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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 Check one
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 for the quarterly period ended June 30, 2005 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission file number 000-50160
 HECHINGER LIQUIDATION TRUST
  Delaware
    
    52-7230151(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 405 East Gude Drive, Suite 206, Rockville, Maryland
    
    20850(Address of principal executive offices)
    
    (Zip Code)
   Yes þ
    
    No o
  Yes o
    
    No þ
  Yes þ
    
    No o




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HECHINGER LIQUIDATION TRUST
 INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
 Description
    
    PagePART
I. FINANCIAL INFORMATION:Item 1.
Financial StatementsUnaudited Statements of Net Assets in Liquidation
    
    
    3Unaudited Statements of Changes in Net Assets in Liquidation
    
    
    4Unaudited Statements of Cash Receipts and Disbursements
    
    
    5Notes to Unaudited Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24PART II. OTHER INFORMATION:Item 1. Legal Proceedings
    
    
    24Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3. Defaults Upon Senior Securities
    
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    26SIGNATURES
    
    
    27INDEX TO EXHIBITS
    
    
    28
  2




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Hechinger Liquidation Trust
 
 Unaudited
Statements of Net Assets in Liquidation
($ in thousands)
 As of
    
    As ofJune 30, 2005
    
    September 30, 2004AssetsCash and cash equivalentsCash designated as available for distribution
    
    $
    3,101
    
    
    $
    3,388Reserved cash
    
    
    22,779
    
    
    
    21,471Restricted cash
    
    
    1,689
    
    
    
    9,312Other cash
    
    
    184
    
    
    
    204Total cash and cash equivalents
    
    
    27,753
    
    
    
    34,375Preference receivables (net of costs of
recovery of $132 and $1,029,
respectively)
    
    
    874
    
    
    
    3,149Other assets
    
    
    603
    
    
    
    160Total assets
    
    
    29,230
    
    
    
    37,684LiabilitiesUnimpaired and convenience claims payable
    
    
    2,937
    
    
    
    2,970Uncashed claims checks
    
    
    295
    
    
    
    142Distributions payable
    
    
    262
    
    
    
    228Estimated costs of liquidationWind-down reserve
    
    
    1,600
    
    
    
    3,518Litigation reserve
    
    
    1,181
    
    
    
    2,384Fleet loss
contingency accrual
    
    
    3,500
    
    
    
    Total liabilities
    
    
    9,775
    
    
    
    9,242Net Assets in Liquidation
    
    $
    19,455
    
    
    $
    28,442
  3




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Hechinger Liquidation Trust
 
 Unaudited Statements of Changes in Net Assets in Liquidation
($ in thousands)
 For the three
    
    For the threemonths ended
    
    months endedJune 30, 2005
    
    June 30, 2004Increase/(decrease) in Net Assets in LiquidationFleet loss contingency accrual
    
    $
    (3,500
    )
    
    $
    Increase in estimated fair value
of preference receivables, net
    
    
    396
    
    
    
    447Increase in estimated costs of liquidation:Wind-down reserve
    
    
    (124
    )
    
    
    Decrease in estimated fair value of unimpaired
and convenience claims payable
    
    
    
    
    
    
    3,806Interest income
    
    
    187
    
    
    
    65Other increases
    
    
    104
    
    
    
    63Net (decrease)/increase in Net Assets in Liquidation
before distributions authorized
    
    
    (2,937
    )
    
    
    4,381Distributions authorized
    
    
    (7,055
    )
    
    
    (134
    )Net (decrease)/increase in Net Assets in Liquidation
after distributions authorized
    
    
    (9,992
    )
    
    
    4,247Net Assets in Liquidation at beginning of period
    
    
    29,447
    
    
    
    33,269Net Assets in Liquidation at end of period
    
    $
    19,455
    
    
    $
    37,516
 For the nine
    
    For the ninemonths ended
    
    months endedJune 30, 2005
    
    June 30, 2004Increase/(decrease) in Net Assets in LiquidationFleet loss contingency accrual
    
    $
    (3,500
    )
    
    $
    Increase in estimated fair value
of preference receivables, net
    
    
    329
    
    
    
    3,537Increase in estimated costs of liquidation:Wind-down reserve
    
    
    (124
    )
    
    
    (1,540
    )Litigation reserve
    
    
    
    
    
    
    (2,000
    )Decrease in estimated fair value of unimpaired
and convenience claims payable
    
    
    23
    
    
    
    3,806Interest income
    
    
    447
    
    
    
    191Other increases
    
    
    1,115
    
    
    
    835Net (decrease)/increase in Net Assets in Liquidation
before distributions authorized
    
    
    (1,710
    )
    
    
    4,829Distributions authorized
    
    
    (7,277
    )
    
    
    (1,889
    )Net (decrease)/increase in Net Assets in Liquidation
after distributions authorized
    
    
    (8,987
    )
    
    
    2,940Net Assets in Liquidation at beginning of period
    
    
    28,442
    
    
    
