-----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, JM43ZNi6ZHhM6Njpy08WCwi7mWwQ99rb7gvRMsFZb4WI6YK7CC2PWwrUs38i44dg 3PpgPmB7nYWlPXVyL9BqiA== /in/edgar/work/20000810/0000066025-00-000007/0000066025-00-000007.txt : 20000921 0000066025-00-000007.hdr.sgml : 20000921 ACCESSION NUMBER: 0000066025-00-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIDLAND CO CENTRAL INDEX KEY: 0000066025 STANDARD INDUSTRIAL CLASSIFICATION: [6331 ] IRS NUMBER: 310742526 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06026 FILM NUMBER: 691279 BUSINESS ADDRESS: STREET 1: 7000 MIDLAND BLVD STREET 2: P O BOX 125 CITY: AMELIA STATE: OH ZIP: 45102-2607 BUSINESS PHONE: 5139437100 MAIL ADDRESS: STREET 2: P O BOX 1256 CITY: CINCINNATI STATE: OH ZIP: 45201 10-Q 1 0001.txt UNITED STATES 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______________June 30, 2000_______________________ 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_________________1-6026___________________________________ _____________________________The Midland Company________________________________ (Exact name of registrant as specified in its charter) _________Incorporated in Ohio_________________ _______________31-0742526______ (State or other jurisdiction of incorporation (I.R.S. Employer Identification or organization) No.) 7000 Midland Boulevard, Amelia, Ohio 45102-2607 (Address of principal executive offices) (Zip Code) (513) 943-7100 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) 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, and (2) has been subject to such filing requirements for the past 90 days. Yes___X___. No______. The number of common shares outstanding as of June 30, 2000 was 9,400,809. PART I. FINANCIAL INFORMATION THE MIDLAND COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 2000 AND DECEMBER 31, 1999 Amounts in 000's (Unaudited) June 30, Dec. 31, ASSETS 2000 1999 ---------- ---------- MARKETABLE SECURITIES AVAILABLE FOR SALE: Fixed income (cost, $472,995 at June 30, 2000 and $488,492 at December 31, 1999) $ 467,044 $ 479,772 Equity (cost, $71,244 at June 30, 2000 and $46,400 at December 31, 1999) 152,119 131,087 ---------- ---------- Total 619,163 610,859 ---------- ---------- CASH 8,214 10,098 ---------- ---------- ACCOUNTS RECEIVABLE - NET 74,490 60,426 ---------- ---------- REINSURANCE RECOVERABLES AND PREPAID REINSURANCE PREMIUMS 48,140 43,151 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT - NET 58,316 62,585 ---------- ---------- DEFERRED INSURANCE POLICY ACQUISITION COSTS 91,701 85,168 ---------- ---------- OTHER ASSETS 18,494 15,770 ---------- ---------- TOTAL ASSETS $ 918,518 $ 888,057 ========== ========== See notes to condensed consolidated financial statements. THE MIDLAND COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 2000 AND DECEMBER 31, 1999 Amounts in 000's (Unaudited) June 30, Dec. 31, LIABILITIES & SHAREHOLDERS' EQUITY 2000 1999 ---------- ---------- UNEARNED INSURANCE PREMIUMS $ 342,062 $ 312,838 ---------- ---------- INSURANCE LOSS RESERVES 129,680 133,713 ---------- ---------- INSURANCE COMMISSIONS PAYABLE 20,099 20,291 ---------- ---------- FUNDS HELD UNDER REINSURANCE AGREEMENTS AND REINSURANCE PAYABLES 3,252 3,097 ---------- ---------- LONG-TERM DEBT 42,181 44,288 ---------- ---------- OTHER NOTES PAYABLE: Banks 13,000 20,000 Commercial paper 6,011 5,550 ---------- ---------- Total 19,011 25,550 ---------- ---------- DEFERRED FEDERAL INCOME TAX 28,174 28,171 ---------- ---------- OTHER PAYABLES AND ACCRUALS 62,685 62,107 ---------- ---------- COMMITMENTS AND CONTINGENCIES - - ---------- ---------- SHAREHOLDERS' EQUITY: Common stock (issued and outstanding: 9,401 shares at June 30, 2000 and 9,515 shares at December 31, 1999 after deducting treasury stock of 1,527 shares and 1,413 shares, respectively) 911 911 Additional paid-in capital 19,664 18,583 Retained earnings 222,103 207,005 Accumulated other comprehensive income 48,711 49,388 Treasury stock - at cost (18,448) (15,786) Unvested restricted stock awards (1,567) (2,099) ---------- ---------- Total 271,374 258,002 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 918,518 $ 888,057 ========== ========== See notes to condensed consolidated financial statements. THE MIDLAND COMPANY AND SUBSIDIARIES STATEMENTS OF CONDENSED CONSOLIDATED INCOME (Unaudited) FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2000 AND 1999 Amounts in 000's (except per share information) Six-Mos. Three-Mos. Ended June 30, Ended June 30, --------------------- --------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- REVENUES: Insurance: Premiums earned $ 222,764 $ 197,974 $ 112,266 $ 99,837 Net investment income 14,452 12,272 7,391 6,201 Net realized investment gains 3,201 1,739 1,319 669 Other insurance income 4,174 2,100 2,215 1,354 Transportation 16,034 15,558 9,034 7,631 Other 559 788 218 655 ---------- ---------- ---------- ---------- Total 261,184 230,431 132,443 116,347 ---------- ---------- ---------- ---------- COSTS AND EXPENSES: Insurance: Losses and loss adjustment expenses 116,939 103,893 61,963 55,511 Commissions and other policy acquisition costs 68,039 58,693 33,177 28,244 Operating and administrative expenses 35,344 29,932 17,511 15,509 Transportation operating expenses 13,496 14,930 7,186 7,242 Interest expense 2,056 2,139 1,168 1,077 Other operating and administrative expenses 1,280 2,815 429 1,820 ---------- ---------- ---------- ---------- Total 237,154 212,402 121,434 109,403 ---------- ---------- ---------- ---------- INCOME BEFORE FEDERAL INCOME TAX 24,030 18,029 11,009 6,944 PROVISION FOR FEDERAL INCOME TAX 7,517 4,958 3,679 1,733 ---------- ---------- ---------- ---------- NET INCOME $ 16,513 $ 13,071 $ 7,330 $ 5,211 ========== ========== ========== ========== BASIC EARNINGS PER SHARE OF COMMON STOCK $ 1.80 $ 1.43 $ 0.80 $ 0.57 ========== ========== ========== ========== DILUTED EARNINGS PER SHARE OF COMMON STOCK $ 1.75 $ 1.38 $ 0.78 $ 0.55 ========== ========== ========== ========== CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.150 $ 0.135 $ 0.0750 $ 0.0675 ========== ========== ========== ========== See notes to condensed consolidated financial statements. THE MIDLAND COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited) Amounts in 000's Accumulated Unvested Additional Other Compre- Restricted Compre- Common Paid-In Retained hensive Treasury Stock hensive Stock Capital Earnings Income Stock Awards Total Income -------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1998 $911 $15,947 $178,398 $ 70,507 $(15,293) $(1,638) $248,832 Comprehensive income: Net income 13,071 13,071 $ 13,071 Decrease in unrealized gain on marketable securities, net of related income tax effect of $(6,319) (11,733) (11,733) (11,733) ---------- Total comprehensive income $ 1,338 ========== Purchase of treasury stock (2,688) (2,688) Issuance of treasury stock for options exercised and employee savings plan 31 1,671 1,702 Cash dividends declared (1,285) (1,285) Restricted stock awards 1,411 1,267 (2,678) - Amortization and cancellation of unvested restricted stock awards (17) (15) 654 622 --------------------------------------------------------------------------------- BALANCE, JUNE 30, 1999 $911 $17,372 $190,184 $ 