U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
_ X _ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal quarter ended July 31, 1996
_____ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-620
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DETROIT & CANADA TUNNEL CORPORATION
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(Name of small business issuer in its charter)
Michigan 38 - 0477830
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
100 East Jefferson Avenue, Detroit, Michigan 48226
- -------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (313) 567-4422
-----------------
Check whether the registrant (1) filed all reports required to be filed
by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
( X ) Yes ( ) No
The number of outstanding shares of the issuer's common stock as of July 22,
1996 was 676,027.
Transitional Small Business Disclosure (check one) Yes ( ) No ( x )
<PAGE>
PART I.
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DETROIT & CANADA TUNNEL CORPORATION
AND
SUBSIDIARIES
Consolidated Balance Sheets
Unaudited
July 31 October 31
1996 1995
--------- ----------
<S> <C> <C>
CURRENT ASSETS
CASH $ 3,178,944 $ 2,129,988
SHORT TERM INVESTMENTS 5,137,829 4,840,847
ACCOUNTS RECEIVABLE, Net of allowance
for doubtful accounts of $12,500 and $5,000 680,554 1,057,094
PREPAID EXPENSES 592,930 446,199
------------ ------------
TOTAL CURRENT ASSETS 9,590,258 8,474,127
------------ ------------
LONG TERM INVESTMENTS
EQUITY INVESTMENTS - Available for Sale 1,788,000 1,573,768
OTHER INVESTMENTS 673,800 673,800
------------ ------------
2,461,800 2,247,568
------------ ------------
PROPERTY, PLANT & EQUIPMENT
Leasehold Improvements 12,374,123 11,694,880
Equipment 1,206,716 1,157,898
------------ ------------
13,580,839 12,852,778
Accumulated Depreciation and Amortization (2,331,810) (2,025,624)
------------ ------------
11,249,029 10,827,154
------------ ------------
DEFERRED INCOME TAX BENEFIT 342,071 415,000
------------ ------------
$ 23,643,158 $ 21,963,850
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DETROIT & CANADA TUNNEL CORPORATION
AND
SUBSIDIARIES (continued)
Consolidated Balance Sheets
Unaudited
July 31 October 31
1996 1995
--------- ----------
<S> <C> <C>
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 597,236 $ 960,616
ACCRUED PAYROLL & VACATION 104,982 135,556
ACCRUED TAXES 198,723 301,965
OTHER ACCRUED LIABILITIES 125,312 115,507
----------- -----------
TOTAL CURRENT LIABILITIES 1,026,253 1,513,644
----------- -----------
POSTRETIREMENT BENEFITS 3,560,309 3,383,744
----------- -----------
STOCKHOLDERS' INVESTMENT
COMMON STOCK, 1,000,000 shares authorized,
676,027 issued and outstanding 3,382,965 3,382,965
CAPITAL SURPLUS 28,124 28,124
RETAINED EARNINGS 14,700,292 12,851,549
UNREALIZED NET GAIN ON INVESTMENT
SECURITIES AVAILABLE FOR SALE 945,215 803,823
----------- -----------
19,056,596 17,066,461
----------- -----------
$23,643,158 $21,963,850
=========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DETROIT & CANADA TUNNEL CORPORATION
AND
SUBSIDIARIES
Consolidated Statements of Operations
For the nine months ended
Unaudited
July 31 July 31
1996 1995
-------- --------
<S> <C> <C>
OPERATING REVENUE
Tolls $6,453,682 $5,457,549
Management Fee 404,250 456,775
Rental and Lease Income 1,048,789 726,785
---------- ----------
7,906,721 6,641,110
---------- ----------
OPERATING EXPENSES
Tunnel Operations 4,515,911 4,372,578
Taxes Other than Income 441,858 408,894
Foreign Currency Transaction (Gain)Loss 62,852 7,594
---------- ----------
5,020,619 4,789,067
---------- ----------
2,886,102 1,852,043
---------- ----------
OTHER INCOME
Interest and Dividends 292,266 359,571
Other Income - net 32,462 14,882
---------- ----------
324,727 374,454
---------- ----------
Income before taxes 3,210,828 2,226,497
Provision for income taxes 1,108,574 813,021
---------- ----------
Net Income $2,102,254 $1,413,476
