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 JULY 29, 1995 COMMISSION FILE NUMBER: 1-6166
PETRIE STORES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 36-2137966
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
70 ENTERPRISE AVENUE
SECAUCUS, NEW JERSEY 07094
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 866-3600
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF
CHANGED SINCE LAST REPORT: NONE
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: 52,350,238 shares, $1.00 par value per
share, of common stock outstanding as of September 6,
1995.
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (unaudited)
Statements of Net Assets in Liquidation - July
29, 1995 and January 28, 1995 . . . . . . . . . . 3
Statements of Changes in Net Assets in
Liquidation - For the Three Months and Six
Months Ended July 29, 1995 . . . . . . . . . . . 4
Consolidated Statements of Operations - For the
Three Months and Six Months Ended July 30,
1994 . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statement of Cash Flows - For the
Six Months Ended July 30, 1994 . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 17
PETRIE STORES CORPORATION
STATEMENTS OF NET ASSETS IN LIQUIDATION (NOTE 2)
(IN THOUSANDS)
JULY 29, 1995 JANUARY 28,
(UNAUDITED) 1995
Assets
Cash and cash equivalents $ 20,787 $ 11,854
Investment in Toys "R" Us, Inc.
common stock 439,605 1,262,293
Total assets 460,392 1,274,147
Liabilities
Accrued expenses and other liabilities 5,805 9,495
Deferred income taxes 114,063 428,182
Total liabilities 119,868 437,677
Commitments and contingencies
Net assets in liquidation $ 340,524 $ 836,470
See accompanying notes.
PETRIE STORES CORPORATION
STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION (NOTE 2)
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS SIX MONTHS
ENDED ENDED
JULY 29, 1995 JULY 29, 1995
Net assets in liquidation at
beginning of period $ 311,796 $ 836,470
Investment income 203 367
Corporate overhead (864) (2,752)
Net realized and unrealized
gain (loss) on Toys "R" Us,
Inc. common stock 51,118 (163,116)
Income (loss) before income
tax (expense) credit 50,457 (165,501)
Income tax (expense) credit (21,707) 63,986
Net income (loss) for the period 28,750 (101,515)
Distribution of 26,175,109
shares of Toys "R" Us, Inc.
common stock, net
of taxes (22) (394,431)
Increase (decrease) in net assets 28,728 (495,946)
Net assets in liquidation at
July 29, 1995 $340,524 $340,524
Net income (loss) per share $.55 $(1.94)
Weighted average number of shares 52,350 52,350
See accompanying notes.
PETRIE STORES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (NOTES 2 AND 3)
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 30, 1994* JULY 30, 1994*
Interest expense $(2,516) $(5,032)
Loss from continuing
operations before
income taxes (2,516) (5,032)
Income tax benefit 1,007 2,013
Loss from continuing
operations (1,509) (3,019)
Loss from discontinued
operations, net
of income taxes (13,336) (10,924)
Net loss
$(14,845) $(13,943)
Loss per share:
Loss from continuing operations $(.03) $(.06)
Loss from discontinued
operations (.29) (.24)
Net loss $(.32) $(.30)
Weighted average number of
shares 46,774 46,772
* Restated
See accompanying notes.
PETRIE STORES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 30, 1994
(UNAUDITED)
(IN THOUSANDS)
Cash flows from operating activities
Net loss $(13,943)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization of property and
equipment 27,466
Other amortization 1,562
Deferred income taxes (2,176)
Changes in assets and liabilities:
(Increase) in:
Accounts receivable (1,127)
Merchandise inventories (44,135)
Prepaid expenses and sundry receivables (12,214)
Other assets (33)
Increase (decrease) in:
Accounts payable 10,475
Accrued expenses and other liabilities (6,381)
Other long-term liabilities (320)
Proceeds from sale of common stock held for
investment - trading securities 36,076
Net cash used in operating activities (4,750)
Cash flows used in investing activities
Additions to property and equipment (29,002)
Cash flows from financing activities
Net short-term borrowings 26,477
Cash dividends (4,679)
Net cash provided by financing activities 21,798
Net decrease in cash and cash equivalents (11,954)
Cash and cash equivalents, beginning of period 39,290
Cash and cash equivalents, end of period $27,336
See accompanying notes.
PETRIE STORES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX MONTHS ENDED JULY 30, 1994
(UNAUDITED)
(IN THOUSANDS)
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 5,077
Income taxes $ 1,158
See accompanying notes.
