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 September 30, 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 October 31, 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 and Nine Months Ended
September 30, 1994 and 1993.
Consolidated Balance Sheet - 5
September 30, 1994 and December 31, 1993.
Consolidated Statement of Cash Flows - 6
Nine Months Ended September 30, 1994 and 1993.
Notes to Consolidated Financial Statements. 7 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 12
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.
- 2 -
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 September 30, 1994, and the results of
operations for the quarter and nine months ended September 30, 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.
- 3 -
IP TIMBERLANDS, Ltd.
CONSOLIDATED STATEMENT OF EARNINGS
(In thousands - except per unit data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
1994 1993 1994 1993
------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Stumpage Sales
International Paper $44,574 $ 43,392 $132,887 $128,013
Unaffiliated parties 26,758 34,171 84,255 77,827
Forestland sales 19,182 26,050 67,975 79,558
Other income, net 7,929 6,883 11,895 11,727
------- -------- -------- --------
Total revenues 98,443 110,496 297,012 297,125
------- -------- -------- --------
Operating Costs and Expenses
Depletion
International Paper 2,992 2,391 8,009 7,161
Unaffiliated parties 2,436 3,285 8,315 7,796
Cost of forestlands sold 4,143 1,751 9,964 11,601
Amortization of roads 521 538 1,579 1,623
Forest operations 11,190 10,247 30,151 27,959
General and administrative 4,969 5,024 15,181 15,837
Property and severance taxes 4,168 4,134 12,833 12,463
------- -------- -------- --------
Total operating costs and
expenses 30,419 27,370 86,032 84,440
------- -------- -------- --------
Operating Earnings 68,024 83,126 210,980 212,685
Interest Income 5,070 3,214 11,607 9,719
General Partners' Interest
in IPTO (731) (863) (2,226) (2,224)
------- -------- -------- --------
Net Partnership Earnings $72,363 $ 85,477 $220,361 $220,180
======= ======== ======== ========
Earnings per Class A Unit
(Note 5) $ 1.47 $ 1.47 $ 4.05 $ 3.93
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 4 -
IP TIMBERLANDS, Ltd.
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
Assets
Current Assets
Cash and temporary investments $ 7,971 $ 6,782
Notes receivable - International Paper 416,177 276,146
Due from International Paper 7,033 -
Accounts and notes receivable 9,829 37,279
---------- ----------
Total current assets 441,010 320,207
Notes receivable 2,381 1,872
Forestlands 731,198 736,685
Roads, net of accumulated amortization
of $46,971 (1994) and $46,747 (1993) 35,064 35,269
---------- ----------
Total assets $1,209,653 $1,094,033
========== ==========
Liabilities and Partners' Capital
Current Liabilities
Accounts payable and accrued
liabilities $ 402 $ 431
Due to International Paper - 3,825
Accrued property and severance taxes 7,872 5,577
Customer advance payments 4,106 2,725
---------- ----------
Total current liabilities 12,380 12,558
Lease Obligations 1,448 1,567
General Partners' Interest in IPTO 34,423 33,264
Partners' Capital
General partners 33,469 32,321
Limited partners 1,127,933 1,014,323
---------- ----------
Total Liabilities and Partners' Capital $1,209,653 $1,094,033
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 5 -
IP TIMBERLANDS, Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
1994 1993
--------- ---------
<S> <C> <C>
Operating Activities
Net Partnership earnings $ 220,361 $ 220,180
Noncash items
Depletion 16,324 14,957
Cost of forestland sold 9,964 11,601
Amortization of roads 1,579 1,623
Other, net 2,294 1,281
Changes in current assets and liabilities
Accounts and notes receivable 26,941 32,737
Due from International Paper (10,858) (19,019)
Customer advance payments 1,381 371
Other, net 2,147 3,073
--------- ---------
Cash provided by operations 270,133 266,804
--------- ---------
Investment Activities
Investment in forestlands and roads (22,243) (36,108)
Loans to International Paper (266,571) (246,286)
Repayment of loans by International Paper 126,540 122,214
--------- ---------
Cash used for investment activities (162,274) (160,180)
--------- ---------
Financing Activities
Distributions to partners of IPT and IPTO (106,670) (106,670)
--------- ---------
Change in Cash and Temporary Investments 1,189 (46)
Cash and Temporary Investments
Beginning of the period 6,782 6,630
--------- ---------
End of the period $ 7,971 $ 6,584
========= =========
</TABLE>
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 September 30, 1994 and 1993 were $2.3 and $2.5 million,
respectively, and for the nine-month periods ended September 30, 1994 and 1993
were $7.0 and $7.6 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 for the quarters
ended September 30, 1994 and 1993 was $4.7 and $3.0 million, respectively, and
for the nine-month periods ended September 30, 1994 and 1993 was $10.6 and $8.4
million, respectively.
