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 JUNE 30, 1996 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.)
70 ENTERPRISE AVENUE
SECAUCUS, NEW JERSEY 07094
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 422-0496
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED
SINCE LAST REPORT:
N/A
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 issuer's classes of common stock, as of the latest
practicable date: As of August 12, 1996, there were
52,350,238 Units of Beneficial Interest outstanding.
PETRIE STORES LIQUIDATING TRUST
(SUCCESSOR TO PETRIE STORES CORPORATION)
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements (unaudited)
Statements of Net Assets in Liquidation
- June 30, 1996 and January 22, 1996 . . 2
Statements of Changes in Net Assets in
Liquidation - For the Three Months
Ended June 30, 1996 and July 29,
1995, the Period from January 23,
1996 to June 30, 1996 and the Six
Months Ended July 29, 1995 . . . . . . 3
Notes to Unaudited Financial Statements. . 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . 20
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 20
PETRIE STORES LIQUIDATING TRUST
(SUCCESSOR TO PETRIE STORES CORPORATION)
STATEMENTS OF NET ASSETS IN LIQUIDATION
(IN THOUSANDS)
June 30, 1996 January 22, 1996
(Unaudited) (Predecessor)
Assets
Cash and cash equivalents $ 59,073 $ 63,647
Cash and cash equivalents held in escrow 69,050 67,470
Investments in common stock (including
3,493,450 shares opf Toys "R" Us
common stock held in escrow) 144,084 106,799
_________ ________
Total assets 272,207 237,916
Liabilities
Accrued expenses and other liabilities 47,137 35,322
_________ ________
Total liabilities 47,137 35,322
Commitments and contingencies _________ ________
Net assets in liquidation $225,070 $202,594
========= ========
See accompanying notes.
<TABLE>
<CAPTION>
PETRIE STORES LIQUIDATING TRUST
(SUCCESSOR TO PETRIE STORES CORPORATION)
STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER UNIT AND PER SHARE AMOUNTS)
Three
Months Period
Three Ended From Six Months
Months July 29, January 23, Ended
Ended 1995 1996 to July 29, 1995
June 30, 1996 (Predecessor) June 30, 1996 (Predecessor)
<S> <C> <C> <C> <C>
Net assets in
liquidation at beginning
of period $232,541 $311,796 $202,594 $836,470
Investment income 1,721 203 2,982 367
Corporate overhead (16,775) (864) (17,791) (2,752)
Net realized and unrealized
gain (loss) on Toys "R"
Us common stock 7,583 51,118 37,285 (163,116)
Income (loss) before
income tax (expense) benefit (7,471) 50,457 22,476 (165,501)
Income tax (expense)
benefit --- (21,707) --- 63,986
________ _________ _______ ________
Net income (loss) for
the period (7,471) 28,750 22,476 (101,515)
Distribution of
26,173,718 shares
of Toys "R" Us common
stock, net of related
deferred taxes --- (22) --- (394,431)
Increase (decrease) in
net assets (7,471) 28,728 22,476 (495,946)
_________ _______ _______ _________
Net assets in
liquidation at
end of period $225,070 $340,524 $225,070 $340,524
======== ======== ======== ========
Net income (loss) per
unit or share $ (.14) $ .55 $ .43 $ (1.94)
_________ ________ ________ ________
Weighted average number
of units or shares 52,350 52,350 52,350 52,350
======== ======== ======== ========
See accompanying notes.
</TABLE>
PETRIE STORES LIQUIDATING TRUST
(SUCCESSOR TO PETRIE STORES CORPORATION)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1996
1. INTERIM REPORTING
The accompanying unaudited financial statements of the 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 period from January
23, 1996 to June 30, 1996 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 period ended January 22, 1996.
2. BASIS OF PRESENTATION
The Liquidating Trust is the successor to Petrie Stores
Corporation ("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, held on December
6, 1994, Petrie's shareholders approved the sale of Petrie's retail
operations (the "Sale"). On December 9, 1994, pursuant to a Stock
Purchase Agreement, dated as of August 23, 1994 and amended as of
November 3, 1994 (the "Retail Operations Stock Purchase Agreement"),
PS Stores Acquisition Corp. ("PS Stores") purchased all of the stock
of Petrie Retail, Inc., a former subsidiary of Petrie to which all of
Petrie's retail operations had been transferred ("Petrie Retail").
At Petrie's Reconvened Annual Meeting, 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.
Since the Succession Date, Petrie has been preparing for its
dissolution, which is expected to be completed in the fall of 1996,
assuming all necessary consents and clearances are received at such
time. Petrie is otherwise inactive.
Beginning with the period ending 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. The statements of net assets in liquidation at June 30, 1996
and January 22, 1996 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 Liquidating Trust is a complete pass-through entity for
federal income taxes and, accordingly, is not subject to income tax.
Instead, each holder of Units of Beneficial Interest in the
Liquidating Trust is required to take into account, in accordance
with such holder's method of accounting, his pro rata share of the
Liquidating Trust's items of income, gain, loss, deduction or credit,
regardless of the amount or timing of distributions to such holder.
3. INVESTMENTS IN COMMON STOCK
The Liquidating Trust's investments in common stock consist of
shares, which are carried at market value, of Toys "R" Us, which
operates a chain of specialty retail stores principally engaged in
the sale of toys and children's clothing in the United States and
abroad.
