<PAGE>
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
<TABLE>
<CAPTION>
For Quarter Ended September 30, 1997 Commission file number:1-8859
<S> <C>
</TABLE>
IP TIMBERLANDS, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
TEXAS 13 3259241
<S> <C>
(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)
</TABLE>
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, 1997: 46,445,729
<PAGE>
IP TIMBERLANDS, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
-----------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements..................................................................... 3
Consolidated Statement of Earnings -
Three Months and Nine Months Ended
September 30, 1997 and 1996.............................................................. 4
Consolidated Balance Sheet -
September 30, 1997 and December 31, 1996................................................. 5
Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1997 and 1996............................................ 6
Notes to Consolidated Financial Statements............................................... 7 - 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.... 11 - 14
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......................................................... 15
SIGNATURES.. 16
</TABLE>
* 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 September 30, 1997, and the results of
operations for the quarter and nine months ended September 30, 1997. 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, 1996, 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ----------------------
1997 1996 1997 1996
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Stumpage sales
International Paper.............................................. $ 45,962 $ 26,455 $ 101,449 $ 89,712
Unaffiliated parties............................................. 37,302 46,050 108,004 108,931
Forestland sales................................................... 714 449 1,975 6,421
Other income, net.................................................. 11,210 10,345 16,914 16,142
--------- --------- ---------- ----------
Total revenues..................................................... 95,188 83,299 228,342 221,206
--------- --------- ---------- ----------
OPERATING COSTS AND EXPENSES
Depletion
International Paper.............................................. 5,381 2,261 10,034 6,455
Unaffiliated parties............................................. 5,782 5,029 19,226 12,165
Cost of forestlands sold........................................... 85 15 207 383
Amortization of roads.............................................. 422 410 1,295 1,393
Forest operations.................................................. 12,241 11,046 35,483 32,982
General and administrative......................................... 4,642 4,505 13,880 14,129
Property and severance taxes....................................... 3,251 3,086 9,731 9,909
--------- --------- ---------- ----------
Total operating costs and expenses................................. 31,804 26,352 89,856 77,416
--------- --------- ---------- ----------
63,384 56,947 138,486 143,790
Gains on Sales of Partnership Interests............................ 37,009 52,009 656,654
--------- --------- ---------- ----------
OPERATING EARNINGS................................................. 100,393 56,947 190,495 800,444
INTEREST INCOME.................................................... 7,553 4,125 20,832 15,696
INTEREST EXPENSE................................................... (9,657) (3,096) (26,616) (14,465)
GENERAL PARTNERS' INTEREST IN IPTO................................. (1,029) (562) (1,983) (1,568)
--------- --------- ---------- ----------
NET PARTNERSHIP EARNINGS........................................... $ 97,260 $ 57,414 $ 182,728 $ 800,107
--------- --------- ---------- ----------
--------- --------- ---------- ----------
EARNINGS PER CLASS A UNIT (NOTE 7)................................. $ 1.61 $ 1.23 $ 3.67 $ 7.87
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
IP TIMBERLANDS, LTD.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and temporary investments.................................................... $ 9,692 $ 7,843
Notes receivable--International Paper............................................. 371,467 259,351
Due from International Paper...................................................... 7,128 15,071
Accounts and notes receivable..................................................... 24,287 8,228
------------- ------------
Total current assets.............................................................. 412,574 290,493
NOTES RECEIVABLE.................................................................... 430 42
FORESTLANDS......................................................................... 781,168 660,369
ROADS, net of accumulated amortization of $33,283 (1997) and $31,994 (1996)......... 27,153 25,144
------------- ------------
Total Assets........................................................................ $ 1,221,325 $ 976,048
------------- ------------
------------- ------------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable and accrued liabilities.......................................... $ 4,417 $ 6,719
Accrued interest.................................................................. 6,376 3,541
Accrued property and severance taxes.............................................. 6,835 5,550
Customer advance payments......................................................... 5,405 3,266
------------- ------------
Total current liabilities......................................................... 23,033 19,076
