-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HWBDRp7s5MWbyUTEUXWtvzT45goKAtUgNUxtC8H5siVE3evtu+aY/02ZfCs6EwS7 t9N8G4Hc2hJ8wAR7LUS2dQ== 0000835582-95-000014.txt : 19951101 0000835582-95-000014.hdr.sgml : 19951101 ACCESSION NUMBER: 0000835582-95-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950907 FILED AS OF DATE: 19951031 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOMELAND HOLDING CORP CENTRAL INDEX KEY: 0000835582 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FOOD STORES [5400] IRS NUMBER: 731311075 STATE OF INCORPORATION: DE FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11555 FILM NUMBER: 95585666 BUSINESS ADDRESS: STREET 1: 400 N E 36TH ST CITY: OKLAHOMA CITY STATE: OK ZIP: 73105 BUSINESS PHONE: 4055575500 MAIL ADDRESS: STREET 1: 400 N E 36TH CITY: OKLAHOMA CITY STATE: OK ZIP: 73125 FORMER COMPANY: FORMER CONFORMED NAME: SWO HOLDING CORP DATE OF NAME CHANGE: 19901017 FORMER COMPANY: FORMER CONFORMED NAME: SWO ACQUISTION CORP DATE OF NAME CHANGE: 19890716 10-Q 1 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)
Minimum Class A Additional Pension Total Common Stock Paid-inAccumulatedLiabilityTreasury Stock Stockholders' Shares Amount Capital Deficit AdjustmentShares Amo unt Equity 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)
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:
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 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
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) EX-10 2 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 EX-10 3 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 -----END PRIVACY-ENHANCED MESSAGE-----