SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
- - -------------------------------------------------------------------------------
FORM 10-Q
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
------------------------------------------
For Quarter Ended March 31, 1994 Commission file number: 1-8859
IP TIMBERLANDS, LTD.
(Exact name of registrant as specified in its charter)
Texas 13 3259241
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Manhattanville Road, Purchase, NY 10577
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 914-397-1500
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 / /
Class A Depositary Units outstanding on April 29, 1994: 46,445,729
IP TIMBERLANDS, LTD.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Statement of Earnings -- 4
Three Months Ended March 31, 1994 and 1993.
Consolidated Balance Sheet -- 5
March 31, 1994 and December 31, 1993.
Consolidated Statement of Cash Flows -- 6
Three Months Ended March 31, 1994 and 1993.
Notes to Consolidated Financial Statements. 7 - 9
Item 2. Management's Discussion and Analysis of 10 - 12
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults upon Senior Securities *
Item 4. Submission of Matters to a Vote of *
Security Holders
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
* Omitted since no answer is called for, answer is in the negative or
inapplicable.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
conformity with current Securities and Exchange Commission regulations
governing interim financial reporting. In the opinion of the managing
general partner of IP Timberlands, Ltd. (the "Registrant"), a Texas
limited partnership, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position of the Registrant as
of March 31, 1994, and the results of operations for the quarter ended
March 31, 1994. It is suggested that these interim financial statements
be read in conjunction with the financial statements and notes thereto,
incorporated by reference in the Registrant's Form 10-K for the year
ended December 31, 1993, which has been previously filed with the
Commission.
The results for the interim period covered by this report are not
necessarily indicative of what the results will be for the remainder of
the year.
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IP TIMBERLANDS, LTD.
CONSOLIDATED STATEMENT OF EARNINGS
(In thousands -- except per unit data)
(Unaudited)
Three Months Ended
March 31,
--------------------------
1994 1993
-------- --------
REVENUES
Stumpage sales
International Paper $ 47,502 $ 43,213
Unaffiliated parties 34,396 30,841
Forestland sales 26,583 27,499
Other income, net 1,098 1,715
-------- --------
Total revenues 109,579 103,268
-------- --------
OPERATING COSTS AND EXPENSES
Depletion
International Paper 2,766 2,710
Unaffiliated parties 3,030 2,610
Cost of forestlands sold 4,508 6,584
Amortization of roads 539 545
Forest operations 9,232 9,022
General and administrative 5,187 5,425
Property and severance taxes 4,412 4,078
-------- --------
Total operating costs and expenses 29,674 30,974
-------- --------
OPERATING EARNINGS 79,905 72,294
INTEREST INCOME 2,820 3,387
GENERAL PARTNERS' INTEREST IN IPTO (827) (757)
-------- --------
NET PARTNERSHIP EARNINGS $ 81,898 $ 74,924
-------- --------
-------- --------
EARNINGS PER CLASS A UNIT (NOTE 5) $ 1.49 $ 1.41
-------- --------
-------- --------
The accompanying notes are an integral part of these financial statements.
-4-
IP TIMBERLANDS, LTD.
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
March 31, December 31,
1994 1993
---------- ------------
ASSETS
CURRENT ASSETS
Cash and temporary investments $ 7,816 $ 6,782
Notes receivable - International
Paper 322,531 276,146
Due from International Paper 10,839 -
Accounts and notes receivable 25,461 37,279
---------- ----------
Total current assets 366,647 320,207
NOTES RECEIVABLE 2,607 1,872
FORESTLANDS 735,613 736,685
ROADS, net of accumulated amortiza-
tion of $47,209 (1994) and
$46,747 (1993) 34,813 35,269
---------- ----------
Total Assets $1,139,680 $1,094,033
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable and accrued
liabilities $ 483 $ 431
Due to International Paper - 3,825
Accrued property and severance
taxes 6,659 5,577
Customer advance payments 3,964 2,725
---------- ----------
Total current liabilities 11,106 12,558
LEASE OBLIGATIONS 1,498 1,567
GENERAL PARTNERS' INTEREST IN IPTO 33,735 33,264
PARTNERS' CAPITAL
General partners 32,788 32,321
Limited partners 1,060,553 1,014,323
---------- ----------
Total Liabilities and Partners'
Capital $1,139,680 $1,094,033
---------- ----------
---------- ----------
The accompanying notes are an integral part of these financial statements.
