns approximately 57% of outstanding shares of the Class A Stock of the Company and 94% of the outstanding shares of both CKB Petroleum, Inc. ("Petroleum") and CKB & Associates, Inc. ("Associates"). A resolution adopted in 1992 by the Board of Directors of the Company authorizes the Company to enter into a transaction with an affiliate of the Company so long as the Board of Directors determines that such a transaction is fair and reasonable to the Company and is on terms no less favorable to the Company than can be obtained from an unaffiliated party in an arms' length transaction. The Company pays oil transportation charges to Petroleum for transporting crude oil from its South Pass blocks. Since March 1985, Petroleum has owned a minority interest in the pipeline transporting oil from the wells in the South Pass blocks to Venice, Louisiana. The tariff for the pipeline at $2.75 per barrel was published and filed with the Federal Energy Regulatory Commission, which regulates such rates. The rate has been uniform since 1982 among all owners of the pipeline from south Pass Block 89 Field and is consistent with the rate charged by an unaffiliated party to the Predecessor Partnership prior to the acquisition of the pipeline interest by Petroleum. Petroleum billed the Company $684,000 and $2.7 million during the three and nine months ended September 30, 1996, respectively, as compared to $804,000 and $1.9 million for the same periods in 1995. The amended judgment by the trial court in the Griffin Case imposed a constructive trust upon this pipeline interest in favor of the Company, but this decision later was reversed on appeal to the Fifth Circuit. See Note 3. Commitments and Contingencies - Griffin Cases. The Company billed Petroleum and other related parties, including the Estate, Box Brothers and certain of their affiliates, for the estimated fair value of usage of an allocated portion of subleased office space, certain payroll costs and benefits, and other overhead costs. The amounts billed are considered to be the fair value of such usage by, or allocations for the benefit of, the related parties. The Company billed the related parties $14,000 and $53,000 respectively, for the three and nine months ended September 30, 1996 and $20,000 and $50,000, respectively, for the same two periods in the prior year. In March 1995, two of the Company's current Directors, seven of its former Directors, two of its current officers and one former officer were named as defendants in a lawsuit filed in state district court in Dallas, Texas by the same plaintiffs as in the Griffin Case. In addition, nine of the Company's current and former Directors have been named as defendants in two class action lawsuits filed in the Delaware Chancery Court in Wilmington. See Note 3. Commitments and Contingencies - - Griffin Cases and Devere and Nealon Cases. In accordance with the Bylaws of the Company, the defendants have executed written undertakings to repay the Company for any such expenses advanced on their behalf if it is later found that such costs were not subject to indemnification by the Company. Although the plaintiffs in the Griffin Case have requested that the court prohibit the advancement of such defense costs, the Company believes it has indemnification obligations to the defendants as a result of the lawsuits. The total legal costs incurred related to these cases in the three and nine months ended September 30, 1996 were $12,000 and $35,000, respectively, and $120,000 and $456,000, respectively for the three and nine months ended September 30, 1995. The trial court in the Griffin Case entered its amended final judgment in October 1994 with respect to certain related party transactions on derivative claims against the General Partners and in favor of the Company. Cloyce K. Box died in October 1993. The Company has filed a claim against the Estate in the Probate Court for Collin County, Texas seeking to recover the full amount of the judgment, including certain attorney's fees and costs as described below. The Partnership Agreement provided that the General Partners were to be indemnified for litigation expenses in certain situations in which they were sued in their capacity as general partners of the Predecessor Partnership. Accordingly, the Predecessor Partnership, and later the Company, paid the legal expenses and other defense costs of the General Partners during a large portion of the Griffin Case litigated. These payments were required under the Partnership Agreement as a result of the General Partners' execution of written undertakings to repay the Company for any such litigation expenses advanced on their behalf if it was later determined that such advancements were not subject to indemnification by the Company. The Company did not pay the legal expenses and other defense costs of the General Partners after February 1994. After the decision of the Fifth Circuit was handed down, the General Partners sought and received reimbursement from the Company of these legal fees for the period March 1994 to April 1996 in the amount of $1.4 million. Since that date, the indemnified parties have incurred additional litigation expenses of approximately $42,000, which the Company has advanced or is obligated to advance. In its claim in the Probate Court described above, the Company is seeking to recover from the Estate an amount of attorneys' fees and costs equal to the percentage of attorneys' fees and costs attributable to the defense of the derivative claims as to be determined by the district court in connection with the plaintiffs' request