SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the plan fiscal year ended July 31, 1998.
TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period _____________ to _____________.
Commission File No. 1-11555
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
HOMELAND STORES, INC.
EMPLOYEE STOCK BONUS PLAN
B. Name of the issuer of the securities held pursuant to the plan
and the address of its principal executive office:
HOMELAND HOLDING CORPORATION
2601 Northwest Expressway, Suite 1100E
Oklahoma City, OK 73112
1. Financial Statements. The financial statements and related
information filed as part of this Report are set forth after the signature
page hereof.
2. Exhibit. The following exhibit is filed as part of this Report:
Exhibit No. Description
----------- -----------
23.1 Consent of PricewaterhouseCoopers LLP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Homeland Stores, Inc. Employee Stock Bonus Plan Committee has duly caused
this Annual Report to be signed by the undersigned, thereunto duly authorized.
HOMELAND STORES, INC. EMPLOYEE STOCK
BONUS PLAN COMMITTEE
By: /s/ Wayne S. Peterson
Wayne S. Peterson
Member of the Committee
Date: May 18, 1999
HOMELAND STORES, INC.
EMPLOYEE STOCK BONUS PLAN
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT ACCOUNTANTS
FOR THE YEARS ENDED JULY 31, 1998 AND 1997
HOMELAND STORES, INC. EMPLOYEE STOCK BONUS PLAN
Index
Page
Report of Independent Accountants 1
Financial Statements:
Statements of Net Assets Available for Plan Benefits
as of July 31, 1998 and 1997 2
Statements of Changes in Net Assets Available for Plan
Benefits for the Years Ended July 31, 1998 and 1997 3
Notes to Financial Statements 4
Supplemental Schedules:
Schedule I:
Item 27a - Schedule of Assets Held for Investment
Purposes at July 31, 1998 8
Schedule II:
Item 27d - Schedule of Reportable Transactions for the
Year Ended July 31, 1998 9
Report of Independent Accountants
To the Homeland Stores, Inc.
Employee Stock Bonus Plan Committee:
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statements of changes in net assets available for
plan benefits present fairly, in all material respects, the net assets available
for benefits of the Homeland Stores, Inc. Employee Stock Bonus Plan (the "Plan")
at July 31, 1998 and 1997, and the changes in net assets available for benefits
for the years then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Plan's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The supplemental schedules of assets held for
investment purposes and reportable transactions are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements, but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
The schedule of assets held for investment purposes that accompanies the Plan's
financial statements does not disclose the historical cost of certain Plan
assets held by the Plan trustee. Disclosure of this information is required by
the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974.
PRICEWATERHOUSECOOPERS LLP
April 9, 1999
Homeland Stores, Inc. Employee Stock Bonus Plan
Statements of Net Assets Available for Plan Benefits
As of July 31, 1998 and 1997
1998 1997
Assets:
Investments:
Homeland Holding Corporation Common Stock, at fair
value (114,087 shares) $ 741,565 $ -
Interest-bearing cash 220 -
Receivables:
Employer contributions 1,556 467,827
Employees' contributions 4,672 -
Net assets available for plan benefits $ 748,013 $ 467,827
The accompanying notes are an integral part of these financial statements.
2
Homeland Stores, Inc. Employee Stock Bonus Plan
Statements of Changes in Net Assets Available for Plan Benefits
For the years ended July 31, 1998 and 1997
1998 1997
Additions:
Investment income:
Net depreciation in fair value of investments $ (184,916) $ -
Contributions:
Employer required contributions 464,200 467,827
Employer matching contributions 18,965 -
Employees' contributions 56,952 -
Total additions 355,201 467,827
Deductions:
Distributions to participants 75,015 -
Net increase 280,186 467,827
Net assets available for plan benefits:
Beginning of year 467,827 -
End of year $ 748,013 $ 467,827
The accompanying notes are an integral part of these financial statements.
