CITY INVESTING CO LIQUIDATING TRUST
10-Q, 1996-07-23
FINANCE SERVICES
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<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 June 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 June 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
                  SECOND QUARTER AND SIX MONTHS ENDED JUNE 30
 
<TABLE>
<CAPTION>
 
<S>                                             <C>          <C>        <C>           <C>
 
                                                     SECOND QUARTER                 SIX MONTHS
 
 
(IN THOUSANDS, EXCEPT PER UNIT DATA)                 1996         1995           1996          1995
 
- -------------------------------------------------------------------------------------------------------
 
Gains (losses) on dispositions of assets, net     $    23      $  (301)     $      17      $   (370)
Interest, dividend and other income                   841          483          2,517           941
 
- -------------------------------------------------------------------------------------------------------
 
Total income                                          864          182          2,534           571
Administrative expenses                                86          158            166           220
 
- -------------------------------------------------------------------------------------------------------

NET INCOME                                        $   778      $    24      $   2,368      $    351
 
- -------------------------------------------------------------------------------------------------------

NET INCOME PER UNIT                               $  0.02      $     -      $    0.06      $   0.01
 
- -------------------------------------------------------------------------------------------------------

OUTSTANDING UNITS                                  38,979       38,979         38,979        38,979
- -------------------------------------------------------------------------------------------------------  

 
                                            BALANCE SHEETS
 
 
                                                                             JUNE 30,      DECEMBER 31,
 
 
(IN THOUSANDS)                                                                   1996          1995
 
- -------------------------------------------------------------------------------------------------------

ASSETS
Cash and cash equivalents                                                   $     333      $    217
Investment securities                                                          55,304        53,078 
Restricted funds                                                                4,206         4,213
Investments                                                                       609           609
Real estate and mortgage receivable                                             4,708         4,675
 
- -------------------------------------------------------------------------------------------------------
 
TOTAL ASSETS                                                                $  65,160      $ 62,792

- -------------------------------------------------------------------------------------------------------

LIABILITIES AND TRUST EQUITY
Accounts payable                                                            $     235      $    235
Trust equity                                                                   64,925        62,557
 
- -------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND TRUST EQUITY                                          $  65,160      $ 62,792
 
- ------------------------------------------------------------------------------------------------------- 

 
 
See accompanying notes to financial statements.
 
 
</TABLE>
 
 
<PAGE>
                    CITY INVESTING COMPANY LIQUIDATING TRUST
                            STATEMENTS OF CASH FLOWS
                            SIX MONTHS ENDED JUNE 30
 
<TABLE>
<CAPTION>
 
<S>                                                     <C>                <C>
 
(IN THOUSANDS)                                                1996               1995
 
- ---------------------------------------------------------------------------------------
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
Net income                                                $  2,368           $    351
Adjustments to reconcile net income to
net cash used for operating activities:
Gain on sale of real estate                                    (92)                 -
Loss on sale of investment in PCA                                -                200
Interest income earned on investment in U.S. Treasuries     (2,250)              (717)
 
- ---------------------------------------------------------------------------------------

Net cash provided by (used for) operating activities            26               (166)
 
- ---------------------------------------------------------------------------------------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of real estate                               59                  -
Proceeds from sale of investment in PCA                          -             27,821
Maturities of investment securities                         42,142             27,843
Purchases of investment securities                         (42,118)           (54,963)
Restricted funds, net                                            7                (89)
Other, net                                                       -               (206)
 
- ---------------------------------------------------------------------------------------

Net cash provided by investing activities                       90                406
 
- ---------------------------------------------------------------------------------------
 
Net increase in cash and cash equivalents                      116                240
Cash and cash equivalents at beginning of year                 217                108
 
- ---------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                $    333           $    348
 
- ---------------------------------------------------------------------------------------

 
                        STATEMENTS OF CHANGES IN TRUST EQUITY
                               SIX MONTHS ENDED JUNE 30
 
 
(IN THOUSANDS)                                                1996               1995
 
- ---------------------------------------------------------------------------------------

Balance at December 31                                    $ 62,557           $ 62,105
Net income                                                   2,368                351
 
- ---------------------------------------------------------------------------------------

BALANCE AT JUNE 30                                        $ 64,925           $ 62,456
 
- ---------------------------------------------------------------------------------------
 
 
 
 
See accompanying notes to financial statements.
 