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IP TIMBERLANDS, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
--------------------------
1994 1993
--------- --------
OPERATING ACTIVITIES
Net Partnership earnings $ 81,898 $ 74,924
Noncash items
Depletion 5,796 5,320
Cost of forestlands sold 4,508 6,584
Amortization of roads 539 545
Other, net 519 1,198
Changes in current assets and
liabilities
Accounts and notes receivable 11,083 (11,531)
Due from International Paper (14,664) (20,596)
Customer advance payments 1,239 1,336
Other, net 1,066 1,538
--------- --------
Cash provided by operations 91,984 59,318
--------- --------
INVESTMENT ACTIVITIES
Investment in forestlands and roads (9,008) (13,098)
Loans to International Paper (101,685) (50,582)
Repayment of loans by International
Paper 55,300 39,500
--------- --------
Cash used for investment
activities (55,393) (24,180)
--------- --------
FINANCING ACTIVITIES
Distributions to partners of IPT
and IPTO (35,557) (35,557)
--------- --------
CHANGE IN CASH AND TEMPORARY
INVESTMENTS 1,034 (419)
CASH AND TEMPORARY INVESTMENTS
Beginning of the period 6,782 6,630
--------- --------
End of the period $ 7,816 $ 6,211
--------- --------
--------- --------
The accompanying notes are an integral part of these financial statements.
-6-
IP TIMBERLANDS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION
IP Timberlands, Ltd. (the "Registrant" or "IPT"), is a Texas limited
partnership. IP Forest Resources Company ("IPFR"), a wholly owned
subsidiary of International Paper, is the managing general partner of
the Registrant and International Paper is the special general partner.
The Registrant operates through IP Timberlands Operating Company, Ltd.
("IPTO"), a Texas limited partnership, in which the Registrant holds a
99% limited partner's interest, and IPFR and International Paper
together hold a 1% general partners' interest. IPFR is also the
managing general partner of IPTO, and International Paper is the special
general partner.
2. TRANSACTIONS WITH INTERNATIONAL PAPER
The Registrant reimburses IPFR and International Paper for both direct
and indirect costs and expenses associated with the management and
operations of the Partnerships. Charges from International Paper for
indirect expenses for the quarters ended March 31, 1994 and 1993 were
$2.3 million and $2.5 million, respectively. The interim period charges
are based upon estimates of the total charges for the year.
Interest income from notes receivable from International Paper was $2.5
million for the quarters ended March 31, 1994 and 1993.
3. TEMPORARY INVESTMENTS
Temporary investments with a maturity of three months or less are
treated as cash equivalents and are stated at cost. Temporary
investments at March 31, 1994 and December 31, 1993 were $6.8 million
and $6.5 million respectively.
-7-
4. RECEIVABLES
The major classifications of Accounts and Notes Receivable are shown
below. No allowance for doubtful accounts was considered necessary.
