-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OYnq1abRtAlQ4BdesLxnyoSWZ9tQbtzPsWyqxorKydaQrtcO7BCumIZljPTkAeCv TWR7Skno1c2RjyOPiRO5nw== 0000950172-00-000928.txt : 20000516 0000950172-00-000928.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950172-00-000928 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PETRIE STORES LIQUIDATING TRUST CENTRAL INDEX KEY: 0000077808 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 226679945 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06166 FILM NUMBER: 634306 BUSINESS ADDRESS: STREET 1: 201 RT 17 STREET 2: SUITE 300 CITY: RUTHERFORD STATE: NJ ZIP: 07070 BUSINESS PHONE: 2125569600 FORMER COMPANY: FORMER CONFORMED NAME: PETRIE STORES CORP DATE OF NAME CHANGE: 19920703 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 COMMISSION FILE NUMBER: 0-3777 PETRIE STORES LIQUIDATING TRUST (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW YORK 22-6679945 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 201 ROUTE 17, SUITE 300 RUTHERFORD, NEW JERSEY 07070 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 635-9637 FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT: Not Applicable. 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 period 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 the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date: As of May 12, 2000, there were 52,350,238 Units of Beneficial Interest outstanding. PETRIE STORES LIQUIDATING TRUST INDEX TO FORM 10-Q PART I - FINANCIAL INFORMATION Page Item 1. Financial Statements Statements of Net Assets in Liquidation - March 31, 2000 (Unaudited) and December 31, 1999............................... 2 Statements of Changes in Net Assets in Liquidation (Unaudited) - For the Three Months Ended March 31, 2000 and 1999......................................... 3 Notes to Financial Statements........................................ 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................................10 PART II - OTHER INFORMATION Item 1. Legal Proceedings....................................................13 Item 6. Exhibits and Reports on Form 8-K.....................................13
PETRIE STORES LIQUIDATING TRUST STATEMENTS OF NET ASSETS IN LIQUIDATION (IN THOUSANDS) MARCH 31, 2000 DECEMBER 31, (UNAUDITED) 1999 ---------------- --------------- ASSETS Cash and cash equivalents......................................$ 444 $ 280 U.S. Treasury obligations...................................... 116,438 194,048 U.S. Treasury obligations held in escrow....................... 5,470 5,470 Investments in common stock.................................... - 24,168 ---------------- --------------- Total assets................................................... 122,352 223,966 LIABILITIES Accrued expenses and other liabilities......................... 36,781 37,024 Commitments and contingencies ---------------- --------------- Net assets in liquidation......................................$ 85,571 $ 186,942 ================ ===============
See accompanying notes.
PETRIE STORES LIQUIDATING TRUST STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION (UNAUDITED) (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS) THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, MARCH 31, 2000 1999 --------------- ---------------- Net assets in liquidation at beginning of period.............. $186,942 $184,713 --------------- ---------------- Investment income............................................. 1,926 1,522 Corporate overhead............................................ (604) (413) Net realized and unrealized gain (loss) on investments........ (4,327) 3,854 --------------- ---------------- Net income (loss) for the period.............................. (3,005) 4,963 --------------- ---------------- Liquidating distributions (including cash and 1,688,576 shares of Toys "R" Us common stock valued at $11.75 per share)....... (98,366) - --------------- ---------------- Net assets in liquidation at end of period.................... $85,571 $189,676 =============== ================ Net income (loss) per unit.................................... ($0.06) $0.09 =============== ================ Weighted average number of units.............................. 52,350 52,350 =============== ================
