-----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, LXP7VzaolE4kbq0Uj2BSBxUDL8OV80ohyGP5Jgvgf2Q8FHYmpkQ3KArJ47yTsZML 96LEgLmpr/k2AJKHNztfRw== 0000950172-05-001584.txt : 20050516 0000950172-05-001584.hdr.sgml : 20050516 20050516123359 ACCESSION NUMBER: 0000950172-05-001584 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050516 DATE AS OF CHANGE: 20050516 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: 05832555 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 ny508948.txt FORM 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 March 31, 2005 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) (201) 635-9637 -------------------------------------------------- Registrant's Telephone Number, Including Area Code Not Applicable - ------------------------------------------------------------------------------- Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes: _____ No: __X__ 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 13, 2005, 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, 2005 (Unaudited) and December 31, 2004...................................................... 2 Statements of Changes in Net Assets in Liquidation (Unaudited) - For the Three Months Ended March 31, 2005 and 2004............................. 3 Notes to Financial Statements.................................................... 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................................9 Item 3. Quantitative and Qualitative Disclosures About Market Risk ......................12 Item 4. Controls and Procedures..........................................................12 PART II - OTHER INFORMATION Item 1. Legal Proceedings................................................................13 Item 6. Exhibits.........................................................................13
PETRIE STORES LIQUIDATING TRUST STATEMENTS OF NET ASSETS IN LIQUIDATION (In thousands)
March 31, 2005 December 31, (Unaudited) 2004 ----------------- ----------------- Assets Cash and cash equivalents.................... $ 141 $ 211 U.S. Treasury obligations.................... 43,611 43,624 Prepaid expenses............................. 124 11 ----------------- ----------------- Total assets................................. 43,876 43,846 Liabilities Accrued expenses and other liabilities....... 16,134 15,988 Liquidating distribution payable............. 15,705 - ----------------- ----------------- Total liabilities............................ 31,839 15,988 Commitments and contingencies ----------------- ----------------- Net assets in liquidation.................... $ 12,037 $ 27,858 ================= ================= See accompanying notes.
PETRIE STORES LIQUIDATING TRUST STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION (Unaudited) (In thousands, except per unit amounts)
Three Months Ended Three Months Ended March 31, 2005 March 31, 2004 ------------------- ------------------ Net assets in liquidation at beginning of period........ $ 27,858 $ 39,559 ------------------- ------------------ Investment income....................................... 242 113 Corporate overhead expense.............................. (358) (362) ------------------- ------------------ Net loss for the period................................. (116) (249) ------------------- ------------------ Liquidating distributions............................... (15,705) (20,940) ------------------- ------------------ Net assets in liquidation at end of period.............. $ 12,037 $ 18,370 ------------------- ------------------ Net loss per unit....................................... $ 0.00 $ 0.00 ------------------- ------------------ Weighted average number of units........................ 52,350 52,350 =================== ==================
See accompanying notes. PETRIE STORES LIQUIDATING TRUST NOTES TO FINANCIAL STATEMENTS (Unaudited) March 31, 2005 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, 2005 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, 2004. 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 (the "Sale") to PS Stores Acquisition Corp. ("PS Stores") of all of the stock of Petrie's former subsidiary, Petrie Retail, Inc. ("Petrie Retail"), which then owned all of Petrie's retail operations, for $190 million in cash plus the assumption of certain of Petrie's liabilities. 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 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 amounts of which are subject to inherent uncertainty in the valuation process. The amounts actually realized or settled could be materially different from those reflected in the financial statements (Note 5). On November 19, 2002, the expiration date of the Liquidating Trust was extended from December 6, 2002 to December 6, 2006 (subject to further extension by the Liquidating Trustees). Beginning with the period ended December 31, 1996, the Liquidating Trust has adopted the calendar year as its fiscal year. A liquidation basis of accounting was implemented as of January 28, 1995. Under such basis, assets and liabilities have been recorded at estimated fair values. In accordance with the liquidation basis of accounting, the financial statements reflect the estimated costs of liquidating the assets and distributing the proceeds to holders of beneficial interests. The statements of net assets in liquidation at March 31, 2005 and December 31, 2004 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. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The Liquidating Trust's most significant estimate is associated with the accrual for certain contingent liabilities (see Note 5). 3. Related Party Transactions Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden, Arps") serves as legal counsel to the Liquidating Trust. Joseph H. Flom, a Liquidating Trustee, is a partner in Skadden, Arps. At March 31, 2005 and December 31, 2004, the accrued expenses and liabilities of the Liquidating Trust included in the Statement of Net Assets in Liquidation included $287,450 and $161,450, respectively, for amounts owed to Skadden, Arps. During the three months ended March 31, 2005 and March 31, 2004, the corporate overhead expense of the Liquidating Trust included in the Statement of Changes in Net Assets in Liquidation included $126,000 and $31,000, respectively, of expenses to Skadden, Arps. 4. Liquidating Distributions Pursuant to an agreement dated as of December 24, 2003, the Liquidating Trust and Toys "R" Us terminated the Liquidating Trust's obligations under a letter agreement dated as of January 24, 1995 to provide notice to Toys "R" Us (and an opportunity for Toys "R" Us to object) prior to making any liquidating distributions. Accordingly, the Liquidating Trust is no longer obligated to provide notice to Toys "R" Us prior to making distributions. On March 31, 2005, the Liquidating Trust announced a distribution of $15,705,071 in cash that was paid on April 21, 2005. In the distribution, unit holders received $0.30 in cash for each unit of beneficial interest held of record at the close of business on April 11, 2005. On January 30, 2004, the Liquidating Trust distributed to its unit holders a total of $20,940,095 in cash. In the distribution, unit holders received $0.40 in cash for each unit of beneficial interest held of record at the close of business on January 20, 2004. 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 matters. The Liquidating Trust had accrued approximately $16 million for the aforementioned contingent liabilities at both March 31, 2005 and December 31, 2004. As the scope of these liabilities becomes further refined and additional analysis is performed, 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 approximately $5.5 million held in a 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 its claim against the Distribution Company. On December 18, 2001, the Liquidating Trust received $1,530,000 as partial payment of the Liquidating Trust's claim against the Distribution Company. On or about July 1, 2003, the Liquidating Trust received an additional $1,836,000 as partial payment of the Liquidating Trust's claim against the Distribution Company. As of May 13, 2005, the Liquidating Trust's remaining claim against the Distribution Company was $11,169,000. There can be no assurance as to the timing of the payment, if any, 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 or about December 30, 2003, the Liquidating Trust received a refund in respect of previous tax years of approximately $949,000 to which the Liquidating Trust was entitled pursuant to a settlement agreement between the Liquidating Trust and the Petrie Retail bankruptcy estate. 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. After taking into account settlements and releases obtained from landlords, the Liquidating Trust, as successor to Petrie, remains the guarantor of 140 of the retail leases, including 61 leases that were rejected during the pendency of the Petrie Retail bankruptcy (the "Rejected Leases") and 79 other leases described below. The Liquidating Trust's exposure relating to the 140 retail leases, without giving effect to any present value discount and assuming the landlord in each case is unable to mitigate its damages, but after giving effect to the factors described in the following paragraph, would be approximately $21 million. Such exposure includes approximately $15 million in potential liability related to 61 of the Rejected Leases described above, which amount is included in the Liquidating Trust's accrued expenses and other liabilities at March 31, 2005 and December 31, 2004. In the fourth quarter of 2004, the Liquidating Trust commissioned its real estate advisor to visit the properties underlying the Rejected Leases to assess the level of risk of liability associated with such properties (including whether the property was vacant). After receiving a report as to such property visits, the Liquidating Trust determined to reduce its accrual related to exposure under the Rejected Leases by $9 million. In making such determination to reduce the accrual, the Liquidating Trust assessed a number of factors, including (1) applicable law related to the impact of an affirmative defense available to the Liquidating Trust relating to the expiration of the statute of limitations within which claims relating to certain of the Rejected Leases would have had to have been made (the "Statute of Limitations Defense"), (2) the absence of any new landlord claims over the past several years related to rejected store