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 its Toys Common Stock into an escrow account (the
"Escrow Account") pursuant to the terms of an escrow agreement, dated
as of January 24, 1995, between Petrie and Custodial Trust Company,
as Escrow Agent (the "Escrow Agreement"). The shares of Toys Common
Stock placed into the Escrow Account pursuant to the Escrow Agreement
secure the payment of certain obligations of the Liquidating Trust,
as successor to Petrie, to Toys "R" Us arising (i) under (x) the Toys
Acquisition Agreement, (y) the Seller Indemnification Agreement,
dated as of December 9, 1994, among Petrie, Toys "R" Us, Petrie
Retail, PS Stores and certain subsidiaries of PS Stores and (z) the
Retail Operations Stock Purchase Agreement and (ii) otherwise.
Petrie had also placed 3,200,082 shares of Toys Common Stock in
a collateral account (the "Collateral Account") pursuant to the terms
of an Amended and Restated Cash Collateral and Pledge Agreement,
dated as of December 9, 1994 and amended as of January 24, 1995,
among Petrie, PS Stores, certain subsidiaries of PS Stores, and
Custodial Trust Company, as Collateral Agent (the "Amended and
Restated Cash Collateral Agreement"). On December 19, 1995, the
Amended and Restated Cash Collateral Agreement was further amended
and restated and, pursuant thereto, the 3,200,082 shares of Toys
Common Stock held in the Collateral Account were released to Petrie
in exchange for Petrie's deposit of $67.5 million in cash equivalents
into the Collateral Account. The cash equivalents and accrued
interest thereon placed in the Collateral Account pursuant to the
Amended and Restated Cash Collateral Agreement secure the payment of
certain obligations of the Liquidating Trust, as successor to Petrie,
to PS Stores arising under (i) the Retail Operations Stock Purchase
Agreement and (ii) the Cross-Indemnification and Procedure Agreement,
dated as of December 9, 1994, between Petrie and PS Stores (Note 4).
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, until such time as a hedge or
similar arrangement which would protect the value of the Toys Common
Stock 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 4). At August 12, 1996, the Liquidating Trust, as successor to
Petrie, was required to retain substantially all of its (i) 5,055,576
shares of Toys Common Stock (including the 3,493,450 shares of Toys
Common Stock held in the Escrow Account) and (ii) approximately $128
million in cash and cash equivalents.
The price per share of Toys Common Stock, as reported by the New
York Stock Exchange Composite Tape, increased from $27 per share at
March 29, 1996 to $281/2 per share at June 28, 1996, the last business
day prior to the end of the quarters ended March 31, 1996 and June
30, 1996, respectively.
4. COMMITMENTS AND CONTINGENCIES
As successor to Petrie, the Liquidating Trust has certain
contingent liabilities with respect to existing or potential claims,
lawsuits and other proceedings, which primarily relate to (i)
guarantees of certain retail store leases, expiring at various times
through 2011, to which Petrie Retail or an affiliate thereof is a
party, 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 fails to perform, (ii) Petrie's
agreement with Petrie Retail to indemnify it for certain liabilities
relating to Petrie Retail's withdrawal from the United Auto Workers
District 65 Security Plan Pension Fund (the "Multiemployer Plan") and
(iii) an ongoing dispute with the Internal Revenue Service (the
"IRS") relating to the manner in which Petrie computed the basis of
shares of Toys Common Stock transferred in connection with the
exchange of certain of Petrie's exchangeable subordinated debentures
in fiscal year 1989. The Liquidating Trust accrues liabilities when
it is probable that future costs will be incurred and when such costs
can be reasonably estimated. Such accruals are based on developments
to date, the Liquidating Trust's estimates of the outcome of these
matters and its experience (including that of its predecessor,
Petrie) in contesting, litigating and settling matters. At June 30,
1996, the Liquidating Trust, as successor to Petrie, has accrued
approximately $44 million for contingent liabilities. As the scope
of these liabilities becomes better defined, there may be changes in
the estimates of future costs, which could have a material effect on
the Liquidating Trust's financial condition or liquidity.
On October 12, 1995, Petrie Retail filed a voluntary petition
for bankruptcy protection under Chapter 11 of the Federal Bankruptcy
Code with the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court"). As a result of its
bankruptcy filing, Petrie Retail has failed to perform or make
payment with respect to certain of the Assumed Obligations,
including, but not limited to, Assumed Obligations relating to store
leases to which Petrie Retail or an affiliate thereof is a party,
state taxes, employment agreements and certain other claims and
contractual obligations. Accordingly, the Liquidating Trust may be
required to make payments in respect of certain of the Assumed
Obligations. The Liquidating Trust intends to file a claim in the
Bankruptcy Court against Petrie Retail in respect of any such
payments. Additionally, the Liquidating Trust intends to assert a
right of setoff in respect of any such payments against any claims
Petrie Retail and its affiliates may have against Petrie and the
Liquidating Trust, as successor to Petrie. The Liquidating Trust is
unable to predict the timing or probability of the collection of
these claims against Petrie Retail.
Since filing its petition for bankruptcy protection, Petrie
Retail has closed approximately 550 of the roughly 1600 stores it
operated prior to filing the petition, and in connection with the
going-out-of-business sales described below (and the subsequent lease
rejections), additional stores are expected to be closed. Of the 550
closed stores, 385 relate to rejected leases and the remainder of the
leases generally have expired or were terminated by mutual landlord
and tenant consent. The Liquidating Trust, as successor to Petrie,
is a guarantor of approximately 48 of the rejected leases and its
aggregate guarantee liability on those leases is approximately $18
million, which the Liquidating Trust, as successor to Petrie, has
included in accrued expenses and other liabilities in the
accompanying financial statements at June 30, 1996. Such aggregate
guarantee liability has been reduced by approximately $2 million to
take into account settlement agreements entered into and releases
obtained by the Liquidating Trust. The Liquidating Trust's lease
guarantee liability will be further reduced by, among other things, the
extent to which new rent-paying tenants are found for the closed
stores.
