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, 1999.
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 OWNERSHIP 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 Ownership Plan Committee has duly
caused this Annual Report to be signed by the undersigned, thereunto duly
authorized.
HOMELAND STORES, INC. EMPLOYEE STOCK
OWNERSHIP PLAN COMMITTEE
By: /s/ Wayne S. Peterson
Wayne S. Peterson
Member of the Committee
Date: January 26, 2000
HOMELAND STORES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT ACCOUNTANTS
FOR THE YEARS ENDED JULY 31, 1999 AND 1998
HOMELAND STORES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Index
Page
Report of Independent Accountants 1
Financial Statements:
Statements of Net Assets Available for Plan Benefits
as of July 31, 1999 and 1998 2
Statements of Changes in Net Assets Available for Plan
Benefits for the Years Ended July 31, 1999 and 1998 3
Notes to Financial Statements 4
Supplemental Schedules:
Schedule I:
Item 27a - Schedule of Assets Held for Investment
Purposes at July 31, 1999 8
Schedule II:
Item 27d - Schedule of Reportable Transactions for the
Year Ended July 31, 1999 9
Report of Independent Accountants
To the Homeland Stores, Inc.
Employee Stock Ownership 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 Ownership Plan (the
"Plan", formerly the Homeland Stores, Inc. Employee Stock Bonus Plan) at July
31, 1999 and 1998, 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.
/s/ PRICEWATERHOUSECOOPERS LLP
December 30, 1999
Homeland Stores, Inc. Employee Stock Ownership Plan
Statements of Net Assets Available for Plan Benefits
As of July 31, 1999 and 1998
Homeland Stores, Inc. Employee Stock Ownership Plan
Statements of Changes in Net Assets Available for Plan Benefits
For the years ended July 31, 1999 and 1998
1999 1998
Assets
Investment:
Homeland Holding Corporation Common Stock, at fair
value (101,906 and 114,087 shares, respectively) $ 363,091 $ 741,565
Interest-bearing cash 665 220
Receivables:
Employer required contribution 206,743 -
Employer matching contributions 1,120 1,556
Employees' contributions 3,603 4,672
Due from brokers 3,313 -
Net assets available for plan benefits 578,535 748,013
The accompanying notes are an integral part of these financial statements.
2
Homeland Stores, Inc. Employee Stock Ownership Plan
Statements of Changes in Net Assets Available for Plan Benefits
1999 1998
Additions:
Investment income:
Net depreciation in fair value of investments $ (338,365) $ (184,916)
Contributions:
Employer required contributions 206,743 464,200
Employer matching contributions 13,519 18,965
Employees' contributions 40,598 56,952
Total additions (77,505) 355,201
Deductions:
Distributions to participants 91,973 75,015
Net increase (decrease) (169,478) 280,186
Net assets available for plan benefits:
Beginning of year 748,013 467,827
End of year $ 578,535 $ 748,013
The accompanying notes are an integral part of these financial statements.
3
Homeland Stores, Inc. Employee Stock Ownership Plan
Notes to Financial Statements
1. Description of the Plan
General
Homeland Stores, Inc. (the "Company") established the Homeland Stores, Inc.
Employee Stock Ownership Plan (the "Plan", formerly the Homeland Stores, Inc.
Employee Stock Bonus 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 ending July 31, 1998 and 1999.
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 the
three year period ending August 2, 2000, 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 contributions
beginning February 1 and August 1 of each Plan year subsequent to the
participant's initial employment date as a union employee.
4
Homeland Stores, Inc. Employee Stock Ownership Plan
Notes to Financial Statements, continued
1. Description of the Plan, continued
Contributions, continued
(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.
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.
5
Homeland Stores, Inc. Employee Stock Ownership Plan
Notes to Financial Statements, continued
1. Description of the Plan, continued
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 years 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 obtained
by the custodial bank agent from an independent pricing service. 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.
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.
6
Homeland Stores, Inc. Employee Stock Ownership Plan
Notes to Financial Statements, continued
2. Summary of Significant Accounting Policies, continued
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 $3.56 per share and $3.63 per share at July 31, 1999 and
December 30, 1999, respectively.
Tax Status
The Internal Revenue Service ("IRS") has determined and informed the
Company by letter dated as of June 9, 1999, 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 1999 and 1998 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, 1999 and 1998. As of the end of the 1999 Plan year, the
Company had not contributed the Required Company Contribution for the 1999
Plan year, which has been reported as an employer required 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, 1999.
7
Homeland Stores, Inc. Employee Stock Ownership Plan
Schedule I
Item 27a-Schedule of Assets Held for Investment Purposes
July 31, 1999
Identity of Issue and Number Current
Description of Investment of Shares Cost Value
Homeland Holding Corporation Common Stock 101,906 $ * 363,091
* Bank of Oklahoma was unable to provide this information
8
Homeland Stores, Inc. Employee Stock Ownership Plan
Schedule II
Item 27d-Schedule of Reportable Transactions
For the year ended July 31, 1999
<TABLE>
Homeland Stores, Inc. Employee Stock Ownership Plan
Schedule II
Item 24d-Schedule of Reportable Transactions
For the year ended July 31, 1999
<CAPTION>
Current
Value of
Total Total Assets on
Description Number of Number Purchase Selling Cost of Transaction Net Gain
Identity of Party involved of Asset Purchases of Sales Price Price Asset Date or (Loss)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series of 5 percent Transactions
Bank of Oklahoma Cash Management 26 - $ 97,773 $ - $ 97,773 $ 97,773 -
Fund - 21 - 93,519 93,519 93,519 -
Cantor Fitzgerald & Co., Inc. Homeland Holding
Corp. Common Stock - 14 - 92,786 * 92,786 *
Single 5 percent Transactions
Bank of Oklahoma Cash Management
Fund - - - 38,418 38,418 38,418 -
<FN>
<F1>
* Bank of Oklahoma was unable to provide this information.
</FN>
</TABLE>
9
