Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Apr. 30, 2020 | Jun. 05, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Period End Date | Apr. 30, 2020 | |
Entity Registrant Name | MESABI TRUST | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 13,120,010 | |
Current Fiscal Year End Date | --01-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0000065172 | |
Amendment Flag | false |
Statements of Income
Statements of Income - USD ($) | 3 Months Ended | |
Apr. 30, 2020 | Apr. 30, 2019 | |
REVENUES | ||
Royalty income | $ 2,135,494 | $ 5,361,790 |
Interest | 33,269 | 105,083 |
Total revenues | 2,168,763 | 5,466,873 |
EXPENSES | ||
Expenses | 557,142 | 556,585 |
Net income | $ 1,611,621 | $ 4,910,288 |
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING | 13,120,010 | 13,120,010 |
Net income per unit (Note 2) (in dollars per unit) | $ 0.1228 | $ 0.3743 |
Distribution declared per unit (Note 3) (in dollars per unit) | $ 0.5600 | $ 0.8900 |
Balance Sheets
Balance Sheets - USD ($) | Apr. 30, 2020 | Jan. 31, 2020 |
ASSETS | ||
Cash and cash equivalents | $ 14,283,675 | $ 10,177,655 |
U.S. Government securities, at amortized cost (which approximates fair value) | 13,332,474 | |
Accrued income receivable | 30,983 | 69,588 |
Prepaid expenses | 78,851 | 67,654 |
Current assets | 14,393,509 | 23,647,371 |
Assignments of leased property | ||
Amended assignment of Peters Lease | 1 | 1 |
Assignment of Cloquet Leases | 1 | 1 |
Certificate of beneficial interest for 13,120,010 units of Land Trust | 1 | 1 |
Total fixed property | 3 | 3 |
Total assets | 14,393,512 | 23,647,374 |
LIABILITIES, UNALLOCATED RESERVE AND TRUST CORPUS | ||
Distribution payable | 7,347,206 | 9,184,007 |
Accrued expenses | 159,712 | 120,630 |
Net contract liability | 791,162 | 2,511,720 |
Total liabilities | 8,298,080 | 11,816,357 |
Unallocated reserve | 6,095,429 | 11,831,014 |
Trust corpus | 3 | 3 |
Total liabilities, unallocated reserve and trust corpus | $ 14,393,512 | $ 23,647,374 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - shares | Apr. 30, 2020 | Jan. 31, 2020 |
Balance Sheets | ||
Certificate of beneficial interest of Land Trust, units | 13,120,010 | 13,120,010 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 3 Months Ended | |
Apr. 30, 2020 | Apr. 30, 2019 | |
Operating activities | ||
Royalties received | $ 449,496 | $ 3,149,582 |
Interest received | 37,314 | 40,324 |
Expenses paid | (529,257) | (817,592) |
Net cash from (used for) operating activities | (42,447) | 2,372,314 |
Investing activities | ||
Maturities of U.S. Government securities | 26,899,691 | 18,236,603 |
Purchases of U.S. Government securities | (13,567,217) | (2,803,492) |
Net cash from investing activities | 13,332,474 | 15,433,111 |
Financing activity | ||
Distributions to unitholders | (9,184,007) | (18,236,814) |
Net change in cash and cash equivalents | 4,106,020 | (431,389) |
Cash and cash equivalents, beginning of period | 10,177,655 | 881,810 |
Cash and cash equivalents, end of period | 14,283,675 | 450,421 |
Reconciliation of net income to net cash from operating activities | ||
Net income | 1,611,621 | 4,910,288 |
Decrease (increase) in accrued income receivable | 38,605 | (1,038,520) |
Increase in contract asset | (1,238,447) | |
Increase in prepaid expense | (11,197) | (16,613) |
Increase (decrease) in accrued expenses | 39,082 | (244,394) |
Decrease in contract liability | (1,720,558) | |
Net cash from (used for) operating activities | (42,447) | 2,372,314 |
Non cash financing activity | ||
Distributions declared and payable | $ 7,347,206 | $ 12,332,809 |
NATURE OF BUSINESS AND ORGANIZA
NATURE OF BUSINESS AND ORGANIZATION | 3 Months Ended |
Apr. 30, 2020 | |
NATURE OF BUSINESS AND ORGANIZATION | |