See accompanying notes. PETRIE STORES LIQUIDATING TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2000 1. INTERIM REPORTING The accompanying unaudited financial statements of Petrie Stores Liquidating Trust (the "Liquidating Trust") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 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 the Liquidating Trust, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Results for the three months ended March 31, 2000 are not necessarily indicative of the results that may be expected for the current fiscal year. For further information, reference is made to the financial statements and footnotes thereto included in the Liquidating Trust's Annual Report on Form 10-K for the year ended December 31, 1999. 2. BASIS OF PRESENTATION The Liquidating Trust is the successor to Petrie Stores Corporation, a New York corporation that was dissolved effective February 5, 1997 ("Petrie"). Prior to December 9, 1994, Petrie operated a chain of retail stores that specialized in women's apparel and were located throughout the United States (including Puerto Rico and the U.S. Virgin Islands). At Petrie's Annual Meeting of Shareholders, held on December 6, 1994, Petrie's shareholders approved the sale of Petrie's retail operations (the "Sale"). At Petrie's Reconvened Annual Meeting of Shareholders, held on January 24, 1995, Petrie's shareholders approved (i) an exchange of shares of Toys "R" Us, Inc. ("Toys 'R' Us") common stock ("Toys Common Stock") with Toys "R" Us (Note 3) and (ii) the liquidation and dissolution of Petrie pursuant to a plan of liquidation and dissolution (the "Plan of Liquidation"). Pursuant to the Plan of Liquidation and the Agreement and Declaration of Trust, dated as of December 6, 1995 (the "Liquidating Trust Agreement"), between Petrie and the trustees named therein (the "Liquidating Trustees"), effective as of the close of business on January 22, 1996 (the "Succession Date"), Petrie transferred its remaining assets (then consisting of approximately $131 million in cash and cash equivalents and 5,055,576 shares of Toys Common Stock) to, and its remaining fixed and contingent liabilities were assumed by (the "Succession"), the Liquidating Trust. The assets of the Liquidating Trust are subject to various contingent liabilities, the status of which is presently unclear (Note 4), as well as the terms of a letter agreement with Toys "R" Us (Note 3) pursuant to which the Liquidating Trust is required to provide notice to Toys "R" Us (and an opportunity for Toys "R" Us to object) prior to making any future liquidating distributions. Beginning with the period ended December 31, 1996, the Liquidating Trust adopted the calendar year as its fiscal year. A liquidation basis of accounting was implemented as of January 28, 1995. The statements of net assets in liquidation at March 31, 2000 and December 31, 1999 do not distinguish between current and long-term balances as would be reflected if such statements had been prepared on a going-concern basis. At the Succession Date, and as a result of the Succession, Petrie ceased to be a taxable entity. The Liquidating Trust is a complete pass-through entity for federal income taxes and, accordingly, is not itself subject to federal income tax. Instead, each holder of units of beneficial interest in the Liquidating Trust is required to take into account, in accordance with such holder's method of accounting, his pro rata share of the Liquidating Trust's items of income, gain, loss, deduction or credit, regardless of the amount or timing of distributions to such holder. 3. INVESTMENTS IN COMMON STOCK The Liquidating Trust's investments in common stock at December 31, 1999 consisted of 1,688,576 shares of Toys "R" Us, which operates a chain of specialty retail stores principally engaged in the sale of toys and children's clothing in the United States and abroad. At December 31, 1999, the 1,688,576 shares were carried at market value. During the three-month period ended March 31, 2000, the Liquidating Trust distributed its remaining shares of Toys "R" Us common stock to its unit holders. At March 31, 2000, the Liquidating Trust did not own any shares of Toys Common Stock. On January 24, 1995, pursuant to the terms of an Acquisition Agreement dated as of April 20, 1994, and amended as of May 10, 1994 (the "Toys Acquisition Agreement"), between Petrie and Toys "R" Us, Petrie exchanged (the "Exchange") with Toys "R" Us all of its shares of Toys Common Stock (39,853,403 shares), plus $165 million in cash, for 42,076,420 shares of Toys Common Stock (approximately 15.0% of the outstanding Toys Common Stock at January 28, 1995). Simultaneously with the closing of the Exchange, Petrie placed 3,493,450 shares of Toys Common Stock into an escrow account (the "Escrow Account") pursuant to the terms of an escrow agreement, dated as of January 24, 1995, between Petrie and Custodial Trust Company, as Escrow Agent (the "Escrow