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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, 1998
[ ] 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)
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)
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
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At June 30, 1998 there were 38,979,372 Trust Units of Beneficial Interest
outstanding.
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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>
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SECOND QUARTER SIX MONTHS
($ IN THOUSANDS, EXCEPT PER UNIT DATA) 1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Gains (losses) on dispositions of assets, net ($23) ($2) ($88) ($96)
Interest, dividend and other income 935 891 1,802 1,395
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Total income 912 889 1,714 1,299
Administrative expenses 49 61 142 133
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NET INCOME $863 $828 $1,572 $1,166
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NET INCOME PER UNIT $0.02 $0.02 $0.04 $ 0.03
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OUTSTANDING UNITS 38,979 38,979 38,979 38,979
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</TABLE>
BALANCE SHEETS
<TABLE>
<CAPTION>
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JUNE 30, DECEMBER 31,
($ IN THOUSANDS) 1998 1997
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<S> <C> <C>
ASSETS
Cash and cash equivalents $82 $243
U.S. Treasury Bills 63,239 58,541
Restricted funds 3 2,968
Investments 609 609
Real estate and mortgage receivable (net of unrealized gain) 4,628 4,628
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TOTAL ASSETS $68,561 $66,989
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LIABILITIES AND TRUST EQUITY
Trust equity $68,561 $66,989
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TOTAL LIABILITIES AND TRUST EQUITY $68,561 $66,989
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</TABLE>
See accompanying notes to financial statements.
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CITY INVESTING COMPANY LIQUIDATING TRUST
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30
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<CAPTION>
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($ IN THOUSANDS) 1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,572 $1,166
Adjustments to reconcile net income to
net cash used for operating activities:
Interest income earned on investment in U.S. Treasuries (1,610) (850)
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Net cash (used for) provided by operating activities (38) 316
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of real estate 0 0
Maturities of investment securities 31,361 29,140
Purchases of investment securities (34,449) (29,052)
Restricted funds, net 2,965 (260)
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Net cash used for investing activities (123) (172)
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Net (decrease) increase in cash and cash equivalents (161) 144
Cash and cash equivalents at beginning of year 243 78
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $82 $222
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</TABLE>
STATEMENTS OF CHANGES IN TRUST EQUITY
SIX MONTHS ENDED JUNE 30
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<CAPTION>
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($ IN THOUSANDS) 1998 1997
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<S> <C> <C>
Balance at December 31 $66,989 $65,504
Net income 1,572 1,166
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BALANCE AT JUNE 30 $68,561 $66,670
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</TABLE>
See accompanying notes to financial statements.
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CITY INVESTING COMPANY LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
NOTE 1 - ORGANIZATION
The June 30, 1998 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; and assets are reflected at their tax basis.
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:
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JUNE 30, 1998 DECEMBER 31, 1997
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CARRYING FAIR CARRYING FAIR
VALUE COST VALUE VALUE COST VALUE
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<S> <C> <C> <C> <C> <C> <C>
U.S. Treasuries
maturing within
one year $63,239 $63,239 $64,914 $58,541 $58,541 $60,182
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</TABLE>
The gross unrealized gains on investment securities at June 30, 1998 and
December 31, 1997, are $1,675 and $1,641, respectively.
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CITY INVESTING COMPANY LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
NOTE 6 - RESTRICTED FUNDS
Restricted funds represent funds held in escrow in connection with the
following:
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<CAPTION>
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JUNE 30, DECEMBER 31,
1998 1997
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<S> <C> <C>
City Investing Company Liquidating Trust
v. Continental Casualty $0 $2,965
Other 3 3
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Total restricted funds $3 $2,968
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</TABLE>
See Part II, Item 1., "Legal Proceedings," for further information.
NOTE 7 - INVESTMENTS
Investments are as follows:
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<CAPTION>
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JUNE 30, DECEMBER 31,
1998 1997
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<S> <C> <C>
Oklahoma Energy Corp $27 $27
Global Bancorporation 582 582
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Total investments $609 $609
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</TABLE>
The Trust holds 3,108,105 shares of Oklahoma Energy Corp., previously known as
Cayman Resources Corporation common stock, which are carried at their tax basis.
At June 30, 1998 and December 31, 1997, the fair market value of the Oklahoma
Energy stock, based on quoted market prices, was $497 and $137, respectively.
The Trust holds 10,000 shares of Global Bancorporation which are carried at
their tax basis. It is currently projected that a final liquidating distribution
will be received by the Trust in respect of those Global Bancorporation shares
in the amount of $20.