March 31, December 31,
1994 1993
--------- ------------
(In thousands)
Notes receivable - trade $24,210 $35,329
Accounts receivable - trade 675 1,268
Accrued interest and other
receivables 576 682
------- -------
$25,461 $37,279
------- -------
------- -------
5. COMPUTATION OF EARNINGS PER CLASS A UNIT
The Partnership Agreement provides for the allocation of Partnership
earnings among the general and limited partners. The following table
presents the computation of earnings per Class A Unit (in thousands,
except per unit data):
Three Months Ended
March 31,
----------------------
1994 1993
------- -------
Allocation to Primary Account $72,471 $68,595
Allocation to Secondary Account 9,427 6,329
------- -------
Net Partnership Earnings 81,898 74,924
------- -------
95% of the Primary Account 68,848 65,166
4% of the Secondary Account 377 253
------- -------
Earnings Allocated to
Class A Limited Partners $69,225 $65,419
------- -------
------- -------
Weighted Average Class A
Units Outstanding 46,446 46,446
------- -------
------- -------
Earnings Per Class A Unit $ 1.49 $ 1.41
------- -------
------- -------
-8-
6. Partners' Capital
The following table presents an analysis of the activity in Partners'
Capital (in thousands):
Partners' Capital
---------------------------------
General Limited
Partners' Partners' Total
--------- ---------- ----------
Three Months Ended March 31, 1994
Balance - January 1, 1994 $32,321 $1,014,323 $1,046,644
Net earnings for the period 819 81,079 81,898
Partner distributions (352) (34,849) (35,201)
------- ---------- ----------
Balance - March 31, 1994 $32,788 $1,060,553 $1,093,341
------- ---------- ----------
------- ---------- ----------
Three Months Ended March 31, 1993
Balance - January 1, 1993 $32,456 $1,027,703 $1,060,159
Net earnings for the period 749 74,175 74,924
Partner distributions (352) (34,849) (35,201)
------- ---------- ----------
Balance - March 31, 1993 $32,853 $1,067,029 $1,099,882
------- ---------- ----------
------- ---------- ----------
The authorized and outstanding Class A and B Depositary Units at March
31, 1994, and 1993, which represent the limited partnership interests of
IPT, are presented below. The Class B Units are 100% owned by
International Paper and affiliates.
CLASS A DEPOSITARY UNITS OUTSTANDING
--------------------------------------- CLASS B
International Unaffiliated DEPOSITARY
Paper and Third UNITS
Affiliates Parties Total OUTSTANDING
------------- ------------ ---------- -----------
Number of units 39,146,229 7,299,500 46,445,729 50,976,480
- - -------------------------------------------------------------------------
Percentage of total 84% 16% 100% 100%
- - -------------------------------------------------------------------------
Under the terms of the Partnership Agreement, International Paper has
the right to purchase, at any time, all outstanding Class A Units at a
price equal to 133% of the market price at that time.
-9-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total Partnership revenues for the first quarter of 1994 were $109.6
million, or 6% higher than in the first quarter of 1993. Although total
harvest volumes were essentially the same, higher average prices during
the first quarter of 1994 led to an 11% increase in stumpage sales
revenues. Net Partnership earnings for the quarter were 9% higher than
for the comparable period of 1993.
In the South, a 5% increase in volumes, combined with an 8% increase in
average prices, led to stumpage sales revenues 13% above the 1993 first
quarter level. Strong lumber and panel markets and wet weather
conditions early in the period caused sawlog prices to trend higher in
this region. Although volumes declined 12% in the West, revenues from
stumpage sales were 5% higher than the prior year level due to record
level prices. In the Northeast, the first quarter volumes were slightly
lower than for the same period of 1993 due to harsh weather conditions
early in the quarter. However, strong demand from Canadian sawmills and
domestic lumber producers supported prices which were 24% higher than
first quarter 1993, resulting in a 21% increase in stumpage sales
revenues.
Forestland sales of selected nonstrategic holdings vary from year to
year. First quarter forestland sales were $26.6 million, down slightly
from $27.5 million for the first quarter of 1993.
Amounts attributable to the Primary and Secondary Accounts for major
categories in the statement of earnings were (in thousands):
Three Months
Ended
March 31,
-----------------
1994 1993
------- -------
Stumpage Sales
Primary Account $81,898 $72,044
Secondary Account - 2,010
------- -------
$81,898 $74,054
------- -------
------- -------
Forestland Sales
Primary Account $12,096 $14,610
Secondary Account 14,487 12,889
------- -------
$26,583 $27,499
------- -------
------- -------
Operating Costs and Expenses
Primary Account $22,921 $20,962
Secondary Account 6,753 10,012
------- -------
$29,674 $30,974
------- -------
------- -------
Operating costs and expenses by category are shown in the consolidated
statement of earnings on page 4.