NATURE OF BUSINESS AND ORGANIZATION | Note 1. The financial statements and notes to financial statements included herein have been prepared without audit (except for the balance sheet at January 31, 2020) in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Trustees, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the results of operations for the three months ended April 30, 2020 and 2019, (b) the financial position at April 30, 2020 and (c) the cash flows for the three months ended April 30, 2020 and 2019, have been made. For further information, refer to the financial statements and footnotes included in Mesabi Trust’s Annual Report on Form 10-K for the year ended January 31, 2020. The Trust’s royalties have been and may continue to be adversely affected by the coronavirus (COVID-19) outbreak. The spread of COVID-19 has led to the disruption of the business operations of Cliffs and its wholly-owned subsidiary, Northshore, upon which the Trust is dependent for royalties. Cliffs has indicated that the COVID-19 pandemic will adversely impact its sales of steel and customized iron ore pellets. In particular, the automotive industry, which Cliffs relies on for a significant amount of its sales, has been significantly disrupted. As previously announced, Cliffs has temporarily shut down construction activities at its HBI production plant in Toledo, Ohio in March 2020, temporarily idled certain steel facilities in March and April 2020 and idled its Northshore mine in mid-April 2020. Although the Northshore mine is idled, Cliffs has continued to ship limited amounts of stockpiled iron ore products from Northshore for which the Trust receives a royalty. The Trust is unable to predict if and to what degree these shipments will continue. In addition, although Cliffs has indicated that its expects its Northshore mine to restart in August 2020, it noted that it cannot predict when it will be able to restart construction of its HBI production plant, when its production facilities and/or mines will be able to resume operations or whether any other production facilities and/or mines will experience disruptions in the future. On December 9, 2019, the Trustees of Mesabi Trust announced that the Trust initiated arbitration against Northshore, the lessee/operator of the leased lands and its parent, Cliffs. The arbitration proceeding was commenced with the American Arbitration Association. The Trust asserts claims concerning the calculation of royalties related to the production, shipment and sale of iron ore, including DR-grade pellets. Based on information currently available to the Trust, the Trust seeks an award of damages, along with specific performance and declaratory relief. The arbitration is in its early stages. gg |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Apr. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 2. Net income per unit is based on 13,120,010 units outstanding during the period. The Trust accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers . All revenue is recognized as the performance obligations are satisfied. Disaggregation of Revenues The following tables represent a disaggregation of revenue for the three months ended April 30, 2020 and April 30, 2019. Three Months Ended April 30, 2020 2019 Base overriding royalties $ 1,182,012 $ 3,068,019 Bonus royalties 779,712 2,106,957 Fee royalties 173,770 186,814 Total royalty income $ 2,135,494 $ 5,361,790 Base overriding royalties The performance obligation for the base overriding royalty consists of providing Northshore Mining Company (“Northshore”) access to the Peters Lands, Cloquet Lands, and Mesabi Lands and the right to mine on these lands. The consideration to be received from this access relates to the volume of iron ore shipped by Northshore. Mesabi Trust receives royalties at the greater of (i) the aggregate quantity of iron ore products shipped that were mined from Mesabi Trust Lands, and (ii) a portion of the aggregate quantity of all iron ore products shipped from Silver Bay that were mined from any lands, such portion being 90% of the first four million tons shipped from Silver Bay during such year, 85% of the next two million tons shipped during such year, and 25% of all tonnage shipped during such year in excess of six million tons. The royalty percentage paid to the Trust increases as the aggregate tonnage of iron ore products shipped, attributable to the Trust, in any calendar year increases past each of the first four one-million ton volume thresholds. The base overriding royalties contain