FORM 10-Q 		 SECURITIES AND EXCHANGE COMMISSION 			 Washington, D.C. 20549 (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 			 EXCHANGE ACT OF 1934 For the quarterly period ended _____September 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 _____________1-6026____________________________________ ____________________________The Midland Company_______________________________ 	 (Exact name of registrant as specified in its charter) ______Incorporated in Ohio__________________ ________31-0742526___________ (State or other jurisdiction of incorporation (I.R.S. Employer 	 or organization) Identification No.) 			 	 7000 Midland Boulevard, Amelia, Ohio 45102-2607 		 (Address of principal executive offices) 				 (Zip Code) 				(513) 943-7100 	 (Registrant's telephone number, including area code) 		537 E. Pete Rose Way, Cincinnati, Ohio 45202 	 (Former name, former address and former fiscal year, 			if changed since last report) 	The financial information furnished herein reflects all adjustments which are of a normal and recurring nature and, in the opinion of management, necessary for a fair statement of the results for the periods covered. Letters from Deloitte & Touche LLP, the Company's independent accountants, dated October 19, 1995, are attached hereto as Exhibits I and II. 	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, and (2) has been subject to such filing requirements for the past 90 days. Yes___X___. No_______. 	The number of common shares outstanding as of September 30, 1995 was 3,020,431. 			PART I. FINANCIAL INFORMATION 			 THE MIDLAND COMPANY 			 AND SUBSIDIARIES 			 CONSOLIDATED BALANCE SHEETS 		 SEPTEMBER 30, 1995 AND DECEMBER 31, 1994 						 (Unaudited) 						 Sept. 30, Dec. 31, 	 ASSETS 1995 1994 						-------------- -------------- CASH $ 4,462,000 $ 4,036,000 						-------------- -------------- MARKETABLE SECURITIES 327,920,000 278,088,000 						-------------- -------------- RECEIVABLES: Accounts receivable 102,138,000 82,293,000 Finance receivables (including amounts maturing after one year) 2,664,000 4,120,000 						-------------- -------------- Sub-Total 104,802,000 86,413,000 Less allowance for losses 1,601,000 1,535,000 						-------------- -------------- Total 103,201,000 84,878,000 						-------------- -------------- INVENTORY - SPORTSWEAR DIVISION 14,264,000 11,116,000 						-------------- -------------- PROPERTY, PLANT AND EQUIPMENT - AT COST 132,362,000 109,729,000 Less accumulated depreciation 48,183,000 43,687,000 						-------------- -------------- Net 84,179,000 66,042,000 						-------------- -------------- DEFERRED INSURANCE POLICY ACQUISITION COSTS 43,732,000 37,653,000 						-------------- -------------- OTHER ASSETS 476,000 733,000 						-------------- -------------- TOTAL $ 578,234,000 $ 482,546,000 						============== ============== Note: The December 31, 1994 balance sheet amounts are derived from the audited financial statements but do not include all disclosures required by generally accepted accounting principles. 		 			 THE MIDLAND COMPANY 			 AND SUBSIDIARIES 			 CONSOLIDATED BALANCE SHEETS 		 SEPTEMBER 30, 1995 AND DECEMBER 31, 1994 						 (Unaudited) 						 Sept. 30, Dec. 31, LIABILITIES & SHAREHOLDERS' EQUITY 1995 1994 						-------------- -------------- NOTES PAYABLE WITHIN ONE YEAR: Banks $ 38,000,000 $ 22,000,000 Commercial paper 5,243,000 5,546,000 						-------------- -------------- Total 43,243,000 27,546,000 						-------------- -------------- ACCOUNTS PAYABLE - TRADE 4,239,000 6,232,000 						-------------- -------------- OTHER PAYABLES AND ACCRUALS 68,678,000 46,455,000 						-------------- -------------- CURRENT PORTION OF LONG-TERM DEBT 2,478,000 2,451,000 						-------------- -------------- UNEARNED INSURANCE PREMIUMS 189,213,000 158,316,000 INSURANCE LOSS RESERVES 63,676,000 57,715,000 						-------------- -------------- DEFERRED FEDERAL INCOME TAX 13,545,000 6,754,000 						-------------- -------------- LONG-TERM DEBT 42,793,000 44,640,000 						-------------- -------------- SHAREHOLDERS' EQUITY: Common stock (issued and outstanding: 3,020,000 shares at September 30, 1995 and 2,997,000 shares at December 31, 1994 after deducting treasury stock of 622,000 shares and 646,000 shares, respectively) 911,000 911,000 Additional paid-in capital 15,388,000 14,607,000 Retained earnings 137,197,000 131,675,000 Net unrealized gain on marketable securities 15,793,000 2,754,000 Treasury stock - at cost (16,540,000) (16,648,000) Unvested restricted stock awards (2,380,000) (862,000) 						-------------- -------------- Total 150,369,000 132,437,000 						-------------- -------------- TOTAL $ 578,234,000 $ 482,546,000 						============== ============== Note: The December 31, 1994 balance sheet amounts are derived from the audited financial statements but do not include all disclosures required by generally accepted accounting principles. 		 			 