-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UUpHzvg/XHeYriwRGtIkFAkIKONw/QofB39ARdHx8wlPfARzQ6rqiYbW3ORYFH2W YvOGSf8IP/h0R/zvkJ1gPQ== /in/edgar/work/20000613/0000912057-00-028428/0000912057-00-028428.txt : 20000919 0000912057-00-028428.hdr.sgml : 20000919 ACCESSION NUMBER: 0000912057-00-028428 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000613 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MESABI TRUST CENTRAL INDEX KEY: 0000065172 STANDARD INDUSTRIAL CLASSIFICATION: [6795 ] IRS NUMBER: 136022277 STATE OF INCORPORATION: NY FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04488 FILM NUMBER: 654144 BUSINESS ADDRESS: STREET 1: P O BOX 318 CHURCH ST STATION STREET 2: C/O BANKERS TRUST CO CORP TRUST CITY: NEW YORK STATE: NY ZIP: 10008-0318 BUSINESS PHONE: 2122506696 MAIL ADDRESS: STREET 1: C/O BANKERS TRUST COMPANY, CORPORATE STREET 2: P.O. BOX 318 CHURCH STREET STATION CITY: NEW YORK STATE: NY ZIP: 10008-0318 10-Q 1 a10-q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended April 30, 2000 or / / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ____________ Commission File Number: 1-4488 MESABI TRUST (Exact name of registrant as specified in its charter) NEW YORK 13-6022277 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) IN CARE OF BANKERS TRUST COMPANY, CORPORATE TRUST & AGENCY GROUP P.O. BOX 318 CHURCH STREET STATION NEW YORK, NEW YORK 10008-0318 (Address of principal executive offices) (212) 250-6519 (Registrant's telephone number, including area code) 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 / / As of June 9, 2000, there were 13,120,010 Units of Beneficial Interest in Mesabi Trust outstanding. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (NOTE 1)
THREE MONTHS ENDED APRIL 30, ----------------------------------- 2000 1999 ---- ---- A. Condensed Statements of Income Revenues: Royalty income $ 433,471 $ 443,931 Interest income 10,358 12,029 ------------ ------------ $ 443,829 $ 455,960 Expenses 91,619 85,917 ------------ ------------ Net income $ 352,210 $ 370,043 ============ ============ Weighted average number of units outstanding 13,120,010 13,120,010 Net income per unit (Note 2) $ 0.0268 $ 0.028204 Distributions declared per unit $ --- $ ---
See Notes to Financial Statements. 2 B. Condensed Balance Sheets
Assets: APRIL 30, 2000 JANUARY 31, 2000 -------------- ---------------- Cash $ 249,837 $ 51,082 U.S. Government securities, at amortized cost (which approximates market) 505,815 2,888,947 Accrued income 412,591 235,056 Prepaid insurance 2,187 4,775 ------------ ------------ $ 1,170,430 $ 3,179,860 ------------ ------------ Fixed property, including intangibles, at nominal values: Amended Assignment of Peters Lease $ 1 $ 1 Assignment of Cloquet Lease 1 1 Certificate of beneficial interest for 13,120,010 units of Land Trust 1 1 ------------ ------------ $ 3 $ 3 ------------ ------------ $ 1,170,433 $ 3,179,863 ============ ============ Liabilities, Unallocated Reserve and Trust Corpus: Liabilities: Distribution payable $ --- $ 2,361,602 Accrued expenses 54,843 54,881 ------------ ------------ $ 54,843 $ 2,416,483 Unallocated reserve (Note 3) 1,115,587 763,377 Trust Corpus 3 3 ------------ ------------ $ 1,170,433 $ 3,179,863 ============ ============
See Notes to Financial Statements. 3 C. Condensed Statements of Cash Flows
THREE MONTHS ENDED APRIL 30, ------------------------------------------------ 2000 1999 ---- ---- Cash flows from operating activities: Royalties received $ 248,229 $ 248,176 Interest received 18,063 19,365 Expenses paid (89,067) (102,054) --------------- -------------- Net cash provided by operating activities $ 177,225 $ 165,487 --------------- -------------- Cash flows from investing activities: Maturities of U.S. Government securities $ 2,538,836 $ 2,475,407 Purchases of U.S. Government securities (155,704) (2,692,476) --------------- -------------- Net cash provided by (used in) investing activities $ 2,383,132 $ (217,069) --------------- -------------- Cash flows from financing activities: Net cash (used in) financing activities, distributions to Unitholders $ (2,361,602) $ (2,033,602) --------------- -------------- Net increase/(decrease) in cash $ 198,755 $ (2,085,184) Cash, beginning of year 51,082 2,115,273 --------------- -------------- Cash, end of quarter $ 249,837 $ 30,089 =============== ============== Reconciliation of net income to net cash provided by operating activities: Net income $ 352,210 $ 370,043 (Increase)/decrease in accrued income (177,535) (188,419) Increase/(decrease) in prepaid insurance 2,588 2,560 (Decrease) in accrued expenses (38) (18,697) ---------------- --------------- Net cash provided by operating activities $ 177,225 $ 165,487 =============== ==============
