<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, 1997 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)
444 Madison Avenue, 7th Floor, New York, New York
10022 (Address of principal executive offices and
zip code)
(212) 317-8292
(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 13, 1997 was
3,298,782.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AEROSPACE CREDITORS LIQUIDATING TRUST
STATEMENT of NET ASSETS in LIQUIDATION
as of March 31, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Assets:
Cash and temporary cash investments (Notes 2 and 9) $ 723 $ 1,237
Restricted cash (Note 8) 77
Marketable securities 7
Interest receivable 2
Assets, at estimated fair value (Notes 4, 5 and 10) 10,826 10,047
------- -------
Total assets $11,551 $11,368
======= =======
Liabilities:
Estimated costs of liquidation (Notes 1 and 3) $ 487 $ 1,018
------- -------
Total liabilities $ 487 $ 1,018
======= =======
Net assets in liquidation $11,064 $10,350
======= =======
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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<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, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Changes in net assets in liquidation before distributions:
Increase in interest income $ $ 1
Increase in accrued interest income 2
Increase in estimated fair value of assets in liquidation 266 242
Decrease in estimated costs of liquidation, net (8) (15)
-------- --------
Net increase in net assets in
liquidation before distributions 260 228
Distributions 4
Net assets in liquidation, beginning
of period 10,804 10,118
-------- --------
Net assets in liquidation, end of period $ 11,064 $ 10,350
======== ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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<PAGE> 4
AEROSPACE CREDITORS LIQUIDATING TRUST
STATEMENT of RECEIPTS and DISBURSEMENTS
(In thousands)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Receipts:
Interest income $ $ 3
------ ------
Total Receipts $ $ 3
====== ======
Disbursements:
Payments of estimated costs of
liquidation:
Trustee fees $ 68 $ 113
Professional fees 20 69
Other 69 91
------ ------
Total Disbursements $ 157 $ 273
====== ======
Decrease in cash and temporary
cash investments before distributions $ 157 $ 270
Distributions 0 4
------ ------
Decrease in cash $ 157 $ 266
Cash, beginning of period 880 1,580
------ ------
Cash, end of period $ 723 $1,314
====== ======
</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,
1997 and 1996.
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.
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<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 September 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.
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
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<PAGE> 7
AEROSPACE CREDITORS LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS, Continued
---------
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 appealed the ruling to the United States District Court for the
Southern District of New York (the "District Court").
The District Court heard oral argument on this matter on July 2, 1996
and on July 30, 1996, the District Court affirmed the Bankruptcy Court's
ruling in favor of LTV. Thomson appealed the decision of the District
Court to the United States Court of Appeals for the Second Circuit (the
"Second Circuit"), and on March 24, 1997, the Second Circuit affirmed
the District Court's decision.
On April 28, 1997, the Trust received a cash payment of $14,669,479.94
of the proceeds paid by Thomson (the "Thomson Payment"), which consists
of $10,000,000, plus the Trust's pro rata portion of interest on the
judgment in the amount of $4,669,479.94. The Thomson Payment resulted in
a gain of approximately $3,843,480 from the estimated fair value of
$10,826,000. This gain is not reflected in the current financial
statements as the Thomson Payment was received by the Trust subsequent
to the three months ended March 31, 1997.
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, 1997, 3,298,782 Units had been distributed to
holders of allowed claims. The remaining 3,468 Units were held in an
escrow account, as described in Note 8, for the benefit of, and pending
distribution to, the proper holders of allowed claims. Pursuant to the
terms of the Plan and the Trust Agreement, such undistributed Units are
no longer required to be held in escrow and were cancelled on January
16, 1997.
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
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<PAGE> 8
AEROSPACE CREDITORS LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS, Continued
---------
Stock Exchange for the first quarter of 1997, which occurred on March 5,
1997, was for $3.50.
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.
Since inception, the Trust has made the following cash distributions, in
the aggregate amount of $72,550,432.50 ($21.97 per Unit):
(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 established an Escrow Account for the purpose of holding
undistributed Units and distributions allocated to such Units. Pursuant
to the terms of the Plan and the Trust Agreement, such funds are no
longer required to be segregated for the benefit of the undistributed
Units. Therefore, the Escrow Account was closed on December 31, 1996
with the balance of $82,593 transferred to the Trust's custodian
account.
