Conformed Copy
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended: September 9, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file No.: 33-48862
HOMELAND HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 73-1311075
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2601 Northwest Expressway
Oil Center-East
Oklahoma City, Oklahoma 73112
(Address of principal executive offices) (Zip Code)
(405) 879-6600
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the
issuer's classes of common stock as of October 20, 1995.
Class A Common Stock, including redeemable common stock: 32,599,707 shares
Class B Common Stock: None
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
ASSETS
September 9, December 31,
1995 1994
Current assets:
Cash and cash equivalents $ 7,871 $ 339
Receivables, net of allowance for uncollectible
accounts of $1,965 and $1,543 13,312 12,235
Receivables for taxes - 2,270
Inventories 47,070 89,850
Prepaid expenses and other current assets 3,287 6,384
Total current assets 71,540 111,078
Property, plant and equipment:
Land 9,160 10,997
Buildings 22,274 29,276
Fixtures and equipment 43,492 61,360
Land and leasehold improvements 23,271 32,410
Software 16,677 17,876
Leased assets under capital leases 28,580 46,015
Construction in progress 2,479 2,048
145,933 199,982
Less, accumulated depreciation
and amortization 65,269 82,603
Net property, plant and equipment 80,664 117,379
Excess of purchase price over fair
value of net assets acquired, net
of amortization of $908 and $795 2,398 2,475
Other assets and deferred charges 5,465 8,202
Total assets $160,067 $239,134
Continued
The accompanying notes are an integral part
of these financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, Continued
(In thousands, except share and per share amounts)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 9, December 31,
1995 1994
Current liabilities:
Accounts payable - trade $ 21,327 $ 30,317
Salaries and wages 2,056 1,925
Taxes 6,175 6,492
Accrued interest payable 503 3,313
Other current liabilities 13,425 15,050
Current portion of long-term debt - 2,250
Current portion of obligations under capital
leases 4,149 7,828
Current portion of restructuring reserve 1,113 -
Total current liabilities 48,748 67,175
Long-term obligations:
Long-term debt 97,717 145,000
Obligations under capital leases 9,024 11,472
Other noncurrent liabilities 3,896 5,176
Noncurrent restructuring reserve 7,694 5,005
Total long-term obligations 118,331 166,653
Redeemable common stock, Class A, $.01 par value,
1,720,718 shares at September 9, 1995 and
3,864,211 shares at December 31, 1994, at 815 1,235
redemption value
Stockholders' equity:
Common stock
Class A, $.01 par value, authorized - 40,500,000
shares, issued - 33,748,482 shares at September 9,
1995 and 31,604,989 shares at December 31, 1994
outstanding - 30,878,989 shares 337 316
Additional paid-in capital 54,947 53,896
Accumulated deficit (60,296) (48,398)
Treasury stock, 2,869,493 shares at September 9,
1995 and 726,000 shares at December 31, 1994,
at cost (2,815) (1,743)
Total stockholders' equity (7,827) 4,071
Total liabilities and stockholders' equity $160,067 $239,134
The accompanying notes are an integral part
of these financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
12 weeks 12 weeks
ended ended
September 9, September 10,
1995 1994
Sales, net $133,020 $174,264
Cost of sales 101,491 128,443
Gross profit 31,529 45,821
Selling and administrative 32,465 43,962
Operating profit (loss) (936) 1,859
Interest expense 3,367 4,140
Loss before income taxes (4,303) (2,281)
Income tax expense - -
Net loss $ (4,303) $ (2,281)
Net loss per common share $ (.13) $ (.07)
Weighted average shares outstanding 32,599,707 34,743,200
The accompanying notes are an integral part
of these financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
36 weeks 36 weeks
ended ended
September 9, September 10,
1995 1994
Sales, net $458,088 $541,591
Cost of sales 347,506 400,115
Gross profit 110,582 141,476
Selling and administrative 108,473 128,309
Operating profit 2,109 13,167
Interest expense 11,677 12,190
Income (loss) before income taxes and
extraordinary items (9,568) 977
Income tax expense - 1,046
Loss before extraordinary items (9,568) (69)
Extraordinary items (2,330) -
Net loss $(11,898) $ (69)
Loss before extraordinary items per
common share $ (.29) $ (.00)
Extraordinary items per common share (.07) -
Net loss per common share $ (.36) $ (.00)
Weighted average shares outstanding 33,500,994 34,756,672
The accompanying notes are an integral part
of these financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Minimum
Class A Additional Pension Total
Common Stock Paid-inAccumulatedLiabilityTreasury Stock Stockholders'
Shares Amount Capital Deficit AdjustmentShares Amo
unt Equity
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Balance, January 1, 199431,498,989 $315$46,358$(7,753)$(572) 620,000
