Item 1. BUSINESS
The Registrant ("Trust") owns interests in fee, mineral and nonmineral lands on the Mesabi Iron Range of Minnesota. Income is derived through royalties on iron ore minerals (principally taconite) taken from these properties by lessees. The Registrant is presently involved solely with the leasing and care of these properties. There have been no significant changes in these functions since the beginning of the fiscal year.
The raw materials essential to the business of the Registrant are the minerals contained in properties owned and leased by the Registrant. Since the Registrant leases its properties to mining interests which control the amount of ore production, the Registrant itself has no direct control over the tonnage mined from its properties but is solely involved with administering the leases on the properties. Since operating companies insist on freedom to move from property to property as mining requirements dictate, such changes in production cannot be precisely reduced to financial forecasts.
Registrant owns mineral interests in 12,033 acres on the Mesabi Iron Formation, including approximately 7,443 acres which are wholly owned, 1,080 acres in which Registrant is a tenant in common with a 91% interest, 3,350 acres in tenancy in common with a 50% interest and 160 acres in tenancy in common with other fractional interests. Of said total, 7,152 acres are under lease and 4,881 acres are unleased.
Registrant cannot estimate at this time any tonnage for nonmagnetic taconite because of lack of drilling, testing and of any established large-scale commercial treatment method for Mesabi Iron Range nonmagnetic taconite. To give a better perspective on magnetic taconite, Registrant's engineers estimate that the magnetic taconite under lease as of January 1, 2001 was equivalent to approximately 382,900,000 tons of pellets.
Present leases provide for minimum payments (advance royalties) aggregating approximately $2,455,000 for the year 2001 even if no taconite is mined. All of this amount is attributable to long-term taconite leases.
None of the Registrant's leases provide for any right of renewal by the lessees upon expiration, even though unmined minerals might remain. Any extension of any such terminating lease would have to be negotiated in the same manner as unleased properties.
Item 1. BUSINESS--Continued
All leases granted by the Registrant, except some covering remnants of natural ore, have provisions for escalation of royalty rates. Most of the taconite royalty rates are escalated on the basis of the price of pellets, the iron content, the Producers Price Index (PPI) (All Commodities), the PPI (Iron and Steel subgroup) or certain combinations of the above.
Firm data on competitive conditions in the iron ore industry are not available. Iron ore is also available from a number of other sources. The Registrant's non-taconite shipments have ceased as a source of income because the ore deposits have, for practical purposes, been exhausted. The mining of taconite by lessees is the most important part of the Registrant's business. Future development depends, to a large part, on the demand for taconite from the Registrant's properties by mining companies.
On May 24, 2000, LTV Steel Company announced the closing about mid-year 2001 of its northern Minnesota taconite pellet facility, LTV Steel Mining Company (LTVSMC). The closure date subsequently was moved up to January 2001. The Trust has a lease with LTVSMC referred to as the Wentworth mine. Historically, the Wentworth mine has only accounted for about 3 1/2% of the Trust's average annual pellet shipments and, as such, the closing of the facility is not expected to materially impact the Trust's earnings.
The Registrant's royalty income is dependent on the number of tons of taconite shipped from its properties by the lessees, royalty rates, advance royalties collected and liquidation of advance royalties collected. Following is a summary of shipments by lessee during 2000, 1999 and 1998:
TONS SHIPPED --------------------------------------- 2000 1999 1998 --------------------------------------- United States Steel Corporation (USX) 3,969,669 3,014,550 2,833,531 Hibbing Taconite Company 2,454,681 1,874,302 2,739,779 National Steel Corporation 483,468 811,852 656,164 LTV Steel Mining Company 34,721 432,872 154,752 --------------------------------------- 6,942,539 6,133,576 6,384,226 =======================================
At December 31, 2000, the Registrant employed 10 persons. The Registrant has been engaged in only one line of business, namely the leasing and maintenance of its mineral properties. The business of the Registrant is not seasonal, but income depends upon production by mining companies which lease its properties. The Registrant has no operations in foreign countries and has no customers or lessees in foreign countries.
Item 1. BUSINESS--Continued
As previously reported, Section 646 of the Tax Reform Act of 1986, as amended, provided a special elective provision under which the Trust was allowed to convert from taxation as a corporation to that of a grantor trust. Pursuant to an Order of the Ramsey County District Court, the Trustees filed the Section 646 election with the Internal Revenue Service on December 30, 1988. On January 1, 1989, the Trust became exempt from federal and Minnesota corporate income taxes. For years 1989 and thereafter, certificate holders are taxed on their allocable share of the Trust's income whether or not the income is distributed. For certificate holder tax purposes, the Trust's income is determined on an annual basis, one-fourth then being allocated to each quarterly record date.