On May 7, 1996, Petrie Retail filed a motion with the Bankruptcy
Court to conduct going-out-of-business sales at 226 stores and
indicated, without identifying the relevant leases, that it intended
to close 12 additional stores where the leases have expired or are
scheduled to expire in the near future. Of the 226 stores included
in the May 7 motion, 31 have been terminated by mutual consent of the
landlord and tenant, 16 have been assigned to new tenants and 140
have been rejected, which rejected leases are included in the
analysis above. The Liquidating Trust expects that Petrie Retail
will reject the remainder of the leases in the near future. The
Liquidating Trust, as successor to Petrie, is a guarantor of
approximately seven of the remaining leases. If Petrie Retail were
to close all seven of the stores under such leases, the Liquidating
Trust's aggregate guarantee liability on these leases would be
approximately $4.5 million, which amount has been included in the
Liquidating Trust's accrued expenses and other liabilities at June
30, 1996.
No assurance can be given as to how many additional stores
Petrie Retail will close for which the Liquidating Trust, as
successor to Petrie, has guarantee liability. If Petrie Retail were
to close every store for which the Liquidating Trust, as successor to
Petrie, believes it has liability as a lease guarantor, giving effect
to all the lease guarantee releases executed by landlords and
assuming that no mitigation or defense were successful, the
Liquidating Trust's theoretical exposure relating to such leases,
without giving effect to any present value discount, would be
approximately $92 million (including the $18 million in aggregate
liability relating to the rejected leases and the $4.5 million in
aggregate liability relating to the going-out-of-business sales
described above), with approximately $9.5 million coming due in the
year ending December 31, 1996, approximately $17.5 million due in
1997, approximately $15.5 million due in 1998 and approximately $49.5
million due thereafter. As discussed below, landlords under leases
relating to 146 stores operated by Petrie Retail or an affiliate
thereof have alleged in a complaint that the Liquidating Trust, as
successor to Petrie, has liability as a guarantor of certain leases
notwithstanding Petrie's receipt from these landlords of releases of
guarantees with respect to such leases. Based on the complaint, such
alleged guarantor liability represents approximately $85 million in
lease payments, without giving effect to any present value discount
or rental payments made by Petrie Retail since the complaint was
filed and assuming that all of the 146 stores which are the subject
of these landlords' claims are closed and that the landlord in each
case is unable to mitigate its damages. The Liquidating Trust
believes it has substantial legal defenses to these landlords' claims
and is vigorously contesting such claims. Although the Liquidating
Trust considers it unlikely, a decision by a court in favor of these
landlords could have a material adverse effect on the Liquidating
Trust's liquidity and financial condition.
In addition, since Petrie Retail's bankruptcy filing, a dispute
has arisen between the Liquidating Trust, on the one hand, and Petrie
Retail and its affiliates, on the other, as to whether the
Liquidating Trust, as successor to Petrie, or Petrie Retail and its
affiliates is responsible as guarantor of 43 additional leases. The
maximum theoretical exposure relating to such leases, based on the
same assumptions set forth in the preceding paragraph and without
giving effect to any present value discount, would be approximately
$30 million, with approximately $2 million coming due in the year
ending December 31, 1996, approximately $5 million due in 1997,
approximately $5 million due in 1998 and approximately $18 million
due thereafter. To date, Petrie Retail has rejected 11 of such
leases, representing approximately $7.5 million in potential liability.
Such potential liability has been reduced by approximately $1 million
to take into account the settlement agreements entered into and
releases obtained by the Liquidating Trust. Two of the 43 leases,
representing approximately $1.5 million in potential liability, were
included in Petrie Retail's May 7, 1996 motion to conduct going-out-
of-business sales at 226 stores, and are leases which the Liquidating
Trust expects that Petrie Retail will reject in the near future. The
Liquidating Trust has included $9 million in respect of the
aforementioned disputed leases in accrued expenses and other
liabilities at June 30, 1996.
The Liquidating Trust's lease exposure calculations reflect the
estimated sum of all base rent and additional rent (such as taxes and
common area charges) due under a lease through the end of the current
lease term, but do not reflect potential penalties, interest and
other charges to which a landlord may be entitled. Such additional
charges (which may in part be unenforceable) are not expected to
materially increase the Liquidating Trust's lease guarantee
liability.
A significant number of leases discussed above under which a
landlord might claim that the Liquidating Trust, as successor to
Petrie, has liability as a lease guarantor either expressly contain
mitigation provisions or relate to property in states that imply such
provisions as a matter of law. Mitigation generally requires, among
other things, that a landlord of a closed store seek to reduce its
damages, including by attempting to locate a new tenant.
On October 23, 1995, Petrie Retail notified two former
executives of Petrie (one of whom is a current director of Petrie)
and the current President and Chief Executive Officer of Petrie (who
is also a current director 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, while preserving its rights against
Petrie Retail, entered into settlement agreements with one of the
former executives and the current President and Chief Executive
Officer of Petrie. Pursuant to the settlement agreements, the
Liquidating Trust agreed to pay each substantially all the amounts
due under their respective agreements with Petrie. The total cost of
these settlements to the Liquidating Trust was approximately $2.9
million (accrued for at January 22, 1996) of which approximately $2.0
million has been paid.