$(1,488) $36,860
Purchase of treasury stock106,000 1 254 - - 106,000
(255) -
Adjustment to reduce
minimum liability - - - - 572 - - 572
Net loss - - - (69) - - -
(69)
Balance, September 10, 199431,604,989$316$46,612$(7,822)$ - 726,000
$(1,743) $37,363
Balance, December 31, 199431,604,989$316$53,896$(48,398)$ - 726,000
$(1,743) $ 4,071
Purchase of treasury stock2,143,493 21 1,051 - - 2,143,493
(1,072) -
Net loss - - - (11,898) - - -
(11,898)
Balance, September 9, 199533,748,482$337$54,947$(60,296)$ - 2,869,493
$(2,815) $(7,827)
</TABLE>
The accompanying notes are an integral part
of these financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
(Unaudited)
36 weeks 36 weeks
ended ended
September 9, September 10,
1995 1994
Cash flows from operating activities:
Net loss $(11,898) $ (69)
Adjustments to reconcile net loss to net
cash from operating activities:
Depreciation and amortization 8,908 11,399
Amortization of financing costs 771 998
Write-off of financing cost on long
term debt retired 1,424 -
Loss (gain) on disposal of assets (275) 28
Amortization of beneficial interest in
operating leases 143 179
Change in assets and liabilities:
(Increase) decrease in receivables (426) 2,136
Decrease in receivables for taxes 2,270 -
Decrease in inventories 14,904 1,400
(Increase) decrease in prepaid expenses
and other current assets 3,097 (6,914)
Decrease in other assets and deferred charges 228 107
Decrease in accounts payable - trade (8,989) (1,861)
Increase (decrease) in salaries and wages 131 (859)
Increase (decrease) in taxes (317) 3,475
Decrease in accrued interest payable (2,810) (2,676)
Decrease in other current liabilities (1,625) (1,142)
Decrease in noncurrent restructuring reserve(12,196) -
Decrease in other noncurrent liabilities (1,105) (1,768)
Total adjustments 4,133 4,502
Net cash provided by (used in) operating
activities (7,765) 4,433
Cash flows from investing activities:
Capital expenditures (1,008) (4,713)
Cash received from sale of assets 73,038 401
Net cash provided by (used in) investing
activities 72,030 (4,312)
Cash flows from financing activities:
Payments under senior secured floating rate
notes (9,375) -
Payments under senior secured fixed rate notes(15,625) -
Borrowings under revolving credit loans 62,811 43,000
Payments under revolving credit loans (85,095) (35,000)
Net payments under swing loans (1,500) (5,000)
Principal payments under notes payable (750) (1,000)
Principal payments under capital lease
obligations (6,127) (2,359)
Payments to acquire treasury stock (1,072) (255)
Net cash used in financing activities (56,733) (614)
Net increase (decrease) in cash and cash
equivalents 7,532 (493)
Cash and cash equivalents at beginning of period 339 2,194
Cash and cash equivalents at end of period $ 7,871 $ 1,701
continued
The accompanying notes are an integral part
of these financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
(Unaudited)
36 weeks 36 weeks
ended ended
September 9, September 10,
1995 1994
Supplemental information:
Cash paid during the period for interest $13,636 $13,794
Cash paid during the period for income taxes $ - $ 236
The accompanying notes are an integral part
of these financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Preparation of Consolidated Financial Statements.
The accompanying unaudited consolidated financial
statements of Homeland Holding Corporation and
Subsidiary (the "Company") reflect all adjustments
consisting only of normal and recurring adjustments
which are, in the opinion of management, necessary to
present fairly the consolidated financial position and
the consolidated results of operations and cash flows
for the periods presented. These unaudited
consolidated financial statements should be read in
conjunction with the consolidated financial statements
of the Company for the period ended December 31, 1994
and the notes thereto. As a result of the amendments
to the Senior Note Indenture, as well as the redemption
of a portion of the Senior Notes and the replacement of
the Revolving Credit Agreement, discussed in Item 2
"Management's Discussion and Analysis of Financial
Condition and Results of Operations: Liquidity and
Capital Resources", the Company incurred the following
extraordinary loss in the 36 weeks ended September 9,
1995:
Consent fees equal to
$5.00 for each $1,000
principal amount of the
$120.0 million Senior Notes $600,000
Premiums on redemption of
$15.6 million of the
Senior Secured Fixed Rate
Notes, due March 1999 306,000
Unamortized financing costs
related to the redemption of
$25.0 million of Senior
Notes, due March 1997 and
March 1999, and the replacement
of the Revolving Credit
Agreement 1,424,000
Extraordinary loss $2,330,000
2. Accounting Policies.
The policies of the Company are summarized in the
consolidated financial statements of the Company for
the 52 weeks ended December 31, 1994 and the notes
thereto.
