UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 - For the Period Ended SEPTEMBER 30, 1996
Or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 - For the Transition Period From ______________ to ______________
Commission file number 1-701
GREAT NORTHERN IRON ORE PROPERTIES
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(Exact name of registrant as specified in its charter)
Minnesota 41-0788355
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
W-1290 First National Bank Building
332 Minnesota Street
Saint Paul, Minnesota 55101-1361
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(Address of principal executive office) (Zip Code)
(612) 224-2385
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
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 periods 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 _____
Number of shares of beneficial interest outstanding on September 30, 1996:
1,500,000
PART I. FINANCIAL INFORMATION
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GREAT NORTHERN IRON ORE PROPERTIES
CONDENSED BALANCE SHEETS
September 30 December 31
1996 1995
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(Unaudited) (Note)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 259,930 $ 262,525
United States Treasury and other government securities
(including accrued interest thereon) 3,373,443 4,603,942
Royalties receivable 3,008,644 2,314,340
Prepaid expenses 18,252 4,394
----------- -----------
TOTAL CURRENT ASSETS 6,660,269 7,185,201
NONCURRENT ASSETS
United States Treasury Notes 4,839,115 3,773,396
Prepaid pension expense 254,726 255,317
----------- -----------
5,093,841 4,028,713
PROPERTIES
Mineral lands 37,723,536 37,625,536
Less allowances for depletion and
amortization 32,699,731 32,587,321
----------- -----------
5,023,805 5,038,215
Building and equipment--at cost, less
allowances for accumulated depreciation
(9/30/96 - $122,722; 12/31/95 - $128,734) 95,564 83,297
----------- -----------
5,119,369 5,121,512
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$16,873,479 $16,335,426
=========== ===========
LIABILITIES AND BENEFICIARIES' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 81,139 $ 112,519
Distributions 2,480,000 2,180,000
----------- -----------
TOTAL CURRENT LIABILITIES 2,561,139 2,292,519
BENEFICIARIES' EQUITY, including certificate
holders' equity, represented by 1,500,000
shares of beneficial interest authorized
and outstanding, and reversionary interest 14,312,340 14,042,907
----------- -----------
$16,873,479 $16,335,426
=========== ===========
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed financial statements.
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<CAPTION>
GREAT NORTHERN IRON ORE PROPERTIES
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
September 30 September 30
------------------------------ ------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income:
Royalties $ 3,158,644 $ 2,647,153 $ 7,178,723 $ 6,846,410
Interest and other income 133,314 122,151 412,763 365,069
----------- ----------- ----------- -----------
3,291,958 2,769,304 7,591,486 7,211,479
Costs and expenses 374,279 361,917 1,172,053 1,130,486
----------- ----------- ----------- -----------
NET INCOME $ 2,917,679 $ 2,407,387 $ 6,419,433 $ 6,080,993
=========== =========== =========== ===========
Average shares outstanding 1,500,000 1,500,000 1,500,000 1,500,000
NET INCOME PER SHARE $ 1.95 $ 1.60 $ 4.28 $ 4.05
=========== =========== =========== ===========
Distributions declared per share $ 1.60 (1) $ 1.30 (2) $ 4.10 (3) $ 3.60 (4)
Distributions paid per share $ 1.15 (5) $ 1.15 (6) $ 3.90 (7) $ 3.45 (8)
</TABLE>
<TABLE>
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<S> <C> <C> <C> <C> <C> <C>
(1) $1.60 declared 9/16/96
payable 10/31/96
(2) $1.30 declared 9/15/95
paid 10/31/95
(3) $1.35 declared 3/18/96 plus $1.15 declared 6/17/96 plus $1.60 declared 9/16/96
paid 4/30/96 paid 7/31/96 payable 10/31/96
(4) $1.15 declared 3/17/95 plus $1.15 declared 6/7/95 plus $1.30 declared 9/15/95
paid 4/28/95 paid 7/31/95 paid 10/31/95
(5) $1.15 declared 6/17/96
paid 7/31/96
(6) $1.15 declared 6/7/95
paid 7/31/95
(7) $1.40 declared 12/14/95 plus $1.35 declared 3/18/96 plus $1.15 declared 6/17/96
paid 1/31/96 paid 4/30/96 paid 7/31/96
(8) $1.15 declared 12/16/94 plus $1.15 declared 3/17/95 plus $1.15 declared 6/7/95
paid 1/31/95 paid 4/28/95 paid 7/31/95
See notes to condensed financial statements.
