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 June 30, 1995 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 July 31, 1995: 46,445,729
<PAGE>
IP TIMBERLANDS, Ltd.
INDEX
Page No.
--------
PART I. Financial Information
Item 1. Financial Statements 3
Consolidated Statement of Earnings - 4
Three Months and Six Months Ended
June 30, 1995 and 1994
Consolidated Balance Sheet - 5
June 30, 1995 and December 31, 1994
Consolidated Statement of Cash Flows - 6
Six Months Ended June 30, 1995 and 1994
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.
2
<PAGE>
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 June 30, 1995, and the results of operations
for the quarter and six months ended June 30, 1995. It is suggested that these
interim financial statements be read in conjunction with the audited financial
statements and notes thereto incorporated by reference in the Registrant's Form
10-K for the year ended December 31, 1994, 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
<PAGE>
IP TIMBERLANDS, Ltd.
CONSOLIDATED STATEMENT OF EARNINGS
(In thousands - except per unit data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ---------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues
Stumpage sales
International Paper $ 46,363 $ 40,811 $ 98,932 $ 88,313
Unaffiliated parties 21,756 23,101 50,032 57,497
Forestland sales 869 22,209 928 48,792
Other income, net 3,944 2,869 5,307 3,967
------------- ------------ ----------- ----------
Total revenues 72,932 88,990 155,199 198,569
------------- ------------ ----------- ----------
Operating Costs and Expenses
Depletion
International Paper 2,835 2,250 6,065 5,016
Unaffiliated parties 2,757 2,849 5,522 5,879
Cost of forestlands sold 37 1,313 84 5,821
Amortization of roads 539 519 1,074 1,058
Forest operations 10,769 9,729 20,523 18,961
General and administrative 5,323 5,026 10,714 10,213
Property and severance taxes 3,839 4,253 7,632 8,665
------------- ------------ ----------- ----------
Total operating costs and expenses 26,099 25,939 51,614 55,613
------------- ------------ ----------- ----------
Operating Earnings 46,833 63,051 103,585 142,956
Interest Income 4,241 3,717 11,246 6,537
General Partners' Interest in IPTO (511) (668) (1,148) (1,495)
------------- ------------ ----------- ----------
Net Partnership Earnings $ 50,563 $ 66,100 $ 113,683 $ 147,998
============= ============ =========== ==========
Earnings per Class A Unit (Note 5) $ 1.27 $ 1.09 $ 2.63 $ 2.58
============= ============ =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
IP TIMBERLANDS, Ltd.
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
June 30, December 31,
1995 1994
------------- -------------
Assets
Current Assets
Cash and temporary investments $ 12,174 $ 7,922
Notes receivable - International Paper 274,831 430,146
Due from International Paper 6,065 3,328
Accounts and notes receivable 4,540 8,716
------------- ------------
Total current assets 297,610 450,112
Notes Receivable 981 1,174
Forestlands 741,618 739,136
Roads, net of accumulated amortization of
$48,578(1995) and $47,504(1994) 35,833 36,097
------------- ------------
Total Assets $ 1,076,042 $ 1,226,519
============= ============
Liabilities and Partners' Capital
Current Liabilities
Accounts payable and accrued liabilities $ 357 $ 354
Accrued property and severance taxes 8,700 5,868
Customer advance payments 5,302 4,658
------------- ------------
Total current liabilities 14,359 10,880
Lease Obligations 1,304 1,443
General Partners' Interest in IPTO 33,069 34,607
Partners' Capital
General partners 32,128 33,651
Limited partners 995,182 1,145,938
------------- ------------
Total Liabilities and Partners' Capital $ 1,076,042 $ 1,226,519
============= ============
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
IP TIMBERLANDS, Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
--------------------
1995 1994
------ ------
Operating Activities
Net Partnership earnings $ 113,683 $ 147,998
Noncash items
Depletion 11,587 10,895
Cost of forestlands sold 84 5,821
Amortization of roads 1,074 1,058
Other, net 1,011 1,434
Changes in current assets and liabilities
Accounts and notes receivable 4,369 13,800
Due from International Paper (2,737) (13,445)
Customer advance payments 644 1,913
Other, net 2,697 3,102
---------- ----------
Cash provided by operations 132,412 172,576
---------- ----------
Investment Activities
Investment in forestlands and roads (14,826) (18,463)
Loans to International Paper (99,970) (172,396)
Repayment of loans by International Paper 255,285 93,840
---------- ----------
Cash provided by (used for) investment activities 140,489 (97,019)
---------- ----------
Financing Activities
Distributions to partners of IPT and IPTO (268,649) (71,113)
---------- ----------
Change in Cash and Temporary Investments 4,252 4,444
Cash and Temporary Investments
Beginning of the period 7,922 6,782
---------- ----------
End of the period $ 12,174 $ 11,226
========== ==========
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
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 June 30, 1995 and 1994 were
$2.3 million for both quarters and for the six-month periods ended June
30, 1995 and 1994 were $ 4.6 million for both periods. 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 June 30, 1995 and 1994 was $ 4.1 and $ 3.5 million,
respectively, and for the six-month periods ended June 30, 1995 and
1994 was $ 10.9 and $ 5.9 million, respectively. The increase in
interest income was due to higher interest rates and loan balances.
