-----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, EBkdZuCEhVEyumY5sZ5ZX8oL4KJdc992ylC0hMDVAH2OxCNp14Z+72bEnJ2mDTzO jyedPmzdGvarIc5mrMH4zw== 0000950172-01-501122.txt : 20020410 0000950172-01-501122.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950172-01-501122 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 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: 1934 Act SEC FILE NUMBER: 001-06166 FILM NUMBER: 1787117 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 s364632.txt 10-Q 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 September 30, 2001 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 November 12, 2001, 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 - September 30, 2001 (Unaudited) and December 31, 2000................................................... 2 Statements of Changes in Net Assets in Liquidation (Unaudited) - For the Three and Nine Months Ended September 30, 2001 and 2000............. 3 Notes to Financial Statements................................................. 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................9 PART II - OTHER INFORMATION Item 1. Legal Proceedings............................................................12 Item 6. Exhibits and Reports on Form 8-K.............................................12
PETRIE STORES LIQUIDATING TRUST STATEMENTS OF NET ASSETS IN LIQUIDATION (In thousands)
September 30, 2001 December 31, (Unaudited) 2000 -------------- -------------- Assets Cash and cash equivalents...................................... $ 401 $ 513 U.S. Treasury obligations...................................... 87,021 85,831 ------------------ ----------------- Total assets................................................... 87,422 86,344 Liabilities Accrued expenses and other liabilities......................... 26,817 28,063 Commitments and contingencies ------------------ ----------------- Net assets in liquidation...................................... $60,605 $58,281 ================== ================= 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 Nine Months Nine Months Ended Ended Ended Ended September September 30, September September 30, 30, 2001 2000 30, 2001 2000 -------------- --------------- -------------- ----------------- Net assets in liquidation at beginning of period............................................ $ 59,809 $ 87,024 $ 58,281 $ 186,942 -------------- --------------- -------------- ----------------- Investment income................................. 959 1,712 3,392 5,266 Corporate overhead (expense) benefit.............. (163) 2,761 (1,068) 1,982 Net realized loss on investments.................. - - - (4,327) -------------- --------------- -------------- ----------------- Net income (loss) for the period.................. 796 4,473 2,324 2,921 -------------- --------------- -------------- ----------------- 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............................................ $ 60,605 $ 91,497 $ 60,605 $ 91,497 ============== =============== ============== ================= Net income (loss) per unit........................ $ 0.02 $ 0.09 $ 0.04 $ 0.06 ============== =============== ============== ================= Weighted average number of units.................. 52,350 52,350 52,350 52,350 ============== =============== ============== ================= ================= See accompanying notes.
PETRIE STORES LIQUIDATING TRUST NOTES TO FINANCIAL STATEMENTS (Unaudited) September 30, 2001 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 and nine months ended September 30, 2001 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, 2000. 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 5), as well as the terms of a letter agreement with Toys "R" Us (Note 4) 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. On November 8, 2000, the expiration date of the Liquidating Trust was extended from December 6, 2000 to December 6, 2002 (subject to further extension by the Liquidating Trustees). 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 September 30, 2001 and December 31, 2000 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 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 Account terminated in accordance with its terms on January 24, 2000. 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 Acquisition Corp. ("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 stipulations approved by the bankruptcy court in Petrie Retail Inc.'s ("Petrie Retail") bankruptcy case (discussed below), the remaining amounts held in the Collateral Account have been released and transferred to the Liquidating Trust. Between January 1995 and November 1999, Petrie and the Liquidating Trust (i) sold an aggregate of 6,977,700 shares of Toys Common Stock and (ii) delivered 2,000,000 shares of Toys Common Stock to Canadian Imperial Bank of Commerce in exchange for a cash payment of approximately $61.4 million. In addition, Petrie and the Liquidating Trust have made liquidating distributions of shares of Toys Common Stock held by them to shareholders of Petrie and unit holders of the Liquidating Trust, respectively (Note 4). As a result of the foregoing transactions, at December 31, 2000 and September 30, 2001, the Liquidating Trust did not own any shares of Toys Common Stock. 