3. Restructuring.
In accordance with a strategic plan approved by the
Board of Directors in December 1994, the Company
entered into an agreement with Associated Wholesale
Grocers, Inc. ("AWG") on February 6, 1995, pursuant to
which the Company sold 29 of its stores and its
warehouse and distribution center to AWG on April 21,
1995. In connection with this strategic plan, the
Company also plans to close fifteen under-performing
stores during 1995, nine of which were closed during
the 36 weeks ended September 9, 1995. During the 36
weeks ended September 9, 1995, the Company incurred
expenses associated with the operational restructuring
as follows:
<TABLE>
<CAPTION>
Operational
Operational restructuring Operational
restructuring expenses incurred restructuring
reserve at in the 36 weeks ended reserve at
December 31, 1994 September 9, 1995 September 9, 1995
<S> <C> <C>
<C>
Expenses associated with the
planned store closings,
primarily occupancy costs
from closing date to lease
termination or sublease date $8,319 $(1,523) $6,796
Expenses associated with the AWG
transaction, primarily service
and equipment contract
cancellation fees 5,649 (6,208) (559)
Estimated severance costs
associated with the AWG
transaction 5,624 (4,293) 1,331
Legal and consulting fees
associated with the
AWG transaction 4,905 (3,749) 1,156
Net gain on sale of property,
plant and equipment to AWG (19,492) 19,575 83
Operational restructuring
reserve $ 5,005 $ 3,802 $ 8,807
</TABLE>
The separately identifiable revenue and store contribution to
operating profit related to the stores sold to AWG or closed
and expenses related to the warehouse facility are as
follows:
36 weeks 36 weeks
ended ended
September 9, September 10,
1995 1994
Sales, net $70,544 $154,626
Store contribution to
operating profit before
allocation of administrative
and advertising expenses $ 2,929 $ 6,701
Warehouse expenses $ 3,853 $ 8,369
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Comparison of Twelve and Thirty-Six Weeks Ended
September 9, 1995 with Twelve and Thirty-Six Weeks Ended
September 10, 1994.
Sales. Net sales for the 12 weeks and 36 weeks
ended September 9, 1995 decreased 23.7% and 15.4%
respectively, over the net sales of the corresponding
periods of 1994. The decrease in net sales was due
primarily to the sale of 29 stores to AWG on April 21, 1995
and the closing of nine stores, five in February 1995, two
in March 1995 and two in July 1995. These stores were
closed pursuant to the Company's plan to close certain
underperforming stores. Net sales were also impacted by
increased competition in the Company's market area resulting
from additional store openings of Wal-Mart Stores, Inc.
("Wal-Mart") supercenter stores and Albertson's Inc. stores
during 1994. There were 11 new Wal-Mart supercenter stores
opened in the Company's market area during 1994.
Net sales for the 12 weeks ended September 9, 1995
for the Company's comparable stores increased 2.7% over the
corresponding prior period due primarily to improved store
conditions, a new advertising program and increased
promotional pricing. Net sales for the 36 weeks ended
September 9, 1995 increased 0.1% for the reasons described
above.
Cost and Expenses. Gross profit as a percentage
of sales for the 12 weeks ended September 9, 1995 decreased
to 23.7% compared to 26.3% for the corresponding period of
1994. Gross profit as a percentage of sales for the 36
weeks ended September 9, 1995 decreased to 24.1% compared to
26.1% for the corresponding period of 1994. The decrease in
gross margins was the result of increased promotional
pricing in an effort to grow market share and in response to
increased competition. In addition, the reduction can be
attributed in part to the sale of the Company's distribution
center to AWG, at which time the Company converted from self-
supply of product to procuring product from AWG. Further,
pending the April 21, 1995 sale of the Company's warehouse
and certain stores to AWG and the transition to being
supplied by AWG, the Company experienced a reduction of
vendor allowances which adversely affected gross profit.
Selling and administrative expenses decreased
$11.5 million for the 12 weeks ended September 9, 1995
compared to the prior period, and decreased as a percentage
of sales to 24.4% from 25.2%. For the 36 weeks ended
September 9, 1995, selling and administrative expenses
declined $19.8 million compared to the prior period while as
a percentage of sales, they remained at 23.7 %. The
decreases in expenses for the 12 weeks and 36 weeks ended
September 9, 1995 were due to the sale of the Company's 29
stores to AWG, the closing of nine stores, as well as
personnel and other cost reductions at the corporate office.
Operating Income. The Company recorded an
operating loss for the 12 weeks ended September 9, 1995 of
$936,000 compared to $1.9 million profit for the
corresponding period of 1994. Operating income for the 36
weeks ended September 9, 1995 decreased to $2.1 million
compared to $13.2 million in the corresponding period of
1994. The decrease for the 12 weeks and 36 weeks ended
September 9, 1995 was the result of the decrease in gross
profit margins offset in part by the decrease in selling and
administrative expenses.