3
Homeland Stores, Inc. Employee Stock Bonus Plan
Notes to Financial Statements
1. Description of the Plan
General
Homeland Stores, Inc. (the "Company") established the Homeland Stores,
Inc. Employee Stock Bonus Plan (the "Plan") effective as of August 2, 1996
("Effective Date"). The Plan, which is maintained pursuant to collective
bargaining agreements entered into in August 1996, provides for employees
covered under the collective bargaining agreements an opportunity to
participate in the growth of the Company through ownership of common stock
of Homeland Holding Corporation (the "Common Stock"). The Plan is a defined
contribution plan and contributions made are held in each participant's
account in a trust. The benefit that a participant receives depends on the
amount of contribution made by each participant and the Company and the
performance of the Common Stock. The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA").
Contributions
There are four ways that contributions may be made to the Plan by the
participant and/or the Company. They are:
(1) Required Company Contributions:
The Company is required to make a contribution to the Plan of
58,025 shares of Common Stock as soon as practical after the
Effective Date and in each of the next two Plan years.
Participants employed on a full-time basis for the entire Plan
year receive a per capita allocation of shares. Part-time
participants employed on a continuous basis since February 1 of
the respective Plan year and full-time participants employed
on a continuous basis since February 1, but after the beginning
of the respective Plan year, will receive one-half of the
allocation received by full-time employees employed the entire
Plan year.
(2) Participant and Company Matching Contributions:
Beginning on the first anniversary of the Effective Date and
for three years thereafter, participants may make pre-tax
contributions, subject to certain tax law limitations, in an
amount equal to their ratable share of the equivalent of the
fair value of 43,519 shares of Common Stock each year. The
Company will match 33 1/3% of each participant's pre-tax
contribution in the form of Common Stock. The matching
contributions are credited to each participant's account at
the end of each month. All employees covered by the collective
bargaining agreements are eligible to make participant
4
Homeland Stores, Inc. Employee Stock Bonus Plan
Notes to Financial Statements
1. Description of the Plan, continued
Contributions, continued
(2) Participant and Company Matching Contributions:, continued
contributions beginning February 1 and August 1 of each Plan
year subsequent to the participant's initial employment date as
a union employee.
(3) Contingent Company Contributions:
If the Company's earnings before the deductions of interest,
taxes, depreciation and amortization ("EBITDA") exceeds $25.0
million in the first year ending on the anniversary of the
collective bargaining agreements, $27.5 million the second
year ending on the anniversary of the collective bargaining
agreements, and $30.25 million in the third year ending on the
anniversary of the collective bargaining agreements, then the
Company shall make additional contributions to the Plan of
58,025 shares of Common Stock in each of those years in which
the targets are achieved. The allocation of these shares is the
same as described above for Required Company Contributions.
(4) Discretionary Company Contributions:
The Company, at its sole discretion, may make additional
contributions of cash or Common Stock whenever it desires.
The allocation of such contributions is the same as described
above for Required Company Contributions.
Vesting
Each participant's account, including participant and allocated Company
contributions, is always 100% vested and non-forfeitable, including the
earnings thereon.
Distribution of Benefits
No distribution from the Plan will be made until a participant retires, dies
(in which case payment shall be made to the participant's beneficiary), or
otherwise terminates employment with the Company, or upon termination of the
Plan, except that distribution of the participant's account shall commence in
any event no later than April 1 following the end of the calendar year in which
the participant reaches 70 1/2, regardless of whether the participant is
employed on such date. Distributions are made in lump-sum payments or
installment payments made over a period of two years, unless the participant
is at least age 70 1/2, in which case the participant may elect installment
payments over their life expectancy.
5
Homeland Stores, Inc. Employee Stock Bonus Plan
Notes to Financial Statements
1. Description of the Plan, continued
Distribution of Benefits, continued
Distributions are made in cash or, if the participant elects, in the form
of Common Stock plus cash for any fractional shares.
Voting Rights
Each participant is entitled to exercise voting rights with respect to
the Common Stock allocated to his or her account.