58,774 $(15,058) $(3,662) $248,521 ================================================================================= BALANCE, DECEMBER 31, 1999 $911 $18,583 $207,005 $ 49,388 $(15,786) $(2,099) $258,002 Comprehensive income: Net income 16,513 16,513 $ 16,513 Decrease in unrealized gain on marketable securities, net of related income tax effect of $(367) (677) (677) (677) ---------- Total comprehensive income $ 15,836 ========== Purchase of treasury stock (2,799) (2,799) Issuance of treasury stock for options exercised and employee savings plan 125 259 384 Cash dividends declared (1,415) (1,415) Federal income tax benefit related to the exercise or granting of stock awards 263 263 Revaluation of stock options relating to a plan amendment 776 776 Amortization and cancellation of unvested restricted stock awards (83) (122) 532 327 --------------------------------------------------------------------------------- BALANCE, JUNE 30, 2000 $911 $19,664 $222,103 $ 48,711 $(18,448) $(1,567) $271,374 ================================================================================= See notes to condensed consolidated financial statements.
THE MIDLAND COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) FOR THE SIX-MONTHS ENDED JUNE 30, 2000 AND 1999 Amounts in 000's 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: --------- ---------- Net income $ 16,513 $ 13,071 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,630 4,542 Net realized investment gains (3,201) (1,739) Increase in unearned insurance premiums 29,224 17,995 Increase in net accounts receivable (13,955) (6,348) Increase in deferred insurance policy acquisition costs (6,533) (9,605) Increase in reinsurance recoverables and prepaid reinsurance premiums (4,989) (1,158) Increase (decrease) in insurance loss reserves (4,033) 4,835 Increase (decrease) in other accounts payable and accruals 1,189 (4,198) Increase in deferred federal income tax 368 - Decrease (increase) in other assets (292) 182 Increase (decrease) in insurance commissions payable (192) 1,001 Increase (decrease) in funds held under reinsurance agreements and reinsurance payables 155 (5,307) Other-net (988) 995 --------- ---------- Net cash provided by operating activities 17,896 14,266 --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities (122,228) (76,326) Sale of marketable securities 89,881 46,724 Maturity of marketable securities 16,254 18,465 Decrease in cash equivalent marketable securities 9,877 15,578 Net cash used in business acquisition (2,471) (2,636) Proceeds from sale of property, plant and equipment 2,161 181 Acquisition of property, plant and equipment (841) (1,414) --------- ---------- Net cash provided by (used in) investing activities (7,367) 572 --------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in net short-term borrowings (6,539) (8,343) Purchase of treasury stock (2,799) (2,688) Repayment of long-term debt (2,107) (1,673) Dividends paid (1,352) (1,226) Issuance of treasury stock 384 1,702 --------- ---------- Net cash used in financing activities (12,413) (12,228) --------- ---------- NET INCREASE (DECREASE) IN CASH (1,884) 2,610 CASH AT BEGINNING OF PERIOD 10,098 3,687 --------- ---------- CASH AT END OF PERIOD $ 8,214 $ 6,297 ========= ========== INTEREST PAID $ 2,074 $ 2,139 INCOME TAXES PAID $ 5,330 $ 4,500 See notes to the condensed consolidated financial statements. THE MIDLAND COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) JUNE 30, 2000 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of The Midland Company and subsidiaries (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Financial information as of December 31, 1999 has been derived from the audited consolidated financial statements of the Company. Revenue and operating results for the six and three-month periods ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information, refer to the audited consolidated financial statements and footnotes thereto for the year ended December 31, 1999 included in the Company's Annual Report on Form 10-K. Certain reclassifications (minor in nature) have been made to the 1999 amounts to conform to 2000 classifications. 2. EARNINGS PER SHARE Earnings per share (EPS) of common stock amounts are computed by dividing net income by the weighted average number of shares outstanding during the period for basic EPS, plus the dilutive share equivalents for stock options and restricted stock awards for diluted EPS. Shares used for EPS calculations were as follows (000's): For Basic EPS For Diluted EPS ------------- --------------- Six months ended June 30: 2000 9,156 9,461 ===== ===== 1999 9,106 9,437 ===== ===== 3. INCOME TAXES The federal income tax provisions for the three and six-month periods ended June 30, 2000 and 1999 are different from amounts derived by applying the statutory tax rates to income before federal income tax as follows (000's): Six-Mos. Three-Mos. Ended June 30, Ended June 30, 2000 1999 2000 1999 -------- -------- -------- -------- Federal income tax at statutory rate $ 8,410 $ 6,310 $ 3,853 $ 2,430 Add (deduct) the tax effect of: Tax exempt interest and excludable dividend income (1,660) (1,523) (842) (786) Federal excise tax 570 -- 570 -- Other - net 197 171 98 89 -------- -------- -------- -------- Provision for federal income tax $ 7,517 $ 4,958 $ 3,679 $ 1,733 ======== ======== ======== ======== THE MIDLAND COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) 4. SEGMENT DISCLOSURES Since the Company's annual report for 1999, there have been no changes in reportable segments or the manner in which the Company determines reportable segments or measures segment profit or loss. Summarized segment information for the interim periods for 2000 and 1999 is as follows (000's): Six Months Three Months Ended June 30, 2000 Ended June 30, 2000 ------------------------------- --------------------- Revenues- Revenues- Total External Pre-Tax External Pre-Tax Assets Customers Income Customers Income -------- ---------- ---------- ---------- --------- Reportable Segments: Insurance: Manufactured housing n/a $152,960 $ 18,795 $76,957 $ 7,679 Other n/a 73,978 5,644 37,524 2,428 Unallocated $855,186 - (976) - (316) Transportation 31,089 16,034 2,039 9,034 1,479 Corporate and all other - - (1,472) - (261) --------- -------- $ 24,030 $11,009 ========= ======== Six Months Three Months Ended June 30, 1999 Ended June 30, 1999 ------------------------------- --------------------- Revenues- Revenues- Total External Pre-Tax External Pre-Tax Assets Customers Income Customers Income -------- ---------- ---------- ---------- --------- Reportable Segments: Insurance: Manufactured housing n/a $139,346 $ 20,165 $70,578 $ 9,730 Other n/a 60,728 1,775 30,613 (806) Unallocated $767,140 - (645) - (325) Transportation 35,173 15,558 510 7,631 339 Corporate and all other - - (3,776) - (1,994) --------- -------- $ 18,029 $ 6,944 ========= ======== Intersegment revenues are insignificant. Revenues reported above, by definition, exclude investment income and realized gains. Certain amounts are not allocated to segments ("n/a" above) by the Company. 