-----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, oxL4VTFKbeclADebYHzIe1pPkSNW89blCClOzaZTdA6XadjCbKQHEU8ull1uLEhM 7pQ9xpimc3rrAtOgIP/glw== 0000066025-95-000009.txt : 19950516 0000066025-95-000009.hdr.sgml : 19950516 ACCESSION NUMBER: 0000066025-95-000009 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIDLAND CO CENTRAL INDEX KEY: 0000066025 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] 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: 95539159 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 THE MIDLAND COMPANY FORM 10-Q FIRST QUARTER REPORT 1995 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 March 31, 1995 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.) 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 April 20, 1995, 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 March 31, 1995 was 3,041,231. PART I. FINANCIAL INFORMATION THE MIDLAND COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 1995 AND DECEMBER 31, 1994 (Unaudited) Mar. 31, Dec. 31, ASSETS 1995 1994 ------------- ------------- CASH $ 4,498,000 $ 4,036,000 ------------- ------------- MARKETABLE SECURITIES 274,494,000 278,088,000 ------------- ------------- RECEIVABLES: Accounts receivable 78,290,000 82,293,000 Finance receivables (including amounts maturing after one year) 4,543,000 4,120,000 ------------- ------------- Sub-Total 82,833,000 86,413,000 Less allowance for losses 1,392,000 1,535,000 ------------- ------------- Net 81,441,000 84,878,000 ------------- ------------- INVENTORY - SPORTSWEAR DIVISION 13,415,000 11,116,000 ------------- ------------- PROPERTY, PLANT AND EQUIPMENT - AT COST 117,396,000 109,729,000 Less accumulated depreciation and amortization 45,126,000 43,687,000 ------------- ------------- Property, Plant and Equipment - Net 72,270,000 66,042,000 ------------- ------------- DEFERRED INSURANCE POLICY ACQUISITION COSTS 39,661,000 37,653,000 ------------- ------------- OTHER ASSETS 685,000 733,000 ------------- ------------- TOTAL $486,464,000 $482,546,000 ============= ============= Note: The December 31, 1994 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 MARCH 31, 1995 AND DECEMBER 31, 1994 (Unaudited) Mar. 31, Dec. 31, LIABILITIES & SHAREHOLDERS' EQUITY 1995 1994 ------------- ------------- NOTES PAYABLE WITHIN ONE YEAR: Banks $ 14,000,000 $ 22,000,000 Commercial paper 5,312,000 5,546,000 ------------- ------------- Total 19,312,000 27,546,000 ------------- ------------- ACCOUNTS PAYABLE - TRADE 4,345,000 6,232,000 ------------- ------------- OTHER PAYABLES AND ACCRUALS 45,059,000 46,455,000 ------------- ------------- CURRENT PORTION OF LONG-TERM DEBT 2,454,000 2,451,000 ------------- ------------- UNEARNED INSURANCE PREMIUMS 162,176,000 158,316,000 ------------- ------------- INSURANCE LOSS RESERVES 56,486,000 57,715,000 ------------- ------------- DEFERRED FEDERAL INCOME TAX 10,174,000 6,754,000 ------------- ------------- LONG-TERM DEBT 44,038,000 44,640,000 ------------- ------------- SHAREHOLDERS' EQUITY: Common stock (issued and outstanding: 3,041,000 shares at March 31, 1995 and 2,997,000 shares at December 31, 1994 after deducting treasury stock of 602,000 shares and 646,000 shares, respectively) 911,000 911,000 Additional paid-in capital 15,388,000 14,607,000 Retained earnings 135,014,000 131,675,000 Net unrealized gain on marketable securities 9,427,000 2,754,000 Treasury stock - at cost (15,600,000) (16,648,000) Unvested restricted stock awards (2,720,000) (862,000) ------------- ------------- Total 142,420,000 132,437,000 ------------- ------------- TOTAL $486,464,000 $482,546,000 ============= ============= Note: The December 31, 1994 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 THREE-MONTHS ENDED MARCH 31, 1995 AND 1994 1995 1994 REVENUES: ------------- ------------- Insurance $ 63,461,000 $ 51,364,000 Transportation 6,871,000 11,716,000 Sportswear 5,453,000 6,065,000 Finance 154,000 171,000 ------------- ------------- Total 75,939,000 69,316,000 ------------- ------------- COSTS AND EXPENSES: Insurance claims and policy acquisition costs 47,452,000 42,624,000 Insurance operating and administrative expenses 7,980,000 5,768,000 Transportation operating expenses 5,811,000 11,524,000 Sportswear operating expenses 7,233,000 7,082,000 Interest expense 976,000 1,171,000 Other operating and administrative expenses 1,198,000 433,000 ------------- ------------- Total 70,650,000 68,602,000 ------------- ------------- INCOME BEFORE FEDERAL INCOME TAX 5,289,000 714,000 PROVISION (CREDIT) FOR FEDERAL INCOME TAX 1,478,000 (96,000) ------------- ------------- NET INCOME $ 3,811,000 $ 810,000 ============= ============= EARNINGS PER SHARE OF COMMON STOCK (A): $ 1.24 $ 0.26 ============= ============= CASH DIVIDENDS PER SHARE OF COMMON STOCK $ 0.155 $ 0.145 ============= ============= (A) Earnings per share of common stock have been computed