THE MIDLAND COMPANY 			 AND SUBSIDIARIES 		 STATEMENTS OF CONSOLIDATED INCOME (Unaudited) 	FOR THE NINE AND THREE-MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 			 Nine-Mos. Ended Sept. 30, Three-Mos. Ended Sept. 30, 			 1995 1994 1995 1994 			 ------------- ------------- ------------ ------------ REVENUES: Insurance $ 208,958,000 $ 160,214,000 $ 71,122,000 $ 56,636,000 Transportation 22,207,000 38,606,000 8,158,000 13,266,000 Sportswear 25,971,000 29,796,000 14,381,000 14,923,000 Finance 676,000 827,000 365,000 293,000 			 ------------- ------------- ------------ ------------ Total 257,812,000 229,443,000 94,026,000 85,118,000 			 ------------- ------------- ------------ ------------ COSTS AND EXPENSES: Insurance claims and policy acquisition costs 162,462,000 134,083,000 53,382,000 45,035,000 Insurance operating and administrative expenses 27,533,000 19,168,000 10,927,000 6,821,000 Transportation operating expenses 19,570,000 34,593,000 7,335,000 10,958,000 Sportswear operating expenses 33,243,000 31,727,000 18,058,000 15,135,000 Interest expense 3,025,000 3,638,000 800,000 1,227,000 Other operating and administrative expenses 2,852,000 1,491,000 756,000 497,000 			 ------------- ------------- ------------ ------------ Total 248,685,000 224,700,000 91,258,000 79,673,000 			 ------------- ------------- ------------ ------------ INCOME BEFORE FEDERAL INCOME TAX 9,127,000 4,743,000 2,768,000 5,445,000 PROVISION FOR FEDERAL INCOME TAX 2,197,000 568,000 616,000 1,531,000 			 ------------- ------------- ------------ ------------ NET INCOME $ 6,930,000 $ 4,175,000 $ 2,152,000 $ 3,914,000 			 ============= ============= ============ ============ EARNINGS PER SHARE OF COMMON STOCK $ 2.26 $ 1.37 $ 0.71 $ 1.28 			 ============= ============= ============ ============ CASH DIVIDENDS PER SHARE OF COMMON STOCK $ 0.465 $ 0.435 $ 0.155 $ 0.145 			 ============= ============= ============ ============ Note: Earnings per share of common stock have been computed by dividing net income by 3,071,000 shares in 1995 and 3,047,000 shares in 1994. The calculations assume the exercise of outstanding dilutive stock options and include the amortized portion of restricted stock awards. Certain reclassifications (minor in nature) have been made to 1994 amounts to conform to 1995 classifications. 			 			 THE MIDLAND COMPANY 			 AND SUBSIDIARIES 	 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 	 FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 						 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: -------------- -------------- Net income $ 6,930,000 $ 4,175,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,535,000 8,008,000 Increase in unearned insurance premiums 30,897,000 33,974,000 Increase in other accounts payable and accruals 20,197,000 3,455,000 Increase in net accounts receivable (19,779,000) (24,690,000) Increase in deferred insurance policy acquisition costs (6,079,000) (7,424,000) Increase in insurance loss reserves 5,961,000 12,829,000 Decrease (increase) in inventory - sportswear division (3,148,000) 3,337,000 Decrease in other assets 257,000 624,000 Decrease in deferred federal income tax (118,000) - Other-net 103,000 (134,000) 						-------------- -------------- Net cash provided by operating activities 41,756,000 34,154,000 						-------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities (115,782,000) (74,171,000) Sale of marketable securities 42,197,000 37,698,000 Acquisition of property, plant and equipment (24,882,000) (10,167,000) Decrease in cash equivalent marketable securities 22,613,000 19,368,000 Maturity of marketable securities 20,805,000 6,875,000 Net decrease in finance receivable 1,456,000 1,335,000 Sale of property, plant and equipment 853,000 2,357,000 						-------------- -------------- Net cash used in