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Mesabi Trust Reports Operating Results (10-Q)

June 05, 2012 | About:
10qk

10qk

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Mesabi Trust (MSB) filed Quarterly Report for the period ended 2012-04-30.

Mesabi Trust has a market cap of $316.3 million; its shares were traded at around $24.42 with a P/E ratio of 9.5 and P/S ratio of 9.3. The dividend yield of Mesabi Trust stocks is 1.1%. Mesabi Trust had an annual average earning growth of 21.8% over the past 10 years. GuruFocus rated Mesabi Trust the business predictability rank of 1-star.

Highlight of Business Operations:

Total royalty income for the quarter increased $416,532 to $3,693,121, as compared to the three months ended April 30, 2011. The increase in total royalty income is due to higher average sales prices per ton of iron ore pellets sold and an increase in the total volume of iron ore pellets shipped during the

The table below shows that the base overriding royalties, the bonus royalties, and the fee royalties increased $122,956, $219,963, and $73,613 respectively, for the three months ended April 30, 2012, as compared to the three months ended April 30, 2011. The increases in the base overriding royalties and the bonus royalties are both attributable to the higher sales prices per ton of iron ore pellets and the increase in the volume of tons shipped during the three months ended April 30, 2012, each as compared to the three months ended April 30, 2011. The increase in the fee royalty amount is due to an increase in the amount of ore mined under the Peters Lease and a higher current market value for crude ore mined under the Peters Lease.

Net income for the three months ended April 30, 2012 was $3,369,892, an increase of $306,631 compared to the three months ended April 30, 2011. As with the increase in total royalty income, the increase in net income for the quarter ended April 30, 2012 is the result of higher sales prices per ton of iron ore pellets shipped and an increase in the volume of tons shipped. The Trusts expenses increased $108,767 for the three months ended April 30, 2012, as compared to the three month period ended April 30, 2011. The primary factors resulting in higher expenses were higher accounting and legal fees due to a change in the Trusts independent registered public accounting firm and an increase in the Trusts administration fees under the Agreement of Trust. The table below summarizes the Trusts income and expenses for the three months ended April 30, 2012 and April 30, 2011.

As set forth in the table below, Unallocated Reserve, which is comprised of accrued income receivable, cash reserve for potential fixed or contingent future liabilities and deferred royalty revenue, increased from $3,395,062 as of April 30, 2011 to $3,548,599 as of April 30, 2012. The increase in the Unallocated Reserve is primarily the result of an increase in the Trusts accrued income receivable. The accrued income receivable portion of the Unallocated Reserve increased from $2,666,600 as of April 30, 2011 to $2,915,527 as of April 30, 2012. The increase in the accrued income receivable portion of the Unallocated Reserve is the result of a higher volume of shipments during the month of April 2012, as compared to April 2011. At the same time, the Trusts cash reserve for potential fixed or contingent future liabilities decreased from $754,044 as of April 30, 2011 to $700,155 as of April 30, 2012. The decrease in the cash reserve for potential fixed or contingent future liabilities is due to the Trustees decision to use a portion of the Trusts cash reserve to pay distributions to Unitholders during calendar year 2011.

to $1,000,000, to meet present or future liabilities of the Trust.Although the actual amount of the Unallocated Reserve will fluctuate from time to time and may increase or decrease from its current level, it is currently intended that future distributions will be highly dependent upon royalty income as it is received and the level of Trust expenses. The amount of future royalty income available for distribution will be subject to the volume of iron ore product shipments and the dollar level of sales by Northshore. Shipping activity is greatly reduced during the winter months and economic conditions, particularly those affecting the steel industry, may adversely affect the amount and timing of such future shipments and sales. The Trustees will continue to monitor the economic circumstances of the Trust to strike a responsible balance between distributions to Unitholders and the need to maintain adequate reserves at a prudent level, given the unpredictable nature of the iron ore industry, the Trusts dependence on the actions of the lessee/operator, and the fact that the Trust essentially has no other liquid assets.

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