-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, fKATVoMdBf4WxENEPVuooAz+/vD4/wsO7rGR3IMBt+c5Kon9F9CbdyIVkAHbAiyn /sjox53TUfXqCDxdpm8KnA== 0000066025-95-000004.txt : 19950109 0000066025-95-000004.hdr.sgml : 19950109 ACCESSION NUMBER: 0000066025-95-000004 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19950106 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIDLAND CO CENTRAL INDEX KEY: 0000066025 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 310742526 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06026 FILM NUMBER: 95500473 BUSINESS ADDRESS: STREET 1: 537 E PETE ROSE WAY CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137213777 MAIL ADDRESS: STREET 1: 537 E PETE ROSE WAY CITY: CINCINNATI STATE: OH ZIP: 45202 10-Q/A 1 WE ARE FILING THIS AMENDED FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1994, TO INCLUDE THE FINANCIAL DATA SCHEDULE - EXHIBIT 27. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended________September 30, 1994______________ 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 (I.R.S. Employer Identification No.) incorporation or organization) 537 E. Pete Rose Way, Cincinnati, Ohio 45202 (Address of principal executive offices) (Zip Code) (513) 721-3777 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) The financial information furnished herein reflects all adjustments which are of a normal and recurring nature and, in the opinion of management, necessary to a fair statement of the results for the periods covered. Letters from Deloitte & Touche LLP, the Company's independent accountants, dated October 20, 1994, are attached hereto as Exhibits I and II. 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 September 30, 1994 was 2,997,181. PART I. FINANCIAL INFORMATION THE MIDLAND COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1994 AND DECEMBER 31, 1993 (Unaudited) Sept. 30, Dec. 31, ASSETS 1994 1993 ------------- ------------- CASH $ 2,727,000 $ 3,935,000 ------------- ------------- MARKETABLE SECURITIES 226,207,000 224,614,000 ------------- ------------- RECEIVABLES: Accounts receivable 87,852,000 62,907,000 Finance receivables (including amounts maturing after one year) 4,177,000 5,512,000 ------------- ------------- Sub-Total 92,029,000 68,419,000 Less allowance for losses 1,372,000 1,117,000 ------------- ------------- Total 90,657,000 67,302,000 ------------- ------------- INVENTORY - SPORTSWEAR DIVISION 12,631,000 15,968,000 ------------- ------------- PROPERTY, PLANT AND EQUIPMENT - AT COST 183,511,000 185,164,000 Less accumulated depreciation 74,750,000 77,272,000 ------------- ------------- Net 108,761,000 107,892,000 ------------- ------------- DEFERRED INSURANCE POLICY ACQUISITION COSTS 36,249,000 28,825,000 ------------- ------------- OTHER ASSETS 1,062,000 1,686,000 ------------- ------------- TOTAL $ 478,294,000 $ 450,222,000 ============= ============= Note: The December 31, 1993 balance sheet amounts are derived from the audited financial statements but do not include all disclosures required by generally accepted accounting principles. THE MIDLAND COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1994 AND DECEMBER 31, 1993 (Unaudited) Sept. 30, Dec. 31, LIABILITIES & SHAREHOLDERS' EQUITY 1994 1993 -------------- -------------- NOTES PAYABLE WITHIN ONE YEAR: Banks $ 21,000,000 $ 22,000,000 Commercial paper 5,859,000 14,302,000 -------------- -------------- Total 26,859,000 36,302,000 -------------- -------------- ACCOUNTS PAYABLE - TRADE 4,636,000 5,142,000 -------------- -------------- OTHER PAYABLES AND ACCRUALS 41,585,000 37,513,000 -------------- -------------- CURRENT PORTION OF LONG-TERM DEBT 6,970,000 9,412,000 -------------- -------------- UNEARNED INSURANCE PREMIUMS 152,776,000 118,802,000 -------------- -------------- INSURANCE LOSS RESERVES 55,436,000 42,607,000 -------------- -------------- DEFERRED FEDERAL INCOME TAX 17,563,000 20,224,000 -------------- -------------- LONG-TERM DEBT 41,628,000 47,110,000 -------------- -------------- SHAREHOLDERS' EQUITY: Common stock (issued and outstanding: 2,997,000 shares at September 30, 1994 and 2,999,000 shares at December 31, 1993 after deducting treasury stock of 646,000 shares and 644,000 shares, respectively) 911,000 911,000 Additional paid-in capital 14,607,000 14,620,000 Retained earnings 126,866,000 123,995,000 Net unrealized gain on marketable securities 6,039,000 11,308,000 Treasury stock - at cost (16,648,000) (16,564,000) Unvested restricted stock awards (934,000) (1,160,000) -------------- -------------- Total 130,841,000 133,110,000 -------------- -------------- TOTAL $ 478,294,000 $ 450,222,000 ============== ============== Note: The December 31, 1993 balance sheet amounts are derived from the audited financial statements but do not include all disclosures required by generally accepted accounting principles. THE MIDLAND COMPANY AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (Unaudited) FOR THE NINE AND THREE-MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 Nine-Mos. Ended Sept. 30, Three-Mos. Ended Sept. 30, 1994 1993 1994 1993 REVENUES: ------------- ------------- ------------ ------------ Insurance $ 160,214,000 $ 132,018,000 $ 56,636,000 $ 49,570,000 River transportation 38,606,000 39,808,000 13,266,000 13,451,000 Sportswear 29,796,000 24,152,000 14,923,000 12,380,000 Finance and other 827,000 841,000 293,000 315,000 ------------- ------------- ------------ ------------ Total 229,443,000 196,819,000 85,118,000 75,716,000 ------------- ------------- ------------ ------------ COSTS AND EXPENSES: Insurance claims and policy acquisition costs 132,781,000 97,953,000 44,601,000 35,938,000 Insurance operating and administrative expenses 19,129,000 15,299,000 6,780,000 4,847,000 River transportation operating expenses 34,219,000 36,720,000 10,831,000 12,527,000 Sportswear operating expenses 31,490,000 25,484,000 15,023,000 12,119,000 Interest expense 3,638,000 2,952,000 1,227,000 1,087,000 Other operating and administrative expenses 3,443,000 3,516,000 1,211,000 1,280,000 ------------- ------------- ------------ ------------ Total 224,700,000 181,924,000 79,673,000 67,798,000 ------------- ------------- ------------ ------------ INCOME BEFORE FEDERAL INCOME TAX AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 4,743,000 14,895,000 5,445,000 7,918,000 PROVISION FOR FEDERAL INCOME TAX 568,000 4,435,000 1,531,000 2,771,000 ------------- ------------- ------------ ------------ INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 4,175,000 10,460,000 3,914,000 5,147,000 CUMULATIVE EFFECT OF ACCOUNTING CHANGE (A) - 4,867,000 - - ------------- ------------- ------------ ------------ NET INCOME $ 4,175,000 $ 15,327,000 $ 3,914,000 $ 5,147,000 ============= ============= ============ ============ EARNINGS PER COMMON SHARE (B): Income before cumulative effect of accounting $ 1.37 $ 3.40 $ 1.28 $ 1.67 Cumulative effect of accounting change - 1.58 - - ------------- ------------- ------------ ------------ Net Income $ 1.37 $ 4.98 $ 1.28 $ 1.67 ============= ============= ============ ============ DIVIDENDS PER COMMON SHARE $ .435 $ .405 $ .145 $ .135 ============= ============= ============ ============ (A) Cumulative Effect of Accounting Change represents the adoption of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, effective January 1, 1993. (B) Earnings per common share have been computed by dividing net income by 3,047,000 shares in 1994 and 3,076,000 shares in 1993. The calculations assume the exercise of outstanding dilutive stock options and include the amortized portion of restricted stock awards. THE MIDLAND COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 1994 1993 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,175,000 $ 15,327,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,008,000 7,412,000 Increase in unearned insurance premiums 33,974,000 17,214,000 Increase in net accounts receivable (24,690,000) (12,276,000) Increase in insurance loss reserves 12,829,000 5,351,000 Increase in deferred insurance policy acquisition costs (7,424,000) (6,058,000) Increase in other accounts payable and accruals 3,961,000 3,937,000 Decrease (increase) in inventory - sportswear division 3,337,000 (7,910,000) Decrease (increase) in other assets 624,000 (55,000) Increase (decrease) in accounts payable - trade (506,000) 1,978,000 Decrease in deferred federal income tax - (4,510,000) Other-net (134,000) 604,000 -------------- -------------- Net cash provided by operating activities 34,154,000 21,014,000 -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities (74,171,000) (55,490,000) Sale of marketable securities 37,698,000 44,457,000 Decrease in cash equivalent marketable securities 19,368,000 12,253,000 Acquisition of property, plant and equipment (10,167,000) (25,217,000) Maturity of marketable securities 6,875,000 3,135,000 Sale of property, plant and equipment 2,357,000 2,426,000 Net change in finance receivables 1,335,000 (6,331,000) -------------- -------------- Net cash used in investing activities (16,705,000) (24,767,000) -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in net