Agreement"). The shares of Toys Common Stock were placed into the Escrow Account pursuant to the Escrow Agreement to provide for the payment of certain obligations of the Liquidating Trust, as successor to Petrie, to Toys "R" Us arising (i) under (x) the Toys Acquisition Agreement, (y) the Seller Indemnification Agreement, dated as of December 9, 1994, among Petrie, Toys "R" Us, Petrie Retail, Inc. ("Petrie Retail"), PS Stores Acquisition Corp. ("PS Stores"), and certain subsidiaries of PS Stores, and (z) the Retail Operations Stock Purchase Agreement, dated as of August 23, 1994 and amended on November 3, 1994 (the "Retail Operations Stock Purchase Agreement"), between Petrie and PS Stores, and (ii) otherwise. The Escrow Account terminated in accordance with its terms on January 24, 2000. The assets of the Liquidating Trust are subject to the terms of a letter agreement dated as of January 24, 1995, pursuant to which the Liquidating Trust is required, prior to making any future distribution, to provide notice to Toys "R" Us and an opportunity for Toys "R" Us to object to such distribution. Petrie had also placed 3,200,082 shares of Toys Common Stock in a collateral account (the "Collateral Account") pursuant to the terms of an Amended and Restated Cash Collateral and Pledge Agreement, dated as of December 9, 1994 and amended as of January 24, 1995, among Petrie, PS Stores, certain subsidiaries of PS Stores, and Custodial Trust Company, as Collateral Agent (the "Amended and Restated Cash Collateral Agreement"). On December 19, 1995, the Amended and Restated Cash Collateral Agreement was further amended and restated and, pursuant thereto, the 3,200,082 shares of Toys Common Stock held in the Collateral Account were released to Petrie in exchange for Petrie's deposit of $67.5 million in U.S. Treasury obligations in the Collateral Account. In connection with the settlement of a dispute with the Internal Revenue Service (the "IRS"), approximately $32 million in U.S. Treasury obligations held in the Collateral Account were transferred to the Liquidating Trust on May 20, 1997. Pursuant to a stipulation and release approved by the bankruptcy court in Petrie Retail's bankruptcy case (discussed below), an additional $32 million in U.S. Treasury obligations held in the Collateral Account were transferred to the Liquidating Trust on November 10, 1999. The Liquidating Trust is currently required to maintain approximately $5.5 million in the Collateral Account. The U.S. Treasury obligations held in the Collateral Account pursuant to the Amended and Restated Cash Collateral Agreement secure the payment of certain obligations of the Liquidating Trust, as successor to Petrie, to PS Stores arising under (i) the Retail Operations Stock Purchase Agreement and (ii) the Cross-Indemnification and Procedure Agreement, dated as of December 9, 1994, between Petrie and PS Stores (Note 4). On February 11, 2000, the Liquidating Trust distributed to its unit holders a total of $78,525,357 in cash and 1,688,576 shares of Toys Common Stock. 4. COMMITMENTS AND CONTINGENCIES As successor to Petrie, the Liquidating Trust has certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, which primarily relate to (i) guarantees of certain retail store leases, expiring at various times through 2011 for which Petrie Retail or an affiliate thereof assumed liability, and certain other liabilities that were assumed by Petrie Retail (but as to which Petrie's liability has not been released) in connection with the Sale (collectively, the "Assumed Obligations") to the extent that Petrie Retail or its successor fails to perform; and (ii) Petrie's agreement with Petrie Retail to indemnify it for certain liabilities relating to the funding of, and Petrie Retail's withdrawal from, the United Auto Workers District 65 Security Plan Pension Fund (the "Multiemployer Plan"). The Liquidating Trust accrues liabilities when it is probable that future costs will be incurred and when such costs can be reasonably estimated. Such accruals are based on developments to date, the Liquidating Trust's estimates of the outcome of these matters and its experience (including that of its predecessor, Petrie) in contesting, litigating and settling matters. At March 31, 2000 and December 31, 1999, the Liquidating Trust, as successor to Petrie, had accrued approximately $35 million and $36 million, respectively, for contingent liabilities. As the scope of these liabilities becomes better defined, there may be changes in the estimates of future costs, which could have a material effect on the Liquidating Trust's financial condition, liquidity