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: June 17, 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 July 31, 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
June 17, December 31,
1995 1994
Current assets:
Cash and cash equivalents $ 10,526 $ 339
Receivables, net of allowance for uncollectible
accounts of $2,374 and $2,690 9,967 12,235
Receivables for taxes 1,551 2,270
Inventories 44,600 89,850
Prepaid expenses and other current assets 2,661 6,384
Total current assets 69,305 111,078
Property, plant and equipment:
Land 9,159 10,997
Buildings 22,274 29,276
Fixtures and equipment 43,465 61,360
Land and leasehold improvements 23,271 32,410
Software 16,620 17,876
Leased assets under capital leases 28,580 46,015
Construction in progress 1,965 2,048
145,334 199,982
Less accumulated depreciation
and amortization 62,872 82,603
Net property, plant and equipment 82,462 117,379
Excess of purchase price over fair
value of net assets acquired, net
of amortization of $943 and $830 2,362 2,475
Other assets and deferred charges 5,913 8,202
Total assets $160,042 $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
June 17, December 31,
1995 1994
Current liabilities:
Accounts payable - trade $ 16,172 $ 30,317
Salaries and wages 2,343 1,925
Taxes 6,020 6,492
Accrued interest payable 2,505 3,313
Other current liabilities 9,279 15,050
Current portion of long-term debt - 2,250
Current portion of obligations under capital
leases 4,146 7,828
Current portion of restructuring reserve 1,113 -
Total current liabilities 41,578 67,175
Long-term obligations:
Long-term debt 97,938 145,000
Obligations under capital leases 9,540 11,472
Other noncurrent liabilities 4,193 5,176
Noncurrent restructuring reserve 9,489 5,005
Total long-term obligations 121,160 166,653
Redeemable common stock, Class A, $.01 par value,
1,748,028 shares at June 17, 1995 and 3,864,211
shares at December 31, 1994, at redemption value 828 1,235
Stockholders' equity:
Common stock
Class A, $.01 par value, authorized - 40,500,000
shares, issued - 33,721,172 shares at June 17,
1995 and 31,604,989 shares at December 31, 1994
outstanding - 30,878,989 shares 337 316
Additional paid-in capital 54,933 53,896
Accumulated deficit (55,993) (48,398)
Treasury stock, 2,842,183 shares at June 17, 1995
and 726,000 shares at December 31, 1994, at cost (2,801) (1,743)
Total stockholders' equity (3,524) 4,071
Total liabilities and stockholders' equity $160,042 $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
June 17, June 18,
1995 1994
Sales, net $147,059 $182,490
Cost of sales 110,530 133,973
Gross profit 36,529 48,517
Selling and administrative 36,039 42,330
Operating profit 490 6,187
Interest expense 3,899 4,043
Income (loss) before income taxes and
extraordinary items (3,409) 2,144
Income tax expense - 339
Income (loss) before extraordinary items (3,409) 1,805
Extraordinary items (2,330) -
Net income (loss) $ (5,739) $ 1,805
Income (loss) before extraordinary items per
common share (.10) .05
Extraordinary items per common share (.07) -
Net income (loss) per common share $ (.17) $.05
Weighted average shares outstanding 33,264,305 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)
24 weeks 24 weeks
ended ended
June 17, June 18,
1995 1994
Sales, net $325,068 $367,327
Cost of sales 246,015 271,672
Gross profit 79,053 95,655
Selling and administrative 76,008 84,347
Operating profit 3,045 11,308
Interest expense 8,310 8,050
Income (loss) before income taxes and
extraordinary items (5,265) 3,258
Income tax expense - 1,046
Income (loss) before extraordinary items (5,265) 2,212
Extraordinary items (2,330) -
Net income (loss) $ (7,595) $ 2,212
Income (loss) before extraordinary items per
common share (.15) .06
Extraordinary items per common share (.07) -
Net income (loss) per common share $ (.22) $.06
Weighted average shares outstanding 33,957,711 34,763,408
The accompanying notes are an integral part
of these financial statements.
<TABLE>
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share and per share amounts)
(Unaudited)
<CAPTION>
Minimum
Class A Additional Pension Total
Common Stock Paid-in Accumulated Liability Treasury Stock Stockholders'
Shares Amount Capital Deficit Adjustment Shares Amount Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 31,498,989 $315 $46,358 $(7,753) $(572) 620,000 $(1,488) $36,860
Purchase of treasury stock 106,000 1 254 - - 106,000 (255) -
Adjustment to reduce
minimum liability - - - - 572 - - 572
Net income - - - 2,212 - - - 2,212
Balance, June 18, 1994 31,604,989 $316 $46,612 $(5,541) $ - 726,000 $(1,743) $39,644
Balance, Dec. 31,1994 31,604,989 $316 $53,896 $(48,398) $ - 726,000 $(1,743) $ 4,071
Purchase treasury stock 2,116,183 21 1,037 - - 2,116,183 (1,058) -
Net loss - - - (7,595) - - - (7,595)
Balance, June 17, 1995 33,721,172 $337 $54,933 $(55,993) $ - 2,842,183 $(2,801) $(3,524)
<FN>
<F1>
The accompanying notes are an integral part
of these financial statements.