by dividing net income by 3,083,000 shares in 1995 and 3,059,000 shares in 1994. The calculations assume the exercise of outstanding stock options and include the amortized portion of restricted stock awards. (B) Certain reclassifications (minor in nature) have been made to 1994 amounts to conform to 1995 classification. THE MIDLAND COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) FOR THE THREE-MONTHS ENDED MARCH 31, 1995 AND 1994 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: ------------- ------------- Net income $ 3,811,000 $ 810,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,124,000 2,601,000 Decrease (increase) in net accounts receivable 3,860,000 (6,306,000) Increase in unearned insurance premiums 3,860,000 5,177,000 Decrease in accounts payable and accruals (3,320,000) (2,734,000) Increase in inventory-sportswear division (2,299,000) (1,618,000) Decrease (increase) in deferred insurance policy acquisition costs (2,008,000) 225,000 Increase (decrease) in insurance loss reserves (1,229,000) 6,852,000 Decrease (increase) in other assets 48,000 (102,000) Decrease in deferred federal income tax (39,000) - Other-net 301,000 205,000 ------------- ------------- Net cash provided by operating activities 5,109,000 5,110,000 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in cash equivalent marketable securities 26,113,000 26,179,000 Purchase of marketable securities (19,341,000) (48,469,000) Acquisition of property, plant and equipment (8,626,000) (3,503,000) Maturity of marketable securities 3,383,000 2,537,000 Sale of marketable securities 3,284,000 29,857,000 Net decrease (increase) in finance receivables (423,000) 115,000 Sale of property, plant and equipment 382,000 1,287,000 ------------- ------------- Net cash provided by investing activities 4,772,000 8,003,000 ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in net short-term borrowings (8,234,000) (12,201,000) Repayment of long-term debt (526,000) (1,539,000) Dividends paid (435,000) (405,000) Purchase of treasury stock (203,000) (52,000) Payment of capitalized lease obligations (73,000) (224,000) Issuance of treasury stock 52,000 25,000 ------------- ------------- Net cash used in financing activities (9,419,000) (14,396,000) ------------- ------------- NET INCREASE (DECREASE) IN CASH 462,000 (1,283,000) CASH AT BEGINNING OF PERIOD 4,036,000 3,935,000 ------------- ------------- CASH AT END OF PERIOD $ 4,498,000 $ 2,652,000 ============= ============= Supplemental Disclosures: The Company paid interest of $609,000 and $1,135,000 and income taxes of $2,000,000 and $0 in the first three months of 1995 and 1994, respectively. In 1995, the Company issued 48,950 shares of Treasury Stock under a Restricted Stock Award program that relieved Treasury Stock by approximately $1,262,000 and also increasedadditional paid-in capital by approximately $855,000. 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 1994 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 Company's property and casualty insurance division continues to grow due primarily to increased penetration in each of its marketing channels. Net premiums written in the first quarter of 1995 increased 27% over the first quarter of 1994. The increases in deferred insurance policy acquisition costs, unearned insurance premiums, insurance revenues, insurance claims and policy acquisition costs and insurance operating and administrative expenses are the result of this growth. The operating performance of this division in the first quarter of 1995 was excellent due primarily to mild weather conditions throughout the United States during 1995. This division's operating performance in the first quarter of 1994 was negatively impacted by the heavy losses from the California earthquake as well as unusually severe weather related losses during the period. Due primarily to the strong performance of the insurance division during the first quarter of 1995, the Company's overall operating performance during the first quarter was the second best first quarter in the Company's history. Transportation revenues and related expenses of the Company's transportation division decreased in the first quarter of 1995 due to this division's sale in December, 1994 of approximately 67% of its river transportation equipment as well as its affreightment contracts. The operating performance of this division improved significantly in the first quarter of 1995 due primarily to the strong performance of this division's brokerage operation which increased revenues and improved profitability in the first quarter of 1995 as compared to the first quarter of 1994. The transportation division's operating performance in the first quarter of 1994 was hindered by severe winter weather and unusual flooding conditions. M/G Transport Services, Inc. is the subject of a criminal prosecution and related civil