<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1996 Commission File Number 0-21984
AEROSPACE CREDITORS LIQUIDATING TRUST
(Exact name of registrant)
New York 13-7020026
(State of organization) (I.R.S. Employer
Identification Number)
245 Park Avenue, 44th Floor, New York, New York 10167
(Address of principal executive offices and zip code)
(212) 808-0539
(Registrant's telephone Number)
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 by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
------- -------
Number of Units of Beneficial Interest outstanding as of May 10, 1996 was
3,302,250.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AEROSPACE CREDITORS LIQUIDATING TRUST
STATEMENT of NET ASSETS in LIQUIDATION
as of March 31, 1996 and 1995
(In thousands)
------
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Assets:
Cash and temporary cash investments (Note 9) $ 1,237 $ 2,201
Restricted cash (Note 8) 77 17
Marketable securities 7
Interest receivable 16
Assets, at estimated fair value (Notes 4 and 5) 10,047 66,180
---------- --------
Total assets $ 11,368 $ 68,414
========== ========
Liabilities:
Estimated costs of liquidation (Notes 1 and 3) $ 1,018 $ 5,846
---------- --------
Total liabilities $ 1,018 $ 5,846
========== ========
Net assets in liquidation $ 10,350 $ 62,568
========== ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
- 2 -
<PAGE> 3
AEROSPACE CREDITORS LIQUIDATING TRUST
STATEMENT of CHANGES in NET ASSETS in LIQUIDATION
(In thousands)
------
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Changes in net assets in liquidation before distributions:
Increase in interest and dividend income $ 1 $ 62
Accrued interest and dividend income 16
Increase in estimated fair value of
assets in liquidation 242 1,860
Decrease in estimated costs
of liquidation, net (15) (3,646)
------------ -----------
Net increase in net assets in
liquidation before distributions $ 228 $ (1,708)
============ ===========
Distributions 4 (2,968)
Net assets in liquidation, beginning
of period 10,118 67,244
------------ -----------
Net assets in liquidation, end of period $ 10,350 $ 62,568
============ ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
- 3 -
<PAGE> 4
AEROSPACE CREDITORS LIQUIDATING TRUST
STATEMENT of RECEIPTS and DISBURSEMENTS
(In thousands)
------
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Receipts:
Interest income $ 3 $ 81
----------- -----------
Total Receipts $ 3 $ 81
=========== ===========
Disbursements:
Payments of estimated costs of
liquidation:
Trustee fees $ 113 $ 113
Professional fees 69 249
Other 91 72
----------- -----------
Total Disbursements $ 273 $ 434
=========== ===========
Increase/(decrease) in cash and temporary
cash investments before distributions $ (270) (353)
Distributions 4 (2,968)
----------- -----------
Increase/(decrease) in cash $ (266) $ (3,321)
Cash, beginning of period 1,580 5,539
----------- -----------
Cash, end of period $ 1,314 $ 2,218
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
- 4 -
<PAGE> 5
AEROSPACE CREDITORS LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
----------
1. Basis of Presentation:
The Aerospace Creditors Liquidating Trust (the "Trust") was established
on June 28, 1993 in accordance with the LTV Second Modified Joint Plan
of Reorganization (the "Plan") confirmed by the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court") by order dated May 26, 1993. The purpose of the Trust is to
marshal, liquidate and distribute the Trust assets in an expeditious
and orderly manner.
The Trust issued certificates of beneficial interest ("CBIs") to
holders of allowed claims against the LTV Aerospace and Defense Company
("Aerospace") in exchange for receiving certain assets deemed
distributed to the creditors and contributed to the Trust. The
Aerospace Creditors Liquidating Trust Agreement (the "Trust Agreement")
provides that the Trust will terminate ten years from the date of the
transfer of the Initial Trust Assets to the Trust, unless earlier
termination is required by action of New York State law or CBI holders
or by distribution of all Trust assets, unless extended for one-year
renewal terms pursuant to the terms of the Trust Agreement.
In accordance with the Trust Agreement, each Trustee shall be
indemnified by and receive reimbursement from the Trust against and
from any and all loss, liability or damage, including payment of
attorney's fees and other costs of defending himself, which such
Trustee may inure or sustain, without gross negligence or willful
misconduct, in the exercise and performance of any of the powers and
duties of such Trustee under the Trust Agreement.
Preparation of the financial statements on the liquidating basis
required that the Trustees make a number of assumptions regarding the
value of the Trust's assets and the projected total cost of liquidating
such assets and winding up the affairs of the Trust. There may be
differences between the assumptions and the actual results because
events and circumstances frequently do not occur as expected. Those
differences, if any, could result in a change in the net assets
reflected in the statements of net assets in liquidation as of March
31, 1996 and 1995.
