<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
-----------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________________to____________________
Commission file number 2-39895
--------------------------------
Midland Enterprises Inc.
______________________________________________________________________________
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 04-2284434
________________________________ _________________________________
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1400-580 Building; Cincinnati, Ohio 45202
________________________________ _________________________________
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code 513-721-4000
-------------------
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
WHICH REGISTERED
________________________________ _________________________________
________________________________ _________________________________
Securities registered pursuant to Section 12(g) of the Act:
None
______________________________________________________________________________
______________________________________________________________________________
(TITLE OF CLASS)
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 (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. YES X
NO ____ ----
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE
CONTAINED TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS
FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X]
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NONAFFILIATES OF THE REGISTRANT. (THE AGGREGATE MARKET VALUE SHALL BE
COMPUTED BY REFERENCE TO THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE
AVERAGE BID AND ASKED PRICES OF SUCH STOCK, AS OF A SPECIFIED DATE
WITHIN 60 DAYS PRIOR TO THE DATE OF FILING.)
Not Applicable
______________________________________________________________________________
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE (APPLICABLE
ONLY TO CORPORATE REGISTRANTS).
March 16, 1995 - 15 1/2 SHARES
______________________________________________________________________________
DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH THE
DOCUMENT IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS; (2)
ANY PROXY OR INFORMATION STATEMENT; AND (3) ANY PROSPECTUS FILED
PURSUANT TO RULE 424(b) OR (c) UNDER THE SECURITIES ACT OF 1933. (THE
LISTED DOCUMENTS SHOULD BE CLEARLY DESCRIBED FOR IDENTIFICATION
PURPOSES.)
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J
(1) (A) AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE
REDUCED DISCLOSURE FORMAT.
<PAGE> 2
PART I
ITEM 1. BUSINESS
--------
(A) GENERAL
-------
Midland Enterprises Inc. (the "Registrant"), incorporated under the laws of the
State of Delaware in 1961, is a wholly-owned subsidiary of Eastern Enterprises
("Eastern") of Weston, Massachusetts. The Registrant is primarily engaged
through wholly-owned subsidiaries in the operation of a fleet of towboats,
tugboats and barges, principally on the Ohio and Mississippi Rivers and their
tributaries and the Gulf Intracoastal Waterway and in the Gulf of Mexico. The
Registrant's barge line subsidiaries transport bulk commodities, a major
portion of which is coal. In December, 1993, the Company sold its liquid
barges and in conjunction, Chotin, a subsidiary, sold its liquid contract and
trade name. The Registrant, through other subsidiaries, also performs repair
work on marine equipment and operates two coal dumping terminals, a phosphate
rock and phosphate chemical fertilizer terminal, and a marine fuel supply
facility. In June 1994, the Company sold its barge construction facility
located in Louisiana.
Substantially all of the barges, towboats and tugboats operated by the
Registrant's barge line subsidiaries are owned by and chartered from the
Registrant. A substantial portion of this equipment is mortgaged or leased and
the payments under related charter agreements with its subsidiaries are pledged
to secure long-term debt or to meet lease payments.
The Registrant's barge line subsidiaries are The Ohio River Company ("ORCO"),
Orgulf Transport Co. ("Orgulf"), Red Circle Transport Co. ("Red Circle"), and
Orsouth Transport Co. ("Orsouth"). The Registrant's other principal
subsidiaries, all of whose outstanding stock is owned by the Registrant, are
Eastern Associated Terminals Company ("EATCO"), Hartley Marine Corp.
("Hartley"), The Ohio River Terminals company ("ORTCO") and West Virginia
Terminals Inc.
(B) INDUSTRY SEGMENTS
-----------------
Registrant's only reportable industry segment is barge transportation.
(C) (1) (I) PRINCIPAL SERVICES AND MARKETS
------------------------------
ORCO is the largest of the Registrant's subsidiaries, accounting for 65% of the
Registrant's total 1994 tonnage transported. ORCO operates principally on the
Ohio River and certain of its tributaries. The principal commodity transported
by ORCO is coal, primarily for electric utilities. Grain, stone, sand, gravel,
iron, steel, scrap, and coke are the other groups of commodities which ORCO
carries in significant amounts.
Orgulf operates principally on the Mississippi and Ohio Rivers, and the
Illinois Waterway, transporting principally coal, primarily for electric
utilities, and grain. Stone, gravel, scrap, steel, coke and ores constitute
the other significant commodities transported.
Orsouth operates principally on the Tennessee-Tombigbee and Gulf Intracoastal
Waterways, and the Black Warrior and Mississippi Rivers transporting
principally coal and ores.
Red Circle is engaged primarily in the offshore transportation of phosphate
rock in the Gulf of Mexico and grain from Louisiana to Puerto Rico. EATCO owns
and operates a terminal on leased land at Tampa, Florida. Hartley operates
shipyard facilities at Paducah, Kentucky, sells fuel at Point Pleasant, West
Virginia, and provides towing services principally on the Ohio River and its
tributaries. ORTCO owns and operates a coal dumping facility in Huntington,
West Virginia. West Virginia Terminals Inc. operates a coal dumping facility
in Kenova, West Virginia.
1
<PAGE> 3
<TABLE>
The following table indicates the tonnages transported by the Registrant's
subsidiaries for the period 1992 - 1994:
<CAPTION>
TONNAGES TRANSPORTED (IN THOUSANDS)
-----------------------------------
<S> <C> <C> <C>
1994 1993 1992
---- ---- ----
Dry Cargo....................... 69,620 60,919 60,781
Liquid Cargo.................... - 1,599 1,583
------ ------ ------
Total Tonnage.............. 69,620 62,518 62,364
====== ====== ======
</TABLE>
The record tonnage in 1994 increased 11% over 1993, despite the absence of the
liquid business, due to a stronger economy as evidenced by increased shipments
of coal, aggregates, ores, steel products and scrap. Tonnage in 1993 increased
slightly over 1992 due to increased shipments of non-coal commodities. Coal
tonnage in 1993 was negatively impacted by a prolonged coal miners strike.
The next table summarizes the ton miles of cargo transported by Registrant's
subsidiaries for the period 1992 - 1994.
<TABLE>
<CAPTION>
TON MILES TRANSPORTED (IN BILLIONS)
-----------------------------------
<S> <C> <C> <C>
1994 1993 1992
---- ---- ----
Dry Cargo....................... 35.3 30.7 30.8
Liquid Cargo.................... - 1.5 1.6
---- ---- ----
Total Ton miles............ 35.3 32.2 32.4
==== ==== ====
</TABLE>
Ton miles are the product of tons and distance transported. The record
tonmiles in 1994, reflected the 11% increase in tonnage noted above. The
slight decline in ton miles from 1992 to 1993 reflected shorter average hauls
on approximately equal tonnage. In addition to changes in ton miles
transported, Registrant's revenues and net income are affected by other factors
such as competitive conditions, weather and the segment of the river system
traveled. See "Seasonality and Competition."
(C) (1) (II) STATUS OF PRODUCT OR SEGMENT
----------------------------
No significant new product, service or segment requiring a material amount of
assets was developed.
(C) (1) (III) RAW MATERIALS
-------------
The only significant raw material required by the Registrant is the diesel fuel
to operate towboats. Diesel fuel is purchased from a variety of sources and
the Registrant regards the availability of diesel fuel as adequate for
presently planned operations.