On January 12, 1996, Petrie received a notice of final
determination from the New Jersey Division of Taxation of a liability
for New Jersey corporate income tax in the aggregate amount
(including interest) of approximately $3.1 million. The liability,
which related to Petrie's 1987, 1989, 1990, 1991, 1992 and 1993 tax
years, had been assumed by Petrie Retail in connection with the Sale.
Additionally, the Liquidating Trust, as successor to Petrie, was
assessed approximately $270,000 (excluding interest) in sales and use
taxes for the years 1989 through 1995. In May 1996, the Liquidating
Trust paid the New Jersey Division of Taxation approximately $1.2
million in full settlement of its liability for New Jersey corporate
income tax and sales and use taxes for the respective periods
described above in connection with New Jersey's tax amnesty program,
which provided for interest to be forgiven and future penalties to be
avoided upon receipt of payment for taxes owed.
Effective January 31, 1995, Petrie Retail withdrew from the
Multiemployer Plan. Due to underfunding of the Multiemployer Plan,
Petrie Retail and its affiliates have incurred liability under the
Employee Retirement Income Security Act of 1974, as amended. By
letter dated May 30, 1996, the Multiemployer Plan assessed withdrawal
liability against Petrie Retail in the amount of approximately $9.4
million plus interest, to be paid in quarterly installments of
approximately $317,000 commencing August 1, 1996 through and
including August 1, 2006, with a final payment of approximately
$18,000 due on November 1, 2006. In addition, the Multiemployer Plan
assessed liability against Petrie Retail of approximately $2 million
attributable to the Multiemployer Plan's failure to meet certain
Internal Revenue Code minimum funding standards, which amount was
payable on August 1, 1996. To the knowledge of the Liquidating
Trust, as of August 12, 1996, Petrie Retail has not yet paid any
amounts for its liabilities in connection with the Multiemployer
Plan. In the event of a mass withdrawal by contributing employers
from the Multiemployer Plan, the withdrawal liability allocated to
Petrie Retail and its affiliates may be higher. Pursuant to the
Retail Operations Stock Purchase Agreement, Petrie Retail and its
affiliates are responsible for the first $10 million in withdrawal
and related liabilities, with the next $50 million of such
liabilities allocated 75 percent to the Liquidating Trust, as
successor to Petrie, and 25 percent to Petrie Retail and its
affiliates. It is unclear what effect, if any, Petrie Retail's
bankruptcy filing may have upon the timing and amount of any payments
the Liquidating Trust may be required to make under the agreement
with respect to the Multiemployer Plan, but in no event does the
Liquidating Trust believe that its maximum contractual liability will
be increased as a result of Petrie Retail's bankruptcy filing.
In connection with an audit being conducted by the IRS, the
agent examining Petrie's federal tax return for its fiscal year ended
January 28, 1989 raised an issue regarding the manner pursuant to
which Petrie computed the basis of its Toys Common Stock transferred
in connection with the exchange of certain of its exchangeable
subordinated debentures. The examining agent has proposed an
adjustment to Petrie's taxable income which would result in an
additional federal tax liability, including interest, of
approximately $53 million. The Liquidating Trust, as successor to
Petrie, is contesting the agent's proposed adjustment in
administrative proceedings. If the Liquidating Trust and the IRS are
unable to resolve this matter in administrative proceedings, the
Liquidating Trust intends to litigate its position. The Liquidating
Trust believes that the agent's proposed adjustment is incorrect as a
matter of law. Depending on how and when this issue is resolved with
the IRS, there also may be due state and local taxes (and interest
thereon).
The Liquidating Trust believes that 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.
Set forth below are the principal suits to which Petrie and the
Liquidating Trust, as successor to Petrie, are defendants.
As previously disclosed, actions were commenced in the New York
State Supreme Court against Petrie, its directors and certain former
members of its senior management alleging that (i) Petrie's directors
violated their fiduciary duties of loyalty and fair dealing by
exclusively negotiating with PS Stores for the sale of Petrie's
retail operations, (ii) Petrie's directors failed to adequately
explore third-party interest and thus did not maximize shareholder
value and (iii) PS Stores was in possession of non-public information
that allowed it to purchase the retail operations at an inadequate
price. On March 29, 1996, the New York State Supreme Court dismissed
the consolidated action with prejudice. On May 10, 1996, the
plaintiffs filed a notice of appeal with the Appellate Division,
First Department, of New York State Supreme Court with respect to the
dismissal.
As previously disclosed, a complaint was filed in the United
States District Court for the Southern District of Texas on October
31, 1995, as amended on January 24, 1996, against Petrie by the
landlord for two retail stores which had been operated by an
affiliate of Petrie Retail prior to Petrie Retail's rejection of the
underlying leases in the Bankruptcy Court. The complaint alleged,
among other things, that, in light of Petrie Retail's failure to
perform its obligations under these leases, Petrie has liability as a
guarantor for the amounts due under these two leases notwithstanding
that Petrie was released as a guarantor upon the execution and
delivery of substitute guarantees by Petrie Retail. Petrie answered
the amended complaint denying liability. On July 8, 1996, the
parties agreed to a settlement and the complaint was dismissed with
prejudice.