and future ability to make liquidating distributions. Petrie Retail's Bankruptcy. On October 12, 1995, Petrie Retail filed a voluntary petition for reorganization relief under Chapter 11 of the United States Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). In connection with its filing for bankruptcy protection, Petrie Retail failed to perform or make payments with respect to certain of the Assumed Obligations, including, but not limited to, Assumed Obligations relating to store leases for which Petrie Retail or an affiliate thereof had assumed liability, state and federal taxes, employment agreements, insurance premiums and certain other claims and contractual obligations. Accordingly, the Liquidating Trust has been and may continue to be required to make payments in respect of certain of the Assumed Obligations. On December 23, 1997, the Liquidating Trust filed over 110 claims in the Bankruptcy Court against Petrie Retail and certain of its affiliates with respect to an aggregate of approximately $14 million in payments which had then been made by the Liquidating Trust as a result of the failure by Petrie Retail or an affiliate thereof to perform or pay certain of the Assumed Obligations. The Liquidating Trust subsequently amended these claims such that it asserted fixed claims representing a total of approximately $16.9 million against Petrie Retail's estate. The Liquidating Trust also filed approximately 600 additional claims in the Bankruptcy Court against Petrie Retail and certain of its affiliates with respect to payments which the Liquidating Trust may in the future be required to make as a result of the failure by Petrie Retail or its affiliates to perform or pay Assumed Obligations. On December 8, 1998, the Bankruptcy Court confirmed a proposed plan of reorganization for Petrie Retail (the "Petrie Retail Plan"), which modified the plan of reorganization filed by Petrie Retail and Warburg Pincus Ventures, L.P. ("Warburg") with the Bankruptcy Court on August 6, 1998, as amended. Under the confirmed Petrie Retail Plan, Petrie Retail sold substantially all of its remaining operating assets to Urban Acquisition Corp., an affiliate of Urban Brands, Inc., a retailer that operates under the Ashley Stewart trade name, for $52.25 million, and retained 13 of its store leases, for which Warburg was required to contribute $12 million to the bankruptcy estate, assume $3.1 million of Petrie Retail's executive severance obligations and waive approximately $3.8 million in fees and expenses allegedly owed to it under Petrie Retail's debtor-in-possession financing arrangement. On April 12, 2000, the Bankruptcy Court approved a stipulation of settlement between the distribution company (the "Distribution Company") designated by the Petrie Retail Plan and the Liquidating Trust. Pursuant to the stipulation, the Liquidating Trust and Distribution Company have settled their disputes regarding the claims that the Liquidating Trust filed against Petrie Retail by (i) allowing the Liquidating Trust a single unsecured claim against Petrie Retail in the amount of approximately $14.4 million, subject to increase up to $15.3 million pending resolution of the Distribution Company's objections to certain landlord claims against Petrie Retail, (ii) agreeing to release to the Liquidating Trust the approximately $5.5 million held in the Collateral Account by June 30, 2000, unless the Distribution Company pays $10 million or more to the Multiemployer Plan prior to that date, and (iii) exchanging mutual releases. There can be no assurance as to the timing of the payment of claims by the Distribution Company or the amount of the payments, if any, that the Distribution Company will make to creditors asserting unsecured claims. Accordingly, no amounts have been accrued as receivables for potential reimbursement or recoveries from the reorganized Petrie Retail entity. On April 10, 1998, PS Stores, the parent of Petrie Retail, filed a voluntary petition for reorganization relief under Chapter 11 of the United States Bankruptcy Code with the Bankruptcy Court. On August 7, 1998, the Liquidating Trust filed claims in the Bankruptcy Court against PS Stores substantially similar to those filed against Petrie Retail. On December 8, 1998, the Bankruptcy Court confirmed PS Stores' proposed plan of reorganization. In August 1999, pursuant to a settlement approved by the Bankruptcy Court, the Liquidating Trust received a payment in the amount of approximately $0.2 million from PS Stores' bankruptcy estate. Store Leases. As described above, in December 1998, Petrie Retail disposed of substantially all