UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT
Commission file number: 0-11027
SOUTHERN TIMBER PARTNERS I
(formerly Hutton Southern Timber Partners I)
Exact name of registrant as specified in its charter
Georgia 56-1303554
State or other jurisdiction
of incorporation or organization I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor
New York, NY Attn.: Andre Anderson 10285
Address of principal executive offices Zip code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Title of Class
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 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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
DOCUMENTS INCORPORATED BY REFERENCE:
The Registrant's Prospectus dated October 30, 1981, as
supplemented on January 5, 1982 and January 12, 1982, is
incorporated by reference in Part I.
The Registrant's Annual Report to Unitholders for the year ended
December 31, 1996 is incorporated by reference in Parts I, II,
III and IV.
PART I
Item 1. Business
(a) General Development of Business
Southern Timber Partners I (the "Partnership" or "Registrant")
(formerly known as Hutton Southern Timber Partners I) was
organized as a Georgia limited partnership in 1981, and is
engaged in the business of investing in timberland and timber
cutting rights in the southeastern United States. The Registrant
acquired properties, and currently manages the timber growth on
its timberland with a view toward increasing its value and
selling the timber and timberlands.
Its general partner is Southern Timber Resources Corp. (the
"General Partner"), formerly known as Hutton Timber Resources
Corp., a Delaware corporation which is an affiliate of Lehman
Brothers Inc. ("Lehman"), a Delaware corporation (see Item 10).
The General Partner has responsibility for all aspects of the
Registrant's operations and provides executive, supervisory and
certain administrative services for the Registrant.
In 1982, the Registrant concluded a public offering (the
"Offering") of 40,000 units of limited partnership interest (the
"Units") at a price of $500 per Unit. The Units were registered
under the Securities Act of 1933 on Form S-11 (Registration No.
2-73838) which had been declared effective October 29, 1981.
Reference is made to the Prospectus of the Registrant dated
October 30, 1981, as supplemented on January 5, 1982 and January
12, 1982, filed pursuant to Rules 424(b) and 424(c), under the
Securities Act of 1933 and incorporated herein by reference (said
Prospectus, as so supplemented, is hereinafter called the
"Prospectus"). Upon the sale of 20,000 Units, the Registrant
exercised its option, described in the Prospectus, to offer
20,000 additional Units for sale, and continued the Offering
until February 22, 1982, at which time all 40,000 Units had been
sold. The limited partners made aggregate capital contributions
to the Registrant of $20,000,000. The Registrant admitted the
subscribers in two groups, the first group on January 11, 1982
and the remaining subscribers on March 1, 1982. As of
December 31, 1983, the Registrant had invested all of the
proceeds of the Offering available for investment in timber
properties. The Registrant may sell or exchange its properties
for other properties at any time. However, the Registrant may
not reinvest the proceeds from sales in other properties. The
Registrant may also invest in timber through the purchase of
timber cutting rights but has not invested in such rights to
date. The Registrant may utilize borrowing to increase its
invested assets if the General Partner determines that the terms
of such borrowing would be advantageous to the Registrant. At
this time, the General Partner does not anticipate utilizing
additional borrowing.
On October 13, 1987, the Registrant contributed two tracts of
land, which totaled 1,239 acres of timberland and had a fair
market value of $946,676 and a net book value of $1,432,655 at
the time, to a newly formed joint venture, Southern Timber
Venture Partners 1, formerly Hutton Timber Venture Partners 1
(the "Joint Venture"), in exchange for a 24% interest in the
Joint Venture. An affiliated partnership, Southern Timber
Partners 2 (formerly Hutton Southern Timber Partners 2),
contributed $3,011,417 in cash in exchange for the remaining 76%
interest. On October 15, 1987 substantially all of these
contributions were applied to the acquisition of a 1,709 acre
tract of timberland (the "Laurel View tract"), located in Liberty
County, Georgia. For a description of the Joint Venture see Note
6 of the Notes to the Financial Statements of the Partnership's
Annual Report to Unitholders for the year ended December 31,
1996, which is filed as an exhibit under Item 14 and incorporated
herein by reference.
Although the Partnership's original termination date was December
31, 1996, the Partnership Agreement states that the General
Partner may extend the life of the Partnership beyond the
termination date if it is determined that a sale of the
timberland at that time would cause undue loss to the partners.
The Partnership's termination will be accomplished through the
liquidation of its two remaining assets, its investment in the
Joint Venture which owns the 1,709 acre Laurel View Tract located
in Georgia, and the Estes Tract, a 5,947 acre Tract located in
Florida. During 1996 the General Partner executed two separate
purchase and sale agreements to sell the entire Estes Tract, and
began marketing the Laurel View tract for sale with the
assistance of CB Commercial, a commercial real estate brokerage
firm. Reference is made to Item 7 of this Form 10-K and the
"Message to Investors" section of the Partnership's Annual Report
to Unitholders for the year ended December 31, 1996, which is
filed as an exhibit under Item 14 and incorporated herein by
reference.
(b) Financial Information About Industry Segment
The Registrant operates in only one industry segment. The
General Partner, in conjunction with an independent forest
consulting firm, develops a forest management plan for each
property acquired by the Registrant. Such plans estimate the
types and numbers of trees of varying diameter and age on each
tract and the costs and expenses of maintaining the tract,
recommend thinning, harvesting, reforestation and other forest
management practices, analyze maturity cycles, and generally
assist the General Partner in maximizing the Registrant's return
on each investment property. Cutting schedules and priorities
for harvesting may change and are subject to changes in market
conditions or other future developments affecting the properties
or the Registrant.
