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 quarterly period ended June 30, 1995
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: 0-11894
SOUTHERN TIMBER PARTNERS 2
(Exact name of registrant as specified in its charter)
Georgia 13-3139157
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, 29th Floor, New York, NY
ATTN: Andre Anderson 10285
(Address of principal executive offices) (Zip code)
(212) 526-3237
(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
June 30, December 31,
Assets 1995 1994
Timber and timberland, at cost $ 5,669,452 $ 5,700,697
Less accumulated depletion (2,491,940) (2,491,940)
Net timber and timberland 3,177,512 3,208,757
Cash and cash equivalents 743,961 689,002
Accounts receivable - 73,539
Prepaid Insurance 846 5,922
Due from joint venture 9,826 8,494
Investment in joint venture 4,560,521 4,538,504
Total Assets $ 8,492,666 $ 8,524,218
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 22,836 $ 49,505
Due to affiliates 111,006 78,980
Total Liabilities 133,842 128,485
Partners' Capital (Deficit):
General Partner (23,665) (23,296)
Limited Partners (37,191 units outstanding) 8,382,489 8,419,029
Total Partners' Capital 8,358,824 8,395,733
Total Liabilities and Partners' Capital $ 8,492,666 $ 8,524,218
Statement of Partners' Capital
For the six months ended June 30, 1995
Limited General
Partners Partner Total
Balance at December 31, 1994 $ 8,419,029 $ (23,296) $ 8,395,733
Net loss (36,540) (369) (36,909)
Balance at June 30, 1995 $ 8,382,489 $ (23,665) $ 8,358,824
Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1995 1994 1995 1994
Gain (Loss) on sales of
timberland $ 10,826 $ (8,916) $ 10,826 $ (8,916)
Interest 10,983 5,504 21,218 10,856
Other 1,055 565 3,770 3,953
Total Income 22,864 (2,847) 35,814 5,893
Expenses
Property operating 27,575 21,348 54,863 42,751
General and administrative 18,421 18,696 39,877 48,668
Total Expenses 45,996 40,044 94,740 91,419
Loss from operations (23,132) (42,891) (58,926) (85,526)
Other Income
Income (Loss) from joint
venture 6,069 (6,396) 22,017 (12,759)
Net Loss $ (17,063) $(49,287) $ (36,909) $ (98,285)
Net Loss Allocated:
To the General Partner $ (170) $ (493) $ (369) $ (983)
To the Limited Partners (16,893) (48,794) (36,540) (97,302)
$ (17,063) $(49,287) $ (36,909) $ (98,285)
Per limited partnership
unit (37,191 outstanding) $ (.45) $ (1.31) $ (.98) $ (2.61)
Statements of Cash Flows
For the six months ended June 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net loss $ (36,909) $ (98,285)
Adjustments to reconcile net loss to net
cash provided by (used for) operating
activities:
(Gain) Loss on sales of timberland (10,826) 8,916
(Income) Loss from joint venture (22,017) 12,759
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Accounts receivable 73,539 -
Prepaid Insurance 5,076 -
Due from joint venture (1,332) -
Accounts payable and accrued expenses (26,669) (6,786)
Due to affiliates 32,026 (26,708)
Net cash provided by (used for) operating
activities 12,888 (110,104)
Cash Flows from Investing Activities:
Proceeds from sales of timberland 42,071 65,484
Net cash provided by investing activities 42,071 65,484
Net increase (decrease) in cash and cash
equivalents 54,959 (44,620)
Cash and cash equivalents at beginning of period 689,002 850,677
Cash and cash equivalents at end of period $ 743,961 $ 806,057
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1994 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of June 30, 1995, the results of operations for the three and six
months ended June 30, 1995 and 1994, cash flows for the six months ended June
30, 1995 and 1994, and the statement of partners' capital (deficit) for the six
months ended June 30, 1995. Results of operations for the periods are not
necessarily indicative of the results to be expected for the full year.
The following significant event occurred subsequent to fiscal year 1994, which
requires disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
The Partnership completed sales of 1,234 acres of timberland in early
August 1995 for gross proceeds of $678,445 and a net gain of
approximately $106,000.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
The Partnership's cash balance at June 30, 1995 was $743,961, compared to
$689,002 at December 31, 1994. The increase is attributable to cash provided
by operating activities and proceeds from the sale of 74 acres of timberland
during the second quarter of 1995. The sale resulted in the Partnership
receiving gross proceeds of $42,071. The Partnership's cash, along with funds
generated from future timber and timberland sales, are expected to provide
sufficient liquidity for operations.
