- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) January 29, 1998
(November 21, 1997)
MARKWEST HYDROCARBON, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-11566 84-1352233
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
155 Inverness Drive West, Suite 200, Englewood, CO 80112-5004
(Address of principal executive offices)
Registrant's telephone number, including area code: 303-290-8700
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This Current Report on Form 8-K/A amends the Current Report on Form 8-K filed by
MarkWest Hydrocarbon, Inc. on December 3, 1997 solely to add the financial
statements of the business acquired, West Shore Processing Company, L.L.C., as
required by Item 7(a), the pro forma financial information required by Item 7(b)
and the exhibit(s) required by Item 7(c).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
WEST SHORE PROCESSING COMPANY, L.L.C.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM MAY 6, 1996
TO DECEMBER 31, 1996
TABLE OF CONTENTS
Report of Independent Accountants............................................ 1
Consolidated Balance Sheet................................................... 2
Consolidated Statement of Operations......................................... 3
Consolidated Statement of Cash Flows......................................... 4
Consolidated Statement of Changes in Members' Capital........................ 5
Notes to Consolidated Financial Statements................................... 6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of West Shore Processing Company, L.L.C.
In our opinion, the accompanying consolidated balance sheet and related
consolidated statements of operations, of cash flows and of changes in members'
capital present fairly, in all material respects, the financial position of West
Shore Processing Company, L.L.C. at December 31, 1996, and the results of its
operations and its cash flows for the period from May 6, 1996 to December 31,
1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards 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 audit provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Denver, Colorado
April 18, 1997
1
WEST SHORE PROCESSING COMPANY, L.L.C.
CONSOLIDATED BALANCE SHEET
ASSETS September 30, December 31,
1997 1996
------------- ------------
(unaudited)
Current assets:
Cash and cash equivalents..................... $ 600,419 $ 62,224
Trade receivables............................. 808,671 209,976
Receivables from affiliates................... 2,703,267 118,530
Materials and supplies inventory.............. 113,955 113,955
Prepaid expenses and other assets............. 10,256 12,441
------------- ------------
Total current assets................. 4,236,568 517,126
------------- ------------
Construction-in-progress....................... 8,407,794 4,560,554
Property, plant and equipment, at cost, net of
accumulated depreciation of $765,305 and
$342,759, respectively........................ 10,394,918 9,556,790
------------- ------------
Total property, plant and equipment,
net................................. 18,802,712 14,117,344
------------- ------------
Non-current interest receivable................ 360,568 88,791
Long-term notes receivable..................... 9,577,461 7,657,223
------------- ------------
Total assets................................... $32,977,309 $22,380,484
============= ============
LIABILITIES AND MEMBERS' CAPITAL
Current liabilities:
Trade accounts payable........................ $ 86,282 $ 2,005,999
Payable to affiliates......................... 3,235,167 609,464
Accrued liabilities........................... 687,058 122,424
Current portion of notes payable.............. 156,000 156,000
------------- ------------
Total current liabilities............ 4,164,507 2,893,887
------------- ------------
Other non-current liabilities.................. -- 68,750
Notes payable.................................. 69,275 180,791
------------- ------------
Total liabilities.............................. 4,233,782 3,143,428
------------- ------------
Minority interest.............................. 237,376 212,470
------------- ------------
Members' capital............................... 28,506,151 19,024,586
------------- ------------
Total liabilities and members' capital......... $32,977,309 $22,380,484
============= ============
The accompanying notes are an integral part of these consolidated financial
statements.