In addition to income from harvesting or sale of timberlands, the
General Partner may and has in situations deemed appropriate,
endeavored to produce additional cash flow for the Registrant by
ancillary land uses. These may include cattle grazing, mineral
operations, recreational and hunting leases, and conversion or
sale of sites for higher value uses. In the year ended December
31, 1996, revenues from such uses were $1,831.
(c) Narrative Description of Business
The primary investment objectives of the Registrant are:
(1) long-term capital appreciation of its timber properties, and
(2) cash flow derived from periodic harvesting of timber.
The ownership and operation of timber properties involves a
number of risks, and there is no assurance that the Registrant
will ultimately achieve its investment objectives. Risks
include, among others, changes in governmental regulations, fire
hazards, insect damage, diseases and timber theft, and risks of
market fluctuations. The General Partner believes the employment
of good forestry management practices helps to ameliorate the
physical risks of timber investments, however, these risks cannot
be eliminated entirely. (See the caption entitled "Risk Factors"
in the Prospectus which is incorporated herein by reference.)
The Registrant incurs costs in connection with the ownership and
management of its properties. These include costs of maintaining
roads and boundary lines, fire protection, annual property taxes,
fees and expenses of independent forest management firms, and
other costs associated with the ownership and management of
timber properties. Timber harvesting is not performed directly
by the Registrant but by independent timber purchasers or
harvesters.
(d) Competition
The Registrant competes in the sale of timber and timberland with
many other persons and firms holding timberland investments,
including large paper and lumber companies and numerous private
landowners. Many of such competitors have greater financial
resources and experience in the forest industry than the
Registrant.
(e) Employees
The Registrant has no employees.
Item 2. Properties
Incorporated by reference to the section titled "Tract Profiles"
included in the Partnership's Annual Report to Unitholders for
the year ended December 31, 1996, which is filed as an exhibit
under Item 14 and incorporated herein by reference. For
information on the Partnership's Joint Venture, see Note 6 of
Notes to the Financial Statements, which is also included in the
Partnership's Annual Report to Unitholders for the year ended
December 31, 1996.
Item 3. Legal Proceedings
As of December 31, 1996, the Registrant was not a party to any
material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of limited partners during the
fourth quarter of the year for which this report is filed.
PART II
Item 5. Market for the Registrant's Limited Partnership
Interests and Related Security Holder Matters
(a) Market Information
There is no established trading market for the Units of the
Registrant.
(b) Holders
As of December 31, 1996 there were 2,727 holders of the Units of
the Registrant.
(c) Distributions
The Registrant made a cash distribution to the limited partners
on August 9, 1996 in the amount of approximately $27.00 per Unit.
The Registrant made a cash distribution to the limited partners
on June 30, 1995 in the amount of approximately $38.00 per Unit.
No cash distributions were paid to the limited partners for the
year ended December 31, 1994.
Item 6. Selected Financial Data
Incorporated by reference to the section entitled "Financial
Highlights" of the Partnership's Annual Report to Unitholders for
the year ended December 31, 1996, which is filed as an exhibit
under Item 14 and incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(a) Liquidity and Capital Resources
The Partnership currently owns approximately 5,947 acres of
timberland outright, the Estes Tract, and a 24% interest in the
Joint Venture which owns the Laurel View tract, a 1,709 acre
tract located near Savannah, Georgia. On February 6, 1996, the
Partnership entered into a purchase and sale agreement for 1,290
acres of the Estes tract with the State of Florida. On March 6,
1996, the Partnership entered into a second purchase and sale
agreement with the State of Florida for the remaining 4,657 acres
of the Estes tract. The sale is pending the State's final
approval. The General Partner currently expects the sale to
close during the first half of 1997. If and when both sales
close, the Partnership's only remaining timber asset will be its
24% interest in the Joint Venture. While the Laurel View tract
could be sold as timberland, it is contemplated that a higher
value would likely be realized if the tract was sold as a
development site due to its coastal location, close proximity to
major interstate highways and other considerations. The General
Partner has begun marketing the property for sale and has engaged
CB Commercial to assist in marketing the tract. Further
information on efforts to sell the Laurel View Tract is
incorporated by reference to the "Message to Investors" section
of the Partnership's Annual Report to Unitholders for the year
ended December 31, 1996, which is filed as an exhibit under Item
14 and incorporated herein by reference.
At December 31, 1996, the Partnership's cash balance totaled
$431,448, a decrease from $1,683,209 at December 31, 1995. The
decrease is primarily the result of a cash distribution in the
amount of $1,091,000 ($27.00 per Unit) paid in August 1996 with
no offsetting timber or timberland sales in 1996. The
Partnership's cash balance, along with funds generated from
future sales of timber and timberland, are expected to provide
sufficient liquidity to enable the Partnership to meet its
operating expenses.
Accounts payable and accrued expenses was $14,400 at December 31,
1996, compared to $23,854 at December 31, 1995. Due to
affiliates decreased from $201,624 at December 31, 1995 to
$136,129 at December 31, 1996. The decreases are primarily due
to the timing of payments for accrued management fees.
On February 16, 1996, based upon, among other things, the advice
of legal counsel, the General Partner adopted a resolution that
states, among other things, if a Change of Control (as defined
below) occurs, the General Partner may distribute the
Partnership's cash balances not required for its ordinary course
day-to-day operations. "Change of Control" means any purchase or
offer to purchase more than 10% of the Units that is not approved
in advance by the General Partner. In determining the amount of
the distribution, the General Partner may take into account all
material factors. In addition, the Partnership will not be
obligated to make any distribution to any partner and no partner
will be entitled to receive any distribution until the General
Partner has declared the distribution and established a record
date and distribution date for the distribution. The Partnership
filed a Form 8-K disclosing this resolution on February 26, 1996.
