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FORM 10-Q/A
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, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 2-39895
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, 1997
(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 1996 filed on Form 10-K are adequate
to make the information presented not misleading.
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2
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
<TABLE>
<CAPTION>
(000 OMITTED)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
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JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING REVENUES $68,113 $77,000 $132,495 $152,879
------- ------- -------- --------
OPERATING COSTS AND EXPENSES:
Operating Expenses $46,323 $47,873 92,849 $ 96,170
Depreciation and amortization 5,667 5,486 11,323 11,048
Selling, general & administrative 2,880 2,980 5,386 5,794
Overhead allocation from Parent 725 750 1,450 1,500
Taxes, other than income 3,415 4,299 6,956 8,744
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$59,010 $61,388 $117,964 $123,256
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OPERATING EARNINGS $ 9,103 $15,612 $ 14,531 $ 29,623
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OTHER INCOME (EXPENSE):
Interest income from Parent $ 1,034 $ 795 $ 2,051 1,665
Interest income other 4 317 14 661
Gain (Loss) on sale of assets
and other, net (44) (436) (97) (453)
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$ 994 $ 676 $ 1,968 $ 1,873
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INTEREST EXPENSE:
Long-term debt $ 3,406 $ 3,555 6,819 $ 7,130
Other, including amortization
of debt expense 51 79 95 174
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$ 3,457 $ 3,634 $ 6,914 $ 7,304
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Earnings before income taxes $ 6,640 $12,654 $ 9,585 $ 24,192
Provision for Income taxes 2,365 4,568 3,184 8,729
------- ------- -------- --------
NET EARNINGS $ 4,275 $ 8,086 $ 6,401 $ 15,463
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</TABLE>
The accompanying notes are an integral
part of these financial statements.
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MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
(000 OMITTED)
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JUNE 30, DEC. 31, JUNE 30,
1997 1996 1996
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<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 58 $ 91 $ 20,557
Receivables -
Trade, net 17,016 16,728 19,382
Parent 73,576 63,863 55,841
Other 1,325 2,761 3,697
Materials, supplies & fuel 7,992 8,176 7,755
Prepaid expenses 1,081 2,028 2,818
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TOTAL CURRENT ASSETS $101,048 $ 93,647 $110,050
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PROPERTY AND EQUIPMENT, AT COST $623,720 $629,560 $609,723
Less-Accumulated depreciation 327,255 323,120 314,909
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NET PROPERTY AND EQUIPMENT $296,465 $306,440 $294,814
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OTHER ASSETS:
Deferred pension charges $ 13,845 $ 13,587 $ 12,801
Other 3,857 4,117 4,400
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TOTAL OTHER ASSETS $ 17,702 $ 17,704 $ 17,201
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TOTAL ASSETS $415,215 $417,791 $422,065
======== ======== ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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4
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
(000 OMITTED)
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JUNE 30, DEC. 31, JUNE 30,
1997 1996 1996
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<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of long - term debt $ 4,183 $ 3,986 $ 3,797
Accounts payable trade 10,043 11,224 14,916
Reserve for insurance claims 13,326 11,881 13,356
Interest payable 4,009 4,062 4,113
Taxes payable 1,518 5,242 5,639
Accrued expenses 4,888 5,617 5,496
Other current liabilities 9,707 9,851 11,025
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TOTAL CURRENT LIABILITIES $ 47,674 $ 51,863 $ 58,342
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LONG-TERM DEBT $135,084 $137,313 $139,378
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RESERVES AND DEFERRED CREDITS:
Deferred income taxes $ 57,552 $ 54,594 $ 54,346
Unamortized investment tax credits 2,747 2,999 3,254
Post-retirement health care 8,763 8,798 8,765
Coal miners retiree health care 3,400 3,500 3,600
Other reserves 2,108 2,437 1,609
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TOTAL RESERVES AND DEFERRED CREDITS $ 74,570 $ 72,328 $ 71,574
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STOCKHOLDER'S EQUITY:
Common stock, $100 par value -
Authorized - 1,000 shares
Shares issued - 15 1/2 shares $ 1 $ 1 $ 1
Capital in excess of par value 52,519 52,519 52,519
Retained earnings 105,367 103,767 100,251
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TOTAL STOCKHOLDER'S EQUITY $157,887 $156,287 $152,771
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $415,215 $417,791 $422,065
======== ======== ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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5
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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<TABLE>
<CAPTION>
(000 OMITTED)
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FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
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Net earnings $ 6,401 $ 15,463
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 11,323 11,048
Deferred and current income taxes (730) (432)
Net (gain) loss on sale of assets 40 1
Other changes in assets and liabilities:
Trade and other receivables (288) 5,648
Materials, supplies & fuel 184 222
Accounts payable (1,181) (2,600)
Accrued expenses and other current liabilities 484 685
Other 1,537 593
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 17,770 $ 30,628
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Capital expenditures $ (2,363) $(24,328)
Decrease (Increase) in Parent receivable (9,713) 4,517
Proceeds from asset dispositions 1,106 1,135
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NET CASH USED IN INVESTING ACTIVITIES $(10,970) $(18,676)
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Repayment of long-term debt $ (2,032) $ (5,525)
Cash dividends paid to Parent (4,801) (11,598)
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NET CASH USED IN FINANCING ACTIVITIES $ (6,833) $(17,123)
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Net Increase in Cash and Cash Equivalents $ (33) $ (5,171)
Cash and Cash Equivalents at Beginning of Period 91 25,728
-------- --------
Cash and Cash Equivalents at End of Period $ 58 $ 20,557
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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 $ 6,839 $ 7,236
Income taxes $ 3,575 $ 9,187
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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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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Weak demand for transportation services contributed to revenue decreases of 12%
and 13% for the second quarter and first half of 1997, respectively. Industry
demand for transportation services remained soft, continuing the weakness
experienced in the second half of 1996. In addition, periodic high water
conditions on the Mississippi River in the second quarter, coupled with record
Ohio River flooding in the first quarter, combined to raise operating costs and
lower productivity for the first half of 1997. As a result, operating earnings
declined from the record second quarter and record first half of 1996 by $6.5
million and $15.1 million, respectively.
As a result of the operating and market issues discussed above, ton miles
declined 11% and 12%, respectively, from the second quarter and first half of
1996. Coal tonnage declined 22% in the first half of 1997, due entirely to
shortfalls in utility and industrial accounts. Non-coal tonnage for the same
period was off 8%. Spot Market conditions adversely affected spot transportation
rates, particularly for grain.
As a result of the lower operating earnings discussed above, net income for the
second quarter and first six months of 1997 declined $3.8 million and $9.1
million, respectively, as compared to 1996.
OTHER
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In April 1997, the Federal Court of Appeals for the First Circuit affirmed the
decision of the Federal District Court for Massachusetts decision upholding the
constitutionality of the Coal Industry Retiree Health Benefit Act of 1992 as
applied to Midland's Parent, Eastern Enterprises ("Parent"). The Parent has
filed an appeal of this decision to the U.S. Supreme Court.
LIQUIDITY AND CAPITAL RESOURCES
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For the first six months of 1997, capital expenditures, debt repayments, and
dividends and advances to parent were primarily funded from cash provided by
operating activities. For 1997, planned capital expenditures are estimated at
$24 million, the majority of which pertains to purchase commitments for new dry
cargo barges. These purchases will be funded with cash provided from operations
and from the receivable with parent.
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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
1997.
* Filed Previously
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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: /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 30, 1997