2
WEST SHORE PROCESSING COMPANY, L.L.C.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months For the Period from For the Period from
Ended September 30, May 6, 1996 through May 6, 1996 through
1997 December 31, 1996 September 30, 1996
------------------- ------------------- -------------------
(unaudited) (unaudited)
Revenues:
Processing revenue................................ $ 418,661 $ 305,533 $ 168,947
Processing revenue from affiliate................. 619,597 436,613 343,741
Transportation and compression revenue............ 631,701 581,740 367,778
Transportation and compression revenue from
affiliate..................................... 429,703 206,829 161,926
Sale of natural gas liquids....................... 979,178 -- --
Interest income................................... 274,319 89,297 202
Other income...................................... 28,064 87,801 42,935
------------------- ------------------- -------------------
Total revenue.................................. 3,381,223 1,707,813 1,085,529
------------------- ------------------- -------------------
Costs and expenses:
Cost of goods sold................................ 1,035,668 -- --
Operating expenses................................ 1,963,540 845,371 577,633
General and administrative expenses............... 539,501 502,765 194,254
Depreciation...................................... 422,546 342,759 201,513
Loss on retirement of assets and reduction in
carrying value of assets...................... -- 150,405 --
Interest expense.................................. 33,993 100,237 8,599
------------------- ------------------- -------------------
Total costs and expenses....................... 3,995,248 1,941,537 981,999
------------------- ------------------- -------------------
Net (loss) income before minority interest.......... (614,025) (233,724) 103,530
------------------- ------------------- -------------------
Minority interest................................... 12,000 3,607 (1,425)
------------------- ------------------- -------------------
Net (loss) income................................... $ (602,025) $ (230,117) $ 102,105
=================== =================== ===================
The accompanying notes are an integral part of these consolidated financial
statements.
3
WEST SHORE PROCESSING COMPANY, L.L.C.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Period For the Period
For the Nine from May 6, from May 6,
Months Ended 1996, through 1996 through
September 30, December 31, September 30,
1997 1996 1996
------------- -------------- --------------
(unaudited) (unaudited)
Reconciliation of net income to net
cash provided by operating activities:
Net (loss) income........................... $ (602,025) $ (230,117) $ 102,105
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization............... 422,546 342,759 201,513
Loss on retirement of assets and
reduction in carrying value
of assets.................................. -- 150,405 --
Minority interest in net (loss) income...... (12,000) (3,607) 1,425
------------- -------------- --------------
(191,479) 259,440 305,043
------------- -------------- --------------
Adjustments to working capital:
Increase in trade receivables and
receivables from affiliates............... (3,183,432) (328,506) (572,756)
Increase in materials and
supplies inventory........................ -- (113,955) --
Decrease (increase) in prepaid
expenses and other assets................. 2,185 (12,441) (12,121)
Increase in trade accounts
payable, payable to affiliates and
accrued liabilities....................... 1,270,620 2,737,888 620,885
------------- -------------- --------------
(1,910,627) 2,282,986 36,008
------------- -------------- --------------
Net cash (used by) provided by
operating activities...................... (2,102,106) 2,542,426 341,051
Cash flows from investing activities:
Capital expenditures....................... (5,107,914) (4,546,684) (609,100)
Increase in long-term notes
receivable and non-current interest....... (2,192,015) (7,746,014) (1,243,074)
receivable......................
Other...................................... 36,906 -- 11,029
------------- -------------- --------------
Net cash used in investing activities...... (7,263,023) (12,292,698) (1,841,145)
Cash flows from financing activities:
Capital contributions...................... 10,083,590 9,928,703 1,748,785
Net payments of notes payable and
other non-current liabilities............. (180,266) (116,207) (149,229)
------------- -------------- --------------
Net cash provided by financing
activities................................ 9,903,324 9,812,496 1,599,556
------------- -------------- --------------
Net increase in cash and cash
equivalents............................... 538,195 62,224 99,462
Cash and cash equivalents at beginning
of period.................................... 62,224 -- --
------------- -------------- --------------
Cash and cash equivalents at end of
period....................................... $ 600,419 $ 62,224 $ 99,462
============= ============== ==============
The accompanying notes are an integral part of these consolidated financial
statements.
4
WEST SHORE PROCESSING COMPANY, L.L.C.