In addition to the aforementioned sale of 74 acres of timberland during the
second quarter of 1995, the Partnership completed sales of 1,234 acres of
timberland in early August 1995 for gross proceeds of $678,445 and a net gain
of approximately $106,000. These sales will be reflected in the Partnership's
1995 third quarter financial statements.
The Partnership's accounts receivable balance decreased from $73,539 at
December 31, 1994 to $0 at June 30, 1995. The decrease resulted from the
collection in 1995 of net proceeds from a December 21, 1994 closing on the sale
of timberland from the Gray tract.
Prepaid insurance totalled $846 at June 30, 1995, compared to $5,922 at
December 31, 1994. The decrease is attributable to the recognition of
insurance expense for the first two quarters of 1995.
Accounts payable and accrued expenses totalled $22,836 at June 30, 1995,
compared to $49,505 at December 31, 1994. The decrease is primarily
attributable to the payment of professional fees related to appraisal,
inventory evaluation and engineering services, and the timing of the payment of
the Partnership's annual audit fee. Additionally, the balance at June 30, 1995
reflects one-half of the 1995 estimated real estate taxes, whereas the balance
at December 31, 1994 includes the total 1994 real estate taxes.
Due to affiliates increased from $78,980 at December 31, 1994 to $111,006 at
June 30, 1995. The increase is primarily attributable to the timing of
payments of managements fees and, to a lesser extent, an increase in management
fees as a result of the increase in the appraised value of the Laurel View
tract in December 1994.
The Partnership currently owns approximately 5,100 acres of timberland
outright, in addition to a 76% share in the Laurel View tract (the "Joint
Venture"), a 1,709 acre tract located near Savannah, Georgia. While the
long-term trend for timber and timberland prices has been upward, prices are
subject to cyclical fluctuations. Despite the general strengthening of the
real estate construction market, the market for raw land in the area where the
Partnership's tracts are located continues to remain stagnant. As a result,
the Partnership is only pursuing select timberland sales at this time. It is
likely that any increase in the land's value will be largely attributable to
the aging of the premerchantable timber stands.
While the Laurel View tract could be sold as timberland, its primary value
would be realized if sold as a development site due to its coastal location and
close proximity to major interstate highways. The General Partner has prepared
a land use plan which is being incorporated into a more comprehensive marketing
plan. While preparations are underway for marketing the tract, it is difficult
to predict when conditions will be best suited for a sale as it largely depends
on the pace of development in the area surrounding the tract.
Results of Operations
The Partnership's operations resulted in net losses of $17,063 and $36,909,
respectively, for the three and six months ended June 30, 1995, compared to net
losses of $49,287 and $98,285, respectively, for the corresponding periods in
1994. The decreases in net loss are primarily attributable to income generated
from the Joint Venture and gains recognized on the sale of timberland during
the second quarter of 1995 totalling $10,826, compared to a loss on the sale of
timberland during the second quarter of 1994 totalling $8,916.
Interest income totalled $10,983 and $21,218, respectively, for the three and
six months ended June 30, 1995, compared to $5,504 and $10,856, respectively,
for the corresponding periods in 1994. The increase is primarily attributable
to higher interest rates in 1995 earned on the Partnership's average cash
balance.
The Partnership recognized income from the Joint Venture of $6,069 and $22,017,
respectively, for the three and six months ended June 30, 1995, compared to net
losses of $6,396 and $12,759, respectively for the corresponding periods in
1994. The joint venture income in 1995 is attributable to income from sales of
timber from the Laurel View tract during the first six months of 1995 in excess
of ordinary operating expenses. The joint venture loss in 1994 was
attributable to a lack of timber sales and the recording of ordinary operating
expenses.
Property operating expenses were $27,575 and $54,863, respectively, for the
three and six months ended June 30, 1995, compared to $21,348 and $42,751,
respectively, for the corresponding periods in 1994. The increases are due to
higher management fees attributable to the increase in the appraised value of
the Laurel View tract in December 1994.
General and administrative expenses for the three and six months ended June 30,
1995 were $18,421 and $39,877, respectively, compared to $18,696 and $48,668,
respectively, for the corresponding periods in 1994. The decrease for the six
month period is primarily due to a decline in audit and legal fees.
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended June 30, 1995.
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.
SOUTHERN TIMBER PARTNERS 2
BY: TIMBER RESOURCES CORP. II
General Partner
Date: August 11, 1995
BY: /s/ Paul L. Abbott
Paul L. Abbott
Director, President and
Chief Financial Officer
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