2. Significant Accounting Principles:
Under the terms of the Plan, certain cash and temporary cash
investments are restricted for various reserves, as described in Note
9. In addition, temporary cash investment alternatives are limited to
certain securities that comply with guidelines and regulations of the
Internal Revenue Service ("IRS") concerning investments by liquidating
trusts.
Dividend and interest income is recorded as earned.
The present value discount recorded in the estimated costs of
liquidation is amortized using the interest method.
- 5 -
<PAGE> 6
AEROSPACE CREDITORS LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS, Continued
----------
3. Estimated Costs of Liquidation:
The estimated costs of liquidation represent the projected costs of
operating the Trust through its expected economic life, which the
Trustees estimate will extend to June 30, 1997, discounted using a 5.5%
present value factor. These costs, which include staff, office space,
professional fees, trustee fees and transfer agent fees are based on
various assumptions regarding the administrative obligations, use of
professionals and other matters. Actual costs are likely to differ
from estimated costs and those differences may be significant.
4. Valuation of Assets:
Assets of the Trust are recorded at their estimated fair value.
Generally, fair value is the amount which the Trust reasonably expects
to receive upon a sale to a willing buyer. Estimated fair value is a
good faith estimate determined by the Trustees based on the underlying
characteristics of such assets, including but not limited to the size
of investment, credit worthiness of the issuer, yield to maturity,
status of litigation, and private bids. In addition, discount factors,
including those related to the time value of money and risk associated
with collection, have been applied to these assets to arrive at
estimated fair value. Fair value, determined as described above, may
differ from the eventual realizable value of the assets, which can
fluctuate over time in light of business, legal and economic conditions
and the financial results of the obligor. These differences may be
significant.
5. Trust Assets:
The Trust assets were distributed to the Aerospace Creditors on June
28, 1993, (the "Effective Date") and immediately thereafter were
transferred to the Trust which then issued CBIs to the Aerospace
Creditors.
(A) On April 27, 1995, the Trust sold the AMG Obligations and the
AMG Stock to AM General (the "Sale") for a gross purchase
price of $46,946,000, representing a discount on the
outstanding face amount of the AMG Obligations and the rights
to the AMG Stock (including accrued interest on the Adjustment
Promissory Note), at an annualized discount rate equal to
fifteen percent (15%), resulting in a gain of $5,771,000. On
that same date, the Trust paid $400,000 to The LTV Corporation
("LTV") in full and complete satisfaction of any and all
claims that LTV could assert with respect to any of the
proceeds from the Sale (the "LTV Payment"). This resulted in
net proceeds to the Trust of $46,546,000. Upon the receipt of
the proceeds of the Sale, the Trust released all the liens it
held which secured the AMG Obligations.
- 6 -
<PAGE> 7
AEROSPACE CREDITORS LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS, Continued
----------
The $46,546,000 net proceeds that the Trust received from the
Sale were applied to each of the AMG Obligations and the AMG
Stock as follows:
<TABLE>
<CAPTION>
($000)
Present Value
-------------
<S> <C>
Adjustment Promissory Note (principal) $ 15,200
Adjustment Promissory Note (interest) 3,451
Earn-Out Payments 12,923
Confidentiality and Non-Competition Payments 8,482
PUT Option 6,490
--------
TOTAL $ 46,546
========
</TABLE>
(B) On November 1, 1995, the Trust settled the McDonnell Douglas
Cause of Action with McDonnell Douglas Corp. and LTV for a
cash payment to the Trust of $16,500,000. The settlement
resulted in a loss of $300,000 from the estimated fair value
of $16,800,000.
(C) INITIAL THOMSON LITIGATION PROCEEDS. The Initial Thomson
Litigation Proceeds are the first $10 million in proceeds,
plus a pro rata portion of any interest actually received by
LTV under any judgment or settlement (to be paid without any
deduction for legal fees or costs incurred by LTV) actually
received pursuant to the contractual claims of Aerospace in
the action entitled LTV Aerospace and Defense Co. v.
Thomson-CSF S.A., Adv. Proc. No. 920-9531A (Bankr. S.D.N.Y.)
(the "Thomson Litigation").