variable consideration, as the transaction price is based on a percentage that varies based on the total cumulative tons of iron ore shipped for the calendar year. The Trust estimates the variable consideration it expects to be entitled to receive over the contractual period associated with the royalty agreement. Under the royalty agreement, measuring the total cumulative volumes of iron ore shipped, and the applicable royalty percentages, are reset at the beginning of each calendar year. The Trust evaluates the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, the Trust includes the variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. For the base overriding royalties, the Trust estimates the base overriding royalty percentage using the expected value method, which calculates the estimate based off the historical, current, and forecasted shipments. The Trust recognizes base overriding royalties on a quarterly basis based on the actual shipments for the fiscal quarter at the estimated royalty percentage as described above and based on the estimated prices for iron ore products sold under the Cliffs Pellet Agreements. Bonus royalties The performance obligation for the bonus royalties consists of providing Northshore access to the Peters Lands, Cloquet Lands, and Mesabi Lands and the right to mine on these lands and the consideration to be received from this access relates to the volume of iron ore shipped by Northshore. The Trust recognizes bonus royalties on a quarterly basis based on the actual shipments of the fiscal quarter at the actual royalty percentage for those shipments and based on the anticipated prices for iron ore products sold under the Cliffs Pellet Agreements. Fee royalties The performance obligation for the fee royalties consists of the volume of crude ore mined on a quarterly basis. The Trust recognizes fee royalties on a quarterly basis based on the actual crude ore mined during the fiscal quarter. Accrued income receivable The accrued income receivable is included in net income per unit. The Trust recorded $30,983 of accrued income receivable as reflected on the Condensed Balance Sheet as of April 30, 2020 (unaudited). As of January 31, 2020, the Trust recorded accrued income receivable of $69,588. Contract asset and contract liability The contract asset and contract liability are presented net in the accompanying condensed balance sheets as both the contract asset and contract liability are derived from one customer contract. A net contract liability in the amount of $791,162 is reflected on the Condensed Balance Sheet as of April 30, 2020 (unaudited). The net contract liability is made up of a contract asset in the amount of $1,003,962 and a contract liability in the amount of $1,795,124. As of January 31, 2020, the Trust recorded a net contract liability of $2,511,720, made up of a contract asset in the amount of $192,059 and a contract liability in the amount of $2,703,779. The contract asset is based on the revenue recognized on the base overriding royalties, at the estimated prices for iron ore products sold under the Cliffs Pellet Agreements, that will be collected in subsequent quarters as the uncertainty associated with the variable consideration is resolved. The contract asset is not available for distribution to the Unitholders until the applicable royalties are actually received by the Trust. The Trust includes estimated future royalty rates on current contracted volumes within contract asset. The contract liability represents iron ore that has not been shipped by Northshore, but for which the Trust has received a royalty payment during the quarter ended April 30, 2020 based on an initial estimated price, or in certain instances, quarterly payment of minimum advance royalties. Revenue will be recognized in accordance with the Trust’s revenue recognition policy at the estimated prices for iron ore products sold under the Cliffs Pellet Agreements as shipments of these products are made. |
DIVIDEND AND DISTRIBUTION
DIVIDEND AND DISTRIBUTION | 3 Months Ended |
Apr. 30, 2020 | |
DIVIDEND AND DISTRIBUTION | |