LONG-TERM DEBT...................................................................... 450,000 450,000
LEASE OBLIGATIONS................................................................... 1,182 1,241
SERIES A PREFERENCE UNITS IN IPTO................................................... 130,744
GENERAL PARTNERS' INTEREST IN IPTO.................................................. 31,778 30,536
PARTNERS' CAPITAL
General partners.................................................................. 27,701 26,607
Limited partners.................................................................. 556,887 448,588
------------- ------------
Total Liabilities and Partners' Capital............................................. $ 1,221,325 $ 976,048
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
IP TIMBERLANDS, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Partnership earnings................................................................. $ 182,728 $ 800,107
Noncash items
Depletion.............................................................................. 29,260 18,620
Cost of forestlands sold............................................................... 207 383
Amortization of roads.................................................................. 1,295 1,393
Gain on sale of partnership interest................................................... (638,205)
Other, net............................................................................. 6,049 6,085
Changes in current assets and liabilities
Accounts and notes receivable.......................................................... (16,447) 13,716
Due from International Paper........................................................... 7,943 17,880
Customer advance payments.............................................................. 2,139 (291)
Accrued interest payable............................................................... 2,835 (5,983)
Other, net............................................................................. (1,475) (13,500)
---------- ----------
Cash provided by operations............................................................ 214,534 200,205
---------- ----------
INVESTMENT ACTIVITIES
Investment in forestlands and roads...................................................... (26,493) (26,285)
Loans to International Paper............................................................. (270,949) (637,081)
Repayment of loans by International Paper................................................ 158,833 1,023,847
---------- ----------
Cash (used for) provided by investment activities...................................... (138,609) 360,481
---------- ----------
FINANCING ACTIVITIES
Distributions to partners of IPT and IPTO................................................ (74,076) (564,822)
---------- ----------
CHANGE IN CASH AND TEMPORARY INVESTMENTS................................................. 1,849 (4,136)
CASH AND TEMPORARY INVESTMENTS
Beginning of the period................................................................ 7,843 11,899
---------- ----------
End of the period...................................................................... $ 9,692 $ 7,763
---------- ----------
---------- ----------
</TABLE>
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 September 30, 1997 and 1996 were $2.3
million and $2.2 million, respectively and for the nine-month periods
ended September 30, 1997 and 1996 were $7.0 million and $7.4 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, 1997 and 1996 was $5.0 million and $1.4
million, respectively, and for the nine-month periods ended September 30,
1997 and 1996 was $13.3 million and $10.4 million, respectively. The
increase in third quarter interest income was due to higher average loan
balances. Interest expense included $2.5 million and $5.3 million for the
quarter and nine-month periods ended September 30, 1997, respectively, of
preferred return payments to Federal Paper Board Company, a wholly owned
Subsidiary of International Paper, relating to Series A Preference Units
(see note 5). Interest expense in the 1996 third quarter included $3.1
million of interest on notes payable to International Paper.
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, 1997 and December 31, 1996 were $6.4 million and $6.9
million, respectively.
7
<PAGE>
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,
1997 1996
------------- -------------
<S> <C> <C>
(IN THOUSANDS)
Notes receivable--trade............................................................. $ 20,178 $ 2,763
Accounts receivable--trade.......................................................... 1,648 965
Accrued interest and other receivables.............................................. 2,461 4,500
------------- ------
$ 24,287 $ 8,228
------------- ------
------------- ------
</TABLE>
Notes receivable--trade at September 31, 1997 included $10.8 million of
short-term notes from sales in late March.
5. SERIES A PREFERENCE UNITS
In March 1997, IPTO issued 13,074 Series A Preference Units with an
agreed value of $130.7 million to Federal Paper Board Company ("Federal"),
a wholly owned subsidiary of International Paper, in connection with the
purchase from Federal of a timber deed covering approximately 116,000
acres. These units, which may be redeemed by IPTO at any time, require
quarterly preferred return payments, based on an annual rate of 7.5% of
the agreed value, that must be paid before distributions can be made to
the Partnership's Class A or Class B unitholders. Preferred return
payments of $2.5 million and $5.3 million were included in interest
expense for the quarter and nine-month period ended September 30, 1997,
respectively.
