THE MIDLAND COMPANY
Annual Report
on Form 11-K
to the
Securities and Exchange Commission
for the
Year Ended December 31, 1999
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
(Mark one)
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED].
For the Fiscal Year Ended December 31, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
For the transition period from _____ to _____.
MIDLAND-GUARDIAN CO. SALARIED
EMPLOYEES 401(K) SAVINGS PLAN
(Full title of the Plan)
THE MIDLAND COMPANY
7000 Midland Boulevard
Amelia, Ohio 45102-2607
(Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office)
Registrant's telephone number including area code (513) 943-7100
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Required information:
(a) Financial statements filed as a part of this report:
Independent Auditors' Report
Statements of Net Assets Available for Plan Benefits as of
December 31, 1999 and 1998
Statements of Changes in Net Assets Available for Plan
Benefits for the Years Ended December 31, 1999 and 1998
Notes to Financial Statements - December 31, 1999 and 1998
Supplemental Schedules:
Form 5500, Schedule of Assets Held for Investment
Purposes - December 31, 1999
(b) Exhibits
Exhibit 23 Independent Auditors' Consent
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Investment Committee of the Plan has duly caused this annual report to be
signed on its behalf by the undersigned thereunto duly authorized.
MIDLAND-GUARDIAN CO. SALARIED
EMPLOYEES 401(K) SAVINGS PLAN
(Name of Plan)
/s/John I. Von Lehman
John I. Von Lehman
Executive Vice President,
Chief Financial Officer and
Secretary of The Midland Company
For the Midland-Guardian Co. Salaried
Employees 401(k) Savings Plan
Dated: June 29, 2000
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INDEPENDENT AUDITORS' REPORT
We have audited the accompanying statements of net assets available for benefits
of The Midland-Guardian Company Salaried Employees' 401(k) Savings Plan as of
December 31, 1999 and 1998, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1999 and 1998, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. Such
supplemental schedule has been subjected to the auditing procedures applied in
our audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
/s/Deloitte & Touche, LLP
Deloitte & Touche, LLP
Cincinnati, Ohio
June 2, 2000
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MIDLAND-GUARDIAN CO.
SALARIED EMPLOYEES' 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999 AND 1998
ASSETS 1999 1998
-----------------------------------
INVESTMENTS - At market value:
MARKETABLE SECURITIES $25,916,266 $21,184,410
(Cost - 1999, $22,438,036;
1998, $17,942,890)
LOANS TO PARTICIPANTS 441,522 324,644
-----------------------------------
TOTAL INVESTMENTS 26,357,788 21,509,054
CASH - 69
CONTRIBUTIONS RECEIVABLE 9,714 2,508
ACCRUED INCOME 3,707 -
-----------------------------------
NET ASSETS AVAILABLE
FOR BENEFITS $26,371,209 $21,511,631
===================================
See notes to financial statements.
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MIDLAND-GUARDIAN CO.
SALARIED EMPLOYEES' 401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
----------------------------
INCOME:
Contributions from Midland-Guardian Co. $ 672,179 $ 358,980
Contributions from Employees 2,131,776 1,513,245
Dividend and Interest Income 1,830,689 1,872,644
Net Appreciation in Market Value
of Investments 1,572,777 836,677
Rollovers 693,366 265,639
Other 60,242 13,272
----------------------------
Total 6,961,029 4,860,457
BENEFIT PAYMENTS (2,101,451) (1,641,706)
OTHER DEDUCTIONS - (40,636)
----------------------------
INCREASE IN NET ASSETS 4,859,578 3,178,115
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of Year 21,511,631 18,333,516
----------------------------
End of year $26,371,209 $21,511,631
============================
See notes to financial statements.
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MIDLAND-GUARDIAN CO.
SALARIED EMPLOYEES' 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Basis of Accounting
The accompanying financial statements conform to accounting principles
generally accepted in the United States of America and with the
applicable accounting requirements of the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 ("ERISA").
Expenses of the Plan
Midland-Guardian Co. Salaried Employees' 401(K) Savings Plan (the
"Plan") sponsor, Midland-Guardian Co. (the "Company"), pays certain
expenses of the Plan.
Investments
The Plan's investments in mutual funds are stated at fair value, based
on market quotations provided by the trustee, and The Midland Company
stock is valued at its quoted market price. Participant loans are
valued at cost that approximates fair value.
Method of Funding
The Company's annual contribution to the Plan consists of matching 50
percent of the basic contributions made by plan participants up to 6
percent of the participant's wages.
Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions. These estimates and
assumptions affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of additions to and
deductions from net assets available for benefits during the reporting
period. Actual results could differ from those estimates.
Reclassifications
The Plan has apopted Statement of Position 99-3 "Accounting for and
Reporting of Certain Defined Contribution Plan Investments and
Disclosure Matters." As a result, the reclassification of the prior
year financial statements has been made to eliminate the by fund
disclosure.
presentation.
2. Description of the Plan
All full-time salaried employees of Midland-Guardian Co. and part time
employees who anticipate working 1,000 hours or more annually are
eligible to participate in the Plan upon their hire date. An employee
may authorize (matched) basic contributions between one percent and six
percent of base salary through payroll deductions. Supplemental
(unmatched) contributions ranging from one to ten percent of the base
salary are also permitted above the basic contribution. Participants
are 100 percent vested in their contributions. The Company matches 50
percent of an employee's basic contribution. The vesting period in
Company matching contributions is five (5) years. At the end of each
year of employment, the employee will vest in 20 percent of
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the Company's matching contribution. Vesting is based on the date of
hire, not the date of enrollment in the Plan. Forfeitures are used to
reduce future Company contributions.