its remaining operations and store leases as part of the Petrie Retail Plan. Of the roughly 1600 stores that Petrie Retail operated prior to filing its bankruptcy petition in October 1995, (i) 722 leases were rejected, (ii) 615 leases were assigned to third party retailers, including (A) 410 leases which were part of Petrie Retail's former G&G Shops Inc. division and were included in the sale of such division to an investor group led by Pegasus Partners, L.P. and certain executives of such division, (B) 85 leases which were sold to Urban Acquisition Corp. as part of the Petrie Retail Plan and (C) 120 leases which were not part of Petrie Retail's former G&G Shops Inc. division and which were sold to third party retailers other than Urban Acquisition Corp., (iii) 13 leases were retained by the reorganized Petrie Retail entity for stores which are currently managed by Urban Acquisition Corp. and which Urban Acquisition Corp. has the right to purchase at a later date and (iv) approximately 250 leases expired or were terminated by mutual landlord and tenant consent. In addition, an affiliate of the Liquidating Trust's real estate advisor has assumed Petrie Retail's former headquarters lease at 150 Meadowlands Parkway in Secaucus, New Jersey, which lease is guaranteed by the Liquidating Trust. The Liquidating Trust's real estate advisor has sublet a portion of the former headquarters space and is seeking to sublet the remainder of the space in an effort to mitigate the Liquidating Trust's liability under this lease, although no assurance can be given that such efforts will be successful. After taking into account settlements and releases obtained from landlords, the Liquidating Trust, as successor to Petrie, remains the guarantor of 166 of the retail leases and the headquarters lease described above. The Liquidating Trust's theoretical exposure relating to these leases, without giving effect to any present value discount and assuming the landlord in each case is unable to mitigate its damages, would be approximately $45 million. Such exposure includes (i) approximately $29 million in potential liability related to 71 of the rejected store leases described above and 43 of the leases which have expired or were terminated by mutual landlord and tenant consent described above, which amount is included in the Liquidating Trust's accrued expenses and other liabilities at March 31, 2000, (ii) approximately $2 million in potential liability relating to the headquarters lease, which amount is included in the Liquidating Trust's accrued expenses and other liabilities at March 31, 2000, and (iii) approximately $14 million in potential liability related to 51 of the store leases which were either assigned to third party retailers or are still held by the successor of Petrie Retail. Of the $16 million in potential liability related to the assigned leases, the leases that are still held by the successor of Petrie Retail and the headquarters lease, approximately $4 million is due in 2000 and approximately $12 million is due thereafter. As previously disclosed, landlords under leases relating to 135 stores operated by Petrie Retail or an affiliate thereof alleged in a complaint that the Liquidating Trust, as successor to Petrie, had liability as a guarantor of certain leases notwithstanding Petrie's receipt from these landlords of releases of guarantees with respect to substantially all of such leases. On December 28, 1999, the Liquidating Trust paid the plaintiffs $2.4 million in settlement of their remaining claims against the Liquidating Trust and received a full release from all claims, without any recognition of wrongdoing or liability with respect to the claims asserted. The Liquidating Trust's lease exposure calculations reflect the estimated sum of all base rent and additional rent (such as taxes and common area charges) due under a lease through the end of the current lease term, but do not reflect potential penalties, interest and other charges to which a landlord may be entitled. Such additional charges (which may in part be unenforceable) are not expected to materially increase the Liquidating Trust's lease guarantee liability. A significant number of leases discussed above under which a landlord might claim that the Liquidating Trust, as successor to Petrie, has liability as a lease guarantor either expressly contain mitigation provisions or relate to property in states that imply such provisions as a matter of law. Mitigation generally requires, among other things, that a landlord of a closed store seek to reduce its damages, including by attempting to locate a new