See Notes to Financial Statements. 4 MESABI TRUST NOTES TO FINANCIAL STATEMENTS Note 1. The financial statements included herein have been prepared without audit (except for the balance sheet at January 31, 2000) in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Trustees, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the results of operations for the three months ended April 30, 2000 and 1999, (b) the financial positions at April 30, 2000 and January 31, 2000, and (c) the cash flows for the three months ended April 30, 2000 and 1999, have been made. Note 2. Earnings per unit are based on weighted average number of units outstanding during the period (13,120,010 units). Note 3. The Trustees attempt to maintain $500,000 of liquid assets as part of an Unallocated Reserve. The Unallocated Reserve consists of these liquid assets and accrued revenue (primarily royalties not yet received). At April 30, 2000, the Unallocated Reserve was represented by $702,996 in unallocated cash and U.S. Government securities, and $412,591 of accrued revenue primarily representing royalties not yet received by the Trust but anticipated to be received in July 2000 from Northshore as part of the royalty due with respect to the first fiscal quarter, based upon reported lessee shipping activity for the month of April 2000. 5 ITEM 2. TRUSTEES' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. FORWARD-LOOKING INFORMATION Certain statements contained in this document are forward-looking, including specifically those statements estimating calendar year 2000 production or shipments. All such forward-looking statements are based on input from the lessee/operator. The Trust has no control over the operations and activities of the lessee/operator except within the framework of current agreements. Actual results could differ materially from those indicated in such statements. Important factors that could cause actual results to differ materially include those listed in "Important Factors Affecting Mesabi Trust" below. BACKGROUND Leasehold royalty income constitutes the principal source of the Trust's revenue. Royalty rates are determined in accordance with the terms of Mesabi Trust's leases and assignments of leases. Three types of royalties comprise the Trust's leasehold royalty income: - Overriding royalties, which constitute the majority of Mesabi Trust's royalty income, are determined by both the volume and selling price of iron ore products shipped. - Fee royalties, historically a smaller component of the Trust's royalty income, are payable to Mesabi Land Trust, a Minnesota land trust of which Mesabi Trust is the sole beneficiary ("Mesabi Land Trust"), and are based on the amount of crude ore mined. Currently, the fee royalty on crude ore is based on an agreed price per ton, subject to certain indexing. Crude ore is used to produce iron ore pellets and other products. - Minimum advance royalties, the third type of royalty, are discussed below. With respect to the volume component of royalty calculation, Northshore Mining Company ("Northshore") is obligated to pay Mesabi Trust base overriding royalties in varying amounts. The volume component of overriding royalties constitutes a percentage of the gross proceeds of iron ore products produced at Mesabi Trust lands (and to a limited extent other lands) and shipped from Silver Bay, Minnesota. The percentage ranges from 2-1/2% of the gross proceeds for the first one million tons of iron ore products so shipped annually to 6% of the gross proceeds for all iron ore products in excess of 4 million tons so shipped annually. With respect to the selling price component of overriding royalty calculation, Northshore is obligated to pay to Mesabi Trust royalty bonuses. The royalty bonus is a percentage of the gross proceeds of product shipped from Silver Bay and sold at prices above a threshold price. The threshold price is adjusted on an annual basis for inflation and deflation (but not below $30). The threshold price was $37.29 for calendar year 1997, was $38.21 for calendar year 1998, was $38.22 for calendar year 1999 and is $38.82 for calendar year 2000. The royalty bonus percentage ranges from 1/2 of 1% of the gross proceeds (on all tonnage shipped for sale at prices between the threshold price and $2.00 above the threshold price) to 3% of the gross proceeds on all tonnage shipped for sale at prices $10.00 or more above the threshold price. No