As previously disclosed, a complaint was filed in New Jersey
Superior Court against Petrie and the Liquidating Trustees by a
landlord and certain of its affiliates seeking injunctive relief and
unspecified compensatory and punitive damages for breach of contract,
fraud and negligent misrepresentation with respect to two office
leases and three store leases. On April 23, 1996, the parties agreed
to a settlement and the complaint was dismissed with prejudice.
On December 11, 1995, a complaint was filed in New Mexico
District Court against Petrie by a landlord for a retail store which
had been operated by an affiliate of Petrie Retail prior to Petrie
Retail's rejection of the underlying lease in Bankruptcy Court. The
complaint alleges, that, in light of Petrie Retail's failure to
perform its obligations under the lease, Petrie has liability as a
guarantor for the amount due under the lease. Petrie answered the
complaint denying liability and contending that, upon Petrie's
delivery of a Petrie Retail substitute guaranty, Petrie was released
from any guarantor liability. While no assurance can be given,
Petrie believes that it has meritorious defenses to this action and
will defend itself vigorously.
As previously disclosed, a complaint was filed in New York State
Supreme Court against Petrie, the Liquidating Trust and the
Liquidating Trustees by five landlords and certain of their
affiliates seeking declaratory relief and unspecified damages for
breach of contract and fraud with respect to 146 store leases. The
complaint alleges that the Liquidating Trust, as successor to Petrie,
has liability as a guarantor of certain of these leases
notwithstanding Petrie's receipt from these landlords of releases
with respect to substantially all of the purported lease guarantees.
On March 11, 1996, the defendants filed a motion to dismiss the
complaint. During oral argument, on July 15, 1996, the court
directed that the parties make certain additional submissions and
scheduled additional oral argument for a later date. While no
assurance can be given, the defendants believe that they have
meritorious defenses to this action and will defend themselves
vigorously.
In addition to the foregoing, the Liquidating Trust is involved
in other legal proceedings relating to its liquidation and defaults
by Petrie Retail in respect of Assumed Obligations. The Liquidating
Trust believes, based on available information, that, except as
described above, it is unlikely that these items, individually or in
the aggregate, will have a material adverse effect on the Liquidating
Trust's liquidity or financial position.
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. Following the receipt of all necessary
consents, approvals and clearances, Petrie will dissolve. For
financial statement purposes, the Liquidating Trust is deemed to be
the successor to Petrie, and the results of operations of Petrie for
the relevant periods are presented in the financial statements of the
Liquidating Trust. Beginning with the period ending December 31, 1996,
the Liquidating Trust has adopted the calendar year as its fiscal
year.
RESULTS OF OPERATIONS
The Liquidating Trust's net income (loss) for the three months
ended June 30, 1996 and the period from January 23, 1996 to June 30,
1996 was $(7,471,000) and $22,476,000, respectively, as compared to
net income (loss) of $28,750,000 and $(101,515,000) incurred by
Petrie for the three months and six months ended July 29, 1995.
As of August 12, 1996, the closing price per share of Toys
Common Stock as reported on the New York Stock Exchange Composite
Tape was $26 per share. In applying a liquidation basis of
accounting, the Liquidating Trust has given effect in its results of
operations to fluctuations in the market price of its Toys Common
Stock, and has recorded an unrealized gain on the Toys Common Stock
of $7,583,000 for the three months ended June 30, 1996 and
$37,285,000 for the period from January 23, 1996 to June 30, 1996,
respectively, compared with an unrealized gain of $51,118,000 for the
three months ended July 29, 1995 and a net realized and unrealized
loss of $(163,116,000) for the six months ended July 29, 1995.
Petrie sold 610,700 shares of Toys Common Stock on May 26, 1995 and
realized a loss of $3,149,000 thereon. As a result of the net
realized and unrealized gain (loss) for the three and six months
ended July 29, 1995, Petrie recorded income tax expense (credit) of
$21,707,000 and $(63,986,000), respectively.
For the three months ended June 30, 1996 and the period from
January 23, 1996 to June 30, 1996, the Liquidating Trust incurred
corporate overhead of $16,775,000 and $17,791,000, respectively,
compared with $864,000 and $2,752,000 for the three months and six
months ended July 29, 1995. Corporate overhead generally consists of
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, printing and shareholder communications expenses and costs and
expenses that the Liquidating Trust may have incurred as a result of
Petrie Retail's bankruptcy filing. Increases in corporate overhead
for the three months ended June 30, 1996 and the period from January
23, 1996 to June 30, 1996, as compared to the three months and six
months ended July 29, 1995, result primarily from accruals for
contingent guarantee liability relating to stores leases with respect
to which Petrie Retail has announced plans to conduct going-out-of-
business sales. See "-- Liquidity and Capital Resources." The
Liquidating Trust intends to file a claim against Petrie Retail in
the Bankruptcy Court in respect of any payments which are made by the
Liquidating Trust for obligations that Petrie Retail or an affiliate
thereof fails to perform as a result of Petrie Retail's bankruptcy
filing. Additionally, the Liquidating Trust will assert a right of
setoff in respect of any such payments against any claims Petrie
Retail and its affiliates may have against Petrie or the Liquidating
Trust, as successor to Petrie. The Liquidating Trust is unable to
predict the timing or probability of the collection of these claims
against Petrie Retail. See "-- Liquidity and Capital Resources."