Since it is expected that all of the acres under the timber deed will be
harvested prior to the end of the Initial Term, payment of the $130.7
million redemption (or $2.81 per Class A Unit) will be made from the
Primary Account.
6. GAINS ON SALES OF PARTNERSHIP INTERESTS
On March 29, 1996, a subsidiary partnership of IPT completed the sale of
a 98% general partnership interest to R-H Timber Co. As a result of this
transaction, IPT recognized a book gain of approximately $638 million,
approximately $203 million or $4.37 per unit of which was allocated to the
Class A Units. IPT retained a 1% interest in the partnership as well as a
preferred interest. Class A unitholders have approximately a 30% share of
the retained preferred interest, equal to about $.90 per Class A Unit.
In September 1997, the Partnership completed the first in a series of
transactions relating to the sale of a subsidiary partnership interest in
approximately 175,000 acres of forestlands in Pennsylvania and New York.
This initial transaction, covering approximately 25,000 acres, resulted in
a gain of approximately $37 million. Approximately 7% of the earnings from
this sale were attributed to the Primary Account.
8
<PAGE>
In February 1997, the Partnership completed the sale of a special
partnership interest relating to 14,539 acres of pine plantations in
Arkansas and Texas. As a result of this sale, IPT recognized a gain of
approximately $15 million. Approximately 12 % of the earnings from this
sale were attributed to the Primary Account.
In June 1996, the Partnership completed a sale of a special partnership
interest relating to 20,000 acres of pine plantations in the South. As a
result of this sale, IPT recognized a gain of approximately $18 million.
Essentially all of the earnings from this transaction were attributable to
the Secondary Account.
7. 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,
--------------------- -----------------------
1997 1996 1997 1996
--------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Allocation to Primary Account.................................... $ 77,940 $ 60,398 $ 179,466 $ 366,718
Allocation to Secondary Account.................................. 19,320 (2,984) 3,262 433,389
--------- ---------- ------------ ---------
Net Partnership Earnings......................................... 97,260 57,414 182,728 800,107
--------- ---------- ------------ ---------
95% of the Primary Account(1) 74,042 57,378 170,492 348,382
4% of the Secondary Account(1) 774 (119) 131 17,336
--------- ---------- ------------ ---------
Earnings Allocated to
Class A Limited Partners...................................... $ 74,816 $ 57,259 $ 170,623 $365,718(2)
--------- ---------- ------------ ---------
--------- ---------- ------------ ---------
Weighted Average Class A
Units Outstanding.............................................. 46,446 46,446 46,446 46,446
--------- ---------- ------------ ---------
--------- ---------- ------------ ---------
Earnings Per Class A Unit........................................ $ 1.61 $ 1.23 $ 3.67 7.87(2)
--------- ---------- ------------ ---------
--------- ---------- ------------ ---------
</TABLE>
(1) Class B units are allocated 4% of Primary Account and 95% of Secondary
Account earnings.The general partnersare allocated 1% of each account.
(2) Includes $203 million, or $4.37 per Class A Unit, from the sale of a
subsidiary partnership interest.
9
<PAGE>
8. 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, 1997
Balance--January 1, 1997..................................................... $ 26,607 $ 448,588 $ 475,195
Net earnings for the period.................................................. 1,827 180,901 182,728
Partner distributions........................................................ (733) (72,602) (73,335)
--------- ---------- ----------
Balance--September 30, 1997................................................ $ 27,701 $ 556,887 $ 584,588
--------- ---------- ----------
--------- ---------- ----------
Nine Months Ended September 30, 1996
Balance--January 1, 1996..................................................... $ 25,786 $ 367,264 $ 393,050
Net earnings for the period.................................................. 8,001 792,106 800,107
Partner distributions........................................................ (5,608) (555,163) (560,771)
--------- ---------- ----------
Balance--September 30, 1996................................................ $ 28,179 $ 604,207 $ 632,386
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
The authorized and outstanding Class A and B Depositary Units at
September 30, 1997 and 1996, 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.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total Partnership revenues for the third quarter of 1997 were $95.2 million
compared with $83.3 million for the same period of 1996. Revenues from stumpage
sales were $83.3 million in the third quarter of 1997 compared with $72.5
million in 1996. Although harvest volumes were relatively flat with levels for
the same period last year, higher average prices led to a 15% increase in
stumpage sales revenues in the 1997 third quarter. Net Partnership earnings for
the 1997 third quarter were $97.3 million, including a gain of $37.0 million
from the sale of a subsidiary partnership interest, compared with $57.4 million
for the same period of 1996. Earnings as a percent of revenues, before the gain,
were lower in 1997 than in 1996 due to higher depletion costs on timber acquired
from Federal Paper Board Company and higher interest expense.
