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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 March 31, 2006 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)
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HECHINGER LIQUIDATION TRUST
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006
 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
    
    
    19Item 4. Controls and Procedures
    
    
    19PART II. OTHER INFORMATION:Item 1. Legal Proceedings
    
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults Upon Senior Securities
    
    
    21Item 4. Submission of Matters to a Vote of Security Holders
    
    
    21Item 5. Other Information
    
    
    21Item 6. Exhibits
    
    
    21SIGNATURES
    
    
    22INDEX TO EXHIBITS
    
    
    23
 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 ofMarch 31, 2006
    
    
    September 30, 2005AssetsCash and cash equivalentsCash designated as available for distribution
to holders of impaired claims
    
    $
    3,254
    
    
    $
    3,054Reserved cash
    
    
    21,353
    
    
    
    22,206Other cash
    
    
    2,154
    
    
    
    1,389Total cash and cash equivalents
    
    
    26,761
    
    
    
    26,649Committee action settlement receivable
    
    
    
    
    
    
    7,000Preference receivables (net of costs of
recovery of $156 and $152,
respectively)
    
    
    938
    
    
    
    869Other assets
    
    
    3
    
    
    
    3Total assets
    
    
    27,702
    
    
    
    34,521LiabilitiesUnimpaired and convenience claims payable
    
    
    1,337
    
    
    
    1,337Uncashed claims checks
    
    
    334
    
    
    
    361Distributions payable
    
    
    491
    
    
    
    292Estimated costs of liquidationWind-down reserve
    
    
    862
    
    
    
    1,436Litigation reserve
    
    
    461
    
    
    
    730Fleet loss contingency accrual
    
    
    3,500
    
    
    
    3,500Total liabilities
    
    
    6,985
    
    
    
    7,656Net Assets in Liquidation
    
    $
    20,717
    
    
    $
    26,865
  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 endedMarch 31, 2006
    
    
    March 31, 2005Increase in Net Assets in LiquidationIncrease/(decrease) in estimated fair value
of preference receivables, net
    
    $
    66
    
    
    $
    (67
    )Interest income
    
    
    252
    
    
    
    138Other increases
    
    
    2
    
    
    
    998Net increase in Net Assets in Liquidation
before distributions authorized
    
    
    320
    
    
    
    1,069Distributions authorized
    
    
    (53
    )
    
    
    (142
    )Net increase in Net Assets in Liquidation
after distributions authorized
    
    
    267
    
    
    
    927Net Assets in Liquidation at beginning of period
    
    
    20,450
    
    
    
    28,520Net Assets in Liquidation at end of period
    
    $
    20,717
    
    
    $
    29,447
 For the six
    
    
    For the sixmonths ended
    
    
    months endedMarch 31, 2006
    
    
    March 31, 2005Increase in Net Assets in LiquidationIncrease/(decrease) in estimated fair value
of preference receivables, net
    
    $
    35
    
    
    $
    (67
    )Decrease in estimated fair value of unimpaired
and convenience claims payable
    
    
    
    
    
    
    23Interest income
    
    
    486
    
    
    
    260Other increases
    
    
    10
    
    
    
    1,011Net increase in Net Assets in Liquidation
before distributions authorized
    
    
    531
    
    
    
    1,227Distributions authorized
    
    
    (6,679
    )
    
    
    (222
    )Net (decrease)/increase in Net Assets in
Liquidation after distributions authorized
    
    
    (6,148
    )
    
    
    1,005Net Assets in Liquidation at beginning of period
    
    
    26,865
    
    
    
    28,442Net Assets in Liquidation at end of period
    
    $
    20,717
    
    
    $
    29,447
  4




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Hechinger Liquidation Trust
Unaudited Statements of Cash Receipts and Disbursements
 ($ in thousands)
 For the six
    
    
    For the sixmonths ended
    
    
    months endedMarch 31, 2006
    
    
    March 31, 2005Cash receiptsCollection of committee action settlement
    
    $
    7,000
    
    
    $
    Preference collections, before
costs of recovery
    
    
    118
    
    
    
    3,670Interest income
    
    
    486
    
    
    
    260Other receipts
    
    
    10
    
    
    
    65Total cash receipts
    
    
    7,614
    
    
    
    3,995Cash disbursementsCosts of liquidationLegal and professional feesLitigation
    
    
    269
    
    
    
    1,112Preference recoveries
    
    
    152
    
    
    
    951Liquidation Trust operations
    
    
    174
    
    
    
    383Operating expenses
    
    
    400
    
    
    
    939Unimpaired and convenience claims
    
    
    
    
    
    
    10Reissued/(voided) claims checks, net
    
    
    27
    
    
    
    (123
    )Total cash disbursements
    
    
    1,022
    
    
    
    3,272Increase in cash and cash equivalents
before distributions paid
    
    
    6,592
    
    
    
    723Distributions paid
    
    
    6,480
    
    
    
    166Increase in cash and cash equivalents
    
    
    112
    
    
    
    557Cash and cash equivalents
at beginning of period
    
    
    26,649
    
    
    
    34,375Cash and cash equivalents
at end of period
    
    $
    26,761
    
    
    $
    34,932
  5




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




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




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3. Cash and Cash Equivalents
  Cash Designated as Available for Distribution to Holders of Impaired Claims
  ($ in thousands)
 As of
    
    
    As ofMarch 31, 2006
    
    
    September 30, 2005Distributions payable
    
    $
    491
    
    
    $
    292Reserve for remaining disputed impaired
claims at 10.2911% and 9.1%, respectively
    
    
    2,763
    
    
    
