SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 12, 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
MIDCOAST ENERGY RESOURCES, INC.
(Exact name of registrant as specified in charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Current
Report on Form 8-K filed with the Securities and Exchange
Commission on September 22, 1995, as set forth in the pages
attached hereto.
Item 7. Financial Statements and Exhibits.
a) Financial Statements
Midcoast Energy Resources, Inc.
Pro forma balance sheet as of June 30, 1995.
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to be signed on
its behalf by the undersigned, thereunto duly authorized.
MIDCOAST ENERGY RESOURCES, INC.
(Registrant)
Date: November 16, 1995 By: /s/ Dan C. Tutcher
Dan C. Tutcher
Chairman and Chief
Executive Officer
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated balance sheet is
presented as of June 30, 1995. The pro forma balance sheet was
prepared giving effect to the acquisition of Magnolia Pipeline
Corporation (a Transcontinental Pipeline Corporation subsidiary)
("Magnolia") as if the transaction occurred on June 30, 1995.
The acquisition was accounted for under the purchase method of
accounting. The total purchase price of $3,200,000 was allocated
to property, plant, and equipment as the principal asset of
Magnolia consists of approximately 109 miles of natural gas
pipeline located in central Alabama.
On October 2, 1995, $1,200,000 was borrowed from an affiliate owned
by an officer and director of the Company. The loan agreement
calls for interest to be accrued at the prime rate plus 5% and is
due monthly beginning April 2, 1996. The loan is payable in full
on January 31, 1997.
As additional consideration for extending the loan, Midcoast
granted the affiliate a 5% net revenue interest in Magnolia's
earnings before interest, income taxes and depreciation to be paid
on a monthly basis. Furthermore, should the loan not be repaid in
full within six months an additional 5% net revenue interest will
be granted to the affiliate.
Midcoast has the right to repurchase this net revenue interest from
the affiliate for a cash payment of $25,000. However, the
repurchase amount is increased an additional $25,000 on November 1,
1995 and each following month up to a maximum of $500,000.
The $1,200,000 loan and the proceeds from the sale of an investment
were used to repay a $500,000 subordinated debenture and a
$2,700,000 promissory note issued to Williams Holdings of Delaware,
Inc., for the purchase of Magnolia as described in the Form 8-K
which this filing amends.
A pro forma statement of operations is not presented herein as the
operations under the Company's management are expected to be
significantly different than under the predecessor's management.
Approximately eighty percent (80%) of the historical revenues were
derived from an affiliate of the predecessor. Had Midcoast owned
Magnolia Pipeline Corporation during the prior periods it is
uncertain if comparable revenues would have been derived from that
source and determination of the results of operations for previous
periods had the Company operated the pipeline is not quantifiable.
As a result, presentation of historical operating results could be
misleading. Future revenues are expected to be primarily derived
from new customers with which Midcoast's management is currently
negotiating.
However, the anticipated effects of the acquisition on Midcoast's
consolidated operating expenses are quantifiable as follows:
a) Operations and Maintenance expense - the operations and
maintenance of the pipeline will continue to be provided by an
unaffiliated third party under an existing operating agreement
which expires on September 30, 1997. The agreement calls for
monthly payments of $38,480 increased by 4% annually each October.
b) Property Tax - based on 1994 property tax rates, Midcoast will
pay approximately $50,000 annually.
c) Depreciation Expense - the acquisition will increase
depreciation expense by approximately $130,000 annually.
d) Interest Expense - assuming no reduction in the principal
balance of the $1,200,000 debt facility used to partially fund the
acquisition, approximately $120,000 in additional interest expense
will be incurred.
Based on current operating conditions and the current number of
customers with long-term contracts, the operations are
approximately break even on a cash flow basis.
<TABLE>
MIDCOAST ENERGY RESOURCES, INC., AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
Midcoast Energy
Resources, Inc. Pro Forma
Historical Acquisition Pro Forma
ASSETS June 30, 1995 Adjustments June 30, 1995
--------------- ------------- -------------
CURRENT ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents 41,376 41,376
Accounts receivable, no allowance
for doubtful accounts 1,315,179 1,315,179
--------------- -------------
Total current assets 1,356,555 1,356,555
--------------- -------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Natural gas transmission facilities 4,251,577 3,200,000 a 7,451,577
Investment in transmission facilities 1,284,609 1,284,609
Oil and gas properties, using the full
cost method of accounting 276,995 276,995
Other property and equipment 85,369 85,369
--------------- -------------
5,898,550 9,098,550
ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION (580,235) (580,235)
--------------- -------------
5,318,315 8,518,315
DEFERRED CONTRACT COSTS AND OTHER ASSETS,
net of amortization 188,852 188,852
--------------- -------------
Total assets 6,863,722 10,063,722
--------------- -------------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities 1,506,988 2,000,000 a 3,506,988
Current portion of deferred income 83,000 83,000
Short-term borrowing from bank 560,000 560,000
Current portion of long-term debt
payable to banks 930,806 930,806
--------------- -------------
Total current liabilities 3,080,794 5,080,794
--------------- -------------
LONG-TERM DEBT PAYABLE TO:
Bank 1,047,617 1,047,617
Shareholders and affiliates 448,822 1,200,000 a 1,648,822
--------------- -------------
Total long-term debt 1,496,439 2,696,439
--------------- -------------
DEFERRED INCOME 276,667 276,667
STOCKHOLDERS' EQUITY:
Preferred stock 200,000 200,000
Common stock 3,247 3,247
Paid-in capital 18,812,828 18,812,828
Retained deficit (16,882,807) (16,882,807)
Unearned compensation (123,446) (123,446)
--------------- -------------
Total stockholders' equity 2,009,822 2,009,822
--------------- -------------
Total liabilities and
stockholders' equity 6,863,722 10,063,722
--------------- -------------
See notes to unaudited pro forma consolidated financial information.
</TABLE>
Midcoast Energy Resources, Inc., and Subsidiaries
Notes to Unaudited Pro Forma Financial Information
June 30, 1995
In preparing the pro forma consolidated balance sheet at June 30,
1995, the Company made the following adjustments:
a) To give effect as of June 30, 1995 for the acquisition of
Magnolia Pipeline Corporation. The $3,200,000 purchase price was
partially financed with a $1,200,000 long-term loan from an
affiliate owned by a director and officer of the Company. The
remaining funds were derived from the sale of an investment
subsequent to June 30, 1995.
