UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
Commission File Number 1-11566
A. Full title of the plan and the address of the plan, if different from that of the issuer names below:
MarkWest Hydrocarbon, Inc. 401(k) Savings and Profit Sharing Plan
B. Name of the issuer of the securities held pursuant to the plan and the address of its principal executive office:
MarkWest Hydrocarbon, Inc.
155 Inverness Drive West, Suite 200
Englewood, CO 80112-5000
MarkWest Hydrocarbon, Inc. 401(k) Savings and Profit Sharing Plan
Index to Financial Statements and Supplemental Schedule
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Audited Financial Statements: |
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Statements of Net Assets Available for Benefits at December 31, 2002 and 2001 |
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Supplemental Schedule: |
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EXHIBIT:
23.1 | Consent of PricewaterhouseCoopers LLP for the MarkWest Hydrocarbon, Inc. 401(k) Savings and Profit Sharing Plan |
NOTE: Certain supplemental schedules have been omitted because they are not applicable.
To the Participants and Administrator of the
MarkWest Hydrocarbon, Inc. 401(k) Savings and Profit Sharing Plan:
In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the financial status of MarkWest Hydrocarbon, Inc. 401(k) Savings and Profit Sharing Plan (the “Plan”) at December 31, 2002 and 2001 and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of Assets Held for Investment is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP |
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PricewaterhouseCoopers LLP | |
Denver, Colorado | |
June 27, 2003 | |
1
MarkWest Hydrocarbon, Inc. 401(k) Savings and Profit Sharing Plan
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
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| 2002 |
| 2001 |
| ||
Assets |
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|
|
|
| ||
Investments, at fair value: |
|
|
|
|
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Mutual funds (Note 4) |
| $ | 5,070,040 |
| $ | 5,479,322 |
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MarkWest Hydrocarbon, Inc. common stock |
| 1,690,970 |
| 1,709,594 |
| ||
Participant loans |
| 185,842 |
| 147,438 |
| ||
|
|
|
|
|
| ||
|
| 6,946,852 |
| 7,336,354 |
| ||
Receivables: |
|
|
|
|
| ||
Employee contributions and employer match |
| 24,246 |
| 19,212 |
| ||
Employer profit sharing |
| 369,208 |
| 338,532 |
| ||
Loan interest receivable |
| 403 |
| 224 |
| ||
|
|
|
|
|
| ||
Net assets available for benefits |
| $ | 7,340,709 |
| $ | 7,694,322 |
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The accompanying notes are an integral part of these financial statements.
2
MarkWest Hydrocarbon, Inc. 401(k) Savings and Profit Sharing Plan
Statements of Changes in Net Assets Available for Benefits
for the years ended December 31, 2002 and 2001
|
| 2002 |
| 2001 |
| ||
Additions |
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|
|
|
| ||
Contributions: |
|
|
|
|
| ||
Participants: |
|
|
|
|
| ||
Deferral |
| $ | 614,837 |
| $ | 574,089 |
|
Rollover |
| 28,476 |
| 13,038 |
| ||
Employer: |
|
|
|
|
| ||
Match |
| 208,127 |
| 198,484 |
| ||
Discretionary |
| 363,760 |
| 338,532 |
| ||
Loans: |
|
|
|
|
| ||
Interest |
| 13,602 |
| 14,310 |
| ||
|
|
|
|
|
| ||
Investment income: |
|
|
|
|
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Net (depreciation) appreciation of investments Mutual funds (Note 4) |
| (999,745 | ) | (763,088 | ) | ||
MarkWest Hydrocarbon, Inc. common stock |
| (217,934 | ) | (1,141,425 | ) | ||
Interest, dividends and other income |
| 117,368 |
| 127,796 |
| ||
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|
|
|
|
| ||
Deductions |
|
|
|
|
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Benefits paid directly to participants |
| 481,110 |
| 121,649 |
| ||
Loan administration fees and other |
| 994 |
| 683 |
| ||
|
|
|
|
|
| ||
Net increase (decrease) |
| (353,613 | ) | (760,596 | ) | ||
|
|
|
|
|
| ||
Net assets available for benefits at beginning of year |
| 7,694,322 |
| 8,454,918 |
| ||
|
|
|
|
|
| ||
Net assets available for benefits at end of year |
| $ | 7,340,709 |
| $ | 7,694,322 |
|
The accompanying notes are an integral part of these financial statements.