5. NEW ACCOUNTING STANDARDS Accounting Standards Board issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" during 1998. SFAS No. 133, as amended by SFAS Nos. 137 and 138, is effective for fiscal years beginning after June 15, 2000. Adoption of SFAS 133 is not expected to have a material impact on the reported results of operations or financial position of the Company. INDEPENDENT ACCOUNTANTS' REPORT The Midland Company: We have reviewed the accompanying condensed balance sheet of The Midland Company and subsidiaries as of June 30, 2000, and the related condensed consolidated statements of income for the three-month and six-month periods ended June 30, 2000 and 1999 and of changes in shareholders' equity and cash flows for the six-month periods ended June 30, 2000 and 1999. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of The Midland Company and subsidiaries as of December 31, 1999, and the related consolidated statements of income, changes in shareholders' equity and cash flows for the year then ended (not presented herein); and in our report dated February 10, 2000, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1999 is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. /s/Deloitte & Touche LLP Deloitte & Touche LLP Cincinnati, Ohio July 20, 2000 THE MIDLAND COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS A detailed discussion of the Company's liquidity and capital resources is included in the 1999 Annual Report on Form 10-K. Except as discussed below, no material changes have taken place since that date and, accordingly, the discussion is not repeated herein. RESULTS OF OPERATIONS Insurance - --------- Insurance Premiums Direct and assumed written premiums generated from American Modern Insurance Group's (AMIG) property and casualty and life insurance operations increased 10.4% in the second quarter to $142.7 million from $129.2 million for the same quarter of 1999. Net earned premiums for the second quarter of 2000 increased 12.4% to $112.3 million from $99.8 million for the comparable quarter in 1999. On a year-to-date basis, direct and assumed written premiums generated by AMIG's insurance operations increased 15% to $271.1 million from $235.8 million for the same six-month period in 1999. Year-to-date net earned premiums increased 12.5% to $222.8 million from $198.0 million in 1999. The growth in direct and assumed written premiums for the periods presented is primarily the result of continued volume increases in manufactured home and related coverages insurance premium. Manufactured home and related coverages direct and assumed written premium generated in the second quarter increased 7.5% to $91.3 million from $84.9 million for the same quarter of 1999. On a year-to-date basis, manufactured home and related coverages direct and assumed written premium increased 12.9% to $175.3 million from $155.3 million. AMIG also had volume increases in its other specialty insurance products for the three and six-month periods ended June 30, 2000. Direct and assumed written premiums of all other property and casualty insurance products collectively increased 1.7% to $41.2 million for the second quarter of 2000 from $40.5 million for the same quarter in 1999. On a year-to-date basis, direct and assumed written premiums of all other specialty insurance products collectively increased 5.2% to $77.8 million from $74.0 million for the same period in 1999. Investment Income and Realized Capital Gains AMIG's net investment income (before taxes and excluding capital gains) increased 19.4% to $7.4 million in the second quarter of 2000 from $6.2 million for the second quarter of 1999. On a year-to-date basis, AMIG's net investment income increased 17.9% to $14.5 million from $12.3 million for the same six-month period in 1999. Investment income increased due to the continued growth in AMIG's investment portfolio coupled with higher yields from AMIG's fixed income investment portfolio. AMIG's net realized capital gains (after-tax) increased to $0.9 million, $0.09 per share (diluted), for the second quarter of 2000, from $0.4 million, $0.05 per share (diluted), for the same quarter in 1999. On a year-to-date basis, AMIG's net realized capital gains (after-tax) increased to $2.1 million, $0.22 per share (diluted), from $1.1 million, $0.12 per share (diluted), for the same six-month period in 1999. Losses and Loss Adjustment Expenses AMIG's losses and loss adjustment expenses in the second quarter increased 11.7% to $62.0 million from $55.5 million for the second quarter of 1999. AMIG's weather-related catastrophe losses for the second quarter of 2000 amounted to $5.2 million on a pre-tax basis compared with $11.3 million for the same quarter of 1999. These losses had an after-tax impact of approximately $0.36 per share (diluted) in the second quarter of 2000 compared to $0.78 per share (diluted) in the second quarter of 1999. Excluding catastrophe losses, the property and casualty combined ratio for the second quarter was 94.3% compared to 86.7% for the same quarter in 1999. On a year-to-date basis, AMIG's losses and loss adjustment expenses increased 12.5% to $116.9 million from $103.9 million for the same six-month period in 1999. AMIG's weather-related catastrophe losses for the first six months of 2000 amounted to $7.7 million on a pre-tax basis compared with $15.5 million for the same period in 1999. These losses had an after-tax impact of approximately $0.53 per share (diluted) in the first six months of 2000 compared to $1.07 per share (diluted) in the same period of 1999. Excluding catastrophe losses, the property and casualty combined ratio for the first six months of 2000 was 93.5% compared to 88.4% for the same period in 1999. The primary reasons for the increases in AMIG's losses and loss adjustment expenses for the second quarter and first half of 2000 compared to the same periods in 1999 were significant increases in non-catastrophe weather-related losses and fire losses. Commissions, Other Policy Acquisition Costs and Other Operating and Administration Expenses AMIG's commissions and other policy acquisition costs and other operating and administrative expenses for the second quarter of 2000 increased 15.8% to $50.7 million from $43.8 million in the second quarter of 1999. On a year-to-date basis, AMIG's commissions and other policy acquisition costs and other operating and administrative expenses for the first six months of 2000 increased 16.7% to $103.4 million from $88.6 million for the same six-month period in 1999. These increases are due primarily to continued growth in net earned premiums plus an increase in our commission ratio due to a change in a quota share reinsurance arrangement with one of our major national accounts. Property and Casualty Underwriting Results AMIG's property and casualty operations generated a pre-tax underwriting income of $1.1 million for the second quarter of 2000 compared to a pre-tax underwriting profit of $1.7 million for the same quarter in 1999. For the current quarter, AMIG's combined ratio (ratio of losses and expenses as a percent of earned premium) for its property and casualty business was 99.0% compared to 98.3% in the second quarter of 1999. On a year-to-date basis, AMIG's property and casualty pre-tax underwriting income decreased from $6.9 million in the