-----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, VMA6Bv9ZoZhfMSenNwrpyzBR8GUO3oaaTRvk1C1pFn6Id8yqz2KM1iHJQ0A4PCLb N7K+DOZCxTw5eVqWu2Rxyw== 0000066025-95-000010.txt : 19950814 0000066025-95-000010.hdr.sgml : 19950814 ACCESSION NUMBER: 0000066025-95-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 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 SEC ACT: 1934 Act SEC FILE NUMBER: 001-06026 FILM NUMBER: 95561045 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 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 June 30, 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 or organization) Identification 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 for a fair statement of the results for the periods covered. Letters from Deloitte & Touche, LLP, the Company's independent accountants, dated July 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 June 30, 1995 was 3,021,231. PART I. FINANCIAL INFORMATION THE MIDLAND COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 1995 AND DECEMBER 31, 1994 (Unaudited) June 30, Dec. 31 ASSETS 1995 1994 ------------- ------------- CASH $ 5,223,000 $ 4,036,000 ------------- ------------- MARKETABLE SECURITIES 292,653,000 278,088,000 ------------- ------------- RECEIVABLES: Accounts receivable 94,298,000 82,293,000 Finance receivables (including amounts maturing after one 4,436,000 4,120,000 ------------- ------------- Sub-Total 98,734,000 86,413,000 Less allowance for losses 1,392,000 1,535,000 ------------- ------------- Net 97,342,000 84,878,000 ------------- ------------- INVENTORY - SPORTSWEAR DIVISION 21,557,000 11,116,000 ------------- ------------- PROPERTY, PLANT AND EQUIPMENT - AT COST 123,680,000 109,729,000 Less accumulated depreciation 46,657,000 43,687,000 ------------- ------------- Net 77,023,000 66,042,000 ------------- ------------- DEFERRED INSURANCE POLICY ACQUISITION COSTS 39,577,000 37,653,000 ------------- ------------- OTHER ASSETS 843,000 733,000 ------------- ------------- TOTAL $ 534,218,000 $ 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 JUNE 30, 1995 AND DECEMBER 31, 1994 (Unaudited) June 30, Dec. 31 LIABILITIES & SHAREHOLDERS' EQUITY 1995 1994 ------------- ------------- NOTES PAYABLE WITHIN ONE YEAR: Banks $ 30,000,000 $ 22,000,000 Commercial paper 5,521,000 5,546,000 ------------- ------------- Total 35,521,000 27,546,000 ------------- ------------- ACCOUNTS PAYABLE - TRADE 3,863,000 6,232,000 ------------- ------------- OTHER PAYABLES AND ACCRUALS 59,391,000 46,455,000 ------------- ------------- CURRENT PORTION OF LONG-TERM DEBT 2,466,000 2,451,000 ------------- ------------- UNEARNED INSURANCE PREMIUMS 168,429,000 158,316,000 ------------- ------------- INSURANCE LOSS RESERVES 64,579,000 57,715,000 ------------- ------------- DEFERRED FEDERAL INCOME TAX 11,618,000 6,754,000 ------------- ------------- LONG-TERM DEBT 43,416,000 44,640,000 ------------- ------------- SHAREHOLDERS' EQUITY Common stock (issued and outstanding: 3,021,000 shares at June 30, 1995 and 2,997,000 shares at December 31, 1994 after deducting treasury stock of 622,000 shares and 646,000 shares, respectively) 911,000 911,000 Additional paid-in capital 15,388,000 14,607,000 Retained earnings 135,513,000 131,675,000 Net unrealized gain on marketable securities 12,213,000 2,754,000 Treasury stock - at cost (16,540,000) (16,648,000) Unvested restricted stock awards (2,550,000) (862,000) ------------- ------------- Total 144,935,000 132,437,000 ------------- ------------- TOTAL $ 534,218,000 $ 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 SIX AND THREE-MONTHS ENDED JUNE 30, 1995 AND 1994 Six-Mos. Ended June 30, Three-Mos. Ended June 30, ------------------------- ------------------------ 1995 1994 1995 1994 REVENUES: ------------ ------------ ----------- ----------- Insurance $137,836,000 $103,454,000 $74,375,000 $52,090,000 Transportation 14,049,000 25,340,000 7,178,000 13,624,000 Sportswear 11,590,000 14,873,000 6,137,000 8,808,000 Finance 311,000 404,000 157,000 233,000 ------------ ------------ ----------- ----------- Total 163,786,000 144,071,000 87,847,000 74,755,000 ------------ ------------ ----------- ----------- COSTS AND EXPENSES: Insurance claims and policy acquisition costs 109,081,000 89,047,000 61,629,000 46,423,000 Insurance operating and administrative expenses 16,606,000 12,093,000 8,626,000 6,325,000 Transportation operating expenses 12,235,000 23,635,000 6,424,000 12,111,000 Sportswear operating expenses 15,185,000 16,592,000 7,952,000 9,510,000 Interest expense 2,225,000 2,411,000 1,249,000 