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
- 8 -
<PAGE> 9
AEROSPACE CREDITORS LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS, Continued
---------
additional cash reserve in an amount of $3.5 million ("Cash Reserve")
for payment of expenses beyond the amount of the Expense Fund.
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.
Under the Plan, all unclaimed distributions of cash and LTV common stock
owed to the creditors of Aerospace are required to be delivered by LTV
to the Trust. In December 1995, the Trust received $49,412 in cash and
492 shares of LTV common stock from LTV. On May 24, 1996, the Trust sold
the 492 shares of LTV common stock for $6,433.
10. Subsequent Events:
On April 28, 1997, the Trust received a cash payment of $14,669,479.94
of the proceeds paid by Thomson ("Thomson Payment"), as more fully
described in Note 5. This resulted in a gain from the Thomson Payment
of approximately $3,843,480. This gain is not reflected in the current
financial statements as the Thomson Payment was received by the Trust
subsequent to the three months ended March 31, 1997.
- 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.
As of March 31, 1997, the assets of the Trust consisted of (i) the Cash
Reserve of approximately $723,000, and (ii) the proceeds from the Thomson
Litigation, as described more fully in Note 5 of Item 1 above. On April 28,
1997, the Trust received a cash payment of $14,669,479.94 in connection with the
Thomson Litigation, which consists of $10,000,000, plus the Trust's pro rata
portion of interest on the judgment in the amount of $4,669,479.94. The Thomson
Payment resulted in a gain of approximately $3,843,480 from the estimated fair
value of the Thomson Litigation of $10,826,000. This gain is not reflected in
the current financial statements as the Thomson Payment was received by the
Trust subsequent to the three months ended March 31, 1997.
The Trust's source of funds as of March 31, 1997 is the Cash Reserve and
the income received from and the liquidation of the assets of the Trust. Other
than accrued interest of $2,000 from the Trust's temporary cash investments, as
compared to interest income of $3,000 received during the three months ended
March 31, 1996, the Trust did not receive any other income during this period.
This decrease reflects smaller reserves earning interest during the three months
ended March 31, 1997 as compared to slightly larger reserves earning interest
during the three months ended March 31, 1996. The Trust will not receive any
further income other than interest income from the Trust's temporary cash
investments. The Thomson Payment is the last asset of the Trust to be
liquidated.
The Trust incurred liquidation costs of $157,000 during the three months
ended March 31, 1997 as compared to $273,000 during the same period in 1996,
consisting primarily of professional fees (including fees related to reporting
under the securities laws and accounting fees), fees to the Trustees of the
Trust, and fees for office space. The decrease in liquidation costs for the
three months ended March 31, 1997 as compared to the three months ended March
31, 1996 is primarily due to the reduction of legal and professional fees
incurred by the Trust as a result of the liquidation of the assets of the Trust.
The Trustees anticipate that the liquidation costs incurred during the next
quarter will increase as a result of professional fees associated with the
winding up of the Trust.
The Trust has declared a special cash distribution of the Thomson
Payment totaling $11,215,858.80 ($3.40 per Unit) to be made on June 13, 1997, to
holders of record as of May 30, 1997. After this distribution to CBI holders,
the remaining assets of the Trust will consist of the Cash Reserve of
approximately $4,176,621. In order to maintain the listing of the Units on the
Pacific Exchange, Inc., the Units must trade at no less than $1.00 per Unit. If
the trading price falls below $1.00, the Pacific Exchange, Inc. may commence
delisting proceedings. After the Trust makes the initial distribution of the
Thomson Payment, there can be no assurance that the Units will continue to trade
at $1.00 per Unit or more.
The Trustees anticipate that they will distribute the cash remaining in
the Cash Reserve, after any deductions for wind-up expenses, after the Trustees
determine final wind-up and liquidation costs of the Trust, distribute a final
report to CBI Holders, and after any necessary Bankruptcy Court approval of
final wind-up matters. If the Trust incurs all of the current estimated costs of
liquidation, the final distribution to CBI holders would consist of
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<PAGE> 11
approximately $3,689,621 ($1.26 per Unit). While the Trust may not incur all of
the estimated costs of liquidation, there can be no assurance that the Trust
will not incur a greater amount, thereby reducing the actual distribution to CBI
holders.
PART II - OTHER INFORMATION
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 1997.
- 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 15, 1997
- 12 -
<PAGE> 13
EXHIBIT INDEX
Exhibit No.
- -----------
27 Financial Data Schedule
- 13 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 723
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,551
<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>