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<CAPTION>
GREAT NORTHERN IRON ORE PROPERTIES
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
--------------------------
September 30
--------------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Cash received from royalties and rents $ 6,403,171 $ 5,789,828
Cash paid to suppliers and employees -1,089,553 -1,048,039
Interest received 448,916 327,433
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NET CASH PROVIDED BY OPERATING ACTIVITIES 5,762,534 5,069,222
Cash flows from investing activities:
U.S. government securities purchased -3,499,297 -2,100,000
U.S. government securities matured 3,611,172 2,350,000
Net expenditures for equipment -27,004 -33,316
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NET CASH PROVIDED BY INVESTING ACTIVITIES 84,871 216,684
Cash flows from financing activities:
Distributions paid -5,850,000 -5,185,000
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NET CASH USED IN FINANCING ACTIVITIES -5,850,000 -5,185,000
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Net increase (decrease) in cash and cash equivalents -2,595 100,906
Cash and cash equivalents at beginning of year 262,525 111,862
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CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 $ 259,930 $ 212,768
=========== ===========
See notes to condensed financial statements.
</TABLE>
GREAT NORTHERN IRON ORE PROPERTIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Periods of Three and Nine Months ended September 30, 1996 and September 30, 1995
Note A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the periods stated above are not necessarily
indicative of the results that may be expected for each respective full year.
For further information, refer to the financial statements and footnotes
included in the Great Northern Iron Ore Properties (the "Trust") Annual Report
on Form 10-K for the year ended December 31, 1995.
Note B - BENEFICIARIES' EQUITY
Pursuant to the court order of November 29, 1982, the Trustees were directed to
create and maintain an account designated as "Principal Charges." This account
constitutes a first and prior lien between the certificate holders and the
reversioner, and reflects an allocation of beneficiaries' equity between the
certificate holders and the reversioner. The balance in this account consists of
attorneys' fees and expenses of counsel for adverse parties pursuant to court
order in connection with litigation commenced in 1972 relating to the Trustees'
powers and duties under the Trust Instrument and the cost of surface lands
acquired in accordance with provisions of a lease with United States Steel
Corporation, net of an allowance to amortize the cost of the land based on
actual shipments of taconite and net of a credit for disposition of tangible
assets. Following is an analysis of this account as of September 30, 1996:
Attorneys' fees and expenses . . . . . . . . . . . . . . . $ 1,024,834
Cost of surface lands. . . . . . . . . . . . . . . . . . . 4,849,794
Shipment credits (cumulative). . . . . . . . . . . . . . . -443,902
Asset disposition credits. . . . . . . . . . . . . . . . . -18,500
-----------
Principal Charges account . . . . . . . . . . . . . . . $ 5,412,226
===========
Upon termination of the Trust, the Trustees shall either sell tangible assets or
obtain a loan with tangible assets as security to provide monies for
distribution to the certificate holders in the amount of the Principal Charges
account balance.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Periods of Three and Nine Months ended September 30, 1996 and September 30, 1995
The Trust owns interest in 12,033 acres on the Mesabi Iron Range Formation in
northern Minnesota, most of which are under lease to major iron ore producing
companies. Due to the Trustees' election pursuant to Section 646 of the Tax
Reform Act of 1986, as amended, commencing with year 1989, the Trust is not
subject to federal and Minnesota corporate income taxes. The Trust is now a
grantor trust.