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS' CAPITAL
Contributed Accumulated
Capital Deficit Total
----------- ----------- -----------
Balance at May 6, 1996 $ -- $ -- $ --
Capital Contributions................. 11,074,785 -- 11,074,785
Net Income............................ -- 102,105 102,105
----------- --------- -----------
Balance at September 30, 1996
(unaudited).......................... $11,074,785 $ 102,105 $11,176,890
=========== ========= ===========
Capital Contributions................. 8,179,918 -- 8,179,918
Net Loss.............................. -- (332,222) (332,222)
----------- --------- -----------
Balance at December 31, 1996.......... $19,254,703 $(230,117) $19,024,586
=========== ========= ===========
Capital Contributions................. 10,083,590 -- 10,083,590
Net Loss.............................. -- (602,025) (602,025)
----------- --------- -----------
Balance at September 30, 1997
(unaudited).......................... $29,338,293 $(832,142) $28,506,151
=========== ========= ===========
The accompanying notes are an integral part of these consolidated financial
statements.
5
WEST SHORE PROCESSING COMPANY, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
West Shore Processing Company, L.L.C. ("West Shore" or the "Company") was
established on May 6, 1996 as a venture dedicated to natural gas gathering,
treatment, processing and NGL marketing in Manistee, Mason and Oceana Counties
in Michigan.
On May 6, 1996, Michigan Energy Company LLC ("MEC") conveyed 98% of its
ownership interest in Basin Pipeline, L.L.C. ("Basin") to West Shore, and 1.2%
to MarkWest Michigan LLC, the predecessor to MarkWest Michigan, Inc. ("MWM"), a
wholly-owned subsidiary of MarkWest Hydrocarbon, Inc. The transfer of Basin from
MEC to West Shore was accounted for as a transaction between entities under
common control and, accordingly, the assets and liabilities of Basin continue to
be reflected at MEC's predecessor basis. As of December 31, 1996, West Shore was
47% owned by MWM and 53% owned by MEC. MWM has the right to acquire up to a 60%
ownership interest in West Shore based on its levels of future capital
expenditures.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its 98% owned subsidiary, Basin. All significant intercompany accounts and
transactions have been eliminated in consolidation.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash. The Company maintains cash in bank
deposit accounts that at times may exceed federally insured limits. To date, the
Company has not incurred a loss relating to these concentrations of credit risk.
The Company derives all of its revenue from three customers.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents, trade
receivables, accounts payable, other current liabilities and notes payable.
Except for long-term notes receivable and long-term debt, the carrying amounts
of these financial instruments approximate their fair value at December 31, 1996
due to their short maturities. At December 31, 1996, based on rates available
for similar types of long-term notes receivable and long-term debt,
respectively, the fair value of these items was not materially different from
their carrying values.
USE OF ESTIMATES
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's management to
make estimates and assumptions that affect the amounts reported in the
accompanying consolidated financial statements. Actual results could differ from
those estimates.
6
WEST SHORE PROCESSING COMPANY, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
MATERIALS AND SUPPLIES INVENTORY
Materials and supplies are valued at the lower of average cost or estimated net
realizable value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of a natural gas pipeline and gas
gathering and processing equipment which are recorded at cost. Renewals and
betterments that substantially extend the useful life of the assets are
capitalized. Maintenance and repairs are expensed when incurred. Depreciation is
computed using the straight-line method over estimated useful lives ranging from
seven to twenty years. Interest costs for the construction or development of
significant long-term assets are capitalized and amortized over the related
asset's estimated useful life. Gains and losses on retirements are included in
results of operations.
Construction-in-progress consists primarily of a pipeline extension, which is
accounted for at cost.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company follows Statement of Financial Accounting Standards ("SFAS") No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, which requires that an impairment loss be recognized
when the carrying amount of an asset exceeds the expected future undiscounted
net cash flows.
In 1996, the Company recorded a charge of $136,984 for the write-off of
intangible costs related to an abandoned well extension.
REVENUE RECOGNITION
Revenue for sales or services is recognized at the time the product is delivered
or at the time the service is performed.
INCOME TAXES
As a Limited Liability Company, the tax consequences of the Company's operations
are the responsibility of each member. Accordingly, the accompanying financial
statements do not include a provision for income taxes.
SUPPLEMENTAL CASH FLOW INFORMATION
Interest of $13,431 was paid for the period from May 6, 1996 through December
31, 1996. Interest expense in 1996 is net of $19,010 capitalized in relation to
various construction projects.
MEC made a non-cash capital contribution of approximately $9.8 million, which
consisted of the aggregate amount of debt and accrued interest forgiven.
