<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 October 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
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MESABI TRUST
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 13-6022277
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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) (Zip Code)
Registrant's telephone number, including area code: (212) 250-6519
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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 December 13, 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 NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
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1995 1994 1995 1994
---- ---- ----- -----
A. Condensed Statements of Income
<S> <C> <C> <C> <C>
Revenues:
Royalty income $ 1,415,617 $ 1,336,422 $ 2,804,438 $ 2,475,948
Interest income 13,020 5,474 30,815 15,012
----------- ----------- ----------- -----------
$ 1,428,637 $ 1,341,896 $ 2,835,253 $ 2,490,960
Expenses 82,109 102,228 267,295 291,156
----------- ----------- ----------- -----------
Net income $ 1,346,528 $ 1,239,668 $ 2,567,958 $ 2,199,804
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number
of units outstanding 13,120,010 13,120,010 13,120,010 13,120,010
Net income per unit $0.102631 $0.094487 $0.195728 $0.167668
Distributions declared
per unit $.09 $.08 $.155 $.14
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
2
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B. Condensed Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31, 1995 JANUARY 31, 1995
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Assets:
<S> <C> <C>
Cash $ 8,886 $ 1,442,627
U.S. Government securities,
at cost (which approximates
market) 1,722,956 366,650
Accrued revenue 576,820 177,924
Prepaid insurance 7,313 3,938
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$ 2,315,975 $ 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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$ 2,315,978 $ 1,991,142
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----------- -----------
Liabilities, Unallocated
Reserve and Trust Corpus:
Liabilities:
Distribution payable $ 1,180,801 $ 1,312,001
Accrued expenses 12,843 41,566
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$ 1,193,644 $ 1,353,567
Deferred income 112,617 162,214
Unallocated reserve 1,009,714 475,358
Trust Corpus 3 3
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$ 2,315,978 $ 1,991,142
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----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
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C. Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 31,
-----------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating
activities:
Royalties received $ 2,364,055 $ 1,935,407
Interest received 22,706 15,011
Expenses paid (299,394) (315,213)
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Net cash provided by
operating activities $ 2,087,367 $ 1,635,205
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Cash flows from investing
activities:
Sales and redemptions of
U.S. Government
securities $ 3,348,123 $ 5,333,991
Purchases of U.S.
Government securities (4,704,429) (5,309,453)
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Net cash provided by (used in)
investing activities $ (1,356,306) $ 24,538
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Cash flows from financing
activities:
Net cash (used in) financing
activities, distributions
to Unitholders $ (2,164,802) $ (2,099,202)
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Net (decrease)
in cash $ (1,433,741) $ (439,459)
Cash, beginning of year 1,442,627 1,494,936
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Cash, end of period $ 8,886 $ 1,055,477
------------ ------------
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Reconciliation of net income
to net cash provided by
operating activities:
Net income $ 2,567,958 $ 2,199,804
(Increase) in accrued
revenue (398,896) (528,166)
(Increase) in prepaid insurance (3,375) (3,375)
(Decrease) in
accrued expenses (28,723) (20,683)
(Decrease) in deferred income (49,597) (12,375)
------------ ------------
Net cash provided by
operating activities $ 2,087,367 $ 1,635,205
------------ ------------
------------ ------------
</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 nine
months ended October 31, 1995 and 1994, (b) the financial position at
October 31, 1995 and January 31, 1995, and (c) the cash flows for the
nine months ended October 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 products shipped for sale. 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, typically 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 (and other iron ore products) 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. As a
result of this increasing royalty percentage, and assuming the same sales price
per ton of pellets, the shipment of a ton of pellets later in the year generates
higher royalties than a shipment of a ton of pellets earlier in the year. 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. 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 by Northshore from quarter to
quarter or from year to year fluctuate greatly. These factors include the normal
cessation of Great Lakes shipping activity during the winter months due to
freezing of the Great Lakes, increased shipments later in the calendar year in
anticipation of such freezing, and changes in pellet sales resulting from
changes in economic conditions affecting the steel industry generally.