</FN>
</TABLE>
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
(Unaudited)
24 weeks 24 weeks
ended ended
June 17, June 18,
1995 1994
Cash flows from operating activities:
Net income (loss) $(7,595) $ 2,212
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Depreciation and amortization 6,460 7,594
Amortization of financing costs 585 664
Write-off of financing cost on long term debt
retired 1,424 -
Gain on disposal of assets (146) (31)
Amortization of beneficial interest in operating
leases 105 119
Change in assets and liabilities:
Decrease in receivables 2,920 1,377
Decrease in receivables for taxes 719 -
Decrease in inventories 17,374 863
(Increase) decrease in prepaid expenses and
other current assets 3,723 (313)
Decrease in other assets and deferred charges 26 142
Decrease in accounts payable - trade (14,146) (2,157)
Increase (decrease) in salaries and wages 418 (666)
Increase (decrease) in taxes (472) 2,621
Decrease in accrued interest payable (808) (272)
Increase (decrease) in other current
liabilities (5,771) 70
Decrease in noncurrent restructuring reserve(10,338) -
Decrease in other noncurrent liabilities (938) (385)
Total adjustments 1,135 9,626
Net cash provided by (used in) operating
activities (6,460) 11,838
Cash flows from investing activities:
Capital expenditures (409) (3,333)
Cash received from sale of assets 73,038 394
Net cash provided by (used in) investing
activities 72,629 (2,939)
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 34,582 15,000
Payments under revolving credit loans (56,644) (20,000)
Net payments under swing loans (1,500) (3,228)
Principal payments under notes payable (750) (1,000)
Principal payments under capital lease
obligations (5,611) (1,610)
Payments to acquire treasury stock (1,059) (255)
Net cash used in financing activities (55,982) (11,093)
Net increase (decrease) in cash and cash
equivalents 10,187 (2,194)
Cash and cash equivalents at beginning of period 339 2,194
Cash and cash equivalents at end of period $10,526 $ -
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)
24 weeks 24 weeks
ended ended
June 17, June 18,
1995 1994
Supplemental information:
Cash paid during the period for interest $8,533 $7,629
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, discussed in Part II-Item
2 "Changes in Securities", as well as the redemption of
a portion of the Senior Notes and the replacement of
the Revolving Credit Agreement, discussed in Item 2 MDA
"Liquidity and Capital Resources", the Company incurred
the following extraordinary loss in the 12 weeks ended
June 17, 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. The net proceeds from such sale were applied in
the manner provided below in Part II-Item 5 "Other
Information". In connection with this strategic plan,
the Company also plans to close fifteen under-
performing stores during 1995, seven of which were
closed during the 24 weeks ended June 17, 1995. During
the 24 weeks ended June 17, 1995, the Company incurred
expenses associated with the operational restructuring
as follows:
Operational
Operational restructuring Operational
restructuring exp. incurred in restructuring
reserve at the 24 weeks ended reserve at
Dec. 31, 1994 June 17, 1995 June 17, 1995
Expenses associated with the
planned store closings,
primarily occupancy costs
from closing date to lease
termination or sublease date $8,319 $(634) $7,685
Expenses associated with the AWG
Transaction, primarily service
and equipment contract
cancellation fees 5,649 (6,262) (613)
Estimated severance costs
associated with the AWG
Transaction 5,624 (3,889) 1,735
Legal and consulting fees
associated with the
AWG Transaction 4,905 (3,301) 1,604
Net gain on sale of property,
plant and equipment to AWG (19,492) 19,683 191
Operational restructuring
reserve $ 5,005 $ 5,597 $10,602
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:
24 weeks 24 weeks
ended ended
June 17, June 18,
1995 1994
Sales, net $66,437 $105,347
Store contribution to
operating profit before
allocation of administrative
and advertising expenses 2,682 4,641
Warehouse expenses 3,853 5,459
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MDA")
Results of Operations
Comparison of Twelve and Twenty-Four Weeks Ended
June 17, 1995 with Twelve and Twenty-Four Weeks Ended June
18, 1994.