short-term borrowings (9,443,000) 4,546,000 Repayment of long-term debt (7,119,000) (5,290,000) Dividends paid (1,193,000) (1,136,000) Payment of capitalized lease obligations (805,000) (606,000) Purchase of treasury stock (125,000) (250,000) Issuance of treasury stock 28,000 145,000 Issuance of long-term debt - 7,600,000 -------------- -------------- Net cash provided by (used in) financing activities (18,657,000) 5,009,000 -------------- -------------- NET INCREASE (DECREASE) IN CASH (1,208,000) 1,256,000 CASH AT BEGINNING OF PERIOD 3,935,000 2,238,000 -------------- -------------- CASH AT END OF PERIOD $ 2,727,000 $ 3,494,000 ============== ============== Supplemental Disclosures: The Company paid interest of $3,603,000 and $2,818,000 and income taxes of $0 and $1,115,000 in the first nine months of 1994 and 1993, respectively. The Company issued 31,800 shares of Treasury Stock under a Restricted Stock Award program that relieved Treasury Stock by approximately $799,000 and also increased additional paid-in capital by $660,000 in 1993. There are 31,300 shares of stock outstanding under this program at September 30, 1994. 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 1993 Annual Report on Form 10-K. Except as discussed below, no significant changes have taken place since that date and, accordingly, the discussion is not repeated here. The third quarter of 1994 was the second best third quarter in The Midland Company's history primarily as a result of the property and casualty division's performance. The Company's insurance division continues its rapid growth due primarily to increased penetration in each of its marketing channels. Both written and earned premiums have increased substantially during the first nine months and third quarter of 1994 as compared to the same periods in 1993. The increases in accounts receivable, unearned insurance premiums, insurance revenues, claims, and policy acquisition costs are the result of this growth. The performance of this division during the first nine months of 1994 has been adversely affected by catastrophes and other weather-related losses. These catastrophes and other weather-related losses are a primary reason for the increase of approximately $6,500,000 in net losses, $2.13 per common share, on an after tax basis and an increase in the division's loss ratio of approximately seven percentage points as compared to the same period in 1993. The operating performance of this division improved significantly in the third quarter of 1994 and actually exceeded the 1993 third quarter operating results when the impact ($2,800,000 after-tax income) from the settlement of California Proposition 103 is eliminated from that quarter's results. The Company's river transportation division reported comparable revenues and improved operating results during the first nine months and third quarter of 1994 as compared to the same periods in 1993. The earnings from this division for the first nine months of 1994 have been hindered by flooding conditions on the inland waterway system during the first quarter of 1994. Additionally, this division's operating performance continues to be negatively impacted by the depressed affreightment rates and excess capacity that exists in the market place. As previously reported in 1993, M/G Transport Services, Inc. became aware of an investigation by federal authorities. The Company believes that this investigation concerns the possible disposal of bilge water and other refuse from various vessels on the Ohio River. M/G Transport is cooperating fully with the investigation, the outcome of which cannot presently be determined. CS Crable Sportswear, Inc., the Company's sportswear division continues to report higher revenues with comparable operating results during the first nine months and third quarter of 1994 as compared to the same periods in 1993. It is the Company's investment policy to invest in high quality marketable securities. The Company does not own any bonds below investment grade and there are no investments in real estate, other than real estate used by the Company. During 1994, the Company used a portion of the proceeds from the sale and maturity of marketable securities to reduce its short-term borrowings. In connection with these transactions, the Company realized $2,314,000 (pre-tax) in net capital gains in the first nine months of 1994 compared to $3,107,000 (pre-tax) in net capital gains for the same period in 1993. The decrease in long-term debt was due to scheduled repayments during the period. The federal income