During the three months ended June 30, 1996 and the period from
January 23, 1996 to June 30, 1996, the Liquidating Trust earned
$1,721,000 and $2,982,000, respectively, in investment income,
compared with $203,000 and $367,000 earned during the three months
and six months ended July 29, 1995. The increase in investment
income earned during the period ended June 30, 1996, as compared to
the six months ended July 29, 1995, is the result of the Liquidating
Trust's sale of shares of Toys Common Stock and the investment of the
proceeds therefrom in short-term investments.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
As previously disclosed, Petrie has placed 3,493,450 shares of
Toys Common Stock into an escrow account and $67.5 million in cash
equivalents into a collateral account. These assets were placed into
these accounts to secure Petrie's obligations relating to certain
contingent liabilities pursuant to the terms of the Toys Acquisition
Agreement, the Retail Operations Stock Purchase Agreement and other
agreements with Toys "R" Us and/or PS Stores. See "-- Contingent
Liabilities."
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, until such time as a hedge or
similar arrangement which protects the value of the Toys Common Stock
is in place, 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 (as of January 20, 1995) of at least twice the Reserved
Amount, to secure the payment of Petrie's contingent liabilities.
Pursuant to the terms of this letter agreement, the Liquidating
Trust, as successor to Petrie, is presently required to retain
substantially all of its assets (consisting of, at August 12, 1996,
(i) 5,055,576 shares of Toys Common Stock, including the 3,493,450
shares of Toys Common Stock held in the escrow account, and (ii)
approximately $128 million in cash and cash equivalents).
As of August 12, 1996, the Liquidating Trust's 5,055,576 shares
of Toys Common Stock had a market value of approximately $135.9
million, based upon a closing price per share of 26 , as reported on
the New York Stock Exchange Composite Tape on August 12, 1996.
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
$30 to a low of $201/2. No assurance can be given as to the future
market prices of Toys Common Stock.
As of August 12, 1996, the Liquidating Trust had approximately
$128 million in cash and cash equivalents. The Liquidating Trust
believes that it has sufficient liquid funds available to satisfy the
liabilities of the Liquidating Trust that are likely to occur
(including, without limitation, costs and expenses related to the
administration of the Liquidating Trust such as legal fees,
insurance, accounting fees, salaries, real estate advisory fees,
transfer agent fees and printing and shareholder communication
expenses). To the extent that the Liquidating Trust's liquid funds
are insufficient to satisfy such liabilities, however, the
Liquidating Trust will liquidate some or all of the remaining shares
of Toys Common Stock that it holds. The Liquidating Trustees have
determined not to approve any further distributions of shares of Toys
Common Stock until the status of the Liquidating Trust's contingent
liabilities is clarified. See "-- Contingent Liabilities."
CONTINGENT LIABILITIES
The Liquidating Trust's contingent liabilities primarily include
liabilities relating to (i) guarantees of certain retail store
leases, expiring at various times through 2011, to which Petrie
Retail or an affiliate thereof is a party, 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 fails to perform; (ii) Petrie's agreement with Petrie Retail
to indemnify it for certain liabilities relating to Petrie Retail's
withdrawal from the Multiemployer Plan; and (iii) an ongoing dispute
with the IRS relating to the manner in which Petrie computed the
basis of shares of Toys Common Stock transferred in connection with
the exchange of certain of Petrie's exchangeable subordinated
debentures in Petrie's 1989 fiscal year.
Petrie Retail's Bankruptcy
As previously reported, on October 12, 1995, Petrie Retail filed
a voluntary petition for bankruptcy protection under Chapter 11 of
the Federal Bankruptcy Code. As a result of the bankruptcy filing,
Petrie Retail has failed to perform certain of the Assumed
Obligations, including, but not limited to, Assumed Obligations
relating to store leases to which Petrie Retail or an affiliate
thereof is a party, state taxes, employment agreements and certain
other claims and contractual obligations. Accordingly, the
Liquidating Trust may be required to make payments in respect of
certain of the Assumed Obligations. The Liquidating Trust intends to
file a claim against Petrie Retail in the Bankruptcy Court in respect
of such payments. Additionally, the Liquidating Trust intends to
assert a right of setoff in respect of any such payments against any
claims Petrie Retail and its affiliates may have against Petrie. The
Liquidating Trust is unable to predict the timing or probability of
the collection of these claims against Petrie Retail.
Store Leases. Since filing its petition for bankruptcy
protection, Petrie Retail has closed approximately 550 of the roughly
1600 stores it operated prior to filing the petition, and in
connection with the going-out-of-business sales described below (and
subsequent lease rejections), additional stores are expected to be
closed. Of the 550 closed stores, 385 relate to rejected leases and
the remainder generally have expired or were terminated by mutual
landlord and tenant consent. The Liquidating Trust, as successor to
Petrie, is a guarantor of approximately 48 of the rejected leases,
and its aggregate guarantee liability on those leases is
approximately $18 million, which the Liquidating Trust, as
successor to Petrie, has included in accrued expenses and other
liabilities in the accompanying financial statements at June 30,
1996. Such aggregate guarantee liability has been reduced by
approximately $2 million to take into account settlement agreements
entered into and releases obtained by the Liquidating Trust. The
Liquidating Trust's liability will be further reduced by, among other
things, the extent to which new rent-paying tenants are found for the
closed stores.