Plan termination
Although the Company has not expressed any intent to do so, the Company
reserves the right, through its board of directors, to terminate the Plan
at any time. Upon termination of the Plan, the account of each participant
will be distributed as prescribed by the Plan. If the Company is sold or
merged into another company within the first three years of the Plan, the
Company shall contribute additional Common Stock at that time such that
the Company's total contribution of shares will be 522,222 shares of
Common Stock, plus any Discretionary Company Contributions.
Administration of the Plan
Certain administrative duties are performed by officers or employees of
the Company and none of the officers or employees receive compensation
from the Plan. The custodial bank agent processes distribution payments.
All administrative fees incurred during the Plan year were paid by the
Company.
2. Summary of Significant Accounting Policies
Valuation of Investments
The Common Stock is valued at fair value based on quoted market prices.
Purchases and sales of securities are recorded on a trade-date basis.
Net Appreciation (Depreciation) in Investments
The Plan presents, in the statement of changes in net assets available
for plan benefits, the net appreciation (depreciation) in the fair value
of its investments which consists of the realized gains or losses and the
unrealized appreciation (depreciation) on those investments.
6
Homeland Stores, Inc. Employee Stock Bonus Plan
Notes to Financial Statements
2. Summary of Significant Accounting Policies, continued
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of net assets available
for benefits at the date of the financial statements and the reported
amounts of changes in net assets available for benefits during the
reporting period. Actual results could differ from those estimates.
Risks and Uncertainties
The Plan provides for investment of assets in the Common Stock. As such,
those assets are exposed to various market risks. Due to the level of
uncertainty related to changes in the value of the Common Stock, it is
at least reasonably possible that changes in the near term would materially
affect participants' account balances and the amounts reported in the
statement of net assets available for plan benefits and the statement of
changes in net assets available for plan benefits.
The fair value of the Common Stock was $6.50 per share and $2.875 per
share at July 31, 1998 and April 9,1999, respectively.
Tax Status
The Internal Revenue Service ("IRS") has determined and informed the
Company by letter dated as of April 1, 1998, that the Plan, as amended,
is qualified and the trust established under the Plan is tax-exempt,
under the appropriate section of the IRS Code.
3. Employer Contributions
The Company did not achieve the EBITDA targets for the 1998 and 1997 Plan
years pursuant to the Contingent Company Contributions component of the
Plan and no Discretionary Company Contributions were made for the Plan
years ended July 31, 1998 and 1997.
As of the end of the 1997 Plan year, the Company had not established the
trust account to maintain the Common Stock to be held by the Plan.
Accordingly, the Required Company Contribution for the 1997 Plan year has
been reported as an employer contribution receivable in the statement of
net assets available for plan benefits. The receivable is valued based on
the required number of shares to be contributed at the fair value of the
Common Stock, as determined by the quoted market price on July 31, 1997.
7
Homeland Stores, Inc. Employee Stock Bonus Plan
Schedule I
Item 27a-Schedule of Assets Held for Investment Purposes
December 31, 1998
Identity of Issue and Number Current
Description of Investment of Shares Cost Value
Homeland Holding Corporation Common Stock 114,087 $ * $ 741,565
* Bank of Oklahoma was unable to provide this information
8
Homeland Stores, Inc. Employee Stock Bonus Plan
Schedule II
Item 27d-Schedule of Reportable Transactions
For the year ended December 31, 1998
<TABLE>
Current Value
Total Total of Assets on
Number of Number of Purchase Selling Cost of Transaction Net Gain
Identity of Party Involved Purchases Sales Price Price Asset Date or (Loss)
<S> <C> <C> <C> <C> <C> <C> <C>
Series of 5 Percent Transactions
American Performance 7 - $ 52,644 $ - $ 52,644 $ 52,644 -
Cash Management Fund - 9 - 52,442 52,442 52,442 -
</TABLE>
9
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-52267) of Homeland Holding Corporation of
our report dated April 9, 1999 relating to the financial statements, which
appears in this Form 11-K.
PRICEWATERHOUSECOOPERS LLP
Oklahoma City, Oklahoma
May 17, 1999