for attorneys' fees and costs. The Fifth Circuit, however, reversed the award of plaintiffs' attorneys' fees and costs. If another judgment is obtained against the defendants in a new trial, it is doubtful that a significant portion of the judgment, including attorneys' fees and costs, will be recovered by the Company against the Estate because of the uncertainties surrounding the value and the liquidity of the net assets of the Estate and Associates and the amount of other claims pending against the Estate. Note 3. Commitments and Contingencies Griffin Cases The Griffin, et al. v. Box, et al case was filed in November 1987 in the United States District Court for the Northern District of Texas in Dallas. The plaintiffs are a small group of former unitholders of the Predecessor Partnership, including J.R. Simplot, a former unitholder whose units of the Predecessor Partnership have since been converted to approximately 15% of the Company's Class B (Non-Voting) Common Stock. The defendants are Cloyce K. Box and Associates (the "General Partners"), the Predecessor Partnership and Box Brothers. The Estate was substituted in the place of Cloyce K. Box in the litigation after his death in October 1993. As a result of the Corporate Conversion, the Company will receive all benefits, and will suffer all detriments, if any, of the Predecessor Partnership in the litigation. Plaintiffs made two types of claims. First, plaintiffs sought individual damages for alleged securities law violations and a declaratory judgment regarding their voting rights. All of the plaintiffs' claims for individual damages and voting rights were denied by the district court at trial in October 1992. Secondly, plaintiffs brought derivative claims on behalf of the Predecessor Partnership alleging that the General Partners breached the Partnership Agreement, breached fiduciary duties and violated an implied covenant of good faith and fair dealing in relation to three transactions. The derivative defendants' motion that the plaintiffs lacked standing on the derivative claims was rejected by the district court. The first transaction was the 1985 purchase of an interest in an oil pipeline by Petroleum. See Note 2. Related Party Transactions. The second transaction involved the amount of general and administrative expenses paid by the Predecessor Partnership before the Corporate Conversion. The third transaction was a loan made by the Predecessor Partnership to an unaffiliated individual. Plaintiffs alleged actual damages of $20.0 million and punitive damages of $60.0 million. In addition, plaintiffs alleged that the General Partners engaged in racketeering activities in relation to the three transactions. In October 1992, the jury returned a verdict on the derivative claims finding that the General Partners did not breach the Partnership Agreement but breached fiduciary duties and an implied covenant of good faith and fair dealing arising from the Partnership Agreement. The jury awarded actual damages of approximately $20.0 million and future damages of approximately $6.2 million in favor of the Predecessor Partnership and against the General Partners relating to the pipeline transaction. Minor damages were awarded on the general and administrative expenses issue while no damages were awarded based on the loan transaction. In addition, the jury found no violation of the racketeering statutes. Punitive damages of approximately $2.2 million were awarded against Cloyce K. Box. In March 1994, the district court entered its initial judgment in favor of the Company and against the Estate and Associates for $20.1 million for past damages and against the Estate for $2.2 million for punitive damages. In addition, the judgment imposed a constructive trust for the benefit of the Company upon the pipeline interest owned by Petroleum, in lieu of the $6.2 million in future damages included in the verdict. The judgment also dismissed the plaintiffs' claims for individual damages and voting rights for their Class B (Non-Voting) Common Stock. In its amended final judgment issued in October 1994, the district court added prejudgment and post judgment interest. In a separate order, the district court granted the plaintiffs' motion for attorneys' fees and costs without specifying the amount awarded. The plaintiffs sought $3.5 million in attorneys' fees and costs. The plaintiffs, the Estate, Associates and Petroleum all filed notices of appeal in the Griffin case to the Fifth Circuit. In its opinion in the Griffin case issued May 2, 1996, the Fifth Circuit (i) reversed the judgment and related damages against the Estate and Associates, and remanded the case for a new trial because of the jury's inconsistent answers to the liability issues; (ii) ruled that the trial court's imposition of the constructive trust was improper; (iii) affirmed the trial court's dismissal of the plaintiffs' individual claims for monetary damages; (iv) ruled that one plaintiff, James Lyle, was an original limited partner and remanded the case for a new trial to decide the number of voting shares to which he is entitled; (v) remanded the case for further fact findings to decide whether two other plaintiffs, Hayden McIlroy and B. R. Griffin, were original limited partners and the amount, if any, of voting stock to which they are entitled; (vi) affirmed the trial court's judgment that plaintiffs J. R. Simplot and David Hawk were not entitled to voting stock; and (vii) found that the trial court had erred in granting plaintiffs' attorneys fees. On October 7, 1996, the Plaintiffs application to the United