(b) Results of Operations
1996 versus 1995
The Partnership's operations resulted in a net loss of $95,412
and net income of $51,663 for the years ended December 31, 1996
and 1995, respectively. The change from net income to net loss
was primarily the result of a decrease in interest income and no
sales of timberland during 1996.
The Partnership recognized a gain on sales of timberland of
$79,758 for the year ended December 31, 1995, due to the sale of
approximately 2,068 acres from the Estes Tract. No timberland
was sold during 1996.
Interest income decreased to $63,725 for the year ended December
31, 1996, as compared with $107,205 in 1995. The decrease is the
result of lower cash balances invested resulting from the payment
of a cash distribution to the partners in the amount of
$1,091,000 in August 1996.
Property operating expenses were $79,145 for the year ended
December 31, 1996, largely unchanged from $75,666 for the year
ended December 31, 1995, as higher professional fees were offset
by lower management fees and insurance costs.
The Partnership has a 24% interest in the Joint Venture which
owns the 1,709 acre Laurel View Tract. The Partnership
recognized a loss from Joint Venture operations of $9,045 for the
year ended December 31, 1996, compared to income of $2,444 from
Joint Venture's operations for the year ended December 31, 1995.
The 1995 income from the Joint Venture is mainly attributable to
the sale of timber and is offset by ordinary operating expenses.
The loss in 1996 is due primarily to the lack of timber sales and
to the Joint Venture meeting its normal operating expenses.
1995 versus 1994
The Partnership's operations resulted in net income of $51,663
and a net loss of $370,171 for the years ended December 31, 1995
and 1994, respectively. The change from net loss to net income
was primarily the result of the recognition in 1994 of a $570,000
write-down of the value of timberland of the Estes Tract. The
estimated value of the Estes Tract was approximately $346,000
less than its carrying value and the remaining $224,000 was a
provision for loss on sales of timberland which closed during the
first quarter of 1995. As a result, management believed that
approximately $570,000 of the decline in the Estes Tract's value
was other than temporary and in 1994 reduced the carrying value
of the tract accordingly.
The Partnership did not recognize any income from timber-only
sales for the year ended December 31, 1995, compared to $438,094
for the year ended December 31, 1994, as a result of no timber
sales being recorded for the Estes tract during 1995.
Accordingly, no depletion expense was recorded for the year ended
December 31, 1995, compared to $193,259 for 1994.
The Partnership recognized a gain on sales of timberland of
$79,758 for the year ended December 31, 1995, compared to a gain
on the sale of timberland of $148,190 for the year ended December
31, 1994. The gain in 1995 was due to the sale of approximately
2,068 acres from the Estes Tract, while the gain in 1994 was due
to the sale of approximately 1,323 acres from the Estes Tract.
Interest income increased to $107,205 for the year ended December
31, 1995, as compared with $39,161 for the same period in 1994.
The increase is the result of higher cash balances invested
resulting from timberland sales.
Property operating expenses declined to $75,666 for the year
ended December 31, 1995, compared to $156,074 for the
corresponding period in 1994, primarily due to lower management
fees and property maintenance fees.
The Partnership's interest in the Joint Venture is represented by
its 24% share of the Laurel View Tract. The Partnership
recognized income of $2,444 from the Joint Venture's operations
for the year ended December 31, 1995, compared to a loss of
$14,119 for the year ended December 31, 1994. The 1995 income
from the Joint Venture is mainly attributable to the sale of
timber and is offset by ordinary operating expenses. The loss in
1994 is due primarily to the lack of timber sales and to the
Joint Venture meeting its normal operating expenses.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to
Unitholders for the year ended December 31, 1996, included as
Exhibit 13.1.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Registrant has no officers or directors. The General Partner
manages and controls substantially all of the Partnership's
affairs and has general responsibility and ultimate authority in
all matters affecting the Partnership's business.
On July 31, 1993, Shearson Lehman Brothers, Inc. ("Shearson")
sold certain of its domestic retail brokerage and asset
management businesses to Smith Barney, Harris Upham & Co.
Incorporated ("Smith Barney"). Subsequent to the sale, Shearson
changed its name to Lehman Brothers Inc. The transaction did not
affect ownership of the Partnership or the General Partner.
However, the assets acquired by Smith Barney included the name
"Hutton." Consequently, effective November 22, 1993, the General
Partner changed its name to Southern Timber Resources Corp. to
delete any reference to "Hutton." In addition, effective June 8,
1994, the Partnership changed its name to Southern Timber
Partners I.
Certain officers and directors of the General Partner are now
serving (or in the past have served) as officers or directors of
entities which act as general partners of a number of real estate
limited partnerships which have sought protection under
provisions of the Federal Bankruptcy Code. The partnerships
which have filed bankruptcy petitions own real estate which has
been adversely affected by the economic conditions in the markets
in which that real estate is located and, consequently, the
partnerships sought the protection of the bankruptcy laws to
protect the partnerships' assets from loss through foreclosure.
The director and executive officers of the General Partner are as
follows:
Name Office
Paul L. Abbott Director and Chief Executive Officer
Robert J. Hellman President and Chief Financial Officer
John Barker Vice President
Paul L. Abbott, 51, is a Managing Director of Lehman Brothers.
Mr. Abbott joined Lehman Brothers in August 1988, and is
responsible for investment management of residential, commercial
and retail real estate. Prior to joining Lehman Brothers, Mr.
Abbott was a real estate consultant and a senior officer of a
privately held company specializing in the syndication of private
real estate limited partnerships. From 1974 through 1983, Mr.