PETRIE STORES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JULY 29, 1995
1. INTERIM REPORTING
The accompanying unaudited consolidated financial statements of
Petrie Stores Corporation ("Petrie") 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
Petrie, all adjustments (consisting of only normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the six months ended July 29, 1995 are not
necessarily indicative of the results that may be expected for the
fiscal year ending February 3, 1996. For further information,
reference is made to the consolidated financial statements and
footnotes thereto included in Petrie's Annual Report on Form 10-K for
the fiscal year ended January 28, 1995.
2. BASIS OF PRESENTATION
For financial statement presentation purposes, a liquidation basis
of accounting was implemented as of January 28, 1995. The application
of a liquidation basis had no effect on Petrie's net assets as of July
29, 1995 and January 28, 1995. The statements of net assets in
liquidation at July 29, 1995 and January 28, 1995 do not distinguish
between current and long-term balances as would be reflected if such
statements had been prepared on a going-concern basis. The
accompanying consolidated statements of operations for the three months
and six months ended July 30, 1994, and the consolidated statement of
cash flows for the six months then ended, are presented on a going-
concern basis.
In December 1994, as part of the reorganization of Petrie's retail
operations in connection with their sale, all of Petrie's former
subsidiaries with retail operations were transferred to Petrie Retail,
Inc. ("Petrie Retail"), then a wholly-owned subsidiary of Petrie, and
all of the shares of Toys "R" Us, Inc. ("Toys 'R' Us") common stock,
par value $.10 per share ("Toys Common Stock"), held by Petrie's former
subsidiaries were transferred to Petrie. Thereafter, Petrie Retail was
sold to PS Stores Acquisition Corp. (hereafter, including its
subsidiaries and affiliates unless the context requires otherwise, "PS
Stores"). As a result of the reorganization, Petrie has no
subsidiaries.
3. DISCONTINUED OPERATIONS
On December 9, 1994, pursuant to the terms of a Stock Purchase
Agreement, as amended (the "Stock Purchase Agreement"), Petrie completed
the sale of the stock of Petrie Retail. The stock of Petrie Retail
was sold to PS Stores for a net cash purchase price of approximately
$177.5 million and the assumption by PS Stores of various liabilities
including, but not limited to, all of the leases to which Petrie or
any of its subsidiaries was a party (Note 5).
The results of the retail operations are accounted for as
discontinued operations in the accompanying Consolidated Statements of
Operations. Amounts in the Consolidated Statements of Operations and
the notes thereto have been restated to reflect the discontinuance of
the retail operations.
Components of loss from discontinued operations for the three months
and six months ended July 30, 1994 are as follows:
THREE MONTHS SIX MONTHS
ENDED ENDED
JULY 30, 1994 JULY 30, 1994
Net sales $360,387 $697,912
Loss from discontinued retail
operations before income taxes (22,500) (18,207)
Income tax benefit 9,164 7,283
Loss from discontinued retail
operations $(13,336) $(10,924)
4. INVESTMENTS IN COMMON STOCK
Petrie's investments in common stock consist of shares of Toys
Common Stock, which are being carried at market value.
As disclosed in Petrie's Annual Report on Form 10-K for the fiscal
year ended January 28, 1995 and Petrie's Quarterly Report on Form 10-Q
for the three months ended April 29, 1995, Petrie has placed 3,493,450
and 3,200,082 shares of Toys Common Stock into an escrow account and a
collateral account, respectively. The shares were placed into these
accounts to secure the payment of Petrie's contingent liabilities
pursuant to the terms of an Acquisition Agreement with Toys "R" Us, the
Stock Purchase Agreement and other agreements with Toys "R" Us and/or
PS Stores. Petrie has agreed to maintain a value in the collateral
account of at least $74,250,000 until a hedge or similar arrangement
that protects the value of the Toys Common Stock in the collateral
account is in place. Pursuant to the terms of an Amended and Restated
Cash Collateral Agreement between Petrie and PS Stores, PS Stores can
request the collateral agent to sell the Toys Common Stock in the
collateral account if a hedge or similar arrangement that protects the
value of the Toys Common Stock in the collateral account is not
implemented by September 15, 1995. In addition, Petrie has agreed with
Toys "R" Us pursuant to a letter agreement, dated as of January 24,
1995, that, subject to the terms of such letter agreement, until such
time as a hedge or similar arrangement is in place, Petrie will 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 (as of January 20, 1995) of at least
twice the Reserved Amount, to secure the payment of Petrie's contingent
liabilities (Note 5). Petrie is presently required to retain all of
the 10,055,576 shares of Toys Common Stock held by Petrie (including
the 3,493,450 shares of Toys Common Stock held in the escrow account
and the 3,200,082 shares of Toys Common Stock held in the collateral
account).
