-----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, Uf/8MAZyTg0Gxk9JaZ1ZWyqxo7Loj/onNOLf+VBlaFMeD/Gr/VaTh6BK3AljIH/x sYMM54rfaaDONNjnbWCb3A== 0000912057-96-029314.txt : 19961217 0000912057-96-029314.hdr.sgml : 19961217 ACCESSION NUMBER: 0000912057-96-029314 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961216 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MESABI TRUST CENTRAL INDEX KEY: 0000065172 STANDARD INDUSTRIAL CLASSIFICATION: MINERAL ROYALTY TRADERS [6795] IRS NUMBER: 136022277 STATE OF INCORPORATION: NY FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04488 FILM NUMBER: 96681069 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: 10015 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: 10015 10-Q 1 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 October 31, 1996 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 10015 (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 December 12, 1996, there were 13,120,010 Units of Beneficial Interest in Mesabi Trust outstanding. 1 PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Note 1)
THREE MONTHS ENDED NINE MONTHS ENDED OCTOBER 31, OCTOBER 31, 1996 1995 1996 1995 ---- ---- ---- ---- A. Condensed Statements of Income Revenues: Royalty income $2,682,750 $1,415,617 $4,650,447 $2,804,438 Interest income 11,992 13,020 29,307 30,815 ---------- ---------- ---------- ---------- $2,694,742 $1,428,637 $4,679,754 $2,835,253 Expenses 72,123 82,109 244,761 267,295 ---------- ---------- ---------- ---------- Net income $2,622,619 $1,346,528 $4,434,993 $2,567,958 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Weighted average number 13,120,010 13,120,010 13,120,010 13,120,010 of units outstanding Net income per unit (Note 2) $ 0.199895 $ 0.102631 $ 0.338033 $ 0.195728 Distributions declared per unit $ 0.19 $ 0.09 $ 0.275 $ 0.155
SEE NOTES TO FINANCIAL STATEMENTS. 2 B. Condensed Balance Sheets Assets: OCTOBER 31, 1996 JANUARY 31, 1996 ---------------- ---------------- Cash $ 21,014 $ 9,183 U.S. Government securities, at cost (which approximates market) 2,989,504 2,145,588 Accrued income 862,521 127,419 Prepaid insurance 6,771 3,938 ------------ ------------ $ 3,879,810 $ 2,286,128 ------------ ------------ 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 ------------ ------------ $ 3,879,813 $ 2,286,131 ------------ ------------ ------------ ------------ Liabilities, Unallocated Reserve and Trust Corpus: Liabilities: Distribution payable $ 2,492,802 $ 1,574,401 Accrued expenses 18,615 55,979 ------------ ------------ $ 2,511,417 $ 1,630,380 Deferred income -- 114,345 Unallocated reserve (Note 3) 1,368,393 541,403 Trust Corpus 3 3 ------------ ------------ $ 3,879,813 $ 2,286,131 ------------ ------------ ------------ ------------ SEE NOTES TO FINANCIAL STATEMENTS. 3 C. Condensed Statements of Cash Flows
NINE MONTHS ENDED OCTOBER 31, -------------------------------- 1996 1995 ---- ---- Cash flows from operating activities: Royalties received $ 3,791,103 $ 2,364,055 Interest received 39,204 22,706 Expenses paid (284,958) (299,394) ------------ ------------ Net cash provided by operating activities $ 3,545,349 $ 2,087,367 ------------ ------------ Cash flows from investing activities: Sales and redemptions of U.S. Government securities $ 3,979,726 $ 3,348,123 Purchases of U.S. Government securities (4,823,642) (4,704,429) ------------ ------------ Net cash (used in) investing activities $ (843,916) $ (1,356,306) ------------ ------------ Cash flows from financing activities: Net cash (used in) financing activities, distributions to Unitholders $ (2,689,602) $ (2,164,802) ------------ ------------ Net increase (decrease) in cash $ 11,831 $ (1,433,741) Cash, beginning of year 9,183 1,442,627 ------------ ------------ Cash, end of quarter $ 21,014 $ 8,886 ------------ ------------ ------------ ------------ Reconciliation of net income to net cash provided by operating activities: Net income $ 4,434,993 $ 2,567,958 (Increase) in accrued income (735,102) (398,896) (Increase) in prepaid insurance (2,833) (3,375) (Decrease) in accrued expenses (37,364) (28,723) (Decrease) in deferred income (114,345) (49,597) ------------ ------------ Net cash provided by operating activities $ 3,545,349 $ 2,087,367 ------------ ------------ ------------ ------------
