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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For The Quarterly Period Ended April 30, 1997 or
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _________________ to _________________
Commission File Number: 1-4488
MESABI TRUST
(Exact name of registrant as specified in its charter)
NEW YORK 13-6022277
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
IN CARE OF BANKERS TRUST COMPANY,
CORPORATE TRUST & AGENCY GROUP
P.O. BOX 318
CHURCH STREET STATION
NEW YORK, NEW YORK 10015
(Address of principal executive offices)
(212) 250-6519
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
As of June 13, 1997, there were 13,120,010 Units of Beneficial Interest in
Mesabi Trust outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THREE MONTHS ENDED
APRIL 30,
--------------------------
1997 1996
---- ----
A. Condensed Statements of Income
Revenues:
Royalty income $238,850 $374,463
Interest income 10,895 10,079
-------- --------
$249,745 $384,542
Expenses 65,698 74,032
-------- --------
Net income $184,047 $310,510
-------- --------
-------- --------
Weighted average number
of units outstanding 13,120,010 13,120,010
Net income per unit $0.014028 $0.023667
Distributions declared
per unit $ -- $ --
See Notes to Financial Statements.
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B. Condensed Balance Sheets
Assets: April 30, 1997 January 31, 1997
--------------- ----------------
Cash $ 97,489 $ 918
U.S. Government securities,
at amortized cost (which
approximates market) 699,868 2,484,984
Accrued income 82,077 113,617
Prepaid insurance 500 3,645
----------- -----------
$ 879,934 $ 2,603,164
----------- -----------
----------- -----------
Fixed property, including
intangibles, at nominal values
Amended Assignment of
Peters Lease $ 1 $ 1
Assignment of Cloquet Lease 1 1
Certificate of beneficial
interest for 13,120,010
units of Land Trust 1 1
----------- -----------
$ 3 $ 3
----------- -----------
$ 879,937 $ 2,603,167
----------- -----------
----------- -----------
Liabilities, Unallocated
Reserve and Trust Corpus:
Liabilities:
Distribution payable $ - $ 1,902,401
Accrued expenses 45,279 50,155
----------- -----------
$ 45,279 $ 1,952,556
Unallocated reserve 834,655 650,608
Trust Corpus 3 3
----------- -----------
$ 879,937 $ 2,603,167
----------- -----------
----------- -----------
See Notes to Financial Statements.
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C. Condensed Statements of Cash Flows
THREE MONTHS ENDED
APRIL 30,
----------------------
1997 1996
---- ----
Cash flows from operating
activities:
Royalties received $ 262,154 $ 257,895
Interest received 19,131 20,258
Expenses paid (67,429) (93,504)
------------ ------------
Net cash provided by
operating activities $ 213,856 $ 184,649
------------ ------------
Cash flows from investing
activities:
Maturities of
U.S. Government
securities $ 2,644,878 $ 2,161,958
Purchases of U.S.
Government securities (859,762) (742,614)
------------ ------------
Net cash provided by
investing activities $ 1,785,116 $ 1,419,344
------------ ------------
Cash flows from financing
activities:
Net cash (used in) financing
activities, distributions
to Unitholders $ (1,902,401) $ (1,574,401)
------------ ------------
Net increase in cash $ 96,571 $ 29,592
Cash, beginning of quarter 918 9,183
------------ ------------
Cash, end of quarter $ 97,489 $ 38,775
------------ ------------
------------ ------------
Reconciliation of net income
to net cash provided by
operating activities:
Net income $ 184,047 $ 310,510
(Increase) decrease in accrued
income 31,540 (82,921)
Decrease in prepaid insurance 3,145 3,375
(Decrease) in
accrued expenses (4,876) (22,847)
(Decrease) in deferred income -- (23,468)
------------ ------------
Net cash provided by
operating activities $ 213,856 $ 184,649
------------ ------------
------------ ------------
See Notes to Financial Statements.
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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, 1997) 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 months ended
April 30, 1997 and April 30, 1996, (b) the financial position at April
30, 1997 and January 31, 1997, and (c) the cash flows for the three
months ended April 30, 1997 and April 30, 1996, have been made.
Note 2. Earnings per unit are based on weighted average number of units
outstanding during the period (13,120,010 units).