royalty bonus has been paid to date. Generally, Northshore's obligation to pay base overriding royalties and royalty bonuses with respect to the sale of iron ore products accrues upon the shipment of those products from Silver Bay. However, regardless of whether any shipment has occurred, Northshore is obligated to pay to Mesabi Trust a minimum advance royalty. Each year, the amount of the minimum advance royalty is adjusted for 6 inflation and deflation (but not below $500,000 per annum). Advance royalties payable were $621,606 for calendar year 1997, were $636,935 for calendar year 1998, were $637,044 for calendar year 1999 and are $647,282 for calendar year 2000. Until overriding royalties (and royalty bonuses, if any) for a particular year equal or exceed the minimum advance royalty for the year, Northshore must make quarterly payments of up to 25% of the minimum advance royalty for the year. Because advance minimum royalties are essentially prepayments of base overriding and bonus royalties earned each year, any advance minimum royalties paid in a fiscal quarter are recouped by credits against base overriding and bonus royalties earned in later fiscal quarters during the year. Historically, advance minimum royalties have been paid in the first fiscal quarter and recouped in the second fiscal quarter. Northshore is obligated to make quarterly royalty payments in January, April, July and October of each year. In the case of base overriding royalties and royalty bonuses, these quarterly royalty payments are to be made whether or not the related proceeds of sale have been received by Northshore by the time such payments become due. Under the relevant documents, Northshore may mine and ship iron ore products from lands other than Mesabi Trust lands. To encourage the use of iron ore products from Mesabi Trust lands, Mesabi Trust receives royalties on stated percentages of iron ore shipped from Silver Bay, whether or not the iron ore products are from Mesabi Trust lands. Mesabi Trust receives royalties at the greater of (i) the aggregate quantity of iron ore products shipped that were from Mesabi Trust lands, and (ii) a portion of the aggregate quantity of all iron ore products shipped that were from any lands, such portion being 90% of the first four million tons shipped during such year, 85% of the next two million tons shipped during such year, and 25% of all tonnage shipped during such year in excess of six million tons. In its Annual Report for the year ended December 31, 1999 ("CCI's Annual Report"), CCI, parent company of Northshore, the lessee/operator of Mesabi Trust iron ore interests, stated that it was continuing to evaluate whether to build a facility to produce pig iron at CCI's Northshore Mine in Minnesota that would produce premium grade pig iron. CCI stated in the Report that while progress has been made in a number of areas on the project, a decision relative to proceeding with this project has been delayed by uncertainty about market conditions and timing of state environmental permitting. Such statements were previously included in CCI's Annual Report for the year ended December 31, 1998. Because of the preliminary nature of this information, the Mesabi Trustees are unable to determine at this time how the addition of a pig iron facility (if the project proceeds) would impact overall revenues of Mesabi Trust. As indicated elsewhere in this report, the Trust's revenues are currently derived almost entirely from iron ore pellet production and sales. Following LTV Steel's recently announced decision to close the LTV Steel Mining Company's plant at Hoyt Lakes, Minnesota next year, CCI recently announced that it has asked the Minnesota Pollution Control Agency to delay a decision on environmental permitting for the possible pig iron facility at CCI's Northshore Mine in order to evaluate whether its iron ore pellet production should be increased to meet CCI's future sales requirements. CCI stated that the requested delay should not be interpreted to mean that CCI has abandoned plans for a possible pig iron facility. CCI reported that it will be supplying LTV with a majority of its iron ore pellets over the next 10 years with most of the pellets expected to come from Minnesota sources that are owned or managed by CCI. Besides potential expansion at CCI's Northshore Mine, CCI announced that it is reviewing ways to increase production levels at other CCI-managed mines. Mesabi Trust has no employees, but it engages independent consultants to assist the Trustees in monitoring, among other things, the amount and sales prices of iron ore products shipped by Northshore from Silver Bay, Minnesota. As noted above, the information regarding amounts and sales prices of shipped iron ore products is used to compute the royalties payable to Mesabi Trust by Northshore. 