<PAGE> 1
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 June 30, 1995
---------------
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 ADDRESS: 1400 - 580 BUILDING, CINCINNATI, OH 45202
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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
--- ---
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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ITEM 1.
FINANCIAL STATEMENTS
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Company or group of companies for which report is filed:
Midland Enterprises Inc. and Subsidiaries ("Midland")
- -----------------------------------------------------
Consolidated Statements of Income
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<TABLE>
<CAPTION>
(000 Omitted)
-----------------------------------------------------------------
For the Three Months Ended For the Six Months Ended
-------------------------- -------------------------
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
----- ----- ----- -----
<S> <C> <C> <C> <C>
Operating Revenues $69,261 $68,986 $141,988 $127,152
------- ------- -------- --------
Operating Costs and Expenses:
Operating Expenses 43,296 46,012 87,269 86,106
Depreciation and amortization 5,790 5,647 11,506 11,317
Selling, general & administrative
expenses 2,848 2,670 5,295 5,198
Overhead allocation from Parent 675 711 1,350 1,422
Taxes, other than income 4,109 4,075 8,725 8,213
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56,718 59,115 114,145 112,256
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Operating Earnings 12,543 9,871 27,843 14,896
------- ------- -------- --------
Other Income (Expense):
Interest income from Parent 1,254 577 2,303 1,108
Interest income other 166 11 242 18
Gain on sale of barge facility
including $851,000 of
curtaiment gains 0 2,300 0 2,300
Gain (loss) on sale of assets
and other, net (15) 58 (13) 55
------- ------- -------- --------
1,405 2,946 2,532 3,481
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Interest Expense:
Long-term debt 3,665 3,885 7,368 7,782
Other, including amortization of
debt expense 31 43 59 69
Interest capitalized during
construction 0 0 0 (38)
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3,696 3,928 7,427 7,813
------- ------- -------- --------
Earnings before income taxes 10,252 8,889 22,948 10,564
Provision for Income taxes 3,680 3,170 8,243 3,699
------- ------- -------- --------
Net Earnings $6,572 $5,719 $14,705 $6,865
======= ======= ======== ========
The accompanying notes are an integral
part of these financial statements.
</TABLE>
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<TABLE>
Midland Enterprises Inc. And Subsidiaries
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Consolidated Balance Sheets
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<CAPTION>
(000 Omitted)
-------------------------------------------
June 30, Dec. 31, June 30,
1995 1994 1994
----------- ----------- -----------
<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 14,561 $ 4,088 $ 5,088
Receivables -
Trade, net 22,921 24,641 28,003
Parent 67,326 61,866 65,205
Other 5,132 659 1,380
Materials, supplies & fuel 7,849 8,299 9,068
Prepaid expenses 3,015 2,550 2,124
----------- ----------- -----------
Total current assets 120,804 102,103 110,868
----------- ----------- -----------
Property and Equipment, at cost 580,525 581,647 582,724
Less-Accumulated depreciation 301,433 293,375 284,797
----------- ----------- -----------
Net property and equipment 279,092 288,272 297,927
----------- ----------- -----------
Other Assets:
Deferred pension charges 12,056 11,835 11,075
Other 5,411 5,281 5,068
----------- ----------- -----------
Total other assets 17,467 17,116 16,143
----------- ----------- -----------
Total assets $ 417,363 $ 407,491 $ 424,938
=========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
<PAGE> 4
<TABLE>
Midland Enterprises Inc. And Subsidiaries
- -----------------------------------------
Consolidated Balance Sheets
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(000 Omitted)
--------------------------------------
June 30, Dec.31, June 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 $ 3,511 $ 3,354 $ 5,415
Accounts Payable -
Trade 10,611 11,705 9,792
Parent 0 0 2,523
Income taxes payable 2,070 918 590
Accrued expenses 10,732 9,917 11,759
Other current liabilities 21,540 15,217 16,573
---------- ---------- ----------
Total current liabilities 48,464 41,111 46,652
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Long-Term Debt 146,996 148,808 155,184
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Other Liabilities:
Deferred income taxes 55,158 54,644 57,323
Unamortized investment
tax credits 3,856 4,161 4,465
Post-retirement health care 8,810 8,713 8,849
Other reserves 1,497 1,148 860
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Total other liabilities 69,321 68,666 71,497
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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 100,062 96,386 99,085
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Total stockholder's equity 152,582 148,906 151,605
---------- ---------- ----------
Total liabilities and
stockholder's equity 417,363 407,491 424,938
========== ========== ==========
</TABLE>
The accompanying notes are an interal
part of these financial statements.