Sales. Net sales for the 12 weeks and 24 weeks
ended June 17, 1995 decreased 19.4% and 11.5% 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 (see Part II-Item 5
"Other Information") and the closing of seven stores, five
in the first week of February 1995 and two in the fourth
week of March 1995. These stores were closed pursuant to
the Company's plan to close certain underperforming stores.
The decrease in net sales was also due to 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 June 17, 1995 for
the Company's comparable stores decreased 1.9% over the
corresponding prior period due primarily to competitors'
store openings in the Company's market area.
Cost and Expenses. Gross profit as a percentage
of sales for the 12 weeks ended June 17, 1995 decreased to
24.8% compared to 26.6% for the corresponding period of
1994. Gross profit as a percentage of sales for the 24
weeks ended June 17, 1995 decreased to 24.3% compared to
26.0% 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 (see Part II-
Item 5 "Other Information"). 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 $6.3
million for the 12 weeks ended June 17, 1995 compared to the
prior period, although as a percentage of sales they
increased to 24.5% from 23.2%. For the 24 weeks ended June
17, 1995, selling and administrative expenses declined $8.3
million compared to the prior period while as a percentage
of sales, they increased to 23.4% from 23.0%. The decreases
in expenses for the 12 weeks and 24 weeks ended June 17,
1995 were due to the sale of the Company's 29 stores to AWG,
the closing of seven stores, as well as personnel and other
cost reductions at the corporate office.
Operating Income. Operating income for the 12
weeks ended June 17, 1995 decreased to $490,000 compared to
$6.2 million for the corresponding period of 1994.
Operating income for the 24 weeks ended June 17, 1995
decreased to $3.0 million compared to $11.3 million in the
corresponding period of 1994. The decrease for the 12 weeks
and 24 weeks ended June 17, 1995 was the result of the
decrease in sales and gross profit margins offset in part by
the decrease in selling and administrative expenses.
Interest Expense. Interest expense for the 12
weeks ended June 17, 1995 decreased slightly to $3.9 million
from $4.0 million in the corresponding period of 1994, due
to a decrease in the usage of the revolving credit loan, the
redemption of $25.0 million of Senior Notes on June 1, 1995,
offset in part by an increase in interest rates. Interest
expense for the 24 weeks ended June 17, 1995 increased to
$8.3 million from $8.1 million in the corresponding period
of 1994. The increase is a result of higher interest rates
in 1995 compared to 1994, offset in part by a decrease in
revolving credit loan usage during the second quarter and
the redemption of $25.0 million of Senior Notes on June 1,
1995.
Income Tax Expense. No income tax expense was
recorded for the 12 weeks and 24 weeks ended June 17, 1995
as the Company is projecting a taxable loss for fiscal 1995.
The income tax expense for the 12 weeks and 24 weeks ended
June 18, 1994 was $339,000 and $1.0 million respectively.
Extraordinary Items. Extraordinary items for the
12 weeks ended June 17, 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 $5.7 million and $7.6 million, respectively, during the
12 weeks and 24 weeks ended June 17, 1995, compared to net
income of $1.8 million and $2.2 million, respectively, for
the comparable prior periods. The decreases in the net
income were due to the decreases in sales and gross profit
margins and the extraordinary items recognized in the 12
weeks ended June 17, 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.
For information regarding recent amendments to the
Senior Note Indenture, see Part II-Item 2 "Changes in
Securities."
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
(see Part II-Item 5 "Other Information"). At July 31, 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 year's 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 July 31, 1995, $420,000 of
revolving credit loans were outstanding under the Amended
and Restated Credit Agreement.
PART II - OTHER INFORMATION
Item 2. Changes in Securities
On April 13, 1995, the Company received consents
for certain amendments to the Senior Note Indenture and
certain related agreements from holders of Senior Notes.
The amendments (a) increased the interest rate on each
series of Notes by one-half of one percent (0.5%) per annum;
(b) amended, added and deleted certain financial covenants
and related definitions under the Senior Note Indenture
(including modifying the Consolidated Fixed Charge Coverage
Ratio covenant, adding a new Debt-to-EBITDA ratio and a new
Capital Expenditures covenant, deleting the Adjusted
Consolidated Net Worth covenant) to reflect the Company's
size, operations and financial position following the AWG
transaction; (c) amended certain provisions of the Senior
Note Indenture to permit the Company to incur certain liens
and indebtedness and to make an investment in certain
membership stock and receive or earn patronage certificates
or other equity in connection with the supply agreement to
be entered into with AWG; (d) amended certain provisions of
a security agreement securing the Senior Note to provide
that AWG will have a first lien on certain collateral to be
acquired by the Company in connection with the AWG supply
agreement; (e) amended certain other provisions of the
Senior Note Indenture to, among other things, limit the
Company's ability to incur certain future indebtedness and
guarantees, and to provide that a certain amount of net
proceeds from future asset sales must be applied to an offer
to redeem the Senior Notes; and (f) amended a mortgage
securing the Senior Notes to provide that defaults under, or
modifications or terminations of, a certain lease related to
a store to be closed, will not constitute a default or event
of default under the mortgage. On April 21, 1995, the
Company and United States Trust Company of New York, as
trustee for the holders of the Senior Notes, entered into a
supplemental indenture effecting these amendments.
