<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ______ to ______
Commission File Number 0-13881
CITY INVESTING COMPANY LIQUIDATING TRUST
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 13-6859211
(State of organization) (I.R.S. Employer Identification No.)
99 UNIVERSITY PLACE, 7TH FLOOR 10003-4528
NEW YORK, NEW YORK (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (212) 473-1918
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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes __X___ No ______
At September 30, 1996 there were 38,979,372 Trust Units of Beneficial Interest
outstanding.
<PAGE>
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CITY INVESTING COMPANY LIQUIDATING TRUST
STATEMENTS OF INCOME
THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
THIRD QUARTER NINE MONTHS
(IN THOUSANDS, EXCEPT PER UNIT DATA) 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------
Losses on dispositions of assets, net $ (173) $ (191) $ (156 ) $ (561)
Interest, dividend and other income 885 97 3,402 1,038
- ----------------------------------------------------------------------------------------------------
Total income (loss) 712 (94) 3,246 477
Administrative expenses 60 73 226 293
- ----------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 652 $ (167) $ 3,020 $ 184
- ----------------------------------------------------------------------------------------------------
NET INCOME PER UNIT $ 0.02 $ - $ 0.08 $ -
- ----------------------------------------------------------------------------------------------------
OUTSTANDING UNITS 38,979 38,979 38,979 38,979
- ----------------------------------------------------------------------------------------------------
BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS) 1996 1995
- ----------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 114 $ 217
Investment securities 55,974 53,078
Restricted funds 4,252 4,213
Investments 609 609
Real estate 4,628 4,675
- ----------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 65,577 $ 62,792
- ----------------------------------------------------------------------------------------------------
LIABILITIES AND TRUST EQUITY
Accounts payable $ - $ 235
Trust equity 65,577 62,557
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND TRUST EQUITY $ 65,577 $ 62,792
- ----------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CITY INVESTING COMPANY LIQUIDATING TRUST
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
<S> <C> <C>
(IN THOUSANDS) 1996 1995
- ----------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,020 $ 184
Adjustments to reconcile net income to
net cash used for operating activities:
Gain on sale of real estate (82) -
Loss on sale of investment in PACE/City Associates, L.P. - 200
Interest income earned on investment in U.S. Treasuries (3,035) (717)
- ----------------------------------------------------------------------------------------------
Net cash used for operating activities (97) (333)
- ----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of real estate 129 -
Proceeds from sale of investment in PACE/City Associates, L.P. - 27,821
Maturities of U.S. Treasuries 56,779 27,843
Purchases of U.S. Treasuries (56,929) (54,963)
Restricted funds, net (39) (139)
Other, net 54 (206)
- ----------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities (6) 356
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (103) 23
Cash and cash equivalents at beginning of year 217 108
- ----------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 114 $ 131
- ----------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN TRUST EQUITY
NINE MONTHS ENDED SEPTEMBER 30
(IN THOUSANDS) 1996 1995
- ----------------------------------------------------------------------------------------------
Balance at December 31 $ 62,557 $ 62,105
Net income 3,020 184
- ----------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30 $ 65,577 $ 62,289
- ----------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CITY INVESTING COMPANY LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
The September 30, 1996 financial statements for the City Investing Company
Liquidating Trust (the "Trust") are unaudited and subject to year-end
adjustments. In the opinion of the Trustees, the interim financial statements
reflect all adjustments necessary for a fair presentation of the financial
position and income and expenses of the Trust as prepared on a Federal income
tax basis. Results for interim periods are not necessarily indicative of results
for the full year.
NOTE 2 - BASIS OF ACCOUNTING
The accompanying financial statements have been prepared on the basis of
accounting used for Federal income tax purposes. Accordingly, certain revenue
and the related assets are recognized when received rather than when earned; and
certain expenses are recognized when paid rather than when the obligation is
incurred.
NOTE 3 - LOSSES ON DISPOSITIONS OF ASSETS
Losses on dispositions of assets, net, include settlement costs and legal fees
attributable to the disposition of assets incurred in connection with the
defense of litigation against the Trust.
NOTE 4 - TRUST AGREEMENT
In accordance with the Trust Agreement, the Trust has assumed the obligation to
make payments, where required, to discharge all litigation and other contingent
liabilities of City Investing Company ("City") which existed on September 25,
1985.