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 September
30, 1994 and December 31, 1993 were $6.1 and $6.5 million, respectively.
- 7 -
4. Receivables
The major classifications of current receivables are shown below. No allowance
for doubtful accounts was considered necessary.
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
(In thousands)
<S> <C> <C>
Notes receivable - trade $8,480 $35,329
Accounts receivable - trade 1,033 1,268
Accrued interest and other receivables 316 682
------ -------
$9,829 $37,279
====== =======
</TABLE>
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):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
------- ------- --------- --------
<S> <C> <C> <C> <C>
Allocation to Primary Account $71,621 $71,418 $ 196,875 $190,808
Allocation to Secondary Account 742 14,059 23,486 29,372
------- ------- --------- --------
Net Partnership Earnings 72,363 85,477 220,361 220,180
------- ------- --------- --------
95% of the Primary Account 68,040 67,847 187,031 181,268
4% of the Secondary Account 30 562 940 1,175
------- ------- --------- --------
Earnings Allocated to
Class A Limited Partners $68,070 $68,409 $187,971 $182,443
======= ======= ======== ========
Weighted Average Class A
Units Outstanding 46,446 46,446 46,446 46,446
======= ======= ======== ========
Earnings Per Class A Unit $ 1.47 $ 1.47 $ 4.05 $ 3.93
======= ======= ======== ========
</TABLE>
- 8 -
6. Partners' Capital
The following tables present an analysis of the activity in Partners' Capital
(in thousands):
<TABLE>
<CAPTION>
Partners' Capital
---------------------------------
General Limited
Partners' Partners' Total
--------- ---------- ----------
<S> <C> <C> <C>
Nine Months Ended September 30, 1994
Balance - January 1, 1994 $32,321 $1,014,323 $1,046,644
Net earnings for the period 2,204 218,157 220,361
Partner distributions (1,056) (104,547) (105,603)
------- ---------- ----------
Balance - September 30, 1994 $33,469 $1,127,933 $1,161,402
======= ========== ==========
Nine Months Ended September 30, 1993
Balance - January 1, 1993 $32,456 $1,027,703 $1,060,159
Net earnings for the period 2,202 217,978 220,180
Partner distributions (3,012) (298,152) (301,164)
------- ---------- ----------
Balance - September 30, 1993 $31,646 $ 947,529 $ 979,175
======= ========== ==========
</TABLE>
The authorized and outstanding Class A and B Depositary Units at September 30,
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.
<TABLE>
<CAPTION>
Class A Depositary Units Outstanding
---------------------------------------- Class B
International Unaffiliated Depositary
Paper and Third Units
Affiliates Parties Total Outstanding
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Number of Units 39,146,229 7,299,500 46,445,729 50,976,480
Percentage of total 84% 16% 100% 100%
=== === ==== ====
</TABLE>
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
Revenues from stumpage sales were 8% below third quarter 1993 levels due to a
slight decline in harvest volume. This decline, together with lower forestland
sales, led to total Partnership revenues of $98.4 million for the third quarter
of 1994, 11% lower than for the comparable period of 1993. Net Partnership
earnings were $72.4 million, down 15% from the same quarter in 1993.
Stumpage sales revenues in the South were approximately the same as in the third
quarter of 1993. Average prices in this region were 5% above prior year
levels, offsetting a 4% decline in volume. In the West, revenues from stumpage
sales were 28% below 1993 levels. A weak export market and high mill
inventories led to lower demand for Partnership timber. As a result, harvest
volumes dropped 31% below third quarter 1993 levels. Prices softened during
the quarter but remained slightly above prior year levels in this region. In
the Northeast, strong demand from Canadian lumber mills and improved logging
conditions following the spring thaw led to a seasonal increase in harvest
activity, although volumes were slightly below 1993 levels. A 35% increase in
overall average prices led to stumpage sales revenues 29% higher than in the
1993 third quarter.
Forestland sales were $19.2 million for the 1994 third quarter, down $6.9
million from the same period in 1993. Nearly two thirds of these revenues were
allocated to Class A Units since the associated trees would have been harvested
during the Initial Term.