investing activities (52,740,000) (16,705,000) 						-------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in net short-term borrowings 15,697,000 (9,443,000) Repayment of long-term debt (1,593,000) (7,119,000) Dividends paid (1,376,000) (1,193,000) Purchase of treasury stock (1,143,000) (125,000) Payment of capitalized lease obligations (227,000) (805,000) Issuance of treasury stock 52,000 28,000 						-------------- -------------- Net cash provided by (used in) financing activities 11,410,000 (18,657,000) 						-------------- -------------- NET INCREASE (DECREASE) IN CASH 426,000 (1,208,000) CASH AT BEGINNING OF PERIOD 4,036,000 3,935,000 						-------------- -------------- CASH AT END OF PERIOD $ 4,462,000 $ 2,727,000 						============== ============== Supplemental Disclosures: The Company paid interest of $3,866,000 and $3,603,000 and income taxes of $4,971,000 and $0 in the first nine months of 1995 and 1994, respectively. In 1995, the Company issued 48,950 shares of Treasury Stock under a Restricted Stock Award program that relieved Treasury Stock by approximately $1,262,000 and also increased additional paid-in capital by approximately $855,000. 		 THE MIDLAND COMPANY AND SUBSIDIARIES 		 MANAGEMENT'S DISCUSSION AND ANALYSIS OF 		FINANCIAL CONDITION AND RESULTS OF OPERATIONS 	A detailed discussion of the Company's liquidity and capital resources is included in the 1994 Annual Report on Form 10-K. Except as discussed below, no significant changes have taken place since that date and, accordingly, the discussion is not repeated herein. 	The Company's property and casualty insurance division continues to grow due primarily to increased penetration in each of its marketing channels. Both written premiums and earned premiums have increased during the first nine months and third quarter of 1995 as compared to the same periods in 1994. The increases in accounts receivable, deferred insurance policy acquisition costs, other payables and accruals, unearned premiums, loss reserves, insurance revenues, claims and policy acquisition costs and insurance operating and administrative expenses are all due to this growth. The operating performance of this division improved during the first nine months and third quarter of 1995 as compared to the same periods of 1994 due to fewer weather-related losses in 1995 than 1994 and the devastating California earthquake that struck in the first quarter of 1994. The Company's combined ratio, the ratio of losses and expenses to premiums earned, improved favorably from 101.6% for the first nine months of 1994 to 97.4% for the same period in 1995. Pre-tax realized capital gains were $2,183,000 in the first nine months of 1995 compared to $2,314,000 during the first nine months of 1994. 	Transportation revenues and related expenses of the Company's transportation division decreased during the first nine months and third quarter of 1995 as compared to the comparable periods in 1994 due to this division's sale in December, 1994 of approximately 67% of its river transportation equipment as well as its affreightment contracts. The operating performance of this division (revenues less operating expenses and interest) improved during the first nine months of 1995 as compared to the prior year nine month period due primarily to the severe winter weather and flooding conditions which adversely impacted the division's performance during the first quarter of 1994. As previously reported, M/G Transport Services, Inc. is the subject of a criminal prosecution and related civil litigation concerning the alleged disposal of bilge water and other refuse from vessels on the inland waterways. M/G disputes the allegations which give rise to the indictments and intends to vigorously defend itself; the outcome cannot be reasonably estimated at this time. 	Sportswear revenues and related expenses as well as the overall operating performance of the Company's sportswear division decreased in the first nine months and third quarter of 1995 relative to the comparable periods in 1994. These declines were reflective of a general downturn within the entire sportswear apparel industry which is affecting numerous companies within the industry. Reacting to this condition, Crable's revamped Management Team established a policy in the third quarter to sell off as much excess inventory as it possibly could through every expedient channel and increased its reserve for inventory obsolescence. In light of this overall situation, Management does not expect CS Crable's operating margins to improve at least through the remainder of this year. 	