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 June 30, 1995 and December 31, 1994 were $ .5 and $ 6.5
million, respectively.
7
<PAGE>
4. Receivables
The major classifications of current receivables are shown below. No
allowance for doubtful accounts was considered necessary.
June 30, December 31,
1995 1994
----------- ----------
(In thousands)
Notes receivable - trade $ 4,086 $ 7,487
Accounts receivable - trade 143 609
Accrued interest and other receivables 311 620
----------- ----------
$ 4,540 $ 8,716
=========== ==========
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 Six Months
Months Ended Ended
June 30, June 30,
------------------------- --------------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Allocation to Primary Account $ 62,539 $ 52,783 $ 129,310 $ 125,254
Allocation to Secondary Account (11,976) 13,317 (15,627) 22,744
--------- --------- --------- ---------
Net Partnership Earnings 50,563 66,100 113,683 147,998
--------- --------- --------- ---------
95% of the Primary Account/1/ 59,412 50,143 122,844 118,991
4% of the Secondary Account/1/ (479) 533 (625) 910
--------- --------- --------- ---------
Earnings Allocated to
Class A Limited Partners $ 58,933 $ 50,676 $ 122,219 $ 119,901
========= ========= ========= =========
Weighted Average Class A
Units Outstanding 46,446 46,446 46,446 46,446
========= ========= ========= =========
Earnings Per Class A Unit $ 1.27 $ 1.09 $ 2.63 $ 2.58
========= ========= ========= =========
</TABLE>
/1/ Class B units are allocated 4% of Primary Account and 95% of
Secondary Account earnings. The general partners are allocated 1%
of each account.
Partnership earnings allocated to the Secondary Account included $20.0
million for the three months ended June 30, 1994, and $31.4 million for
the six months ended June 30, 1994, generated by forestland sales.
Forestland sales in 1995 were minimal.
8
<PAGE>
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>
Six Months Ended June 30, 1995
Balance - January 1, 1995 $ 33,651 $ 1,145,938 $ 1,179,589
Net earnings for the period 1,137 112,546 113,683
Partner distributions (2,660) (263,302) (265,962)
------------ -------------- ---------------
Balance - June 30, 1995 $ 32,128 $ 995,182 $ 1,027,310
============ ============== ===============
Six Months Ended June 30, 1994
Balance - January 1, 1994 $ 32,321 $ 1,014,323 $ 1,046,644
Net earnings for the period 1,480 146,518 147,998
Partner distributions (704) (69,699) (70,403)
------------ -------------- ---------------
Balance - June 30, 1994 $ 33,097 $ 1,091,142 $ 1,124,239
============ ============== ===============
</TABLE>
The authorized and outstanding Class A and B Depositary Units at June
30, 1995 and 1994, 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
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Total Partnership revenues for the second quarter of 1995 were $72.9 million,
down 18% from 1994 second quarter revenues of $88.9 million due to a $21.3
million decline in forestland sales. Revenues from stumpage sales were $68.1
million in the second quarter of 1995, up from $63.9 million in the second
quarter of 1994, reflecting harvest volumes that were 15% higher than prior year
levels. Overall average prices for the period were 8% lower than in 1994. Net
Partnership earnings were $50.5 million, compared with $66.1 million in 1994.
In the South, a 19% increase in harvest volumes offset slightly lower average
prices to produce stumpage sales revenues 13% above 1994 levels. The decline in
average prices was attributable to a higher percentage of pulpwood in the
harvest volumes. In the West, a 6% decline in average prices and a 2% decline in
harvest volumes led to an 8% drop in stumpage sales revenues. The decline in
prices reflects a higher mix of lower-grade sawlogs and weaker domestic lumber
markets in the 1995 second quarter. In the Northeast, stumpage sales revenues
were 25% above the 1994 amounts. Harvest volumes increased 7% compared with
prior year levels as a result of better logging conditions during the spring
thaw. Prices averaged 17% higher than second quarter 1994, due to higher
pulpwood and sawlog prices early in the quarter, but declined steadily as the
quarter progressed.
Forestland sales, which are made when current market values for selected
nonstrategic tracts exceed the values expected from future operations (and thus
vary from period to period), were minimal in the 1995 second quarter.
Forestland sales totaled $22.2 million in the 1994 second quarter.