On May 26, 1995, Petrie sold 610,700 shares of Toys Common Stock
in open market transactions to raise cash (approximately $15.0 million)
to provide for certain of its contingent liabilities, if and when such
liabilities become due (Note 5).
As approved by Petrie's shareholders on January 24, 1995, Petrie
will be liquidated and dissolved and the shares of Toys Common Stock
held by Petrie will be distributed to its shareholders. In this
regard, on March 24, 1995, Petrie made an initial liquidating
distribution of 26,173,718 shares of Toys Common Stock (market value 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 second liquidating distribution of 5,235,035 shares of
Toys Common Stock (market value of approximately $139.4 million).
Following such distributions, Petrie holds 10,055,576 shares of Toys
Common Stock.
During Petrie's current fiscal year ending February 3, 1996, but
not later than January 24, 1996, Petrie will place its then remaining
shares of Toys Common Stock in a liquidating trust (the "Liquidating
Trust") established to provide for Petrie's contingent liabilities
(Note 5). Petrie's shareholders will receive pro-rata interests in the
Liquidating Trust. Prior to making further distributions of shares of
Toys Common Stock to shareholders of Petrie or establishing the
Liquidating Trust, Petrie is considering entering into a hedge or other
similar arrangement that protects the value of the shares of Toys
Common Stock required to be retained to provide, if necessary, for the
payment of Petrie's contingent liabilities.
5. COMMITMENTS AND CONTINGENCIES
Petrie is a guarantor of certain retail store leases to which
former subsidiaries of Petrie are parties. The leases expire at
various times through 2005. Since December 1994, Petrie has not been
required to, and is not currently aware of any existing conditions
which would cause Petrie to have to, make any payments with respect to
the underlying leases as a result of any default by the lessees
thereunder. As of September 6, 1995, Petrie believes that its
aggregate contingent lease guarantee liability, should there be a
default with respect to the underlying leases, is approximately $81.9
million. Petrie is continuing to seek to negotiate further reductions
in its contingent liability related to these lease guarantees.
Effective January 31, 1995, PS Stores withdrew from the United
Auto Workers District 65 Security Plan Pension Fund (the "Multiemployer
Plan"). Due to the underfunding of the Multiemployer Plan, PS Stores
has incurred withdrawal liability pursuant to the Employee Retirement
Income Security Act of 1974, as amended. Based upon preliminary
discussions with the administrators and trustees of the Multiemployer
Plan, Petrie believes that the withdrawal liability allocated to PS
Stores, as a result of its withdrawal, will be approximately $12
million, with an additional liability allocated to PS Stores of
approximately $3 million attributable to the Multiemployer Plan's
failure to meet certain Internal Revenue Code minimum funding
standards. In the event of a mass withdrawal by contributing employers
from the Multiemployer Plan, the withdrawal liability allocated to PS
Stores may be higher. Pursuant to the Stock Purchase Agreement between
Petrie and PS Stores, PS Stores is responsible for the first $10
million in withdrawal and related liabilities, with the next $50
million of such liabilities allocated 75 percent to Petrie and 25
percent to PS Stores.
Petrie is being audited by the IRS for its 1989 fiscal year. The
IRS has raised an issue regarding the manner pursuant to which Petrie
computed the basis of the Toys Common Stock sold in connection with the
exchange of certain of its exchangeable convertible debentures during
its taxable year ended January 28, 1989. It is expected that this
matter will not be finally resolved for at least several months, and
perhaps longer if Petrie and the IRS are unable to resolve this matter
in administrative proceedings and Petrie is forced to litigate its
position. After an extensive review of its records and consultation
with counsel, Petrie continues to believe that any additional taxes
(including interest) resulting from the ultimate resolution of this
matter will not have a material adverse effect on Petrie's financial
position.
While no assurance can be given, Petrie believes that, based on
currently available information, adequate accruals have been
established in the accompanying financial statements to provide for any
losses that may be incurred with respect to the aforementioned
contingencies.