The increases in deferred federal income tax and net unrealized gain on marketable securities are primarily attributable to the increases in the market values of the Company's investments. The increase in marketable securities is a result of the increase in the market value of the Company's investments previously held as well as additional investments purchased with funds generated from the growth in the Company's insurance operations. 	The increases in fixed assets and short-term bank borrowings are due to the costs associated with the construction of the Company's new corporate headquarters facility. The total cost of this facility, which was occupied in October of this year, is currently estimated at approximately $29,000,000 and is expected to be financed through conventional long-term debt. 	The increase in unvested restricted stock awards was due to an additional stock award in the first quarter of 1995 awarded under the Company's restricted stock award program. 	The federal income tax provision for the three and nine-month periods ended September 30, 1995 and 1994 is different from amounts derived by applying the statutory tax rates to income before federal income tax as follows: 			 Nine-Mos. Ended Sept. 30, Three-Mos. Ended Sept. 30, 			 1995 1994 1995 1994 			 ------------- ------------- ------------ ------------ Federal income tax at statutory rate $ 3,194,000 $ 1,660,000 $ 968,000 $ 1,906,000 Add (deduct) the tax effect of: Tax exempt interest and dividend income (1,162,000) (1,114,000) (406,000) (370,000) Investment tax credits (131,000) (216,000) (43,000) (72,000) Other items-net 296,000 238,000 97,000 67,000 			 ------------- ------------- ------------ ------------ Provision for federal income tax $ 2,197,000 $ 568,000 $ 616,000 $ 1,531,000 			 ============= ============= ============ ============ 				 EXHIBIT I INDEPENDENT ACCOUNTANTS' REPORT The Midland Company: We have reviewed the accompanying consolidated balance sheet of The Midland Company and subsidiaries as of September 30, 1995, and the related consolidated statements of income for the three-month and nine-month periods ended September 30, 1995 and 1994 and of cash flows for the nine-month periods ended September 30, 1995 and 1994. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of The Midland Company and subsidiaries as of December 31, 1994, and the related consolidated statements of income and retained earnings and of cash flows for the year then ended (not presented herein); and in our report dated February 16, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1994 is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. Deloitte & Touche LLP Cincinnati, Ohio October 19, 1995 				 EXHIBIT II LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION The Midland Company: We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of The Midland Company and subsidiaries for the periods ended September 30, 1995 and 1994, as indicated in our report dated October 19, 1995; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, is incorporated by reference in Registration Statement No. 33-48511 on Form S-8. We are also aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. Deloitte & Touche LLP Cincinnati, Ohio October 19, 1995 			 PART II. OTHER INFORMATION 			 THE MIDLAND COMPANY 			 AND SUBSIDIARIES 			 SEPTEMBER 30, 1995 Item 1. Legal Proceedings 		Reference is made to the March 31, 1995 Registrant's Form 10Q. 		 Item 2. Change in Securities 		None Item 3. Defaults Upon Senior Securities 		None Item 4. Submission of Matters to a Vote of Security Holders 		None Item 5. Other Information 		None Item 6. Exhibits and Reports on Form 8-K 		a.) None 		b.) None 				 SIGNATURES 	Pursuant to the requirements 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 Date ___October 19, 1995__________ s/Michael J. Conaton_________________ 					 Michael J. Conaton, President 					 and Chief Operating Officer Date ___October 19, 1995__________ s/John I. Von Lehman_________________ 					 John I. Von Lehman, Vice President and 					 Treasurer and Chief Financial Officer