 
</TABLE>
 
 

 
<PAGE>
                    CITY INVESTING COMPANY LIQUIDATING TRUST
                         NOTES TO FINANCIAL STATEMENTS
 
NOTE 1 - ORGANIZATION
 
The June 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>
 
                             
                             JUNE 30, 1996                        DECEMBER 31, 1995
                             -------------                        -----------------

 
                    CARRYING                  FAIR               CARRYING                   FAIR
(IN THOUSANDS)         VALUE       COST      VALUE                  VALUE       COST       VALUE
 
- ------------------------------------------------------------------------------------------------
 
U.S. Treasuries
maturing within
one year             $55,304    $55,304    $56,135                $53,078    $53,078     $55,085
 
- ------------------------------------------------------------------------------------------------

</TABLE>
 
The gross unrealized gains on investment securities, at June 30, 1996 and
December 31, 1995, are $831,000 and $2,007,000.
 
<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>
 
                                            JUNE 30,             DECEMBER 31,
(IN THOUSANDS)                                  1996                     1995
 
- ------------------------------------------------------------------------------

City Investing Company Liquidating Trust
v. Continental Casualty                    $   3,653              $     3,391   
Tapken v. Brown, et al.                          550                      550
Mortgage matured, May 1996                         -                      268  
Other                                              3                        4
 
- ------------------------------------------------------------------------------

Total restricted funds                     $   4,206              $     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>
 
                                            JUNE 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 June 30, 1996 and
December 31, 1995, the fair market value of the Cayman stock, based on quoted
market prices, was $289,000 and $96,000.
 
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, and includes a mortgage of $79,822 received on the sale of
the two parcels sold in 1996. The Trust realized a long term gain of $91,714 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.
 
 
<PAGE>
                    CITY INVESTING COMPANY LIQUIDATING TRUST
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
 
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.
 
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
 
The Trust recorded net income of $778,000 ($0.02 per unit) in the second quarter
of 1996 and net income of $2,368,000 ($0.06 per unit) in the six-month period
ended June 30, 1996, compared with net income of $24,000 ($0.00 per unit) and
net income of $351,000 ($0.01 per unit) in the corresponding 1995 periods. 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 reported gains (losses) on dispositions of assets, net, reflect gains of
$23,000 and $17,000 in the second quarter and six- month periods of 1996,
respectively, as compared to losses of $301,000 and $370,000 in the
corresponding 1995 periods. The 1996 periods include a long term gain of $91,714
on disposition of assets as a result of the sale of approximately two per cent
of the Trust's real estate. The 1995 periods include $200,000 of losses on
dispositions of assets as a result of the Trust's sale of its limited
partnership interest in PACE/City Associates, L.P. ("PCA"). The remaining losses
in the 1996 periods of $69,000 and $75,000 and in the 1995 periods
of $101,000 and $170,000 principally consist of legal fees incurred in
connection with litigation. Interest, dividend and other income, principally
consisting of interest earned on the investment of cash equivalents and
investment securities, was $841,000 and $2,517,000 in the second quarter and
six months ended June 30, 1996, and $483,000 and $941,000 in the
corresponding 1995 periods. The increase in the 1996 period was due to the
timing of the recognition of interest income, the increase in cash attributable
to the Trust's sale of its interest in PCA and an increase in yield on
investment securities compared to the 1995 periods. Administrative expenses were
$86,000 and $166,000 for the second quarter and six months of 1996,
compared with $158,000 and $220,000 for the comparable 1995
periods. The primary reason that 1996 administrative expenses were less than
1995 is that there was a reduction in legal costs and registrar fees as well as
costs of administration of the Trust.
 
At June 30, 1996, the Trust had cash and cash equivalents, investment securities
and restricted funds of $59,843,000. The Trustees believe that such cash
resources and investment securities are sufficient to meet all anticipated
liquidity requirements.
<PAGE>
                   CITY INVESTMENT COMPANY LIQUIDATING TRUST
 
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 and
awaits argument and disposition by the Court.
 