leases, (3) the Liquidating Trust's previous settlement history related to rejected lease claims and (4) reports prepared by the Liquidating Trust's real estate advisor. Prior to giving effect to the reduction in its accrual related to Rejected Leases, 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, was approximately $24 million. The approximately $15 million in potential liability related to the 61 Rejected Leases is an estimate of the Liquidating Trust's exposure under such leases after giving full effect to the factors described in this paragraph. As of March 31, 2005, nothing has come to the attention of the Liquidating Trust that causes it to believe that such estimate is no longer accurate. The Liquidating Trust's exposure also includes approximately $6 million in potential liability related to 20 of the store leases which were either assigned to third party retailers or are still held by the successor of Petrie Retail and were not rejected in the Petrie Retail bankruptcy (the "Assigned Non-Rejected Leases") and a de minimis amount related to 59 of the leases which have expired or were terminated by mutual landlord and tenant consent described above (the "Terminated Non-Rejected Leases"). Amounts related to Assigned Non-Rejected Leases and Terminated Non-Rejected Leases are not included in the Liquidating Trust's accrued expenses and other liabilities at March 31, 2005 or December 31, 2004. The potential exposure related to Assigned Non-Rejected Leases includes potential liability related to lease extension options that may be exercised following the assignment of leases to third party retailers; however, such liability related to the Assigned Non-Rejected Leases is not included in the potential liability described in the first sentence of this paragraph until the actual lease renewal term commences. The Liquidating Trust's lease exposure calculations related to Rejected Leases, Assigned Non-Rejected Leases and Terminated Non-Rejected Leases 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. Insurance Premium Adjustment. In April 2004, The Liquidating Trust received a bill from Zurich for $84,343 in respect of retrospective premium adjustments purportedly owed by Petrie pursuant to general liability, automobile and workers' compensation insurance agreements between Zurich and Petrie. The amount claimed by Zurich related to policy terms 1988/1989 through and including 1994/1995, and was based on the value of claims made as of December 31, 2003. This amount was included in accrued expenses and other liabilities at December 31, 2003. Such amount was paid by the Liquidating Trust on May 12, 2004. In March 2005, the Liquidating Trust received a bill from Zurich for $106,781 in respect of retrospective premium adjustments purportedly owed by Petrie pursuant to general liability, automobile and workers' compensation insurance agreements between Zurich and Petrie. The amount claimed by Zurich relates to policy terms 1988/1989 through and including 1994/1995, and was based on the value of claims made as of December 31, 2004. This amount was included in accrued expenses and other liabilities as of March 31, 2005. Such amount was paid by the Liquidating Trust on April 8, 2005. 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, 2005 and 2004, 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. Critical Accounting Policies The Liquidating Trust's financial statements are prepared in accordance with accounting principles generally accepted in the United States, and require management to make estimates and assumptions. The Liquidating Trust believes that, of its significant accounting policies, the policies described under Note 5 to the Liquidating Trust's financial statements with respect to estimating the Liquidating Trust's lease exposure may involve a higher degree of judgment and complexity. Results of Operations The Liquidating Trust had a net loss of $116,000 for the three months ended March 31, 2005, as compared to a net loss of $249,000 for the three months ended March 31, 2004. For the three months ended March 31, 2005, the Liquidating Trust incurred corporate overhead expense of $358,000. For the three months ended March 31, 2004, the Liquidating Trust incurred corporate overhead expense of $362,000. 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 decrease in corporate overhead for the three months ended March 31, 2005 compared to the three months ended March 31, 2004 reflects the actions taken by the Liquidating Trust during the year ended December 31, 2004 to reduce certain expenses, including decreasing the salaries of its officers and Liquidating Trustees and the expenses of its advisors, offset by an increase in professional fees. During the three months ended March 31, 2005, the Liquidating Trust earned investment income of $242,000, as compared to $113,000 earned during the three months ended March 31, 2004. The increase in investment income for the three months ended March 31, 2005 was due to higher prevailing interest rates. Liquidity and Capital Resources General Pursuant to an agreement dated as of December 24, 2003, the Liquidating Trust and Toys "R" Us agreed to terminate the Liquidating Trust's obligations under a letter agreement dated as of January 24, 1995 to provide