4. Liquidating Distributions In accordance with the Plan of Liquidation, Petrie made an initial liquidating distribution on March 24, 1995 of 26,173,718 shares of Toys Common Stock (fair market value on March 24, 1995 of approximately $644.5 million). Petrie subsequently distributed 1,391 shares of Toys Common Stock to certain former shareholders of Winkelman Stores Incorporated (a former subsidiary of Petrie) in respect of their interests in the March 24, 1995 distribution. On August 15, 1995, Petrie made a liquidating distribution of 5,235,035 shares of Toys Common Stock (fair market value on August 15, 1995 of approximately $139.4 million). 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 with a fair market value of $19,840,768. On December 21, 2000, the Liquidating Trust distributed to its unit holders a total of $39,262,679 in cash. The assets of the Liquidating Trust are subject to the terms of a letter agreement, dated as of January 24, 1995, pursuant to which Petrie agreed with Toys "R" Us that Petrie would retain, either individually or in combination, (i) cash in an amount of at least $177.5 million (the "Reserved Amount") or (ii) shares of Toys Common Stock having a market value (using the per share price on January 20, 1995) of at least twice the Reserved Amount, to secure the payment of Petrie's contingent liabilities (Note 5). In connection with the Liquidating Trust's distributions of $78,525,357 in cash and 1,688,576 shares of Toys Common Stock on February 11, 2000 and $39,262,679 in cash on December 21, 2000, the Liquidating Trust provided Toys "R" Us with prior notice of such distributions and Toys "R" Us agreed that it did not object to such distributions. Pursuant to the terms of the letter agreement, the Liquidating Trust is required to provide similar notice to Toys "R" Us prior to making any additional distributions. 5. Commitments and Contingencies As successor to Petrie, the Liquidating Trust has accrued for certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, which primarily relate to 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. The Liquidating Trust accrues such 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 such matters. At September 30, 2001 and December 31, 2000, the Liquidating Trust, as successor to Petrie, had accrued approximately $26 million and $27 million, respectively, for contingent liabilities. As the scope of these liabilities becomes further refined, 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 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, under which the Liquidating Trust and the Distribution Company settled their disputes regarding the claims that the Liquidating Trust filed against Petrie Retail. Pursuant to the stipulation of settlement, (i) the Liquidating Trust was allowed a single unsecured claim against Petrie Retail in the amount of approximately $14.4 million, subject to increase upon resolution of the Distribution Company's objections to certain landlord claims against Petrie Retail, (ii) the Distribution Company agreed to release to the Liquidating Trust the approximately $5.5 million held in the Collateral Account by June 30, 2000 (provided that the Distribution Company did not pay $10 million or more to the United Auto Workers District 65 Security Plan Pension Fund prior to that date), and (iii) the Distribution Company and the Liquidating Trust exchanged mutual releases. On June 28, 2000, the approximately $5.5 million held in the Collateral Account was released and transferred to the Liquidating Trust in accordance with the settlement. On December 15, 2000, the Bankruptcy Court entered an order allowing the Liquidating Trust an unsecured claim against the Distribution Company in the amount of $15.3 million. On December 21, 2000, the Liquidating Trust received $765,000 as partial payment of the Liquidating Trust's claim against the Distribution Company. As of November 12, 2001, the Liquidating Trust's remaining claim against the Distribution Company was $14,535,000. There can be no assurance as to the timing of the payment of the remainder of the Liquidating Trust's claim against the Distribution Company or the amount of any further payments 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. After such filing, 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, and in August 1999, pursuant to a settlement approved by the Bankruptcy Court, the Liquidating Trust received a payment in the amount of approximately $200,000 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 reached a settlement with the landlord and returned part of the former headquarters space and has sublet most of the remainder of such space in an effort to mitigate the Liquidating Trust's liability under this lease, although no assurance can be given that the subtenant will continue to pay rent through the remaining term of the headquarters lease (which expires on October 31, 2002). After taking into account settlements and releases obtained from landlords, the Liquidating Trust, as successor to Petrie, remains the guarantor of 143 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 $34 