Interest Expense. Interest expense for the 12
weeks ended September 9, 1995 decreased to $3.4 million
compared to the prior period of $4.1 million. For the 36
weeks ended September 9, 1995, interest expense decreased to
$11.7 million compared to the prior period of $12.2 million.
The decrease is a result of a decline in the usage of the
revolving credit loan and the redemption of $25.0 million of
Senior Notes on June 1, 1995, offset in part by an increase
in interest rates.
Income Tax Expense. No income tax expense was
recorded for the 12 weeks and 36 weeks ended September 9,
1995 as the Company is projecting a taxable loss for fiscal
1995. No income tax expense was recorded for the 12 weeks
ended September 10, 1994. The income tax expense for the 36
weeks ended September 10, 1994 was $1.0 million.
Extraordinary Items. Extraordinary items for the
36 weeks ended September 9, 1995 consist of the payment of
$600,000 in consent fees to the holders of the Senior Notes
(as defined below), $306,000 in premiums on the redemption
of $15.6 million of New Fixed Rate Notes (as defined below)
and $1.4 million in unamortized financing costs related to
the redemption of $25.0 million of Senior Notes and the
replacement of the Revolving Credit Agreement (as defined
below).
Income or Loss. The Company recorded a net loss
of $4.3 million and $11.9 million, respectively, during the
12 weeks and 36 weeks ended September 9, 1995, compared to
net loss of $2.3 million and $69,000, respectively, for the
comparable prior periods. The increases in net loss were
due to the decreases in gross profit margins and the
extraordinary items recognized in the 36 weeks ended
September 9, 1995, offset in part by the decreases in
selling and administrative expenses.
Liquidity and Capital Resources
The major sources of liquidity for the Company's
operations and expansion have been internally generated
funds and borrowings under credit facilities. In March
1992, the Company refinanced its indebtedness by entering
into an Indenture with United States Trust Company of New
York, as trustee (the "Senior Note Indenture"), pursuant to
which the Company issued $45 million in aggregate principal
amount of Series A Senior Secured Floating Rate Notes due
1997, bearing interest at a floating rate of 3% over LIBOR
(the "Old Floating Rate Notes"), and $75 million in
aggregate principal amount of Series B Senior Secured Fixed
Rate Notes due 1999, bearing interest at 11-3/4% per annum
(the "Old Fixed Rate Notes," and together with the Old
Floating Rate Notes, the "Old Notes"). The Old Fixed Rate
Notes were not redeemable by the Company until on or after
March 1, 1997.
In October and November 1992, the Company
conducted an offer to exchange its Series D Senior Secured
Floating Rate Notes due 1997 (the "New Floating Rate Notes")
for an equal principal amount of its outstanding Old
Floating Rate Notes, and Series C Senior Secured Fixed Rate
Notes due 1999 (the "New Fixed Rate Notes," and together
with the New Floating Rate Notes, the "New Notes") for an
equal principal amount of its Old Fixed Rate Notes. The Old
Notes and the New Notes are collectively referred to herein
as the "Senior Notes". The New Notes are substantially
identical to the Old Notes, except that the offering of the
New Notes was registered with the Securities and Exchange
Commission. Holders of the New Notes are not entitled to
certain rights of holders of the Old Notes, as described in
the prospectus relating to the exchange offer.
On June 1, 1995, the Company redeemed $15.6
million of its New Fixed Rate Notes, $6.9 million of New
Floating Rate Notes and $2.5 million of Old Floating Rate
Notes (collectively the "Redeemed Notes"). The redemption
price for the Redeemed Notes was equal to 100% of the
principal amount and accrued interest of $695,000 plus in
the case of the New Fixed Rate Notes, a premium of $306,000.
At October 20, 1995, $59.4 million of New Fixed Rate Notes,
$26.1 million of New Floating Rate Notes and $9.5 million of
Old Floating Rate Notes were outstanding.
On April 21, 1995, the Company replaced its
Revolving Credit Agreement with Union Bank of Switzerland,
New York Branch, as agent and as lender, any other lenders
and financial institutions parties thereto (the "Revolving
Credit Agreement") with a revised revolving facility (the
"Amended and Restated Revolving Credit Agreement"). The
Amended and Restated Revolving Credit Agreement is with
National Bank of Canada ("NBC"), as agent and as lender,
Heller Financial, Inc. and any other lenders thereafter
parties thereto. The Amended and Restated Revolving Credit
Agreement provides a commitment of up to $25 million in
secured revolving credit loans and letters of credit. The
Amended and Restated Revolving Credit Agreement permits (a)
borrowings to refinance the existing Revolving Credit
Agreement and for working capital needs and (b) the issuance
of standby letters of credit and documentary letters of
credit. Borrowings under the Amended and Restated Revolving
Credit Agreement bear interest at the NBC Base Rate plus
1.5% for the first year. Subsequent years' interest rates
will be dependent upon the Company's earnings but will not
exceed the NBC Base Rate plus 2.0%. All borrowings under
the Amended and Restated Revolving Credit Agreement are
subject to certain borrowing base requirements and mature no
later than February 27, 1997, with the possibility of
extending the maturity date to March 31, 1998 at the
lenders' sole discretion. At October 20, 1995, the net
unused and available revolving credit facility under the
Amended and Restated Credit Agreement is $7.3 million.