Item 5. Other Information
On April 21, 1995, the Company sold 29 of its
stores and its warehouse and distribution center to AWG
pursuant to an Asset Purchase Agreement dated as of February
6, 1995 (the "Purchase Agreement") for a cash purchase price
of $45 million plus $27.7 million for the value of inventory
in the stores and the warehouse. The Purchase Agreement
required AWG to assume, or provide certain undertakings with
respect to, certain contracts and lease obligations and
pension liabilities of the Company. At the closing, the
Company and AWG also entered into a seven-year supply
agreement, whereby the Company became a retail member of the
AWG cooperative and AWG became the Company's primary
supplier.
AWG is a buying cooperative which sells groceries
on a wholesale basis to its retail member stores. AWG has
716 member stores located in a nine-state region and is the
nation's fifth largest wholesale distributor, with
approximately $2.6 billion in revenues in 1994.
The Company realized net proceeds from the AWG
transaction of approximately $37.2 million, $25.0 million of
which was allocated to the Senior Notes and $12.2 million
was allocated to indebtedness under the Revolving Credit
Agreement. The remaining proceeds from the AWG transaction
were (i) used to pay certain costs, expenses and liabilities
required to be paid in connection with the AWG transaction
or (ii) deposited into escrow pending reinvestment by the
Company or application against a subsequent offer to redeem
additional Senior Notes in either case within 180 days of
the closing of the AWG transaction.
The purposes of the AWG transaction were: (i) to
reduce the Company's borrowed money indebtedness in respect
of the Senior Notes and under the Revolving Credit Agreement
by $37.2 million in the aggregate; (ii) to have AWG assume,
or provide certain undertakings with respect to, certain
contracts and leases and certain pension liabilities of the
Company; (iii) to sell the Company's warehouse and
distribution center, which eliminated the high fixed
overhead costs associated with the operation of the
warehouse and distribution center and thereby permit the
Company to close marginal and unprofitable stores; and (iv)
to obtain the benefits of becoming a member of the AWG
cooperative, including increased purchases of private label
products, special product purchases, dedicated support
programs and access to AWG's store systems.
The Company plans to close certain marginal and
unprofitable stores. Such a plan is now financially
feasible because of the sale of the warehouse and the
elimination of the high fixed costs associated with the
warehouse operation. The Company has closed nine stores as
of July 31, 1995 and expects to close an additional six
stores by the end of 1995.
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
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
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.
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.
(b) Reports on Form 8-K: The following
reports on Form 8-K were filed during the
quarter ended June 17, 1995.
Date Filed Description
April 10, 1995 Solicitation Statement, dated April 4,
1995
May 9, 1995 Acquisition and
Disposition of Assets with Pro forma and
forecasted financial information, dated
April 21, 1995.
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: August 4, 1995 By: /s/ James A. Demme
James A. Demme, President,
Chief Executive Officer and
Director (Principal Executive
Officer)
Date: August 4, 1995 By: /s/ Larry W. Kordisch
Larry W. Kordisch, Executive
Vice President/Finance,
Treasurer, Chief Financial
Officer and Secretary
(Principal Financial Officer)
Date: August 4, 1995 By: /s/ Terry M. Marczewski
Terry M. Marczewski, Chief
Accounting Officer, Assistant
Treasurer and Assistant
Secretary (Principal
Accounting Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-2
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> MAR-26-1995
<PERIOD-END> JUN-17-1995
<CASH> 10,526
<SECURITIES> 0
<RECEIVABLES> 13,892
<ALLOWANCES> 2,374
<INVENTORY> 44,600
<CURRENT-ASSETS> 69,305
<PP&E> 145,334
<DEPRECIATION> 62,872
<TOTAL-ASSETS> 160,042
<CURRENT-LIABILITIES> 41,578
<BONDS> 121,160
<COMMON> 337
0
0
<OTHER-SE> 828
<TOTAL-LIABILITY-AND-EQUITY> 160,042
<SALES> 147,059
<TOTAL-REVENUES> 147,059
<CGS> 110,530
<TOTAL-COSTS> 110,530
<OTHER-EXPENSES> 36,039
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,899
<INCOME-PRETAX> (3,409)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,409)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,330)
<CHANGES> 0
<NET-INCOME> (5,739)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