7 Bankers Trust Company, the Corporate Trustee, also performs certain administrative functions for Mesabi Trust. IMPORTANT FACTORS AFFECTING MESABI TRUST The Agreement of Trust specifically prohibits the Trustees from entering into or engaging in any business. This prohibition applies even to business activities the Trustees deem necessary or proper for the preservation and protection of the Trust Estate. Accordingly, the Trustees' activities in connection with the administration of Trust assets are limited to collecting income, paying expenses and liabilities, distributing net income and protecting and conserving the assets held. Accordingly, the income of the Trust is highly dependent upon the activities and operations of Northshore, and the terms and conditions of the Amended Assignment Agreements. The Trust and the Trustees have no control over the operations and activities of Northshore, except within the framework of the Amended Assignment Agreements. Due to winter weather, and the increasing royalty percentages based on tonnage shipped in a calendar year, results for a particular calendar quarter are typically not indicative of results for future quarters or the year as a whole. Factors which can impact the results of the Trust in any quarter or year include: 1. SHIPPING CONDITIONS IN THE GREAT LAKES. Shipping activity by Northshore is dependent upon when the Great Lakes shipping lanes freeze for the winter months (typically in January) and when they re-open in the spring (typically late-March or April). Base overriding royalties to Mesabi Trust are based on shipments made in a calendar quarter. Because there typically is little or no shipping activity in the first calendar quarter, the Trust typically receives only the minimum royalty for that period. 2. OPERATIONS OF NORTHSHORE. Because the primary portion of the Trust's revenues derive from iron ore product shipped by Northshore from Silver Bay, Northshore's processing and shipping activities directly impact the Trust's revenues in each quarter and for each year. In turn, a myriad of factors affect Northshore shipment volume. These factors include economic conditions in the iron ore industry, pricing by competitors, long-term customer contracts or arrangements by Northshore or its competitors, availability of ore boats, production at Northshore's mining operations, and production at the pelletizing/processing facility. If any pelletizing line becomes idle for any reason, production and shipments (and, consequently, Trust income) could be adversely impacted. For further information regarding operations of Northshore, see "Recent Developments" on page 9. 3. INCREASING ROYALTIES. As described elsewhere in this Report, the royalty percentage paid to the Trust increases as the aggregate tonnage of iron ore products shipped, attributable to the Trust, in any calendar year increases. Assuming a consistent sales price per ton throughout a calendar year, shipments of iron ore product attributable to the Trust later in the year generate a higher royalty to the Trust. 4. PERCENTAGE OF MESABI TRUST ORE. As described elsewhere in this Report, Northshore has the ability to process and ship iron ore product from lands other than Mesabi Trust lands. In certain circumstances, the Trust may be entitled to royalties on those other shipments, but not in all cases. In general, the Trust will receive higher royalties (assuming all other factors are equal) if a higher percentage of shipments are from Mesabi Trust lands. The percentages of shipments that came 8 from Mesabi Trust lands were 98.9%, 99.3%, 98.3%, 98.4% and 90.6% in calendar years 1999, 1998, 1997, 1996 and 1995, respectively. COMPARISON OF THREE MONTHS ENDED APRIL 30, 2000 AND APRIL 30, 1999 Mesabi Trust's net income decreased to $352,210 for the fiscal quarter ended April 30, 2000, as compared to net income of $370,043 for the fiscal quarter ended April 30, 1999. Mesabi Trust's gross income for the fiscal quarter ended April 30, 2000 was $443,829, consisting of $352,649 in minimum advance royalty income, $0 in overriding royalty income, $80,822 in fee royalty income and $10,358 in interest income, as compared to gross income of $455,960 consisting of $354,467 in minimum advance royalty income, $0 in overriding royalty income, $89,464 in fee royalty income and $12,029 in interest income, for