7
WEST SHORE PROCESSING COMPANY, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the Basin Pipeline acquisition in 1996, the Company assumed a
$431,000 note used to finance certain assets previously purchased from the Dow
Chemical Company. As of December 31, 1996, $336,791 was outstanding under this
note. The note, which carries an imputed interest rate of 5%, requires that the
Company make payments of approximately $13,000 a month, until maturity in early
1999.
NOTE 2. LONG-TERM NOTES RECEIVABLE
Notes receivable at December 31, 1996 consists of a note receivable (the "Note")
from Michigan Production Company, LLC ("MPC"). The Note bears an interest rate
of 5.98%, and is for all sums expended by the Company for the construction of
the 31-mile extension to the Basin Pipeline. Upon completion of the pipeline
extension, MPC expects to contribute the fixed assets to the Company as full
payment for the note balance and accrued interest.
NOTE 3. COMMITMENTS AND CONTINGENCIES
The Company leases certain operating equipment under non-cancelable agreements
accounted for as operating leases. The following is a schedule by years of
future minimum lease payments under such operating leases:
At December 31,
1996
---------------
1997 $ 192,000
1998 192,000
1999 43,899
---------------
Total minimum lease payments $ 427,899
===============
Total rent expense under operating leases was $91,753 for the period from May 6,
1996 through December 31, 1996.
The Company maintains a capital lease for a two-stage compressor with an asset
balance of $124,333, net of accumulated amortization of $16,421. The following
is a schedule by years of future minimum lease payments under capital leases
together with the present value of the minimum lease payments:
At December 31,
1996
---------------
1997 $ 33,000
1998 33,000
1999 33,000
2000 2,750
----------------
Total minimum lease payments 101,750
Less: amount representing interest (11,842)
-----------------
Present value of minimum lease payments $ 89,908
=================
8
WEST SHORE PROCESSING COMPANY, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company is involved in various litigation and administrative proceedings
arising in the normal course of business. In the opinion of management, any
liabilities that may result from these claims will not, individually or in the
aggregate, have a material adverse effect on the Company's financial position or
results of operations.
NOTE 4. RELATED PARTY TRANSACTIONS
During 1996, the Company received financial support from MWM and MarkWest
Hydrocarbon, Inc. ("Hydrocarbon"), the 100% owner of MWM, so as to permit the
Company to continue its operations during this period. MWM and Hydrocarbon have
indicated that they will continue to provide financial support to the Company
through December 31, 1997.
MWM, Hydrocarbon, and MEC pay for various operating expenses on West Shore's
behalf, for which they are reimbursed their actual cost. As a result of such
transactions, at December 31, 1996, the Company had payables outstanding to MWM
and MEC in the amounts of $279,270 and $330,194, respectively.
A portion of Hydrocarbon's debt was utilized to provide West Shore with
financing for construction-in-progress. Accordingly, Hydrocarbon, through MWM,
allocated $19,010 of its interest expense for the period from May 6, 1996
through December 31, 1996 to West Shore. Such interest was capitalized.
For the period from May 6, 1996 through December 31, 1996, West Shore and its
subsidiary provided processing and transportation and compression services for
MPC, an affiliate of the Company, in the amount of $436,613 and $206,829,
respectively. In addition, the Company is constructing various well extensions
on behalf of MPC for which the Company will be reimbursed its actual cost. At
December 31, 1996, the Company had $118,530 in receivables from MPC as a result
of such transactions.
9
(b) Pro Forma Financial Information.
MARKWEST HYDROCARBON, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated balance sheet and pro forma
consolidated statement of operations give effect to the acquisition of the
remaining 40 percent of West Shore Processing Company, L.L.C. from Michigan
Energy Company, L.L.C. ("MEC").
The unaudited pro forma consolidated financial statements comprise historical
financial data of the Registrant which have been retroactively adjusted to
reflect the effect of the transaction. The pro forma information assumes that
the transaction was consummated on September 30, 1997 for the pro forma
consolidated balance sheet and on the first day of each period presented for the
pro forma consolidated statements of operations. Such pro forma information
should be read in conjunction with the related historical financial information
and is not necessarily indicative of the results which would actually have
occurred had the transaction been consummated on the dates or for the periods
indicated or which may occur in the future.