Upon enrollment in the Plan, a participant may direct employee
contributions in one-percent increments in any of ten investment
options. The investment options (funds and fund investment information
obtained from fund publications) are as follows:
a) EB Money Market Fund (formerly Prism Money Market Fund) - Funds are
invested primarily in high-grade money market instruments with the
objective of providing stability and liquidity.
b) Victory Fund for Income - Funds are invested to provide a high level
of current income consistent with preservation of shareholders'
capital.
c) Victory Balanced Fund - Funds are invested in common stock,
securities convertible into common stock, preferred stock, corporate
debt securities and U.S. Government securities.
d) Victory Value Fund - Funds are invested primarily in a diversified
group of common stocks with an emphasis on companies with above
average total return potential.
e) Victory Stock Index Fund - Funds are invested primarily in equity
securities with the objective of matching the performance of the
Standard & Poor's 500 stock index.
f) American Capital Income Builder, Inc. - Funds are invested to seek
above-average current income, a growing stream of income, and
secondarily growth of capital.
g) Janus Twenty Fund - Funds are invested to provide long-term growth of
capital by concentrating its investments in a core position of 20-30
common stocks.
h) Janus Overseas Fund - Funds are invested to seek long-term growth of
capital by investing primarily in the common stocks of companies
outside the United States, normally investing at least 65% of its
assets in securities of issuers from at least five different
countries, excluding the U.S.
i) INVESCO Dynamics Fund - Funds are invested in equity securities of
mid-sized core growth companies with the objective of long-term
capital appreciation through aggressive investment policies.
j) Midland Stock Fund - Funds are invested in common stock of The
Midland Company.
In 1998 the Victory Intermediate Income Fund and the Special Growth
Fund were investment options. In 1999 these funds were terminated and
replaced with the Victory Fund for Income and INVESCO Dynamics Fund,
respectively.
Participants may change their investment elections daily.
The contributions are invested in pooled accounts maintained by the
Plan's trustee. Individual accounts are maintained for each
participant. Income from investments and the change in the market value
of the investments are allocated to the participants' accounts based on
the percentage that each account balance bears to the total pool
balance.
The Plan allows participants to borrow funds from their vested account
balance subject to certain restrictions. Loans are repayable in one to
five years unless the loan is related to the purchase of the
participant's primary residence, in which case the term may be up to
thirty years. The interest rate applicable to Plan loans is established
at 1% over Firstar Corporation's prime rate (9.50% at December 31,
1999).
Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
The Company expects to continue the Plan indefinitely, but reserves the
right to terminate it by duly adopted written resolution of the Board of
Directors of the Company. In the event of termination, the value of
each participant's interest in Company matching contributions will
become fully vested and Plan assets will be allocated to provide
benefits to participants as set forth in the Plan, or as otherwise
required by law.
3. Investments
Investments representing more than five percent of net assets available
for benefits are as follows:
Market
Cost Value
1999 ---- -----
Key Trust Investment Management:
EB Money Market Fund $3,754,681 $4,136,761
Victory Balanced Fund 2,827,618 3,022,349
Victory Value Fund 6,681,384 7,953,734
INVESCO Dynamics 2,101,624 2,937,573
Victory Fund for Income Fund 1,419,664 1,351,958
Janus Twenty Fund 3,052,543 3,717,666
1998
Key Trust Investment Management:
EB Money Market Fund $3,629,911 $4,152,262
Victory Intermediate Income Fund 1,733,526 1,784,359
Victory Balance Fund 2,877,495 3,327,038
Victory Value Fund 7,432,993 9,571,252
Victory Special Growth Fund 1,260,197 1,210,630
The Midland Company Common Stock 1,008,768 1,138,869
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The net appreciation (depreciation) of investments is as follows:
1999 1998
---------- ----------
EB Money Market Fund $ 207,277 $ 211,578
Victory Intermediate Income Fund - 32,052
Victory Balance Fund (121,552) 212,329
Victory Value Fund (134,999) 496,933
Victory Special Growth (19,831) (124,854)
INVESCO Dynamics Fund 870,419 -
Victory Fund for Income (88,474) -
Janus Overseas Fund 239,073 -
Janus Twenty Fund 774,663 -
American Capital Income Builder (2,517) -
Victory Stock Index 44,037 -
The Midland Company Common Stock (195,319) 8,639
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Total $1,572,777 $ 836,677
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4. Tax Status
The Plan has received a letter of determination dated January 25, 1996
from the Internal Revenue Service which indicates that the Plan as
designed at the date of the letter is in compliance with the applicable
requirements of the Internal Revenue Code. The Plan Administrator
believes that the Plan has been operated in compliance with the
applicable requirements of the Internal Revenue Code and that it is
qualified and the related trust is tax exempt.
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SUPPLEMENTAL SCHEDULE I
ASSETS HELD FOR INVESTMENT PURPOSES
MIDLAND-GUARDIAN CO.
SALARIED EMPLOYEES' 401(K) SAVINGS PLAN
DECEMBER 31, 1999
MARKET
UNITS VALUE
----------- --------------
Key Trust Investment Management:
EB Money Market Fund 329,208 $ 4,136,761
Victory Balanced Fund 213,896 3,022,349
Victory Value Fund 463,702 7,953,734
INVESCO Dynamics Fund 113,595 2,937,573
Victory Fund for Income 107,128 1,351,958
Janus Overseas Fund 27,413 1,018,308
Janus Twenty Fund 44,560 3,717,666
American Capital Income Builder 978 41,746
Victory Stock Index Fund 24,054 582,777
The Midland Company Common Stock 53,544 1,153,394
------------
Total before Participant Loans 25,916,266
Participant Loans (interest rates:
6% to 10%) 441,522
------------
TOTAL INVESTMENTS $26,357,788
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