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, 1996) 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 and nine months ended October 31, 1996 and 1995, (b) the financial position at October 31, 1996 and January 31, 1996, and (c) the cash flows for the nine months ended October 31, 1996 and 1995, 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 approximately $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 October 31, 1996, the Unallocated Reserve was represented by $505,872 in unallocated cash and U.S. Government securities, and $862,521 of accrued revenue primarily representing royalties not yet received by the Trust but anticipated to be received in January 1997 from Northshore as part of the royalty due for the fourth calendar quarter, based upon reported lessee shipping activity for the month of October 1996. 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 1996 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. For important factors that could cause actual results to differ materially, see "Important Factors Affecting Mesabi Trust," below. BACKGROUND Leasehold royalty income constitutes the principal source of revenue to Mesabi Trust. Royalty rates are determined by the terms of Mesabi Trust's leases and assignments of leases. Overriding royalties are determined by both the volume and selling price of iron ore products sold. Fee royalties payable to Mesabi Land Trust, a Minnesota land trust of which Mesabi Trust is the sole beneficiary ("Mesabi Land Trust"), are based on the amount of crude ore mined, which crude ore is used to produce iron ore products. Northshore Mining Corporation ("Northshore") is obligated as lessee to pay Mesabi Trust base overriding royalties, in varying amounts constituting a percentage of the gross proceeds of shipments from Silver Bay, Minnesota of pellets produced from Mesabi Trust lands or, to a limited extent, other lands, ranging from 2-1/2% of the gross proceeds for the first one million tons of pellets so shipped annually to 6% of the gross proceeds for all pellets shipped in excess of 4 million tons annually. In addition, Northshore is obligated to pay to Mesabi Trust royalty bonuses constituting a percentage of the gross proceeds of pellets shipped from Silver Bay, Minnesota for sale at prices above a threshold price (which is adjusted on an annual basis for inflation and deflation and is $36.62 for calendar year 1996), ranging 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. Generally, the obligation of Northshore to pay base overriding royalties and royalty bonuses with respect to the sale of pellets accrues upon the shipment of those pellets from Silver Bay. Northshore also is obligated to pay to Mesabi Trust a minimum advance royalty in equal quarterly installments, which is credited against certain base overriding royalties and royalty bonuses. The amount of advance royalties payable is subject to adjustment for inflation and deflation and is $610,335 for calendar year 1996. 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 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. Due to a combination of factors, shipments from quarter to quarter or from year to year fluctuate greatly. These factors include the normal reduction of Great Lakes shipping activity during the winter months, and reduced pellet sales resulting from adverse economic conditions affecting the steel industry generally. IMPORTANT FACTORS AFFECTING MESABI TRUST Under the Agreement of Trust, the activities of the Trust are limited to the collection of income, the payment of expenses and liabilities, the distribution of net income and the protection and 6 conservation of the assets held. The Trustees are specifically prohibited from entering into or engaging in any business. This prohibition applies irrespective of whether the conduct of business activities is deemed by the Trustees to be necessary or proper for the preservation and protection of the Trust Estate. Accordingly, the income of the Trust is highly dependent upon the activities and operations of its assignee/lessee, 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 current agreements. Due to winter weather, and the increasing royalty percentages based on tonnage shipped in a calendar year, results for a particular 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. If there is little or no shipping activity in the first calendar quarter, the Trust only receives the minimum royalty for that period. 2. OPERATIONS OF NORTHSHORE. Since the primary portion of the Trust's revenues are from the shipments of iron ore product by Northshore, Northshore's processing and shipping activities directly impact the Trust's revenues in any quarter or year. Shipments by Northshore are impacted by a myriad of factors, including 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) could be adversely impacted. 3. INCREASING ROYALTIES. As described elsewhere, the royalty percentage paid to the Trust increases as the aggregate tonnage of iron ore products shipped in any calendar year increases. Assuming a consistent sales price per ton throughout a calendar year, shipments of iron ore product later in the year generate a higher royalty to the Trust. 