Abbott was an officer of two life insurance companies and a
director of an insurance agency subsidiary. Mr. Abbott received
his formal education in the undergraduate and graduate schools of
Washington University in St. Louis.
Robert J. Hellman, 42, is a Senior Vice President of Lehman
Brothers and is responsible for investment management of retail,
commercial and residential real estate. Since joining Lehman
Brothers in 1983, Mr. Hellman has been involved in a wide range
of activities involving real estate and direct investments
including origination of new investment products, restructurings,
asset management and the sale of commercial, retail and
residential properties. Prior to joining Lehman Brothers, Mr.
Hellman worked in strategic planning for Mobil Oil Corporation
and was an associate with an international consulting firm. Mr.
Hellman received a bachelor's degree from Cornell University, a
master's degree from Columbia University, and a law degree from
Fordham University.
John Barker, 27, is an Associate of Lehman Brothers Inc. and is
responsible for the investment management of retail, commercial
and residential real estate. Since joining Lehman Brothers in
1996, Mr. Barker has been involved in restructurings, asset
management and the sale of commercial, retail and residential
properties. Prior to joining Lehman Brothers, Mr. Barker worked
in valuation and investment sales for Jones Lang Woonton USA and
was an officer in the United States Navy. Mr. Barker received an
undergraduate degree from the University of Pennsylvania and a
graduate degree from the Navy Supply Corps School.
Item 11. Executive Compensation
All of the directors and executive officers of the General
Partner are employees of Lehman. They do not receive any
salaries or other compensation from the Partnership. See Item 13
below with respect to a description of certain transactions of
the General Partners with the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) Security ownership of certain beneficial owners *
Name and address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
Units of Limited Southern Timber 2,008 Units owned 5.02%
Partnership Interest Resources Corp. beneficially and of record
c/o First Data
Investor Services Group
P.O. Box 1527
Boston, MA 02104
* The Restated Agreement of Limited Partnership of the Registrant
limits the voting power of the limited partners to the following
matters: (a) removal and replacement of the General Partner, (b)
dissolution of the Registrant before December 31, 1996, (c)
material amendments to the Agreement of Limited Partnership and
(d) the sale or other disposition at one time of all or
substantially all of the Registrant's assets. Such matters must
be approved by at least a majority interest of the limited
partners.
(B) Security ownership of management
As of December 31, 1996 no director or officer of the General
Partner owned any of the Units of the Registrant.
(C) Changes in control
None.
Item 13. Certain Relationships and Related Transactions
Reference is made to Note 4 of the Financial Statements of the
Partnership's 1996 Annual Report to Unitholders for information
regarding fees paid to the General Partner and its affiliates.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(1) Financial Statements
Page
Balance Sheets at December 31, 1996 and 1995 (1)
Statements of Operations for the years ended
December 31, 1996, 1995, and 1994 (1)
Statements of Partners' Capital (Deficit) for the years ended
December 31, 1996, 1995, and 1994 (1)
Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994 (1)
Notes to the Financial Statements (1)
Report of Independent Auditors (1)
(1) Incorporated by reference to the Partnership's Annual
Report to Unitholders for the year ended December 31, 1996,
filed as Exhibit 13.1.
(2) Financial Statement Schedules
All schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(3) Exhibits
The following exhibits are being filed as a part of this report.
Documents other than those designated as being filed herewith are
incorporated herein by reference.
3 Restated Agreement of Limited Partnership of the Registrant
(filed as Exhibit 3(b) to Registration Statement on Form
S-11, No. 2-73838 and incorporated herein by reference).
4 Specimen Certificate for Unit of Limited Partnership (filed
as Exhibit 4 to Annual Report on Form 10-K for the fiscal
year ended December 31, 1981 (the "1981 Annual Report") and
incorporated herein by reference).
10.1 Mortgage and Security Agreement dated January 14, 1982
between Timber Properties and John Hancock Mutual Life
Insurance Company (filed as Exhibit 10.5 to the 1981 Annual
Report and incorporated herein by reference).
10.2 Promissory Note dated January 14, 1982 between Timber
Properties and John Hancock Mutual Life Insurance Company
(filed as Exhibit 10.6 to the 1981 Annual Report and
incorporated herein by reference).
10.3 Timber Cutting and Release Agreement dated January 14, 1982
between Timber Properties and John Hancock Mutual Life
Insurance Company (filed as Exhibit 10.7 to the 1981 Annual
Report and incorporated herein by reference).
10.4 Assumption Agreement dated January 21, 1982 between Timber
Properties and the Registrant (filed as Exhibit 10.8 to the
1981 Annual Report and incorporated herein by reference).
10.5 Agreement for the Purchase and Sale of Timberlands, dated as
of May 17, 1983, among the Registrant, Franz Koerling and
Ticor Title Insurance Company (filed as Exhibit 10.8 to
Annual Report on Form 10-K for the fiscal year ended
December 31, 1983 (the "1983 Annual Report") and
incorporated herein by reference).
10.6 Mortgage Extension Agreement dated November 8, 1991 between
Timber Properties and John Hancock Mutual Life Insurance
Company (filed as Exhibit 10.6 to Annual Report on Form 10-K
for the fiscal year ended December 31, 1991 and incorporated
herein by reference).
13.1 Annual Report to Unitholders for the year ended December 31, 1996.
27 Financial Data Schedule
28.1 Prospectus, dated October 30, 1981, as supplemented January
5, 1982 and January 12, 1982 (filed as Exhibit 28.1 to
Annual Report on Form 10-K for the fiscal year ended
December 31, 1982 (the "1982 Annual Report") and
incorporated herein by reference).
28.2 Current Report on Form 8-K, dated August 16, 1982 (filed as
Exhibit 28.2 to the 1982 Annual Report and incorporated
herein by reference).