States Supreme Court for appellate review of the Fifth Circuit's decision was denied. In February and March 1995, the same plaintiffs as in the Griffin case filed two actions against the Company, all of its then current directors, two of its former directors, its then current vice president and chief financial officer, its senior vice president/operations and its vice president and controller in the state district court in Dallas, Texas. In their actions, the plaintiffs allege that the defendants breached their fiduciary duty to the Company in relation to the collection of the trial court judgment entered in favor of the Company in the Griffin case. The plaintiffs further allege conflicts of interest among the directors, misappropriation of corporate assets, breaches of good faith and fair dealing, and wrongful payment of certain attorney's fees in the Griffin case. These claims are apparently alleged both on behalf of the plaintiffs as individuals and derivatively on behalf of the Company. The damages sought exceed $50.0 million plus $100.0 million in punitive damages against each defendant. The action has been abated pending resolution of the underlying case on appeal to the United States Supreme Court, which denied certiorari on October 7, 1996. The defendants are expected to defend the action vigorously. The Company anticipates that it will be required to advance the defense costs of the defendants during the litigation although the plaintiffs have requested that the court prohibit the advancement of such defense costs. In addition, the Company may have indemnification obligations to the defendants because of the lawsuit. Phillips Petroleum Case In August 1990, Phillips Petroleum Company ("Phillips") brought an action against the Predecessor Partnership now pending in state court in Orleans Parish, Louisiana, claiming that Phillips is entitled, pursuant to its 33% Net Profits interest in South Pass Block 89, to receive an overriding royalty interest for months in which monthly net profits were not achieved. In addition, Phillips claims that the net profits account is being charged an excessive oil transportation fee. In September 1991, this lawsuit was amended by Phillips to include a claim that the entire $69.6 million lump sum cash payment received by the Predecessor Partnership in its 1990 settlement of litigation with Texas Eastern Transmission Corporation ("Texas Eastern Settlement") should have been credited to the net profits account. Under this latter claim, Phillips alleges damages in excess of $21.5 million. The Company previously credited the net profits account with $5.8 million of the $69.6 million received in the Texas Eastern Settlement, which is all of the Texas Eastern Settlement proceeds that the Company believes should be credited to the net profits account. On the first two claims, Phillips alleges aggregate damages of several million dollars. Phillips further seeks double damages, interest, attorneys' fees and cancellation of the farmout agreement. The Company is vigorously defending the litigation on the basis that such amounts are not payable under the Net Profits interest and that Phillips is not entitled to any of the damages sought. In March 1993, Phillips filed a motion for summary judgment on its claim relating to the Texas Eastern Settlement. That motion was denied by the court in July 1993. Discovery is ongoing by both parties. A new trial date of March 31, 1997 has been set by the court. Devere and Nealon Cases Two class actions, one styled Melissa Devere v. John F. Arning, Don D. Box, Thomas D. Box, Kent R. Hance, Sr., John L. Kelsey, Alan C. Shapiro, Norman W. Smith, Ewell Doak Walker and Box Energy Corporation, and the other styled Caren M. Nealon and B. Peter Knudson v. John F. Arning, Don D. Box, Thomas D. Box, Kent R. Hance, Sr., John L. Kelsey, Alan C. Shapiro, Norman W. Smith, Ewell Doak Walker, Richard S. Whitesell, Jr. and Box Energy Corporation, were filed in the Chancery Court of Delaware in Wilmington in April and May 1995, respectively. In both cases the plaintiffs are shareholders of the Company's Class B (Non-Voting) Common Stock. The defendants are the Company and its then current Board of Directors. Richard S. Whitesell, Jr., a former director, has been dismissed from the cases. The actions allege that the Company failed to make a proper response to offers or overtures previously made to purchase the Company's stock by J.R. Simplot and Phoenix Canada Oil Co. Ltd. and has failed to solicit other offers for the sale of the Company. The Company believes these class actions are without legal merit and will defend the suits vigorously. The cases have been consolidated. All of the defendants have filed or joined a motion seeking to dismiss the consolidated case. Further, the defendants have filed a motion to stay discovery while the motion to dismiss is pending. The court has yet to set a briefing schedule for either motion. The Company cannot predict when these motions will be resolved or the outcome of these cases. Other Contingencies The Company is not a party to any material pending legal proceedings other than that described or referred to above. If the Company is not successful in one or more of the foregoing suits, an adverse judgment could have a material adverse effect on the Company. Potential Royalties Liability In May 1993, the United States Department of the Interior's Minerals Management Service ("MMS") stated a new position that royalties are payable on gas contract settlement proceeds to resolve take-or-pay, buy-out, buy-down or pricing disputes involving a federal government oil and gas lease. The Company has complied with all filing requirements and disclosed the Texas Eastern Settlement to the MMS. Relying on the holding by the Fifth Circuit in a case styled Diamond Shamrock Exploration Co. v. Hodel and a prior rule of the MMS, the Company paid a one-sixth royalty to the MMS on $5.8 million of the $69.6 million received in the Texas Eastern Settlement, which is all of the royalty that the Company believes is due on the Texas Eastern Settlement proceeds. It is uncertain whether the MMS will accept the Company's calculation of royalty on the Texas Eastern Settlement. The ultimate outcome of these events or potential claims made by the MMS against the Company, if any, cannot be determined at this time. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations In addition to historical information, this discussion contains certain forward-looking statements that involve risk sand uncertainties about the business, long-term strategy, financial condition and future of the Company. Factors that may affect future results are included in the discussion below and in Part I, Items 1 and 2 of the Company's Form 10-K for the year ended December 31, 1995. Actual results could differ materially from those forward-looking statements. Liquidity and Capital Resources On September 30, 1996, the Company's current assets exceeded its current liabilities by $37.7 million. On December 31, 1995 the Company's current assets exceeded its current liabilities by $47.4 million. The $9.7 million decrease primarily resulted from an increase in current liabilities from drilling costs and reorganization costs accrued at September 30, 1996 and a decrease in cash and cash equivalents from higher capital expenditures paid in excess of cash flow from operations during the nine months ended September 30, 1996. Cash, cash equivalents and marketable securities totaled $41.7 million on that date compared to $46.4 million at year end. The ratio of the Company's current assets to current liabilities on September 30, 1996 was 4.2 to 1. Cash flow from operations for the first nine months of 1996 increased by $11.0 million, or 70%, to $26.8 million when compared to the first nine months of 1995. The increase resulted primarily from a 40% increase in cash received from oil and natural gas sales because of higher oil and natural gas production and higher average prices. Oil production increased primarily because of a full nine months of oil production from South Pass Block 87 and several new onshore properties. Natural gas production increased primarily because of production from South Pass Block 87 and Main Pass Block 262. Oil and natural gas production from South Pass Block 87 began in May 1995 and natural gas production from Main Pass Block 262 began in March 1996. The combined production from these two properties in September 1996 was 1,400 BOPD and 11.7 MMcfgd, net to the Company's interest. The Company's net production from all properties during September 1996 was 2,600 BOPD and 22.8 MMcfgd. Average oil and natural gas prices increased significantly during the nine months ended September 30, 1996 when compared to average prices for the nine months ended September 30, 1995. Average oil prices increased $2.65 to $19.33 and the average spot prices for natural gas increased $0.78 to $2.54 for the nine months ended September 30, 1996. In addition, the contract price for South Pass Block 89 production increased 10% under the terms of the long-term natural gas sales contract covering production from this block. The increase in the spot price for natural gas is significant in that almost 50% or 3.0 Bcf of the natural gas produced by the Company for the first nine months of this year was sold on the spot market compared to 22% or 0.9 Bcf for the first nine months ended September 30, 1995. The Company's long-term natural gas sales contract covering production from South Pass Block 89 requires the gas purchaser to take or pay for 80% of the Seller's Delivery Capacity from the Company's gas wells, which is now 8.1 MMcfgd, or 6.7 MMcfgd after payment of royalties. The gas contract does not limit the sales of casinghead gas from the Company's oil wells in South Pass Block 89. The Company is currently sidetracking Well B-11S into the U-sand gas cap reservoir and expects such activity to be finished during the fourth quarter of this year. Future revenues, net income and cash flow from operations are dependent upon natural gas produced from U-sand gas wells in the Platform "B" area because of the high production rate from a limited number of such wells and the high contract price for natural gas production from those wells. During the first nine months of 1996 approximately 57% or $28.1 million of the total oil and natural gas revenues received by the Company are from natural gas sales from South Pass Block 89. Unforeseen mechanical or other failures of these wells or significant reductions in estimated natural gas reserves can potentially have an immediate and significant impact on the operations of the Company. The Company will attempt to reduce these risks by establishing and maintaining multiple take points from this reservoir and by continuing its on-going efforts to diversify its oil and natural gas production by obtaining production from areas outside South Pass Block 89. The Company has reduced the concentration of natural gas revenue from South Pass Block 89 to 57% of total oil and natural gas revenues for the nine months ended September 30, 1996 from 72% for the full year 1995 and 80% for the full year 1994. The