(C) (1) (V) SEASONALITY
-----------
Due to the freezing of some northern rivers and waterways during winter months,
increased coal consumption by electric utilities during the summer months, and
the seasonal fall harvest of grain, average winter month revenues tend to be
lower than revenues for the remainder of the year.
(C) (1) (VI) WORKING CAPITAL
---------------
No unusual working capital requirements are normally encountered.
2
<PAGE> 4
(C) (1) (VII) CUSTOMERS
---------
No customer, or group of customers under common control, accounted for 10% or
more of the total revenues in 1994. On the basis of past experience and its
competitive position, the Registrant considers that the loss of several of its
subsidiaries' largest customers simultaneously, while possible, is unlikely to
happen. The Registrant's subsidiaries have long-term transportation and
terminalling contracts which expire at various dates from January 1996 through
June 2003. During 1994, approximately 38% of the Registrant's consolidated
revenues resulted from these contracts. A substantial portion of the contracts
provide for rate adjustments based on changes in various costs, including
diesel fuel costs, and, additionally, contain "force majeure" clauses which
excuse performance by the parties to the contracts when performance is
prevented by circumstances beyond their reasonable control. Many of these
contracts have provisions for termination for specified causes, such as
material breach of the contract, environmental restrictions on the burning of
coal, or loss by the customer of an underlying commodity supply contract.
Penalties for termination for such causes are not generally specified.
However, some contracts provide that in the event of an uncured material breach
by Registrant's subsidiary which results in termination of the contract,
Registrant's subsidiary would be responsible for reimbursing its customer for
the differential between the contract price and the cost of substituted
performance. Due to the capital-intensive, high fixed cost nature of the
Registrant's business, the negotiation of long-term contracts which facilitate
steady and efficient utilization of equipment is important to profitable
operations.
(C) (1) (VIII) BACKLOG
-------
The backlog of transportation and terminalling business under long-term
contracts is summarized in the next table:
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, 1994 1993
---- ----
Tons (in millions) 168.8 165.5
Revenues (in millions) $422.8 $585.5
Portions of revenue backlog not expected to be filled
within the current fiscal year 77% 80%
</TABLE>
The 1994 revenue backlog (which is based on contracts that extend beyond
December 31, 1995) is shown at prices current as of December 31, 1994 which are
subject to escalation/de-escalation provisions. Since services under many of
the long-term contracts are based on customer requirements, Midland has
estimated its backlog based on its forecast of the requirements of these
long-term contract customers. The revenue backlog decline from 1993 primarily
reflects the amended terms of a contract with Gulf Power Company, which was in
dispute at December 31, 1993. As amended, the contract's term was reduced
approximately 60%, while the average trip length of the tonnage was reduced 70%
resulting in a 60% lower average rate per ton. The combined impact accounted
for a 35% decline in the revenue backlog, although other long-term contract
extensions and additions were partially offsetting. The tonnage backlog was
reduced 11% due to the Gulf Power contract amendment, however, the cumulative
effect of other long-term contract additions and extensions were more than
offsetting. This includes the positive impact on the backlog calculation from
Midland's 5 year contract extension with the Cincinnati Gas & Electric Company,
Midland's largest customer, negotiated early in 1994.
(C) (1) (IX) GOVERNMENT CONTRACTS
--------------------
The Registrant has no material portion of business subject to renegotiation of
profits or termination of contracts or subcontracts at the election of the
Government.
(C) (1) (X) COMPETITION
-----------
Improvements in operating efficiencies have permitted barge operators to
maintain relatively low rate structures. Consequently, the barge industry has
generally been able to retain its competitive position with alternate methods
of transportation for bulk commodities when the origin and destination of such
movements are contiguous to navigable waterways.
3
<PAGE> 5
Primary competitors of the Registrant's barge line subsidiaries include other
barge lines and railroads (including one integrated rail-barge carrier). There
are a number of companies offering transportation services on the waterways
served by the Registrant. In recent years, competition among major barge line
companies has been intense due to an imbalance between barge supply and demand,
impacted at times by weak grain and coal export markets. This in turn has led
to revenue and margin erosion, prompted cost and productivity improvements, and
some industry consolidation. During the second half of 1994, however, barge
demand and supply moved toward equilibrium with rates and margins improving.
However, it is uncertain whether these short-term gains will be sustained
beyond 1995.
Many railroads operating in areas served by the inland waterways compete for
cargoes carried by river barges. In many cases, these railroads offer unit
train service (pursuant to which an entire train is committed to the customer)
and dedicated equipment service (pursuant to which equipment is set aside for
the exclusive use of a particular customer) for coal, grain and other bulk
commodities. In addition, rates charged by both railroads and river barge
operators are sometimes designed to reflect special circumstances and
requirements of the individual shippers. As a result, it is difficult to
compare rates charged for movements of the various commodities between specific
points.
Towboats, such as those which comprise the Registrant's fleet, are capable of
moving in one tow (barge configuration) approximately 22,500 tons of
cargo(equivalent to 225 one hundred-ton capacity railroad cars) on the Ohio
River and on the Upper Mississippi River and approximately 60,000 tons
(equivalent to 600 one hundred-ton capacity railroad cars) on the Lower
Mississippi River, where there are no locks to transit, at average rates per
ton mile which are generally below those charged by Class 1 railroads.
(C) (1) (XI) RESEARCH
--------
No significant amount was spent during the last fiscal year on research to
improve existing services or develop new services. The task of improving and
developing services is a continuing assignment of various operating departments
of Registrant's subsidiaries, but such efforts are not segregated and would not
generally be regarded as research activities.
(C) (1) (XII) COMPLIANCE WITH ENVIRONMENTAL STATUTES
--------------------------------------
The Registrant and/or its subsidiaries are subject to the provisions of the
Federal Water Pollution Control Act, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, the Superfund Amendment and
Reauthorization Act, the Resource Conservation and Recovery Act of 1976, and
the Oil Pollution Act of 1990, which permit the Coast Guard and the
Environmental Protection Agency to assess penalties and clean-up costs for oil,
hazardous substance, and hazardous waste discharges. Some of these acts also
allow third parties to seek damages for losses caused by such discharges.
Compliance with these acts has had no material effect on the Registrant's
capital expenditures, earnings, or competitive position; and no such effect is
anticipated.
(C) (1) (XIII) EMPLOYEES
---------
As of December 31, 1994, Registrant and its subsidiaries employed approximately
1,300 persons, of whom approximately 35% are represented by labor unions. One
of Midland's labor contracts expires in July, 1995.
(D) FOREIGN OPERATIONS
------------------
Registrant does not engage in material operations in foreign countries, and no
material portion of Registrant's revenues is derived from customers in foreign
countries.
4
<PAGE> 6
ITEM 2. PROPERTIES
----------
(A) As of December 31, 1994, the Registrant's floating equipment consisted
of 2,378 barges and 90 boats.
West Virginia Terminals Inc. leases a coal dumping facility in Kenova, West
Virginia. ORCO leases office facilities in Cincinnati, Ohio. EATCO owns
terminal facilities on leased land in Tampa, Florida. ORTCO owns a coal dumping
facility in Huntington, West Virginia. Hartley owns shipyard facilities in
Paducah, Kentucky and a marine supply facility in West Virginia.