NOTE 5 - INVESTMENT SECURITIES
Investment securities consist of U.S. Treasuries with maturities of less than
one year and are carried at cost. Investment securities consist of the
following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
CARRYING FAIR CARRYING FAIR
(IN THOUSANDS) VALUE COST VALUE VALUE COST VALUE
- ------------------------------------------------------------------------------------------------
U.S. Treasuries
maturing within
one year $ 55,974 $55,974 $56,989 $ 53,078 $53,078 $ 55,085
- ------------------------------------------------------------------------------------------------
</TABLE>
The gross unrealized gains on investment securities, at September 30, 1996 and
December 31, 1995, are $1,015,000 and $2,007,000, respectively.
<PAGE>
CITY INVESTING COMPANY LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - RESTRICTED FUNDS
Restricted funds represent funds held in escrow in connection with the
following:
<TABLE>
<CAPTION>
<S> <C> <C>
SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
City Investing Company Liquidating Trust
v. Continental Casualty $ 3,700 $ 3,391
Tapken v. Brown, et al. 550 550
Mortgage matured, May 1996 - 268
Other 2 4
- --------------------------------------------------------------------------------
Total restricted funds $ 4,252 $ 4,213
- --------------------------------------------------------------------------------
</TABLE>
See Part II, Item 1., "Legal Proceedings," for further information.
NOTE 7 - INVESTMENTS
Investments are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Cayman Resources Corporation $ 27 $ 27
Other investments 582 582
- --------------------------------------------------------------------------------
Total investments $ 609 $ 609
- --------------------------------------------------------------------------------
</TABLE>
The Trust holds 3,108,105 shares of Cayman Resources Corporation ("Cayman")
common stock, which are carried at their tax basis. At September 30, 1996 and
December 31, 1995, the fair market value of the Cayman stock, based on quoted
market prices, was $155,000 and $96,000, respectively.
NOTE 8 - REAL ESTATE
Prior to January 2, 1990, the Trust held an undivided interest in a note
received from Texas City Investment Company ("Texas City") in connection with a
sale of land located in Galveston County, Texas on July 22, 1983. Texas City
failed to fully pay the note in accordance with its terms. On January 2, 1990,
the beneficial owners of the note (including the Trust) foreclosed on the
property securing the note and the Trust now holds an undivided interest in the
property. The Trust's interest in the property is classified as real estate in
the accompanying financial statements and valued at the January 2, 1990 fair
market value of $4,675,000, less $46,658, the carrying value of two parcels sold
on April 15, 1996. The Trust realized a long term gain of $81,390 on the April
15, 1996 sale of approximately two per cent of the real estate.
NOTE 9 - CONTINGENT LIABILITIES
In accordance with the Trust Agreement, the Trust has assumed the obligation to
make payments, where required, to discharge all litigation and other contingent
liabilities of City which existed at September 25, 1985. The Trust may have a
contingent liability with respect to certain issues raised by the Internal
Revenue Service upon audit of tax returns of City Investing Company filed with
respect to periods ending on or before September 25, 1985. These issues, if
resolved unfavorably to City, would result in a substantial liability. As other
parties are primarily and jointly responsible for this contingent liability, the
Trust is unable to estimate the ultimate cost, if any, of its exposure. The
Trust also remains subject to possible claims by the United States Environmental
Protection Agency and other third parties.
<PAGE>
CITY INVESTING COMPANY LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 - DIVIDEND RESTRICTIONS
The existence of the contingent liabilities referred to in Note 9 may affect the
timing of future distributions of Trust assets. In connection with the
proceeding entitled Rolo and Tenerelli v. City Investing Company Liquidating
Trust, et al., the Trust is unable to make any dividend payments or liquidating
distributions without further judicial action.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
It is difficult to compare amounts in comparable periods, as the financial
statements of the Trust are prepared on the basis of accounting used for Federal
income tax purposes; that is, amounts are reflected in the financial statements
when amounts are received or paid. The Trust recorded net income of $652,000
($0.02 per unit) in the third quarter of 1996 and net income of $3,020,000
($0.08 per unit) in the nine-month period ended September 30, 1996, compared
with a net loss of $167,000 ($0.00 per unit) and a net income of $184,000 ($0.00
per unit) in the corresponding 1995 periods. Interest, dividend and other
income, principally consisting of interest earned on the investment of cash
equivalents and investment securities, was $885,000 and $3,402,000 in the third
quarter and nine months ended September 30, 1996, and $97,000 and $1,038,000 in
the corresponding 1995 periods. The primary reasons for the increase in net
income and income from investment securities for the third quarter and
nine-month periods is that there were no maturities of Treasury Bills in the
third quarter of 1995 and the approximately $28 million proceeds of the sale of
PACE/City Associates, L.P. ("PCA") did not yield income until the fourth quarter
of 1995. Administrative expenses were $60,000 and $226,000 for the third quarter
and nine months of 1996, compared with $73,000 and $293,000 for the comparable
1995 periods. The primary reason that 1996 administrative expenses were less
than 1995 is that there was a reduction of legal costs, registrar fees, and
costs of administration of the Trust.