DIVIDEND AND DISTRIBUTION | Note 3. The Trustees determine whether to declare a distribution each year in April, July, October and January. The Trust’s financial statements are prepared on an accrual basis and present the Trust’s results of operations based on each of the Trust’s fiscal quarters, which end one month after the close of each calendar quarter. Because (i) distributions, if any, are declared by the Trustees based on, among other considerations, the amount of royalties actually paid to the Trust through the end of each calendar quarter prior to April, July, October and January of each year, the Trustees’ evaluation of known and projected Trust expenses in the current and future quarters, the then-current level of Unallocated Reserve and general economic conditions, and (ii) the Trust’s Net Income is calculated as of the end of each fiscal quarter, the distributions declared by the Trust are not equivalent to the Trust’s Net Income during the periods reported in this quarterly report on Form 10-Q. |
ROYALTY AGREEMENT, UNALLOCATED
ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS | 3 Months Ended |
Apr. 30, 2020 | |
UNALLOCATED RESERVE AND DISTRIBUTIONS | |
ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS | Note 4. On April 30, 2020, the Trustees received the quarterly royalty report of iron ore product shipments from Silver Bay, Minnesota during the calendar quarter ended March 31, 2020 from Cleveland-Cliffs Inc. (“Cliffs”), the parent company of Northshore. On April 13, 2020, the Trustees declared a distribution of $0.56 per Unit of Beneficial Interest payable on May 20, 2020 to Mesabi Trust Unitholders of record at the close of business on April 30, 2020. Each quarter, as authorized by the Agreement of Trust, the Trustees evaluate all relevant factors including all costs, expenses, obligations, and present and future liabilities of the Trust (whether fixed or contingent) in determining the prudent level of unallocated reserve in light of the unpredictable nature of the iron ore industry and current economic conditions. Pursuant to the Agreement of Trust, the Trustees make decisions about cash distributions to Unitholders based on the royalty payments it receives from Northshore when received, rather than as royalty income is recorded in accordance with the Trust’s revenue recognition policy. Refer to Note 3 for further information. As of April 30, 2020 and January 31, 2020, the unallocated cash and U.S. Government securities portion of the Trust’s Unallocated Reserve was comprised of the following components: April 30, 2020 (unaudited) January 31, 2020 Cash and U.S. Government securities $ 14,283,675 $ 23,510,129 Distribution payable (7,347,206) (9,184,007) Unallocated cash and U.S. Government securities $ 6,936,469 $ 14,326,122 A reconciliation of the Trust’s Unallocated Reserve and Trust Corpus for the three months ended April 30, 2020 and 2019 is as follows: Unallocated Trust Reserve Corpus Total Balances at January 31, 2020 $ 11,831,014 $ 3 $ 11,831,017 Net income 1,611,621 — 1,611,621 Distributions declared - $0.5600 per share (7,347,206) — (7,347,206) Balances at April 30, 2020 $ 6,095,429 $ 3 $ 6,095,432 Unallocated Trust Reserve Corpus Total Balances at January 31, 2019 $ 16,805,689 $ 3 $ 16,805,692 Net income 4,910,288 — 4,910,288 Distributions declared - $0.8900 per share (11,676,809) — (11,676,809) Balances at April 30, 2019 $ 10,039,168 $ 3 $ 10,039,171 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Apr. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Revenue recognition | The Trust accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers . All revenue is recognized as the performance obligations are satisfied. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Apr. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of disaggregation of revenue | Three Months Ended April 30, 2020 2019 Base overriding royalties $ 1,182,012 $ 3,068,019 Bonus royalties 779,712 2,106,957 Fee royalties 173,770 186,814 Total royalty income $ 2,135,494 $ 5,361,790 |
UNALLOCATED RESERVE AND DISTRIB
UNALLOCATED RESERVE AND DISTRIBUTIONS (Tables) | 3 Months Ended |
Apr. 30, 2020 | |
