UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 - For the Period Ended MARCH 31, 2003
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Or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 - For the Transition Period From _______________ to ________________
Commission file number 1-701
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GREAT NORTHERN IRON ORE PROPERTIES
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(Exact name of registrant as specified in its charter)
Minnesota 41-0788355
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
W-1290 First National Bank Building
332 Minnesota Street
Saint Paul, Minnesota 55101-1361
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(Address of principal executive office) (Zip Code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
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 periods 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 ___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes _X_ No ___
Number of shares of beneficial interest outstanding on March 31, 2003: 1,500,000
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
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GREAT NORTHERN IRON ORE PROPERTIES
CONDENSED BALANCE SHEETS
March 31 December 31
2003 2002
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(Unaudited) (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 548,310 $ 663,230
United States Treasury securities 3,323,714 4,242,067
Royalties receivable 2,644,088 2,635,883
Prepaid expenses 45,892 2,760
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TOTAL CURRENT ASSETS 6,562,004 7,543,940
NONCURRENT ASSETS
United States Treasury securities 5,005,631 3,760,674
Prepaid pension expense 687,134 708,207
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5,692,765 4,468,881
PROPERTIES
Mineral lands 38,577,007 38,577,007
Less allowances for depletion and
amortization 33,925,615 33,873,565
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4,651,392 4,703,442
Building and equipment--at cost, less
allowances for accumulated depreciation
(3/31/03 - $206,497; 12/31/02 - $197,020) 147,923 157,400
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4,799,315 4,860,842
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$17,054,084 $16,873,663
=========== ===========
LIABILITIES AND BENEFICIARIES' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 107,244 $ 85,574
Distributions 2,250,000 2,250,000
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TOTAL CURRENT LIABILITIES 2,357,244 2,335,574
NONCURRENT LIABILITIES 13,700 13,700
BENEFICIARIES' EQUITY, including certificate holders' equity,
represented by 1,500,000 shares of beneficial interest
authorized and outstanding, and reversionary interest 14,683,140 14,524,389
----------- -----------
$17,054,084 $16,873,663
=========== ===========
Note: The balance sheet at December 31, 2002 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed financial statements.
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GREAT NORTHERN IRON ORE PROPERTIES
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
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March 31
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2003 2002
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Revenues:
Royalties $ 2,908,294 $ 1,567,900
Interest and other income 79,301 152,747
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2,987,595 1,720,647
Costs and expenses 578,844 490,327
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NET INCOME $ 2,408,751 $ 1,230,320
=========== ===========
Weighted-average shares outstanding 1,500,000 1,500,000
BASIC AND DILUTED EARNINGS PER SHARE $ 1.61 $ 0.82
=========== ===========
Distributions declared per share $ 1.50(1) $ 1.10(3)
Distributions paid per share $ 1.50(2) $ 1.60(4)
(1) $1.50 declared 3/14/03
payable 4/30/03
(2) $1.50 declared 12/20/02
paid 1/31/03
(3) $1.10 declared 3/13/02
paid 4/30/02
(4) $1.60 declared 12/10/01
paid 1/31/02
See notes to condensed financial statements.
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GREAT NORTHERN IRON ORE PROPERTIES
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
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March 31
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2003 2002
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Cash flows from operating activities:
Cash received from royalties and rents $ 2,919,319 $ 2,416,995
Cash paid to suppliers and employees -517,706 -440,614
Interest received 83,467 63,160
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NET CASH PROVIDED BY OPERATING ACTIVITIES 2,485,080 2,039,541
Cash flows from investing activities:
United States Treasury securities purchased -1,900,000 -650,000
United States Treasury securities matured 1,550,000 1,100,000
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NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES -350,000 450,000
Cash flows from financing activities:
Distributions paid -2,250,000 -2,400,000
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NET CASH USED IN FINANCING ACTIVITIES -2,250,000 -2,400,000
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Net (decrease) increase in cash and cash equivalents -114,920 89,541
Cash and cash equivalents at beginning of year 663,230 759,281
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CASH AND CASH EQUIVALENTS AT MARCH 31 $ 548,310 $ 848,822
=========== ===========
See notes to condensed financial statements.
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GREAT NORTHERN IRON ORE PROPERTIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Periods of Three Months ended March 31, 2003 and March 31, 2002
Note A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the periods stated above are not necessarily
indicative of the results that may be expected for each respective full year.
For further information, refer to the financial statements and footnotes
included in the Great Northern Iron Ore Properties ("Trust") Annual Report on
Form 10-K for the year ended December 31, 2002.
Note B - BENEFICIARIES' EQUITY
Pursuant to the Court Order of November 29, 1982, the Trustees were directed to
create and maintain an account designated as "Principal Charges." This account
constitutes a first and prior lien between the certificate holders and the
reversioner, and reflects an allocation of beneficiaries' equity between the
certificate holders and the reversioner. This account is neither an asset nor a
liability of the Trust. Rather, this account maintains and represents a balance
which will be payable to the certificate holders from the reversioner at the end
of the Trust. The balance in this account consists of attorneys' fees and
expenses of counsel for adverse parties pursuant to the Court Order in
connection with litigation commenced in 1972 relating to the Trustees' powers
and duties under the Trust Instrument and the cost of surface lands acquired in
accordance with provisions of a lease with United States Steel Corporation, net
of an allowance to amortize the cost of the land based on actual shipments of
taconite and net of a credit for disposition of tangible assets. Following is an
analysis of this account as of March 31, 2003:
Attorneys' fees and expenses ..................................... $ 1,024,834
Cost of surface lands ............................................ 5,703,265
Cumulative shipment credits ...................................... -1,068,677
Asset disposition credits ........................................ -20,106
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Principal Charges account ........................................ $ 5,639,316
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Upon termination of the Trust, the Trustees shall either sell tangible assets or
obtain a loan with tangible assets as security to provide monies for
distribution to the certificate holders in the amount of the Principal Charges
account balance.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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Periods of Three Months ended March 31, 2003 and March 31, 2002
The Trust owns interest in 12,033 acres on the Mesabi Iron Range Formation in
northern Minnesota, most of which are under lease to major iron ore producing
companies. Due to the Trustees' election pursuant to Section 646 of the Tax
Reform Act of 1986, as amended, commencing with year 1989 the Trust is not
subject to federal and Minnesota corporate income taxes. The Trust is now a
grantor trust.