On the Effective Date of the Plan, LTV granted the Trust a
first priority security interest in Aerospace's contractual
claims against Thomson-CSF S.A. ("Thomson") arising out of an
April 1992 agreement which provided for the transfer to
Thomson of substantially all of Aerospace's missiles division
assets. The agreement provided for Thomson to pay a
non-refundable fee of $20 million in the event that certain
United States governmental approvals were not obtained and
Thomson did not proceed with the closing. On July 28, 1992,
Thomson advised LTV that it would not proceed with the
closing. LTV demanded and Thomson refused payment of the $20
million reverse break-up fee. On August 3, 1992, LTV filed a
complaint on behalf of Aerospace in the Bankruptcy Court
seeking payment of the $20 million reverse break-up fee plus
interest, attorneys' fees and costs and compensatory damages.
On August 23, 1995, the Bankruptcy Court ruled in favor of LTV
and ordered Thomson to pay LTV, Vought Industries, Inc. and
Vought International, Inc. the sum of $20 million, with
interest thereon at the rate of nine percent (9%) from August
1, 1992 to August 23, 1995. Thomson has appealed the ruling
to the United States District Court for the Southern District
of New York.
Pursuant to the Plan, if the Initial Thomson Litigation
Proceeds actually received by the Trust, following final
termination of the Thomson Litigation,
- 7 -
<PAGE> 8
AEROSPACE CREDITORS LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS, Continued
----------
are less than $10 million, LTV will promptly pay to the Trust
the difference between $10 million and the Initial Thomson
Litigation Proceeds actually received by the Trust (the
"Thomson Shortfall").
The payment due to the Trust from LTV with respect to any
Thomson Shortfall will be paid within 10 days after any
settlement of the Thomson Litigation or after entry of a
judgment in the Thomson Litigation which is no longer subject
to appeal, and will be paid, at LTV's option, in cash or in
LTV Common Stock or other LTV publicly-traded security, priced
at the then-market price of the stock or security.
6. Taxes:
The Trust was formed as a grantor trust, and thus, in its filings with
the IRS, the Trust itself is not a taxable entity. Accordingly, each
initial holder of a CBI is required to report on his federal tax return
his allocable share of any income, gain, loss, deduction or credit
recognized or incurred by the Trust. The Trust's tax basis in assets
transferred from holders of claims against Aerospace in connection with
the Plan generally equals the fair market value of such assets as of
June 28, 1993.
7. Certificates of Beneficial Interest:
The Trust issued 3,302,250 units of beneficial interest (the "Units")
on September 30, 1993 to holders of allowed claims in Classes 4.30,
5.30 and 7.30, the date registration of the Trust's CBIs became
effective on Form 10. As of March 31, 1996, 3,298,782 Units had been
distributed to holders of allowed claims. The remaining 3,468 Units
are held in an escrow account, as described in Note 8, for the benefit
of, and pending distribution to, the proper holders of allowed claims.
The CBIs were approved by the Pacific Stock Exchange on August 3, 1993,
with trading activity authorized as of September 22, 1993. The last
trade on the Pacific Stock Exchange for the first quarter of 1996,
which occurred on March 1, 1996, was for $2.88.
8. Distributions from the Trust:
The Trust Agreement provides for distributions to be made as often as,
and in the discretion and judgment of the Trustees, there are monies in
an amount sufficient to render feasible a distribution of cash or other
property to CBI holders, but no less often than annually (subject to
there being at least $3 million in cash or other non-cash property
designated by the Trustees available for distribution). Such
distributions are made to CBI holders based upon the number of Units
owned as of the record date determined by the Trustees.
- 8 -
<PAGE> 9
AEROSPACE CREDITORS LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS, Continued
----------
Since inception, the Trust has made the following cash distributions:
(i) $4,590,127.50 ($1.39 per Unit) on March 15, 1994 to holders of
record as of March 7, 1994;
(ii) $2,245,530 ($0.68 per Unit) on June 3, 1994 to holders of
record as of May 23, 1994;
(iii) $2,972,025 ($0.90 per Unit) on February 24, 1995 to holders of
record as of February 10, 1995;
(iv) $42,268,800 ($12.80 per Unit) on June 14, 1995 to holders of
record as of May 31, 1995; and
(v) $20,473,950 ($6.20 per Unit) on December 8, 1995 to holders of
record as of November 24, 1995.
The Trust has established an Escrow Account for the purpose of holding
undistributed Units and distributions allocated to such Units. The
total unclaimed funds as of March 31, 1996 was $76,822.76.
9. Cash and Temporary Cash Investment:
In addition to the Trust Assets, the Trust received $1 million in cash
(the "Expense Fund") from LTV on the Effective Date, to be used solely
to cover the expenses of the Trust incurred after the Effective Date,
including any legal expenses, trustee fees and expenses, costs of
registration under the federal and state securities laws, costs of
audit and similar expenses. Also on the Effective Date, the Trustees
established an additional cash reserve in an amount of $3.5 million
("Cash Reserve") for payment of expenses beyond the amount of the
Expense Fund. Any amount of such Cash Reserve, which is not required
to pay such expenses, will be held for distribution as part of the
Trust Assets.
