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THE MIDLAND COMPANY
Annual Report
on Form 10-K
to the
Securities and Exchange Commission
for the
Year Ended December 31, 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1995
Commission File Number - 1-6026
THE MIDLAND COMPANY
Incorporated in Ohio
I.R.S. Employer Identification No. 31-0742526
7000 Midland Boulevard
Amelia, Ohio 45102-2607
Tel. (513) 943-7100
Securities registered pursuant to Section 12(b) of the Act:
Common stock - no par value. - American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark whether the registrant (1) has filed all other
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes__X__ No_____
The aggregate market value of the voting common stock held by
nonaffiliates, which includes shares held by executive officers and directors,
of the registrant as of March 14, 1996 was $149,518,562.
Number of shares of common stock outstanding as of March 14, 1996 -
3,020,577.
Documents Incorporated by Reference
Annual Report to Shareholders for the year ended December 31, 1995 is
incorporated by reference into Parts I, II and IV.
Registrant's Proxy Statement dated March 15, 1996 is incorporated by
reference into Parts III and IV.
1
THE MIDLAND COMPANY
FORM 10-K
DECEMBER 31, 1995
PART I
ITEM 1. Business.
Incorporated by reference to the inside front cover and pages 2 through
13 and 30 (Note 12) of the Registrant's 1995 Annual Report to
Shareholders. The number of persons employed by the Registrant was
approximately 875 at December 31, 1995.
ITEM 2. Properties.
Incorporated by reference to the inside front cover and pages 2
through 13 of the Registrant's 1995 Annual Report to Shareholders.
ITEM 3. Legal Proceedings.
A Grand Jury returned a nine count indictment against M/G Transport
Services, Inc. in February, 1995, alleging violations of certain
environmental laws. Seven former M/G employees were also indicted.
The indictments alleged that M/G employees had, over a period of
years, discharged or permitted the discharge, of bilge water, ash and
other refuse into the inland waterways. M/G faced fines of up to
$4.2 million.
The case, styled: United States of America vs. M/G Transport
Services, et al., went to trial in the United States District Court
for the District of Ohio beginning November 4, 1995. On December 22,
1995, the jury returned guilty verdicts against M/G on eight of the
nine counts. Three of M/G's former employees were also found guilty
on various counts.
M/G has challenged the verdicts and has preserved its rights of
appeal. If the verdicts are affirmed by the court, M/G could be
fined up to $3.7 million. Sentencing is not expected to occur before
the end of March, 1996.
Related civil litigation is still pending, the outcome of which
cannot be reasonably estimated at this time.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None during the fourth quarter.
PART II
ITEM 5. Market for the Registrant's Common Stock and Related Security Holder
Matters.
Incorporated by reference to pages 16, 30 (Note 13) and 32
of the Registrant's 1995 Annual Report to Shareholders.
ITEM 6. Selected Financial Data.
Incorporated by reference to page 17 of the Registrant's 1995 Annual
Report to Shareholders.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Incorporated by reference to pages 18 and 19 of the Registrant's 1995
Annual Report to Shareholders.
ITEM 8. Financial Statements and Supplementary Data.
Incorporated by reference to pages 16 and 20 through 32 of the
Registrant's 1995 Annual Report to Shareholders.
2
PART II (Continued)
ITEM 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosures.
None.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
Incorporated by reference to the Registrant's Proxy Statement dated
March 15, 1996.
Executive Officers of the Company -
J. P. Hayden, Jr. - Age 66 - Chairman and Chief Executive Officer
Michael J. Conaton - Age 62 - President and Chief Operating Officer
John R. LaBar - Age 64 - Vice President and Secretary
Robert W. Hayden - Age 57 - Vice President
John I. Von Lehman - Age 43 - Vice President, Treasurer and
Chief Financial Officer
Thomas J. Rohs - Age 54 - Vice President
J. P. Hayden, III - Age 43 - Vice President
John W. Hayden - Age 38 - Vice President
Michael L. Flowers - Age 44 - Vice President, Assistant Secretary
and Chief In-House Counsel
J. P. Hayden, Jr. and Robert W. Hayden are brothers. J. P. Hayden, III
and John W. Hayden are sons of J. P. Hayden, Jr.
During 1991, Michael L. Flowers (formerly Assistant Secretary) was
elected Vice President.
The officers listed above have served in the positions indicated for
the past five years (except as noted above).