Petrie, its directors and certain former members of its senior
management are defendants in a consolidated class action brought on
behalf of Petrie's shareholders. The plaintiffs in the action have
alleged (i) that Petrie's directors violated their fiduciary duties of
loyalty and fair dealing by exclusively negotiating with PS Stores for
the sale of the retail operations, (ii) that Petrie's directors failed
to adequately explore third-party interest and thus did not maximize
shareholder value and (iii) that PS Stores was in possession of non-
public information that allowed it to purchase the retail operations at
an inadequate price. The plaintiffs seek, among other things, (i) to
rescind the sale of the retail operations, (ii) a declaratory judgment
that the individual defendants breached their fiduciary duties and/or
(iii) to recover unspecified damages. Petrie continues to believe that
the claims asserted in such complaints are without merit and not
probable of resulting in a material adverse effect on Petrie's
financial position. Petrie plans to contest this suit vigorously and
on August 22, 1995 filed a motion to dismiss the consolidated amended
complaint.
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 provided herein.
RESULTS OF OPERATIONS
As previously disclosed, Petrie Stores Corporation
("Petrie") sold its retail operations on December 9, 1994 (the
"Sale"). On January 24, 1995, Petrie's shareholders approved a
Plan of Liquidation and Dissolution, and Petrie commenced its
liquidation shortly thereafter. As a result, effective January
28, 1995, Petrie changed its basis of accounting from a going-
concern basis to a liquidation basis. Since January 24, 1995,
Petrie's activities have been limited to winding up its affairs
in furtherance of its Plan of Liquidation and Dissolution.
The results of the retail operations provided herein for the
three- and six-month periods ended July 30, 1994 have been
restated so that they may be presented as discontinued operations
in Petrie's Consolidated Statement of Operations. The net income
(loss) for the three- and six-month periods ended July 29, 1995
was $28,750,000 and ($101,515,000), respectively, as compared to
a loss from continuing operations for the three- and six-month
periods ended July 30, 1994 of ($1,509,000) and ($3,019,000),
respectively.
The market price per share of Toys "R" Us, Inc. ("Toys 'R'
Us") common stock, par value $.10 per share ("Toys Common
Stock"), declined from $30 per share at January 28, 1995 to $25
per share at April 29, 1995 and then increased to $28 per share
at July 29, 1995. As of September 6, 1995, the closing price per
share of Toys Common Stock as reported on the New York Stock
Exchange Composite Tape was $27 per share. In applying a
liquidation basis of accounting, Petrie has given effect to the
fluctuation in the market price of Toys Common Stock held by
Petrie and the 610,700 shares thereof sold on May 26, 1995 in
its results of operations and has recorded a net realized and
unrealized gain (loss) on the Toys Common Stock for the three-
and six-month periods ended July 29, 1995 of $51,118,000 and
($163,116,000), respectively. As a result of the net realized
and unrealized gain (loss), Petrie recorded income tax expense
(credit) for the three- and six-month periods ended July 29, 1995
of $21,707,000 and ($63,986,000), respectively. Prior to
adopting a liquidation basis of accounting, unrealized
gains/losses on the Toys Common Stock, net of related deferred
taxes, resulted in adjustments to shareholders' equity.
Corporate overhead of $864,000 and $2,752,000 for the three-
and six-month periods ended July 29, 1995 consists primarily of
the costs and expenses related to the liquidation and dissolution
of Petrie including, but not limited to, legal fees, insurance,
accounting fees, salaries, real estate advisory fees, transfer
agent fees, exchange listing fees and printing and shareholder
communications expenses. Included in corporate overhead for the
six-month period ended July 29, 1995 is $618,000 related to
premiums for directors' and officers' liability insurance. In
connection with Petrie's liquidation basis of accounting, these
premiums were expensed upon payment. Although certain overhead
costs and expenses were also incurred by Petrie during the three-
and six-month periods ended July 30, 1994 in connection with its
public reporting requirements, corporate overhead has been
included in discontinued operations for such period. In the
opinion of management, corporate overhead was not material to
either continuing or discontinued operations for the three- and
six-month periods ended July 30, 1994.
During the three- and six-month periods ended July 29, 1995,
Petrie earned $203,000 and $367,000, respectively, in investment
income. Investment income for the three- and six-month periods
ended July 30, 1994 related to the retail operations and is
included in discontinued operations.