UNALLOCATED RESERVE AND DISTRIBUTIONS | |
Schedule of unallocated cash and U.S. Government securities portion of the Trust's Unallocated Reserve | April 30, 2020 (unaudited) January 31, 2020 Cash and U.S. Government securities $ 14,283,675 $ 23,510,129 Distribution payable (7,347,206) (9,184,007) Unallocated cash and U.S. Government securities $ 6,936,469 $ 14,326,122 |
Schedule of reconciliation of Trust's Unallocated Reserve | Unallocated Trust Reserve Corpus Total Balances at January 31, 2020 $ 11,831,014 $ 3 $ 11,831,017 Net income 1,611,621 — 1,611,621 Distributions declared - $0.5600 per share (7,347,206) — (7,347,206) Balances at April 30, 2020 $ 6,095,429 $ 3 $ 6,095,432 Unallocated Trust Reserve Corpus Total Balances at January 31, 2019 $ 16,805,689 $ 3 $ 16,805,692 Net income 4,910,288 — 4,910,288 Distributions declared - $0.8900 per share (11,676,809) — (11,676,809) Balances at April 30, 2019 $ 10,039,168 $ 3 $ 10,039,171 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares | 3 Months Ended | |
Apr. 30, 2020 | Apr. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Number of units outstanding | 13,120,010 | 13,120,010 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue (Details) | 3 Months Ended | ||
Apr. 30, 2020USD ($)contractitemMT | Apr. 30, 2019USD ($) | Jan. 31, 2020USD ($) | |
Revenue from Contract with Customer [Abstract] | |||
Royalty Revenue | $ 2,135,494 | $ 5,361,790 | |
Base overriding royalties, first tier portion percentage | 90.00% | ||
Base overriding royalties, first tier shipment ceiling (in million tons) | MT | 4 | ||
Base overriding royalties, second tier portion percentage | 85.00% | ||
Base overriding royalties, second tier shipment ceiling (in million tons) | MT | 2 | ||
Base overriding royalties, third tier portion percentage | 25.00% | ||
Base overriding royalties, third tier shipment threshold (in million tons) | MT | 6 | ||
Base overriding royalties, number of volume thresholds for transaction price | item | 4 | ||
Base overriding royalties, volume threshold for transaction price | MT | 1 | ||
Accrued income receivable | $ 30,983 | $ 69,588 | |
Number of customer contracts | contract | 1 | ||
Net contract liability | $ 791,162 | 2,511,720 | |
Contract asset | 1,003,962 | 192,059 | |
Contract liability | 1,795,124 | $ 2,703,779 | |
Base Overriding Royalties | |||
Revenue from Contract with Customer [Abstract] | |||
Royalty Revenue | 1,182,012 | 3,068,019 | |
Bonus Royalties | |||
Revenue from Contract with Customer [Abstract] | |||
Royalty Revenue | 779,712 | 2,106,957 | |
Fee Royalties | |||
Revenue from Contract with Customer [Abstract] | |||
Royalty Revenue | $ 173,770 | $ 186,814 |
DIVIDEND AND DISTRIBUTION (Deta
DIVIDEND AND DISTRIBUTION (Details) | 3 Months Ended |
Apr. 30, 2020 | |
DIVIDEND AND DISTRIBUTION | |
Period after the close of each calendar quarter when the fiscal quarter ends | 1 month |
UNALLOCATED RESERVE AND DISTR_2
UNALLOCATED RESERVE AND DISTRIBUTIONS (Details) - USD ($) | Apr. 13, 2020 | Apr. 30, 2020 | Apr. 30, 2019 | Jan. 31, 2020 |
Unallocated Cash and Securities portion of Unallocated Reserve | ||||
Cash and U.S. Government securities | $ 14,283,675 | $ 23,510,129 | ||
Distribution payable | (7,347,206) | (9,184,007) | ||
Unallocated cash and U.S. Government securities | 6,936,469 | $ 14,326,122 | ||
Reconciliation of Trust's Unallocated Reserve | ||||
Beginning Balance | 11,831,017 | $ 16,805,692 | ||
Net income | 1,611,621 | 4,910,288 | ||
Distributions declared | (7,347,206) | (11,676,809) | ||
Ending Balance | $ 6,095,432 | $ 10,039,171 | ||
Distributions declared per unit (in dollars per unit) | $ 0.5600 | $ 0.8900 | ||
Distributed cash payments | $ 9,184,007 | $ 18,236,814 | ||
Distribution declared per unit | $ 0.56 | |||
Unallocated Reserve | ||||
Reconciliation of Trust's Unallocated Reserve | ||||
Beginning Balance | 11,831,014 | 16,805,689 | ||
Net income | 1,611,621 | 4,910,288 | ||
Distributions declared | (7,347,206) | (11,676,809) | ||
Ending Balance | 6,095,429 | 10,039,168 | ||
Trust Corpus | ||||
Reconciliation of Trust's Unallocated Reserve | ||||
Beginning Balance | 3 | 3 | ||
Ending Balance | $ 3 | $ 3 |