<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended July 31, 1995 or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 1 - 4488
MESABI TRUST
(Exact name of registrant as specified in its charter)
New York 13-6022277
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
In care of Bankers Trust Company,
Corporate Trust Division
P.O. Box 318
Church Street Station
New York, New York 10015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 250-6519
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
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At September 11, 1995, there were 13,120,010 Units of Beneficial
Interest in Mesabi Trust outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
----------------------- ----------------------
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
A. Condensed Statements of Income
Revenues:
Royalty income $1,198,664 $ 929,801 $1,388,821 $1,139,526
Interest income 7,791 5,508 17,795 9,538
---------- --------- ---------- ----------
$1,206,455 $ 935,309 $1,406,616 $1,149,064
Expenses 112,195 94,609 185,186 188,928
---------- --------- ---------- ----------
Net income $1,094,260 $ 840,700 $1,221,430 $ 960,136
---------- --------- ---------- ----------
---------- --------- ---------- ----------
Weighted average number
of units outstanding 13,120,010 13,120,010 13,120,010 13,120,010
Net income per unit $0.083404 $0.064078 $0.093097 $0.073181
Distributions declared
per unit $0.065 $0.06 $0.065 $0.06
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
2
<PAGE>
B. Condensed Balance Sheets
<TABLE>
<CAPTION>
July 31, 1995 January 31, 1995
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<S> <C> <C>
Assets:
Cash $ 273 $1,442,627
U.S. Government securities,
at cost (which approximates
market) 1,392,696 366,650
Accrued revenue 456,746 177,924
Prepaid insurance 10,688 3,938
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$1,860,403 $1,991,139
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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
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$ 3 $ 3
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$1,860,406 $1,991,142
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Liabilities, Unallocated
Reserve and Trust Corpus:
Liabilities:
Distribution payable $ 852,801 $1,312,001
Accrued expenses 20,906 41,566
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$ 873,707 $1,353,567
Deferred income 142,709 162,214
Unallocated reserve 843,987 475,358
Trust Corpus 3 3
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$1,860,406 $1,991,142
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
C. Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31,
----------------------------
1995 1994
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<S> <C> <C>
Cash flows from operating
activities:
Royalties received $ 1,102,291 $ 956,641
Interest received 5,998 9,537
Expenses paid (212,596) (219,269)
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Net cash provided by
operating activities $ 895,693 $ 746,909
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Cash flows from investing
activities:
Sales and redemptions of
U.S. Government
securities $ 2,194,614 $ 3,655,522
Purchases of U.S.
Government securities (3,220,660) (3,820,576)
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Net cash
(used in) investing
activities $(1,026,046) $ (165,054)
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Cash flows from financing
activities:
Net cash (used in) financing
activities, distributions
to Unitholders $(1,312,001) $(1,312,001)
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Net (decrease)
in cash $(1,442,354) $ (730,146)
Cash, beginning of year 1,442,627 1,494,936
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Cash, end of period $ 273 $ 764,790
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----------- -----------
Reconciliation of net income
to net cash provided by
operating activities:
Net income $ 1,221,430 $ 960,136
(Increase) in
accrued revenue (278,822) (191,292)
(Increase) in prepaid insurance (6,750) (6,750)
(Decrease) in
accrued expenses (20,660) (23,592)
(Decrease) increase in deferred income (19,505) 8,407
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Net cash provided by
operating activities $ 895,693 $ 746,909
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----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
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, 1995) 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 six months
ended July 31, 1995 and 1994, (b) the financial position at July 31,
1995 and January 31, 1995, and (c) the cash flows for the six months
ended July 31, 1995 and 1994 have been made.
Note 2. Earnings per unit are based on weighted average number of units
outstanding during the period (13,120,010 units).
5
<PAGE>
Item 2. TRUSTEES' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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 pellets 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 pellets.
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 (but not below $30) and is
approximately $35.77 for calendar year 1995), 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 (but not below $500,000 per annum) for inflation and
deflation and is approximately $596,246 for calendar year 1995. 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.
COMPARISON OF THREE MONTHS ENDED JULY 31, 1995 AND JULY 31, 1994
Mesabi Trust's net income increased to $1,094,260 for the fiscal
quarter ended July 31, 1995, as compared to net income of $840,700 for the
fiscal quarter ended July 31, 1994. The primary reason for the increase was
an increase in royalty income, due to increased pellet shipments in 1995
compared to the same period in 1994. Mesabi Trust's gross income for the
fiscal quarter ended July 31, 1995 was $1,206,455, consisting of $336,844 in
minimum advance royalty income, $786,965 in overriding royalty income,
$74,855 in fee royalty income and $7,791 in interest income, as compared to
gross income of $935,309 for the fiscal quarter ended July 31, 1994. Mesabi
Trust's expenses for the fiscal quarter ended July 31, 1995 were $112,195,
compared to expenses of $94,609 for the fiscal quarter ended July 31, 1994.
6
<PAGE>
COMPARISON OF SIX MONTHS ENDED JULY 31, 1995 AND JULY 31, 1994
Mesabi Trust's gross income for the six months ended July 31, 1995 was
$1,406,616, an increase of $257,552 from the gross income of $1,149,064 for
the six months ended July 31, 1994. The increase was primarily due to an
increase in the amount of pellets that were shipped. Interest income was
higher in the 1995 period. Expenses of $185,186 for the six months ended July
31, 1995 decreased $3,742 from expenses of $188,928 for the six months ended
July 31, 1994. The increased income and decreased expenses resulted in net
income of $1,221,430 for the six months ended July 31, 1995, as compared to
net income of $960,136 for the six months ended July 31, 1994.
Mesabi Trust's Unallocated Reserve aggregated $843,987 at July 31,
1995, as compared with an Unallocated Reserve of $738,400 at July 31, 1994.
The Trustees anticipate that the amount of the 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.
The Trustees have been advised by Northshore that in 1995 total
shipments should be approximately 3,850,000 - 3,900,000 tons, an increase
from 1994. Mesabi Trust's portion of the total shipments is approximately 90%
or 3,480,000 - 3,500,000 tons. The increase, in large part, is due to an iron
ore expansion project (the reactivation of an idle pelletizing line) which
was completed in June 1995. This expansion project could increase annual
production capacity by about 500,000 tons in 1995 and up to 900,000 tons in
1996 depending upon iron ore market conditions. Production in 1995 will be
lower than originally estimated due to a fire which required shutdown of
one pelletizing line with a resulting loss of approximately 110,000 tons of
production, and delay in reactivating the idle pelletizing line. The
Trustees will continue to monitor the economic circumstances of the Trust in
an effort to strike a responsible balance between future distributions to
the Unitholders and the maintenance of adequate Trust reserves.
7
<PAGE>
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
8
<PAGE>
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: September 12, 1995 By: /s/ MATTHEW J. SEELEY
--------------------------------
Name: Matthew J. Seeley
Title: Vice President
* There are no directors
or executive officers of
the registrant.
9
<PAGE>
EXHIBIT INDEX
Item No. Description
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27.1 Financial Data Schedule.........................Filed herewith.
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-START> FEB-01-1995
<PERIOD-END> JUL-31-1995
<CASH> 0
<SECURITIES> 1,393
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,860
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,860
<CURRENT-LIABILITIES> 874
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,860
<SALES> 1,389
<TOTAL-REVENUES> 1,407
<CGS> 0
<TOTAL-COSTS> 185
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,221
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,221
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,221
<EPS-PRIMARY> 0.093
<EPS-DILUTED> 0.093
</TABLE>
