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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For Quarter Ended September 30, 1995
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or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________to ______________
Commission File Number 2-39895
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MIDLAND ENTERPRISES INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 04-2284434
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 PIKE STREET, CINCINNATI, OHIO 45202
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 513-721-4000
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________________________________________________________________________________
(former name, former address and former fiscal year,
if changed since last report.)
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
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The number of shares of common stock of Midland Enterprises Inc. outstanding as
of the date of this report was 15 1/2, all held by Eastern Enterprises.
Registrant meets the conditions set forth in general instructions H(1) (a) and
(b) of Form 10-Q and is therefore filing this form with the reduced disclosure
format.
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FORM 10-Q
PAGE 2
ITEM 1.
FINANCIAL STATEMENTS
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COMPANY OR GROUP OF COMPANIES FOR WHICH REPORT IS FILED:
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES ("MIDLAND")
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CONSOLIDATED STATEMENTS OF INCOME
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(000 OMITTED)
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FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
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SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Operating Revenues $76,486 $67,108 $218,474 $194,260
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Operating Costs and Expenses:
Operating Expenses 47,632 45,057 134,901 131,163
Depreciation and amortization 5,506 5,686 17,012 17,003
Selling, general & administrative expenses 2,662 2,740 7,957 7,938
Overhead allocation from Parent 675 711 2,025 2,133
Taxes, other than income 4,286 3,657 13,010 11,870
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60,761 57,851 174,905 170,107
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Operating Earnings 15,725 9,257 43,569 24,153
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Other Income:
Interest income from Parent 1,150 826 3,452 1,934
Interest income other 62 52 303 70
Gain on sale of barge facility
including $851,000 of curtailment gains 0 0 0 2,300
Gain on sale of assets
and other, net 505 56 492 111
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1,717 934 4,247 4,415
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Interest Expense:
Long-term debt 3,631 3,848 11,000 11,630
Other, including amortization of
debt expense 32 486 89 555
Interest capitalized during
construction 0 0 0 (38)
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3,663 4,334 11,089 12,147
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Earnings before income taxes 13,779 5,857 36,727 16,421
Provision for Income taxes 5,020 2,104 13,263 5,803
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Net Earnings $ 8,759 $ 3,753 $ 23,464 $ 10,618
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</TABLE>
The accompanying notes are in integral
part of these financial statements.
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FORM 10-Q
PAGE 3
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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SEPTEMBER 30, DEC. 31, SEPTEMBER 30,
1995 1994 1994
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<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 16,250 $ 4,088 $ 7,084
Receivables -
Trade, net 26,892 24,641 23,132
Parent 66,974 61,866 64,991
Other 5,222 659 552
Materials, supplies & fuel 7,597 8,299 9,728
Prepaid expenses 2,923 2,550 3,974
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Total current assets 125,858 102,103 109,461
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Property and Equipment, at cost 579,727 581,647 582,414
Less-Accumulated depreciation 302,253 293,375 289,285
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Net property and equipment 277,474 288,272 293,129
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Other Assets:
Deferred pension charges 12,054 11,835 11,076
Other 4,973 5,281 4,924
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Total other assets 17,027 17,116 16,000
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Total assets $420,359 $407,491 $418,590
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</TABLE>
The accompanying notes are in integral
part of these financial statements.
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FORM 10-Q
PAGE 4
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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<CAPTION>
(000 OMITTED)
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SEPTEMBER 30, DEC. 31, SEPTEMBER 30,
1995 1994 1994
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<S> <C> <C> <C>
Liabilities and Stockholder's Equity
Current Liabilities:
Current portion of long - term debt $3,594 $3,354 $4,510
Accounts Payable -
Trade 9,715 11,705 10,106
Parent 0 0 14
Income taxes payable 1,028 918 476
Accrued expenses 15,709 9,917 13,647
Other current liabilities 20,142 15,217 15,305
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Total current liabilities 50,188 41,111 44,058
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Long-Term Debt 145,995 148,808 153,884
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Other Liabilities:
Deferred income taxes 55,514 54,644 54,199
Unamortized investment
tax credits 3,667 4,161 4,312
Post-retirement health care 8,662 8,713 8,710
Other reserves 1,561 1,148 883
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Total other liabilities 69,404 68,666 68,104
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Stockholder's Equity:
Common stock, $100 par value -
Authorized - 1,000 shares
Shares issued & outstanding -
15 1/2 shares 1 1 1
Capital in excess of par value 52,519 52,519 52,519
Retained earnings 102,252 96,386 100,024
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Total stockholder's equity 154,772 148,906 152,544
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Total liabilities and
stockholder's equity $420,359 $407,491 $418,590
============ ============ ============
</TABLE>
The accompanying notes are in integral
part of these financial statements.