1,240,000 Other operating and administrative expenses 2,095,000 995,000 897,000 562,000 ------------ ------------ ----------- ----------- Total 157,427,000 144,773,000 86,777,000 76,171,000 ------------ ------------ ----------- ----------- INCOME (LOSS) BEFORE FEDERAL INCOME TAX 6,359,000 (702,000) 1,070,000 (1,416,000) PROVISION (CREDIT) FOR FEDERAL INCOME TAX 1,581,000 (963,000) 103,000 (867,000) ------------ ------------ ----------- ----------- NET INCOME (LOSS) $ 4,778,000 $ 261,000 $ 967,000 $ (549,000) ============ ============ =========== =========== EARNINGS PER SHARE OF COMMON STOCK (A) $ 1.55 $ 0.09 $ 0.31 $ 0.17 CASH DIVIDENDS PER SHARE ============ ============ ============ =========== OF COMMON STOCK $ 0.31 $ 0.29 $ 0.155 $ 0.145 ============ ============ ============ =========== (A) Earnings per share of common stock have been computed by dividing net income by 3,075,000 shares in 1995 and 3,051,000 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 classifications. THE MIDLAND COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) FOR THE SIX-MONTHS ENDED JUNE 30, 1995 AND 1994 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: ------------- -------------- Net income $ 4,778,000 $ 261,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,325,000 5,325,000 Increase in net accounts receivable (12,148,000) (19,545,000) Increase in unearned insurance premiums 10,113,000 20,637,000 Increase (decrease) in other accounts payable and accruals 10,534,000 (1,151,000) Increase in inventory-sportswear division (10,441,000) (362,000) Increase in insurance loss reserves 6,864,000 12,132,000 Increase in deferred insurance policy acquisition costs (1,924,000) (3,889,000) Decrease (increase) in other assets (110,000) 187,000 Decrease in deferred federal income tax (79,000) - Other-net (98,000) (317,000) ------------- ------------- Net cash provided by operating activities 11,814,000 13,278,000 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities (68,831,000) (55,069,000) Sale of marketable securities 27,926,000 31,046,000 Decrease in cash equivalent marketable securities 34,383,000 29,787,000 Acquisition of property, plant and equipment (15,587,000) (7,663,000) Maturity of marketable securities 6,377,000 4,071,000 Sale of property, plant and equipment 653,000 1,860,000 Net decrease (increase) in finance receivables (316,000) 200,000 ------------- ------------- Net cash provided by (used in) investing activities (15,395,000) 4,232,000 ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in net short-term borrowings 7,975,000 (13,939,000) Purchase of treasury stock (1,143,000) (107,000) Repayment of long-term debt (1,060,000) (3,078,000) Dividends paid (907,000) (840,000) Payment of capitalized lease obligations (149,000) (438,000) Issuance of treasury stock 52,000 28,000 ------------- ------------- Net cash provided by (used in) financing activities 4,768,000 (18,374,000) ------------- ------------- NET INCREASE (DECREASE) IN CASH 1,187,000 (864,000) CASH AT BEGINNING OF PERIOD 4,036,000 3,935,000 ------------- ------------- CASH AT END OF PERIOD $ 5,223,000 $ 3,071,000 ============= ============= Supplemental Disclosures: The Company paid interest of $1,483,000 and $1,850,000 and income taxes of $5,000,000 and $25,000 in the first six 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 increased additional 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. Both written premiums and earned premiums have increased during the first half and second quarter of 1995 as compared to the same periods in 1994. The increases in accounts receivable, deferred insurance policy acquisition costs, other payables and accruals, unearned premiums, loss reserves, revenues, claims and policy acquisition costs and operating and administrative expenses are all due to this growth. The operating performance of this division improved during the first six months of 1995 as compared to the first six months of 1994 due to fewer weather-related losses in 1995 than 1994. The Company's combined ratio, the ratio of losses and expenses to premiums earned, improved favorably from 104% for the first six months of 1994 to 98% for the same period in 1995. The operating results for the second quarter of 1995 were adversely impacted by the storms which plagued Texas and the southeastern United States in May, 1995, however, weather-related losses were more severe during the second quarter of 1994 than the current quarter. The impact of these weather-related losses in both years was reduced by capital gains realized