City Investing Company Liquidating Trust v. Continental Casualty Co. On March
27, 1996, the United States Court of Appeals for the Eleventh Circuit reversed
the District Court's holding that the Florida Department of Revenue ("DOR")
claim against General Development Corporation ("GDC") was entitled to priority
under the bankruptcy law. The Trust has been advised that, had that decision
been sustained, the bankrupt estate of GDC retains sufficient assets to satisfy
priority claims and a substantial amount of the funds currently held in escrow
by fiduciary institutions would have been returned to the Trust. If the DOR
claim is not entitled to priority, some part or all of the escrowed amounts will
be required to be paid by the escrow agents to the DOR. Counsel for the Trust
has filed a petition seeking review of the Eleventh Circuit decision by the
United States Supreme Court.
 
 
ITEM 2. CHANGES IN SECURITIES
 
Trust Units of Beneficial Interest. On June 27, 1996, the Trustees amended the
Trust agreement to extend the existence of the Trust (and thereby the existence
of the Trust Units) until the earlier of (a) the complete distribution of the
Trust Estate or (b) September 25, 1998, unless an earlier termination is
required by the applicable laws of the State of Delaware or by the action of the
Beneficiaries as provided in Section 4.2 of the Trust Agreement or a later
termination is required by the Trustees pursuant to Section 6.2 (q) of the Trust
Agreement.
 
ITEM 5. OTHER INFORMATION
 
None.
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
(a) Exhibits:
    1. Action by Trustees under City Investing Company Liquidating Trust
   Agreement dated June 27, 1996.
 
    2. 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 June 30, 1996.
 
 
<PAGE>
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: July 15, 1996                            By: LESTER J. MANTELL
                                               Trustee
 

<PAGE>
                                   EXHIBIT 1
 
 
                    ACTION OF TRUSTEES UNDER CITY INVESTING
                      COMPANY LIQUIDATING TRUST AGREEMENT
 
 
          The undersigned, Trustees under City Investing Company Liquidating
Trust Agreement (the "Trust Agreement") dated September 25, 1985, by and between
City Investing Company and the undersigned, hereby take the following action
pursuant to Section 6.2 (q) of the Trust Agreement:
          RESOLVED that, because of the Trust's inability to dispose of part of
the Trust Estate in a commercially reasonable manner prior to September 25,
1996, the existence of the Trust is hereby extended until the earlier of (a) the
complete distribution of the Trust Estate or (b) September 25, 1998, unless an
earlier termination is required by the applicable laws of the State of Delaware
or by the action of the Beneficiaries as provided in Section 4.2 of the Trust
Agreement or a later termination is required by the Trustees pursuant to Section
6.2 (q) of the Trust Agreement.
 
 
          IN WITNESS WHEREOF, the undersigned have caused this action to be
taken as of the 27th day of June 1996.
 
 
 
                                         Geo. T. Scharffenberger
                                         Trustee
 
 
                                         Eben W. Pyne
                                         Trustee
 
 
                                         Lester J. Mantell
                                         Trustee
 
 
<PAGE>
                                   EXHIBIT 2

<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 June
30, 1996 and is qualified in its entirety by reference to such financial
statements.
 
<MULTIPLIER>1,000

       

<S>                          <C>

<PERIOD-TYPE>                       3-MOS
 
 
<FISCAL-YEAR-END>             DEC-31-1996
 
 
<PERIOD-END>                  JUN-30-1996
 
 
<CASH>                                333
 
 
<SECURITIES>                       55,304
 
 
<RECEIVABLES>                           0
 
 
<ALLOWANCES>                            0
 
 
<INVENTORY>                             0
 
 
<CURRENT-ASSETS>                        0
 
 
<PP&E>                                  0
 
 
<DEPRECIATION>                          0
 
 
<TOTAL-ASSETS>                     65,160
 
 
<CURRENT-LIABILITIES>                 235
 
 
<BONDS>                                 0
 
 
<COMMON>                                0
 
 
                   0
 
 
                             0
 
 
<OTHER-SE>                         64,925
 
 
<TOTAL-LIABILITY-AND-EQUITY>       65,160
 
 
<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>                 2,368
 
 
<DISCONTINUED>                          0
 
 
<EXTRAORDINARY>                         0
 
 
<CHANGES>                               0
 
 
<NET-INCOME>                        2,368
 
 
<EPS-PRIMARY>                           0
 
 
<EPS-DILUTED>                           0
 
 
        

</TABLE>


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