3
MarkWest Hydrocarbon, Inc. 401(k) Savings and Profit Sharing Plan
1. Description of Plan
The MarkWest Hydrocarbon, Inc. 401(k) Savings and Profit Sharing Plan (the “Plan”) is a defined contribution plan established on August 1, 1993 under the rules of Internal Revenue Code (the “Code”) Section 401(k). Participants should refer to the Plan Agreement for more complete information.
Participation
All full-time, permanent employees of MarkWest Hydrocarbon, Inc. (the “Company”) are eligible to participate in the Plan. Eligibility to participate begins with the first day of the month following employment.
Employee Contributions
The Plan allows eligible participants to contribute a portion of their salaries or wages to the Plan on a before-tax basis within limits defined by the Plan. The maximum contribution for a participant may not exceed the annual maximum limits established under Code Section 402(g). All income earned from invested contributions accumulates tax deferred until withdrawal.
Participants may change the level of their contribution or suspend contributions entirely to the Plan at any time during the Plan year. Notice of suspension must be made in writing at least 30 days in advance. Rollovers represent funds that new participants bring into the Plan from previous employer-qualified plans.
Company Matching Contributions
The Company provides a matching contribution of 50% of each participant’s contributions up to a maximum of 6% of compensation. Additionally, a discretionary contribution may be made based on the profitability of the Company.
Vesting
Employee contributions are fully vested upon contribution while Company contributions vest at 25% per year of service. Participants are fully vested in the Company contributions after four years of service. The cumulative forfeiture balance of $3,865 and $0 was utilized during 2002 and 2001, respectively, by the Company to offset Company Matching Contributions. At December 31, 2002 and 2001 there was no balance in the forfeiture account. In addition, as of December 31, 2002 and 2001, there was a balance of $79,238 and $66,956 in the unvested forfeiture account.
Distribution of Benefits
Distributions to employees are normally made upon termination of employment upon submission of a written request in accordance with Plan provisions.
At any time, but not more frequently than once a year, a participant with an immediate and critical need may request a hardship withdrawal in an amount no greater than is necessary to satisfy such financial hardship. Such request must receive approval of the Company’s benefit administrator.
Participant Loans
Loans are interest bearing at 1% above the published prime rate and are limited to the lesser of $50,000 or 50% of a participant’s vested account balance.
2. Summary of Accounting Policies
Basis of Presentation
The financial statements of the Plan have been prepared on the accrual basis of accounting.
Investments
Investments are stated at fair value based on the quoted market price on the last business day of the Plan year. The Plan presents in the statement of changes in net assets available for benefits the net appreciation (depreciation) in fair value of its investments, which consists of realized gains and losses, and the unrealized appreciation (depreciation) on those investments.
4
Administrative Expenses
Certain costs and expenses incurred in establishing, amending and administering the Plan, including the fees and expenses of the trustees, are paid by the Company.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosures of contingent assets and liabilities. Actual results could differ from those estimates.
Risks and Uncertainties
The Plan provides for various investment options in stocks and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participant’s account balances and the amounts reported in the Statements of Net Assets Available for Benefits and the Statements of Changes in Net Assets Available for Benefits.
3. Plan Termination
Although the Company has not expressed any intent to discontinue the Plan, it may do so at any time. In the event of termination of the Plan, participants become fully vested in all accounts and the assets of the Plan and shall be distributed to the participant in proportion to their respective account balances.