<PAGE> 5
<TABLE>
Midland Enterprises Inc. and Subsidiaries ("Midland")
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Consolidated Statements of Cash Flows
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<CAPTION>
(000 Omitted)
------------------------------
For the Six Months Ended
------------------------------
June 30, June 30,
1995 1994
------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
- -------------------------------------
Net earnings $ 14,705 $ 6,865
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 11,506 11,317
Deferred and current income taxes 1,666 (3,310)
Net (gain) loss on sale of assets (10) (2,672)
Other changes in assets and liabilities:
Trade and other receivables (2,753) (3,674)
Materials, supplies & fuel 450 3,897
Accounts payable (1,094) (656)
Accrued expenses and other current liabilities 7,138 1,786
Other (575) (2,691)
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Net Cash Provided by
Operating Activities 31,033 10,862
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Cash Flows from Investing Activities:
- -------------------------------------
Capital expenditures (2,917) (1,643)
(Increase) decrease in Parent receivable (5,460) (8,253)
Proceeds from asset dispositions 534 12,083
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Net Cash Provided by Investing Activities (7,843) 2,187
Cash Flows from Financing Activities:
- -------------------------------------
Issuance of long-term debt - -
Repayment of long-term debt (1,688) (2,899)
Cash dividends paid to Parent (11,029) (5,150)
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Net Cash Used in
Financing Activities (12,717) (8,049)
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Net Increase in Cash and Cash Equivalents 10,473 5,000
Cash and Cash Equivalents at Beginning of Period 4,088 88
---------- ----------
Cash and Cash Equivalents at End of Period $ 14,561 $ 5,088
========== ==========
Supplemental Disclosures of Cash Flow Information:
- --------------------------------------------------
Cash paid during the period for:
Interest, net of amounts capitalized $ 7,359 $ 7,782
Income taxes $ 6,608 $ 4,634
</TABLE>
The accompanying notes are an integral
part of these financial statements.
<PAGE> 6
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
Notes to Financial Statements
June 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 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.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations:
- ----------------------
Second quarter operating earnings increased 27% over 1994, reflecting
continuation of the significantly higher spot transportation rates,
particularly on export and spot coal, grain, ores and other backhaul
commodities. Efficiencies from traffic pattern improvements, and continued
benefits from increased barge utilization and cost reduction programs initiated
in 1994, contributed to the improved earnings. Revenues were unchanged from
the second quarter of 1994 on 6% fewer ton miles reflecting the higher rate
structure. However, severe flooding on the Mississippi River above St. Louis
and the Illinois Waterway from late May to mid-June, which closed portions of
those rivers during this period, negatively impacted production and increased
operating expenses.
The Company experienced a 6% decline in coal tonnage attributable to reduced
spot transportation. Primary factors, were the utilization of equipment in
non-coal markets and a mild winter which reduced utility requirements for coal.
As such, export and spot coal tonnage declined 31% from second quarter levels
in 1994. However, coal tonnage under long term contracts increased 3% as a
result of the settlement in July 1994 of a contract dispute with Gulf Power
Company that had curtailed shipments in the first half of last year. Non-coal
tonnage declined 7% due to the aforementioned river closures, while related ton
miles were nearly flat, reflecting longer average hauls. The demand for raw
and intermediate materials originating at the Gulf coupled with a strong export
grain market contributed significantly to the increased equipment utilization.
Operating earnings for the first six months of 1995 increased 87% over the
comparable period in 1994, with revenues up 12%, reflecting the improved market
environment, favorable first quarter operating conditions and increased
productivity. For the first six months, ton miles increased 6%, reflecting
Midland's strong first quarter production as compared to 1994 when severe
winter icing and floods negatively impacted operating results. Coal tonnage
increased 4%, with coal tonnage under long term contracts up 12% for the first
six months as compared to 1994, mainly as a result of the settlement of the
contract dispute with Gulf Power Company discussed above. Spot and export
coal tonnage declined 20% from the six month level in 1994, due in part to
equipment requirements to service the Gulf Power contract tonnage, as well as a
softening coal market and shift in emphasis to other non-coal commodities.
Non-coal tonnage increased 2% for the first six months of 1995 over last year
levels.
During the second quarter of 1994, Midland recorded a pre-tax gain of $2.3
million in "Other Income" as a result of the sale of its Port Allen barge
construction and repair facility in Louisiana. Including this gain in 1994,
Midland's net earnings for the second quarter of 1995 increased 15% as a result
of the improved operating results discussed above, and lower net interest
costs. Midland's net earnings for the first six months of 1995 increased 114%
as compared to last year.
<PAGE> 8
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 second quarter and
first six months of 1995. Midland has contracted with Trinity Industries to
purchase 75 new hopper barges to replace fleet retirements, with deliveries
beginning in the third quarter of 1995 and continuing through the first quarter
of 1996. These purchases will be funded with cash provided from operations and
from available cash.
In July 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.
<PAGE> 9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(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 second quarter of 1995.
<PAGE> 10
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: /s/R. L. DOETTLING
----------------------------
R. L. DOETTLING
SENIOR VICE PRESIDENT
FINANCE AND ADMINISTRATION
PRINCIPAL FINANCIAL OFFICER
AND DULY AUTHORIZED OFFICER
DATE: JULY 31, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 14,561
<SECURITIES> 0
<RECEIVABLES> 95,812
<ALLOWANCES> 432
<INVENTORY> 7,849
<CURRENT-ASSETS> 120,804
<PP&E> 580,525
<DEPRECIATION> 301,433
<TOTAL-ASSETS> 417,363
<CURRENT-LIABILITIES> 48,464
<BONDS> 146,996
<COMMON> 1
0
0
<OTHER-SE> 152,582
<TOTAL-LIABILITY-AND-EQUITY> 417,363
<SALES> 0
<TOTAL-REVENUES> 141,988
<CGS> 0
<TOTAL-COSTS> 107,245
<OTHER-EXPENSES> 4,368
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,427
<INCOME-PRETAX> 22,948
<INCOME-TAX> 8,243
<INCOME-CONTINUING> 14,705
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,705
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