Capital expenditures for the Registrant in 1994 totalled approximately $4.3
million. These expenditures were made principally for renewal of existing
equipment.
(B) NOT APPLICABLE.
ITEM 3. LEGAL PROCEEDINGS
-----------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not required
5
<PAGE> 7
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
--------------------------------------------------------------
HOLDER MATTERS
--------------
The Registrant's common stock is held solely by Eastern and is not traded in
any market. Dividends were declared in the amount of $17,050,000 in 1994 and
$10,086,000 in 1993.
The payment of dividends is subject to the restrictions described in Note 4 to
the Consolidated Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
Not required. Reference Management Narrative Analysis following Item 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
1994 COMPARED TO 1993
- ---------------------
Midland's 1994 revenues increased 4% on record ton miles, up 10% compared to
1993, reflecting increased shipments of coal, aggregates, ores and towing of
tramp barges. Revenues generated from the increase in volume were partially
offset by rate reductions negotiated early in the year, business mix changes
from an increased percentage of backhauls and increased towing of tramp
barges. Midland's liquid barge business, which was sold in December 1993,
contributed 5% of Midland's revenues and ton miles in 1993.
Coal tonnage increased 11% from 1993, reflecting increased demand for utility
coal under long term contracts as well as from spot purchases. Coal tonnage
destined for export to the Gulf of Mexico also increased significantly over
last year. During 1993 coal shipments were negatively impacted by the United
Mine Workers (UMW) strike and the record flooding on the Mississippi River
system. Non-coal tonnage increased 11% over 1993 despite a 15% reduction in
grain tonnage, as Midland emphasized increased shipments of aggregates, steel,
scrap, and ores much of which were imported materials representing backhaul
opportunities originating at the Gulf of Mexico. Grain tonnage was negatively
impacted by last year's flooding and crop damage as well as poor export markets
during the first half of 1994, although 1994 second half grain volume and
margins showed seasonal improvement.
Operating results of Midland's terminalling and support facilities were
improved, led by increased coal terminalling, reflecting metallurgical coal
demand by the steel industry, and increased phosphate product terminalling as
export markets rebounded from 1993. During the second quarter of 1994 Midland
sold its barge construction and repair facility located in Louisiana.
Operating earnings increased 8% over 1993 due to the significant volume gains
discussed above, reduced operating and administrative expenses from ongoing
cost reduction and productivity programs, as well as the absence of increased
costs associated with inefficiencies caused by the UMW strike and Mississippi
River flooding that occurred in 1993. Partially offsetting were higher
operating expenses in 1994 associated with flooding and severe winter icing
conditions that occurred in the first quarter, the absence of operating
earnings from the liquid barge business and contractual and market rate
reductions negotiated early in 1994.
6
<PAGE> 8
In June 1994 Midland recognized a pretax gain of $2.3 million on the sale of
its barge construction facility in Louisiana. Midland had recorded a $3.5
million reserve in December 1993 for the shutdown costs and carrying charges
associated with this facility. In addition, in December 1993 Midland sold its
liquid barge business, as mentioned earlier, at a pretax gain of $8.0 million.
These transactions are included in "Other income."
Midland's 1993 net earnings were impacted by the increase in the statutory
Federal income tax rate from 34% to 35%, effective January 1, 1993, that
resulted in additional deferred tax requirements and an increase to the 1993
tax provision of approximately $1.8 million. As a result of this adjustment
and the above changes in operating earnings and other income, net earnings
increased 15% over 1993.
1993 COMPARED TO 1992
- ---------------------
Midland's 1993 tonnage and tonmile production was unchanged from 1992 despite
several significant events that negatively affected the river towing industry
and Midland specifically.
Coal tonnage declined 6% from 1992 primarily reflecting reduced shipments to
electric utilities due to the United Mine Worker's (UMW) strike (resolved in
December, 1993), disruption in river traffic caused by record flooding on the
Mississippi River system, and the mid-year cessation of coal shipments under a
long-term contract with Gulf Power Company. This contract, initially executed
in 1971 and extending through 2007, generated revenues of $17,200,000 and
$9,122,000 in the prior year and 1993, respectively. As a result, Midland
filed suit in U.S. District Court in 1993. (This contractual dispute was
resolved in 1994, resulting in amendment to the contract and resumption of
shipments.)
Non-coal tonnage increased 13% over 1992, despite a 23% reduction in grain
tonnage, and served to offset the lower coal volume, although at lower margins.
The aforementioned flooding on the Mississippi River system and a poor export
market impacted grain tonnage. Increased shipments of alumina, scrap and stone
tonnage and towing of non-affiliated barges contributed to the increase in
non-coal commodities.
Operating results of Midland's terminalling and shipyard repair facilities were
mixed, with improved results for coal terminalling and shipyards being offset
by lower phosphate product terminalling, as export markets continued to be
depressed in 1993. As a result of the reduced coal affreightment tonnage and
lower phosphate terminalling, consolidated revenues declined 3% as compared to
1992.
Operating earnings declined nearly 14% as compared to 1992 with all of the
shortfall occurring in the second half of 1993. The reduction in coal tonnage
as described above, as well as the UMW strikes' related impact on traffic
patterns and operating costs, combined with the record flooding on the Upper
Mississippi River system were the significant negative factors. The Upper
Mississippi River flooding closed or severely restricted operations on that
river segment during the third and fourth quarters which: idled equipment,
significantly increased operating costs, and shifted business to less
profitable markets. Depreciation expense was slightly higher than 1992 due to
recent capital spending for fleet renewal, while administrative costs were 10%
below 1992 due to lower employment and consulting costs, as well as gains on
the purchase of pension annuities for retirees.
7
<PAGE> 9
On December 21, 1993 Midland terminated its participation in the liquid barge
affreightment business by the sale of its tank barges, affreightment contract,
and "Chotin" trade name. The transaction resulted in a pre-tax gain of
$7,988,000. In addition, the Company closed its barge construction facility in
Port Allen, Louisiana, and recorded a $3,500,000 pre-tax charge to reflect
costs associated with the final disposition of the facility. These
transactions resulted in a net gain of $4,488,000 included in "Other Income."
In addition to the above changes in operating earnings and other income,
Midland's 1993 after tax earnings were impacted by the increase in the
statutory Federal income tax rate from 34% to 35% (See Note 5 of Notes to
Financial Statements), which resulted in an increase to the 1993 tax provision
of approximately $1,812,000. Midland's net earnings for 1992 included a
one-time benefit of $12,156,000 on the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109")
recorded as of January 1, 1992.
8
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Debt payments, dividends to Parent and capital expenditures of $4.3 million
were primarily funded from cash provided by operating activities in 1994. The
increase in cash and cash equivalents reflected mortgage indenture restrictions
on the Company's receivables from Parent.
Planned capital expenditures for 1995 are estimated at $25.0 million, the
majority of which pertains to purchase commitments for new open hopper barges.
Management believes that projected cash flow from operations, in combination
with currently available resources, is more than sufficient to meet Midland's
1995 capital expenditure and working capital requirements, normal debt
repayments and anticipated dividends to Parent.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
Information with respect to this item appears on page F-1 of this report. Such
information is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
---------------------
None
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Not required.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Not required.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Not required.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Not required.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(A) (1) AND (2) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES.