4. Investments
All funds are managed by the Trustee. The assets are maintained under ERISA guidelines provided by the Company. The fair values of investments that represent 5% or more of the Plan’s net assets are as follows:
|
| December 31, |
| ||||
|
| 2002 |
| 2001 |
| ||
|
|
|
|
|
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Invesco Dynamics |
| $ | 336,015 |
| $ | 472,708 |
|
Fidelity Blue Chip |
| 904,839 |
| 1,261,057 |
| ||
Fidelity Divd Growth |
| 730,165 |
| 902,951 |
| ||
Fidelity Mgd Inc Port |
| 1,140,124 |
| 949,325 |
| ||
Spartan US Eq Index |
| 581,245 |
| 778,413 |
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MarkWest Hydrocarbon |
| 1,690,970 |
| 1,709,594 |
| ||
During 2002, the Plan’s investments (including gains and losses on investment bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:
|
| December 31, |
| ||||
|
| 2002 |
| 2001 |
| ||
|
|
|
|
|
| ||
Mutual funds |
| $ | (999,745 | ) | $ | (763,088 | ) |
Common stock |
| (217,934 | ) | (1,141,425 | ) | ||
|
|
|
|
|
| ||
|
| $ | (1,217,679 | ) | $ | (1,904,513 | ) |
5
In addition to the Company’s common stock, participating employees have the following fund options in which their contributions may be invested:
Objective:
Seeks growth of capital over the long term.
Strategy:
Normally invests primarily in common stocks of well-known and established companies, domestically and internationally.
Objective:
Seeks high current income and preservation of capital.
Strategy:
Invests approximately 50-75% of its total assets in equity securities and the remainder in U.S. government securities and debt securities. The fund searches for companies selling at a discount as compared with their true underlying value.
Objective:
Seeks capital growth.
Strategy:
Normally invests in common stocks with at least 65% of total assets invested in foreign securities.
Objective:
Seeks capital appreciation.
Strategy:
Normally invests at least 65% of total assets in the common stocks of companies believed to have the potential for dividend growth. Invests in domestic and foreign issuers.
Objective:
Seeks high current income and, as a secondary objective, capital appreciation.
Strategy:
Invests in a combination of Fidelity equity, fixed-income, and money market funds (underlying Fidelity funds) and allocates its assets among these funds according to a stable asset allocation strategy designed for investors already in retirement.
Objective:
Seeks high total return.
Strategy:
Invests in a combination of Fidelity equity, fixed-income, and money market funds (underlying Fidelity funds) and allocates its assets among these funds according to an asset allocation strategy.
6
Objective:
Seeks high total return.
Strategy:
Invests in a combination of Fidelity equity, fixed-income, and money market funds (underlying Fidelity funds) and allocates its assets among these funds according to an asset allocation strategy that becomes increasingly conservative as Freedom 2010 approaches its target retirement date.
Fidelity Freedom 2020 Fund
Objective:
Seeks high total return.
Strategy:
Invests in a combination of Fidelity equity, fixed-income, and money market funds (underlying Fidelity funds) and allocates its assets among these funds according to an asset allocation strategy that becomes increasingly conservative as Freedom 2020 approaches its target retirement date.
Objective:
Seeks high total return.
Strategy:
Invests in a combination of Fidelity equity, fixed-income, and money market funds (underlying Fidelity funds) and allocates its assets among these funds according to an asset allocation strategy that becomes increasingly conservative as Freedom 2030 approaches its target retirement date.
Objective:
Seeks as high a level of current income as is consistent with preservation of capital and liquidity.
Strategy:
Invests in U.S. dollar-denominated money market securities and repurchase agreements and enters into reverse repurchase agreements.
Objective:
The fund seeks to provide investment results that correspond to the total return of the bonds in the Lehman Brothers Aggregate Bond Index.
Strategy:
Normally invests at least 80% of the fund’s assets in bonds included in the Lehman Brothers Aggregate Bond Index. Uses statistical sampling techniques based on duration, maturity, interest rate sensitivity, security structure and credit quality.
Objective:
The fund seeks to provide investment results that correspond to the total return (i.e. the combination of capital changes and income) performance of common stocks publicly traded in the United States.
Strategy:
Normally investing at least 80% of assets in common stocks included in the S&P 500.
7
Invesco Dynamics
Objective:
Seeks capital growth.
Strategy:
The fund invests primarily in the common stocks of rapidly growing mid-sized companies, with market capitalizations generally between $2 billion and $15 billion.
Objective:
The Fund seeks to provide long-term growth of capital.