In the South, third quarter stumpage sales revenues in 1997 were 19% higher
than for the comparable period of 1996 due to 3% higher harvest volumes and 15%
higher average prices. Operating results in this region benefited from
favorable, dry weather logging conditions and continued strong markets. In the
Northeast, harvest volumes were 20% below 1996 third quarter levels. Stumpage
sales revenues were 30% below levels for the comparable period of 1996 due to
lower sales of higher value sawlogs reflecting a decrease in purchases by
Canadian sawmills.
Forestland sales were minimal in both the 1997 and 1996 periods.
In September 1997, the Partnership completed the first in a series of
transactions relating to the sale of a subsidiary partnership interest in
approximately 175,000 acres of forestlands in Pennsylvania and New York.
This initial transaction, covering approximately 25,000 acres, resulted in a
gain of approximately $37 million. A second transaction is expected to close
in the fourth quarter of 1997, with the remaining transactions closing in
1998.
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,
-------------------- ----------------------
1997 1996 1997 1996
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Stumpage Sales
Primary Account.................................................. $ 83,249 $ 64,716 $ 209,438 $ 190,854
Secondary Account................................................ 15 7,789 15 7,789
--------- --------- ---------- ----------
$ 83,264 $ 72,505 $ 209,453 $ 198,643
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Forestland Sales
Primary Account.................................................. $ 254 $ 103 $ 659 $ 753
Secondary Account................................................ 460 346 1,316 5,668
--------- --------- ---------- ----------
$ 714 $ 449 $ 1,975 $ 6,421
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Operating Costs and Expenses
Primary Account.................................................. $ 19,944 $ 14,580 $ 54,876 $ 45,352
Secondary Account................................................ 11,860 11,772 34,980 32,064
--------- --------- ---------- ----------
$ 31,804 $ 26,352 $ 89,856 $ 77,416
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
11
<PAGE>
Stumpage sales attributed to the Secondary Account in 1996 related to a bulk
sale in the third quarter that included timber not scheduled to be harvested
until after the end of the Initial Term.
Operating costs and expenses by category are shown in the consolidated
statement of earnings on page 4. The increase in Primary Account expenses in the
third quarter of 1997 is due to increased depletion charges from higher stumpage
sales.
Sales volumes attributable to timber sales were (in thousand cunits):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Used by International Paper facilities.......................................... 430 295 971 735
Resold by International Paper................................................... 84 146 231 360
Sold to unaffiliated parties.................................................... 546 594 1,573 1,569
--------- --------- --------- ---------
1,060 1,035 2,775 2,664
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Total annual sales volumes for 1997 are expected to remain approximately the
same as in 1996.
Depletion as a percent of stumpage sales increased in the 1997 third quarter
due to sales of higher cost timber acquired from Federal Paper Board Company.
Interest expense for the third quarter of 1997 included $7.1 million related
to $450 million of long-term debt and $2.5 million as a preferred return on the
Series A Preference Units issued to Federal Paper Board Company in March 1997.
LIQUIDITY AND CAPITAL RESOURCES
IPT had cash and temporary investments of $9.7 million, a current receivable
from International Paper of $7.1 million, and notes receivable from
International Paper of $371.5 million, giving the Partnership $388.3 million in
liquid assets at September 30, 1997. 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,
1997 1996
------------- ------------
<S> <C> <C>
Cash, temporary investments and current receivables
Primary Account................................................................... $ 291,885 $ 171,508
Secondary Account................................................................. 96,402 110,757
------------- ------------
$ 388,287 $ 282,265
------------- ------------
------------- ------------
Total per Class A Unit.............................................................. $ 6.05 $ 3.61
------------- ------------
------------- ------------
</TABLE>
In addition, current assets at September 30, 1997 and December 31, 1996,
included $4.1 million and $5.5 million, respectively, of accounts receivable,
and $20.2 million and $2.7 million, respectively, of notes receivable, from
parties other than International Paper, due within the next 12 months.