On May 7, 1996, Petrie Retail filed a motion with the Bankruptcy
Court to conduct going-out-of-business sales at 226 stores and
indicated, without identifying the relevant leases, that it intended
to close 12 additional stores where the leases have expired or are
scheduled to expire in the near future. Of the 226 stores included in
the May 7 motion, 31 have been terminated by mutual consent of the
landlord and tenant, 16 have been assigned to new tenants and 140
have been rejected, which rejected leases are included in the
analysis above. The Liquidating Trust expects that Petrie Retail
will reject the remainder of the leases in the near future. The
Liquidating Trust, as successor to Petrie, is a guarantor of
approximately seven of the remaining leases. If Petrie Retail were
to close all seven of the stores under such leases, the Liquidating
Trust's aggregate guarantee liability on these leases would be
approximately $4.5 million, which amount has been included in the
Liquidating Trust's accrued expenses and other liabilities at June
30, 1996.
No assurance can be given as to how many additional stores
Petrie Retail will close for which the Liquidating Trust, as
successor to Petrie, has guarantee liability. If Petrie Retail were
to close every store for which the Liquidating Trust, as successor to
Petrie, believes it has liability as a lease guarantor, giving effect
to all the lease guarantee releases executed by landlords and
assuming that no mitigation or defense were successful, the
Liquidating Trust's theoretical exposure relating to such leases,
without giving effect to any present value discount, would be
approximately $92 million (including the $18 million in aggregate
liability relating to the rejected leases and the $4.5 million in
aggregate liability relating to the going-out-of-business sales
described above), with approximately $9.5 million coming due in the
year ending December 31, 1996, approximately $17.5 million due in
1997, approximately $15.5 million due in 1998 and approximately $49.5
million due thereafter. As discussed in Item 1 above, landlords
under leases relating to 146 stores operated by Petrie Retail or an
affiliate thereof have alleged in a complaint that the Liquidating
Trust, as successor to Petrie, has liability as a guarantor of
certain leases notwithstanding Petrie's receipt from these landlords
of releases of guarantees with respect to such leases. Based on the
complaint, such alleged guarantor liability represents approximately
$85 million in lease payments, without giving effect to any present
value discount or rental payments made by Petrie Retail since the
complaint was filed and assuming that all of the 146 stores which are
the subject of these landlords' claims are closed and that the
landlord in each case is unable to mitigate its damages.
Approximately $2 million of this total relates to unreleased
guarantees which have been included in the Liquidating Trust's
previous estimates of its contingent lease liability. To date, 31 of
the 146 leases, representing approximately $17.5 million in lease
payments, based on the plaintiffs' liability estimates and without
giving effect to any present value discount or mitigation, have been
rejected by Petrie Retail. An additional 8 of the 146 leases,
representing approximately $3.5 million in lease payments, based on
the plaintiffs' liability estimates and without giving effect to any
present value discount or mitigation, are the subject of Petrie
Retail's May 7, 1996 motion to conduct going-out-of-business sales at
226 stores. The Liquidating Trust believes it has substantial legal
defenses to these landlords' claims and is vigorously contesting such
claims. Although the Liquidating Trust considers it unlikely, a
decision by a court in favor of these landlords could have a material
adverse effect on the Liquidating Trust's liquidity and financial
condition.
In addition, since Petrie Retail's bankruptcy filing, a dispute
has arisen between the Liquidating Trust, on the one hand, and Petrie
Retail and its affiliates, on the other, as to whether the
Liquidating Trust, as successor to Petrie, or Petrie Retail and its
affiliates is responsible as guarantor of 43 additional leases. The
maximum theoretical exposure relating to such leases, based on the
same assumptions set forth in the preceding paragraph and without
giving effect to any present value discount, would be approximately
$30 million, with approximately $2 million remaining due in the year
ending December 31, 1996, approximately $5 million due in 1997,
approximately $5 million due in 1998 and approximately $18 million
due thereafter. To date, Petrie Retail has rejected 11 of such
leases, representing approximately $7.5 million in potential liability.
Such potential liability has been reduced by approximately $1 million
to take into account the settlement agreements entered into and
releases obtained by the Liquidating Trust. Two of the 43 leases,
representing approximately $1.5 million in potential liability, were
included in Petrie Retail's May 7, 1996 motion to conduct going-out-
of-business sales at 226 stores and are leases which the Liquidating
Trust expects that Petrie Retail will reject in the near future. The
Liquidating Trust has included $9 million in respect of the
aforementioned disputed leases in accrued expenses and other
liabilities at June 30, 1996.
The Liquidating Trust's lease exposure calculations reflect the
estimated sum of all base rent and additional rent (such as taxes and
common area charges) due under a lease through the end of the current
lease term, but do not reflect any "percentage" rents, potential
penalties, interest or 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 the 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. On October 23, 1995, Petrie Retail
notified two former executives of Petrie (one of whom is a current
director of Petrie) and the current President and Chief Executive
Officer of Petrie (who is also a current director 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 retail operations. On
April 25, 1996, the Liquidating Trust, while preserving its rights
against Petrie Retail, entered into settlement agreements with one of
the former executives and the current President and Chief Executive
Officer of Petrie. Pursuant to the settlement agreements, the
Liquidating Trust agreed to pay each substantially all the amounts
due under their respective agreements with Petrie. The total cost of
these settlements to the Liquidating Trust was approximately $2.9
million (accrued for at January 22, 1996) of which approximately $2.0
million has been paid.
State Taxes. On January 12, 1996, Petrie received a notice of
final determination from the New Jersey Division of Taxation of a
liability for New Jersey corporate income tax in the aggregate amount
(including interest) of approximately $3.1 million. The liability,
which related to Petrie's 1987, 1989, 1990, 1991, 1992 and 1993 tax
years, was assumed by Petrie Retail in connection with the Sale.