tenant. Employment Agreements. As previously disclosed, on October 23, 1995, Petrie Retail notified three former executives of Petrie that, as a result of Petrie Retail's bankruptcy filing, Petrie Retail would no longer honor its obligations under the employment agreements each executive had entered into with Petrie which had been assumed by Petrie Retail in connection with the sale of the retail operations. On April 25, 1996, the Liquidating Trust entered into settlement agreements with two of the former executives and on January 27, 1997 entered into a settlement agreement with the estate of the third executive. Pursuant to such settlement agreements, the Liquidating Trust agreed to pay each substantially all the amounts due under respective agreements with Petrie. The total cost of these settlements to the Liquidating Trust was approximately $3.2 million, of which approximately $415,000 (relating to certain unfunded pension obligations) remained unpaid and was included in the Liquidating Trust's accrued expenses and other liabilities at March 31, 2000. Multiemployer Plan. As previously disclosed, effective January 31, 1995, Petrie Retail withdrew from the Multiemployer Plan. Due to the Multiemployer Plan's underfunded status, Petrie Retail and its affiliates incurred withdrawal liability under the Employee Retirement Income Security Act of 1974, as amended. By letter dated May 30, 1996, the Multiemployer Plan initially assessed withdrawal liability against Petrie Retail in the amount of approximately $9.4 million plus interest, to be paid in quarterly installments of approximately $317,000 commencing August 1, 1996 through and including August 1, 2006, with a final payment of approximately $18,000 due November 1, 2006. In addition, the Multiemployer Plan initially assessed liability against Petrie Retail of approximately $2 million attributable to the Multiemployer Plan's failure to meet certain Internal Revenue Code minimum funding standards, which amount was payable on August 1, 1996. In December 1998, the Multiemployer Plan also submitted amended proofs of claim indicating that, among other entities, PS Stores and Petrie Retail were indebted to the Multiemployer Plan in the aggregate amount of approximately $17.3 million, consisting of withdrawal liability of $4.7 million, funding deficiencies of $1.4 million and an additional $11.2 million as a result of a mass withdrawal by contributing employers from the Multiemployer Plan. To the knowledge of the Liquidating Trust, Petrie Retail never made any payments with respect to such liabilities. Pursuant to the Retail Operations Stock Purchase Agreement, Petrie Retail and its affiliates are responsible for payment of the first $10 million in withdrawal and related liabilities and are entitled to be reimbursed by the Liquidating Trust, as successor to Petrie, for 75% of the next $50 million paid by Petrie Retail and its affiliates in respect of such liabilities. It is unclear what effect, if any, Petrie Retail's or PS Stores' bankruptcy filings may have upon the timing and amount of any payments the Liquidating Trust may be required to make under the Retail Operations Stock Purchase Agreement with respect to the Multiemployer Plan, but in no event will the Liquidating Trust's maximum contractual liability be increased as a result of Petrie Retail's or PS Stores' bankruptcy filings. See "--Petrie Retail's Bankruptcy" above. On or about September 25, 1998, the Internal Revenue Service issued an examination report asserting that "Petrie Stores, Inc." is liable for excise taxes and penalties of approximately $192,000 relating to the Multiemployer Plan's funding deficiencies for the three plan years ended January 31, 1993, 1994 and 1995. On January 24, 2000, the Liquidating Trust paid the Internal Revenue Service approximately $59,000 in full settlement of the alleged liability. The Liquidating Trust believes, based on the most recently available information, that appropriate accruals have been established in the accompanying financial statements to provide for any losses that may be incurred with respect to the aforementioned contingencies. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion should be read in conjunction with the Financial Statements and the Notes thereto provided herein. As previously disclosed, Petrie sold its retail operations to PS Stores on December 9, 1994, and on January 24, 1995 (the date on which Petrie's shareholders approved the Plan of Liquidation), Petrie commenced its liquidation. As a result, effective January 28, 1995, Petrie changed its basis of accounting from a going-concern basis to a liquidation basis. During the three months ended March 31, 2000, the Liquidating Trust's activities were limited to continuing Petrie's liquidation in furtherance of the Plan of Liquidation. Beginning with the period ended December 31, 1996, the Liquidating Trust adopted the calendar year as its fiscal year. RESULTS OF OPERATIONS The Liquidating Trust's net loss for the three months ended March 31, 2000 was $3,005,000, as compared to net income of $4,963,000 for the three months ended March 31, 1999. In applying a liquidation basis of accounting, the Liquidating Trust has given effect in its results of operations to fluctuations in the market price of its Toys Common Stock, and has recorded a realized loss on the Toys Common Stock for the three months ended March 31, 2000 of $4,327,000, as compared to an unrealized gain of $3,854,000 for the three months ended March 31, 1999. The realized loss for the three months ended March 31, 2000 resulted from the distribution of 1,688,576 shares of Toys Common Stock on February 11, 2000. For the three months ended March 31, 2000, the Liquidating Trust incurred corporate overhead of $604,000, as compared to $413,000 for the three months ended March 31, 1999. Corporate overhead generally consists of costs and expenses related to the liquidation and dissolution of Petrie including, but not limited to, costs and expenses that the Liquidating Trust has incurred as a result of Petrie Retail's failure to perform its obligations in connection with its bankruptcy filing, legal fees, real estate advisory fees, insurance, salaries for the Liquidating Trust's two part-time employees, trustee fees, accounting fees, transfer agent fees and printing and related expenses. There were no additional accruals for lease liabilities or reductions in lease liabilities recorded during the three months ended March 31, 2000. During the three months ended March 31, 1999, the Liquidating Trust's total accrual for lease liabilities was reduced by approximately $400,000 following the settlement and release of claims asserted by landlords. During the three months ended March 31, 2000, the Liquidating Trust earned investment income of $1,926,000, as compared to $1,522,000 earned during the three months ended March 31, 1999. The increase in investment income for the three months ended March 31, 2000 was due to an increase in the amount of funds available for investment and higher prevailing interest rates during the quarter. LIQUIDITY AND CAPITAL RESOURCES GENERAL As previously disclosed, approximately $5.5 million in U.S. Treasury obligations is required to be held by the Liquidating Trust in the Collateral Account to secure the Liquidating Trust's obligation to indemnify PS Stores for certain liabilities relating to Petrie Retail's withdrawal from a multiemployer pension plan. Pursuant to a stipulation approved by the Bankruptcy Court, the Treasury obligations held in the Collateral Account will be released to the Liquidating Trust by June 30, 2000, unless the Distribution Company pays $10 million or more to the Multiemployer Plan prior to that date. The assets of the Liquidating Trust are subject to the terms of a letter agreement dated as of January 24, 1995 (the "Side Letter Agreement"), pursuant to which the Liquidating Trust is required, prior to making any future distribution, to provide notice to Toys "R" Us and an opportunity for Toys "R" Us to object to such distribution. As of May 12, 2000, the Liquidating Trust had approximately $122 million in cash, cash equivalents and investments in U.S. Treasury obligations (including those held in escrow). The Liquidating Trust believes that it has sufficient liquid funds available to satisfy the foreseeable liabilities of the Liquidating Trust (including, without limitation, costs and expenses related to the administration of the Liquidating Trust such as legal fees, real estate advisory fees, insurance, salaries for the Liquidating Trust's two part-time employees, trustee fees, accounting fees, transfer agent fees and printing and related expenses). CONTINGENT LIABILITIES As more fully described in Item 1 of Part I, the Liquidating Trust, as successor to Petrie, has certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, which primarily relate to (i) guarantees of certain retail store leases, expiring at various times through 2011 for which Petrie Retail or an affiliate thereof assumed liability, and certain other liabilities that were assumed by Petrie Retail (but as to which Petrie's liability has not been released) in connection with the Sale to the extent that Petrie Retail or its successor fails to