million (including potential exposure related to the exercise of lease renewal options described below). Such exposure includes (i) approximately $25 million in potential liability related to 64 of the rejected store leases described above, which amount is included in the Liquidating Trust's accrued expenses and other liabilities at September 30, 2001, and (ii) approximately $9 million in potential liability related to 26 of the store leases which were either assigned to third party retailers or are still held by the successor of Petrie Retail, the headquarters lease (which now accounts for less than $1 million in potential liability), and 53 of the leases which have expired or were terminated by mutual landlord and tenant consent described above. Of the $9 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 $1 million is due in 2001 and approximately $8 million is due thereafter. The exposure related to assigned leases or leases still held by the successor to Petrie Retail includes potential liability related to lease extension options that may be exercised following the assignment of leases to third party retailers. 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 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 $265,000 (relating to certain unfunded pension obligations) remained unpaid and was included in the Liquidating Trust's accrued expenses and other liabilities at September 30, 2001. 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 and nine months ended September 30, 2001, 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 income for the three and nine months ended September 30, 2001 was $796,000 and $2,324,000, respectively, as compared to net income of $4,473,000 and $2,921,000 for the three and nine months ended September 30, 2000. In applying a liquidation basis of accounting, the Liquidating Trust gave effect in its results of operations to fluctuations in the market price of its Toys Common Stock, and recorded a realized loss of $4,327,000 on the Toys Common Stock for the nine months ended September 30, 2000. The realized loss for the nine months ended September 30, 2000 resulted from the distribution of 1,688,576 shares of Toys Common Stock on February 11, 2000. The Liquidating Trust did not own any shares of Toys Common Stock during the nine months ended September 30, 2001. For the three and nine months ended September 30, 2001, the Liquidating Trust incurred corporate overhead of $163,000 and $1,068,000, respectively, as compared to a benefit in corporate overhead of $2,761,000 and $1,982,000, respectively, for the three and nine months ended September 30, 2000. 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. The benefit in corporate overhead for the three and nine month periods ended September 30, 2000 was principally due to (i) the elimination of the Liquidating Trust's accrual of $3 million relating to the contingent liability associated with the United Auto Workers District 65 Security Plan Pension Fund, (ii) reductions in the Liquidating Trust's total lease liabilities of approximately $200,000 and $800,000, respectively, following the settlement and release of claims asserted by landlords and (iii) the receipt by the Liquidating Trust of a total of approximately $890,000 resulting from (a) a payment from Petrie Retail pursuant to a stipulation approved by the Bankruptcy Court relating to certain income taxes paid by the Liquidating Trust, as successor to Petrie, (b) a refund from Zurich-American Insurance Group and (c) a payment from the bankruptcy estate of PS Stores. During the three and nine months ended September 30, 2001, the Liquidating Trust earned investment income of $959,000 and $3,392,000, respectively, as compared to $1,712,000 and $5,266,000 earned during the three and nine months ended September 30, 2000. The decrease in investment income for the three and nine months ended September 30, 2001 was due to lower prevailing interest rates and fewer assets available for investment. Liquidity and Capital Resources General 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 November 12, 2001, the Liquidating Trust had approximately $87 million in cash, cash equivalents and investments in U.S. Treasury obligations. 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 accrued for certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, which primarily relate to 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. At September 30, 2001, the Liquidating Trust, as successor to Petrie, had accrued approximately $26 million for contingent liabilities. As the scope of these liabilities becomes further refined, 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. 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; and (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. 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 None (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: November 14, 2001 By /s/ Stephanie R. Joseph ---------------------------- Stephanie R. Joseph Manager and Chief Executive Officer Dated: November 14, 2001 By /s/ H. Bartlett Brown ----------------------------- H. Bartlett Brown Assistant Manager and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----