Additionally, the Liquidating Trust, as successor to Petrie, was
assessed approximately $270,000 (excluding interest) in sales and use
taxes for the years 1989 through 1995. In May 1996, the Liquidating
Trust paid the New Jersey Division of Taxation approximately $1.2
million in full settlement of its liability for New Jersey corporate
income tax and sales and use taxes for the respective preiods
described above in connection with New Jersey's tax amnesty program,
which provided for interest to be forgiven and future penalties to be
avoided upon receipt of payment for taxes owed.
Multiemployer Plan
Due to underfunding of the Multiemployer Plan, Petrie Retail and
its affiliates incurred withdrawal liability under the Employee
Retirement Income Security Act of 1974, as amended, upon their
withdrawal from the Multiemployer Plan, effective January 31, 1995.
By letter dated May 30, 1996, the Multiemployer Plan assessed
withdrawal liability against Petrie Retail in the amount of
approximately $9.4 million plus interest, to be paid in quarterly
installments of approximately $317,000 commencing August 1, 1996
through and including August 1, 2006, with a final payment of
approximately $18,000 due on November 1, 2006. In addition, the
Multiemployer Plan assessed liability against Petrie Retail of
approximately $2 million attributable to the Multiemployer Plan's
failure to meet certain Internal Revenue Code minimum funding
standards, which amount was payable on August 1, 1996. To the
knowledge of the Liquidating Trust, as of August 12, 1996, Petrie
Retail has not yet paid any amounts for its liabilities in connection
with the Multiemployer Plan. In the event of a mass withdrawal by
contributing employers from the Multiemployer Plan, the withdrawal
liability allocated to Petrie Retail and its affiliates may be
higher. Pursuant to the Retail Operations Stock Purchase Agreement,
Petrie Retail and its affiliates are responsible for the first $10
million in withdrawal and related liabilities, with the next $50
million of such liabilities allocated 75 percent to the Liquidating
Trust, as successor to Petrie, and 25 percent to Petrie Retail and
its affiliates. It is unclear what effect, if any, Petrie Retail's
bankruptcy filing may have upon the timing and amount of any payments
the Liquidating Trust may be required to make under the agreement
with respect to the Multiemployer Plan, but in no event does the
Liquidating Trust believe that its maximum contractual liability will
be increased as a result of Petrie Retail's bankruptcy filing. See
"-- Petrie Retail's Bankruptcy."
IRS Tax Dispute
In connection with an audit being conducted by the IRS, the
agent examining Petrie's federal tax return for its fiscal year ended
January 28, 1989 raised an issue regarding the manner pursuant to
which Petrie computed the basis of its Toys Common Stock transferred
in connection with the exchange of certain of its exchangeable
subordinated debentures. The examining agent has proposed an
adjustment to Petrie's taxable income which would result in an
additional federal tax liability, including interest, of
approximately $53 million. The Liquidating Trust, as successor to
Petrie, is contesting the agent's proposed adjustment in
administrative proceedings. If the Liquidating Trust and the IRS are
unable to resolve this matter in administrative proceedings, the
Liquidating Trust intends to litigate its position. The Liquidating
Trust believes that the agent's proposed adjustment is incorrect as a
matter of law. Depending on how and when this issue is resolved with
the IRS, there also may be due state and local taxes (and interest
thereon).
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 status of the Liquidating
Trust's contingent liabilities contained above in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the Notes to Unaudited 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 and liquidity:
(1) A decision by Petrie Retail to close additional stores for
which the Liquidating Trust, as successor to Petrie, has liability as
a guarantor;
(2) A decision by Petrie Retail to liquidate while in Chapter
11 or the conversion of Petrie Retail's bankruptcy case from Chapter
11 to a case under Chapter 7;
(3) Other actions by Petrie Retail 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 as the primary obligor;
(4) 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 thereunder of
releases of guarantees with respect to such leases;
(5) An unfavorable resolution of the Liquidating Trust's
dispute with the IRS with respect to the manner in which Petrie
computed the basis of its Toys Common Stock transferred in its fiscal
year ended January 28, 1989 in connection with the exchange of
certain of its exchangeable subordinated debentures;
(6) A material decline in the price per share of Toys Common
Stock;
(7) An adverse material change in general economic conditions
and the interest rate environment;
(8) The effects of, and changes in, laws and regulations and
other activities of federal and local governments, agencies and
similar organizations; and
(9) 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.
The description of legal proceedings involving
the Liquidating Trust provided in Items 1 and 2 of
Part I is herein incorporated by reference as though
fully set forth herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) LIST OF EXHIBITS
Exhibit 27 -- Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
PETRIE STORES LIQUIDATING TRUST
Dated: August 13, 1996 By /s/ STEPHANIE R. JOSEPH
_____________________________
Stephanie R. Joseph
Manager and Chief Executive Officer
Dated: August 13, 1996 By /s/ H. BARTLETT BROWN
_______________________________
H. Bartlett Brown
Assistant Manager, Chief Financial
Officer and Principal Accounting
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
PETRIE STORES LIQUIDATING TRUST
FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from
the Liquidating Trust's statement of net assets in liquidation at
June 30, 1996 and the Liquidating Trust's statements of changes in
net assets in liquidation for the period from January 22, 1996 to
June 30, 1996, 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> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 128,123
<SECURITIES> 144,084
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 272,207
<CURRENT-LIABILITIES> 47,137
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 225,070
<TOTAL-LIABILITY-AND-EQUITY> 272,207
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,791
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,476
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