NOTE 8 - REAL ESTATE
Prior to January 2, 1990, the Trust held an undivided interest in a July 22,
1983 note received from Texas City Investment Company ("Texas City") in
connection with a sale of land located in Galveston County, Texas. 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 . The Trust now holds an undivided interest in the
property classified as real estate, which is valued at the January 2, 1990 fair
market value, and a mortgage receivable. The Trust realized a long term gain of
$81 on two 1996 sales of approximately two per cent of the real estate. The
Trust has projected that later in 1998, a long term gain of $22 will be realized
when the proceeds are collected on a sale of approximately one-half of one per
cent of the real estate.
NOTE 9 - LITIGATION AND OTHER CONTINGENT LIABILITIES
In accordance with the Trust Agreement, the Trust has assumed the obligation to
make payments, where required, to discharge all litigation and other contingent
liabilities of City which existed at September 25, 1985. The Trust may have a
contingent liability with respect to certain issues raised by the Internal
Revenue Service upon audit of tax returns of City Investing Company filed with
respect to periods ending on or before
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CITY INVESTING COMPANY LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
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.
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.
NOTE 11 - NOTIFICATION OF NASDAQ DELISTING
NASDAQ has notified the Trust that since the Trust is not in compliance with
NASDAQ's minimum $1.00 bid price requirement, the Trust may be delisted from the
SmallCap Market in early October of 1998. If by early October of 1998, the units
of beneficial interest reflect a closing bid price of $1.00 or greater for ten
consecutive trading days, the Trust will not be delisted. If the Trust is
delisted, it is expected to trade on the Over the Counter Bulletin Board
operated by NASDAQ.
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 $863 ($0.02 per unit) in the second quarter of
1998 and net income of $1,572 ($0.04 per unit) in the six-month period ended
June 30, 1998, compared to net income of $828 ($0.02 per unit) and net income of
$1,166 ($0.03 per unit) in the corresponding 1997 periods. The losses on
dispositions of assets, net, reflect losses of $23 and $88 in the second quarter
and six-month periods of 1998 and $2 and $96 in the respective 1997 periods
attributable primarily to legal fees incurred in connection with the defense of
litigation against the Trust.
Interest, dividend and other income, principally consisting of interest earned
on the investment of cash equivalents and investment securities, was $935 and
$1,802 in the second quarter and six months ended June 30, 1998, and $891 and
$1,395 in the corresponding 1997 periods. The increase in the second quarter and
six-month period of 1998 compared to 1997 was due primarily to the timing of the
recognition of interest income. Administrative expenses were $49 and $142 for
the second quarter and six months of 1998, compared with $61 and $133 for the
comparable 1997 periods.
At June 30, 1998, the Trust had cash and cash equivalents and U. S. Treasury
Bills of $63,321. The Trustees believe that such cash resources and investment
securities are sufficient to meet all anticipated liquidity requirements.
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CITY INVESTING 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, 1997 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.
City Investing Company Liquidating Trust v. Continental Casualty Co. The Trust
received the $2,965,000 escrow balance remaining after the Continental Casualty
Co. settlement of $1,150,000 was paid in 1997.
ITEM 2. CHANGES IN SECURITIES
Trust Units of Beneficial Interest. On July 28, 1998, 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, 1999, 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
Reference is made to the information set forth above in Note 11 to the Trust's
financial statements concerning the Notification of Delisting of the Trust's
units from the NASDAQ SmallCap Market.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
1. Action taken by Trustees under City Investing Company Liquidating Trust
Agreement dated July 28, 1998.
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, 1998.
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 28, 1998 By: LESTER J. MANTELL
Trustee
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EXHIBIT 1
ACTION OF TRUSTEES UNDER CITY INVESTING
COMPANY LIQUIDATING TRUST AGREEMENT
The undersigned , Trustees under the 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, 1998 and the continued pendency of certain
litigation affecting the Trust, the existence of the Trust is hereby
extended until the earlier of (a) the complete distribution of the Trust
Estate or (b) September 25, 1999, 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 28th day of July 1998.
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Geo. T. Scharffenberger
Trustee
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Eben W. Pyne
Trustee
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Lester J. Mantell
Trustee
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<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, 1998 and is qualified in its entirety by reference to such Financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 82
<SECURITIES> 63,239
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 68,561
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 68,561
<TOTAL-LIABILITY-AND-EQUITY> 68,561
<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> 863
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 863
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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