-10-
Sales volumes attributable to timber sales were (in thousand cunits):
Three Months
Ended
March 31,
----------------
1994 1993
---- ----
Used by International Paper facilities 223 286
Resold by International Paper 190 199
Sold to unaffiliated parties 441 360
--- ---
854 845
--- ---
--- ---
LIQUIDITY AND CAPITAL RESOURCES
IPT had cash and temporary investments of $7.8 million, an intercompany
account receivable from International Paper of $10.8 million and notes
receivable from International Paper of $322.5 million at March 31, 1994,
giving the Partnership $341.1 million in liquid assets. Cash is either
invested in temporary investments or loaned to International Paper at
market rates. The breakdown of liquid assets between the Primary and
Secondary Accounts was (in thousands):
March 31, 1994 December 31, 1993
-------------- -----------------
Cash, temporary investments
and current receivables from
International Paper
Primary Account $215,983 $158,556
Secondary Account 125,203 124,372
-------- --------
$341,186 $282,928
-------- --------
-------- --------
Total per Class A Unit $ 4.53 $ 3.35
-------- --------
-------- --------
In addition, current assets at March 31, 1994 and December 31, 1993
included $1.3 million and $2.0 million of accounts receivable and $24.2
million and $35.3 million of notes receivable, respectively, from
parties other than International Paper due within the next 12 months.
-11-
The following table reflects cash flow from operations, after capital
expenditures, attributable to the Class A Units (in thousands).
Primary Secondary IPT
Account Account Total
-------- --------- --------
Three Months Ended March 31, 1994
Cash provided by operations $ 84,271 $ 7,713 $ 91,984
Investment in forestlands and roads (6,044) (2,964) (9,008)
IPTO general partners'
interest in above (782) (48) (830)
-------- ------- --------
Cash flow after capital expenditures 77,445 4,701 $ 82,146
Class A Unit allocation factor 95% 4% --------
-------- ------- --------
Cash flow after capital
expenditures for Class A Units $ 73,573 $ 188 $ 73,761
-------- ------- --------
-------- ------- --------
Distributions declared for Class A Units $ 33,441 $ 33,441
-------- ------- --------
-------- ------- --------
Three Months Ended March 31, 1993
Cash provided by operations $ 44,006 $15,312 $ 59,318
Investment in forestlands and roads (10,218) (2,880) (13,098)
IPTO general partners'
interest in above (338) (124) (462)
-------- ------- --------
Cash flow after capital expenditures 33,450 12,308 $ 45,758
Class A Unit allocation factor 95% 4% --------
-------- ------- --------
Cash flow after capital
expenditures for Class A Units $ 31,778 $ 492 $ 32,270
-------- ------- --------
-------- ------- --------
Distributions declared for Class A Units $ 33,441 $ 33,441
-------- ------- --------
-------- ------- --------
In April, IPT declared a cash distribution of $.72 per Class A Unit for
the first calendar quarter of 1994. This distribution is payable on May
16, 1994 to holders of record as of April 29, 1994.
Capital expenditures, including expenditures for reforestation of
harvested forestland, acquisition of capitalized leases and road
construction, are expected to be approximately $50 million for 1994.
-12-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) No Current Reports on Form 8-K have been filed during the quarter
for which this report is filed.
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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.
IP Timberlands, Ltd.
By: IP Forest Resources Company
Managing General Partner
(Registrant)
Date: May 6, 1994 By /s/ James W. Guedry
---------------------------------------
James W. Guedry
Vice President and Secretary
Date: May 6, 1994 By /s/ Frederick L. Bleier
---------------------------------------
Frederick L. Bleier
Treasurer and Controller
and Chief Financial and
Accounting Officer
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