28.3 Current Report on Form 8-K, dated September 6, 1983 (filed
as Exhibit 28.3 to the 1983 Annual Report and incorporated
herein by reference).
(4) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter
of calendar year 1996.
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.
Date: March 24, 1997 SOUTHERN TIMBER PARTNERS I
By: Southern Timber Resources Corp.
General Partner
Date: March 24, 1997 By: /s/ Paul L. Abbott
Name: Paul L. Abbott
Title: Director, President and Chief Financial Officer
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 in the capacities and on the dates
indicated.
SOUTHERN TIMBER RESOURCES CORP.
General Partner
Date: March 24, 1997 By: /s/ Paul L. Abbott
Name: Paul L. Abbott
Title: Director and Chief Executive Officer
Date: March 24, 1997 By: /s/ Robert J. Hellman
Name: Robert J. Hellman
Title: President and Chief Financial Officer
Date: March 24, 1997 By: /s/ John Barker
Name: John Barker
Title: Vice President
Southern Timber Partners I is a limited partnership formed in
1981 to invest in timberland in the southeastern United States.
At December 31, 1996, the Partnership's properties consisted of
approximately 5,947 acres of timberland in Florida and a 24%
share of a 1,709 acre tract in Georgia.
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers First Data Investor Services Group
Service Data Corporation P.O. Box 1527
2424 South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144-2596 Attn.: Financial Communications
800-223-3464 800-223-3464
Message to Investors
Presented for your review is the 1996 Annual Report for Southern
Timber Partners I (the "Partnership"). This report includes an
update on the status of Partnership's two remaining assets, the
Estes tract and its 24% interest in the Laurel View tract.
Following this letter is a profile of these tracts and the
Partnership's audited financial statements for the year ended
December 31, 1996.
Cash Distribution
The Partnership paid a cash distribution in the amount of
approximately $27.00 per Unit on August 9, 1996. This
distribution was paid out of the Partnership's cash reserves.
Including this distribution, Limited Partners have received cash
distributions totaling $196.00 per original $500 Unit. As a
result of these payments, which represent returns of capital, the
size of each Partnership Unit has been reduced to $304. The
General Partner will continue to evaluate the Partnership's cash
needs to determine if and when any future distribution can be
made.
Estes Tract
On February 6, 1996, the Partnership entered into a purchase and
sale agreement with the State of Florida for 1,290 acres of the
Estes tract, and on March 6, 1996, entered into a second purchase
and sale agreement with the State for the remaining 4,657 acres.
The sales are pending the State's final approval. The General
Partner currently expects the sales to close in the first half of
1997. However, there can be no assurance that the sales will
close as expected. Because of the delay in closing these sales
caused by the State's lack of action, the Partnership has
retained special Florida counsel to assist with these contracts.
If and when these two sales close, the Partnership's only
remaining tract of land will be its interest in the Laurel View
Tract.
Laurel View Tract
The Partnership owns a 24% interest in the Laurel View Tract, a
1,709 acre site located approximately 30 miles south of Savannah,
Georgia. The Partnership's interest in the tract is owned as
part of a joint venture with an affiliated partnership, Southern
Timber Partners 2. The partnerships have begun marketing the
parcel, and discussions have been held with both principals and
brokers regarding a sale. The General Partner has determined
that the Partnership is likely to realize the highest sales price
if the tract is marketed as a site for development rather than as
timberland. While some local developers have shown an interest
in the tract, the General Partner decided to expand its marketing
efforts to better maximize the tract's value. Consequently,
during 1996 the General Partner engaged the services of CB
Commercial, a national commercial real estate brokerage firm, to
assist in marketing the tract. CB Commercial will use its
national presence to give the tract broad exposure to a large
pool of potential buyers. Considering the Laurel View Tract is
raw land containing few improvements and that it produces no
income other than from the sale of timber, the General Partner
anticipates it may require several months or longer to secure an
appropriate buyer for the property. Although the Partnership
will attempt to sell the tract during 1997, there can be no
assurance a sale will occur or that any particular price will be
obtained. In the event that a sale is not consummated, within
that time frame, the Partnership will continue to hold the
property as an investment and continue to search for a potential
purchaser.
Financial Highlights
For the years ended December 31,
1996 1995 1994 1993 1992
Total Assets $6,051,642 $7,313,003 $8,746,730 $9,153,160 $10,122,749
Total Income 67,200 198,138 633,800 1,565,892 1,412,029
Net Income (Loss) (95,412) 51,663 (370,171) 446,616 586,732
Net Income (Loss)
per Unit (2.36) .91 (9.16) 10.81 14.52
Distributions
per Unit 27.00 38.00 - 35.00 -
For the year ended December 31, 1996, total income declined
primarily due to a lack of timberland sales during the year. The
lack of timberland sales together with lower interest income were
the primary factors bringing about the change from net income in
1995 to net loss in 1996.
Net Asset Value
As of December 31, 1996, based on the appraised value of the
tracts, contracts in place and taking into account the
Partnership's other assets and liabilities, the General Partner
has determined the Net Asset Value to be $156.62 per $304 limited
partnership Unit. Limited Partners should note that appraisals
are only estimates of current value and actual values realizable
upon sale may be substantially different. Furthermore, the Estes
tract, while under contract, has not yet been sold. Significant
factors in establishing an appraised value are the actual selling
price for tracts which the appraiser believes are comparable and
the rates used by the appraiser to estimate timber growth.