Information with respect to these items appears on page F-1 of this report.
Such information is incorporated herein by reference.
(3) LIST OF EXHIBITS
----------------
3.1 Certificate of Incorporation of Midland Enterprises Inc. (filed
as Exhibit 3.1 to Registration Statement of Midland Enterprises
Inc. on Form S-1 (Registration No. 2-39895, as filed May 5,
1971).1
3.2 By-Laws of Midland Enterprises Inc. (filed as Exhibit 3.2 to
Annual Report of Midland Enterprises Inc. on Form 10-K for the
year ended December 31, 1984).1
________________________
1 Not filed herewith. In accordance with Rule 12-b-32 of the General Rules
and Regulations under the Securities Act of 1934, reference is made to the
document previously filed with the Commission.
9
<PAGE> 11
4.1 Ship financing agreement dated December 27, 1984.2
4.2 Promissory note of Midland Enterprises Inc. to Chemical Bank
dated January 4, 1985.2
4.3 Indenture between Midland Enterprises Inc. and Shawmut Bank, N.A.
dated as of April 1, 1988 (filed as Exhibit 4.2 to Registration
Statement No. 33-20789).1
4.4 Indenture between Midland Enterprises Inc. and The First National
Bank of Boston dated as of April 2, 1990 (filed as Exhibit 4.2
to Registration Statement No. 33-32120).1
(NOTE: The Registrant agrees to furnish to the Securities and
Exchange Commission upon request a copy of any instrument with
respect to any long-term debt of the Registrant.)
24.1 Consent of Independent Public Accountants.1
27 Financial Data Schedule.
(B) REPORTS ON FORM 8-K
-------------------
There were no reports on Form 8-K filed in the fourth quarter of 1994.
__________________________
1 Not filed herewith. In accordance with Rule 12-b-32 of the General Rules
and Regulations under the Securities Act of 1934, reference is made to the
document previously filed with the Commission.
2 Not filed herewith. Private placements that are less than 10% of the total
assets of Registrant and its subsidiaries on a consolidated basis.
10
<PAGE> 12
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MIDLAND ENTERPRISES INC.
(Registrant)
BY R. L. DOETTLING
-------------------------
R. L. DOETTLING
SENIOR VICE PRESIDENT, FINANCE AND ADMINISTRATION
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
DATE MARCH 16, 1995
----------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 16th day of March, 1995.
BY: F. C. RASKIN BY: R. L. DOETTLING
----------------------------- ------------------------------
F. C. RASKIN R. L. DOETTLING
PRESIDENT; DIRECTOR SENIOR VICE PRESIDENT, FINANCE
(PRINCIPAL EXECUTIVE OFFICER) AND ADMINISTRATION; DIRECTOR;
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
BY: P. E. HUBBARD BY: S. A. FRASHER
----------------------------- -------------------------------
P. E. HUBBARD S. A. FRASHER
SENIOR VICE PRESIDENT, SALES VICE PRESIDENT, OPERATIONS;
AND MARKETING; DIRECTOR DIRECTOR
Supplemental information to be Furnished With Reports Filed Pursuant to Section
15 (3) of the Act by Registrants Which Have Not Registered Securities Pursuant
to Section 12 of the Act.
No annual reports to security holders covering the Registrant's last fiscal
year nor any proxy materials have been sent to the Registrant's security
holders.
11
<PAGE> 13
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
(INFORMATION REQUIRED BY ITEMS 8 AND 14 (A) (1) AND (2) OF FORM 10-K)
PAGE
NUMBER
------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS:
Consolidated Statements of Income for the years
ended December 31, 1994, 1993 and 1992 F-3
Consolidated Balance Sheets -- December 31, 1994 and 1993 F-4
Consolidated Statements of Stockholder's Investment for
the years ended December 31, 1994, 1993 and 1992 F-6
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992 F-7
Notes to Consolidated Financial Statements F-8
SCHEDULE:
II - Valuation and Qualifying Accounts and Reserves F-19
Schedules other than that listed above have been omitted as the information has
been included in the consolidated financial statements and related notes, or is
not applicable or not required.
F-1
<PAGE> 14
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To Midland Enterprises Inc.:
We have audited the accompanying consolidated balance sheets of MIDLAND
ENTERPRISES INC. (a Delaware corporation and a wholly-owned subsidiary of
Eastern Enterprises) and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, stockholder's equity, and cash flows
for each of the three years in the period ended December 31, 1994. These
consolidated financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Midland Enterprises Inc. and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
As explained in Note 5 to the Consolidated Financial Statements, effective
January 1, 1992, the Company changed its method of accounting for income taxes.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Consolidated Financial Statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not a required part of
the basic financial statements. This schedule has been subjected to the
auditing procedures applied in our audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
January 24, 1995
F-2
<PAGE> 15
<TABLE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------
(000 OMITTED)
REVENUES (NOTE 1)........................... $ 264,692 $ 254,920 $ 263,617
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Operating expenses...................... $ 177,478 $ 168,140 $ 172,084
Depreciation and amortization (Note 6).. 22,659 25,287 24,607
Selling, general and administrative
expenses............................. 10,855 11,659 13,270
Overhead allocation from Parent (Note 1). 2,551 2,560 2,480
Taxes, other than income................. 15,344 14,273 12,900
--------- --------- ---------
$ 228,887 $ 221,919 $ 225,341
--------- --------- ---------
OPERATING EARNINGS....................... $ 35,805 $ 33,001 $ 38,276
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income from Parent (Note 1)..... $ 2,888 $ 2,374 $ 3,041
Interest income other.................... 120 27 122
Gain on sale of liquid barge business.... - 7,988 -
Closing of barge construction facility... - (3,500) -
Gain on sale of barge construction
facility including $851,000 of
curtailment gains.................... 2,300 - -
Gain (Loss) on sale of assets and
other, net........................... (298) 164 373
--------- --------- ---------
$ 5,010 $ 7,053 $ 3,536
--------- --------- ---------
INTEREST EXPENSE:
Long-term debt........................... $ 15,406 $ 15,879 $ 16,071
Other, including amortization of
debt expense......................... 576 360 179
Interest capitalized during construction
(Note 6)............................. (39) (581) (814)
--------- --------- ---------
$ 15,943 $ 15,658 $ 15,436
--------- --------- ---------
EARNINGS BEFORE INCOME TAXES................. $ 24,872 $ 24,396 $ 26,376
PROVISION FOR INCOME TAXES (NOTE 5).......... 8,805 10,419 9,268
--------- --------- --------- -
EARNINGS BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE........................ $ 16,067 $ 13,977 $ 17,108
Cumulative effect of change in
accounting for income taxes (Note 5)..... - - 12,156
NET EARNINGS................................. $ 16,067 $ 13,977 $ 29,264
========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-3
<PAGE> 16
<TABLE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
ASSETS
<CAPTION>
<S> <C> <C>
1994 1993
---------- ---------
(000 OMITTED)
CURRENT ASSETS:
Cash and cash equivalents (Note 1)....... $ 4,088 $ 88
Receivables -
Trade, less allowances of $469,000
in 1994 and $428,000 in 1993......... 24,690 25,513
Parent (Note 1 and 4)................ 61,866 56,952
Other................................ 610 196
Materials, supplies and fuel (Note 1).... 8,299 12,965