Based on the Company's recent operating
performance, management believes that the Company will not
be able to comply with its Debt-to-EBITDA ratio covenant
under the Revolving Credit Agreement and Senior Note
Indenture at the end of fiscal 1995. If the Company is not
in compliance with such covenant, it will seek to obtain
amendments or waivers from its lenders. Although the
Company has been successful in obtaining amendments or
waivers in the past, there is no assurance that, if
required, it will be able to do so in the future.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders
The Company's 1995 Annual Meeting of Stockholders
was held on August 15, 1995. At the meeting, the Company's
Board of Directors was re-elected in its entirety.
Item 5. Other Information
Employment Agreement
On July 10, 1995, Homeland entered into a two-year
employment agreement with Larry W. Kordisch, the Company's
Executive Vice President-Finance and Chief Financial Officer.
The agreement provides for a base annual salary of not less
than $150,000, subject to increase from time to time at the
discretion of the Board of Directors. Mr. Kordisch is also
entitled to participate in the Incentive Bonus Program based
upon the attainment of performance objectives as the Board of
Directors shall determine from time to time, provided that for
calendar year 1995 the minimum bonus shall be $100,000. If
the Company terminates Mr. Kordisch's employment prior to
expiration of the employment agreement for any reason other
than cause or disability or if Mr. Kordisch elects to
terminate employment following the sale of at least 50% of the
voting securities of the Company the Company will continue to
pay Mr. Kordisch his base salary for one year after the date
of such termination or until the second anniversary of the
agreement's commitment date, whichever is longer. On
September 26, 1995 the employment agreement was extended to
December 31, 1997.
Assertion of Withdrawal Liability
The Company received a notice and demand for
payment, dated June 22, 1995, from Central States, Southeast
and Southwest Areas Pension Fund (the "Fund") in the amount of
approximately $4.4 million. The Fund has asserted that the
Company has incurred a withdrawal liability as a result of the
sale of the distribution center to AWG. The Fund has also
filed a collection action to compel the Company to begin
making payments on the asserted liability. The Company's sale
of the distribution center to AWG was in compliance with ERISA
Section 4204 and, accordingly, no withdrawal from the Fund has
occurred. Pursuant to the AWG transaction, AWG has agreed to
indemnify the Company for a withdrawal liability up to
approximately $3.5 million. The Company believes that the
Fund has no basis for the assertion of withdrawal liability
and does not believe the disposition of the liability would
have a material adverse effect on the Company's financial
position, results of operations or cash flows.
Resolution of UFCWNA Grievances
UFCWNA had previously filed three class grievances
against the Company relating to the AWG transaction. The
grievances were (i) the accrued and unpaid vacation due at
termination (ii) the application of the severance pay
provision in the Labor Agreement and (iii) whether the AWG
transaction triggers a special termination pay provision in
the Labor Agreement. On June 27, 1995, the Company entered
into a Grievance Settlement Agreement with UFCWNA to settle
grievances (i) and (ii) at a minimal cost to the Company. The
third UFCWNA grievance was presented for arbitration and, on
August 31, 1995, the arbitrator issued an opinion denying such
grievance.
Internal Revenue Service Settlement
On June 28, 1995, the Company reached a tentative
agreement with the Internal Revenue Service Appeals Office
settling the fiscal 1990, 1991 and 1992 adjustments proposed
in the Revenue Agent's Report dated January 31, 1994,
discussed in the Company's annual Form 10-K for the year ended
December 31, 1994. The agreement settles all outstanding
matters addressed in the Revenue Agent's Report. The Company
had provided sufficient reserves in its consolidated financial
statements for such settlement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: The following exhibit is filed as part
of this report:
Exhibit No. Description
27 Financial Data Schedule.
10pp (1) Employment Agreement, dated as
of July 10, 1995 and as amended
on September 26, 1995, between
Homeland and Larry Kordisch.
10t.5 (1) Fifth Amendment to Homeland
Employees Retirement Plan
effective July 12, 1995.
(b) Reports on Form 8-K: No reports on Form 8-
K were filed during the quarter ended September
9, 1995.
(1) Management contract or compensatory plan.
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.
