Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jul. 31, 2019 | Sep. 05, 2019 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Period End Date | Jul. 31, 2019 | |
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 | 2020 | |
Document Fiscal Period Focus | Q2 | |
Entity Central Index Key | 0000065172 | |
Amendment Flag | false |
Statements of Income
Statements of Income - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jul. 31, 2019 | Jul. 31, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | |
REVENUES | ||||
Royalty income | $ 14,301,838 | $ 19,125,069 | $ 19,663,627 | $ 25,771,739 |
Interest | 42,386 | 26,883 | 147,469 | 64,260 |
Total revenues | 14,344,224 | 19,151,952 | 19,811,096 | 25,835,999 |
EXPENSES | ||||
Expenses | 432,537 | 280,497 | 989,121 | 648,696 |
Net income | $ 13,911,687 | $ 18,871,455 | $ 18,821,975 | $ 25,187,303 |
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING | 13,120,010 | 13,120,010 | 13,120,010 | 13,120,010 |
Net income per unit (Note 2) (in dollars per unit) | $ 1.0603 | $ 1.4384 | $ 1.4346 | $ 1.9198 |
Distribution declared per unit (Note 3) (in dollars per unit) | $ 0.2100 | $ 0.2200 | $ 1.1000 | $ 0.6700 |
Balance Sheets
Balance Sheets - USD ($) | Jul. 31, 2019 | Jan. 31, 2019 |
ASSETS | ||
Cash and cash equivalents | $ 452,628 | $ 881,810 |
U.S. Government securities, at amortized cost (which approximates fair value) | 16,484,759 | 32,122,312 |
Accrued income receivable | 3,820,631 | 2,339,060 |
Contract asset | 3,223,078 | 56,357 |
Prepaid expenses | 170,698 | 54,472 |
Current assets | 24,151,794 | 35,454,011 |
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 | 24,151,797 | 35,454,014 |
LIABILITIES, UNALLOCATED RESERVE AND TRUST CORPUS | ||
Distribution payable | 2,755,202 | 18,236,814 |
Accrued expenses | 200,939 | 411,508 |
Total liabilities | 2,956,141 | 18,648,322 |
Unallocated reserve | 21,195,653 | 16,805,689 |
Trust corpus | 3 | 3 |
Total liabilities, unallocated reserve and trust corpus | $ 24,151,797 | $ 35,454,014 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - shares | Jul. 31, 2019 | Jan. 31, 2019 |
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 ($) | 6 Months Ended | |
Jul. 31, 2019 | Jul. 31, 2018 | |
Operating activities | ||
Royalties received | $ 15,025,100 | $ 16,056,417 |
Interest received | 137,704 | 51,515 |
Expenses paid | (1,315,916) | (735,803) |
Net cash from operating activities | 13,846,888 | 15,372,129 |
Investing activities | ||
Maturities of U.S. Government securities | 32,122,312 | 24,168,903 |
Purchases of U.S. Government securities | (16,484,759) | (18,273,425) |
Net cash from investing activities | 15,637,553 | 5,895,478 |
Financing activity | ||
Distributions to unitholders | (29,913,623) | (21,385,616) |
Net change in cash and cash equivalents | (429,182) | (118,009) |
Cash and cash equivalents, beginning of period | 881,810 | 314,835 |
Cash and cash equivalents, end of period | 452,628 | 196,826 |
Reconciliation of net income to net cash from operating activities | ||
Net income | 18,821,975 | 25,187,303 |
Increase in accrued income receivable | (1,481,571) | (6,820,424) |
Increase in contract asset | (3,166,721) | (2,907,643) |
Increase in prepaid expense | (116,226) | (97,625) |
Increase (decrease) in accrued expenses | (210,569) | 10,518 |
Net cash from operating activities | 13,846,888 | 15,372,129 |
Non cash financing activity | ||
Distributions declared and payable | $ 2,755,202 | $ 2,886,402 |
NATURE OF BUSINESS AND ORGANIZA
NATURE OF BUSINESS AND ORGANIZATION | 6 Months Ended |
Jul. 31, 2019 | |
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, 2019) 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 and six months ended July 31, 2019 and 2018, (b) the financial position at July 31, 2019 and (c) the cash flows for the six months ended July 31, 2019 and 2018, 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, 2019. gg |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jul. 31, 2019 | |