Prepaid expenses......................... 2,550 1,676
---------- ---------
Total current assets $ 102,103 $ 97,390
---------- ---------
PROPERTY AND EQUIPMENT, AT COST (NOTES 4 AND 6):
Towboats and barges...................... $ 534,707 $ 542,649
Terminals and other facilities........... 42,340 57,339
Land..................................... 4,600 5,159
---------- ---------
Total property and equipment, at cost $ 581,647 $ 605,147
Less - Accumulated depreciation.......... 293,375 288,500
---------- ---------
Net property and equipment........... $ 288,272 $ 316,647
---------- ---------
OTHER ASSETS:
Deferred pension charges (Note 2)........ $ 11,835 $ 10,729
Unamortized debt expense, deferred
maintenance and other (Notes 1 and 6).. 5,281 5,330
---------- ---------
Total other assets................... $ 17,116 $ 16,059
---------- ---------
TOTAL ASSETS......................... $ 407,491 $ 430,096
========== =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-4
<PAGE> 17
<TABLE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
LIABILITIES AND STOCKHOLDER'S EQUITY
<CAPTION>
<S> <C> <C>
1994 1993
-------- --------
CURRENT LIABILITIES: (000 OMITTED)
Current portion of long-term debt (Note 4).... $ 3,354 $ 5,871
Accounts payable -
Trade.................................... 11,705 12,622
Parent................................... 0 349
Reserve for insurance claims (Note 1)......... 8,809 8,285
Accrued expenses.............................. 2,771 2,735
Interest payable.............................. 3,819 4,097
Other taxes payable .......................... 3,327 3,617
Income taxes payable (Note 5)................. 918 3,324
Other current liabilities..................... 6,408 7,812
-------- --------
Total current liabilities................ $ 41,111 $ 48,712
-------- --------
LONG-TERM DEBT (NOTE 4)............................. $148,808 $157,594
-------- --------
RESERVES AND DEFERRED CREDITS:
Deferred income taxes (Note 5)................ $ 54,644 $ 57,899
Unamortized investment tax credits (Note 5)... 4,161 5,192
Post-retirement health care (Note 3).......... 8,713 9,306
Other reserves................................ 1,148 1,504
-------- --------
Total reserves & deferred credits........ $ 68,666 $ 73,901
-------- --------
COMMITMENTS (NOTE 7)
STOCKHOLDER'S EQUITY (NOTE 4):
Common stock, $100 par value -
Authorized Shares - 1,000
Issued Shares - 15 1/2................... $ 1 $ 1
Capital in excess of par value................ 52,519 52,519
Retained earnings............................. 96,386 97,369
-------- --------
Total stockholder's equity............... $148,906 $149,889
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY............................. $407,491 $430,096
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-5
<PAGE> 18
<TABLE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(OOO OMITTED EXCEPT SHARES OUTSTANDING)
<CAPTION>
CAPITAL IN
COMMON STOCK EXCESS OF RETAINED
OUTSTANDING PAR VALUE EARNINGS TOTAL
---------------- ---------- ---------- ---------
SHARES AMOUNT
------ ------
<S> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1991 15.5 $ 1 $ 52,519 $ 101,051 $ 153,571
Net Earnings - - - 29,264 29,264
Dividends to Parent - - - (36,837) (36,837)
---- ----- -------- --------- ---------
BALANCE DECEMBER 31, 1992 15.5 $ 1 $ 52,519 $ 93,478 $ 145,998
Net Earnings - - - 13,977 13,977
Dividends to Parent - - - (10,086) (10,086)
---- ----- --------- --------- --------
BALANCE DECEMBER 31, 1993 15.5 $ 1 $ 52,519 $ 97,369 $ 149,889
Net Earnings - - - 16,067 16,067
Dividends to Parent - - - (17,050) (17,050)
---- ----- -------- --------- ----------
BALANCE DECEMBER 31, 1994 15.5 $ 1 $ 52,519 $ 96,386 $ 148,906
==== ===== ======== ========= ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-6
<PAGE> 19
<TABLE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
1994 1993 1992
--------- -------- ---------
(000 OMITTED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.............................. $ 16,067 $ 13,977 $ 29,264
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization........... 22,269 25,287 24,607
Deferred and current income taxes....... (5,661) 2,992 (8,442)
Net gain on sale of assets.............. (2,522) (8,125) (346)
Other changes in assets and liabilities:
Trade and other receivables........... 409 577 1,006
Materials, supplies and fuel.......... 4,666 2,508 779
Accounts payable...................... (1,266) 623 (3,107)
Accrued expenses and other current
liabilities......................... (1,412) 3,148 1,781
Post-retirement health care........... 593 (18) (104)
Other................................. (3,922) (647) (1,047)
--------- --------- ---------
Net cash provided by operating
activities.......................... $ 29,221 $ 40,322 $ 44,391
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................... $ (4,337) $ (14,191) $ (29,327)
(Increase) decrease in Parent receivable.. (4,914) (25,843) 12,327
Proceeds from sale of liquid barge
business................................ - 14,950 -
Proceeds from sale of barge building
facility................................ 11,155 - -
Proceeds from other asset dispositions.... 1,293 638 735
--------- --------- ---------
Net cash provided by (used in)
investing activities.................. $ 3,197 $ (24,446) $ (16,265)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt................ $ - $ - $ 25,000
Repayment of long-term debt............... (11,368) (5,792) (16,294)
Cash dividends paid to Parent............. (17,050) (10,086) (36,837)
--------- --------- ---------
Net cash used in financing activities. $ (28,418) $ (15,878) $ (28,131)
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................. $ 4,000 $ (2) $ (5)
Cash and cash equivalents at beginning of
period...................................... 88 90 95
--------- --------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.... $ 4,088 $ 88 $ 90
========= ========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest, net of amounts capitalized.... $ 15,617 $ 15,299 $ 15,432
Income taxes............................ $ 13,882 $ 7,639 $ 5,487
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-7
<PAGE> 20
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(1) SIGNIFICANT ACCOUNTING POLICIES
Midland Enterprises Inc. (the "Company") is a wholly-owned subsidiary of
Eastern Enterprises ("Eastern") of Weston, Massachusetts. The consolidated
financial statements include the accounts of the Company and its subsidiaries.
All material intercompany balances and transactions have been eliminated. The
significant accounting policies followed by the Company and its subsidiaries
are described below:
Note 2 - Retirement and employee benefit plans
Note 3 - Post-retirement benefits other than pensions
Note 5 - Income taxes
Note 6 - Property and equipment
(a) The Company's principal business is barge transportation with its
principal commodity being coal, substantially all of which is
transported to electric utilities in the eastern half of the United
States.
(b) Cash Equivalents - Cash equivalents are comprised of highly liquid
instruments with original maturities of three months or less.
(c) Transactions with Parent - Parent receivables represent advances to
Eastern which bear interest at the prime rate for 1992 and 1993 and
at the applicable Federal rate as defined in the Internal Revenue
Code for 1994; 5.75% at December 31, 1994, 6% at December 31, 1993
and 6% at December 31, 1992. The Company was also charged a
corporate overhead allocation from its parent computed on several
factors including direct corporate management time, revenues,
capitalization and employees, which management believes is a
reasonable method of allocation.