========== ==========
Net Income per Average Share $ 3.11 $ 2.08
========== ==========
Dividends declared per share $ 0.375 $ 0.375
========== ==========
Average Shares Outstanding 676,027 678,078
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DETROIT & CANADA TUNNEL CORPORATION
AND
SUBSIDIARIES
Consolidated Statements of Operations
For the three months ended
Unaudited
July 31 July 31
1996 1995
-------- --------
<S> <C> <C>
OPERATING REVENUE
Tolls $2,354,251 $1,973,810
Management Fee 134,750 161,206
Rental & Lease Income 279,623 226,435
---------- ----------
2,768,624 2,361,452
---------- ----------
OPERATING EXPENSES
Tunnel Operations 1,603,135 1,434,789
Taxes Other than Income 140,346 154,997
Foreign Currency Transaction Loss 30,338 8,635
---------- ----------
1,773,819 1,598,421
---------- ----------
994,805 763,031
---------- ----------
OTHER INCOME
Interest & Dividends 98,148 110,949
Other Income - net 8,369 5,201
---------- ----------
106,517 116,150
---------- ----------
Income before taxes 1,101,322 879,181
Provision for Income Taxes 383,553 328,076
---------- ----------
Net Income $ 717,769 $ 551,106
========== ==========
Net Income per Average Share $ 1.06 $ 0.81
========== ==========
Dividends declared per share $ 0.125 $ 0.125
========== ==========
Average Shares Outstanding 676,027 678,078
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DETROIT & CANADA TUNNEL CORPORATION
AND
SUBSIDIARIES
Consolidated Statements of Cash Flows
For nine months ended
Unaudited
July 31 July 31
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,102,254 $ 1,413,476
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Postretirement Benefits 176,565 177,662
Depreciation and amortization 313,452 302,567
Loss (Gain) on sale of investments, net 0 (8,816)
Loss (Gain) on sale of property 725 0
Cash provided (used ) by changes in
Operating assets and liabilities:
Accounts receivable 376,540 (172,844)
Prepaid expenses (146,732) (168,978)
Accounts payable (363,381) (823,407)
Accrued liabilities (20,769) (165,817)
Accrued taxes (103,242) (1,060,500)
Deferred tax liabilities 90 0
----------- -----------
Net cash provided by (used in)
operating activities 2,335,502 (506,657)
Cash flows from investing activities:
Purchase of investment securities 0 (46,528)
Proceeds from sale of investment securities 0 31,786
Net change in short term investments (296,982) 2,250,209
Purchase of property, plant & equipment (737,142) (1,752,083)
Proceeds from sale of property 1,091 0
----------- -----------
Net cash provided by (used in)
investing activities (1,033,033) 483,384
Cash flows from financing activities:
Dividends paid (253,512) (254,262)
Purchase of common stock 0 (159,003)
----------- -----------
Net cash used by financing activities (253,512) (413,265)
----------- -----------
Net increase (decrease) in cash 1,048,957 (436,538)
Cash at beginning of period 2,129,988 1,632,395
----------- -----------
Cash at end of period $ 3,178,944 $ 1,195,857
=========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
DETROIT & CANADA TUNNEL CORPORATION
AND
SUBSIDIARIES
Notes to Consolidated Financial Statements
Unaudited
1 - GENERAL
There has been no change in the Corporation's principal accounting policies
which were set forth in the 1995 Annual Report to the Stockholders.
The consolidated financial statements included herein have been prepared by
the Corporation, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission, and reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of financial results.
All adjustments are of a normal or recurring nature. Certain information and
footnote disclosure normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although the Corporation
believes that the disclosures are adequate so as to not make the information
presented misleading. The financial statements are subject to year-end audit
and other adjustments as later information may require.