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 table represents a disaggregation of revenue for the three and six months ended July 31: Three Months Ended July 31, 2019 2018 Base overriding royalties $ 8,326,504 $ 11,445,963 Bonus royalties 5,818,223 7,515,672 Fee royalties 157,111 163,434 Total royalty income $ 14,301,838 $ 19,125,069 Six Months Ended July 31, 2019 2018 Base overriding royalties $ 11,394,522 $ 15,303,448 Bonus royalties 7,925,180 10,149,903 Fee royalties 343,925 318,388 Total royalty income $ 19,663,627 $ 25,771,739 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 $3,820,631 of accrued income receivable as reflected on the Condensed Balance Sheet as of July 31, 2019 (unaudited). As of January 31, 2019, the Trust recorded accrued income receivable of $2,339,060. Accrued income receivable is accounted for and reported for the Trust’s fiscal quarter based on shipments during the month of July at estimated prices for iron ore products sold under the Cliffs Pellet Agreements, even though such accrued income receivable is not available for distribution to the holders of Certificates of Beneficial Interest in Mesabi Trust (“Unitholders”) until the applicable royalties are actually received by the Trust. Accrued income receivable also includes accruals for anticipated pricing adjustments, which can be positive or negative. Contract asset A contract asset in the amount of $3,223,078 is reflected on the Condensed Balance Sheet as of July 31, 2019 (unaudited). As of January 31, 2019, the Trust recorded a contract asset of $56,357. 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. |
DIVIDEND AND DISTRIBUTION
DIVIDEND AND DISTRIBUTION | 6 Months Ended |
Jul. 31, 2019 | |
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 | 6 Months Ended |
Jul. 31, 2019 | |
UNALLOCATED RESERVE AND DISTRIBUTIONS | |
ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS | Note 4. On July 30, 2019, the Trustees received the quarterly royalty report of iron ore product shipments from Silver Bay, Minnesota during the calendar quarter ended June 30, 2019 from Cleveland-Cliffs Inc., formerly known as Cliffs Natural Resources Inc. (“Cliffs”), the parent company of Northshore. On July 12, 2019, the Trustees declared a distribution of $0.21 per Unit of Beneficial Interest payable on August 20, 2019 to Mesabi Trust Unitholders of record at the close of business on July 30, 2019. 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 July 31, 2019 and January 31, 2019, the unallocated cash and U.S. Government securities portion of the Trust’s Unallocated Reserve was comprised of the following components: July 31, 2019 (unaudited) January 31, 2019 Cash and U.S. Government securities $ 16,937,387 $ 33,004,122 Distribution payable (2,755,202) (18,236,814) Unallocated cash and U.S. Government securities $ 14,182,185 $ 14,767,308 A reconciliation of the Trust’s Unallocated Reserve and Trust Corpus for the six and three months ended July 31, 2019 and 2018 is as follows: Unallocated Trust Reserve Corpus Total Balances at January 31, 2019 $ 16,805,689 $ 3 $ 16,805,692 Net income 18,821,975 — 18,821,975 Distributions declared - $1.1000 per share (14,432,011) — (14,432,011) Balances at July 31, 2019 $ 21,195,653 $ 3 $ 21,195,656 Unallocated Trust Reserve Corpus Total Balances at April 30, 2019 $ 10,039,168 $ 3 $ 10,039,171 Net income 13,911,687 — 13,911,687 Distributions declared - $0.2100 per share (2,755,202) — (2,755,202) Balances at July 31, 2019 $ 21,195,653 $ 3 $ 21,195,656 Unallocated Trust Reserve Corpus Total Balances at January 31, 2018 $ 10,606,675 $ 3 $ 10,606,678 Net income 25,187,303 — 25,187,303 Distributions declared - $0.6700 per share (8,790,406) — (8,790,406) Balances at July 31, 2018 $ 27,003,572 $ 3 $ 27,003,575 Unallocated Trust Reserve Corpus Total Balances at April 30, 2018 $ 11,018,518 $ 3 $ 11,018,521 Net income 18,871,455 — 18,871,455 Distributions declared - $0.2200 per share (2,886,401) — (2,886,401) Balances at July 31, 2018 $ 27,003,572 $ 3 $ 27,003,575 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jul. 31, 2019 | |
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) | 6 Months Ended |
Jul. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of disaggregation of revenue | Three Months Ended July 31, 2019 2018 Base overriding royalties $ 8,326,504 $ 11,445,963 Bonus royalties 5,818,223 7,515,672 Fee royalties 157,111 163,434 Total royalty income $ 14,301,838 $ 19,125,069 Six Months Ended July 31, 2019 2018 Base overriding royalties $ 11,394,522 $ 15,303,448 Bonus royalties 7,925,180 10,149,903 Fee royalties 343,925 318,388 Total royalty income $ 19,663,627 $ 25,771,739 |
UNALLOCATED RESERVE AND DISTRIB
UNALLOCATED RESERVE AND DISTRIBUTIONS (Tables) | 6 Months Ended |
Jul. 31, 2019 | |
UNALLOCATED RESERVE AND DISTRIBUTIONS | |