(d) Materials, Supplies and Fuel - Materials, supplies and fuel are
stated at the lower of cost (first-in, first-out or average) or
market.
(e) Unamortized Debt Expense - Unamortized debt expense represents fees
and discounts incurred in obtaining long-term debt. Such costs are
being amortized over the terms of the respective bond issues.
(f) Accounting for Income on Tows in Progress - The Company recognizes
income on tows in progress on the percentage of completion method by
relating the number of miles completed to date to the total miles to
be traveled.
(g) Reserve for Insurance Claims - The Company is self-insured for
personal injury and property claims, certain of which are insured
above a deductible amount per occurrence. The Company's estimate of
liability for the self-insured claims is included in the "Reserve
for Insurance Claims" in the Consolidated Balance Sheets. Payments
made for losses incurred are netted against the related liability
for the loss.
(h) Reclassifications - Certain reclassifications of previously reported
amounts have been made to conform with current classifications.
F-8
<PAGE> 21
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) RETIREMENT AND EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries, through various Company-administered plans
and union-administered plans, provide retirement benefits for substantially all
of their employees. Normal retirement age is 65, but provision is made for
earlier retirement. Benefits under non-union plans are based on salary or wages
and years of service, while benefits under union plans are based on negotiated
amounts and years of service.
The funding of retirement and employee benefit plans is in accordance with the
requirements of the plans and collective bargaining agreements and, where
applicable, is in sufficient amount to satisfy the "Minimum Funding Standards"
of the Employee Retirement Income Security Act of 1974.
<TABLE>
The net pension cost for these plans and agreements charged to income was as
follows:
<CAPTION>
<S> <C> <C> <C>
1994 1993 1992
-------- ------- ------
(000 OMITTED)
----------------------------------
Company-administered plans $ 374 $ 280 $ 283
Multi-employer union retirement
and welfare plans 309 369 322
------- ------- -------
Total Net Pension Cost $ 683 $ 649 $ 605
======= ======= =======
The net pension cost for Company-administered plans consisted of:
1994 1993 1992
---- ---- ----
(000 OMITTED)
-----------------------------------------------
<S> <C> <C> <C>
Service cost $ 1,518 $ 1,490 $ 1,470
Interest cost on projected benefit
obligation 1,661 1,592 1,392
Actual return on plan assets (1,551) (4,682) (2,895)
Net amortization and deferral (1,254) 1,880 316
------- ------- -------
Total Net Pension Cost $ 374 $ 280 $ 283
======= ======= ========
The assumptions used to determine the annual pension expense and the projected benefit obligation at the end of the year were as
follows:
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Assumed discount rate 7.5% 7.5% 7.5%
Assumed rate of compensation increase 5.0% 5.0% 5.0%
Expected rate of return on plan assets 8.5% 8.5% 8.5%
</TABLE>
During 1993 the Company settled portions of its defined benefit pension
obligation through the purchase of annuity contracts from insurance companies.
In compliance with the provisions of Statement of Financial Accounting
Standards No. 88, "Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans," the Company recognized a pre-tax gain of
$603,267 in 1993.
In 1994 the Company recognized pension curtailment gains of $796,861 relating
to the closing and sale of certain operations, primarily Port Allen Marine.
F-9
<PAGE> 22
<TABLE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) RETIREMENT AND EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the funded status of the Company-administered
plans and amounts recognized in the consolidated balance sheets as of December
31, 1994 and 1993, respectively, utilizing actuarial measurement dates as of
October 1, 1994 and 1993:
<CAPTION>
1994 1993
-------------------------
(000 OMITTED)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including:
Vested benefits $ 15,271 $ 12,561
Non-vested benefits 2,373 2,623
-------- --------
$ 17,644 $ 15,184
Effect of future salary increases 4,476 5,365
-------- --------
Projected benefit obligations for services
rendered to date $ 22,120 $ 20,549
======== ========
Plan assets at fair value, primarily listed
stocks and bonds $ 35,791 $ 34,315
Less - Projected benefit obligations 22,120 20,549
-------- --------
Excess of plan assets over projected benefit
obligations $ 13,671 $ 13,766
Unrecognized net obligation at December 31,
1985 being amortized over 13 - 15 years (379) (457)
Unrecognized net actuarial gain (2,053) (3,458)
Unrecognized prior service cost 329 182
Amounts contributed to plans during fourth quarter 221 191
Unfunded accumulated benefits (83) (89)
-------- --------
Net Pension Assets $ 11,706 $ 10,135
======== ========
</TABLE>
Certain of the Company's subsidiaries participate in one or more multi-employer
pension plans, and contribute to such plans in amounts required by the
applicable union contracts. Contribution levels are negotiated between the
subsidiaries and the unions. A subsidiary would be required under the Federal
law to compute its liability for, and accelerate its funding of, its
proportionate share of a multi-employer plan's unfunded vested benefits (if
any) upon its withdrawal from, or the termination of, such a plan.
F-10
<PAGE> 23
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company and its subsidiaries, through various Company-administered plans
and other union retirement and welfare plans under collective bargaining
agreements, provide certain health care and life insurance benefits for retired
employees. The Company's employees, who are participants in the pension plans,
become eligible for these benefits if they reach retirement age while working
for the Company.
<TABLE>
The net post-retirement benefit cost of these plans and agreements charged to
expense was as follows:
<CAPTION>
DECEMBER 31
--------------------------------
1994 1993 1992
------ ------ ------
(000 OMITTED)
<S> <C> <C> <C>
Service cost $ 160 $ 249 $ 336
Interest cost on accumulated benefit obligation 591 760 753
Net amortization and deferral (126) 47 (57)
------ ------ ------ -
Net periodic post-retirement benefit costs $ 625 $1,056 $1,032
====== ====== =======
The following table sets forth the funded status of the plans and amounts recognized in the Company's consolidated balance sheets
as of December 31, 1994 and 1993 (using a measurement date of October 1, 1994 and 1993):
DECEMBER 31
---------------------------
1994 1993
------- -------
(000 OMITTED)
<S> <C> <C>
Accumulated benefit obligation:
Retirees $ 6,718 $ 5,180
Fully eligible plan participants 1,562 1,096
Other active plan participants 1,923 2,003
------- -------
$10,203 $ 8,279
Plan assets at fair value - -
------- -------
Accumulated benefit obligation in excess of
plan assets $10,203 $ 8,279
Unrecognized net (gain) (3,449) (1,101)
Unrecognized prior service cost 1,959 2,128
------- -------
Post-retirement health care reserve $ 8,713 $ 9,306
======= =======
</TABLE>
In 1994 the Company recognized post-retirement benefit curtailment gains of
$410,455 relating to the closing and sale of certain operations.
F-11
<PAGE> 24
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) POST-RETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
The weighted average discount rate used in determining the accumulated benefit
obligation was 7.5%. An 11% and 12% increase in cost of covered health care
benefits has been assumed for 1994 and 1993, respectively. This rate of
increase is assumed to drop gradually to 5% after 7 years. A one percentage
point increase in the assumed health care cost trend would have increased the
net periodic post-retirement benefit cost by $54,000 in 1994 and $48,000 in
1993 and the accumulated post-retirement benefit obligation by $675,000 in 1994
and $561,000 in 1993.