The terms of the Great Northern Iron Ore Properties Trust Agreement, created
December 7, 1906, state that the Trust shall continue for twenty years after the
death of the last surviving of eighteen named in the Trust Agreement. The last
survivor of these eighteen named in the Trust Agreement died on April 6, 1995.
According to the terms of the Trust Agreement, the Trust now terminates twenty
years from April 6, 1995. At that time, all monies remaining in the hands of the
Trustees (after paying and providing for all expenses and obligations of the
Trust) shall be distributed ratably among the certificate holders, while all
property other than monies shall be conveyed and transferred to the reversioner.
Results of Operations:
Royalty income increased $332,313 and $511,491 during the first nine months and
third quarter of 1996, respectively, as compared to the same periods in 1995,
due mainly to a higher average earned royalty rate attained.
Interest and other income increased $47,694 and $11,163 during the first nine
months and third quarter of 1996, respectively, as compared to the same periods
in 1995, due mainly to improved yields on our investments.
Costs and expenses increased $41,567 and $12,362 during the first nine months
and third quarter of 1996, respectively, as compared to the same periods in
1995, due mainly to an increase in the amortization rate applied to surface
lands, a result of a fixed termination date of the Trust.
At their meeting held on September 16, 1996, the Trustees declared a third
quarter distribution of $1.60 per share, amounting to $2,400,000 payable October
31, 1996 to certificate holders of record at the close of business on September
30, 1996. The Trustees have now declared three quarterly distributions in 1996.
The first, in the amount of $1.35 per share, was paid on April 30, 1996 to
certificate holders of record on March 29, 1996; the second, in the amount of
$1.15 per share, was paid on July 31, 1996 to certificate holders of record on
June 28, 1996; and the third, that being the current distribution. The first,
second and third quarter 1995 distributions were $1.15, $1.15 and $1.30 per
share, respectively. The Trustees intend to continue quarterly distributions and
set the record date as of the last business day of each quarter. The next
distribution will be paid in late January 1997 to certificate holders of record
on December 31, 1996.
A mining agreement dated January 1, 1959 with United States Steel Corporation
provides that one-half of annual earned royalty income, after satisfaction of
minimum royalty payments, shall be applied to reimburse the lessee for its cost
of acquisition of surface lands overlying the leased mineral deposits, which
surface lands are then conveyed to the Trustees. There are surface lands yet to
be purchased, the costs of which are yet unknown and will not be known until the
actual purchases are made.
Liquidity:
In the interest of preservation of principal of Court-approved reserves and
guided by the restrictive provisions of Section 646 of the Tax Reform Act of
1986, as amended, monies are invested primarily in U.S. government securities
with maturity dates not to exceed three years and, along with cash flows from
operations, are deemed adequate to meet currently foreseeable liquidity needs.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - (27) Financial Data Schedule (only filed electronically
via EDGAR)
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREAT NORTHERN IRON ORE PROPERTIES
(Registrant)
Date October 17, 1996 By /s/ Harry L. Holtz
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Harry L. Holtz
President of the Trustees
Chief Executive Officer
Date October 17, 1996 By /s/ Thomas A. Janochoski
------------------------------- --------------------------------------
Thomas A. Janochoski
Vice President and Secretary
Chief Financial Officer
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GREAT
NORTHERN IRON ORE PROPERTIES BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND INCOME
STATEMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 259,930
<SECURITIES> 8,212,558
<RECEIVABLES> 3,008,644
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,660,269
<PP&E> 37,941,822
<DEPRECIATION> 32,822,453
<TOTAL-ASSETS> 16,873,479
<CURRENT-LIABILITIES> 2,561,139
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 14,312,340
<TOTAL-LIABILITY-AND-EQUITY> 16,873,479
<SALES> 7,178,723
<TOTAL-REVENUES> 7,591,486
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,172,053
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,419,433
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,419,433
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,419,433
<EPS-PRIMARY> 4.28
<EPS-DILUTED> 0
</TABLE>