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FORM 10-Q
PAGE 5
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES ("MIDLAND")
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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<CAPTION>
(000 OMITTED)
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FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
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<S> <C> <C>
Cash Flows from Operating Activities:
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Net earnings $23,464 $10,618
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 17,012 17,003
Deferred and current income taxes 980 (6,548)
Net (gain) loss on sale of assets (492) (2,672)
Other changes in assets and liabilities:
Trade and other receivables (2,251) 2,025
Materials, supplies & fuel 702 3,237
Accounts payable (1,990) (2,851)
Accrued expenses and other current liabilities 10,717 2,406
Other (4,141) (4,500)
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Net Cash Provided by
Operating Activities 44,001 18,718
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Cash Flows from Investing Activities:
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Capital expenditures (9,576) (2,683)
Increase in Parent receivable (5,108) (8,039)
Proceeds from asset dispositions 3,256 12,083
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Net Cash Provided (Used) by
Investing Activities (11,428) 1,361
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Cash Flows from Financing Activities:
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Repayment of long-term debt (2,813) (5,120)
Cash dividends paid to Parent (17,598) (7,963)
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Net Cash Used in
Financing Activities (20,411) (13,083)
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Net Increase in Cash and Cash Equivalents 12,162 6,996
Cash and Cash Equivalents at Beginning of Period 4,088 88
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Cash and Cash Equivalents at End of Period $16,250 $7,084
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Supplemental Disclosures of Cash Flow Information:
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Cash paid during the period for:
Interest, net of amounts capitalized $8,124 $8,687
Income taxes $12,313 $11,767
</TABLE>
The accompanying notes are in integral
part of these financial statements.
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MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) ACCOUNTING POLICIES
It is Midland's opinion that the financial information contained in this report
reflects all adjustments necessary to present a fair statement of the results
for the periods reported, but such results are not necessarily indicative of
results to be expected for the year, due to the somewhat seasonal nature of
Midland's operations. All such adjustments were of a normal, recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in this Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission. However, the
disclosures herein when read with the annual report for 1994 filed on Form 10-K
are adequate to make the information presented not misleading.
(2) CONTINGENCIES
In July and September 1995 Midland's Parent, Eastern Enterprises, received
notice from the Social Security Administration claiming that the Parent is
responsible for health benefit premiums for an additional group of retired coal
miners and their beneficiaries under the federal Coal Industry Retiree Health
Benefit Act of 1992 ("Coal Act"). In 1993 the Parent recorded an extraordinary
charge for its estimated obligations under the Coal Act relative to a group of
retired coal miners and their beneficiaries assigned to it at that time, as
discussed in Note 12 to Notes to Financial Statements in the Parent's 1994
Annual Report. A portion of the recent assignment to the Parent is assertedly
due to the Parent's relationship to a predecessor of Midland that is no longer
in business. At this time neither assignments nor invoices for health benefit
premiums have been received by Midland. Due to a lack of information about the
recent assignment of the additional group of retired miners and their
beneficiaries and their relationship to Midland, it is not known what the
ultimate cost of such assignment, if any, will be to Midland and no provision
has been made at this time.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
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Revenues for the third quarter of 1995 increased 14% over the comparable period
in 1994 reflecting a 4% increase in ton miles and significantly higher spot
transportation rates, particularly on export and spot coal, grain, ores and
other backhaul commodities. For the first nine months of 1995, revenues
increased 12%, reflecting the improved market environment resulting from
decreased equipment availability and strong export and import demand for river
transportation. Year-to-date ton miles increased 6%, reflecting changes to
traffic patterns resulting in longer average trip lengths and the strong first
quarter activity as compared to 1994, when severe winter icing and flooding
negatively impacted operations.