Note 3. The Trustees attempt to maintain at least $500,000 of liquid assets as
part of an Unallocated Reserve. The Unallocated Reserve consists of
these liquid assets and accrued revenue (primarily royalties not yet
received). At April 30, 1997, the Unallocated Reserve was represented
by $752,578 in unallocated cash and U.S. Government securities, and
$82,077 of accrued revenue primarily representing royalties not yet
received by the Trust but anticipated to be received in July 1997 from
Northshore as part of the royalty due for the second calendar quarter,
based upon reported lessee shipping activity for the month of April
1997.
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Item 2. TRUSTEES' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING INFORMATION
Certain statements contained in this document are forward-looking,
including specifically those statements estimating calendar year 1997 production
or shipments. All such forward-looking statements are based on input from the
lessee/operator. The Trust has no control over the operations and activities of
the lessee/operator except within the framework of current agreements. Actual
results could differ materially from those indicated in such statements. For
important factors that could cause actual results to differ materially, see
"Important Factors Affecting Mesabi Trust" below.
BACKGROUND
Leasehold royalty income constitutes the principal source of revenue
to Mesabi Trust. Royalty rates are determined by the terms of Mesabi Trust's
leases and assignments of leases. Overriding royalties are determined by both
the volume and selling price of iron ore products sold. Fee royalties payable
to Mesabi Land Trust, a Minnesota land trust of which Mesabi Trust is the sole
beneficiary ("Mesabi Land Trust"), are based on the amount of crude ore mined,
which crude ore is used to produce iron ore products.
Northshore Mining Corporation ("Northshore") is obligated as lessee
to pay Mesabi Trust base overriding royalties, in varying amounts
constituting a percentage of the gross proceeds of shipments from Silver Bay,
Minnesota of pellets produced from Mesabi Trust lands or, to a limited
extent, other lands, ranging from 2-1/2% of the gross proceeds for the first
one million tons of iron ore product so shipped annually to 6% of the gross
proceeds for all iron ore product shipped in excess of four million tons
annually. In addition, Northshore is obligated to pay to Mesabi Trust
royalty bonuses constituting a percentage of the gross proceeds of iron ore
product shipped from Silver Bay, Minnesota for sale at prices above a
threshold price (which is adjusted on an annual basis for inflation and
deflation and is $37.29 for calendar year 1997), 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 iron ore
product accrues upon the shipment of iron ore product from Silver Bay.
Northshore also is obligated to pay to Mesabi Trust a minimum advance royalty
in equal quarterly installments, which is credited against certain base
overriding royalties and royalty bonuses. The amount of advance royalties
payable is subject to adjustment for inflation and deflation and is $621,606
for calendar year 1997. 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
and from year to year fluctuate greatly. These factors include the normal
reduction of Great Lakes shipping activity during the winter months, and
reduced sales of iron ore product resulting from adverse economic conditions
affecting the steel industry generally.
IMPORTANT FACTORS AFFECTING MESABI TRUST
Under the Agreement of Trust, the activities of the Trust are limited
to the collection of income, the payment of expenses and liabilities, the
distribution of net income and the protection and
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conservation of the assets held. The Trustees are specifically prohibited from
entering into or engaging in any business. This prohibition applies
irrespective of whether the conduct of business activities is deemed by the
Trustees to be necessary or proper for the preservation and protection of the
Trust Estate.
Accordingly, the income of the Trust is highly dependent upon the
activities and operations of its assignee/lessee, Northshore, and the terms and
conditions of the Amended Assignment Agreements. The Trust and the Trustees
have no control over the operations and activities of Northshore except within
the framework of current agreements.
Due to winter weather, and the increasing royalty percentages based on
tonnage shipped in a calendar year, results for a particular quarter are
typically not indicative of results for future quarters or the year as a whole.
Factors which can impact the results of the Trust in any quarter or year
include:
1. SHIPPING CONDITIONS IN THE GREAT LAKES. Shipping activity by
Northshore is dependent upon when the Great Lakes shipping lanes
freeze for the winter months (typically in January) and when they re-
open in the spring (typically late-March or April). Base overriding
royalties to Mesabi Trust are based on shipments made in a calendar
quarter. If there is little or no shipping activity in the first
calendar quarter, the Trust only receives the minimum royalty for that
period.