The terms of the Great Northern Iron Ore Properties Trust Agreement, created
December 7, 1906, state that the Trust shall continue for twenty years after the
death of the last surviving of eighteen named in the Trust Agreement. The last
survivor of these eighteen named in the Trust Agreement died April 6, 1995.
According to the terms of the Trust Agreement, the Trust now terminates twenty
years from April 6, 1995, that being April 6, 2015. The termination of the Trust
on April 6, 2015 means that there will be no trading of the Trust's 1,500,000
certificates of beneficial interest (shares) on the New York Stock Exchange
beyond that date. At the end of the Trust, all monies remaining in the hands of
the Trustees (after paying and providing for all expenses and obligations of the
Trust) shall be distributed ratably among the certificate holders, while all
property other than monies shall be conveyed and transferred to the reversioner.
In addition, by the terms of a District Court Order dated November 29, 1982, the
reversioner, in effect, is required to pay the balance in the Principal Charges
account (see Note B above) which primarily represents the costs of acquiring
homes and land parcels on the iron formation that are necessary for the orderly
mine development by United States Steel Corporation under its 1959 lease with
the Trustees. This account balance, which may increase or decrease, will be
added to the cash distributable to the certificate holders of record at the
termination of the Trust.
Results of Operations:
----------------------
Royalties increased $1,340,394 during the three months ended March 31, 2003, as
compared to the same period in 2002, due mainly to increased taconite
production.
Interest and other income decreased $73,446 during the three months ended March
31, 2003, as compared to the same period in 2002, due mainly to a lower yield on
our funds held for investment and reduced timber receipts.
Costs and expenses increased $88,517 during the three months ended March 31,
2003, as compared to the same period in 2002, due mainly to a listing fee now
again payable to the New York Stock Exchange and also an increased pension
expense caused, in part, by a reduced return on pension plan assets.
At their meeting held on March 14, 2003, the Trustees declared a distribution of
$1.50 per share, amounting to $2,250,000 payable April 30, 2003 to certificate
holders of record at the close of business on March 31, 2003. At their meeting
held on March 13, 2002, the Trustees declared a distribution of $1.10 per share,
amounting to $1,650,000 paid on April 30, 2002 to certificate holders of record
at the close of business on March 28, 2002. The Trustees intend to continue
quarterly distributions and set the record date as of the last business day of
each quarter. The next distribution will be paid in late July 2003 to
certificate holders of record on June 30, 2003.
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A mining agreement dated January 1, 1959 with United States Steel Corporation
provides that one-half of annual earned royalty income, after satisfaction of
minimum royalty payments, shall be applied to reimburse the lessee for its cost
of acquisition of surface lands overlying the leased mineral deposits, which
surface lands are then conveyed to the Trustees. There are surface lands yet to
be purchased, the costs of which are yet unknown and will not be known until the
actual purchases are made.
Liquidity:
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In the interest of preservation of principal of Court-approved reserves and
guided by the restrictive provisions of Section 646 of the Tax Reform Act of
1986, as amended, monies are invested primarily in U.S. Treasury securities with
maturity dates not to exceed three years and, along with cash flows from
operations, are deemed adequate to meet currently foreseeable liquidity needs.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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- None
Item 4. Controls and Procedures
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Based on their most recent evaluation, which was completed within ninety days of
the filing of this report, the Trust's Chief Executive Officer and Chief
Financial Officer have concluded that the Trust's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Trust in the reports it files or submits under the Securities Exchange Act
of 1934, as amended, is accumulated and communicated to the Trust's management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure and are
effective to ensure that such information is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms. There were no significant changes in the Trust's
internal controls or in other factors that could significantly affect those
controls subsequent to the date of their evaluation.
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
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- None
Item 2. Changes in Securities and Use of Proceeds
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- None
Item 3. Defaults Upon Senior Securities
- None
Item 4. Submission of Matters to a Vote of Certificate Holders
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- None
Item 5. Other Information
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- None
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits: Exhibit 99(a) - Certifications pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K - None
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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.
GREAT NORTHERN IRON ORE PROPERTIES
(Registrant)
Date April 16, 2003 By /s/ Joseph S. Micallef
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Joseph S. Micallef, President of the Trustees
and Chief Executive Officer
Date April 16, 2003 By /s/ Thomas A. Janochoski
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Thomas A. Janochoski, Vice President &
Secretary and Chief Financial Officer
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Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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I, Joseph S. Micallef, President of the Trustees and Chief Executive Officer of
Great Northern Iron Ore Properties, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Great Northern
Iron Ore Properties;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report ("Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors [or persons performing the
equivalent function]:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date April 16, 2003 By /s/ Joseph S. Micallef
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Joseph S. Micallef, President of the Trustees
and Chief Executive Officer
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Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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I, Thomas A. Janochoski, Vice President & Secretary and Chief Financial Officer
of Great Northern Iron Ore Properties, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Great Northern
Iron Ore Properties;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report ("Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors [or persons performing the
equivalent function]:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date April 16, 2003 By /s/ Thomas A. Janochoski
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Thomas A. Janochoski, Vice President
& Secretary and Chief Financial Officer
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