<TABLE>
(4) LONG-TERM OBLIGATIONS AND CREDIT AGREEMENTS
(a) Summary of Long-term Debt - Long-term debt consists of the following:
<CAPTION>
DECEMBER 31
---------------------
1994 1993
-------- --------
(000 OMITTED)
<S> <C> <C>
First Preferred Ship Mortgage Bonds -
9.9% Series, payable in annual amounts of
$5,000,000 beginning in 1999 to 2008...... $ 50,000 $ 50,000
8.1%-9.85% Medium Term Notes, Series A,
due 2002-2012............................. 71,000 75,000
-------- --------
Total Mortgage Bonds.................. $121,000 $125,000
-------- --------
Obligations under Capital Leases and Other -
BA Leasing & Capital Corporation (Successor
to Wells Fargo Leasing Corporation)....... $ 7,164 $ 8,033
Security Pacific Equipment Leasing, Inc....... 15,885 17,409
Westinghouse Credit Corporation............... 9,355 10,362
8.8% Ship Financing Bond, due 1996............ - 938
Variable-rate promissory note payable to bank,
retired in 1994........................... - 3,031
Other (including unamortized debt discount)... (878) (944)
-------- --------
$ 31,526 $ 38,829
-------- --------
Less:
Current Portion of Long-Term Debt Included $ 3,354 $ 5,871
Above Monies on Deposit (d)................... 364 364
-------- --------
$ 3,718 $ 6,235
-------- --------
Total Long-Term Debt...................... $148,808 $157,594
</TABLE> ======== ========
F-12
<PAGE> 25
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) LONG-TERM OBLIGATIONS AND CREDIT AGREEMENTS (CONTINUED)
(a) Summary of Long-Term Debt (Continued)
The First Preferred Ship Mortgage Bonds, Ship Financing Bond, and obligations
under capital leases are secured by a substantial portion of the Company's
towboats and barges and by assignment of rentals for that equipment payable to
the Company by its subsidiaries. $25,000,000 First Preferred Ship Mortgage
Medium-Term Notes were issued in 1992.
Under the most restrictive of the mortgage indentures, the Company, (a) may not
pay dividends, reacquire its common stock or make any advances or loans to its
stockholder or subsidiaries of its stockholder except to the extent of the sum
of (i) Consolidated Net Earnings after December 31, 1988, (ii) the net proceeds
of the sale of stock of the Company after December 31, 1988, and (iii) the
amount of $50,000,000 with respect to any advances or loans to its stockholder
or to subsidiaries of its stockholder, (b) is required to maintain Consolidated
Net Current Assets at least equal to $1,250,000, and (c) may not incur or
permit any of its subsidiaries to incur additional Senior Unsecured Funded Debt
except for refunding unless immediately thereafter Consolidated Net Tangible
Assets will aggregate at least 150% of (i) Consolidated Senior Unsecured Funded
Debt (excluding therefrom unsecured loans or advances to the Company from its
stockholder) plus (ii) Consolidated Senior Secured Funded Debt (all terms as
defined in the applicable indenture). Under these agreements, $17,214,000 of
retained earnings at December 31, 1994 are available for additional dividends
to Eastern.
Included in obligations under capital leases is $32,404,000 of barge lease
obligations having a weighted average interest rate of 10%. Minimum lease
payments under these agreements are due in installments through 2003; principal
payments due for the next five years amount to $3,354,000 in 1995, $3,684,000
in 1996, $4,057,000 in 1997, $4,468,000 in 1998, and $4,921,000 in 1999.
(b) Credit Agreements
Eastern maintains a credit agreement with a group of banks which provides for
the borrowing by Eastern and certain subsidiaries of up to $100,000,000 at any
time through December 31, 1999. The Company's maximum available borrowings
under the credit agreement are $50,000,000. The agreement requires a facility
fee, which averages 1/7 of 1% of the unused portion. During 1994 and at
December 31, 1994, the Company had no borrowings outstanding under this
agreement. The interest rate for borrowings is the agent bank's prime rate or,
at Eastern's option, various alternatives.
F-13
<PAGE> 26
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) LONG-TERM OBLIGATIONS AND CREDIT AGREEMENTS (CONTINUED)
(c) Consolidated Five Year Sinking Funds and Maturities
The aggregate annual sinking fund requirements and current maturities of
long-term debt, including capital leases, for the next five years amount to
$3,354,000 in 1995, $3,684,000 in 1996, $4,057,000 in 1997, and $4,468,000 in
1998, and $9,921,000 in 1999.
(d) Deposited Monies
Monies on deposit with trustee are netted against long-term debt. In
accordance with the provision of certain bond indentures, these amounts
represent deposits with the bond trustee for the equipment mortgaged under the
bond indenture and subsequently sold. It is the Company's intention to
repurchase its own bonds with these funds to be used for sinking fund
requirements.
(5) INCOME TAXES
The Company and its subsidiaries are members of an affiliated group of
Companies which files a consolidated Federal Income Tax return with Eastern.
The Companies follow the policy, established for the group, of providing for
Federal Income Taxes which would be payable on a separate company basis. For
financial reporting purposes, investment tax credits were deferred and are
being amortized to income over the book life of the related property and
equipment.
<TABLE>
The following is a summary of the provision for income taxes:
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1994 1993 1992
-------- ------- -------
(000 OMITTED)
<S> <C> <C> <C>
Current:
Federal $ 12,446 $ 7,835 $ 5,364
State 222 415 407
-------- ------- -------
Total Current Provision $ 12,668 $ 8,250 $ 5,771
Deferred:
Federal (3,863) 2,169 3,497
-------- ------- -------
Total Provision $ 8,805 $10,419 $ 9,268
======== ======= =======
</TABLE>
F-14
<PAGE> 27
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
(5) INCOME TAXES (CONTINUED)
<CAPTION>
The table below reconciles the statutory U.S. Federal Income Tax provision to
the recorded income tax provision:
YEARS ENDED DECEMBER 31,
--------------------------
1994 1993 1992
------- ------- -------
(000 OMITTED)
<S> <C> <C> <C>
Statutory rate 35% 35% 34%
Computed provision for income taxes
at statutory Federal rate $ 8,705 $ 8,539 $ 8,968
Increase (decrease) from statutory
rate resulting principally from:
State taxes, net of Federal benefit 144 270 269
Effect of increase in Federal income
tax rate - 1,572 -
Nondeductible expenses 53 28 26
Other, net (97) 10 5
------- ------- -------
Provision for Income Taxes $ 8,805 $10,419 $ 9,268
======= ======= =======
</TABLE>
Effective January 1, 1992, Midland adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes". SFAS 109
requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been recognized in the
financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
At the date of adoption, Midland recorded a tax credit of approximately
$12,156,000 which represents the net decrease to the deferred tax liabilities
as of that date. This amount has been reflected in the consolidated statement
of earnings as the cumulative effect of an accounting change.
The Revenue Reconciliation Act of 1993, increased the statutory Federal income
tax rate from 34% to 35%, effective January 1, 1993. The provision for income
tax in 1993 includes approximately $240,000 for the impact of the rate change
in the current earnings, and approximately $1,572,000 to reflect the additional
deferred tax requirements as of January 1, 1993, in accordance with SFAS 109.