MARKWEST HYDROCARBON, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(000S, EXCEPT SHARE DATA)
MarkWest
Hydrocarbon,
ASSETS Inc. (a) Adjustments Pro Forma
------------ ----------- ---------
Current assets:
Cash and cash equivalents $ -- $ -- $ --
Receivables......................................... 8,749 (1,825) (b)(c) 6,924
Inventories......................................... 7,419 -- 7,419
Prepaid feedstock................................... 3,098 -- 3,098
Other assets........................................ 498 -- 498
------------ ----------- ---------
Total current assets.......................... 19,764 (1,825) 17,939
Property and equipment:
Gas processing, gathering, storage and marketing
equipment.......................................... 48,027 (551) (d) 47,476
Oil and gas properties and equipment................ 7,205 -- 7,205
Land, buildings and other equipment................. 9,250 -- 9,250
Construction in progress............................ 13,044 1,091 (c) 14,135
------------ ----------- ---------
77,526 540 78,066
Less: accumulated depreciation, depletion and
amortization....................................... (14,619) -- (14,619)
------------ ----------- ---------
Total property and equipment, net............. 62,907 540 63,447
Intangible assets, net of accumulated amortization
of $276 and $315, respectively..................... 500 -- 500
Note receivable and other assets..................... 9,938 -- 9,938
------------ ----------- ---------
Total assets......................................... $ 93,109 $(1,285) $ 91,824
============ =========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable.............................. $ 1,937 $ -- $ 1,937
Accrued liabilities................................. 4,625 -- 4,625
Current portion of long-term debt................... 156 -- 156
------------ ----------- ---------
Total current liabilities..................... 6,718 -- 6,718
Long-term debt....................................... 22,969 7,828 (e) 30,797
Deferred income taxes................................ 5,175 -- 5,175
Minority interest.................................... 9,113 (9,113) (f) --
Stockholders' equity:
Preferred stock, par value $0.01, 5,000,000 shares
authorized, 0 shares issued and outstanding........ -- -- --
Common stock, par value $0.01, 20,000,000 shares
authorized, 8,510,173 shares issued, 8,485,268
shares outstanding................................. 85 -- 85
Additional paid-in capital.......................... 42,582 -- 42,582
Retained earnings................................... 6,792 -- 6,792
Treasury stock...................................... (325) -- (325)
------------ ----------- ---------
Total stockholders' equity....................... 49,134 -- 49,134
------------ ----------- ---------
Total liabilities and stockholders' equity........... $ 93,109 $(1,285) $ 91,824
============ =========== =========
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements.
MARKWEST HYDROCARBON, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(000s, except per share data)
MarkWest
Hydrocarbon, Inc.
(a) Adjustments Pro Forma
----------------- ----------- ---------
Revenues:
Gathering, processing and marketing revenue......... $ 54,121 $ -- $ 54,121
Oil and gas revenue................................. 695 -- 695
Interest income..................................... 406 -- 406
Other income........................................ 508 -- 508
----------------- ----------- ---------
Total revenue.............................. 55,730 -- 55,730
----------------- ----------- ---------
Costs and expenses:
Cost of sales....................................... 31,140 -- 31,140
Operating expenses.................................. 7,605 -- 7,605
General and administrative expenses................. 5,467 -- 5,467
Depreciation, depletion and amortization............ 2,408 (21) (g) 2,387
Interest expense, net of capitalized interest....... 726 429 (h) 1,155
----------------- ----------- ---------
Total costs and expenses................... 47,346 408 47,754
----------------- ----------- ---------
Income (loss) before minority interest and income
taxes............................................... 8,384 (408) 7,976
Minority interest in net loss of subsidiary.......... 252 (252) (f) --
----------------- ----------- ---------
Income (loss) before income taxes.................... 8,636 (660) 7,976
Provision (benefit) for income taxes................. 3,186 (251) (i) 2,935
----------------- ----------- ---------
Net income (loss).................................... $ 5,450 $ (409) $ 5,041
================= =========== ========
Earnings per share of common stock................... $ 0.64 $ 0.59
Weighted average number of outstanding shares of
common stock........................................ 8,485 8,485
================= ========
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements.