perform; and (ii) Petrie's agreement with Petrie Retail to indemnify it for certain liabilities relating to Petrie Retail's withdrawal from the United Auto Workers District 65 Security Plan Pension Fund. At March 31, 2000, the Liquidating Trust, as successor to Petrie, had accrued approximately $35 million for contingent liabilities. As the scope of these liabilities becomes better defined, there may be changes in the estimates of future costs, which could have a material effect on the Liquidating Trust's financial condition, liquidity and future ability to make liquidating distributions. See Notes to Financial Statements. YEAR 2000 The Liquidating Trust's principal information technology software package is compliant with respect to year 2000 issues. In addition, according to information provided to the Liquidating Trust by Petrie Retail and its successor, the computer systems of Petrie Retail's successor are year 2000 compliant. Based on the foregoing, the Liquidating Trust believes that year 2000 issues have not resulted, and are not expected to result, in the imposition of material costs on the Liquidating Trust. If, however, all year 2000 issues have not been properly identified or effectively remedied, there can be no assurance that year 2000 issues will not have a material adverse effect on the Liquidating Trust. Additionally, there can be no assurance that the impact of year 2000 issues on other entities will not have a material adverse effect on the Liquidating Trust. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Except for historical matters, the matters discussed in this Form 10-Q are forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements relating to the Liquidating Trust's contingent liabilities contained above in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Notes to Financial Statements. The Liquidating Trust wishes to caution readers that in addition to factors that may be described elsewhere in this Form 10-Q, the following important factors, among others, could cause the Liquidating Trust's assets and liabilities to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Liquidating Trust, and could materially affect the Liquidating Trust's financial condition, liquidity and future ability to make liquidating distributions: (1) A decision by Petrie Retail's successor to close additional stores for which the Liquidating Trust, as successor to Petrie, has liability as a guarantor; (2) Other actions by Petrie Retail's successor which cause the default of obligations assumed by Petrie Retail in connection with the Sale for which the Liquidating Trust, as successor to Petrie, may be deemed to have liability; (3) An adverse material change in general economic conditions and the interest rate environment; (4) The effects of, and changes in, laws and regulations and other activities of federal and local governments, agencies and similar organizations; (5) The costs and other effects of other legal and administrative cases and proceedings, settlements and claims relating to the Liquidating Trust's contingent liabilities; and (6) The failure of the Liquidating Trust, Petrie Retail's successor or other third parties on whom the Liquidating Trust's financial condition and results of operations are dependent to properly identify and effectively remedy all year 2000 issues affecting their operations. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. ----------------- See the discussion contained in the Notes to Financial Statements in Part I, Item 1 of this Quarterly Report. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. -------------------------------- (a) LIST OF EXHIBITS Exhibit 27 -- Financial Data Schedule (b) REPORTS ON FORM 8-K None 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. PETRIE STORES LIQUIDATING TRUST Dated: May 15, 2000 By /s/ Stephanie R. Joseph ______________________________________________ Stephanie R. Joseph Manager and Chief Executive Officer Dated: May 15, 2000 By /s/ H. Bartlett Brown _____________________________________________ H. Bartlett Brown Assistant Manager and Chief Financial Officer EX-27 2 FDS
5 This schedule contains summary financial information extracted from the Liquidating Trust's statement of net assets in liquidation at March 31, 2000 and the Liquidating Trust's statement of changes in net assets in liquidation for the three months ended March 31, 2000, and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-2000 MAR-31-2000 122,352 0 0 0 0 0 0 0 122,352 36,781 0 0 0 0 85,571 122,352 0 1,926 0 0 604 0 0 (3,005) 0 (3,005) 0 0 0 (3,005) (.06) (.06)
-----END PRIVACY-ENHANCED MESSAGE-----