10-Q 1 a37548.txt CITY INVESTING LIQUIDATING TRUST 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 March 31, 2004 [ ] 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.) 853 Broadway, Suite 1607 10003-4703 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 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] At March 31, 2004 there were 38,979,372 Trust Units of Beneficial Interest outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements CITY INVESTING COMPANY LIQUIDATING TRUST Statements of Operations Three Months ended March 31 (Unaudited) ------------------------------------------------------------------------------- (Amounts in thousands, except per unit data) 2004 2003 ------------------------------------------------------------------------------- Losses on dispositions of assets, net ($34) ($2) Interest, dividend and other income 204 406 ------------------------------------------------------------------------------- Total income 170 404 Administrative expenses 90 125 ------------------------------------------------------------------------------- Net income $80 $279 ------------------------------------------------------------------------------- Net income per unit $0.00 $0.01 ------------------------------------------------------------------------------- Outstanding units 38,979 38,979 ------------------------------------------------------------------------------- Balance Sheets ------------------------------------------------------------------------------- (Unaudited) March 31, December 31, ($ in thousands) 2004 2003 ------------------------------------------------------------------------------- Assets Cash and cash equivalents $304 $78 U.S. Treasuries 82,845 82,991 Restricted funds 4 4 Investments 27 27 Mortgage receivable, net of deferred gain 1,004 1,004 ------------------------------------------------------------------------------- Total assets $84,184 $84,104 ------------------------------------------------------------------------------- Liabilities and trust equity Trust equity $84,184 $84,104 ------------------------------------------------------------------------------- Total liabilities and trust equity $84,184 $84,104 ------------------------------------------------------------------------------- See accompanying notes to financial statements. - 2 - CITY INVESTING COMPANY LIQUIDATING TRUST Statements of Cash Flows Three Months ended March 31 (Unaudited) -------------------------------------------------------------------------------- ($ in thousands) 2004 2003 -------------------------------------------------------------------------------- Cash flows from operating activities: Net income $80 $279 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of premium of investment securities 420 286 -------------------------------------------------------------------------------- Net cash provided by operating activities 500 565 -------------------------------------------------------------------------------- Cash flows from investing activities: Maturities/sales of investment securities 102,940 19,786 Purchases of investment securities (103,214) (20,440) -------------------------------------------------------------------------------- Net cash used for investing activities (274) (654) -------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 226 (89) Cash and cash equivalents at beginning of year 78 158 -------------------------------------------------------------------------------- Cash and cash equivalents at end of period $304 $69 -------------------------------------------------------------------------------- Statements of Changes in Trust Equity Three Months ended March 31 (Unaudited) -------------------------------------------------------------------------------- ($ in thousands) 2004 2003 -------------------------------------------------------------------------------- Balance at beginning of period $84,104 $83,180 Net income 80 279 -------------------------------------------------------------------------------- Balance at March 31 $84,184 $83,459 -------------------------------------------------------------------------------- See accompanying notes to financial statements. - 3 - CITY INVESTING COMPANY LIQUIDATING TRUST Notes to Financial Statements (Unaudited) Note 1 - Organization The accompanying financial statements for the City Investing Company Liquidating Trust (the "Trust") are unaudited. 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 legal fees attributable to issues that relate to periods before the liquidation of City Investing Company. Note 4 - Investment Securities Investment securities, all of which mature within one year, consist of U.S. Treasuries and are carried at original cost, net of premium amortization recorded at interest collection dates. The fair value of U.S. Treasuries is based on quoted market prices. Investment securities consist of the following:

------------------------------------------------------------------------------------------------------------~~---------~~ ~~Third~~Audited ~~Quarter~~March ~~Nine~~31, ~~Months~~2004 ~~(In~~December ~~thousands~~31, ~~except per unit data)~~ 2003 ~~2002 2003 2002~~ -------------------------------------- -------------------------------------~~------------------------------------------~~ ~~(Losses)~~Carrying ~~gains~~Amortized onFair ~~dispositions~~Carrying ofAmortized ~~assets,~~Fair ~~net $~~(~~39)~~ $~~(308)~~ ~~$60~~in ~~$(727~~thousands) ~~Interest,~~Value ~~dividend~~Cost ~~and~~Value ~~other~~Value ~~income~~Cost ~~264~~Value ~~826 1,192 2,266~~ ------------------------------------------------------------------------------------------------------------~~---------~~ ~~Total~~U.S. ~~income~~Treasuries ~~225 518 1~~$82,~~252~~845 1$82,~~539~~845 ~~Administrative expenses 47 54 245 274 --------------------------------------------------------------------------------------------------------------------- Net income~~ $~~178~~82,896 $~~464 $1~~82,~~007~~991 $182,~~265~~991 ~~--------------------------------------------------------------------------------------------------------------------- Net income per unit~~ $~~0.01 $0.01 $0.03 $0.03 --------------------------------------------------------------------------------------------------------------------- Outstanding units 38~~83,~~979~~053 ~~38,979 38,979 38,979~~ ------------------------------------------------------------------------------------------------------------~~---------~~

The gross unrealized gains/(losses) on investment securities amounted to the following: -------------------------------------------------------------------------------- Audited March 31, December 31, ($ in thousands) 2004 2003 -------------------------------------------------------------------------------- Gross unrealized gains $53 $68 -------------------------------------------------------------------------------- Gross unrealized (losses) (2) (6) -------------------------------------------------------------------------------- Note 5 - Restricted Funds Restricted funds at March 31, 2004 and December 31, 2003 represent a rent deposit of $4,000. - 4 - CITY INVESTING COMPANY LIQUIDATING TRUST Notes to Financial Statements (continued) (Unaudited) Note 6 - Investments Investments are as follows: -------------------------------------------------------------------------------- Audited March 31, December 31, ($ in thousands) 2004 2003 -------------------------------------------------------------------------------- Oklahoma Energy Corp. $27 $27 -------------------------------------------------------------------------------- The Trust holds 310,810 shares of Oklahoma Energy Corp. common stock, which are carried at their tax basis. At March 31, 2004 and December 31, 2003, the fair market value of the Oklahoma Energy stock, based on the average of quoted market prices, was $2,176 and $31, respectively. Note 7 - Real Estate In February 2000, the Trust sold 39 percent of certain real estate acreage for $2,410,000 in cash, which resulted in a recognized long-term capital gain, net of expenses, of $610,000. In May 2000, the Trust sold its remaining real estate acreage for $478,000 in cash and a non-recourse promissory note of $3,683,000, payable in five equal annual installments plus interest at 8 percent. The May 2000 sale resulted in a recognized long-term capital gain, net of expenses, of $171,000 and deferred gain of $1,173,000. The deferred gain of $1,173,000 was recorded as a reduction to the $3,683,000 mortgage receivable. In June 2001, 2002 and 2003, cash payment installments of $960,000, $907,000 and $850,000, respectively, were received which resulted in a recognized long-term gain, net of expenses, of $183,000 in each of the years and net interest income of $274,000, $222,000 and $177,000, respectively. The deferred gain of $469,000 at March 31, 2004 and December 31, 2003, is netted against the gross mortgage receivable of $1,473,000 at March 31, 2004 and December 31, 2003. A one-year extension of the non-recourse promissory note to pay only interest in 2004 and principal and interest in 2005 and 2006 was requested by the mortgagor and was approved by the holders of the mortgage. It is projected that if the remaining payments are made, the remaining deferred gain of $469,000 will be subject to expenses estimated to be $102,000. Note 8 - Litigation and Other Contingent Liabilities In accordance with the Trust Agreement, the Trust has assumed the obligation to make payments, where required, to discharge certain litigation and other contingent liabilities of City Investing Company which existed at September 25, 1985, or which have subsequently arisen. The Trust is subject to possible claims by the United States Environmental Protection Agency and other third parties. Note 9 - Future Distributions of Trust Assets Pending resolution of possible claims by the Environmental Protection Agency and other third parties, see Note 8 to Financial Statements - Litigation and Other Contingent Liabilities, the Trust is unable to make any dividend payments or liquidation distributions. - 5 - 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 $80,000 ($0.00 per unit) in the quarter ended March 31, 2004, compared to net income of $279,000 ($0.01 per unit) in the first quarter of 2003. The reported losses on the dispositions of assets, net, reflect losses of $34,000 in 2004 as compared to losses of $2,000 in 2003, which consist of legal fees attributable to issues that relate to periods before the liquidation of City Investing Company. In 2004, the higher litigation costs were attributable to the Trust being defended against claims brought by Rheem Manufacturing Company. Interest, dividend and other income, principally consisting of interest earned on the investment of cash equivalents and investment securities was $204,000 in the first quarter of 2004, compared with $406,000 in the first quarter of 2003. The decrease in the 2004 period was primarily due to lower interest rates in the 2004 versus 2003 period. Administrative expenses were $90,000 and $125,000 in the first quarters of 2004 and 2003, respectively. In 2004, the principal reason for the decrease was the timing of payment of audit expenses. At March 31, 2004, the Trust had cash and cash equivalents and U. S. Treasuries of $83,149,000. The Trustees believe that such cash resources and investment securities are sufficient to meet all anticipated liquidity requirements. ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES As of the end of the period covered by this report, the Trust carried out an evaluation, under the supervision and with the participation of the Trust's management, including the trustee who is the functional equivalent of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Trust's internal disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. That Rule requires that such controls and procedures assure that information required to be included in the Trust's periodic SEC filings is recorded, processed, summarized and reported within the time periods specified by the rules and forms. Based upon that evaluation, the Trustees concluded that the Trust's internal disclosure controls and procedures are effective in assuring that information required to be disclosed by the Trust in its periodic SEC filings is accurate and communicated to the Trust's management in order to allow timely decisions regarding required disclosure. There have not been any significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of such evaluation. 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, 2003 is incorporated by reference herein. Except as set forth in Note 8 to the Financial Statements - Litigation and Other Contingent Liabilities herein, there have been no material developments in such legal proceedings subsequent to the date of that information. Pending resolution of possible claims, see Note 8 to Financial Statements - Litigation and Other Contingent Liabilities, the Trust is unable to make any dividend payments or liquidation distributions. - 6 - ITEM 2. CHANGES IN SECURITIES None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 31. Certification Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002. 32. Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K: The Registrant was not required to file a Current Report on Form 8-K during the quarter ended March 31, 2004. 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 By: /s/ LESTER J. MANTELL -------------------------------------- Date: April 27, 2004 LESTER J. MANTELL Trustee - 7 -