the fiscal quarter ended April 30, 1999. The decrease in royalty income was primarily due to decreased pellet shipments as compared to the comparable prior period. Mesabi Trust's expenses for the fiscal quarter ended April 30, 2000 were $91,619, compared to expenses of $85,917 for the fiscal quarter ended April 30, 1999. Mesabi Trust's Unallocated Reserve aggregated $1,115,587 at April 30, 2000, as compared with an Unallocated Reserve of $1,082,995 at April 30, 1999. The increase of $32,592 was due to the net effect of: (a) the decrease in net income of $17,833 during the three months ended April 30, 2000 as compared with the three months ended April 30, 1999 and (b) the January 31, 2000 unallocated reserve balance of $763,377 was $50,425 higher than the January 31, 1999 unallocated reserve balance of $712,952. The Trustees anticipate that the amount of Unallocated Reserve will fluctuate from time to time, depending upon a number of factors, including but not limited to the income for a particular period, the amount and timing of distributions, uncertainty about future royalty income and the uncertainty of future expenses. ROYALTY COMPARISONS The following chart summarizes Mesabi Trust's royalty income for the quarters ended April 30, 2000 and April 30, 1999, respectively:
Three Months Ended April 30, 2000 1999 ---- ---- Base overriding royalties $352,649 $354,467 Bonus Royalties 0 0 Minimum advance royalty paid (recouped) 0 0 -------- -------- $352,649 $354,467 -------- -------- Fee royalties 80,822 89,464 Total royalty income $433,471 $443,931 ======== ========
RECENT DEVELOPMENTS The Trustees of Mesabi Trust have learned through a public announcement by CCI, the corporate parent of Northshore, that CCI has asked the Minnesota Pollution Control Agency to delay a decision on environmental permitting for the possible pig iron facility at CCI's Northshore Mine. CCI announced that it made this request in order to evaluate whether its iron ore pellet production should be increased to meet CCI's future sales requirements following LTV Steel's decision announced in May 2000 to close the LTV Steel Mining Company's plant at Hoyt Lakes, Minnesota next year. CCI reported 9 that it will be supplying LTV with a majority of its iron ore pellets over the next 10 years with most of the pellets expected to come from Minnesota sources that are owned or managed by CCI. Besides potential expansion at CCI's Northshore Mine, CCI announced that it is reviewing ways to increase production levels at other CCI-managed mines and that the requested delay in environmental permitting should not be interpreted to mean that CCI has abandoned plans for a possible pig iron facility. Increasing production levels at the Northshore plant, however, would presumably require additional capital investment to increase plant capacity, about which the Trustees have no information. Based on this public announcement by CCI, the Mesabi Trustees anticipate that if this potential plant expansion is achieved, production levels of iron ore pellets could, over time, increase at the Northshore plant. If such an increase in iron ore pellet production levels results in increased shipments of iron ore pellets, overall revenues of Mesabi Trust would be positively impacted. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Not applicable. 10 PART II - OTHER INFORMATION ITEM 2. LEGAL PROCEEDINGS. None. ITEM 3. CHANGES IN SECURITIES AND USE OF PROCEEDS. None. ITEM 4. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 6. OTHER INFORMATION. None. ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K. 27.1 Financial Data Schedule........................Filed herewith. 11 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. MESABI TRUST ------------------------------------- (Registrant) By: BANKERS TRUST COMPANY Corporate Trustee Principal Administrative Officer and duly authorized signatory:* Date: June 12, 2000 By: /s/ Daniel M. Chipko --------------------------------- Name: Daniel M. Chipko Title: Associate * There are no directors or executive officers of the registrant. 12 EXHIBIT INDEX Item No. Description -------- ----------- 27.1 Financial Data Schedule...............Filed herewith. 13 EX-27.1 2 ex-27_1.txt EX-27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF EARNINGS AND THE CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JAN-31-2001 FEB-01-2000 APR-30-2000 249,837 505,815 2,187 0 0 1,170,433 0 0 1,170,433 54,843 0 0 0 0 0 1,170,433 433,471 443,829 0 91,619 0 0 0 352,210 0 352,210 0 0 0 352,210 .027 .027
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