ITEM 11. Executive Compensation.
Incorporated by reference to the Registrant's Proxy Statement dated
March 15, 1996.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated by reference to the Registrant's Proxy Statement dated
March 15, 1996.
ITEM 13. Certain Relationships and Related Transactions.
Incorporated by reference to the Registrant's Proxy Statement dated
March 15, 1996.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements.
Incorporated by reference in Part II of this report:
Data pertaining to The Midland Company and Subsidiaries -
Report of Independent Public Accountants.
Consolidated Balance Sheets, December 31, 1995 and 1994.
Consolidated Statements of Income and Retained Earnings for
the Years Ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
3
PART IV (Continued)
(a) 2. Financial Statement Schedules.
Included in Part IV of this report:
Data pertaining to The Midland Company and Subsidiaries - Page
Independent Auditors Consent and Report on Schedules. 7
Schedule I - Condensed Financial Information of
Registrant. 8-12
Schedule II - Allowance for Losses for the Years Ended
December 31, 1995, 1994 and 1993. 13
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
(a) 3. Exhibits.
3. Articles of Incorporation and By-Laws - Filed as
Exhibit 3 to the Registrant's 1980 Annual Report on
Form 10-K, and incorporated herein by reference.
10. A description of the Company's Stock Option Plan and
Profit Sharing Plan - Incorporated by reference to the
Registrant's Proxy Statement dated March 15, 1996.
11. Computation of Consolidated Net Income Per Share for
the years ended December 31, 1995, 1994 and 1993. 14
13. Annual Report to security holders - Incorporated by
reference to the Registrant's 1995 Annual Report to
Shareholders.
21. Subsidiaries of the Registrant. 15
22. Registrant's Proxy Statement - Incorporated by reference
to the Registrant's Proxy Statement dated March 15, 1996.
23. Independent Auditors' Consent - Included in Consent and
Report on Schedules referred to under Item 14(a)2 above.
27. Financial Data Schedule.
(b) Report on Form 8-K - No such reports filed or required to be
filed in the fourth quarter of 1995.
4
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.
THE MIDLAND COMPANY
Signature Title Date
S/ J. P. Hayden, Jr. Chairman, and March 7, 1996
(J. P. Hayden, Jr.) Chief Executive Officer
S/ John I. Von Lehman Vice President, Treasurer, March 7, 1996
(John I. Von Lehman) Chief Financial Officer and
Chief Accounting Officer
5
SIGNATURES
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 and on the dates indicated.
THE MIDLAND COMPANY
Signature Title Date
S/ George R. Baker Director March 7, 1996
(George R. Baker)
S/ James H. Carey Director and Member March 7, 1996
(James H. Carey) of Audit Committee
S/ Michael J. Conaton President, Chief Operating March 7, 1996
(Michael J. Conaton) Officer and Director
S/ J. P. Hayden, Jr. Chairman, Chief Executive March 7, 1996
(J. P. Hayden, Jr.) Officer and Director
S/ J. P. Hayden, III Vice President and Director March 7, 1996
(J. P. Hayden, III)
S/ John W. Hayden Vice President and Director March 7, 1996
(John W. Hayden)
S/ Robert W. Hayden Vice President and Director March 7, 1996
(Robert W. Hayden)
S/ William T. Hayden Director March 7, 1996
(William T. Hayden)
S/ William J. Keating Director March 7, 1996
(William J. Keating)
S/ William McD. Kite Director March 7, 1996
(William McD. Kite)
S/ John R. LaBar Vice President, Secretary March 7, 1996
(John R. LaBar) and Director
S/ John M. O'Mara Director and Member March 7, 1996
(John M. O'Mara) of Audit Committee
S/ John R. Orther Director and Member March 7, 1996
(John R. Orther) of Audit Committee
S/ William F. Plettner Director March 7, 1996
(William F. Plettner)
S/ Glenn E. Schembechler Director and Member March 7, 1996
(Glenn E. Schembechler) of Audit Committee
S/ John I. Von Lehman Vice President, Treasurer, March 7, 1996
(John I. Von Lehman) Chief Financial Officer,
Chief Accounting Officer
and Director
6
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
To the Shareholders of The Midland Company:
We consent to the incorporation by reference in Registration Statement No. 33-
64821 on Form S-3 and No. 33-48511 on Form S-8 of The Midland Company of our
report dated February 15, 1996, incorporated by reference in this Annual Report
on Form 10-K, and our report (appearing below) on the financial statement
schedules of The Midland Company for the year ended December 31, 1995.
