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 September 30, 1997
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
Incorporation or Organization I.R.S. Employer 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 ____
Balance Sheets At September 30, At December 31,
1997 1996
Assets
Timber and timberland, at cost: $ 0 $ 1,160,233
Cash and cash equivalents 804,423 914,981
Prepaid insurance 4,045 2,450
Due from related party 31,850 31,850
Investment in joint venture 4,485,941 4,517,604
----------- -----------
Total Assets $ 5,326,259 $ 6,627,118
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 31,966 $ 34,800
Due to affiliates 78,671 66,535
----------- -----------
Total Liabilities 110,637 101,335
----------- -----------
Partners' Capital (Deficit):
General Partner (41,996) (41,996)
Limited Partners (37,191 units outstanding) 5,257,618 6,567,779
----------- -----------
Total Partners' Capital 5,215,622 6,525,783
----------- -----------
Total Liabilities and Partners' Capital $ 5,326,259 $ 6,627,118
=========== ===========
Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1997
General Limited
Partner Partners Total
Balance at December 31, 1996 $ (41,996) $ 6,567,779 $ 6,525,783
Cash distributions (16,154) (1,599,213) (1,615,367)
Net income 16,154 289,052 305,206
--------- ----------- -----------
Balance at September 30, 1997 $ (41,996) $ 5,257,618 $ 5,215,622
========= =========== ===========
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
Income
Gain on sales of timberland $ 0 $ 0 $ 433,981 $ 0
Interest 9,251 17,031 34,665 79,107
Other 1,130 385 3,530 1,880
--------- --------- --------- ---------
Total Income 10,381 17,416 472,176 80,987
--------- --------- --------- ---------
Expenses
Property operating 23,394 21,519 58,054 65,751
General and administrative 23,987 25,430 77,253 92,952
--------- --------- --------- ---------
Total Expenses 47,381 46,949 135,307 158,703
--------- --------- --------- ---------
Income (loss) from operations (37,000) (29,533) 336,869 (77,716)
Other Loss
Loss from joint venture (8,872) (5,615) (31,663) (18,617)
--------- --------- --------- ---------
Net Income (Loss) $ (45,872) $ (35,148) $ 305,206 $ (96,333)
--------- --------- --------- ---------
Net Income (Loss) Allocated:
To the General Partner $ 0 $ (351) $ 16,154 $ (963)
To the Limited Partners (45,872) (34,797) 289,052 (95,370)
--------- --------- --------- ---------
$ (45,872) $ (35,148) $ 305,206 $ (96,333)
========= ========= ========= =========
Per limited partnership unit
(37,191 outstanding) $(1.23) $(.94) $7.77 $(2.56)
------ ----- ----- ------
Statements of Cash Flows
For the nine months ended September 30,
1997 1996
Cash Flows From Operating Activities
Net income (loss) $ 305,206 $ (96,333)
Adjustments to reconcile net income (loss)
to net cash used for operating activities:
Gain on sales of timberland (433,981) 0
Loss from joint venture 31,663 18,617
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Prepaid insurance (1,595) 895
Accounts payable and accrued expenses (2,834) 7,680
Due to affiliates 12,136 (25,368)
------------ ------------
Net cash used for operating activities (89,405) (94,509)
------------ ------------
Cash Flows From Investing Activities
Proceeds from sales of timberland 1,594,214 0
------------ ------------
Net cash provided by investing activities 1,594,214 0
------------ ------------
Cash Flows From Financing Activities
Cash distributions paid (1,615,367) (1,690,800)
------------ ------------
Net cash used for financing activities (1,615,367) (1,690,800)
------------ ------------
Net decrease in cash and cash equivalents (110,558) (1,785,309)
Cash and cash equivalents, beginning of period 914,981 2,332,145
------------ ------------
Cash and cash equivalents, end of period $ 804,423 $ 546,836
============ ============
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1996 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 September 30, 1997 and the results of operations for the three
and nine months ended September 30, 1997 and 1996, cash flows for the nine
months ended September 30, 1997 and 1996 and the statement of partners' capital
(deficit) for the nine months ended September 30, 1997. Results of operations
for the period are not necessarily indicative of the results to be expected for
the full year.
Reclassification. Certain prior year amounts have been reclassified to conform
to the current year's presentation.
The following significant events have occurred subsequent to fiscal year 1996,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
On April 21, 1997, the Partnership completed a combined sale of the entire
Claxton and Southern Timberland Tracts for net proceeds of $1,594,214 and a net
gain of approximately $434,000.
On September 18, 1997, the Partnership entered into a contract with an
unaffiliated third party for the sale of the Laurel View Tract, a 1,709 acre
tract of land owned as part of a joint venture with Southern Timber Partners I,
for a price of $6.3 million. Southern Timber Partners 2 owns a 76% interest in
the Laurel View Tract.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
On April 21, 1997 the Partnership completed a combined sale of the entire
Claxton and Southern Timberland Tracts for net proceeds of $1,594,214 and a net
gain of approximately $434,000. On April 30, 1997, the Partnership paid a cash
distribution to the limited partners in the amount of $1,599,213, or $43 per
Unit, representing proceeds from the sale of the Claxton and Southern
Timberland Tracts.
The Partnership's sole remaining timberland asset is a 76% interest in a joint
venture (the "Joint Venture") which owns the Laurel View Tract, a 1,709 acre
tract located near Savannah, Georgia. The remaining 24% interest in the Joint
Venture is owned by an affiliated partnership, Southern Timber Partners 1. The
partnerships began actively marketing the parcel for sale during 1996 and
engaged the services of CB Commercial, a national commercial real estate
brokerage firm. Following discussions with several possible buyers, on
September 18, 1997 the Partnership entered into a contract with an unaffiliated
third party for the sale of the Laurel View Tract for a price of $6.3 million.