The Trustees are responsible for establishing any additional cash
reserves for the payment of expenses from any proceeds received from
the liquidation of the Trust Assets after the Effective Date.
- 9 -
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Trust was established for the purpose of liquidating certain
assets. The Trust Agreement prohibits the Trustees from engaging in any
business. No part of the assets of the Trust or the proceeds, revenue or
income therefrom can be used or disposed of by the Trustees in furtherance of
any business.
The assets of the Trust currently consist of (i) the Cash Reserve of
approximately $1,300,000, and (ii) the proceeds from the Thomson Litigation, as
described more fully below in Item 1 of Part II. The Trustees do not expect to
make another cash distribution until the Trust receives proceeds, if any, from
the Thomson Litigation.
The Trust's source of funds as of March 31, 1996 is the Cash Reserve
and the income received from and the liquidation of the assets of the Trust.
Other than interest income of $3,000 from the Trust's temporary cash
investments, as compared to interest income of $81,000 received during the
three months ended March 31, 1995, the Trust did not receive any other income
during this period. The decline in interest income is a result of lower cash
investments during the current period as compared to larger cash investments in
1995 before distributions of cash to CBI holders in February 1995. The Trust
incurred liquidation costs of $273,000 during the three months ended March 31,
1996 as compared to $434,000 during the three months ended March 31, 1995,
consisting primarily of professional fees (including fees related to disclosure
reporting under the securities laws and accounting fees), fees to the Trustees
of the Trust, annual insurance premium for Trustees' insurance and fees for
office space. The decrease in liquidation costs for the three months ended
March 31, 1996 as compared to the three months ended March 31, 1995 is
primarily due to the elimination of litigation fees as a result of the
settlement of the McDonnell Douglas Cause of Action in November 1995.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 23, 1995, the Bankruptcy Court ruled in favor of LTV
in the action entitled LTV Aerospace and Defense Co. v. Thomson-CSF S.A., Adv.
Proc. No. 92-9531A (Bankr. S.D.N.Y.) (the "Thomson Litigation"). The
Bankruptcy Court ordered Thomson to pay LTV, Vought Industries, Inc. and Vought
International, Inc. the sum of $20 million, with interest thereon at the rate
of nine percent (9%) from August 1, 1992 to August 23, 1995. The Trust is
entitled to the first $10,000,000 in proceeds, plus a pro rata portion of any
interest actually received by LTV under any judgment or settlement of the
Thomson Litigation, without deduction for legal and professional fees and
expenses incurred (the "Initial Thomson Litigation Proceeds"). For as long as
the Thomson Litigation is subject to appeal and possible reversal, there is no
assurance that LTV and the Trust will actually receive any interest. As set
forth in Note 5(C) to the Trust's financial statements, if the Initial Thomson
Litigation Proceeds actually received by the Trust (to be paid without any
deduction for legal fees or costs incurred by LTV) following final termination
of the Thomson Litigation, are less than $10 million, LTV is required to
promptly pay to the Trust (the "LTV Guaranty") the difference between $10
million and the Initial Thomson Litigation Proceeds actually received by the
Trustees (the "Thomson Shortfall").
- 10 -
<PAGE> 11
Thomson has appealed the ruling to the United States District Court for
the Southern District of New York and oral argument has been scheduled for July
2, 1996. LTV remains responsible for the costs of the Thomson Litigation. A
final resolution of the Thomson Litigation could take a significant amount of
time to achieve. Any payments to be made by LTV on the Thomson Shortfall, if
any, pursuant to the LTV Guaranty are not required until after entry of a
judgment in the Thomson Litigation which is no longer subject to appeal.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Trust during the
first quarter of 1996.
- 11 -
<PAGE> 12
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.
AEROSPACE CREDITORS LIQUIDATING TRUST
(Registrant)
BY: /s/ MARK M. FELDMAN
----------------------------------------
Mark M. Feldman
Trustee
BY: /s/ BRADFORD T. WHITMORE
---------------------------------------
Bradford T. Whitmore
Trustee
BY: /s/ PAUL S. WOLANSKY
-----------------------------------------
Paul S. Wolansky
Trustee
Dated: May 14, 1996
- 12 -
<PAGE> 13
EXHIBIT INDEX
Exhibit No.
- - -----------
27 Financial Data Schedule
- 13 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,314
<SECURITIES> 7
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,368
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<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> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