Company's capital expenditures for the first nine months of 1996 increased by 97% to $31.3 million from $15.9 million for the same nine-month period in the prior year. The following table presents the capital expenditures by area for the nine months ended September 30, 1996 and the capital expenditures budget for the remaining three months of 1996. Nine Months Budget for Three Ended September 30, Months Ended Area 1996 December 31, 1996 ________________________ ________________ _________________ (In thousands) South Pass Blocks 86, 87 and 89 and West Delta Block 128 $ 2,700 $ 1,300 Gulf of Mexico 18,900 3,500 West Texas / New Mexico 2,300 100 South Texas 1,700 200 Alabama / Mississippi 5,500 1,200 Miscellaneous 200 0 ________________ ________________ Total Capital Expenditures $ 31,300 $ 6,300 ================ ================ Capital expenditures for the Gulf of Mexico area included approximately $4.2 million for platform fabrication, drilling and completion costs of two Main Pass Block 262 wells, $7.9 million for an exploratory well in Ship Shoal Block 352, $1.8 million for an exploratory well in High Island Block 576, $1.4 million for an exploratory well in Eugene Island Block 135 and $866,000 for an exploratory well in West Cameron Block 365. Other Gulf of Mexico capital expenditures totaling $2.6 million include costs incurred in acquiring additional offshore blocks. The Company plans to sell or exchange part of its working interest in one or more of these blocks for interests in other offshore blocks. During the first nine months of 1996, the Company drilled six wells in the West Texas / New Mexico area, six wells in South Texas and ten wells in the Alabama / Mississippi area. Seven of these 22 wells are completed or being completed. Additional reserves from these wells have not yet been estimated. The capital investment and exploration budget for the remaining three months of 1996 include amounts budgeted for two exploratory wells in the Gulf of Mexico area, one well in the West Texas / New Mexico area, three wells in the South Texas and three exploratory wells and one development well in the Alabama / Mississippi area. The Company believes that its capital investment and exploration budget will be primarily funded from cash flow from operations throughout the year with additional capital requirements being met by existing cash and cash equivalents or sales of marketable securities, if required. During 1996, the Company purchased high-grade fixed income securities with excess cash in order to obtain a higher yield on cash and cash equivalents. The securities have an "AA" rating, or higher, and maturities of less than seven years. The Company's line of credit facility with a bank in the amount of $25.0 million was renewed in June 1996 and will be effective until June 1997. The line of credit with a current borrowing base of $10.0 million is collateralized by the Company's South Pass oil and gas properties. The Company has issued letters of credit to the MMS totaling $150,000 against this line of credit in connection with the Company's oil and gas leases in the Gulf of Mexico. The Company entered into severance agreements with its employees in December 1995. The severance agreements require certain payments to employees upon termination of employment, in certain instances, during a period of two years after a change in control (as defined in the severance agreements). Terminations providing severance benefits include terminations by the Company other than for cause (as defined in the severance agreements) or by the employee following a change in control and upon the occurrence of certain events adversely affecting the employee's employment. When the certain stockholder consents became effective on July 30, 1996, a change in control, as defined in the severance agreements, occurred. The total estimated cost under the severance agreements, if all severance agreement became effective, is $5.4 million. As of September 30, 1996, twelve employees were dismissed, reached agreements to terminate employment or were notified of their impending termination. Amounts totaling $1.9 million relating to terminated employees, were charged to reorganization expense for the period ending September 30, 1996. The Company can not currently estimate whether any additional severance claims will be made or the likelihood of future payments of severance benefits. See Notes to Financial Statements - Note 1. Accounting Policies and Basis of Presentation - Severance Agreements. The Company's liquidity and capital resources could be adversely affected if the Company were to make a significant acquisition of properties, if certain pending litigation were resolved in a manner adverse to the Company, See Notes to Financial Statements Note 3. Commitments and Contingencies, if oil or natural gas prices received by the Company were to decline or if oil or natural gas production or reserves were to decline. Depending on the nature, amount and timing of any such event, the effect on the Company could be material. Results of Operations The Company recorded a net loss for the third quarter of 1996 of $3.1 million, or $0.15 per share, and a net loss of $4.2 million, or $0.20 per share, for the first nine months of 1996. The loss primarily resulted from dry hole costs totaling $15.2 million for the first nine months of 1996, reimbursement for litigation expenses in the Griffin case and reorganization costs incurred in the third quarter. These expenses were partially offset by 6% and 26% increases in total revenues for the three and nine month periods ended