It is currently anticipated that the sale will be consummated prior to the end
of November 1997. Thereafter, the net proceeds from the sale and cash reserves
available after payment of any remaining Partnership liabilities will be
distributed to Limited Partners and the Partnership will be dissolved. While
it is the General Partner's objective to dissolve the Partnership and make
liquidating distributions prior to the end of 1997, there can be no assurance
that the sale will be consummated as contemplated, or that a sale will result
in any particular level of distributable cash.
The Partnership had cash and cash equivalents at September 30, 1997 of $804,423
compared to $914,981 at December 31, 1996. The decrease is primarily due to
distributions to the limited partners and the payment of property operating and
general and administrative expenses in excess of proceeds from the sales of
timberland, interest and other income in 1997, and an increase in the loss from
the Joint Venture. The Partnership's cash, along with funds generated from
future timberland sales from the Joint Venture, are expected to provide
sufficient liquidity for operations.
Accounts payable and accrued expenses totaled $31,966 at September 30, 1997,
compared to $34,800 at December 31, 1996. The decrease is primarily
attributable to the payment of professional fees and postage expenses.
Due to affiliates totaled $78,671 at September 30, 1997, compared to $66,535 at
December 31, 1996. The increase is primarily due to the timing of payments.
Results of Operations
The Partnership's operations resulted in a net loss of $45,872 for the three
months ended September 30, 1997, compared to a net loss of $35,148 for the
corresponding period in 1996. The higher net loss for the 1997 period is
primarily attributable to a decrease in total income resulting from a decrease
in interest income. The Partnership's operations resulted in net income of
$305,206 for the nine months ended September 30, 1997, compared to a net loss
of $96,333 for the corresponding period in 1996. The change from net loss to
net income for the nine-month period is primarily due to an increase in total
income resulting from the gain on the sale of the Claxton and Southern
Timberland Tracts and, to a lesser extent, a decrease in total expenses, which
was partially offset by an increase in loss from the Joint Venture.
The Partnership generated total income of $10,381 and $472,176 for the three
and nine months ended September 30, 1997, respectively, compared to total
income of $17,416 and $80,987 for the corresponding periods in 1996. The
decrease in total income for the three-month period is due to a decrease in
interest income, which was partially offset by an increase in other income. The
increase in total income for the nine-month period is primarily attributable to
the gain on sales of timberland, which was partially offset by a decrease in
interest income. Interest income totaled $9,251 and $34,665 for the three and
nine months ended September 30, 1997, respectively, compared to $17,031 and
$79,107, respectively, for the corresponding periods in 1996. The decreases
are primarily the result of lower average cash balances in 1997.
Total expenses were $47,381 and $135,307 for the three and nine months ended
September 30, 1997, compared to $46,949 and $158,703 for the corresponding
periods in 1996. The increase for the three-month period is primarily the
result of higher property operating expenses, which were partially offset by
lower general and administrative expenses. The decrease for the nine-month
period is primarily the result of lower property operating and general and
administrative expenses. General and administrative expenses for the three and
nine months ended September 30, 1997 were $23,987 and $77,253, respectively,
compared to $25,430 and $92,952 for the same periods in 1996. During the 1997
periods, certain expenses incurred by an unaffiliated third party service
provider in servicing the Partnership, which were voluntarily absorbed by
affiliates of the General Partner in prior periods, were reimbursable to the
General Partner and its affiliates. For the nine-month period, these expenses
were partially offset by lower appraisal and other professional fees, resulting
in a decrease in general and administrative expenses for the 1997 period.
Property operating expenses were $58,054 for the nine months ended
September 30, 1997, compared to $65,751 for the corresponding period in 1996.
The decrease is mainly due to a decline in real estate fees for 1997 due to
the sale of timberland.
The Partnership recognized losses from joint venture of $8,872 and $31,663 for
the three and nine months ended September 30, 1997, respectively, compared with
losses from joint venture of $5,615 and $18,617 for the corresponding periods
in 1996. The increased losses from joint venture are mainly attributable to
the payment of joint venture general and administrative expenses in 1997,
whereas no such costs were incurred during 1996.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K -
On September 25, 1997 the Partnership filed a Form 8-K
reporting that on September 18, 1997 the Partnership
entered into a contract with an unaffiliated third party
for the sale of the Laurel View Tract, a 1,709 acre
tract of land owned as part of a joint venture with
Southern Timber Partners I.
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: November 12, 1997
BY: /s/Robert J. Hellman
Robert J. Hellman
President, Director and Chief
Financial Officer
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<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Sep-30-1997
<CASH> 804,423
<SECURITIES> 0
<RECEIVABLES> 31,850
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 840,318
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,326,259
<CURRENT-LIABILITIES> 31,966
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<COMMON> 0
0
0
<OTHER-SE> 5,215,622
<TOTAL-LIABILITY-AND-EQUITY> 5,326,259
<SALES> 433,981
<TOTAL-REVENUES> 472,176
<CGS> 0
<TOTAL-COSTS> 58,054
<OTHER-EXPENSES> 77,253
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 305,206
<INCOME-TAX> 0
<INCOME-CONTINUING> 305,206
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 305,206
<EPS-PRIMARY> 7.77
<EPS-DILUTED> 7.77
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