first half of 1999 to $6.4 million during the first six months of 2000. AMIG's combined ratio for its property and casualty business was 97.1% for the first six months of 2000 compared to 96.4% for the same period in 1999. Transportation - -------------- M/G Transport, the Company's transportation subsidiary, reported revenues for the second quarter of $9.0 million compared with $7.6 million in the second quarter of 1999. Included in revenues for the second quarter of 2000 is a one-time gain of $1.0 million from the sale of transportation equipment. This gain has been treated as a capital gain and has been excluded from reported operating earnings. Excluding this one-time gain, revenues for the second quarter increased 4.5% over the comparable period in 1999. Pre-tax operating profit increased from $0.3 million in 1999 to $0.4 million in 2000. The improved operating performance in the second quarter of 2000 was due primarily to increased demand for barite plus a reduction in operating expenses. On a year-to-date basis, revenues (excluding $1.0 million in capital gains) decreased $0.6 from $15.6 million in 1999 to $15.0 million in 2000 due to a reduced demand for petroleum coke. Operating pre-tax income increased $0.5 million in the first six-months of 2000 from $0.5 million in 1999 to $1.0 million in 2000 due to a reduction of $1.4 million in operating costs. Corporate - --------- During the second quarter of 2000, Midland recorded a gain of $7.0 million from the curtailment of a portion of its pension plan. This gain was offset by excise taxes on the withdrawal of a portion of overfunded pension assets and by one-time expenses related to consulting agreements with retired executives. These transactions -exclusive of the excise tax-were included in the income statement as a credit to other operating and administrative expenses. The excise tax component was included in the Provision for Federal Income Tax. The net impact of these transactions was a net after-tax charge to earnings of one cent per share. LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION Cash flows from operating and investing activities were used to purchase marketable securities and to decrease the Company's short-term borrowings (Other Notes Payable). Management expects that cash and other liquid investments, coupled with future operating cash flows, will be readily available to meet the Company's operating cash requirements for the next twelve months. The Company declared $1.4 million in dividends to its shareholders during the first six months of 2000. OTHER MATTERS Comprehensive Income - -------------------- The only difference between net income and comprehensive income is the net after-tax change in unrealized gains on marketable securities. For the three and six-month periods ended June 30, 2000 and 1999, such net unrealized gains decreased, net of related income tax effects, by the following amounts (in thousands): 2000 1999 -------- -------- Three months ended June 30 $ 5,560 $ 7,443 Six months ended June 30 $ 677 $11,733 Changes in net unrealized gains on marketable securities result from both market conditions and realized gains recognized in a reporting period. Acquisitions - ------------ AMIG acquired the operating assets of a relatively small business during the first half of 2000 and also acquired the operating assets of several businesses during the second quarter of 1999. These acquisitions were for amounts not material to the capital and liquidity of the Company. Management pursued these acquisitions to afford AMIG the opportunity to expand its service contract, loan facilitation, financial and insurance capabilities. Private Securities Reform Act of 1995 - Forward Looking Statements Disclosure - ----------------------------------------------------------------------------- This report contains forward looking statements. For purposes of this report, a "Forward Looking Statement", within the meaning of the Securities Reform Act of 1995, is any statement concerning the year 2000 and beyond. The actions and performance of the company and its subsidiaries could deviate materially from what is contemplated by the forward looking statements contained in this report. Factors which might cause deviations from the forward looking statements include, without limitations, the following: 1) changes in the laws or regulations affecting the operations of the company or any of its subsidiaries, 2) changes in the business tactics or strategies of the company or any of its subsidiaries, 3) acquisition(s) of assets or of new or complementary operations, or divestiture of any segment of the existing operations of the company or any of its subsidiaries, 4) changing market forces or litigation which necessitate, in management's judgement, changes in plans, strategy or tactics of the company or its subsidiaries and 5) adverse weather conditions, fluctuations in the investment markets, changes in the retail marketplace or fluctuations in interest rates, any one of which might materially affect the operations of the company and/or its subsidiaries. Any forward-looking statement speaks only as of the date made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market risks associated with the Company's investment portfolios have not changed materially from those disclosed at year-end 1999. PART II. OTHER INFORMATION THE MIDLAND COMPANY AND SUBSIDIARIES JUNE 30, 2000 Item 1. Legal Proceedings Reference is made to Item 3 of Registrant's December 31, 1999 Form 10-K concerning the conclusion of criminal litigation against M/G Transport Services, Inc., a subsidiary of Registrant. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders At the Company's 2000 annual meeting of Shareholders held on April 13, 2000, the following actions were taken: a) The following persons were elected as members of the Board of Directors to serve until the annual meeting of 2003 and until their successors are chosen and qualified: Votes Broker Name Votes For Withheld Abstentions Non-Votes ---- --------- -------- ----------- --------- Michael J. Conaton 8,902,042 45,741 0 0 Jerry A. Grundhofer 8,902,772 45,011 0 0 Joseph P. Hayden III 8,900,636 47,147 0 0 William J. Keating 8,902,223 45,560 0 0 John R. LaBar 8,901,036 46,747 0 0 b) A proposal by the Board of Directors to adopt the Associate Discount Stock Purchase Plan was approved by the Shareholders. The Shareholders cast 6,807,557 votes in favor of this proposal and 1,105,991 votes against it. There were 5,371 abstentions. c) A proposal by the Board of Directors to adopt the Amended and Restated 1992 Associate Incentive Stock Plan was approved by the Shareholders. The Shareholders cast 6,402,711 votes in favor of this proposal and 1,509,734 votes against it. There were 6,474 abstentions. d) A proposal by the Board of Directors to adopt the Stock Option Plan for Non-Employee Directors was approved by the Shareholders. The Shareholders cast 7,239,384 votes in favor of this proposal and 671,967 votes against it. There were 7,568 abstentions. e) A proposal by the Board of Directors to amend the Company's Amended and Restated Code of Regulations was approved by the Shareholders. The Shareholders cast 8,671,705 votes in favor of this proposal and 265,409 votes against it. There were 10,669 abstentions. f) A proposal by the Board of Directors to ratify the appointment of the firm of Deloitte & Touche LLP, as the Company's independent auditors to conduct the annual audit of the financial statements of the Company for the year ending December 31, 2000, was approved by the Shareholders. The Shareholders cast 8,938,285 votes in favor of this proposal and 6,727 votes against it. There were 2,771 abstentions. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K a.) Exhibit 3(ii) - Code of Regulations (Amended and Restated) Exhibit 10.1 - Annual Incentive Plan (incorporated by reference to 2000 Proxy Statement) Exhibit 10.2 - Consulting Agreements with J.P. Hayden, Jr., Michael J. Conaton, John R. LaBar and Robert W. Hayden (incorporated by reference to 2000 Proxy Statement) Exhibit 10.3 - Employee Retention Agreements with Joseph P. Hayden III, John W. Hayden, John I. Von Lehman and Paul T. Brizzolara (incorporated by reference to 2000 Proxy Statement) Exhibit 15 - Letter re: Unaudited Interim Financial Information Exhibit 27 - Financial Data Schedule b.) Reports on Form 8-K - None SIGNATURE 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. THE MIDLAND COMPANY Date______July 20, 2000________ /s/John I. Von Lehman_________________ John I. Von Lehman, Executive Vice President, Chief Financial Officer and Secretary EX-3 2 0002.txt EXHIBIT 3(ii) AMENDED AND RESTATED CODE OF REGULATIONS OF THE MIDLAND COMPANY ARTICLE I Section 1 - Principal Office: The principal office of the corporation shall be at 7000 Midland Blvd., Amelia, Ohio, until such time as otherwise designated by the Board of Directors. Section 2 - Other Offices: The corporation shall also have offices at such other places without, as well as within the State of Ohio, as the Board of Directors may from time to time determine. ARTICLE II Section 1 - Annual Meeting: The Annual Meeting of the shareholders of the corporation for the purpose of electing directors and transacting such other business as may come before the meeting shall be held (i) at 10 a.m. on the second Thursday in April of each year, if not a legal holiday, but if a legal holiday, then on the next business day following or (ii) at such other date and time as may be provided for by the Board of Directors. Section 2 - Special Meetings: Special Meetings of the shareholders may be called at any time by the Chairman of the Board, President or Vice President, or by a majority of the Board of Directors acting with or without a meeting, or by the holder or holders of forty percent (40%) of all shares outstanding and entitled to vote thereat. Section 3 - Place of Meetings: Meetings of shareholders shall be held at the office of the corporation in Amelia, Ohio, or at such other place within or without the State of Ohio as shall be determined by the Board of Directors and set forth in the notice thereof. Section 4 - Notice of Meetings: Unless waived, written, printed or typewritten notice of each annual or special meeting stating the time, place and purpose thereof shall be served upon or mailed to each shareholder of record entitled to vote or entitled to notice, not more than sixty (60) days nor less than ten (10) days before any such meeting. If mailed, it shall be directed to shareholders at their address as the same appears upon records of the corporation. Section 5 - Waiver of Notice: Any shareholder either before or after any meeting may waive any notice required to be given by law or these regulations. Section 6 - Quorum and Voting: The holders of shares entitling them to exercise a majority of the voting power of the corporation, present in person or by proxy, shall constitute a quorum for any meeting. The shareholders present in person or by proxy, whether or not a quorum be present, may adjourn the meeting from time to time without notice other than by announcement at the meeting. In any other matter brought before any meeting of shareholders, the affirmative vote of the holders of shares representing a majority of the votes actually cast shall be the act of the shareholders provided, however, that no action required by law, the Articles of Incorporation, or this Code of Regulations to be authorized or taken by the holders of a designated proportion of the shares of the corporation may be authorized or taken by a lesser proportion. Section 7 - Notice of Shareholder Business and Nominations: (a) Annual Meeting of Shareholders. Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders pursuant to the corporation's notice of the meeting, by or at the direction of the Board of Directors or by any shareholder of the corporation who was a shareholder of record at the time of giving of notice provided for in this Code of Regulations, who is entitled to vote at the meeting and who complies with the notice procedures set forth herein. For nominations or other business properly to be brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the corporation and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the 90th day prior to the first anniversary of the date of mailing of the notice of the preceding year's annual meeting; provided, however, that if the date of the annual meeting is more than sixty (60) days before or after such anniversary date, notice must be so delivered not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of notice. Such notice shall set forth as to each person whom the shareholder proposes to nominate for election as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 14a-11 thereunder including such person's written consent to be named in the proxy statement as a nominee and to serving as a director if elected. As to any other business that the shareholder proposes to bring before the meeting, such notice shall include a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made. The shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made shall state the name and address of such shareholder, as they appear on the corporation's books, and of such beneficial owner and the class and number of shares of the corporation which are owned beneficially and of record by such shareholder and such beneficial owner. If the number of directors to be elected is increased and there is no public announcement by the corporation naming all of the nominees for the director or specifying the size of the increased Board of Directors at least seventy (70) days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this Code of Regulations shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the corporation. (b) Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareholder of the corporation who is a shareholder of record at the time of giving notice provided for in this Code of Regulations, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Code of Regulations. If the Corporation calls a special meeting of shareholders for the purpose of electing one or more directors to the Board of Directors, any such shareholder may nominate a person or persons for election to such position(s) as specified in the corporation's notice of meeting, if the shareholder's notice required by this Code of Regulations shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a shareholder's notice as described above. (c) General. Only such persons who are nominated in accordance with the procedures set forth in this Regulation shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Code of Regulations. Except as otherwise provided by law, the Articles of Incorporation or these Code of Regulations, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Code of Regulations and, if any proposed nomination or business is not in compliance with this Code of Regulations, to declare that such defective proposal or nomination shall be disregarded. Section 8 - Electronic Notices, Proxy Submission, Etc.: The corporation may, from time to time, establish procedures whereby shareholders may choose to, but shall not be required to, receive notice of meetings and other documents and information required to be provided to shareholders by the corporation by telephone, facsimile transmission, electronic mail or by other means of electronic or telephonic transmission. Notice of meetings to a shareholder who chooses to receive notices in any such manner shall be deemed sufficient notice for purposes of Section 4 of this Article. The corporation may, from time to time, establish procedures whereby shareholders may, but shall not be required to, make submission of proxies for voting at meetings of shareholders and other documents and information to the corporation by telephone, facsimile transmission, electronic mail or by other means of electronic or telephonic transmission. ARTICLE III DIRECTORS Section 1 - Number of Directors: The business of the corporation shall be managed and conducted by a Board of Directors consisting of not less than three (3) members, one of whom shall be designated Chairman and none of whom need be shareholders of the corporation. Without amendment of this Code of Regulations, the number of Directors may be fixed or changed by resolution at any annual meeting or at any special meeting of shareholders called for that purpose or the purpose of electing Directors, adopted by the vote of the holders of shares, present in person or by proxy, entitling them, to exercise a majority of the voting power represented at such meeting or by a resolution of the Directors adopted at any meeting of the Board of Directors by a majority vote. Where action is taken by the Board of Directors, the Directors in office may fill any Directors' office that is created by an increase in the number of Directors. No reduction of the number of Directors shall have the effect of removing any Director prior to the expiration of his or her term of office. Section 2 - Tenure and Election of Directors: Directors shall be divided into three classes each of which shall consist of not less than one (1) Director. Such three classes shall be known initially as three-year, two-year, and one-year classes. The term of office of the one-year Directors shall expire at the first annual meeting of the corporation; the term of office of the two-year Directors shall expire at the second annual meeting and the term of office of the three-year Directors shall expire at the third annual meeting. Upon expiration of the terms of office of the Directors as set forth above, their successors shall be elected for a term of three years or until their successors are elected and qualified. Election of Directors shall be at the annual meeting of shareholders and may be conducted in such manner as may be approved at such meeting. Section 3 - Meeting of the Board: An organization meeting of the Board of Directors shall be held either immediately following the adjournment of each shareholders' annual meeting (and notice of such annual meeting of Directors need not be given) or at such other time (pursuant to notice) as the Board may determine. At such annual organizational meeting of the Board, the Directors may choose one of their number as Chairman of the Board. The Chairman of the Board shall preside at all meetings, regular or special, of the Board. In the event that no Chairman of the Board shall have been elected or, if a Chairman of the Board shall have been elected, in the absence of the Chairman of the Board from any meeting of the Board or from the affairs of the corporation as such Chairman of the Board, the Vice Chairman of the Board shall act as Chairman of the Board. In the event that no Vice Chairman of the Board shall have been elected or, if a Vice Chairman of the Board shall have been elected, in the absence of the Vice Chairman of the Board from any meeting of the Board, the President of the corporation, if the person then holding such office be a member of the Board, shall act as Chairman of the Board. The Board of Directors may, by by-laws or resolutions, provide for other regular meetings of the Board in addition to the annual organizational meeting. Special meetings of the Board of Directors may be held at any time upon the call of the Chairman of the Board or the President of the corporation, or any two members of the Board. Notice of any special meeting of the Board shall be given either personally, by telephone, facsimile transmission, electronic mail or by other means of electronic or telephonic transmission to each Director at least two days before the date on which the meeting is to be held or by mail at least five days before the date on which the meeting is to be held. Notice may be waived by any Director present in person at such special meeting. Every notice must state the time and place of the meeting, but need not state the purpose thereof. Any meeting of the Board (whether organization, regular or special) shall be a legal meeting, even though no prior notice of any kind has been given, if a majority of the Directors then qualified and acting shall actually be present thereat. Any and all meetings of the Board, except the annual organizational meeting may be held at any place in the United States as may be specified in the notice thereof. Section 4 - Quorum: A majority of the Board of Directors (then qualified and acting) shall constitute a quorum for the transaction of business. Section 5 - Vacancies: Vacancies in the Board of Directors may be filled by a majority vote of the remaining Directors until the next annual meeting. Shareholders entitled to elect Directors shall have the right to fill any vacancy in the Board (whether the same has been temporarily filled by the remaining Directors or not) at any meeting of the shareholders and attended by a quorum thereof, held for any purpose during the interim, and any Directors elected at such meeting of the shareholders shall serve until the next annual election of Directors, and until their successors are elected and qualified. Section 6 - Committees: The Board of Directors may create an Executive Committee to consist of one (1) or more Directors, and may delegate to such executive committee all of the authority of the Board of Directors, however conferred, other than that of filling vacancies among the Board of Directors or in any committee of the Board of Directors. The Board of Directors may create any other committee of the Directors, to consist of one (1) or more Directors, and may delegate to such committee any of