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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 June 30, 1996
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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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1
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(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 1995 filed on Form 10-K are adequate
to make the information presented not misleading.
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2
ITEM 1.
FINANCIAL STATEMENTS
COMPANY OR GROUP OF COMPANIES FOR WHICH REPORT IS FILED:
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES ("MIDLAND")
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(000 OMITTED)
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FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
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JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating Revenues $77,000 $69,261 $152,879 $141,988
------- ------- -------- --------
Operating Costs and Expenses:
Operating Expenses 47,873 43,296 96,170 87,269
Depreciation and amortization 5,486 5,790 11,048 11,506
Selling, general & administrative expenses 2,980 2,848 5,794 5,295
Overhead allocation from Parent 750 675 1,500 1,350
Taxes, other than income 4,299 4,109 8,744 8,725
------- ------- -------- --------
61,388 56,718 123,256 114,145
------- ------- -------- --------
Operating Earnings 15,612 12,543 29,623 27,843
------- ------- -------- --------
Other Income:
Interest income from Parent 795 1,254 1,665 2,303
Interest income other 317 166 661 242
Premium paid on debt
retirement and other, net (436) (15) (453) (13)
------- ------- -------- --------
676 1,405 1,873 2,532
------- ------- -------- --------
Interest Expense:
Long-term debt 3,555 3,665 7,130 7,368
Other, including amortization of
debt expense 79 31 174 59
------- ------- -------- --------
3,634 3,696 7,304 7,427
------- ------- -------- --------
Earnings before income taxes 12,654 10,252 24,192 22,948
Provision for Income taxes 4,568 3,680 8,729 8,243
------- ------- -------- --------
Net Earnings $ 8,086 $ 6,572 $ 15,463 $ 14,705
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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3
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(000 OMITTED)
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JUNE 30, DEC. 31, JUNE 30,
1996 1995 1995
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<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 20,557 $ 25,728 $ 14,561
Receivables -
Trade, net 19,623 25,030 22,921
Parent 55,841 60,358 67,326
Other 3,456 5,044 5,132
Materials, supplies & fuel 7,755 7,977 7,849
Prepaid expenses 2,818 1,637 3,015
-------- -------- --------
Total current assets 110,050 125,774 120,804
-------- -------- --------
Property and Equipment, at cost 609,723 588,857 580,525
Less-Accumulated depreciation 314,909 306,415 301,433
-------- -------- --------
Net property and equipment 294,814 282,442 279,092
-------- -------- --------
Other Assets:
Deferred pension charges 12,801 12,794 12,056
Other 4,400 5,002 5,411
-------- -------- --------
Total other assets 17,201 17,796 17,467
-------- -------- --------
Total assets $422,065 $426,012 $417,363
======== ======== ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(000 OMITTED)
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JUNE 30, DEC. 31, JUNE 30,
1996 1995 1995
-------- -------- --------
Liabilities and Stockholder's Equity
Current Liabilities:
<S> <C> <C> <C>
Current portion of long-term debt $ 3,797 $ 3,684 $ 3,511
Accounts payable trade 14,916 17,516 10,611
Reserve for insurance claims 13,356 13,037 14,175
Income taxes payable 941 1,451 2,070
Accrued expenses 14,307 13,983 10,732
Other current liabilities 11,025 10,983 7,365
-------- -------- --------
Total current liabilities 58,342 60,654 48,464
-------- -------- --------
Long-Term Debt 139,378 144,903 146,996
-------- -------- --------
Other Liabilities:
Deferred income taxes 54,346 54,268 55,158
Unamortized investment
tax credits 3,254 3,524 3,856
Post-retirement health care 8,765 8,726 8,810
Coal miners retiree health care 3,600 3,700 0
Other reserves 1,609 1,331 1,497
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Total other liabilities 71,574 71,549 69,321
-------- -------- --------
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 100,251 96,386 100,062
-------- -------- --------
Total stockholder's equity 152,771 148,906 152,582
-------- -------- --------
Total liabilities and
stockholder's equity $422,065 $426,012 $417,363
======== ======== ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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5
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES ("MIDLAND")
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(000 OMITTED)
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FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995
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Cash Flows from Operating Activities:
<S> <C> <C>
Net earnings $ 15,463 $ 14,705
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 11,048 11,506
Deferred and current income taxes (432) 1,666
Net (gain) loss on sale of assets 1 (10)
Other changes in assets and liabilities:
Trade and other receivables 5,648 (2,753)
Materials, supplies & fuel 222 450
Accounts payable (2,600) (1,094)