4. PERCENTAGE OF MESABI TRUST ORE. As described elsewhere, 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. For calendar year 1996, Northshore has advised the Trustees that 98% or more of shipments will come from Mesabi Trust lands. This compares to percentages of 90.6%, 88.3% and 87.8% in calendar years 1995, 1994, and 1993, respectively. COMPARISON OF THREE MONTHS ENDED OCTOBER 31, 1996 AND OCTOBER 31, 1995 Mesabi Trust's net income increased to $2,622,619 for the fiscal quarter ended October 31, 1996, as compared to net income of $1,346,528 for the fiscal quarter ended October 31, 7 1995. The increase in royalty income was primarily due to increased pellet shipments and at a higher average price, a higher percentage of shipments from Mesabi Trust lands, and increased crude ore production (increasing the amount of fee royalty income). Mesabi Trust's gross income for the fiscal quarter ended October 31, 1996 was $2,694,742, consisting of $2,601,982 in overriding royalty income, $80,768 in fee royalty income and $11,992 in interest income, as compared to gross income of $1,428,637 for the fiscal quarter ended October 31, 1995. Mesabi Trust's expenses for the fiscal quarter ended October 31, 1996 were $72,123. This compares to expenses for the fiscal quarter ended October 31, 1995 of $82,109. COMPARISON OF NINE MONTHS ENDED OCTOBER 31, 1996 AND OCTOBER 31, 1995 Mesabi Trust's gross income for the nine months ended October 31, 1996 was $4,679,754, an increase of $1,844,501 from the gross income of $2,835,253 for the nine months ended October 31, 1995. The increase in royalty income was primarily due to increased pellet shipments and at a higher average price, a higher percentage of shipments from Mesabi Trust lands, increased crude ore production (increasing the amount of fee royalty income) and a decrease in the deferred income amount as compared to the comparable period. The amount of royalty income is directly dependent upon shipments and selling price and the applicable royalty rate. Interest income was higher in the 1995 period. Expenses of $244,761 for the nine months ended October 31, 1996 decreased $22,534 from expenses of $267,295 for the nine months ended October 31, 1995. The increased income and decreased expenses resulted in net income of $4,434,993 for the nine months ended October 31, 1996, as compared to net income of $2,567,958 for the nine months ended October 31, 1995. Mesabi Trust's Unallocated Reserve aggregated $1,368,393 at October 31, 1996, as compared with $1,009,714 at October 31, 1995. At October 31, 1996, the Unallocated Reserve was represented by $505,872 in unallocated cash and U.S. Government securities, and $862,521 of accrued revenue primarily representing royalties not yet received by the Trust but anticipated to be received in January 1997 from Northshore as part of the royalty due for the fourth calendar quarter, based upon reported lessee shipping activity for the month of October 1996. The Trustees have been advised by Northshore that Northshore currently estimates its calendar year 1996 shipments to be more than 4.0 million tons, an increase from 1995 shipments of 3.6 million tons. The increase, in large part, is due to the full year impact of an iron ore expansion project (the reactivation of a previously idle pelletizing line) which was completed in mid-June 1995. In addition, Northshore has advised that a higher percentage of its calendar year 1996 shipments will be of iron ore products from Mesabi Trust lands than during the past several years, which will result in increased royalties to Mesabi Trust. See "Important Factors Affecting Mesabi Trust" above. 8 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES 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. 27.1 Financial Data Schedule .......................Filed herewith. 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: December 13, 1996 By: /s/ Matthew J. Seeley ------------------------------------- Name: Matthew J. Seeley Title: Vice President * There are no directors or executive officers of the registrant. 10 EXHIBIT INDEX Item No. Description -------- ----------- 27.1 Financial Data Schedule.................Filed herewith. 11 EX-27 2 EXHIBIT 27 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED FINANCIAL STATEMENTS OF THE COMPANY FOR THE QUARTER AND NINE-MONTH PERIODS ENDED OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS JAN-31-1997 OCT-31-1996 21,014 2,989,504 862,521 0 0 3,879,810 0 0 3,879,813 2,511,417 0 0 0 0 1,368,396 3,879,813 4,650,447 4,679,754 0 0 244,761 0 0 4,434,993 0 4,434,993 0 0 0 4,434,993 0.338 0.338
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