Petrie's 8% Convertible Subordinated Debentures due December
31, 2010 were fully redeemed or converted in the fiscal year
ended January 28, 1995. As a result, no interest expense was
incurred by Petrie for the six months ended July 29, 1995.
LIQUIDITY AND CAPITAL RESOURCES
As previously disclosed, Petrie has delivered 3,493,450
shares of the Toys Common Stock held by Petrie 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 placed into the
Escrow Account pursuant to the Escrow Agreement secure the
payment of certain of Petrie's obligations to Toys "R" Us arising
(i) under (x) the Acquisition Agreement, dated as of April 20,
1994 and amended as of May 10, 1994, between Petrie and Toys "R"
Us, (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 (the "Seller Indemnification
Agreement") and (z) the Stock Purchase Agreement, dated as of
August 23, 1994 and amended as of November 3, 1994, between
Petrie and WP Investors, Inc. (the "Retail Operations Stock
Purchase Agreement") and (ii) otherwise.
In addition, Petrie has delivered 3,200,082 shares of the
Toys Common Stock held by Petrie into 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"). The shares of Toys Common
Stock placed in the Collateral Account pursuant to the Amended
and Restated Cash Collateral Agreement secure the payment of
certain of Petrie's obligations 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 (the "Cross-
Indemnification and Procedure Agreement"). These obligations
relate primarily to the fiscal year 1989 tax audit (the "Tax
Audit") and the United Auto Workers District 65 Security Plan
Pension Fund (the "Multiemployer Plan"). Pursuant to the Amended
and Restated Cash Collateral Agreement, until the implementation
of a hedge or similar arrangement that protects the value of the
Toys Common Stock in the Collateral Account, Petrie has agreed to
maintain a value in the Collateral Account of at least
$74,250,000. The Amended and Restated Cash Collateral Agreement
provides that PS Stores can request the Collateral Agent to sell
the Toys Common Stock in the Collateral Account if the value of
the Toys Common Stock in the Collateral Account is not protected,
as of September 15, 1995, by a hedge or similar arrangement.
Petrie has agreed with Toys "R" Us pursuant to a letter
agreement, dated as of January 24, 1995 (the "Side Letter
Agreement"), that, until such time as a hedge or similar
arrangement that protects the value of the Toys Common Stock is
in place, Petrie will maintain a reserve (the "Reserve") against
certain contingent liabilities (the "Liabilities"), including,
but not limited to (i) guarantees by Petrie of certain retail
store leases to which Petrie's former subsidiaries are parties
and which expire at various times through 2005 (the "Lease
Guarantees"), (ii) liabilities in connection with Petrie's past
participation in the Multi-employer Plan, (iii) assessments made
by or settlements negotiated with the IRS relating to the Tax
Audit and (iv) liabilities in connection with the administration
of Petrie and the Liquidating Trust. Subject to the terms of the
Side Letter Agreement, Petrie is required to fund the Reserve
with, 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 (as of January 20, 1995)
of at least twice the Reserved Amount. The Reserve presently
contains all of the 10,055,576 shares of Toys Common Stock held
by Petrie (including the 3,493,450 shares of Toys Common Stock
held in the Escrow Account and the 3,200,082 shares of Toys
Common Stock held in the Collateral Account). In the event that
Petrie desires to make a distribution from the Reserve other than
for the Liabilities, Petrie must notify Toys "R" Us of its intent
to make such a distribution and give Toys "R" Us twenty days
within which to object.
On May 26, 1995, Petrie sold 610,700 shares of Toys Common
Stock in open market transactions to raise cash (approximately
$15.0 million) to provide for certain of its contingent
liabilities, if and when such liabilities become due.
On August 15, 1995, Petrie made a second liquidating
distribution (the "Distribution") to its shareholders of an
aggregate of 5,235,035 shares of Toys Common Stock, or
approximately 34.2% of the Toys Common Stock held by Petrie,
pursuant to Petrie's Plan of Liquidation and Dissolution. In the
Distribution, Petrie's shareholders received 0.1 of a share of
Toys Common Stock for every share of Petrie Common Stock held of
record at the close of business on August 7, 1995. In addition,
Petrie distributed an aggregate of 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 Petrie's initial liquidating distribution made on
March 24, 1995. As a result, Petrie presently holds 10,055,576
shares of Toys Common Stock.