the authority of the Directors, however conferred, other than that of filling vacancies among the Board of Directors or in any committee of the Board of Directors. Section 7 - Relationship with Corporation: Directors shall not be barred from providing professional or other services to the corporation. No contract, action or transaction shall be void or voidable with respect to the corporation for the reason that it is between or affects the corporation and one or more of its Directors, or between or affects the corporation and any other person in which one or more of its Directors are directors, trustees or officers or have a financial or personal interest, or for the reason that one or more interested Directors participate in or vote at a meeting of the Directors or committee thereof that authorizes such contract, action or transaction, if in any such case any of the following apply: (a) the material facts as to the Director's relationship or interest and as to the contract, action or transaction are disclosed or are known to the Directors or the committee and the Directors or committee, in good faith, reasonably justified by such facts, authorize the contract, action or transaction by the affirmative vote of a majority of the disinterested Directors, even though the disinterested Directors constitute less than a quorum; (b) the material facts as to the Director's relationship or interest and as to the contract, action or transaction are disclosed or are known to the shareholders entitled to vote thereon and the contract, action or transaction is specifically approved at a meeting of the shareholders held for such purpose by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the corporation held by persons not interested in the contract, action or transaction; or (c) the contract, action or transaction is fair as to the corporation. This Section 7 is intended to be used only in instances in which the corporation intends to provide a conclusive determination regarding the circumstances described in the second sentence hereof. This Section 7 shall not be read to require that any of the steps outlined in subsections (a), (b) and (c) above need be followed with respect to any transaction of the nature described above. Section 8 - Attendance at Meetings of Persons Who Are Not Directors: Unless waived by a majority of Directors in attendance, not less than twenty four (24) hours before any regular or special meeting of the Board of Directors, any Director who desires the presence at such meeting of a person who is not a Director shall so notify all other Directors, requesting the presence of such person at the meeting, and stating the reason in writing. Such person will not be permitted to attend the Directors' meeting unless a majority of the Directors in attendance vote to admit such person to the meeting. Such vote shall constitute the first order of business for any such meeting of the Board of Directors. Such right to attend, whether granted by waiver or vote, may be revoked at any time during any such meeting by the vote of a majority of the Directors in attendance. ARTICLE IV OFFICERS Section 1 - General Provisions: The Board of Directors shall elect a President, a Secretary and a Treasurer, and may elect a Chairman of the Board, one or more Vice Presidents, and such other officers and assistant officers as the Board may from time to time deem necessary. The Chairman of the Board, if any, shall be a Director, but none of the other officers need be a Director. Any two or more offices may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required to be executed, acknowledged or verified by two or more officers. Section 2 - Powers and Duties: All officers, as between themselves and the corporation, shall respectively have such authority and perform such duties as are customarily incident to their respective offices, and as may be specified from time to time by the Board of Directors, regardless of whether such authority and duties are customarily incident to such office. In the absence of any officer of the corporation, or for any other reason the Board of Directors may deem sufficient, the powers or duties of such officer, or any of them may be delegated, to any other officer or to any Director. The Board of Directors may from time to time delegate to any officer authority to appoint and remove subordinate officers and to prescribe their authority and duties. Section 3 - Term of Office and Removal: 3.1 Term. Each officer of the corporation shall hold office at the pleasure of the Board of Directors, and unless sooner removed by the Board of Directors, until the meeting of the Board of Directors following the date of election of Directors and until his or her successor is elected and qualified. 3.2 Removal. The Board of Directors may remove any officer at any time with or without cause by the affirmative vote of a majority of Directors in office. Section 4 - Compensation of Officers: Unless compensation is otherwise determined by a majority of the Directors at a regular or special meeting of the Board of Directors or unless such determination is delegated by the Board of Directors to a committee of the Board of Directors or to another officer or officers, the President of the Corporation from time to time shall determine the compensation to be paid to all officers and other employees for services rendered to the corporation. ARTICLE V AMENDMENTS This Code of Regulations may be amended or repealed at any meeting of shareholders called for that purpose by the affirmative votes of the holders of record of shares entitling them to then exercise a majority of the voting power on such proposal. ARTICLE VI INDEMNIFICATION Section 1 - Right to Indemnification: Each person who was or is made a party of is threatened to be made a party to or is otherwise involved (including, without limitation, as a witness) in any actual or threatened action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a Director or officer of the corporation or that, being or having been such a Director or officer of the corporation, he or she is or was serving at the request of an executive officer of the corporation as a director, officer, partner, employee, or agent of another corporation, partnership, joint venture, trust, limited liability company, or other enterprise, including service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as such a director, officer, partner, employee, or agent, shall be indemnified and held harmless by the corporation to the fullest extent not prohibited by the General Corporation Law of Ohio, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than permitted prior thereto), or by other applicable law as then in effect, against all expense, liability, and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) actually and reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators. Except as provided in Section 2, below, with respect to proceedings seeking to enforce rights to indemnification, the corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized or ratified by the Board of Directors of the corporation. The right to indemnification conferred in this Section 1 shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"). An