Because of the nature of the Partnership's properties, there can
be no assurance that the other tracts reviewed by the appraiser
are comparable. Additionally, the appraised value does not
reflect the actual costs which would be incurred in selling the
tracts. As a result of these factors and the illiquid nature of
an investment in Units of the Partnership, the variation between
the appraised value of the Partnership's tracts and the price at
which Units of the Partnership could be sold is likely to be
significant. Fiduciaries of Limited Partners which are subject
to ERISA or other provisions of law requiring valuation of Units
should consider all relevant factors, including, but not limited
to the Net Asset Value, in determining the fair market value of
the investment in the Partnership for such purposes.
General Information
As you are probably aware, several third parties have commenced
partial tender offers to purchase units of the Partnership at
grossly inadequate prices which are substantially below the
Partnership's Net Asset Value. In response, we recommended that
limited partners reject these offers because they do not reflect
the underlying value of the Partnership's assets. To date,
holders of over 98% of the outstanding units agreed that these
offers were inadequate, rejected the offer and did not tender
their units. Please be assured that if any additional tender
offers are made for your units, we will make every effort to
provide you with our position regarding such offer on a timely
basis.
Summary
During 1997, the General Partner will endeavor to close the sales
of the Estes tract to the State of Florida and will continue to
aggressively market the Laurel View tract. We will provide you
with an update on our progress in future correspondence.
Very truly yours,
Southern Timber Partners I
Southern Timber Resources Corp.
General Partner
/s/ Robert J. Hellman
Robert J. Hellman
President
March 24, 1997
Tract Profiles
Estes Tract
Acres: 5,947 at December 31, 1996
Location: Santa Rosa County, Florida (20 miles northeast of Pensacola)
Purchase Date: January 14, 1982
1995 Appraised
Value: $3,897,000 ($1,673,000 - timberland, $2,224,000 - timber)
Timber Stands: 73% merchantable and shelterwood stands,
23% premerchantable,
4% clear-cut and non-merchantable
Laurel View Tract
(This tract is owned as part of a joint venture between
Southern Timber Partners I and Southern Timber Partners 2.
Southern Timber Partners I owns a 24% interest in the joint
venture.)
Acres: 1,709
Location: Liberty County, Georgia bordering
Laurel View River and Jones Creek
(approximately 30 miles south of Savannah)
Purchase Date: September 30, 1987
1996 Appraised
Value: $7,370,000 ($6,170,000 - timberland, $1,200,000 - timber)(A)
Timber Stands: 68% merchantable, 10% premerchantable, 22% non-merchantable
merchantable - timber which is generally fifteen years and older and
suitable for current harvesting
premerchantable - timber which is less than fifteen years old and not
suitable for current harvesting
clear-cut - timberland on which all the timber has been harvested
Balance Sheets At December 31, At December 31,
1996 1995
Assets
Timber and timberland, at cost $6,987,505 $6,987,505
Less accumulated depletion (2,806,428) (2,806,428)
Net timber and timberland 4,181,077 4,181,077
Cash and cash equivalents 431,448 1,683,209
Prepaid insurance 2,450 4,813
Due from related parties 10,058 8,250
Investment in joint venture 1,426,609 1,435,654
Total Assets $6,051,642 $7,313,003
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 14,400 $ 23,854
Due to affiliates 136,129 201,624
Total Liabilities 150,529 225,478
Partners' Capital (Deficit):
General Partner (57,127) (45,263)
Limited Partners (40,000 units outstanding) 5,958,240 7,132,788
Total Partners' Capital 5,901,113 7,087,525
Total Liabilities and Partners' Capital $6,051,642 $7,313,003
Statements of Partners' Capital (Deficit)
For the years ended December 31, 1996, 1995 and 1994
General Limited
Partner Partners Total
Balance at December 31, 1993 $(41,561) $8,982,947 $8,941,386
Net Loss (3,702) (366,469) (370,171)
Distributions to foreign limited partners - (1,627) (1,627)
Balance at December 31, 1994 (45,263) 8,614,851 8,569,588
Net Income 15,353 36,310 51,663
Cash distributions (15,353) (1,518,373) (1,533,726)
Balance at December 31, 1995 (45,263) 7,132,788 7,087,525
Net Loss (954) (94,458) (95,412)
Distributions (10,910) (1,080,090) (1,091,000)
Balance at December 31, 1996 $(57,127) $5,958,240 $5,901,113
Statements of Operations
For the years ended December 31, 1996 1995 1994
Income
Timber sales $ - $ - $ 438,094
Gain on sales of timberland - 79,758 148,190
Interest 63,725 107,205 39,161
Other 3,475 11,175 8,355
Total Income 67,200 198,138 633,800
Expenses
Depletion - - 193,259
Property operating 79,145 75,666 156,074
General and administrative 74,422 73,253 70,519
Loss on write-down of timberland - - 570,000
Total Expenses 153,567 148,919 989,852
Income (loss) from operations (86,367) 49,219 (356,052)
Other Income (Loss)
Income (loss) from joint venture (9,045) 2,444 (14,119)
Net Income (Loss) $(95,412) $ 51,663 $(370,171)
Net Income (Loss) Allocated:
To the General Partner $ (954) $ 15,353 $ (3,702)
To the Limited Partners (94,458) 36,310 (366,469)
$(95,412) $ 51,663 $(370,171)
Per limited partnership unit
(40,000 outstanding) $(2.36) $.91 $(9.16)
Statements of Cash Flows
For the years ended December 31, 1996 1995 1994
Cash Flows From Operating Activities
Net Income (Loss) $(95,412) $ 51,663 $(370,171)
Adjustments to reconcile net income
(loss) to net cash
provided by (used for) operating activities:
Loss on write-down of timberland - - 570,000
Depletion - - 193,259
Gain on sales of timberland - (79,758) (148,190)
(Income) loss from joint venture 9,045 (2,444) 14,119
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Accounts receivable - 515,767 (515,767)
Prepaid Insurance 2,363 1,109 (5,922)
Due from related parties (1,808) (5,778) (2,472)
Accounts payable and accrued expenses (9,454) (7,454) (8,835)
Due to affiliates (65,495) 55,790 (25,797)
Net cash provided by (used for) operating
activities (160,761) 528,895 (299,776)