September 30, 1996, respectively, when compared to the same periods in the prior year. Net sales volumes and average sales prices of the Company's oil and natural gas production (including the proceeds from the sale of liquids extracted from the natural gas) for the three and nine months ended September 30, 1996 and 1995 were as follows: Three Months Ended Nine Months Ended September 30, % September 30, % 1996 1995 Change 1996 1995 Change ______ ______ ______ ______ ______ ______ Net sales volumes: Oil (MBbls): Platform "B" 40 74 -46% 148 230 -36% Platform "C 47 70 -33% 146 220 -34% Platform "D" 118 101 17% 345 135 156% Other-all onshore 23 7 229% 55 7 686% ______ ______ ______ ______ ______ ______ Total oil volumes 228 252 -10% 694 592 17% ====== ====== ====== ====== ====== ====== Natural gas (MMcf): Platform "B" 638 813 -22% 2,335 2,475 -6% Platform "C" 323 433 -25% 965 1,216 -21% Platform "D" 822 330 149% 1,926 416 363% Main Pass Block 262 81 0 n/a 856 0 n/a Other-all onshore 24 0 n/a 41 0 n/a ______ ______ ______ ______ ______ ______ Total natural gas volumes 1,888 1,576 20% 6,123 4,107 49% ====== ====== ====== ====== ====== ====== Average sales prices: Oil (per Bbl) $19.77 $16.08 23% $19.33 $16.68 16% Natural gas (per Mcf) $ 5.40 $ 6.19 -13% $ 5.86 $ 6.92 -15% Total oil revenues increased by $462,000, or 11%, during the third quarter of 1996 and by $3.5 million, or 36%, during the first nine months of 1996 when compared to same periods in the prior year, respectively. The increase in oil revenues for the third quarter of 1996 resulted from a $3.69 increase in the average prices which increased oil revenues $781,000. Offsetting this increase was a net 24,000 barrel decrease in oil production, primarily from Platforms "B" and "C", which decreased oil revenues $319,000. A full nine months of production from Platform "D" combined with oil production from other new areas increased oil revenues $4.3 million. In addition, a $2.65 increase in average prices increased revenues an additional $1.9 million. However, decreases in oil production from the natural depletion of oil reserves located in the Platform "B" and "C" areas offset the increases in oil revenues by $2.7 million. Natural gas revenues increased by $453,000, or 5%, for the third quarter of 1996 and by $7.5 million, or 26%, for the first nine months of 1996 when compared to the same periods in the prior year. The increases were the result of a net increase in natural gas production and increased natural gas prices. First, natural gas revenues increased by $841,000 and by $2.6 million for the three and nine months ended September 30, 1996, respectively, as a result of natural gas production from Platform "D" and by $139,000 and by $1.9 million for the three and nine months ended September 30, 1996, respectively, from initial non- South Pass natural gas production, primarily from Main Pass Block 262. The increases in natural gas production from these areas were partially offset by lower natural gas production from Platforms "B" and "C" which decreased natural gas revenues $1.9 million and $1.7 million for the three and nine months ended September 30, 1996 respectively. Second, natural gas prices from wells in South Pass Block 89 increased by 10% on January 1, 1996, in accordance with the Company's long-term gas sales contract, and natural gas spot prices increased by 44% and 32% for the third quarter of 1996 and first nine months of 1996, respectively, when compared to the same periods of 1995. The increase in sales prices added $1.3 million and $4.6 million to natural gas revenues for the three and nine months ended September 30, 1996, respectively. Operating expenses increased by 17%, or $226,000, for the third quarter of 1996 compared to the third quarter of 1995 and by 27%, or $1.0 million, for the nine months of 1996 compared to the first nine months of 1995. The increase resulted from the beginning of operations on several new properties, primarily South Pass Block 87 and Main Pass Block 262 but also including several new on-shore properties. Net Profits expense decreased by $1.0 million for the third quarter of 1996 due to lower natural gas revenues and higher capital expenditures from South Pass Block 89 for the three month period ended September 30, 1996. Net Profits expense increased $832,000, or 10%, during the nine months ended September 30, 1996, when compared to the same period in 1995 because of higher natural gas revenues from South Pass Block 89 for the nine months then ended. Exploration expense increased by $5.6 million for the three months ended September 30, 1996 and by $14.0 million for the nine months ended September 30, 1996 primarily because of an increase in dry hole expense. During the first nine months of 1996, the Company drilled three non- commercial exploration wells in the Gulf of Mexico: Ship Shoal Block 352 at a total cost of $7.9 million, High Island Block 576 at a total cost of $1.8 million and West Cameron Block 365 at a total cost of $866,000. The remaining $4.6 million in dry hole costs are primarily related to unsuccessful exploration drilling in the onshore areas of exploration. Depreciation, depletion and amortization expense increased by $764,000, or 19%, for the third quarter of 1996 and by $2.7 million, or 26%, for the first nine months of 1996 when compared to the same periods in the prior year. This increase was due to the commencement of depreciation, depletion and amortization of Platform "D" and other new oil and natural gas properties. General and administrative expenses increased by 54%, or $1.2 million, and