Amounts attributable to the Primary and Secondary Accounts for major categories
in the statement of earnings were (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ------------------------------
1995 1994 1995 1994
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Stumpage Sales
Primary Account $ 68,118 $ 63,912 $ 148,937 $ 145,810
Secondary Account 1 - 27 -
----------- ---------- ------------ ------------
$ 68,119 $ 63,912 $ 148,964 $ 145,810
=========== ========== ============ ============
Forestland Sales
Primary Account $ 628 $ 1,147 $ 633 $ 13,243
Secondary Account 241 21,062 295 35,549
----------- ---------- ------------ ------------
$ 869 $ 22,209 $ 928 $ 48,792
=========== ========== ============ ============
Operating Costs and Expenses
Primary Account $ 16,967 $ 16,444 $ 36,237 $ 39,365
Secondary Account 9,132 9,495 15,377 16,248
----------- ---------- ------------ ------------
$ 26,099 $ 25,939 $ 51,614 $ 55,613
=========== ========== ============ ============
</TABLE>
Operating costs and expenses by category are shown in the consolidated statement
of earnings on page 4.
10
<PAGE>
Sales volumes attributable to timber sales were (in thousand cunits):
Three Months Six Months
Ended Ended
June 30, June 30,
------------ --------------
1995 1994 1995 1994
---- ---- ---- ----
Used by International Paper facilities 255 212 569 435
Resold by International Paper 122 125 278 315
Sold to unaffiliated parties 362 303 760 744
---- ---- ---- ----
739 640 1,607 1,494
==== ==== ===== =====
The business outlook for the remainder of 1995 is generally favorable, although
some further softening of stumpage prices is expected in all three of the
Partnership's operating areas due to sluggish lumber and panel markets and
weaker export demand.
Liquidity and Capital Resources
IPT had cash and temporary investments of $12 million, an intercompany account
receivable from International Paper of $6 million and notes receivable from
International Paper of $275 million at June 30, 1995, giving the Partnership
$293 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):
June 30, December 31,
1995 1994
----------- ------------
Cash, temporary investments
and current receivables from
International Paper
Primary Account $ 198,144 $ 313,742
Secondary Account 94,926 124,326
---------- ----------
$ 293,070 $ 438,068
========== ==========
Total per Class A Unit $ 4.13 $ 6.52
========== ==========
The decrease in Primary Account liquid assets reflects the payment of a $4.00
per Class A Unit special distribution on March 31, 1995.
In addition, current assets at June 30, 1995 and December 31, 1994, included $.4
million and $1.2 million of accounts receivable, respectively, and $4.1 million
and $7.5 million of notes receivable, respectively, from parties other than
International Paper, due within the next 12 months.
11
<PAGE>
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>
Six Months Ended June 30, 1995
Cash provided by operations $ 142,631 $ (10,219) $ 132,412
Investment in forestlands and roads (4,698) (10,128) (14,826)
IPTO general partners' interest in above (1,379) 203 (1,176)
-------------- ------------ -------------
Cash flow after capital expenditures 136,554 (20,144) $ 116,410
=============
Class A Unit allocation factor 95% 4%
-------------- ------------
Class A Unit cash flow
after capital expenditures $ 129,726 $ (806) $ 128,920
============== ============ =============
Distributions declared for Class A Units $ 252,665 $ 252,665
============== =============
Six Months Ended June 30, 1994
Cash provided by operations $ 148,730 $ 23,846 $ 172,576
Investment in forestlands and roads (10,042) (8,421) (18,463)
IPTO general partners' interest in above (1,387) (154) (1,541)
-------------- ------------ -------------
Cash flow after capital expenditures 137,301 15,271 $ 152,572
=============
Class A Unit allocation factor 95% 4%
-------------- ------------
Class A Unit cash flow
after capital expenditures $ 130,436 $ 611 $ 131,047
============== ============ =============
Distributions declared for Class A Units $ 66,882 $ 66,882
============== =============
</TABLE>
In July, IPT declared a cash distribution of $.72 per Class A Unit for the
second calendar quarter of 1995. This distribution is payable on August 15, 1995
to holders of record as of July 31, 1995. In March 1995, IPT declared a special
cash distribution of $4.00 per unit, based on management's evaluation 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 $44 million for 1995.
12
<PAGE>
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
<PAGE>
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: August 11, 1995 By: /s/ James W. Guedry
-------------------
James W. Guedry
Vice President and Secretary
Date: August 11, 1995 By: /s/ Frederick L. Bleier
-----------------------
Frederick L. Bleier
Treasurer and Controller
and Chief Financial and
Accounting Officer
<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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 12,174
<SECURITIES> 0
<RECEIVABLES> 285,436
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 297,610
<PP&E> 777,451
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,076,042
<CURRENT-LIABILITIES> 14,359
<BONDS> 0
<COMMON> 1,027,310
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,076,042
<SALES> 149,892
<TOTAL-REVENUES> 155,199
<CGS> 0
<TOTAL-COSTS> 51,614
<OTHER-EXPENSES> 1,148
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (11,246)
<INCOME-PRETAX> 113,683
<INCOME-TAX> 0
<INCOME-CONTINUING> 113,683
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113,683
<EPS-PRIMARY> 2.63
<EPS-DILUTED> 2.63
</TABLE>