Cash Flows From Investing Activities
Proceeds from sales of timberland - 1,259,054 1,080,461
Net cash provided by investing activities - 1,259,054 1,080,461
Cash Flows From Financing Activities
Distributions - income tax withholdings
for foreign partners - - (1,627)
Cash distributions paid (1,091,000) (1,533,726) -
Net cash used for financing activities (1,091,000) (1,533,726) (1,627)
Net increase (decrease) in cash
and cash equivalents (1,251,761) 254,223 779,058
Cash and cash equivalents,
beginning of period 1,683,209 1,428,986 649,928
Cash and cash equivalents,
end of period $431,448 $1,683,209 $1,428,986
Notes to the Financial Statements
December 31, 1996, 1995 and 1994
1. Organization
Southern Timber Partners I (the "Partnership"), formerly Hutton
Southern Timber Partners I, was organized as a limited
partnership under the laws of the State of Georgia pursuant to a
Certificate and Agreement of Limited Partnership (the
"Partnership Agreement") dated and filed on June 15, 1981. The
general partner is Southern Timber Resources Corp. (the "General
Partner"), formerly Hutton Timber Resources Corp., a Delaware
corporation. The Partnership was formed for the purpose of
making investments in timberland and timber cutting rights in the
southeastern United States. The Partnership's original
termination date was December 31, 1996, however, the Partnership
Agreement states that the General Partner can extend the life of
the Partnership beyond the termination date if it is determined
that a sale of the timberland at that time would cause undue loss
to the partners.
On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of
its domestic retail brokerage and management businesses to Smith
Barney, Harris Upham & Co. Incorporated ("Smith Barney").
Subsequent to the sale, Shearson Lehman Brothers Inc. changed its
name to Lehman Brothers Inc. ("Lehman Brothers"). The
transaction did not affect the ownership of the general partner.
However, the assets acquired by Smith Barney included the name
"Shearson" and the name "Hutton." Consequently, the names of the
Partnership and the General Partner were changed to Southern
Timber Partners I and Southern Timber Resources Corp.,
respectively, to delete any reference to "Hutton."
On February 16, 1996, based upon, among other things, the advice
of legal counsel, the General Partner adopted a resolution that
states, among other things, if a Change of Control (as defined
below) occurs, the General Partner may distribute the
Partnership's cash balances not required for its ordinary course
day-to-day operations. "Change of Control" means any purchase or
offer to purchase more than 10% of the Units that is not approved
in advance by the General Partner. In determining the amount of
the distribution, the General Partner may take into account all
material factors. In addition, the Partnership will not be
obligated to make any distribution to any partner and no partner
will be entitled to receive any distribution until the General
Partner has declared the distribution and established a record
date and distribution date for the distribution. The Partnership
filed a Form 8-K disclosing this resolution on February 26, 1996.
2. Significant Accounting Policies
Basis of Accounting The accompanying financial statements have
been prepared on the accrual basis of accounting in accordance
with generally accepted accounting principles. Revenues are
recognized as earned and expenses are recorded as obligations are
incurred.
Timberland Investments Timberland investments include the
initial purchase price of the property, closing costs,
acquisition and legal fees, as well as land improvements and
reforestation costs.
Depletion of timberlands is provided by applying a cost per cord
utilizing estimates of total recoverable timber from each tract.
Such estimates are revised annually to account for additional
growth.
During 1994 the Partnership wrote down the net book value of
timberland by $570,000 as management believed that approximately
$570,000 of the decline in the property's value was other than
temporary. The carrying value of the property was reduced
accordingly.
Accounting for Impairment In March 1995, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of "
("FAS 121"), which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets'
carrying amount. FAS 121 also addresses the accounting for long-
lived assets that are expected to be disposed of. The
Partnership adopted FAS 121 in the fourth quarter of 1995.
Cash Equivalents Cash equivalents consist of short-term, highly
liquid investments with maturities of three months or less from
the date of issuance. The carrying amount approximates fair
value because of the short maturity of these investments.
Concentration of Credit Risk Financial instruments which
potentially subject the Partnership to a concentration of credit
risk principally consist of cash in excess of the financial
institutions' insurance limits. The Partnership invests
available cash with high credit quality financial institutions.
Investment in Joint Venture The Partnership accounts for its
investment in the Joint Venture under the equity method of
accounting.
Income Taxes No provision for income taxes has been made in the
financial statements since such taxes are the responsibility of
the individual partners rather than that of the Partnership.
Use of Estimates The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
During 1996 the General Partner executed two purchase and sale
agreements to sell the Estes Tract. As of December 31, 1996 the
Partnership has not completed either sale. The final
determination as to whether the Partnership will sell the Estes
Tract pursuant to the purchase and sale agreements will be
resolved during 1997.
The ownership and operation of timber properties involves a
number of risks, among others, changes in governmental
regulations, fire hazards, insect damage, diseases and timber
theft, and risks of market fluctuations. The General Partner
believes the employment of good forestry management practices
helps to ameliorate the physical risks of timber investments,
however, these risks cannot be eliminated entirely.