by 38%, or $2.4 million, for the three and nine months ended September 30, 1996, respectively. The increase was attributable to increased legal and professional fees which included legal expenses related to reimbursement of legal fees and costs payable to the Estate for litigation costs incurred with respect to the Griffin case, See Notes to Financial Statements - Note 2. Related Party Transactions and Note 3. Commitments and Contingencies - Griffin cases, litigation costs related to the Phillips Petroleum case, See Notes to Financial Statements - Note 3. Commitments and Contingencies -Phillips Petroleum case, and legal fees and costs related to the study to determine whether the issuance of shares of the Company in the Corporate Conversion as Class B (Non-Voting) Common Stock, rather than Class A (Voting) Common Stock, to certain holders was in accordance with the Fifth Circuit's opinion in the Griffin Case. See Notes to Financial Statements - Note 1. Accounting Policies and Basis of Presentation - Common Stock. Reorganization costs totaling $1.9 million were accrued during the third quarter of 1996 as a result of the termination of several employees in accordance with the terms of severance agreements. See Notes to Financial Statements - Note 1. Accounting Policies and Basis of Presentation - Severance Agreements. In the first quarter of 1995, the Company accrued $723,000 as reorganization costs for the discontinuance of certain administrative positions in the Dallas office and closing other offices. Income tax expense or benefit decreased for the third quarter and first nine months of 1996 because of the net loss before income taxes incurred during both periods. PART II. OTHER INFORMATION Item 1. Legal Proceedings Incorporated herein by this reference is the discussion of litigation set forth in Part I, Item 1, Note 3 of this Form 10-Q. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders On June 27, 1996 Box Brothers, as the record and beneficial holder of approximately 57% of the outstanding Class A (Voting) Common Stock of the Company, delivered a Written Consent executed by Box Brothers pursuant to Section 228 of the Delaware General Corporation Law that (i) amended the Company's By-Laws to permit the removal of directors without cause, (ii) removed all the then current directors except Don D. Box and Alan C. Shapiro, (iii) fixed the number of the directors of the Company at seven and elected the following as directors of the Company: Don D. Box; Alan C. Shapiro; Glen Adams; Daryl L. Buchanan; Richard D. Squires; Thomas D. Rollins; and Bernay C. Box. The effective date of the Written Consent was July 30, 1996. Subsequently, written consents to the same effect, executed by Messrs. Georges and Rutherford, the record holders of 23% of the Company's Class A (Voting) Common Stock, were delivered to the Company. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 3.1* Certificate of Incorporation, as amended. 3.2* By-laws. 4.1* Form of Indenture. 10.1* Amended and Restated Certificate and Articles of Limited Partnership of OKC Limited Partnership. 10.2* Restatement and Amendment of Gas Purchase Contract Dated July 15, 1982, as amended October 5, 1982 and December 21, 1982 and December 26, 1984. 10.3* Offshore Operating Agreement (SLAM Group), dated as of January 1, 1977, as amended. 10.4* Farmout Agreement with Aminoil USA, Inc., effective May 1, 1977, dated May 9, 1977. 10.5* Assignment of Lease, dated May 26, 1977. 10.6* Oil and Gas Lease of Submerged Lands under the Outer Continental Shelf Lands Act dated July 1, 1967, covering all of Block 89, South Pass Area, South and East Addition, by the United States of America, as Lessor, dated July 1, 1967, said lease having been assigned to Box Energy Corporation as of April 15, 1992. 10.7* Oil and Gas Lease of Submerged Lands under the Outer Continental Shelf Lands Act dated July 1, 1967, covering all of Block 86, South Pass Area, South and East Addition, by the United States of America, as Lessor, dated July 1, 1983, said lease having been assigned to Box Energy Corporation as of April 15, 1992. 10.8* Oil and Gas Lease of Submerged Lands under the Outer Continental Shelf Lands Act dated July 1, 1967, covering all of Block 87, South Pass Area, South and East Addition, by the United States of America, as Lessor, dated September 1, 1985, said lease having been assigned to Box Energy Corporation as of April 15, 1992. 10.9* Transportation Agreement with CKB Petroleum, Inc. dated March 1, 1985, as amended on April 19, 1989. 10.10* Agreement of Compromise and Amendment to Farmout Agreement, dated July 3, 1989. 10.11* Settlement Agreement with Texas Eastern Transmission Corporation, dated November 14, 1990. 10.12* Guarantee of Panhandle Eastern Corporation, dated November 21, 1990. 10.13* Bill of Sale and Assumption of Obligations from OKC Limited Partnership, dated April 15, 1992. 10.14* Asset Purchase Agreement, dated April 15, 1992. 10.15* Sales Agreement with Marathon Oil Company, effective April 1, 1992, dated June 2, 1992, with Amendment, effective June 8, 1992. 10.16* Sales Agreement with Marathon Oil Company, effective April 1, 1992, dated June 18, 1992. 10.17* 1992 Incentive Stock Option Plan of Box Energy Corporation. 10.18* 1992 Non-Qualified Stock Option Plan of Box Energy Corporation. 10.19** Pension Plan of Box Energy Corporation, effective April 16, 1992. 10.20# First Amendment to the Pension Plan of Box Energy Corporation dated December 16, 1993. 10.21# Platform Sharing Agreement, effective December 10, 1993, regarding Platform "D" in South Pass Block 87. 