Accrued expenses and other current liabilities 685 7,138
Other 593 (575)
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Net Cash Provided by
Operating Activities 30,628 31,033
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (24,328) (2,917)
Decrease (Increase) in Parent receivable 4,517 (5,460)
Proceeds from asset dispositions 1,135 534
-------- --------
Net Cash Used by
Investing Activities (18,676) (7,843)
-------- --------
Cash Flows from Financing Activities:
Repayment of long-term debt (5,525) (1,688)
Cash dividends paid to Parent (11,598) (11,029)
-------- --------
Net Cash Used in
Financing Activities (17,123) (12,717)
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents (5,171) 10,473
Cash and Cash Equivalents at Beginning of Period 25,728 4,088
-------- --------
Cash and Cash Equivalents at End of Period $ 20,557 $ 14,561
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 6,512 $ 7,359
Income taxes $ 9,187 $ 6,608
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS:
The Company achieved records for ton mile production, revenue, and operating
earnings in the second quarter and six months ended June 30, 1996. Ton mile
production increased 7% and 2% respectively for the quarter and six months
compared to the same periods in 1995. The increased production along with
improved market rates, particularly on non-coal commodities, increased second
quarter revenues 11%, to $77 million, and six month revenues 8%, to $153
million. While seasonal second quarter flooding was less disruptive in 1996, the
current year was impacted by severe winter weather and flooding in the first
quarter that significantly impacted navigation, resulting in lost production and
substantially higher operating costs. As a result, comparative operating
earnings, while increasing 24% in the second quarter over 1995, improved 6% over
the first six months of last year. Efficiencies from increased fleet utilization
programs contributed to the improved earnings, although rising fuel prices in
1996 were partially offsetting.
Strong second quarter coal shipments, with tonnage increasing 4% over the
comparable period in 1995, enabled 1996 first half coal tonnage to approximate
last year's record level, despite the weather-related operating problems
encountered in the first quarter. Coal ton miles increased 10% and 8% for the
second quarter and first six months, respectively, reflecting longer average
hauls associated with increased shipments of export and spot coal. Coal tonnage
under long term contracts declined 4% in the second quarter and 3% for the first
six months, reflecting the expiration of a large utility contract. However, a
majority of the tonnage associated with this contract was moved on a spot basis.
Non-coal tonnage increased 1% in the second quarter compared to 1995, reflecting
continued strong demand for raw and intermediate materials much of which
originated in the Gulf, but declined 3% over the first six months due to the
aforementioned weather-related loss of production in the first quarter of 1996
and a decline in towing for others.
Other income declined slightly in the second quarter and first six months of
1996 as compared to 1995 from lower earnings on advances with Parent due to the
impact of the increased level of capital spending on cash balances, and expenses
incurred related to the early retirement of long-term debt.
As a result of the improvement in operating earnings, and other items as
discussed above, net earnings for the second quarter and first six months of
1996 increased 23% and 5% respectively as compared to last year.
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7
LIQUIDITY AND CAPITAL RESOURCES
For the first six months of 1996, capital expenditures, debt repayments and
dividends to Parent were funded from cash provided from operating activities or
the receivable with Parent. For 1996, planned capital expenditures are estimated
at $50 million, the majority of which pertains to purchase commitments for new
dry cargo barges. It is anticipated that these purchases will be funded with
cash provided from operating activities and the receivable from Parent.
In June 1996, Midland retired $3 million of medium-term notes and incurred a
related premium charge of $420,000.
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8
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
There were no reports on Form 8-K filed in the second quarter of 1996.
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9
SIGNATURE
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
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R. L. DOETTLING
SENIOR VICE PRESIDENT
FINANCE AND ADMINISTRATION
PRINCIPAL FINANCIAL OFFICER
AND DULY AUTHORIZED OFFICER
DATE: JULY 29, 1996
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 20,557
<SECURITIES> 0
<RECEIVABLES> 79,605
<ALLOWANCES> 685
<INVENTORY> 7,755
<CURRENT-ASSETS> 110,050
<PP&E> 609,723
<DEPRECIATION> 314,909
<TOTAL-ASSETS> 422,065
<CURRENT-LIABILITIES> 58,342
<BONDS> 139,378
0
0
<COMMON> 1
<OTHER-SE> 152,771
<TOTAL-LIABILITY-AND-EQUITY> 422,065
<SALES> 0
<TOTAL-REVENUES> 152,879
<CGS> 0
<TOTAL-COSTS> 115,673
<OTHER-EXPENSES> 5,710
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,304
<INCOME-PRETAX> 24,192
<INCOME-TAX> 8,729
<INCOME-CONTINUING> 15,463
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,463
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