F-15
<PAGE> 28
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
(5) INCOME TAXES (CONTINUED)
Significant items making up deferred tax liabilities and deferred tax assets,
as of December 31, 1994 and 1993, are as follows:
<CAPTION>
1994 1993
-------- --------
(000 Omitted)
<S> <C> <C>
Assets:
Post-retirement benefits $ 3,550 $ 3,292
Other 4,961 5,973
-------- --------
Total Deferred Tax Assets $ 8,511 $ 9,265
Liabilities:
Accelerated depreciation (57,510) (59,967)
Other (5,373) (7,197)
-------- --------
Total Deferred Tax Liabilities $(62,883) $(67,164)
-------- --------
Total Deferred Taxes $(54,372) $(57,899)
========= ========
</TABLE>
(6) PROPERTY AND EQUIPMENT
(a) Depreciation and Amortization - Depreciation and amortization are
provided using the straight-line method over the estimated useful lives of
property and equipment. Depreciation and amortization as a percentage of
average depreciable assets was 3.9%, 4.2% and 4.1% in 1994, 1993 and 1992,
respectively.
(b) Maintenance & Repairs - The costs of routine maintenance and repairs
are charged to expense as incurred. Major renovations and renewals, which
benefit future periods or extend the life of the asset, are capitalized and
amortized over their estimated useful lives.
(c) Interest During Construction - The Company reflects as an element of
cost in all major construction projects the estimated cost of borrowed funds
employed during the period of construction. Capitalized interest is amortized
over the estimated useful life of the property or equipment.
(7) COMMITMENTS
The Company and its subsidiaries lease certain facilities, vessels and
equipment under long-term leases which expire on various dates through 2008.
<TABLE>
The minimum rental commitment for noncancelable operating leases at December
31, 1994 is as follows:
<CAPTION>
MINIMUM
YEARS ENDING ANNUAL RENTAL
------------ -------------
(000 OMITTED)
<S> <C>
1995 $ 4,183
1996 3,938
1997 2,594
1998 1,573
1999 1,225
2000 - 2008 6,800
-------
$20,313
=======
</TABLE>
F-16
<PAGE> 29
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) SIGNIFICANT CUSTOMERS
None of the subsidiaries' customers accounted for more than 10% of the
Company's total consolidated operating revenues in 1994, 1993 and 1992.
(9) FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
disclosures for financial instruments:
Cash, trade receivables and accounts payable: The carrying amounts
approximates fair value because of the short maturity of these instruments.
Long-term debt: The fair value of long-term debt is estimated using discounted
cash flow analyses based on the current incremental borrowing rates for similar
types of borrowing arrangements.
<TABLE>
The carrying amounts and estimated fair values of Midland's financial
instruments at December 31, 1994 and 1993 are as follows:
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- --------
(000 Omitted)
<S> <C> <C>
DECEMBER 31, 1994
Long-term debt $119,758 $126,906
DECEMBER 31, 1993
Long-term debt $123,692 $149,223
</TABLE>
F-17
<PAGE> 30
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) UNAUDITED INTERIM FINANCIAL INFORMATION
<TABLE>
The following table summarizes the Company's reported unaudited consolidated
quarterly results of operations for the years ended December 31, 1994 and 1993.
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- -------- --------
(000 OMITTED)
1994
- ------
<S> <C> <C> <C> <C>
Revenues $ 58,166 $ 68,986 $ 67,108 $ 70,432
======== ======== ======== ========
Operating Earnings $ 5,025 $ 9,871 $ 9,257 $ 11,652
======== ======== ======== ========
Net earnings $ 1,146 $ 5,719 $ 3,753 $ 5,449
======== ======== ======== ========
1993
- ------
Revenues $ 65,850 $ 66,746 $ 56,427 $ 65,898
======== ======== ======== ========
Operating Earnings $ 9,087 $ 9,812 $ 5,009 $ 9,093
======== ======== ======== ========
Net earnings $ 3,730 $ 4,252 $ (563) $ 6,558
======== ======== ======== ========
</TABLE>
F-18
<PAGE> 31
SCHEDULE II
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
(OOO OMITTED)
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
---------------------- ----------
Charges
for which
Balance Charged Charged Reserves Balance
Beginning Costs & to Other Were End of
Of Year Expenses Accounts Created Year
------ -------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
1994
----
Allowances and reserves deducted
from assets-
Allowance for doubtful accounts $ 428 $ 32 $ - $ 9 $ 469
======= ======= ======= ======== =======
Reserves included in liabilities -
Reserve for environmental expenses 841 175 - (262) 754
Reserve for insurance claims 8,285 5,904 2,127 (7,507) 8,809
Reserve for post-retirement
health care 9,306 625 - (1,218) 8,713
Reserve for employee benefits 2,563 6,129 148 (6,548) 2,292
------- ------- ------- -------- -------
Total Other Reserves $20,995 $12,833 $ 2,275 $(15,535) $20,568
======= ======= ======= ======== =======
1993
- ------
Allowances and reserves deducted
from assets-
Allowance for doubtful accounts $ 428 $ - $ - $ - $ 428
======= ======= ======= ======== =======
Reserves included in liabilities -
Reserve for environmental expenses 884 (76) - 33 841
Reserve for insurance claims 8,480 5,587 1,098 (6,880) 8,285
Reserve for post-retirement
health care 9,288 1,056 - (1,038) 9,306
Reserve for employee benefits 2,670 6,904 65 (7,076) 2,563
------- ------- ------- ------- -------
Total Other Reserves $21,322 $13,471 $ 1,163 $(14,961) $20,995
======= ======= ======= ======== =======
1992
- ------
Allowances and reserves deducted
from assets-
Allowance for doubtful accounts $ 424 $ - $ - $ 4 $ 428
======= ======= ======= ======== =======
Reserves included in liabilities -
Reserve for environmental expenses 1,120 - 282 (518) 884
Reserve for insurance claims 8,722 5,932 232 (6,406) 8,480
Reserve for post-retirement
health care 9,184 1,168 - (1,064) 9,288
Reserve for employee benefits 2,061 7,231 46 (6,668) 2,670
------- ------- ------- -------- -------
Total Other Reserves $21,087 $14,331 $ 560 $(14,656) $21,322
======= ======= ======= ======== =======
</TABLE>
F-19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF EARNINGS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 4,088
<SECURITIES> 0
<RECEIVABLES> 87,166
<ALLOWANCES> 469
<INVENTORY> 8,299
<CURRENT-ASSETS> 102,103
<PP&E> 581,647
<DEPRECIATION> 293,375
<TOTAL-ASSETS> 407,491
<CURRENT-LIABILITIES> 41,111
<BONDS> 148,808
<COMMON> 1
0
0
<OTHER-SE> 148,905
<TOTAL-LIABILITY-AND-EQUITY> 407,491
<SALES> 0
<TOTAL-REVENUES> 264,692
<CGS> 0
<TOTAL-COSTS> 215,014
<OTHER-EXPENSES> 8,828
<LOSS-PROVISION> 35
<INTEREST-EXPENSE> 15,943
<INCOME-PRETAX> 24,872
<INCOME-TAX> 8,805
<INCOME-CONTINUING> 16,067
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,067
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