As of September 6, 1995, the closing price per share of Toys
Common Stock as reported on the New York Stock Exchange Composite
Tape was $27 per share, and during the fifty-two weeks prior to
the date of this report, the price per share of Toys Common Stock
has fluctuated from a high of $39 to a low of $23 . No assurance
can be given as to the future market prices of Toys Common Stock
or as to the extent to which Petrie will be successful in
reducing the Liabilities. However, as noted above, in accordance
with the Amended and Restated Cash Collateral Agreement and the
Side Letter Agreement, Petrie is considering entering into a
hedge or similar arrangement that protects the value of its
remaining shares of Toys Common Stock in light of its remaining
Liabilities. No assurance can be given as to the effect that a
hedge or similar arrangement would have on the value of the Toys
Common Stock available for distribution to Petrie's shareholders.
Sometime during the second half of Petrie's current fiscal
year, but not later than January 24, 1996, Petrie will place its
remaining shares of Toys Common Stock and any other assets it
then holds in the Liquidating Trust, and Petrie's shareholders
will become holders of beneficial interests in the Liquidating
Trust. Additional distributions of the shares of Toys Common
Stock held by Petrie will be made from time to time to holders of
beneficial interests in the Liquidating Trust to the extent that
such shares are not needed to satisfy the Liabilities. It has
not yet been determined whether Petrie will make another
liquidating distribution prior to establishing the Liquidating
Trust.
As noted above, the Liabilities consist primarily of
contingent liabilities related to the Lease Guarantees, the Tax
Audit and the Multiemployer Plan. As of September 6, 1995,
Petrie believes that the aggregate contingent liability related
to the Lease Guarantees, should the lessees thereunder fail to
perform on the underlying lease obligations, is approximately
$81.9 million. Petrie is continuing to seek to negotiate further
reductions in its contingent liability related to the Lease
Guarantees. Since the sale of the retail operations on December
9, 1994, Petrie has not been required to, and is not currently
aware of any existing condition which would cause it to have to,
make any payment with respect to the underlying lease obligations
as a result of any default by the lessees thereunder. Petrie
does not presently believe that the amounts that may be payable
by it in connection with the Tax Audit or the Multiemployer Plan
will have a material adverse effect on Petrie's financial
position.
As of September 6, 1995, Petrie has approximately $20.4
million in cash (and cash equivalents). Petrie believes that its
cash will be adequate to fund the costs and expenses related to
its liquidation and those of administering the Liquidating Trust
and to provide for certain of the Liabilities if and when they
become due. Costs and expenses related to the liquidation and
the administration of the Liquidating Trust include legal fees,
insurance, accounting fees, salaries, real estate advisory fees,
transfer agent fees, trustee fees, exchange listing fees,
Securities and Exchange Commission filing fees, and printing and
shareholder communications expenses. To the extent that there is
cash remaining upon the termination of the Liquidating Trust,
such cash will be distributed to the Liquidating Trust's
beneficial owners.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) LIST OF EXHIBITS
Exhibit 27 -- Financial Data Schedule
(b) REPORTS ON FORM 8-K
Current Report on Form 8-K, dated as of August 30,
1995, reporting the second liquidating distribution.
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.
Dated: September 12, 1995 PETRIE STORES CORPORATION
By /s/ HILDA KIRSCHBAUM GERSTEIN
Hilda Kirschbaum Gerstein
President and Chief Executive Officer
Dated: September 12, 1995 By /s/ H. BARTLETT BROWN
H. Bartlett Brown
Treasurer, Principal Financial
Officer and Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
PETRIE STORES CORPORATION
FINANCIAL DATA SCHEDULE
This schedule contains summary financial information
extracted from Petrie's statement of net assets in
liquidation at July 29, 1995 and Petrie's statement of
changes in net assets in liquidation for the six months
ended July 29, 1995, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> FEB-3-1996
<PERIOD-END> JUL-29-1995
<CASH> 20,787
<SECURITIES> 439,605
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 460,392
<CURRENT-LIABILITIES> 5,805
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 340,524
<TOTAL-LIABILITY-AND-EQUITY> 460,392
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,752
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (165,501)
<INCOME-TAX> 63,986
<INCOME-CONTINUING> (101,515)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101,515)
<EPS-PRIMARY> (1.94)
<EPS-DILUTED> (1.94)
</TABLE>