3. Partnership Allocations
Distribution of Partnership Funds Net cash from operations and
net proceeds from sales will be distributed from time to time at
the discretion of the General Partner, 99% to the Limited
Partners and 1% to the General Partner until each Limited Partner
has received an amount equal to an 8% cumulative annual return on
his adjusted capital value, as defined in the Partnership
Agreement, plus an amount equal to 100% of his adjusted capital
value. Thereafter, cash distributions will be distributed 85% to
the Limited Partners and 15% to the General Partner.
Allocation of Income and Loss All income shall be allocated each
year to the General Partner in an amount equal to the net cash
from operations distributed or distributable and net proceeds
from sales distributed or distributable to the General Partner
for such year. The balance shall be allocated to the Limited
Partners, pro rata, in accordance with their ownership of units.
If for any year, no net cash from operations and net proceeds
from sales are distributed or distributable to the General
Partner, any income for such year shall be allocated 99% to the
Limited Partners, and 1% to the General Partner. All losses,
including losses from the sale of properties, shall be allocated
99% to the Limited Partners and 1% to the General Partner.
Dissolution of Partnership If, upon dissolution of the
Partnership, the General Partner has a negative capital account,
it shall contribute capital equal to the amount of the deficit.
In no event, however, shall the required capital contribution
exceed 1% of the total capital contributed by the Limited
Partners.
4. Transactions with Related Parties
Amounts earned by the General Partner and its affiliates for
management and supervisory fees totaled $53,735, $56,769 and
$108,733 for the years ended December 31, 1996, 1995 and 1994,
respectively. Amounts earned by the General Partner and its
affiliates are included in property operating expenses.
5. Sales of Timberland
During 1995, the Partnership made the following sales of
timberland:
Net Gain
Acres Selling (Loss)
Date Tract Sold Price on Sale
February 27, 1995 Estes 882 $441,264 $ -
February 27, 1995 Estes 133 89,570 -
June 13, 1995 Estes 383 186,822 (8,648)
September 12, 1995 Estes 353 245,729 13,337
December 14, 1995 Estes 156 134,603 11,767
December 20, 1995 Estes 161 161,066 63,302
$1,259,054 $79,758
During 1994, the Partnership made the following sales of timberland:
Net Gain
Acres Selling on
Date Tract Sold Price Sale
June 13, 1994 Estes 603 $552,344 $ 49,463
December 29, 1994 Estes 720 528,117 98,727
$1,080,461 $148,190
6. Investment in Joint Venture
On October 13, 1987, the Partnership contributed land with a fair
market value of $946,676 to a newly formed joint venture,
Southern Timber Venture Partners 1 (the "Joint Venture"),
formerly Hutton Timber Venture Partners 1, in exchange for a 24%
interest in the profits, losses and distributable cash from the
Joint Venture. An affiliated partnership, Southern Timber
Partners 2, formerly Hutton Southern Timber Partners 2,
contributed $3,011,417 in cash in exchange for the remaining 76%
interest. The purpose of the Joint Venture is to manage,
maintain and commercially exploit the acquired property in a
manner consistent with each coventurer's objectives for
investment. The Joint Venture Agreement provides that all major
decisions, as defined, must be approved by each of the
coventurers.
On October 15, 1987, the aforementioned contributions were
substantially applied to the acquisition of the Laurel View
Tract, located in Liberty County, Georgia, totaling 1,709 acres.
In order to pay off a Joint Venture promissory note in 1988, the
Partnership contributed $469,559 or 24% of total principal and
interest due. The remainder was contributed by Southern Timber
Partners 2.
The General Partner developed a marketing plan for the tract and
began actively marketing the land during 1996. However, there is
no assurance that a sale will be consummated prior to the end of
1997. The Joint Venture's balance sheets at December 31, 1996
and 1995 and statements of operations for the three years ended
December 31, 1996, 1995 and 1994 are as follows:
Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
Net timberland $5,949,788 $5,949,788
Cash 38,963 37,152
Total Assets $5,988,751 $5,986,940
Liabilities and Partners' Capital
Liabilities:
Due to affiliates $ 42,038 $ 5,040
Deferred income 2,500 -
Total Liabilities 44,538 5,040
Partners' Capital:
Southern Timber Partners I 1,426,609 1,435,654
Southern Timber Partners 2 4,517,604 4,546,246
Total Partners' Capital 5,944,213 5,981,900
Total Liabilities and Partners' Capital $5,988,751 $5,986,940
Statements of Operations
For the years ended December 31, 1996, 1995 and 1994
Income 1996 1995 1994
Timber sales $ - $ 93,776 $ -
Interest 1,847 3,410 1,785
Other 2,500 4,900 5,000
Total Income 4,347 102,086 6,785
Expenses
Depletion - 27,621 -
Property operating 42,034 62,523 37,553
General and administrative - 1,756 28,063
Total Expenses 42,034 91,900 65,616
Net Income (Loss) $ (37,687) $ 10,186 $(58,831)
7. Reconciliation of Net Income (Loss) to Taxable Income (Loss)
For the years ended December 31, 1996, 1995 and 1994 taxable
income (loss) of approximately $(95,000), $51,000, and $200,000
respectively, was reported to the partners compared to net income
(loss) of approximately ($95,000), $52,000 and ($370,000),
respectively reported in the financial statements. The
difference in 1994 of $570,000 resulted from the property write-
down as discussed in Note 2.
Report of Independent Auditors
To Partners
Southern Timber Partners I
We have audited the accompanying balance sheets of Southern
Timber Partners I as of December 31, 1996 and 1995 and the
related statements of operations, partners' capital (deficit) and
cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Southern Timber Partners I at December 31, 1996 and 1995, and
the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 16, 1997
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<PERIOD-END> DEC-31-1996
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<RECEIVABLES> 10,058
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<OTHER-SE> 5,901,113
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<CGS> 0
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