The Trustees provided annual tax information in January 2001 to certificate holders of record with holdings on any of the four quarterly record dates during 2000. This information included a:
Substitute Form 1099-MISC - This form reported one's 2000 allocable share of income from the Trust, distributions declared and any taxes withheld. (Foreign certificate holders received a Form 1042S.)
Trust Supplemental Statement - This statement reported the number of units (shares) held on any of the four quarterly record dates in 2000.
Tax Return Guide - This guide instructed the certificate holders as to the preparation of their income tax returns with respect to income allocated from the Trust and various deductions allowable.
Item 1. BUSINESS--Continued
The following is a listing of the Registrant's current leases:
Item 2.
Item 2. PROPERTIES
The Registrant owns interests in fee, mineral and nonmineral lands on the Mesabi Iron Range of Minnesota, most of which are leased to mining companies which extract taconite. Taconite deposits are substantial.
Item 3.
Item 3. LEGAL PROCEEDINGS
In proceedings commenced in 1972, the Minnesota Supreme Court determined that while by the terms of the Trust, the Trustees are given discretionary powers to convert Trust assets to cash and to distribute the proceeds to certificate holders, they are limited in their exercise of those powers by the legal duty imposed by well established law of trusts to serve the interests of both term beneficiaries and the reversionary beneficiary with impartiality. Thus, the Trustees have no duty to exercise the powers of sale and distribution unless required to do so to serve both term and reversionary interests; and, if the need arises, the Trustees may petition the District Court of Ramsey County, Minnesota, for further instructions defining what is required in a particular case to balance the interests of certificate holders and reversioner. Also, the Court, in effect, held that the Trust is a conventional trust, rather than a business trust, and must operate within the framework of well established trust law.
By a letter dated April 14, 2000, certificate holders of record as of March 1, 2000 and the reversioner were notified of a hearing on May 24, 2000 in Ramsey County Courthouse, Saint Paul, Minnesota, for the purpose of settling and allowing the Trust accounts for the year 1999. By Court Order signed and dated May 24, 2000, the 1999 accounts were settled and allowed in all respects. By previous Orders, the Court settled and allowed the accounts of the Trustees for preceding years of the Trust.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF CERTIFICATE HOLDERS
None.
PART II
Item 5.
Item 5. MARKET FOR THE REGISTRANT'S SHARES OF BENEFICIAL INTEREST AND RELATED SECURITY HOLDER MATTERS
Shares of Beneficial Interest, Market Prices and Distributions on pages 3 and 4 of the annual report to certificate holders for the year ended December 31, 2000 are incorporated herein by reference.
Item 6.
Item 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 2 of the annual report to certificate holders for the year ended December 31, 2000 is incorporated herein by reference.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations on page 2 of the annual report to certificate holders for the year ended December 31, 2000 are incorporated herein by reference.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Registrant, included in the annual report to certificate holders for the year ended December 31, 2000, are incorporated herein by reference:
Balance Sheets--December 31, 2000 and 1999.
Statements of Income--Years ended December 31, 2000, 1999 and 1998.
Statements of Beneficiaries' Equity--Years ended December 31, 2000, 1999 and 1998.
Statements of Cash Flows--Years ended December 31, 2000, 1999 and 1998.
Notes to Financial Statements--December 31, 2000.
Quarterly Results of Operations on page 4 of the annual report to certificate holders for the year ended December 31, 2000 are incorporated herein by reference.
Item 9.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant, being a trust, has no directors as such. The management of the Trust is vested in the following trustees and officers whose terms of office are not fixed for a specified time:
YEARS OF NAME AND POSITION AGE SERVICE ---------------------------------------------------------------------
Joseph S. Micallef President of the Trustees 67 24 years Harry L. Holtz Trustee 82 29 Roger W. Staehle Trustee 67 19 Robert A. Stein Trustee 62 19 Thomas A. Janochoski Vice President and Secretary 42 9
Principal occupations of Trustees and officers during the last five years:
JOSEPH S. MICALLEF President and Chief Executive Officer, Great Northern Iron Ore Properties; Consultant and Director, Fiduciary Counselling, Inc., St. Paul, Minnesota until December 31, 1998; Advisory Director, First Trust National Association until February 27, 1996.
HARRY L. HOLTZ President, Alliss Foundation; President and Chief Executive Officer, Great Northern Iron Ore Properties until December 31, 1998.