Amounts attributable to the Primary and Secondary Accounts for major categories
in the statement of earnings were (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
1994 1993 1994 1993
------- ------- -------- --------
<S> <C> <C> <C> <C>
Stumpage Sales
Primary Account $71,332 $77,415 $217,142 $203,681
Secondary Account - 148 - 2,159
------- ------- -------- --------
$71,332 $77,563 $217,142 $205,840
======= ======= ======== ========
Forestland Sales
Primary Account $12,335 $ 6,039 $ 25,578 $ 28,697
Secondary Account 6,847 20,011 42,397 50,861
------- ------- -------- --------
$19,182 $26,050 $ 67,975 $ 79,558
======= ======= ======== ========
Operating Costs and Expenses
Primary Account $21,610 $20,006 $ 60,975 $ 56,672
Secondary Account 8,809 7,364 25,057 27,768
------- ------- -------- --------
$30,419 $27,370 $ 86,032 $ 84,440
======= ======= ======== ========
</TABLE>
- 10 -
Operating costs and expenses by category are shown in the consolidated statement
of earnings on page 4.
Sales volumes attributable to timber sales were (in thousand cunits):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Used by International
Paper facilities 283 258 718 740
Resold by International Paper 153 177 468 521
Sold to unaffiliated parties 434 496 1,178 1,112
--- --- ----- -----
870 931 2,364 2,373
=== === ===== =====
</TABLE>
Liquidity and Capital Resources
IPT had cash and temporary investments of $8 million, an intercompany account
receivable from International Paper of $7 million and notes receivable from
International Paper of $416 million at September 30, 1994, giving the
Partnership $431 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):
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
Cash, temporary investments
and current receivables from
International Paper
Primary Account $290,230 $158,556
Secondary Account 140,951 124,372
-------- --------
$431,181 $282,928
======== ========
Total per Class A Unit $ 6.06 $ 3.35
======== ========
</TABLE>
In addition, current assets at September 30, 1994 and December 31, 1993,
included $1.3 million and $2.0 million of accounts receivable, respectively,
and $8.5 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).
<TABLE>
<CAPTION>
Primary Secondary IPT
Account Account Total
-------- --------- --------
<S> <C> <C> <C>
Nine Months Ended September 30, 1994
Cash provided by operations $224,728 $ 45,405 $270,133
Investment in forestlands and roads (10,274) (11,969) (22,243)
IPTO general partners'
interest in above (2,145) (334) (2,479)
-------- -------- --------
Cash flow after capital expenditures 212,309 33,102 $245,411
========
Class A Unit allocation factor 95% 4%
-------- --------
Class A Unit cash flow
after capital expenditures $201,694 $ 1,324 $203,018
======== ======== ========
Distributions declared for Class A
Units $100,323 $100,323
======== ========
Nine Months Ended September 30, 1993
Cash provided by operations $186,073 $ 80,731 $266,804
Investment in forestlands and roads (25,613) (10,495) (36,108)
IPTO general partners'
interest in above (1,605) (702) (2,307)
-------- -------- --------
Cash flow after capital expenditures 158,855 69,534 $228,389
========
Class A Unit allocation factor 95% 4%
-------- --------
Class A Unit cash flow
after capital expenditures $150,913 $ 2,781 $153,694
======== ======== ========
Distributions declared for Class A
Units $286,106 $286,106
======== ========
</TABLE>
In October, IPT declared a cash distribution of $.72 per Class A Unit for the
third calendar quarter of 1994. This distribution is payable on November 15,
1994 to holders of record as of October 31, 1994. In September 1993, IPT
declared a special cash distribution of $4.00 per unit, as management believed
that existing cash balances plus projected future cash flows would be adequate
for capital expenditure, working capital and regular quarterly distribution
requirements during the remainder of the Initial Term.
Capital expenditures, including expenditures for reforestation of harvested
forestland, acquisition of capitalized leases and road construction, are
expected to be approximately $30 million for 1994.
- 12 -
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) No Current Reports on Form 8-K have been filed during the quarter for
which this report is filed.
- 13 -
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: November 11, 1994 By /s/ James W. Guedry
James W. Guedry
Vice President and Secretary
Date: November 11, 1994 By /s/ Frederick L. Bleier
Frederick L. Bleier
Treasurer and Controller
and Chief Financial and
Accounting Officer
- 14 -
EXHIBIT INDEX
Exhibit No.
- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Earnings and the Consolidated Balance Sheet of IP
Timberlands, Ltd. 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> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 7,971
<SECURITIES> 0
<RECEIVABLES> 433,039
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 441,010
<PP&E> 766,262
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,209,653
<CURRENT-LIABILITIES> 12,380
<BONDS> 0
0
0
<COMMON> 1,161,402
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,209,653
<SALES> 285,117
<TOTAL-REVENUES> 297,012
<CGS> 0
<TOTAL-COSTS> 86,032
<OTHER-EXPENSES> 2,226
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (11,607)
<INCOME-PRETAX> 220,361
<INCOME-TAX> 0
<INCOME-CONTINUING> 220,361
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 220,361
<EPS-PRIMARY> 4.05
<EPS-DILUTED> 4.05
<FN>
(In thousands - except per unit data)
(Unaudited)
</FN>
</TABLE>