HOMELAND HOLDING CORPORATION
Date: October 30, 1995 By: /s/ James A. Demme
James A.Demme, President,
Chief Executive Officer and
Director (Principal Executive
Officer)
Date: October 30, 1995 By: /s/ Larry W. Kordisch
Larry W. Kordisch, Executive
Vice President/Finance,
Treasurer, Chief Financial
Officer and Secretary
(Principal Financial Officer)
Date: October 30, 1995 By: /s/ Terry M. Marczewski
Terry M. Marczewski, Chief
Accounting Officer,Assistant
Treasurer and Assistant
Secretary (Principal
Accounting Officer)
EXHIBIT 10t.5
FIFTH AMENDMENT TO THE
Homeland Stores, Inc.
Employees' Retirement Plan
Pursuant to the authority set forth in Article X thereof,
Homeland Stores, Inc. Employees' Retirement Plan, is hereby
amended, effective as of the dates set forth below, in the
following respects only:
RESTATED/ADDED PAGES AMENDED SECTION EFFECTIVE
DATES
ii Table of Contents
(added new section)
9 Section 2.35 (clarified January 1,1989
definition of compensation
and added new compensation
limit effective January 1,
1994
20 Section 4.9 (added new January 1,1993
Section on direct rollovers)
HOMELAND STORES, INC.
EMPLOYEES' RETIREMENT PLAN
Effective as of January 1, 1989
Homeland Stores, Inc.
Oklahoma City, Oklahoma
Section 2.32 - Participation Date 9
Section 2.33 - Plan and Prior Plan 9
Section 2.34 - Plan Administrator 9
Section 2.35 - Plan Compensation 9
Section 2.36 - Plan Year 10
Section 2.37 - Qualified Election 10
Section 2.38 - Qualified Joint and Survivor Annuity 10
Section 2.39 - Qualified Preretirement Survivor Annuity 11
Section 2.40 - Retired Participant 11
Section 2.41 - Retirement Committee 11
Section 2.42 - Social Security Covered Compensation 11
Section 2.43 - Spouse or Surviving Spouse 11
Section 2.44 - Termination of Employment or Terminates Employment 11
Section 2.45 - Trust or Trust Agreement 11
Section 2.46 - Trust Fund 12
Section 2.47 - Trustee 12
Section 2.48 - Years of Eligibility Service 12
Section 2.49 - Years of Vesting Service 12
ARTICLE III - PARTICIPATION IN THE PLAN 14
Section 3.1 - Participation 14
Section 3.2 - Plan and Trust Agreement Binding 14
Section 3.3 - Duration of Participation 14
ARTICLE IV - MONTHLY RETIREMENT INCOME 15
Section 4.1 - Payment of Benefits Only From the Trust Fund 15
Section 4.2 - Qualified Joint and Survivor Annuity Rules/Forms of
Payment 15
Section 4.3 - Normal Retirement 17
Section 4.4 - Late Retirement 17
Section 4.5 - Early Retirement 17
Section 4.6 - Reemployment After the Commencement of Plan Benefits 18
Section 4.7 - Qualified Domestic Relations Order 19
Section 4.8 - Benefits Not Decreased Due to Post-Termination Social
Security Increase 19
Section 4.9 - Direct Rollover Rules 20
ARTICLE V - OTHER BENEFITS 21
Section 5.1 - Termination of Employment 21
Section 5.2 - Qualified Preretirement Survivor Annuity
Rules/Qualified Preretirement Survivor Annuity
Death Benefits 21
Section 5.3 - Post-Retirement Death Benefit 24
Section 5.4 - Beneficiary's Death; No Beneficiary Named 24
Section 5.5 - Cash-Out of Small Amounts 25
Section 5.6 - Limitation on Timing of Benefit Payments 25
Section 5.7 - Duration of Benefit Payments 25
Section 5.8 - Required Distributions 25
ii Fifth Amendment
credited with five (5) Years of Vesting Service under the Plan or
if earlier, the fifth (5th) anniversary of his commencement of
participation in the Plan.
Section 2.30 - Normal Retirement Date The term "Normal
Retirement Date" shall mean the first day of the month coincident
with or next following the Participant's attaining his Normal
Retirement Age.
Section 2.31 - Participant The term "Participant" shall mean any
Employee of an Employer who has become a Participant as provided
in Article III hereof.
Section 2.32 - Participation Date The term "Participation Date"
shall mean the January 1 or July 1 coincident with or immediately
following an Employee's completion of the requirements for
participation as provided in Article III hereof.
Section 2.33 - Plan and Prior Plan The term "Plan" shall mean
the Homeland Stores, Inc. Employees' Retirement Plan as set forth
herein. See the Preamble for the definition of "Prior Plan."
Section 2.34 - Plan Administrator The term "Plan Administrator"
shall mean the Company or other such person or entity designated
by the Company from time to time.