10.22## Secured Revolving Credit Loan Agreement by and between Box Energy Corporation, as borrower, and Comerica Bank-Texas, as lender, dated May 13, 1994. 10.23## Revolving Credit Note dated May 13, 1994, in the maximum principal amount of $25.0 million executed by Box Energy Corporation, payable to Comerica Bank-Texas. 10.24## Act of Mortgage and Security Agreement dated May 13, 1994, executed by Box Energy Corporation in favor of Comerica Bank-Texas. 10.25## Second Amendment to the Pension Plan of Box Energy Corporation dated December 31, 1994. 10.26+ Form of Executive Severance Agreements dated as of December 12, 1995 by and between Box Energy Corporation and key employees. 10.27+ Form of Letter Agreements regarding severance benefits dated as of December 12, 1995 by and between Box Energy Corporation and employees not covered by Executive Severance Agreements. 10.28+ First Amendment to Secured Revolving Credit Loan Agreement dated May 13, 1996 by and between Box Energy Corporation and Comerica Bank-Texas. 10.29+ Renewal and Extension Revolving Credit Note dated May 13, 1996, in the maximum principal amount of $25.0 million executed by Box Energy Corporation, payable to Comerica Bank-Texas. 11.1 Statement regarding computation of earnings per share. 27 Financial Data Schedule (b) The Company filed a Form 8-K during the quarter ended September 30, 1996 which reported the Company's dismissal of Coopers & Lybrand L.L.P. as independent accountants and the retaining of Arthur Andersen LLP as the Company's independant accountants for 1996. - ------------------ *Incorporated by reference to the Company's Registration Statement on Form S-2 (file number 33-52156) filed with the Commission and effective on December 1, 1992. **Incorporated by reference to the Company's Form 10-K (file number 1- 11516) for the fiscal year ended December 31, 1992 filed with the Commission and effective on or about March 30, 1993. #Incorporated by reference to the Company's Form 10-K (file number 1- 11516) for the fiscal year ended December 31, 1993 filed with the Commission and effective on or about March 30, 1994. ##Incorporated by reference to the Company's Form 10-K (file number 1- 11516) for the fiscal year ended December 31, 1994 filed with the Commission and effective on or about March 30, 1995. +Incorporated by reference to the Company's Form 10-K (file number 1- 11516) for the fiscal year ended December 31,1995 filed with the Commission and effective on or about March 30, 1996. 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. BOX ENERGY CORPORATION Date: November 14, 1996 By: (Don D. Box) ______________________ ___________________________________ Don D. Box Chief Executive Officer and President Date: November 14, 1996 By: (J. Burke Asher) ______________________ __________________________________ J. Burke Asher Chief Accounting Officer EX-11.1 2 BOX ENERGY CORPORATION COMPUTATION OF INCOME PER SHARE Exhibit 11.1 (In thousands, except per share amounts) Three Months Ended September 30, 1996 1995 _____________ _____________ Net income (loss) for primary income (loss) per share $ (3,138) $ 1,918 Interest expense on 8 1/4% convertible subordinated notes 1,145 1,145 Income tax effect (assumed to be 35%) (401) (401) _____________ _____________ Net income (loss) for fully-diluted income (loss) per share $ (2,394) $ 2,662 ============= ============= Primary income (loss) per share $ (0.15) $ 0.09 ============= ============= Fully-diluted income (loss) per share $ (0.09) $ 0.10 ============= ============= Calculation of weighted average shares Class A (Voting) Common Stock 3,250 3,250 Class B (Non-voting) Common Stock 17,553 17,553 Stock options considered common stock equivalents 0 0 _____________ _____________ Total shares used for primary income (loss) per share 20,803 20,803 Contingent shares from remaining stock options granted 331 243 Contingent shares from 8 1/4% convertible subordinated notes 5,007 5,007 _____________ _____________ Total shares used for fully-diluted income (loss) per share 26,141 26,053 ============= ============= Nine Months Ended September 30, 1996 1995 _____________ _____________ Net income (loss) for primary income (loss) per share $ (4,194) $ 3,493 Interest expense on 8 1/4% convertible subordinated notes 3,411 3,399 Income tax effect (assumed to be 35%) (1,194) (1,190) _____________ _____________ Net income (loss) for fully-diluted income (loss) per share $ (1,977) $ 5,702 ============= ============= Primary income (loss) per share $ (0.20) $ 0.17 ============= ============= Fully-diluted income (loss) per share $ (0.08) $ 0.22 ============= ============= Calculation of weighted average shares Class A (Voting) Common Stock 3,250 3,250 Class B (Non-voting) Common Stock 17,553 17,553 Stock options considered common stock equivalents 4 0 _____________ ____________ Total shares used for primary income (loss) per share 20,807 20,803 Contingent shares from remaining stock options granted 313 282 Contingent shares from 8 1/4% convertible subordinated notes 5,007 5,007 _____________ ____________ Total shares used for fully-diluted income (loss) per share 26,127 26,092 ============= ============ EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOX ENERGY CORPORATION'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000874992 BOX ENERGY CORPORATION 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 13049 28622 6795 0 0 49885 184521 106628 144937 12145 555077 0 0 20803 56912 144955 49273 52757 45065 55682 0 0 3676 (6601) (2407) (4194) 0 0 0 (4194) (.20) (.20)
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