    2,762Total available cash
    
    $
    3,254
    
    
    $
    3,054
 Reserved Cash
 Other Cash
 4. Committee Action Settlement Receivable
   5. Preference Receivables
  8




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6. Unimpaired and Convenience Claims Payable
   ($ in thousands)
 As of
    
    
    As ofMarch 31, 2006
    
    
    September 30, 2005Allowed unimpaired claims
    
    $
    1,335
    
    
    $
    1,335Estimated fair value of disputed unimpaired claims
    
    
    
    
    
    
    Convenience claims
    
    
    2
    
    
    
    2Total
    
    $
    1,337
    
    
    $
    1,337Number of disputed unimpaired claims
    
    
    3
    
    
    
    3
    7. Uncashed Claims Checks
  9




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8. Distributions Payable
  9. Estimated Costs of Liquidation
     10. Fleet Loss Contingency Accrual
   10




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11. Bankruptcy Reserves Required
  ($ in thousands)
 As of
    
    
    As ofMarch 31, 2006
    
    
    September 30, 2005Liability reservesFleet loss contingency accrual
    
    $
    3,500
    
    
    $
    3,500Wind-down
    
    
    862
    
    
    
    1,436Litigation
    
    
    461
    
    
    
    730Unimpaired and convenience claims
    
    
    1,337
    
    
    
    1,337Uncashed claims checks
    
    
    334
    
    
    
    361Total liability reserves
    
    
    6,494
    
    
    
    7,364Contingency reservesFleet
    
    
    7,500
    
    
    
    7,500Litigation appeals provision
    
    
    4,000
    
    
    
    4,000Excess disputed unimpaired claims
    
    
    300
    
    
    
    300Preference settlement claims
    
    
    59
    
    
    
    42Minimum reserve
    
    
    3,000
    
    
    
    3,000Total contingency reserves
    
    
    14,859
    
    
    
    14,842Total reserves
    
    $
    21,353
    
    
    $
    22,206
     11




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12. Impaired Claims
  ($ in thousands)
 As of
    
    
    As ofMarch 31, 2006
    
    
    September 30, 2005Allowed impaired claims
    
    $
    706,043
    
    
    $
    706,043Estimated fair value of disputed impaired claims
    
    
    13,784
    
    
    
    13,775Total estimated impaired claims
    
    $
    719,827
    
    
    $
    719,818Asserted value of disputed impaired claims
    
    $
    52,028
    
    
    $
    55,179Number of disputed impaired claims
    
    
    15
    
    
    
    16
    13. Contingencies
 The Bondholder Action
  The Committee Action
  12




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13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   I. Accounting Policies and Estimates
   II. Changes in Net Assets in Liquidation
   14




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($ in thousands)
 For the three months endedMarch 31, 2006
    
    
    March 31, 2005Distributions authorized
    
    $
    (53
    )
    
    $
    (142
    )Increase/(decrease) in estimated fair value
of preference receivables, net
    
    
    66
    
    
    
    (67
    )Interest income and net other increases
    
    
    254
    
    
    
    1,136Net increase in net assets in liquidation
    
    $
    267
    
    
    $
    927
 ($ in thousands)
 For the six months endedMarch 31, 2006
    
    
    March 31, 2005Distributions authorized
    
    $
    (6,679
    )
    
    $
    (222
    )Increase/(decrease) in estimated fair value
of preference receivables, net
    
    
    35
    
    
    
    (67
    )Interest income and net other increases
    
    
    496
    
    
    
    1,294Net increase in net assets in liquidation
    
    $
    (6,148
    )
    
    $
    1,005
 A. Distributions authorized
    B. Changes in estimated fair value of preference receivables, net
  15




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C. Interest income and net other increases
  III. Cash Receipts and Disbursements
  ($ in thousands)
 For the six months endedMarch 31, 2006
    
    
    March 31, 2005Cash receiptsCollection of
committee action settlement
    
    $
    7,000
    
    
    $
    Preference collections, before
costs of recovery
    
    
    118
    
    
    
    3,670Other receipts
    
    
    496
    
    
    
    325Total cash receipts
    
    
    7,614
    
    
    
    3,995Cash disbursementsLegal and professional feesLitigation
    
    
    269
    
    
    
    1,112Preference recoveries
    
    
    152
    
    
    
    951Liquidation Trust operations
    
    
    174
    
    
    
    383Operating expenses
    
    
    400
    
    
    
    939Claims payments
    
    
    
    
    
    
    10Reissued/(voided) claims checks, net
    
    
    27
    
    
    
    (123
    )Total cash disbursements
    
    
    1,022
    
    
    
    3,272Distributions paid
    
    
    6,480
    
    
    
    166Increase in cash and cash equivalents
    
    $
    112
    
    
    $
    557
 A. Cash receipts
   16




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B. Legal and professional fees
     17




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C. Operating expenses
  D. Distributions paid
  IV. Net Assets in Liquidation
 A. Assets
    18




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B. Liabilities and Reserves
   V. Contingencies
  VI. Forward-Looking Statements
  Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Item 4. Controls and Procedures
  19




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PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Bankruptcy Court Case
  Federal Court Cases
 The Bondholder Action
  The Committee Action
  20




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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
  Item 6. Exhibits
 ExhibitNumber
    
    Document31.1
    
    Certification by Liquidation Trustee32.1
    
    Liquidation Trustees Certification Pursuant to 18 U.S.C. Section 1350
 21




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SIGNATURES
  HECHINGER LIQUIDATION TRUSTDate: May 15, 2006
    
    By:
    
    /s/ Conrad F. HockingName: Conrad F. HockingTitle: Liquidation Trustee
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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 1350
 23