Section 2.35 - Plan Compensation The term "Plan Compensation"
shall mean base salary or wages plus overtime and bonuses, but
excluding non-cash taxable benefits, which an Employee is paid by
the Employers for the performance of duties during such portion
of the Plan Year as he is accruing Benefit Service hereunder.
Plan Compensation shall also include any salary reduction
contributions to Code sections 401(k) and 125 plans for such Plan
Year. Such determination period for Plan Compensation shall end
with the Employee's Early, Normal or Late Retirement Date or
termination date under Section 5.1 or the date his benefit
payments are resumed under Section 4.6 hereof. Notwithstanding
the above to the contrary, the Participant's Plan Compensation
for any Plan Year on or after January 1, 1989, (or portion
thereof in which Benefit Service is accrued) determined under
this section shall be limited to Two Hundred Thousand Dollars
($200,000) as to benefit accruals occurring prior to January 1,
1994 and One Hundred Fifty Thousand Dollars ($150,000) as to
benefit accruals occurring on and after January 1, 1994 (or such
adjusted amount for the year for cost-of-living pursuant to Code
sections 401(a)(17) and 415(d)).
For purposes of determining the Plan Compensation of a
Participant who is a "Highly Compensated Employee" (as defined in
Code section 414(q) by reason of being a "Five Percent (5%)
Owner" (as defined in Code section 414(q)(3) or a member of the
group consisting of the ten (10) Highly Compensated Employees
paid the greatest total "Compensation" (as defined in Code
section 414(q)(7) during the Plan Year, Plan Compensation of such
Employee shall include the Plan Compensation of "family members"
who are Participants. "Family members" as used herein shall mean
the spouse of the Participant and any lineal descendants of the
Participant who have not Attained Age nineteen (19) before the
close of the year. If such aggregated Plan Compensation for the
year exceeds the dollar limit, then the dollar limit applicable
to each such Participant's Plan Compensation for such year will
be the dollar limit otherwise applicable for such year multiplied
by a fraction, the numerator of which is such Participant's
unlimited Plan
9 Fifth Amendment
Section 4.8 - Benefits Not Decreased Due to Post-Termination
Social Security Increase Any benefit which a Participant is
eligible to receive shall not be decreased by reason of any
increase in a benefit level or wage base under Title II of the
Social Security Act if such increase takes place after the later
of (i) September 2, 1974, or (ii) the date of the Employee's
Termination of Employment hereunder.
Section 4.9 - Direct Rollover Rules The following rules shall
apply as provided herein.
Section 4.9(a) - This section applies to distributions made
on or after January 1, 1993. Notwithstanding any provision
of the Plan to the contrary that would otherwise limit a
distributee's election under this section, a distributee may
elect, at the time and in the manner prescribed by the
Retirement Committee, to have any portion of an eligible
rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct
rollover.
Section 4.9(b) - Definitions (applicable to this section):
(i) Eligible rollover distribution: An eligible
rollover distribution is any distribution of all or
any portion of the balance to the credit of the
distributee, except that an eligible rollover
distribution does not include: any distribution that
is one of a series of substantially equal periodic
payments (not less frequently than annually) made
for the life (or life expectancy) of the distributee
or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated
beneficiary, or for a specified period of ten years
or more; any distribution to the extent such
distribution is required under section 401(a)(9) of
the Code; and the portion of any distribution that
is not includable in gross income (determined
without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(ii) Eligible retirement plan: An eligible
retirement plan is an individual retirement account
described in section 408(a) of the Code, an
individual retirement annuity described in section
408(b) of the Code, an annuity plan described in
section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that
accepts the distributee's eligible rollover
distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement
account or individual retirement annuity.
(iii) Distributee: A distributee includes an
employee or former employee. In addition, the
employee's or former employee's surviving spouse and
the employee's or former employee's spouse or former
spouse who is the alternate payee under a qualified
domestic relations order, as defined in section
414(p) of the Code, are distributees with regard to
the interest of the spouse or former spouse.
(iv) Direct rollover: A direct rollover is a
payment by the Plan to the eligible retirement plan
specified by the distributee.
20 Fifth Amendment
Homeland Stores Inc.
P. O. Box 25008
Oklahoma City, Oklahoma 73125
September 26, 1995
Mr. Larry Kordisch
11324 Shady Glen Road
Oklahoma City, OK 73162
Dear Larry:
This letter amends and restates, and supersedes in
its entirety the February 9, 1995 letter regarding the terms
of your employment with Homeland Stores Inc. (the
"Company").
1. Duties. You will serve as an Executive Vice
President and Chief Financial Officer of the Company. You
will devote all of your skill, knowledge and full working
time (reasonable vacation time and absence for sickness or
disability excepted) solely and exclusively to the
conscientious performance of your duties hereunder.