litigation concerning the alleged disposal of bilge water and other refuse from vessels on the inland waterways. M/G disputes the allegations which give rise to the indictments, and intends to vigorously defend itself; the outcome cannot be reasonably estimated at this time. Sportswear revenues and related expenses of the Company's sportswear division in the first quarter of 1995 are comparable to the first quarter of 1994. The operating performance of this division declined in the first quarter of 1995 as compared to the first quarter of 1994, however, this division's operating performance is in line with management's expectations. Cash flows from operations and sales and maturities of marketable securities were used to reduce the Company's short-term bank borrowings and finance the increase in fixed assets. The increases in deferred federal income tax and net unrealized gain on marketable securities are the result of this increase in the market value of the Company's investments. The increase in fixed assets is due to the costs associated with the construction of the Company's new corporate headquarters facility which is currently under construction and scheduled for completion in the fall of 1995. The total cost of this facility is currently estimated at approximately $26,000,000 and will eventually be financed through conventional long-term debt financing. The increase in unvested restricted stock awards was due to an additional stock award in the first quarter of 1995 awarded under the Company's restricted stock award program. The federal income tax provision for the three-month periods ended March 31, 1995 and 1994 is different from amounts derived by applying the statutory tax rates to income before federal income tax as follows: 1995 1994 ------------- ------------- Federal income tax at statutory rate $ 1,851,000 $ 250,000 Tax effect of: Tax exempt interest and excludable dividend income (371,000) (366,000) Net life insurance tax deductions (60,000) (10,000) Investment tax credits (44,000) (72,000) Other - net 102,000 102,000 ------------- ------------- Provision (credit) for federal income tax $ 1,478,000 $ (96,000) ============= ============= EXHIBIT I INDEPENDENT ACCOUNTANTS' REPORT The Midland Company: We have reviewed the accompanying consolidated balance sheet of The Midland Company and subsidiaries as of March 31, 1995, and the related consolidated statements of income and of cash flows for the three-month periods ended March 31, 1995 and 1994. 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, 1994, 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 16, 1995, 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, 1994 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 April 20, 1995 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 March 31, 1995 and 1994, as indicated in our report dated April 20, 1995; 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 March 31, 1995, 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 April 20, 1995 PART II. OTHER INFORMATION THE MIDLAND COMPANY AND SUBSIDIARIES MARCH 31, 1995 Item 1. Legal Proceedings M/G Transport Services, Inc., a subsidiary of the Registrant, is a named defendant in a criminal case that commenced on February 16, 1995, in the United States District Court for the Southern District of Ohio. The case is styled: United States of America vs. M/G Transport Services, et al. The case arises out of allegations that M/G's employees discharged or permitted the discharge of bilge water, ash and other refuse into the inland waterways over a period of years. Seven former employees have also been indicted. The Government may seek fines against the Company which could total $4.2 million if M/G Transport Services, Inc. is convicted on all nine counts. M/G disputes the allegations which give rise to the indictments, and intends to vigorously defend itself. 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.) None b.) A Form 8-K dated January 5, 1995 was filed with the Commission regarding the sale in December, 1994 of certain river transportation assets. 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 ___April 20, 1995__________ s/Michael J. Conaton_________________ Michael J. Conaton, President and Chief Operating Officer Date ___April 20, 1995__________ s/John I. Von Lehman_________________ John I. Von Lehman, Vice President and Treasurer and Chief Financial Officer EX-27 2 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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. QTR-1 DEC-31-1995 MAR-31-1995 4,498,000 274,494,000 82,833,000 1,392,000 13,415,000 0 117,396,000 45,126,000 486,464,000 0 44,038,000 911,000 0 0 141,509,000 486,464,000 5,391,000 75,939,000 4,957,000 68,626,000 1,198,000 (150,000) 976,000 5,289,000 1,478,000 3,811,000 0 0 0 3,811,000 1.24 1.24
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