Strategy:
The fund invests at least 65% of assets in equities of small companies with market capitalizations of less than $2.5 billion or below at the time of purchase.
5. Income Tax Status
The Internal Revenue Service has determined and informed the Company in a letter dated September 24, 1994 that the Plan is qualified and the Trust established under the Plan is tax exempt, under Section 401(k) of the Code. The Company believes that the Plan has been administered in accordance with the changes to the Code effective after the date of such letter, and the Plan has been timely amended to incorporate such changes, it should retain its exempt status. Thus, contribution to the Plan and earnings thereon should not be taxable until distributed to the participant.
6. Related Party Transactions
Certain Plan investments represent shares of registered investment companies managed by Fidelity Management Trust Company as of December 31, 2002 and December 31, 2001. Fidelity Management Trust Company is the trustee as defined by the Plan and, therefore, these investments and investment transactions qualify as party-in-interest transactions.
Certain Plan investments represent shares of common stock of MarkWest Hydrocarbon, Inc. as of December 31, 2002 and December 31, 2001. MarkWest Hydrocarbon, Inc. is the plan sponsor as defined by the Plan and, therefore, these investments and investment transactions qualify as party-in-interest transactions.
8
MarkWest Hydrocarbon, Inc. 401(k) Savings and Profit Sharing Plan
Schedule of Assets Held for Investment Purposes At End of Year
December 31, 2002
(a) |
| (b) |
| (c) |
|
|
| (e) |
| |
|
|
|
|
|
|
|
|
|
| |
|
| Invesco Dynamics |
| 31,521 |
| shares |
| $ | 336,015 |
|
|
|
|
|
|
|
|
|
|
| |
|
| Invesco Small Co. Growth |
| 5,173 |
| shares |
| 43,092 |
| |
|
|
|
|
|
|
|
|
|
| |
|
| Oakmark Equity & Income |
| 2,199 |
| shares |
| 39,568 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
| MarkWest Hydrocarbon, Inc. |
| 296,661 |
| shares |
| 1,690,970 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
| Fidelity Blue Chip Growth Fund |
| 28,329 |
| shares |
| 904,839 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
| Fidelity Diversified International Fund |
| 9,375 |
| shares |
| 160,875 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
| Fidelity Dividend Growth Fund |
| 32,713 |
| shares |
| 730,165 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
| Fidelity Freedom Income |
| 517 |
| shares |
| 5,485 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
| Fidelity Freedom 2000 Fund |
| 4,198 |
| shares |
| 46,215 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
| Fidelity Freedom 2010 Fund |
| 16,438 |
| shares |
| 188,052 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
| Fidelity Freedom 2020 Fund |
| 25,967 |
| shares |
| 276,292 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
| Fidelity Freedom 2030 Fund |
| 9,497 |
| shares |
| 97,253 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
| Fidelity Managed Income Portfolio |
| 1,140,124 |
| shares |
| 1,140,124 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
| Fidelity US Bond Index |
| 46,336 |
| shares |
| 520,820 |
| |
|
|
|
|
|
|
|
|
|
| |
|
| Spartan US Equity Index |
| 18,660 |
| shares |
| 581,245 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
| Participant loans |
| 5.75% - 10.5 | % |
|
| 185,842 |
| |
|
|
|
|
|
|
|
|
|
| |
|
| Total |
|
|
|
|
| $ | 6,946,852 |
|
* Represents a party-in-interest
9
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Administrator of the Plan has duly caused this annual report to be signed on its behalf by the undersigned, hereunto duly authorized.
|
| MARKWEST HYDROCARBON, INC. |
|
| 401(k) Savings and Profit Sharing Plan |
|
|
|
DATE: June 27, 2003 | BY: | /s/ Donald C. Heppermann |
|
| Donald C. Heppermann |
|
| Sr. Vice President Finance, |
|
| Chief Financial Officer and Secretary |
|
| (On Behalf of the Administrator and Principal |
|
| Financial and Accounting Officer) |
10
Exhibit |
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23.1 |
| Consent of PricewaterhouseCoopers LLP for the MarkWest Hydrocarbon, Inc. 401(k) Savings and Profit Sharing Plan |
11