    34,576Net Assets in Liquidation at end of period
    
    $
    19,455
    
    
    $
    37,516
  4




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Hechinger Liquidation Trust
 
 Unaudited Statements of Cash Receipts and Disbursements
($ in thousands)
 For the nine
    
    For the ninemonths ended
    
    months endedJune 30, 2005
    
    June 30, 2004Cash receiptsPreference collections, before
costs of recovery
    
    $
    3,742
    
    
    $
    7,294Other receipts
    
    
    691
    
    
    
    832Interest income
    
    
    447
    
    
    
    191Total cash receipts
    
    
    4,880
    
    
    
    8,317Cash disbursementsCosts of liquidationOperating expenses
    
    
    1,497
    
    
    
    1,411Legal and professional feesLitigation
    
    
    1,203
    
    
    
    2,276Preference recoveries
    
    
    1,156
    
    
    
    1,371Liquidation Trust operations
    
    
    546
    
    
    
    1,319Unimpaired and convenience claims
    
    
    11
    
    
    
    626Reissued/(voided) claims checks, net
    
    
    (153
    )
    
    
    249Total cash disbursements
    
    
    4,260
    
    
    
    7,252Increase in cash and cash equivalents
before distributions paid
    
    
    620
    
    
    
    1,065Distributions paid
    
    
    ( 7,242
    )
    
    
    ( 2,336
    )Increase/(decrease) in cash
and cash equivalents
    
    
    (6,622
    )
    
    
    (1,271
    )Cash and cash equivalents
at beginning of period
    
    
    34,375
    
    
    
    46,837Cash and cash equivalents
at end of period
    
    $
    27,753
    
    
    $
    45,566
  5




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Hechinger Liquidation Trust
 
 Notes to Unaudited Financial Statements
 1.
    
    Background and Basis of Presentation
 Background
       Basis of Presentation
  6




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2.
    
    Significant Accounting Policies
 Use of Estimates
  Cash and Cash Equivalents
  Taxes
    3.
    
    Cash and Cash Equivalents
  7




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Cash Designated as Available for Distribution
  ($ in thousands)
 As of
    
    As ofJune 30, 2005
    
    September 30, 2004Distributions payable
    
    $
    262
    
    
    $
    228Reserve for remaining disputed
impaired claims at 9.1% and 8.1%,
respectively
    
    
    2,839
    
    
    
    3,160Total available cash
    
    $
    3,101
    
    
    $
    3,388
 Reserved Cash
 Restricted Cash
 Other Cash
 4.
    
    Preference Receivables and Other Assets
    8




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5.
    
    Unimpaired and Convenience Claims Payable
   ($ in thousands)
 As of
    
    As ofJune 30, 2005
    
    September 30, 2004Allowed unimpaired claims
    
    $
    2,935
    
    
    $
    1,339Estimated fair value of disputed unimpaired claims
Kemper claim, net
    
    
    
    
    
    
    1,600Other disputed unimpaired claims
    
    
    
    
    
    
    29Total estimated fair value of disputed unimpaired claims
    
    
    
    
    
    
    1,629Convenience claims
    
    
    2
    
    
    
    2Total
    
    $
    2,937
    
    
    $
    2,970Number of disputed unimpaired claims
    
    
    5
    
    
    
    9
     9




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6.
    
    Uncashed Claims Checks
  7.
    
    Distributions Payable
  8.
    
    Estimated Costs of Liquidation
      9.
    
    Fleet Loss Contingency Accrual
  10




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10.
    
    Bankruptcy Reserves Required
  ($ in thousands)
 As of
    
    As ofJune 30, 2005
    
    September 30, 2004Liability ReservesFleet loss contingency accrual
    
    $
    3,500
    
    
    $
    Wind-down (net of related escrow of $0,
and $278, respectively)
    
    
    1,600
    
    
    
    3,240Litigation
    
    
    1,181
    
    
    
    2,384Unimpaired and convenience claims
(excluding secured claim (see Note 5))
    
    
    1,337
    
    
    
    1,370Uncashed claims checks
    
    
    295
    
    
    
    142Total liability reserves
    
    
    7,913
    
    
    
    7,136Contingency ReservesFleet
    
    
    7,500
    
    
    
    11,000Litigation appeals provision
    
    
    4,000
    
    
    
    Excess disputed unimpaired claims
    
    
    329
    
    
    
    309Preference settlement claims
    
    
    37
    
    
    
    26Minimum reserve
    
    
    3,000
    
    
    
    3,000Total contingency reserves
    
    
    14,866
    
    
    
    14,335Total reserves
    
    $
    22,779
    
    
    $
    21,471
   11




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11.
    