12
<PAGE>
In March 1997, IPTO issued 13,074 Series A Preference Units, with an agreed
value of $130.7 million, to Federal Paper Board Company in exchange for a timber
deed on approximately 116,000 acres. These units, which may be redeemed by IPTO
at any time, require quarterly preferred return payments, based on an annual
rate of 7.5% of the agreed value, that must be paid before distributions can be
made to the Partnership's Class A or Class B unitholders. Since it is expected
that the harvest from this timber deed will be prior to the end of the Initial
Term, payment of the $130.7 million redemption value (or $2.81 per Class A Unit)
will be made from the Primary Account.
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, 1997
Cash provided by operations.................................................. $ 191,956 $ 22,578 $ 214,534
Investment in forestlands and roads.......................................... (166) (26,327) (26,493)
IPTO general partners' interest in above..................................... (1,918) 37 (1,881)
---------- ---------- ----------
Cash flow after capital expenditures......................................... 189,872 (3,712) $ 186,160
Class A Unit allocation factor............................................... 95% 4%
---------- ---------- ----------
Class A Unit cash flow after capital expenditures............................ $ 180,378 $ (148) $ 180,230
---------- ---------- ----------
---------- ---------- ----------
Distributions declared for Class A Units..................................... $ 69,669 $ 69,669
---------- ----------
---------- ----------
Nine Months Ended September 30, 1996
Cash provided by operations.................................................. $ 193,800 $ 6,405 $ 200,205
Investment in forestlands and roads.......................................... (1,769) (24,516) (26,285)
IPTO general partners' interest in above..................................... (1,920) 181 (1,739)
---------- ---------- ----------
Cash flow after capital expenditures......................................... 190,111 (17,930) $ 172,181
Class A Unit allocation factor............................................... 95% 4%
---------- ---------- ----------
Class A Unit cash flow after capital expenditures............................ $ 180,605 $ (717) $ 179,888
---------- ---------- ----------
---------- ---------- ----------
Distributions declared for Class A Units..................................... $ 522,515 $ 522,515
---------- ----------
---------- ----------
</TABLE>
In October 1997, IPT declared a regular quarterly cash distribution of $.50
per Class A Unit for the third calendar quarter of 1997. This distribution is
payable on November 14, 1997 to holders of record as of October 31, 1997.
In April 1996, IPT had declared a regular $.50 per Class A Unit distribution
and a $9.75 per Class A Unit special distribution. The payment of this
distribution was the result of management's evaluation that remaining cash
balances and projected future cash flows would be adequate for future asset
acquisition and operating requirements.
13
<PAGE>
Capital expenditures, including expenditures for reforestation of harvested
forestland, acquisition of capitalized leases and road construction, are
expected to be approximately $170 million for 1997, including the issuance of
$131 million in preferred units in March 1997 for the Federal timber deed
acquisition.
14
<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.
15
<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: November 14, 1997 By: /s/ James W. Guedry
--------------------
James W. Guedry
Vice President and Secretary
Date: November 14, 1997 By: /s/ Frederick L. Bleier
------------------------
Frederick L. Bleier
Treasurer and Controller
and Chief Financial and
Accounting Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,692
<SECURITIES> 0
<RECEIVABLES> 402,882
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 412,574
<PP&E> 808,321
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,221,325
<CURRENT-LIABILITIES> 23,033
<BONDS> 0
130,744
0
<COMMON> 584,588
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,221,325
<SALES> 211,428
<TOTAL-REVENUES> 228,342
<CGS> 0
<TOTAL-COSTS> 89,856
<OTHER-EXPENSES> 1,983
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,784
<INCOME-PRETAX> 182,728
<INCOME-TAX> 0
<INCOME-CONTINUING> 182,728
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 182,728
<EPS-PRIMARY> 3.67
<EPS-DILUTED> 3.67
</TABLE>