Our audits of the consolidated financial statements referred to in our
aforementioned report also included the financial statement schedules of The
Midland Company and its subsidiaries, listed in Item 14 (a)2. These financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
S/ Deloitte & Touche LLP
Deloitte & Touche LLP
Cincinnati, Ohio
March 22, 1996
7
THE MIDLAND COMPANY (Parent Only)
Schedule I - Condensed Financial Information of Registrant
Condensed Balance Sheet Information
December 31, 1995 and 1994
ASSETS 1995 1994
-----------------------------
Cash $ 240,000 $ 184,000
-----------------------------
Marketable Securities (at market value) 8,116,000 10,974,000
-----------------------------
Receivables - Net 7,230,000 4,118,000
-----------------------------
Property, Plant and Equipment (at cost) 54,958,000 47,363,000
Less Accumulated Depreciation 4,112,000 12,935,000
-----------------------------
Net 50,846,000 34,428,000
-----------------------------
Other Assets 1,075,000 31,000
-----------------------------
Investment in Subsidiaries (at equity) 169,978,000 169,093,000
-----------------------------
Total $ 237,485,000 $ 218,828,000
=============================
8
THE MIDLAND COMPANY (Parent Only)
Schedule I - Condensed Financial Information of Registrant
Condensed Balance Sheet Information
December 31, 1995 and 1994
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
-----------------------------
Notes Payable within One Year:
Banks (including current portion of
long-term debt) $ 31,767,000 $ 22,265,000
Commercial Paper 4,620,000 5,546,000
-----------------------------
Total 36,387,000 27,811,000
-----------------------------
Other Payables and Accruals 1,471,000 568,000
-----------------------------
Intercompany Payables 14,541,000 49,570,000
-----------------------------
Long-Term Debt 28,491,000 8,442,000
-----------------------------
Shareholders' Equity:
Common Stock - No Par (issued and outstanding:
3,020,000 shares at December 31, 1995 and
2,997,000 shares at December 31, 1994 after
deducting treasury stock of 623,000 shares
and 646,000 shares, respectively) 911,000 911,000
Additional Paid-In Capital 15,362,000 14,607,000
Retained Earnings 139,350,000 131,675,000
Net Unrealized Gain on Marketable Securities 19,716,000 2,754,000
Treasury Stock (at cost) (16,575,000) (16,648,000)
Unvested Restricted Stock Awards (2,169,000) (862,000)
-----------------------------
Total 156,595,000 132,437,000
-----------------------------
Total Liabilities and Shareholders' Equity $ 237,485,000 $ 218,828,000
=============================
9
THE MIDLAND COMPANY (Parent Only)
Schedule I - Condensed Financial Information of Registrant
Condensed Statements of Income Information
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
-----------------------------------------
Revenues:
Dividends from Subsidiaries $ 35,117,000 $ - $ -
All Other Income, Primarily Charges
to Subsidiaries 9,434,000 8,001,000 7,018,000
-----------------------------------------
Total Revenues 44,551,000 8,001,000 7,018,000
-----------------------------------------
Expenses:
Interest Expense 5,248,000 3,442,000 2,739,000
Depreciation and Amortization 4,884,000 3,715,000 2,884,000
All Other Expenses 1,727,000 1,968,000 1,430,000
-----------------------------------------
Total Expenses 11,859,000 9,125,000 7,053,000
-----------------------------------------
Income (Loss) Before Federal Income Tax,
Cumulative Effect of Accounting Change
and Change in Undistributed Income
of Subsidiaries 32,692,000 (1,124,000) (35,000)
Provision (Credit) for Federal
Income Tax (902,000) (430,000) 214,000
-----------------------------------------
Income (Loss) Before Cumulative Effect
of Accounting Change and Change in
Undistributed Income of Subsidiaries 33,594,000 (694,000) (249,000)
Cumulative Effect of Change in
Accounting for Income Taxes - - 3,358,000
-----------------------------------------
Income (Loss) Before Change in
Undistributed Income of Subsidiaries 33,594,000 (694,000) 3,109,000
Less - Distributed Income of
Subsidiaries (35,117,000) - -
Plus - Undistributed Income of
Subsidiaries 11,075,000 10,113,000 14,863,000
-----------------------------------------