    Impaired Claims
  ($ in thousands)
 As of
    
    As ofJune 30, 2005
    
    September 30, 2004Allowed impaired claims
    
    $
    705,720
    
    
    $
    704,015Estimated fair value of disputed impaired claims
    
    
    17,272
    
    
    
    20,798Total estimated impaired claims
    
    $
    722,992
    
    
    $
    724,813Asserted value of disputed impaired claims
    
    $
    55,996
    
    
    $
    64,068Number of disputed impaired claims
    
    
    23
    
    
    
    47
  12.
    
    Contingencies
 The Bondholder Action
  The Committee Action
  12




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13.
    
    Subsequent events
  13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   I.
    
    Accounting Policies and Estimates
   Fleet loss contingency accrual
   14




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1.
    
    Bondholder Action
    2.
    
    Committee Action
  II.
    
    Changes in Net Assets in Liquidation
    15




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($ in thousands)
 For the three months endedJune 30, 2005
    
    June 30, 2004Distributions authorized
    
    $
    (7,055
    )
    
    $
    (134
    )Changes in estimates increase/(decrease)
in net assets in liquidationFleet loss contingency accrual
    
    
    (3,500
    )
    
    
    Preference receivables, net
    
    
    396
    
    
    
    447Estimated costs of liquidation
    
    
    (124
    )
    
    
    Unimpaired claims payable
    
    
    
    
    
    
    3,806Net other increases
    
    
    291
    
    
    
    128Net (decrease)/increase in net assets in liquidation
    
    $
    (9,992
    )
    
    $
    4,247
 For the nine months endedJune 30, 2005
    
    June 30, 2004Distributions authorized
    
    $
    (7,277
    )
    
    $
    (1,889
    )Changes in estimates  (decrease)/increase
in net assets in liquidationFleet loss contingency accrual
    
    
    (3,500
    )
    
    
    Preference receivables, net
    
    
    329
    
    
    
    3,537Estimated costs of liquidation
    
    
    (124
    )
    
    
    (3,540
    )Unimpaired claims payable
    
    
    23
    
    
    
    3,806Net other increases
    
    
    1,562
    
    
    
    1,026Net (decrease)/increase in net assets in liquidation
    
    $
    (8,987
    )
    
    $
    2,940
 A.
    
    Distributions authorized
     16




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B.
    
    Fleet loss contingency accrual
  C.
    
    Changes in estimates  estimated fair value of preference receivables
   D.
    
    Changes in estimates  estimated costs of liquidation
      17




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E.
    
    Changes in estimates  estimated fair value of unimpaired claims payable
     18




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F.
    
    Net other increases
  III.
    
    Cash Receipts and Disbursements
  ($ in thousands)
 For the nine months endedJune 30, 2005
    
    June 30, 2004Cash receiptsPreference collections, before
costs of recovery
    
    $
    3,742
    
    
    $
    7,294Other receipts
    
    
    1,138
    
    
    
    1,023Total cash receipts
    
    
    4,880
    
    
    
    8,317Cash disbursementsOperating expenses
    
    
    1,497
    
    
    
    1,411Legal and professional feesLitigation
    
    
    1,203
    
    
    
    2,276Preference recoveries
    
    
    1,156
    
    
    
    1,371Liquidation Trust operations
    
    
    546
    
    
    
    1,319Claims payments
    
    
    11
    
    
    
    626Reissued/(voided) claims checks, net
    
    
    (153
    )
    
    
    249Total cash disbursements
    
    
    4,260
    
    
    
    7,252Distributions paid
    
    
    (7,242
    )
    
    
    (2,336
    )Net cash outflow
    
    $
    (6,622
    )
    
    $
    (1,271
    )
 A.
    
    Cash receipts
    19




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B.
    
    Operating expenses
  C.
    
    Legal and professional fees
       20




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D.
    
    Claims payments
  E.
    
    Distributions paid
    21




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IV.
    
    Net Assets in LiquidationA.
    
    Assets
         22




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B.
    
    Liabilities
   C.
    
    Contingency reserves
   V.
    
    Contingencies
  VI.
    
    Forward-Looking Statements
  23




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
    
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  Federal Court Cases
 The Bondholder Action
  The Committee Action
  24




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Bankruptcy Court Case
 The Kemper Complaint
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  25




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Item 6. Exhibits
 ExhibitNumber
    
    Document31.1
    
    Certification by Liquidation Trustee32.1
    
    Liquidation Trustees Certification Pursuant to 18 U.S.C. Section 135099.7
    
    Notice of the Liquidation Trust of Fourth Interim Distribution
to Classes 4A and 4B
 26




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SIGNATURES
  HECHINGER LIQUIDATION TRUSTDate:  August 15, 2005
    By:
    /s/      Conrad F. HockingName:
    Conrad F. HockingTitle:
    Liquidation Trustee 27




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INDEX TO EXHIBITS
FORM 10-Q
 Exhibit No.31.1
    
    Certification by Liquidation Trustee32.1
    
    Liquidation Trustees Certification Pursuant to 18 U.S.C. Section 135099.7
    
    Notice of the Liquidation Trust of Fourth Interim Distribution to Classes 4A and 4B
 28