2. OPERATIONS OF NORTHSHORE. Since the primary portion of the Trust's
revenues are from the shipments of iron ore product by Northshore,
Northshore's processing and shipping activities directly impact the
Trust's revenues in any quarter or year. Shipments by Northshore are
impacted by a myriad of factors, including economic conditions in the
iron ore industry, pricing by competitors, long-term customer
contracts or arrangements by Northshore or its competitors,
availability of ore boats, production at Northshore's mining
operations, and production at Northshore's pelletizing/processing
facility. If any pelletizing line becomes idle for any reason,
production (and shipments) could be adversely impacted.
3. INCREASING ROYALTIES. As described elsewhere, the royalty percentage
paid to the Trust increases as the aggregate tonnage of iron ore
product shipped in any calendar year increases. Assuming a
consistent sales price per ton throughout a calendar year, shipments
of iron ore product later in the year generate a higher royalty to the
Trust.
4. PERCENTAGE OF MESABI TRUST ORE. As described elsewhere, Northshore
has the ability to process and ship iron ore product from lands other
than Mesabi Trust lands. In certain circumstances, the Trust may be
entitled to royalties on those other shipments, but not in all cases.
In general, the Trust will receive higher royalties (assuming all other
factors are equal) if a higher percentage of shipments are from Mesabi
Trust lands. The percentage of shipments from Mesabi Trust lands were
98.4%, 90.6%, 88.3% and 87.8% in calendar years 1996, 1995, 1994, and 1993,
respectively.
COMPARISON OF THREE MONTHS ENDED APRIL 30, 1997 AND APRIL 30, 1996
Mesabi Trust's net income decreased to $184,047 for the fiscal quarter
ended April 30, 1997, as compared to net income of $310,510 for the fiscal
quarter ended April 30, 1996. Mesabi Trust's gross
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income for the fiscal quarter ended April 30, 1997 was $249,745, consisting of
$155,402 in minimum advance royalty income, $83,448 in fee royalty income and
$10,895 in interest income, as compared to gross income of $384,542 consisting
of $242,643 in minimum advance royalty income, $44,431 in overriding royalty
income, $87,389 in fee royalty income and $10,079 in interest income, for the
fiscal quarter ended April 30, 1996. The decrease in royalty income was
primarily due to decreased pellet shipments (decreasing the amount of fee
royalty income) as compared to the comparable prior period. Mesabi Trust's
expenses for the fiscal quarter ended April 30, 1997 were $65,698 compared to
expenses of $74,032 for the fiscal quarter ended April 30, 1996. The decrease
in expenses was primarily due to a decrease in postage and printing costs.
Mesabi Trust's Unallocated Reserve aggregated $834,655 at April 30,
1997, as compared with an Unallocated Reserve of $851,913 at April 30, 1996.
The decrease of $17,258 was due to the net effect of: (a) the decrease in net
income of $126,463 during the fiscal quarter ended April 30, 1997 as compared
with the fiscal quarter ended April 30, 1996 and (b) the January 31, 1997
unallocated reserve balance of $650,608 was $109,205 higher than the January 31,
1996 unallocated reserve balance of $541,403.
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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.
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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: June 13, 1997 By: /s/ Matthew J. Seeley
------------------------------------------------
Name: Matthew J. Seeley
Title: Vice President
* There are no directors
or executive officers of
the registrant.
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EXHIBIT INDEX
Item No. Description
-------- -----------
27.1 Financial Data Schedule......................Filed herewith.
11
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINCANIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF EARNINGS AND THE CONSOLIDATED BALANCE SHEET AND IS
QUALIFIED IN ITS ENITETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1998
<PERIOD-END> APR-30-1997
<CASH> 97
<SECURITIES> 699
<RECEIVABLES> 82
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 879,934
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 879,937
<CURRENT-LIABILITIES> 45,279
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 879,937
<SALES> 238,850
<TOTAL-REVENUES> 249,745
<CGS> 0
<TOTAL-COSTS> 65,698
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 184,047
<INCOME-TAX> 0
<INCOME-CONTINUING> 184,047
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 184,047
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