notice to Toys "R" Us (and an opportunity for Toys "R" Us to object) prior to making any liquidating distributions. Accordingly, the Liquidating Trust is no longer obligated to provide notice to Toys "R" Us prior to making distributions. As of May 13, 2005, the Liquidating Trust had approximately $28 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 March 31, 2005, the Liquidating Trust, as successor to Petrie, had accrued approximately $16 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 Quarterly Report on 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 Quarterly Report on 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) A decision by a court that the Liquidating Trust, as successor to Petrie, has liability as a guarantor of certain leases notwithstanding Petrie's receipt from the landlords thereof of releases of guarantees with respect to such leases; (4) A decision by a court that the Statute of Limitations Defense is not available to the Liquidating Trust with respect to one or more Rejected Leases; (5) An adverse material change in general economic conditions and the interest rate environment; (6) The effects of, and changes in, laws and regulations and other activities of federal and local governments, agencies and similar organizations; and (7) The costs and other effects of other legal and administrative cases and proceedings, settlements and claims relating to the Liquidating Trust's contingent liabilities. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The Liquidating Trust invests its available cash in short-term United States Treasury Obligations. Although the rate of interest paid on short-term United States Treasury Obligations may fluctuate over time based on changes in the general level of U.S. interest rates, each of such investments is made at a fixed interest rate over the duration of the investment and each has a maturity of less than 365 days. In addition, the Liquidating Trust Agreement prohibits the Liquidating Trust from making certain investments with a maturity of greater than one year and certain other investments that could expose the Liquidating Trust to market risk. The Liquidating Trust believes that its exposure to market risk fluctuations for its investments is not material as of March 31, 2005. Item 4. Controls and Procedures. (a) Disclosure Controls and Procedures. The Liquidating Trust's management, with the participation of the Liquidating Trust's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Liquidating Trust's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Liquidating Trust's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Liquidating Trust's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in the Liquidating Trust's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Liquidating Trust's internal control over financial reporting. 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 on Form 10-Q. Item 6. Exhibits. Exhibit 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 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 16, 2005 By: /s/ Stephanie R. Joseph ------------------------------- Stephanie R. Joseph Manager and Chief Executive Officer Dated: May 16, 2005 By: /s/ H. Bartlett Brown ------------------------------- H. Bartlett Brown Assistant Manager and Chief Financial Officer Exhibit 31.1 - ------------ Certification of Chief Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Stephanie R. Joseph, Manager and Chief Executive Officer of Petrie Stores Liquidating Trust, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Petrie Stores Liquidating Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 16, 2005 /s/ Stephanie R. Joseph ----------------------------------- Stephanie R. Joseph Manager and Chief Executive Officer Exhibit 31.2 - ------------ Certification of Chief Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, H. Bartlett Brown, Assistant Manager and Chief Financial Officer of Petrie Stores Liquidating Trust, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Petrie Stores Liquidating Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 16, 2005 /s/ H. Bartlett Brown ----------------------------------- H. Bartlett Brown Assistant Manager and Chief Financial Officer Exhibit 32.1 - ------------ Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report of Petrie Stores Liquidating Trust (the "Trust") on Form 10-Q for the period ending March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Stephanie R. Joseph, as Chief Executive Officer of the Trust, and H. Bartlett Brown, as Chief Financial Officer of the Trust, each hereby certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, to the best of her or his knowledge, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. /s/ Stephanie R. Joseph - ----------------------------------- Stephanie R. Joseph Chief Executive Officer May 16, 2005 /s/ H. Bartlett Brown - ----------------------------------- H. Bartlett Brown Chief Financial Officer May 16, 2005 This certification accompanies this Report pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Trust for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by Section 906 has been provided to the Trust and will be retained by the Trust and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----