COMPARISON OF THREE MONTHS ENDED OCTOBER 31, 1995 AND OCTOBER 31, 1994
Mesabi Trust's net income increased to $1,346,528 for the fiscal quarter
ended October 31, 1995, as compared to net income of $1,239,668 for the fiscal
quarter ended October 31, 1994. The primary reason for the increase was an
increase in royalty income due to an increase in shipments plus a higher average
sales price per ton. The amount of royalty income is directly dependent upon
shipments and selling price and the applicable royalty rate (which increases as
a percentage, as described above, based on tons of pellets shipped year-to-
date). Mesabi Trust's gross income for the fiscal quarter ended October 31, 1995
was $1,428,637, consisting of $1,347,370 in overriding royalty income, $68,247
in fee royalty income and $13,020 in interest income, as compared to gross
income of $1,341,896 for the fiscal quarter ended October 31, 1994. Mesabi
Trust's expenses for
6
<PAGE>
the fiscal quarter ended October 31, 1995 were $82,109. This compares to
expenses for the fiscal quarter ended October 31, 1994 of $102,228. The higher
expense level in the 1994 fiscal quarter was primarily due to costs related to
improving the Trust's systems for processing of tax information for the benefit
of Unitholders, which did not recur in the 1995 fiscal quarter.
COMPARISON OF NINE MONTHS ENDED OCTOBER 31, 1995 AND OCTOBER 31, 1994
Mesabi Trust's gross income for the nine months ended October 31, 1995 was
$2,835,253, an increase of $344,293 from the gross income of $2,490,960 for the
nine months ended October 31, 1994. The increase was primarily due to an
increase in royalty income resulting from increases in shipments and product
prices. 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 $267,295 for the nine months ended October 31, 1995
decreased $23,861 from expenses of $291,156 for the nine months ended October
31, 1994. The increased income and decreased expenses resulted in net income of
$2,567,958 for the nine months ended October 31, 1995, as compared to net income
of $2,199,804 for the nine months ended October 31, 1994.
The documents establishing the Trust provide that the trustees may make
provision by reserve for such amount as they determine to be necessary to meet
present or future liabilities of the Trust, whether fixed or contingent. The
amount of unallocated cash and U.S. Government securities at the end of the
quarter was reserved for such purpose, to provide for contingencies. This
reserve fluctuates from quarter to quarter. Additionally, during the period
between income distribution dates, which fall at the end of each fiscal quarter,
income accrued (but not yet received) for that quarter is added to the current
Unallocated Reserve, increasing it in amount until the end of the particular
quarter, at which time such accrued income, after receipt, is generally
distributed and the Unallocated Reserve is restored to the amount determined by
the Trustee.
Mesabi Trust's Unallocated Reserve aggregated $1,009,714 at October 31,
1995 as compared with $928,467 at October 31, 1994. At October 31, 1995, the
Unallocated Reserve was represented by $432,894 in unallocated cash and U.S.
Government securities, and $576,820 of accrued revenue primarily representing
royalties not yet received by the Trust but anticipated to be received in
January 1996 from Northshore as part of the royalty due for the fourth calendar
quarter, based upon reported lessee shipping activity reported for the month of
October 1995.
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.
None.
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: December 13, 1995 By: /s/ MATTHEW J. SEELEY
------------------------------------
Name: Matthew J. Seeley
Title: Vice President
* There are no directors
or executive officers of
the registrant.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME AND THE COMPANY BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-1-1995
<PERIOD-END> OCT-31-1995
<CASH> 8
<SECURITIES> 1,722
<RECEIVABLES> 576
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,315
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,315
<CURRENT-LIABILITIES> 2,315
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1
<TOTAL-LIABILITY-AND-EQUITY> 2,315
<SALES> 2,804
<TOTAL-REVENUES> 2,835
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 267
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,567
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,567
<EPS-PRIMARY> 0.195
<EPS-DILUTED> 0.195
</TABLE>