in both years. Pre-tax realized capital gains were $1,941,000 in the first six months of 1995 of which $2,028,000 were realized during the second quarter of 1995. Pre-tax realized capital gains amounted to $2,077,000 during the first six months of 1994 of which $2,136,000 were realized during the first quarter of 1994. Transportation revenues and related expenses of the Company's transportation division decreased during the first six months and second quarter of 1995 as compared to the comparable periods in 1994 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 during the first six months of 1995 as compared to the prior year six month period due primarily to the severe winter weather and flooding conditions which adversely impacted the division's performance during the first quarter of 1994. This division's operating results in the second quarter of 1995 were comparable to the same period in 1994. 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 as well as the overall operating performance of the Company's sportswear division decreased in the first six months and second quarter of 1995 relative to the comparable periods in 1994. These declines were reflective of a general downturn within the entire sportswear apparel industry which is affecting numerous companies within the industry. In light of this overall situation, Management does not expect CS Crable's operating margins to improve at least through the remainder of this year. The increases in deferred federal income tax and net unrealized gain on marketable securities are primarily attributable to the increases in the market values of the Company's investments. The increase in marketable securities is a result of the increase in the market value of the Company's investments previously held as well as additional investments purchased with funds generated from operation. The increases in fixed assets and short-term bank borrowings are 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 $28,000,000 and will eventually be financed through conventional long-term debt or sale and leaseback 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 and six-month periods ended June 30, 1995 and 1994 is different from amounts derived by applying the statutory tax rates to income before federal income tax as follows: Six-Mos. Ended June 30, Three-Mos. Ended June 30, 1995 1994 1995 1994 ------------- ------------- ------------- ------------- Federal income tax at statutory rate $ 2,226,000 $ (246,000) $ 375,000 $ (496,000) Add (deduct) the tax effect of: Tax exempt interest and excludable dividend income (756,000) (744,000) (385,000) (378,000) Investment tax credits (88,000) (144,000) (44,000) (72,000) Net life insurance tax deductions - (35,000) 60,000 (25,000) Other items-net 199,000 206,000 97,000 104,000 ------------- ------------- ------------- ------------- Provision (credit) for federal income tax $ 1,581,000 $ (963,000) $ 103,000 $ (867,000) ============= ============= ============= ============= EXHIBIT I INDEPENDENT ACCOUNTANTS' REPORT The Midland Company: We have reviewed the accompanying consolidated balance sheet of The Midland Company and subsidiaries as of June 30, 1995, and the related consolidated statements of income for the three month and six month periods ended June 30, 1995 and 1994 and of cash flows for the six month periods ended June 30, 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 July 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 June 30, 1995 and 1994, as indicated in our report dated July 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 June 30, 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 July 20, 1995 PART II. OTHER INFORMATION THE MIDLAND COMPANY AND SUBSIDIARIES JUNE 30, 1995 Item 1. Legal Proceedings Reference is made to the March 31, 1995 Registrant's Form 10Q. 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.) 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 ___July 20, 1995_____________ s/Michael J. Conaton_________________ Michael J. Conaton, President and Chief Operating Officer Date ___July 20, 1995_____________ 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 EXTRACED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1995 JUN-30-1995 5,223,000 292,653,000 98,734,000 1,392,000 21,557,000 0 123,680,000 46,657,000 534,218,000 0 43,416,000 911,000 0 0 144,024,000 534,218,000 11,494,000 163,786,000 10,451,000 153,257,000 2,095,000 (150,000) 2,225,000 6,359,000 1,581,000 4,778,000 0 0 0 4,778,000 1.55 1.55
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