MARKWEST HYDROCARBON, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
($000S, EXCEPT PER SHARE DATA)
MarkWest
Hydrocarbon,
Inc. (a) Adjustments Pro Forma
------------ ----------- ---------
Revenues:
Gathering, processing and marketing revenue........ $ 70,405 $ -- $ 70,405
Oil and gas revenue................................. 347 -- 347
Interest income..................................... 192 -- 192
Other income........................................ 1,008 -- 1,008
------------ ----------- ---------
Total revenues............................. 71,952 -- $ 71,952
------------ ----------- ---------
Costs and expenses:
Cost of sales....................................... 40,907 -- 40,907
Operating expenses.................................. 7,048 -- 7,048
General and administrative expenses................. 5,302 -- 5,302
Depreciation, depletion and amortization............ 2,910 (28) (g) 2,882
Interest expense, net of capitalized interest....... 1,090 572 (h) 1,662
------------ ----------- ---------
Total costs and expenses................... 57,257 544 57,801
------------ ----------- ---------
Income (loss) before minority interest, income taxes
and extraordinary item.............................. 14,695 (544) 14,151
Minority interest in net loss of subsidiary.......... 65 (65) (f) --
------------ ----------- ---------
Income (loss) before income taxes and extraordinary
item................................................ 14,760 (609) 14,151
Provision (benefit) for income taxes................. 6,991 (231) (i) 6,760
------------ ----------- ---------
Net income (loss).................................... $ 7,769 $ (378) $ 7,391
============ =========== =========
Earnings per share of common stock................... $ 0.98 $ 0.93
============ =========
Weighted average number of outstanding shares of
common stock....................................... 7,908 7,908
============ =========
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements.
MARKWEST HYDROCARBON, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(a) Prior to the acquisition, MarkWest Hydrocarbon, Inc. ("MarkWest") owned 60%
of West Shore Processing Company, L.L.C. ("West Shore") through its 100%
owned subsidiary, MarkWest Michigan, Inc. Accordingly, the historical
financial statements of MarkWest include the accounts of West Shore on a
fully consolidated basis.
(b) Represents the collection of approximately $734,000 due to MarkWest
Michigan, Inc. from Michigan Energy Company, L.L.C. ("MEC"), the original
40% owner, at the time of the acquisition.
(c) Represents the transfer of a receivable to construction in progress. The
receivable, which was due from MEC, was related to a construction project
the Company was building on behalf of MEC. As part of the acquisition, the
Company agreed to fund MEC's 40% share of the construction project.
(d) Represents the excess of the fair value of net assets acquired over cost
allocated to reduce the values otherwise assignable to noncurrent assets.
(e) Represents debt incurred to fund the acquisition, less accounts receivable
collected on closing.
(f) Represents the elimination of the 40% minority interest ownership in West
Shore.
(g) Represents the decrease in depreciation expense and accumulated
depreciation, that would have occurred as a result of (d) above, assuming
an estimated useful life of 20 years.
(h) Represents interest expense of $499,000 and $665,000 for the nine months
ending September 30, 1997 and the year ending December 31, 1996,
respectively, at 8.5% on the amount assumed to be borrowed in conjunction
with the acquisition, net of capitalized interest. Interest capitalized for
the same periods was $70,000 and $93,000, respectively. A change of 0.125%
in the assumed interest rate would result in an increase or decrease of
interest expense of approximately $9,800.
(i) Reflects the income tax effects of the pro forma adjustments to income.
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements.
(c) Exhibits
2.1 Purchase and Sale Agreement
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MARKWEST HYDROCARBON, INC.
(Registrant)
Date: January 29, 1998 BY: /s/ Gerald A. Tywoniuk
-------------------------------
Gerald A. Tywoniuk
Chief Financial Officer and
Vice President of Finance
(On Behalf of the Registrant and as
Principal Financial and Accounting
Officer)