advancement of expenses incurred by an indemnitee in his or her capacity as a director, officer or employee (and not in any other capacity in which service was or is rendered by such indemnitee including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Section 1 or otherwise. An advancement of expenses shall not be made if the corporation's Board of Directors make a good faith determination that such payment would violate law or public policy. Section 2 - Right of Indemnitee to Bring Suit: If a claim under Section 1 of this Article is not paid in full by the corporation within sixty (60) days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall also be entitled to be paid the expense of prosecuting or defending such suit. The indemnitee shall be presumed to be entitled to indemnification under this Article upon submission of a written claim (and, in an action brought to enforce a claim for an advancement of expenses, where the required undertaking has been tendered to the corporation), and thereafter the corporation shall have the burden of proof to overcome the presumption that the indemnitee is so entitled. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its shareholders) that the indemnitee is not entitled to indemnification shall be a defense to the suit or create a presumption that the indemnitee is not so entitled. Section 3 - Nonexclusivity and Survival of Rights: The rights to indemnification and to the advancement of expenses conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the corporation's Articles of Incorporation, this Code of Regulations, agreement, vote of shareholders or disinterested directors, or otherwise. Notwithstanding any amendment to or repeal of this Article, or of any of the procedures established by the Board of Directors pursuant to Section 7 of this Article, any indemnitee shall be entitled to indemnification in accordance with the provisions hereof and thereof with respect to any acts or omissions of such indemnitee occurring prior to such amendment or repeal. Without limiting the generality of the foregoing paragraph, the rights to indemnification and to the advancement of expenses conferred in this Article shall, notwithstanding any amendment to or repeal of this Article, inure to the benefit of any person who otherwise may be entitled to be indemnified pursuant to this Article (or the estate or personal representative of such person) for a period of six years after the date such person's service to or in behalf of the corporation shall have terminated or for such longer period as may be required in the event of a lengthening in the applicable statute of limitations. Section 4 - Insurance, Contracts, and Funding: The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee, or agent of the corporation or another corporation, partnership, joint venture, trust, or other enterprise against any expense, liability, or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability, or loss under the General Corporation Law of Ohio. The corporation may enter into contracts with any indemnitee in furtherance of the provisions of this Article and may create a trust fund, grant a security interest, or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnifications as provided in this Article. Section 5 - Persons Serving Other Entities: Any person who is or was a Director, officer, or employee of the corporation who is or was serving (i) as a director or officer of another corporation of which a majority of the shares entitled to vote in the election of its directors is held by the corporation or (ii) in an executive or management capacity in a partnership, joint venture, trust, limited liability company or other enterprise which the corporation or a wholly-owned subsidiary of the corporation is a general partner or member or has a majority ownership shall be deemed to be so serving at the request of an executive officer of the corporation and entitled to indemnification and advancement of expenses under Section 1 of this Article. Section 6 - Indemnification of Employees and Agents of the Corporation: The corporation may, by action of its Board of Directors, authorize one or more executive officers to grant rights to advancement of expenses to employees or agents of the corporation on such terms and conditions no less stringent than provided in Section 1 of this Article as such officer or officers deem appropriate under the circumstances. The corporation may, by action of its Board of Directors, grant rights to indemnification and advancement of expenses to employees or agents or groups of employees or agents of the corporation with the same scope and effect as the provisions of this Article with respect to the indemnification and advancement of expenses of Directors and officers of the corporation; provided, however, that an undertaking shall be made by an employee or agent only if required by the Board of Directors. Section 7 - Procedures for the Submission of Claims: The Board of Directors may establish reasonable procedures for the submission of claims for indemnification pursuant to this Article, determination of the entitlement of any person thereto, and review of any such determination. Such procedures shall be set forth in an appendix to these Code of Regulations and shall be deemed for all purposes to be a part hereof. ARTICLE VII STOCK CERTIFICATE The certificates in and for the shares of the corporation of any class may be executed by any two of the following officers (either by actual or facsimile signing): Chairman of the Board, President, Executive Vice President, Vice President, Secretary, Treasurer. The stock certificates of the corporation, within the limitations of the Articles of Incorporation of this corporation as amended, may be such as the Board of Directors of this corporation shall from time to time determine. The Board of Directors of this Company is authorized to enter into arrangements with one or more transfer agents for the stock of the corporation and/or a registrar either in the City of Cincinnati, or City of New York, or elsewhere. EX-15 3 0003.txt EXHIBIT 15 LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION The Midland Company: We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited condensed interim financial information of The Midland Company and subsidiaries for the periods ended June 30, 2000 and 1999, as indicated in our report dated July 20, 2000; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, is incorporated by reference in Registration Statements No. 33-64821 on Form S-3 and Nos. 33-48511 and 333-40560 on Forms S-8. We are also aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. /s/Deloitte & Touche LLP Deloitte & Touche LLP Cincinnati, Ohio July 20, 2000 EX-27 4 0004.txt
7 6-MOS DEC-31-2000 JUN-30-2000 467,044,000 0 0 152,119,000 0 0 619,163,000 8,214,000 19,025,000 91,701,000 918,518,000 129,680,000 342,062,000 0 23,351,000 61,192,000 0 0 911,000 270,463,000 918,518,000 222,764,000 14,452,000 3,201,000 20,767,000 116,939,000 68,039,000 35,344,000 24,030,000 7,517,000 16,513,000 0 0 0 16,513,000 1.80 1.75 89,325,000 0 0 0 0 89,220,000 0
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