Coal tonnage declined 8% in the third quarter from the comparable period in
1994, with related ton miles down 2%, due to reduced domestic utility and
industrial coal shipments. Primary factors include plant downtime for several
customers under long-term contract, the closure of the Illinois Waterway for
repairs during August and September, and longer average trip lengths for spot
coal shipments. For the first nine months, coal tonnage was unchanged from
1994 reflecting strong first quarter shipments, offset by weaker demand later
in the year due to the mild winter and the factors discussed above. Non-coal
tonnage declined less than 2% for the third quarter and first nine months of
1995, compared to the same periods last year while related ton miles rose 10%
and 13% respectively. Significantly longer trip lengths associated with
higher margin spot commodities increased ton mile production and revenues
although fewer actual tons were delivered.
Operating earnings for the third quarter and first nine months of 1995 were
favorably impacted by the aforementioned improved spot transportation rates,
efficiencies gained from traffic pattern improvements, continued benefits from
increased barge utilization and cost reduction programs and generally favorable
operating conditions as compared to 1994. Terminal and support operation
results were largely unchanged from 1994 levels. As a result, comparative
operating earnings increased by 70% and 80% for the third quarter and first
nine months of 1995, respectively, and resulted in all time record earnings.
During the second quarter of 1994, Midland recorded a pre-tax gain of $2.3
million as a result of the sale of its Port Allen barge construction and
repair facility in Louisiana. This gain is included in " Other Income" on the
Consolidated Statements of Income. During the third quarter and first nine
months of 1995, sales and disposals of assets generated net pre-tax gains of
approximately $.5 million. Lower net financing expenses also contributed to
improved Earnings before income taxes.
Including the pre-tax items and the operating results discussed above, Net
Earnings for the third quarter and first nine months of 1995 increased 133% and
121% over the respective periods in 1994.
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LIQUIDITY AND CAPITAL RESOURCES
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Capital expenditures, debt repayments and dividends and advances to parent were
funded from cash provided by operating activities in the third quarter and
first nine months of 1995. Midland has contracted with Trinity Industries to
purchase 125 new hopper barges to replace fleet retirements, with deliveries
beginning in the third quarter of 1995 and continuing into the second quarter
of 1996. These purchases will be funded with cash provided from operations and
from the receivable with parent.
In July and September 1995 Midland's Parent received notice from the Social
Security Administration claiming that the Parent is responsible for health
benefit premiums under the federal Coal Industry Retiree Health Benefit Act of
1992 for a group of retired coal miners and their beneficiaries, assertedly due
to the Parent's relationship to a predecessor of Midland that is no longer in
business. As described in Note 2 of Notes to Financial Statements, no
provision has been made at this time because the amount of the reserve, if any,
cannot be reasonably estimated.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
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There were no reports on Form 8-K filed in the third quarter of 1995.
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SIGNATURE
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It is Midland's opinion that the financial information contained in this report
reflects all normal, recurring adjustments necessary for a fair statement of
results for the period reported, but such results are not necessarily
indicative of results to be expected for the year, due to the seasonal nature
of Midland's operations. All accounting policies have been applied in a manner
consistent with prior periods. Such financial information is subject to year
end adjustments and annual audit by independent public accountants.
Pursuant to the requirements of the Securities Exchange Act of 1934, Midland
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
MIDLAND ENTERPRISES INC.
BY: R. L. DOETTLING
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R. L. DOETTLING
SENIOR VICE PRESIDENT
FINANCE AND ADMINISTRATION
PRINCIPAL FINANCIAL OFFICER
AND DULY AUTHORIZED OFFICER
DATE: NOVEMBER 6, 1995
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<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>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 16,250
<SECURITIES> 0
<RECEIVABLES> 99,638
<ALLOWANCES> 550
<INVENTORY> 7,597
<CURRENT-ASSETS> 125,858
<PP&E> 579,727
<DEPRECIATION> 302,253
<TOTAL-ASSETS> 420,359
<CURRENT-LIABILITIES> 50,188
<BONDS> 145,995
<COMMON> 1
0
0
<OTHER-SE> 154,772
<TOTAL-LIABILITY-AND-EQUITY> 420,359
<SALES> 0
<TOTAL-REVENUES> 76,486
<CGS> 0
<TOTAL-COSTS> 57,297
<OTHER-EXPENSES> 1,748
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,663
<INCOME-PRETAX> 13,779
<INCOME-TAX> 5,020
<INCOME-CONTINUING> 8,759
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,759
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