2. Base Salary. As compensation for the duties
to be performed by you under the terms of this letter
agreement, the Company will pay you a base salary in the
amount of $150,000 per annum, payable at the same time as the
Company pays salary to its other executive employees. The
Company will review your base salary from time to time after
1995 and, at the discretion of the Board of Directors, may
increase your base salary based upon your performance and
other relevant factors.
3. Incentive Bonus. While you are providing
services pursuant to this letter, you will be given the
opportunity to receive an annual bonus upon the attainment of
such performance objectives as the Board of Directors shall
determine from time to time after consulting with you;
provided that, for calendar year 1995, you will receive a
minimum bonus of $100,000. Any bonus payable to you will be
paid to you at the same time as bonuses are paid to other
executives.
4. Long Term Incentive Plan. You shall be
eligible to receive awards under a long term incentive
compensation plan to be established by the Company at a level
commensurate with your position and responsibilities with
Company.
5. Employee Benefits. While you are providing
services pursuant to this letter agreement, you will be
eligible to participate in the employee benefit plans and
programs generally available to the Company's employees
(including, but not limited to, coverage under the Company's
medical, dental, life and disability insurance plans and
participation in the Company's qualified plans) as in effect
from time to time on the same basis as the Company's other
employees, subject to the terms and provisions of such plans
and programs.
6. Executive Perquisites. You will be eligible to
receive the perquisites and other personal benefits made
available to the Company's senior executives from time to
time.
7. Expenses. The Company will reimburse you for all
reasonable expenses incurred by you in connection with your
performance of services under this letter agreement in
accordance with the Company's policies, practices and
procedures.
8. Termination of Employment. If the Company
terminates your employment prior to December 31, 1997 for any
reason other than Cause or Disability or if you shall
terminate your employment following the sale of at least 50%
of the voting securities of the Company or its parent, the
Company will continue to pay you your Base Salary (i) for one
year after the date of your termination of employment or (ii)
until December 31, 1997, whichever period is longer. In the
event your employment terminates (i) due to your death or
Disability or (ii) is terminated by the Company for Cause,
you will only be entitled to receive the compensation and
benefits payable to you under the Company's otherwise
applicable employee benefit plans or programs.
As used in this Agreement, "Cause" means (i) your
willful failure to perform substantially your duties as an
officer and employee of the Company (other than due to
physical or mental illness), (ii) your engaging in serious
misconduct that is injurious to the Company, (iii) you having
been convicted of, or entered a plea of nolo contendere to, a
crime that constitutes a felony, or (iv) your unauthorized
disclosure of confidential information (other than to the
extent required by an order of court having competent
jurisdiction or under subpoena from an appropriate government
agency) that has resulted or is likely to result in material
economic damage to the Company. "Disability" means that, as
a result of your incapacity due to physical or mental
illness, you have been absent from your duties to the Company
on a substantially full-time basis for 180 days in any twelve-
month period.
9. Binding Effect. This letter agreement will insure
to the benefit of and be enforceable by your personal or
legal representatives, executors, administrators, heirs,
distributees, devisees and legatees. If you should die while
any amounts would still be payable to you under this letter
agreement if you had continued to live, all such amounts,
unless otherwise provided herein, will be paid in accordance
with the terms of this letter agreement to your personal or
legal representatives, executors, administrators, heirs,
distributees, devisees, legatees or estate, as the case may
be.
10. Indemnification. The Company agrees to indemnify
you to the fullest extent permitted under its By-laws as in
effect from time to time.
11. General Provisions. No provisions of this letter
agreement may be modifies, waived or discharged unless such
modification, waiver or discharge is approved by the
Company's Board of Directors and is agreed to in a writing
signed by you and such Company officer as may be specifically
designated by the Board.
No agreements or representations, oral or other-
wise, express or implied, with respect to the subject matter
hereof have been made by either party which are not set forth
expressly in this letter agreement. The invalidity or
unenforceability of any one or more provisions of this letter
agreement will not affect the validity or enforceability of
any other provision of this letter agreement, which will
remain in full force and effect. This letter agreement may
be executed in one or more counterparts, each of which will
be deemed to an original but all of which together will
constitute one and the same instrument.
All amounts payable to you hereunder will be paid
net of any and all applicable income or employment taxes
required to be withheld therefrom under applicable Federal,
State or local laws or regulations.
The validity, interpretation, construction and
performance of this letter agreement will be governed by the
laws of the State of Oklahoma, without giving effect to its
conflict of laws provisions.
* * * *
If the foregoing accurately sets forth the terms of
your employment with the Company, please so indicate by
signing below and returning one signed copy of this letter
agreement to me.
Sincerely,
HOMELAND STORES, INC.
/s/ Charles B. Ames
Charles B. Ames
ACCEPTED AND AGREED
as of this 26 th day
of September, 1995
/s/ Larry Kordisch
Larry Kordisch