ROGER W. STAEHLE Adjunct Professor, Institute of Technology, University of Minnesota; Industrial Consultant.
ROBERT A. STEIN Executive Director and Chief Operating Officer, American Bar Association.
THOMAS A. JANOCHOSKI Vice President and Secretary, Chief Financial Officer, Great Northern Iron Ore Properties.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT--Continued
Executive employees in addition to those listed above include Roger P. Johnson, Manager of Mines and Chief Engineer.
There are no family relationships among any of the above persons.
Item 11.
Item 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ------------------------------ NAME AND PRINCIPAL POSITION YEAR SALARY BONUS -----------------------------------------------------------------------
As CEO and President of the Trustees: Joseph S. Micallef 2000 $90,000 $35,000 Joseph S. Micallef 1999 90,000 35,000 Harry L. Holtz 1998 90,000 35,000
The Trust Agreement (as modified by Court Orders) currently provides for annual compensation to the President of the Trustees of $90,000 and, in addition, a sum equal to one percent of the excess of the gross income of the Trust over $5,000,000 for that year until his annual compensation shall reach $125,000. No other executive's compensation exceeds $100,000. The Trustees, including the President, are not eligible to receive retirement benefits based on their services as Trustees. There are no options, SARs, long-term performance-based incentive plans or retirement benefits applicable to the CEO or the Trustees and, accordingly, disclosure tables with respect to such benefits have been omitted.
COMPENSATION OF TRUSTEES
The Trust Agreement (as modified by Court Orders) currently provides for annual compensation to each Trustee (other than the President) of $40,000, without any additional amounts payable for committee participation or special assignments. There are no other arrangements pursuant to which any Trustee was compensated for any services provided as a Trustee during the year.
Item 11. EXECUTIVE COMPENSATION--Continued
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Because the compensation of the Trustees and the Chief Executive Officer is established by the Trust Agreement (as modified by Court Orders), there is no compensation committee for the Trustees and there is no Trustee compensation committee report on executive compensation. The Board of Trustees, as a whole, determines the compensation of executive officers other than the President and Chief Executive Officer.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The only authorized securities of the Registrant are Trustees' Certificates of Beneficial Interest and the holders of these securities do not have voting rights. There were no entities holding more than 5% of the Certificates of Beneficial Interest outstanding, of record and/or beneficially, as of December 31, 2000.
(b) There were no securities owned by the Trustees or officers as of December 31, 2000.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2)--The response to this portion of Item 14 is submitted as a separate section of this report.
(3) Listing of Exhibits:
Exhibit 13--Annual Report to Certificate Holders
Exhibit 23--Consent of Independent Auditors
Exhibit 99(a)--Tax Return Guide
Exhibit 99(b)--Audit Committee Charter
Exhibit 99(c)--Report of Audit Committee
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K--Continued
(b) Report on Form 8-K--None.
(c) Exhibits--The response to this portion of Item 14 is submitted as a separate section of this report.
(d) Financial Statement Schedules--The response to this portion of Item 14 is submitted as a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
/s/ Joseph S. Micallef 2-12-01 -------------------------------------------- -------------- Joseph S. Micallef, Chief Executive Date Officer, Trustee and President of the Trustees
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ Harry L. Holtz 2-22-01 -------------------------------------------- -------------- Harry L. Holtz, Trustee Date
/s/ Roger W. Staehle 2-22-01 -------------------------------------------- -------------- Roger W. Staehle, Trustee Date
/s/ Robert A. Stein 2-17-01 -------------------------------------------- -------------- Robert A. Stein, Trustee Date
/s/ Thomas A. Janochoski 2-15-01 -------------------------------------------- -------------- Thomas A. Janochoski, Vice President Date and Secretary, Chief Financial Officer
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) and (2) and ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 2000
GREAT NORTHERN IRON ORE PROPERTIES
W-1290 First National Bank Building 332 Minnesota Street Saint Paul, Minnesota 55101-1361
FORM 10-K--Item 14(a)(1) and (2) GREAT NORTHERN IRON ORE PROPERTIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following financial statements of Great Northern Iron Ore Properties, included in the annual report of the Registrant to its certificate holders for the year ended December 31, 2000, are incorporated by reference in Item 8:
Balance Sheets--December 31, 2000 and 1999
Statements of Income--Years ended December 31, 2000, 1999 and 1998
Statements of Beneficiaries' Equity--Years ended December 31, 2000, 1999 and
Statements of Cash Flows--Years ended December 31, 2000, 1999 and 1998
Notes to Financial Statements--December 31, 2000
All Item 14(d) schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.