Net Income $ 9,552,000 $ 9,419,000 $ 17,972,000
=========================================
10
THE MIDLAND COMPANY (Parent Only)
Schedule I - Condensed Financial Information of Registrant
Condensed Statements of Cash Flows Information
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
-----------------------------------------
Cash Flows from Operating Activities:
Net Income $ 9,552,000 $ 9,419,000 $ 17,972,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Undistributed income of
subsidiaries (11,075,000) (10,113,000) (14,863,000)
Dividends received from subsidiaries 35,117,000 - -
Depreciation and amortization 4,884,000 3,715,000 2,884,000
Increase in receivables (3,995,000) (5,000) (2,951,000)
Increase in other assets (1,044,000) (3,000) (8,000)
Increase (decrease) in other
payables & accruals 871,000 (7,610,000) (1,749,000)
Other - net 166,000 71,000 2,128,000
-----------------------------------------
Net cash provided by (used in)
operating activities 34,476,000 (4,526,000) 3,413,000
-----------------------------------------
Cash Flows from Investing Activities:
Acquisition of property, plant
& equipment (28,060,000) (12,083,000) (11,085,000)
Capital contributions to subsidiaries (2,999,000) (2,847,000) -
Sale of property, plant & equipment 599,000 349,000 -
Change in investments (excluding
unrealized appreciation/depreciation) 5,379,000 (4,814,000) (232,000)
-----------------------------------------
Net cash provided by (used in)
investing activities (25,081,000) (19,395,000) (11,317,000)
-----------------------------------------
Cash Flows from Financing Activities:
Net change in intercompany payables (35,029,000) 34,662,000 622,000
Increase (decrease) in long-term debt 20,551,000 (250,000) 8,957,000
Increase (decrease) in short-term
borrowings 8,074,000 (8,756,000) 436,000
Dividends paid (1,844,000) (1,628,000) (1,590,000)
Purchase of treasury stock (1,143,000) (118,000) (799,000)
Issuance of treasury stock 52,000 32,000 215,000
-----------------------------------------
Net cash provided by (used in)
financing activities (9,339,000) 23,942,000 7,841,000
-----------------------------------------
Net Increase (Decrease) in Cash 56,000 21,000 (63,000)
Cash at Beginning of Year 184,000 163,000 226,000
-----------------------------------------
Cash at End of Year $ 240,000 $ 184,000 $ 163,000
=========================================
11
THE MIDLAND COMPANY (Parent Only)
Schedule I - Condensed Financial Information of Registrant
Notes to Condensed Financial Information
For the Years Ended December 31, 1995 and 1994
The accompanying condensed financial information should be read in conjunction
with the consolidated financial statements and notes included in the
Registrant's 1995 Annual Report to shareholders.
Total debt of the Registrant (parent only) consists of the following:
DECEMBER 31,
------------------------------
1995 1994
------------------------------
Short-Term Bank Borrowings $ 31,000,000 $ 22,000,000
Commercial Paper 4,620,000 5,546,000
Secured Mortgage Notes:
6.94% - Due December 20, 2005 20,800,000 -
5.82% - Due December 1, 2003 8,458,000 8,707,000
------------------------------
Total Debt $ 64,878,000 $ 36,253,000
==============================
See Note 6 to the consolidated financial statements included in the 1995 Annual
Report to Shareholders for further information on the Company's outstanding debt
at December 31, 1995.
The amount of debt, other than debt eliminated in consolidation, that becomes
due during each of the next five years is as follows: 1996 - $36,387,000;
1997 - $824,000; 1998 - $880,000; 1999 - $939,000; 2000 - $998,000.
12
SCHEDULE II
THE MIDLAND COMPANY
AND SUBSIDIARIES
SCHEDULE II - ALLOWANCE FOR LOSSES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
-------------------------------------------------
YEAR ENDED DECEMBER 31, 1995:
Allowance For Losses $ 1,535,000 $ 468,000 $ 641,000(1) $ 1,362,000
YEAR ENDED DECEMBER 31, 1994:
Allowance For Losses $ 1,117,000 $ 576,000 $ 158,000(1) $ 1,535,000
YEAR ENDED DECEMBER 31, 1993:
Allowance For Losses $ 1,192,000 $ 357,000 $ 432,000(1) $ 1,117,000
NOTES: (1) Accounts written off are net of recoveries.
13