At September 30, 1996, the Trust had cash and cash equivalents, investment
securities and restricted funds of $60,340,000. The Trustees believe that such
cash resources and investment securities are sufficient to meet all anticipated
liquidity requirements.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information contained under Legal Proceedings in the Trust's Annual Report
on Form 10-K for the year ended December 31, 1995 is incorporated by reference
herein. Except as set forth below, there have been no material developments in
such legal proceedings subsequent to the date of that information.
Rolo and Tenerelli v. City Investing Company Liquidating Trust, et al.
Plaintiffs have appealed to the United States Court of Appeals for the Third
Circuit the District Court's dismissal of their Amended Complaint and denial of
leave to file a further Amended Complaint. The appeal has been briefed, argued
and awaits disposition by the Court.
City Investing Company Liquidating Trust v. Continental Casualty Co. On October
7, 1996, the United States Supreme Court denied the Trust's petition for
certiorari seeking review of the decision of the Court of Appeals for the
Eleventh Circuit holding that the Florida Department of Revenue ("DOR") claim
against General Development Corporation ("GDC") was not entitled to priority in
the GDC bankruptcy. As a result, a portion of the funds previously deposited by
the Trust in escrow to guarantee Continental Casualty Co. against liability with
respect to certain GDC development obligations may be required to be paid over
to the DOR. The amount to be paid over, if any, is currently the subject of
negotiation between the Trust's counsel and the DOR.
Marina Pacifica: Environmental Protection Agency Claim. Marina Pacifica, a
California limited partnership whose general partner was a former subsidiary of
City, was notified on November 4, 1987, by the United States Environmental
Protection Agency (the "EPA"), that it is deemed a potentially responsible party
("PRP") with respect to the Operating Industries, Inc. Superfund Site (the
"Site") in Monterey Park, California. The Site, a landfill for municipal and
industrial waste, was included on the National Priorities List in May 1986.
Marina Pacifica was in the business of developing and selling
<PAGE>
condominiums. Development of one construction site required the relocation of
six oil wells. Drilling muds generated during the relocation activities
allegedly were disposed of at the Site. The EPA has documented the release or
threatened release of hazardous substances at the Site and has taken actions to
control the release of these substances at the Site. The EPA identified three
initial stages of remedial action for the Site, the Records of Decision for
which were signed in July 1987, November 1987, September 1988 and amended in
September 1990, respectively. The EPA has estimated the aggregate cost of these
stages of remediation at $287 million. In July 1996, the EPA solicited public
comments on proposed remedial measures to provide final cleanup of the Site
which it estimates will cost an additional $115 million. EPA expects to issue a
Record of Decision by the end of 1996 to select the final remedy for the Site.
In May 1989, a settlement was reached between the EPA and a group of PRPs to
conduct remedial activities for the first two stages and to pay state and
federal response costs incurred up to June 1, 1988. At that time, the EPA listed
Marina Pacifica as 53rd of 181 separate PRPs identified by the EPA in terms of
volume of waste disposed of at the Site. The EPA has since entered into a
subsequent settlement with additional PRPs for the same matter. Counsel for
Marina Pacifica notified the EPA that Marina Pacifica had been dissolved and
that it would not participate in the settlements.
In September 1990, the EPA sent a special notice letter to all PRPs, including
Marina Pacifica, demanding payment of the total costs incurred by the government
since June 1, 1988, which the EPA estimated were at least $15.3 million. The EPA
also requested a good faith offer to perform or pay for the remedy selected for
the third remedial stage. The EPA included an updated list of 269 PRPs, of which
Marina Pacifica appeared 57th. Marina Pacifica did not make a counter offer.
Counsel has advised that, based on its volumetric share and other material
factors, actual payments, if any, required of Marina Pacifica would be a small
fraction of the total costs of the remediation effort.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
1. Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
The Registrant was not required to file a Current Report on Form 8-K during the
quarter ended September 30, 1996.
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.
CITY INVESTING COMPANY LIQUIDATING TRUST
Date: November 8, 1996
By: __________________________________________
Lester J. Mantell, Trustee
<PAGE>
EXHIBIT 1
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
This schedule contains summary financial information extracted from the
Financial Statements contained in Item 1 of Form 10-Q for the period ended
September 30, 1996 and is qualified in its entirety by reference to such
financial statements.
<CAPTION>
<S> <C>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 114
<SECURITIES> 55,974
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 65,577
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 65,577
<TOTAL-LIABILITY-AND-EQUITY> 65,577
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,020
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,020
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