------------------------------------------------------------------------------------------------------------------ (Unaudited) September 30, December 31, ($ in thousands) 2003 2002 ------------------------------------------------------------------------------------------------------------------ Assets Cash and cash equivalents $517 $158 U.S. Treasuries 82,635 81,485 Restricted funds 4 4 Investments 27 27 Mortgage receivable, net of deferred gain 1,004 1,506 ------------------------------------------------------------------------------------------------------------------ Total assets $84,187 $83,180 ------------------------------------------------------------------------------------------------------------------ Liabilities and trust equity Trust equity $84,187 $83,180 ------------------------------------------------------------------------------------------------------------------ Total liabilities and trust equity $84,187 $83,180 ------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------- ($ in thousands) 2003 2002 ------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $1,007 $1,265 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of real estate (183) (183) Gain on sale of stock - (29) Amortization of premium of investment securities 1,042 1,523 ------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 1,866 2,576 ------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from sale of real estate 685 685 Proceeds from sale of stock - 29 Maturities/sales of investment securities 60,305 59,321 Purchases of investment securities (62,497) (62,627) Restricted funds, net - 1 ------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (1,507) (2,591) ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 359 (15) Cash and cash equivalents at beginning of period 158 187 ------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $517 $172 -------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------- Audited September 30, 2003 December 31, 2002 -------------------------------------- -------------------------------------- Carrying Amortized Fair Carrying Amortized Fair ($ in thousands) Value Cost Value Value Cost Value ------------------------------------------------------------------------------------------------------------------- U.S. Treasuries $82,635 $82,635 $82,764 $81,485 $81,485 $81,886 -------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------ Audited September 30, December 31, ($ in thousands) 2003 2002 ------------------------------------------------------------------------------------------------------------------ Gross unrealized gains $129 $401 ------------------------------------------------------------------------------------------------------------------

Investments are as follows: ------------------------------------------------------------------------------------------------------------------- Audited September 30, December 31, ($ in thousands) 2003 2002 ------------------------------------------------------------------------------------------------------------------- Oklahoma Energy Corp. $27 $27 -------------------------------------------------------------------------------------------------------------------

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