tax provision for the three and nine-month periods ended September 30, 1994 and 1993 is different from amounts derived by applying the statutory tax rates to income before federal income tax as follows: Nine-Mos. Ended Sept. 30, Three-Mos. Ended Sept. 30, 1994 1993 1994 1993 ------------ ------------ ------------ ------------ Federal income tax at statutory rate $ 1,660,000 $ 5,213,000 $ 1,906,000 $ 2,841,000 Add (deduct) the tax effect of: Tax exempt interest and excludable dividend income (1,114,000) (972,000) (370,000) (344,000) Increase in statutory rate on deferred taxes - 357,000 - 357,000 Investment tax credits (216,000) (216,000) (72,000) (72,000) Net life insurance tax deductions (68,000) (84,000) (33.000) (37,000) Other items - net 306,000 137,000 100.000 26,000 ------------ ------------ ------------ ------------ Provision for federal income tax $ 568,000 $ 4,435,000 $ 1,531,000 $ 2,771,000 ============ ============ ============ ============ During the third quarter of 1994, the Company began construction of its new corporate headquarters building. It is currently estimated that this facility will cost approximately $26 million. This facility will be financed through conventional long-term debt financing upon anticipated completion in the fourth quarter of 1995. The Company adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS No. 109), effective January 1, 1993. The cumulative effect of adopting SFAS No. 109 on the Company's financial statements was to increase income by $4,867,000 ($1.58 per common share), which was recorded in income for the nine months ended September 30, 1993, and to decrease the deferred federal income tax liability. In connection with accounting for reinsurance contracts, reclassifications have been made in the accompanying December 31, 1993 Balance Sheet (total assets and total liabilities have each been increased by $14,624,000) to conform with September 30, 1994 classifications. EXHIBIT I INDEPENDENT ACCOUNTANTS' REPORT The Midland Company: We have reviewed the accompanying consolidated balance sheet of The Midland Company and subsidiaries as of September 30, 1994, and the related consolidated statements of income for the three-month and nine-month periods ended September 30, 1994 and 1993 and of cash flows for the nine-month periods ended September 30, 1994 and 1993. 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 generally accepted auditing standards, 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 consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of The Midland Company and subsidiaries as of December 31, 1993, and the related consolidated statements of income and retained earnings and of cash flows for the year then ended (not presented herein); and in our report dated February 10, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1993 is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. Deloitte & Touche LLP Cincinnati, Ohio October 20, 1994 EXHIBIT II 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 interim financial information of The Midland Company and subsidiaries for the periods ended September 30, 1994 and 1993, as indicated in our report dated October 20, 1994; 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 September 30, 1994, is incorporated by reference in Registration Statement No. 33-48511 on Form 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. Deloitte & Touche LLP Cincinnati, Ohio October 20, 1994 PART II. OTHER INFORMATION THE MIDLAND COMPANY AND SUBSIDIARIES SEPTEMBER 30, 1994 Item 1. Legal Proceedings None other than ordinary routine litigation incidental to the business of the Company and its subsidiaries. Item 2. Change in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a.) Exhibits 27. Financial Data Schedule b.) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto dully authorized. THE MIDLAND COMPANY Date ___October 20, 1994__________ s/Michael J.Conaton_________________ Michael J. Conaton, President and Chief Operating Officer Date ___October 20, 1994__________ s/John I. Von_Lehman_________________ John I. Von Lehman, Vice President and Treasurer and Chief Financial Officer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1994 SEP-30-1994 2,727,000 226,207,000 90,069,000 1,372,000 12,631,000 367,573,000 183,511,000 74,750,000 478,294,000 291,486,000 41,628,000 911,000 0 0 129,930,000 478,294,000 29,796,000 229,443,000 22,580,000 217,321,000 3,443,000 298,000 3,638,000 4,743,000 568,000 4,175,000 0 0 0 4,175,000 1.37 1.37
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