<PAGE>
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
I. Results of Operations
For the nine months ended July 31, 1996
Toll revenue increased 18.3% overall during the first nine months
corresponding to a 10.6% increase in traffic volume due to casino related
traffic and a toll increase of $0.25 per car effective March 1, 1996. A second
gaming facility in Windsor opened in December, 1995. Management expects
current high traffic volumes to continue.
Foreign currency transaction loss was $62,852 in 1996 compared to a loss of
$7,594 in 1995 as the value of the Canadian dollar fell against the United
States dollar.
The Corporation leases a portion of its office facility to the United States
General Services Administration (GSA). In addition to making lease payments,
the GSA reimburses the Corporation for maintenance and operating services
provided. The GSA has concluded its outstanding review of expense
reimbursements for the fiscal years 1989 through 1995. Adjustments to
previously paid amounts resulted in additional income to the Corporation of
approximately $280,000 pre-tax ($0.41 per share) and was included in Rental
and Lease Income in the second quarter.
II. Liquidity
During the first nine months, the Corporation met its dividend, operating and
construction capital needs using cash provided from operating activities. A $4
million line of credit is available from a bank to meet short term cash needs.
III. Changes in Financial Condition
The Corporation and the City of Windsor are engaged in a major renovation of
the tunnel property. During the first nine months of fiscal 1996, expenditures
for capital projects by the Corporation were $.7 million. Projected
expenditures for fiscal 1996 are expected to be $2.2 million. Additional major
capital expenditures are expected in subsequent years. Construction pojects
will be funded through current earnings, utilization of short term investments
and if necessary, short term draws against the line of credit.
Deferred tax benefits relate principally to postretirement benefits which will
be paid in future periods.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DETROIT & CANADA TUNNEL CORPORATION
(Registrant)
BY : /s/ David C. Canavesio
----------------------
David C. Canavesio
Treasurer and Vice President - Finance
(Principal Financial Officer and Principal Accounting Officer)
Date September 13, 1996
---------------------
<PAGE>
PART II
ITEM 5. OTHER INFORMATION
On July 24, 1996, the Corporation announced that an investment banker had been
retained to assist the Board of Directors in exploring alternatives to enhance
shareholder value. Such alternatives to be considered may include the sale of
the company or merger with another firm.
ITEM 6. EXHIBITS and REPORTS ON Form 8-K
(a) The following exhibits are filed as part of this report :
3.1 Restated Articles of Incorporation, filed as Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ended
October 31, 1990, are incorporated herein by this reference.
3.2 Bylaws, filed as Exhibit 3.2 to the Registrant's Annual Report
on Form 10-K for the year ended October 31, 1990, are
incorporated herein by this reference.
3.3 Amendment to Bylaws, filed as Exhibit 3.3 to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended April
30,1996, are incorporated herein by this reference.
10 Joint Operating Agreement, filed as Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the year ended
October 31, 1991, is incorporated herein by this reference.
21 Subsidiaries of the Registrant, filed as Exhibit 22 to the
Registrant's Annual Report on Form 10-K for the year ended
October 31, 1990, are incorporated herein by this reference.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Corporation during the quarter
ended July 31, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1996
<CASH> $ 3,178,944
<SECURITIES> 5,137,829
<RECEIVABLES> 680,554
<ALLOWANCES> 12,500
<INVENTORY> 0
<CURRENT-ASSETS> 9,590,258
<PP&E> 13,580,839
<DEPRECIATION> (2,331,810)
<TOTAL-ASSETS> 23,643,158
<CURRENT-LIABILITIES> 1,026,253
<BONDS> 0
<COMMON> 3,382,965
0
0
<OTHER-SE> 14,728,416
<TOTAL-LIABILITY-AND-EQUITY> 23,643,158
<SALES> 0
<TOTAL-REVENUES> 8,231,448
<CGS> 0
<TOTAL-COSTS> 5,020,619
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,210,828
<INCOME-TAX> 1,108,574
<INCOME-CONTINUING> 2,102,254
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,102,254
<EPS-PRIMARY> 3.11
<EPS-DILUTED> 3.11
</TABLE>