Schedule of unallocated cash and U.S. Government securities portion of the Trust's Unallocated Reserve | July 31, 2019 (unaudited) January 31, 2019 Cash and U.S. Government securities $ 16,937,387 $ 33,004,122 Distribution payable (2,755,202) (18,236,814) Unallocated cash and U.S. Government securities $ 14,182,185 $ 14,767,308 |
Schedule of reconciliation of Trust's Unallocated Reserve | Unallocated Trust Reserve Corpus Total Balances at January 31, 2019 $ 16,805,689 $ 3 $ 16,805,692 Net income 18,821,975 — 18,821,975 Distributions declared - $1.1000 per share (14,432,011) — (14,432,011) Balances at July 31, 2019 $ 21,195,653 $ 3 $ 21,195,656 Unallocated Trust Reserve Corpus Total Balances at April 30, 2019 $ 10,039,168 $ 3 $ 10,039,171 Net income 13,911,687 — 13,911,687 Distributions declared - $0.2100 per share (2,755,202) — (2,755,202) Balances at July 31, 2019 $ 21,195,653 $ 3 $ 21,195,656 Unallocated Trust Reserve Corpus Total Balances at January 31, 2018 $ 10,606,675 $ 3 $ 10,606,678 Net income 25,187,303 — 25,187,303 Distributions declared - $0.6700 per share (8,790,406) — (8,790,406) Balances at July 31, 2018 $ 27,003,572 $ 3 $ 27,003,575 Unallocated Trust Reserve Corpus Total Balances at April 30, 2018 $ 11,018,518 $ 3 $ 11,018,521 Net income 18,871,455 — 18,871,455 Distributions declared - $0.2200 per share (2,886,401) — (2,886,401) Balances at July 31, 2018 $ 27,003,572 $ 3 $ 27,003,575 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Jul. 31, 2019 | Jul. 31, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||
Number of units outstanding | 13,120,010 | 13,120,010 | 13,120,010 | 13,120,010 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue, fixed assets (Details) | 3 Months Ended | 6 Months Ended | |||
Jul. 31, 2019USD ($) | Jul. 31, 2018USD ($) | Jul. 31, 2019USD ($)itemMT | Jul. 31, 2018USD ($) | Jan. 31, 2019USD ($) | |
Revenue from Contract with Customer [Abstract] | |||||
Royalty Revenue | $ 14,301,838 | $ 19,125,069 | $ 19,663,627 | $ 25,771,739 | |
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 | 3,820,631 | $ 3,820,631 | $ 2,339,060 | ||
Contract asset | 3,223,078 | 3,223,078 | $ 56,357 | ||
Base Overriding Royalties | |||||
Revenue from Contract with Customer [Abstract] | |||||
Royalty Revenue | 8,326,504 | 11,445,963 | 11,394,522 | 15,303,448 | |
Bonus Royalties | |||||
Revenue from Contract with Customer [Abstract] | |||||
Royalty Revenue | 5,818,223 | 7,515,672 | 7,925,180 | 10,149,903 | |
Fee Royalties | |||||
Revenue from Contract with Customer [Abstract] | |||||
Royalty Revenue | $ 157,111 | $ 163,434 | $ 343,925 | $ 318,388 |
DIVIDEND AND DISTRIBUTION (Deta
DIVIDEND AND DISTRIBUTION (Details) | 6 Months Ended |
Jul. 31, 2019 | |
DIVIDEND AND DISTRIBUTION | |
Period after the close of each calendar quarter when the fiscal quarter ends | 1 month |
ROYALTY AGREEMENT, UNALLOCATE_2
ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS (Details) - USD ($) | Jul. 12, 2019 | Jul. 31, 2019 | Jul. 31, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | Jan. 31, 2019 |
UNALLOCATED RESERVE AND DISTRIBUTIONS | ||||||
Distribution declared per unit (Note 3) (in dollars per unit) | $ 0.21 | $ 0.2100 | $ 0.2200 | $ 1.1000 | $ 0.6700 | |
Unallocated Cash and Securities portion of Unallocated Reserve | ||||||
Cash and U.S. Government securities | $ 16,937,387 | $ 16,937,387 | $ 33,004,122 | |||
Distribution payable | (2,755,202) | (2,755,202) | (18,236,814) | |||
Unallocated cash and U.S. Government securities | 14,182,185 | 14,182,185 | $ 14,767,308 | |||
Reconciliation of Trust's Unallocated Reserve | ||||||
Beginning Balance | 10,039,171 | $ 11,018,521 | 16,805,692 | $ 10,606,678 | ||
Net income | 13,911,687 | 18,871,455 | 18,821,975 | 25,187,303 | ||
Distributions declared | (2,755,202) | (2,886,401) | (14,432,011) | (8,790,406) | ||
Ending Balance | $ 21,195,656 | $ 27,003,575 | $ 21,195,656 | $ 27,003,575 | ||
Distribution declared per unit | $ 0.2100 | $ 0.2200 | $ 1.1000 | $ 0.6700 | ||
Unallocated Reserve | ||||||
Reconciliation of Trust's Unallocated Reserve | ||||||
Beginning Balance | $ 10,039,168 | $ 11,018,518 | $ 16,805,689 | $ 10,606,675 | ||
Net income | 13,911,687 | 18,871,455 | 18,821,975 | 25,187,303 | ||
Distributions declared | (2,755,202) | (2,886,401) | (14,432,011) | (8,790,406) | ||
Ending Balance | 21,195,653 | 27,003,572 | 21,195,653 | 27,003,572 | ||
Trust Corpus | ||||||
Reconciliation of Trust's Unallocated Reserve | ||||||
Beginning Balance | 3 | 3 | 3 | 3 | ||
Ending Balance | $ 3 | $ 3 | $ 3 | $ 3 |