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 April 30, 1996
_____ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-620
DETROIT & CANADA TUNNEL CORPORATION
(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 April 12,
1996 was 676,027.
Transitional Small Business Disclosure (check one) Yes ( ) No ( x )
<PAGE>
PART I.
ITEM 1. FINANCIAL STATEMENTS
DETROIT & CANADA TUNNEL CORPORATION
AND
SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Unaudited
---------
April 30 October 31
1996 1995
-------- ----------
<S> <C> <C>
CURRENT ASSETS
CASH $ 2,701,609 $ 2,129,988
SHORT TERM INVESTMENTS 4,157,772 4,840,847
ACCOUNTS RECEIVABLE, Net of allowance
for doubtful accounts of $10,500 and $5,000 1,714,494 1,057,094
PREPAID EXPENSES 467,561 446,199
------------ ------------
TOTAL CURRENT ASSETS 9,041,436 8,474,127
------------ ------------
LONG TERM INVESTMENTS
EQUITY INVESTMENTS - Available for Sale 1,721,453 1,573,768
OTHER INVESTMENTS 673,800 673,800
------------ ------------
2,395,253 2,247,568
------------ ------------
PROPERTY, PLANT & EQUIPMENT
Leasehold Improvements 12,020,989 11,694,880
Equipment 1,206,716 1,157,898
------------ ------------
13,227,705 12,852,778
Accumulated Depreciation and Amortization (2,228,062) (2,025,624)
------------ ------------
10,999,643 10,827,154
------------ ------------
DEFERRED INCOME TAX BENEFIT 364,697 415,000
------------ ------------
$ 22,801,029 $ 21,963,850
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
DETROIT & CANADA TUNNEL CORPORATION
AND
SUBSIDIARIES
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
Unaudited
---------
April 30 October 31
1996 1995
-------- ----------
<S> <C> <C>
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 621,775 $ 960,616
ACCRUED PAYROLL & VACATION 129,075 135,556
ACCRUED TAXES 129,694 301,965
OTHER ACCRUED LIABILITIES 39,517 115,507
----------- -----------
TOTAL CURRENT LIABILITIES 920,061 1,513,644
----------- -----------
POSTRETIREMENT BENEFITS 3,501,558 3,383,744
----------- -----------
STOCKHOLDERS' INVESTMENT
COMMON STOCK, 1,000,000 shares authorized, 3,382,965 3,382,965
676,027 issued and outstanding
CAPITAL SURPLUS 28,124 28,124
RETAINED EARNINGS 14,067,027 12,851,549
UNREALIZED NET GAIN ON INVESTMENT
SECURITIES AVAILABLE FOR SALE 901,294 803,823
----------- -----------
18,379,410 17,066,461
----------- -----------
$22,801,029 $21,963,850
=========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
DETROIT & CANADA TUNNEL CORPORATION
AND
SUBSIDIARIES
Consolidated Statements of Operations
For the six months ended
<TABLE>
<CAPTION>
Unaudited
---------
April 30 April 30
1996 1995
-------- --------
<S> <C> <C>
OPERATING REVENUE
Tolls $ 4,099,431 $ 3,483,739
Management Fee 269,500 295,569
Rental and Lease Income 769,166 500,350
----------- -----------
5,138,097 4,279,658
----------- -----------
OPERATING EXPENSES
Tunnel Operations 2,912,775 2,937,789
Taxes Other than Income 301,512 253,897
Foreign Currency Transaction (Gain)Loss 32,514 (1,041)
----------- -----------
3,246,800 3,190,646
----------- -----------
1,891,297 1,089,012
----------- -----------
OTHER INCOME
Interest and Dividends 194,118 248,622
Other Income - net 24,093 9,681
----------- -----------
218,210 258,303
----------- -----------
Income before taxes 2,109,507 1,347,315
Provision for income taxes 725,021 484,945
----------- -----------
Net Income $ 1,384,486 $ 862,370
=========== ===========
Net Income per Average Share $ 2.05 $ 1.27
=========== ===========
Dividends declared per share $ 0.250 $ 0.250
=========== ===========
Average Shares Outstanding 676,027 679,127
=========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
DETROIT & CANADA TUNNEL CORPORATION
AND
SUBSIDIARIES
Consolidated Statements of Operations
For the three months ended
<TABLE>
<CAPTION>
Unaudited
---------
April 30 April 30
1996 1995
-------- --------
<S> <C> <C>
OPERATING REVENUE
Tolls $ 2,190,680 $ 1,732,473
Management Fee 109,381 146,632
Rental & Lease Income 515,245 234,696
----------- -----------
2,815,306 2,113,801
----------- -----------
OPERATING EXPENSES
Tunnel Operations 1,505,918 1,421,662
Taxes Other than Income 140,090 145,982
Foreign Currency Transaction Loss 59,622 (59,156)
----------- -----------
1,705,630 1,508,489
----------- -----------
1,109,676 605,312
----------- -----------
OTHER INCOME
Interest & Dividends 76,164 124,540
Other Income - net 19,844 1,818
----------- -----------
96,008 126,357
----------- -----------
Income before taxes 1,205,684 731,669
Provision for Income Taxes 405,545 254,926
----------- -----------
Net Income $ 800,139 $ 476,743
=========== ===========
Earnings per Average Share $ 1.18 $ 0.70
=========== ===========
Dividends declared per share $ 0.125 $ 0.125
=========== ===========
Average Shares Outstanding 676,027 679,127
=========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
DETROIT & CANADA TUNNEL CORPORATION
AND
SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended
<TABLE>
<CAPTION>
Unaudited
---------
April 30 April 30
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,384,486 $ 862,370
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Postretirement Benefits 117,815 118,563
Depreciation and amortization 202,438 197,692
Loss (Gain) on sale of investments, net 0 0
Loss (Gain) on sale of property 0 0
Cash provided (used ) by changes in
Operating assets and liabilities:
Accounts receivable (657,400) 317,859
Prepaid expenses (21,363) (24,934)
Accounts payable (338,842) (984,857)
Accrued liabilities (82,471) (21,338)
Accrued taxes (172,271) (1,118,314)
Deferred tax liabilities 87 0
----------- -----------
Net cash provided by (used in)
operating activities 432,480 (652,959)
Cash flows from investing activities:
Purchase of investment securities 0 0
Proceeds from sale of investment securities 0 (7,585)
Net change in short term investments 683,076 2,113,307
Purchase of property, plant & equipment (374,927) (1,176,551)
Proceeds from sale of property 0 0
----------- -----------
Net cash provided by (used in)
investing activities 308,149 929,171
Cash flows from financing activities:
Dividends paid (169,008) (169,758)
Purchase of common stock 0 (159,003)
----------- -----------
Net cash used by financing activities (169,008) (328,761)
----------- -----------
Net increase (decrease) in cash 571,621 (52,549)
Cash at beginning of period 2,129,988 1,632,395
----------- -----------
Cash at end of period $ 2,701,609 $ 1,579,846
=========== ===========
<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 six months ended April 30, 1996
Toll revenue increased 17.6% overall during the first six months corresponding
to a 13.1% 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 gain was $32,514 in 1996 compared to a loss of
$1,041 in 1995 as the value of the Canadian dollar rose 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,
GSA reimburses the Corporation for maintenance and operating services
provided. 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 is included in Rental and Lease Income.
II. Liquidity
During the first six months of fiscal 1996, the Corporation met its dividend,
operating and construction capital needs using cash provided from operating
activities, utilization of cash reserves and short and long term investments.
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 six months of fiscal 1996, expenditures
for capital projects by the Corporation were $.4 million. Projected
expenditures for fiscal 1996 are expected to be $3.9 million. Additional major
capital expenditures are expected in subsequent years. Construction projects
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.
The Postretirement Benefits Liability reflects the Corporation's adoption of
The Financial Accounting Standards Board Statement No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions".
<PAGE>
PART II
ITEM 5. OTHER INFORMATION. On March 13, 1996, the Corporation's Board of
Directors amended the Corporation's bylaws to exempt the Corporation from
Chapter 7B of the Michigan Business Corporation Act (the "MBCA") and adopted a
resolution exempting the Corporation from Chapter 7A of the MBCA. Exhibit 3.3
is the bylaw amendment.
In April, 1996, the Corporation agreed with the City of Windsor for the
extension of the Joint Operating Agreement between the Corporation and Windsor
until October 31, 1997. A formal amendment is in preparation.
On May 17, 1996, Robert M. Teeter resigned as a director of the
Corporation.
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
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 fiscal quarter ended April 30, 1996.
<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 :____________________________________
David C. Canavesio
Treasurer and Vice President - Finance
(Principal Financial Officer and Principal Accounting Officer)
Date ______________________
EXHIBIT 3.3
AMENDMENT TO BYLAWS
OF
DETROIT & CANADA TUNNEL CORPORATION
The following Article XI is added to the Bylaws of Detroit & Canada
Tunnel Corporation:
ARTICLE XI
CONTROL SHARE ACT
Chapter 7B of the Michigan Business Corporation Act does not apply to
control share acquisitions of shares of the Corporation.
<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> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1996
<CASH> $ 2,701,609
<SECURITIES> 4,157,772
<RECEIVABLES> 1,714,494
<ALLOWANCES> 7,900
<INVENTORY> 0
<CURRENT-ASSETS> 9,041,436
<PP&E> 13,227,705
<DEPRECIATION> (2,228,062)
<TOTAL-ASSETS> 22,801,029
<CURRENT-LIABILITIES> 920,061
<BONDS> 0
<COMMON> 3,382,965
0
0
<OTHER-SE> 14,095,151
<TOTAL-LIABILITY-AND-EQUITY> 22,801,029
<SALES> 0
<TOTAL-REVENUES> 5,356,307
<CGS> 0
<TOTAL-COSTS> 3,246,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,109,507
<INCOME-TAX> 725,021
<INCOME-CONTINUING> 1,384,486
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,384,486
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 2.05
</TABLE>
