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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 March 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
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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
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At March 31, 2003 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 Operations
Three Months ended March 31
(Unaudited)
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($ in thousands, except per unit data) 2003 2002
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Losses on dispositions of assets, net ($2) ($389)
Interest, dividend and other income 406 791
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Total income 404 402
Administrative expenses 125 146
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Net income $279 $256
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Net income per unit $0.01 $0.01
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Outstanding units 38,979 38,979
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Balance Sheets
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(Unaudited)
March 31, December 31,
($ in thousands) 2003 2002
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Assets
Cash and cash equivalents $69 $158
U.S. Treasuries 81,853 81,485
Restricted funds 4 4
Investments 27 27
Mortgage receivable, net of deferred gain 1,506 1,506
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Total assets $83,459 $83,180
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Liabilities and trust equity
Trust equity $83,459 $83,180
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Total liabilities and trust equity $83,459 $83,180
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See accompanying notes to financial statements.
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CITY INVESTING COMPANY LIQUIDATING TRUST
Statements of Cash Flows
Three Months ended March 31
(Unaudited)
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($ in thousands) 2003 2002
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Cash flows from operating activities:
Net income $279 $256
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of premium of investment securities 286 416
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Net cash provided by operating activities 565 672
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Cash flows from investing activities:
Maturities/sales of investment securities 19,786 19,067
Purchases of investment securities (20,440) (19,705)
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Net cash used for investing activities (654) (638)
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Net (decrease) increase in cash and cash equivalents (89) 34
Cash and cash equivalents at beginning of year 158 187
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Cash and cash equivalents at end of period $69 $221
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Statements of Changes in Trust Equity
Three Months ended March 31
(Unaudited)
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($ in thousands) 2003 2002
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Balance at beginning of period $83,180 $81,676
Net income 279 256
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Balance at March 31 $83,459 $81,932
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See accompanying notes to financial statements.
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CITY INVESTING COMPANY LIQUIDATING TRUST
Notes to Financial Statements
(Unaudited)
Note 1 - Organization
The accompanying financial statements for the City Investing Company Liquidating
Trust (the "Trust") are unaudited. In the opinion of the Trustees, the interim
financial statements reflect all adjustments necessary for a fair presentation
of the financial position and income and expenses of the Trust as prepared on a
Federal income tax basis. Results for interim periods are not necessarily
indicative of results for the full year.
Note 2 - Basis of Accounting
The accompanying financial statements have been prepared on the basis of
accounting used for Federal income tax purposes. Accordingly, certain revenue
and the related assets are recognized when received rather than when earned; and
certain expenses are recognized when paid rather than when the obligation is
incurred; and assets are reflected at their tax basis.
Note 3 - Losses on Dispositions of Assets
Losses on dispositions of assets, net, include legal fees attributable to issues
that relate to periods before the liquidation of City Investing Company.
Note 4 - Investment Securities
Investment securities, all of which mature within one year, consist of U.S.
Treasuries and are carried at original cost, net of premium amortization
recorded at interest collection dates. The fair value of U.S. Treasuries is
based on quoted market prices. Investment securities consist of the following:
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March 31, 2003 December 31, 2002
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Carrying Amortized Fair Carrying Amortized Fair
($ in thousands) Value Cost Value Value Cost Value
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U.S. Treasuries $81,853 $81,853 $82,720 $81,485 $81,485 $81,886
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The gross unrealized gains on investment securities amounted to the following:
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March 31, December 31,
($ in thousands) 2003 2002
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Gross unrealized gains $867 $401
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Note 5 - Restricted Funds
Restricted funds at March 31, 2003 and December 31, 2002 represent a rent
deposit of $4,000.
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CITY INVESTING COMPANY LIQUIDATING TRUST
Notes to Financial Statements (continued)
(Unaudited)
Note 6 - Investments
Investments are as follows:
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March 31, December 31,
($ in thousands) 2003 2002
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Oklahoma Energy Corp. $27 $27
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The Trust holds 310,810 shares of Oklahoma Energy Corp. common stock, which are
carried at their tax basis. At March 31, 2003 and December 31, 2002, the fair
market value of the Oklahoma Energy stock, based on quoted market prices, was
$6,216 and $9,324, 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 and
2002, cash payment installments of $960,000 and $907,000, respectively, were
received which resulted in a recognized long-term gain, net of expenses, of
$183,000 in both years and net interest income of $274,000 and $222,000,
respectively. The deferred gain of $704,000 at March 31, 2003 and December 31,
2002, is netted against the gross mortgage receivable of $2,210,000 at March 31,
2003 and December 31, 2002. It is projected that the remaining deferred gain of
$704,000 will be subject to expenses estimated to be $154,000.
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,
including:
AmBase Corporation v. City Investing Company Liquidating Trust, et al. (01 Civ.
0771): On April 3, 2003, the United States Court of Appeals for the Second
Circuit (Docket No. 02-7230) affirmed the District Court's dismissal of this
action commenced by AmBase Corporation against the Trust. AmBase has filed a
petition for rehearing with the Court of Appeals for the Second Circuit.
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.
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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 $279,000 ($0.01 per unit) in the quarter ended
March 31, 2003, compared to net income of $256,000 ($0.01 per unit) in the first
quarter of 2002. The reported losses on the dispositions of assets, net, reflect
losses of $2,000 in 2003 as compared to losses of $389,000 in 2002, which
consist of legal fees attributable to issues that relate to periods before the
liquidation of City Investing Company. In 2002, the higher litigation costs were
attributable to the Trust being defended against claims brought by AmBase
Corporation, as well as Rheem Manufacturing Company.
Interest, dividend and other income, principally consisting of interest earned
on the investment of cash equivalents and investment securities was $406,000 in
the first quarter of 2003, compared with $791,000 in the first quarter of 2002.
The decrease in the 2003 period was primarily due to lower interest rates in the
2003 versus 2002 period. Administrative expenses were $125,000 and $146,000 in
the first quarters of 2003 and 2002, respectively. In 2003, the largest single
item to decrease was legal expenses.
At March 31, 2003, the Trust had cash and cash equivalents and U.S. Treasuries
of $81,922,000. The Trustees believe that such cash resources and investment
securities are sufficient to meet all anticipated liquidity requirements.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of 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-14. Based upon that evaluation, the Trustees
concluded that the Trust's internal disclosure controls and procedures are
effective in timely alerting them to material information relating to the Trust
required to be included in the Trust's periodic SEC filings. 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, 2002 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.
ITEM 2. CHANGES IN SECURITIES
None.
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
99.1. Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2. Certification Pursuant to Section 302(a) 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, 2003.
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: April 17, 2003 By: /s/ Lester J. Mantell
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LESTER J. MANTELL
Trustee
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