-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, IIRuiEd0xp29ZTrU+tea2uD8kYYlzXYctqfajq7Ujw4Yw6hcDlU5NnlYCag5Yxqx 1+LsPIdxl6mTZqdmwyvPDA== 0000835582-94-000006.txt : 19940519 0000835582-94-000006.hdr.sgml : 19940519 ACCESSION NUMBER: 0000835582-94-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940326 FILED AS OF DATE: 19940518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOMELAND HOLDING CORP CENTRAL INDEX KEY: 0000835582 STANDARD INDUSTRIAL CLASSIFICATION: 5400 IRS NUMBER: 731311075 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-22829 FILM NUMBER: 94529222 BUSINESS ADDRESS: STREET 1: 400 N E 36TH ST CITY: OKLAHOMA CITY STATE: OK ZIP: 73125 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 1ST QUARTER 10-Q 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: March 26, 1994 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.) 400 N.E. 36th Street Oklahoma City, Oklahoma 73l25 (Address of principal executive offices) (Zip Code) (405) 557-5500 (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 May 6, 1994. Class A Common Stock, including redeemable common stock: 34,743,200 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) ASSETS
March 26, January 1, 1994 1994 --------- ---------- (Unaudited) Current assets: Cash and cash equivalents $ 266 $ 2,194 Receivables, net of allowance for uncollectible accounts of $2,165 and $2,034 11,678 11,750 Inventories 92,280 93,145 Prepaid expenses and other current assets 3,772 3,697 Deferred tax assets 3,997 3,997 -------- -------- Total current assets 111,993 114,783 Property, plant and equipment: Land 12,486 12,486 Buildings 30,343 30,335 Fixtures and equipment 59,966 59,950 Land and leasehold improvements 31,038 31,045 Transportation equipment 93 93 Software 17,410 17,410 Leased assets under capital leases 51,321 51,321 Construction in progress 3,442 2,564 -------- -------- 206,099 205,204 Less accumulated depreciation and amortization 71,111 67,509 -------- -------- Net property, plant and equipment 134,988 137,695 Excess of purchase price over fair value of net assets acquired, net of amortization of $743 and $717 3,789 3,815 Other assets and deferred charges 13,162 13,919 -------- -------- Total assets $263,932 $270,212 ======== ======== 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) LIABILITIES AND STOCKHOLDERS' EQUITY
March 26, January 1, 1994 1994 -------- ---------- (Unaudited) Current liabilities: Accounts payable - trade $ 32,891 $ 33,800 Salaries and wages 2,150 2,746 Taxes 5,728 4,724 Accrued interest payable 1,146 3,366 Other current liabilities 6,357 6,548 Current portion of long-term debt 1,500 6,000 Current portion of obligations under capital leases 3,177 3,334 -------- -------- Total current liabilities 52,949 60,518 Long-term obligations: Long-term debt 137,000 135,750 Obligations under capital leases 17,096 17,807 Other noncurrent liabilities 9,735 9,709 -------- -------- Total long-term obligations 163,831 163,266 Redeemable common stock, Class A, $.01 par value, 3,864,211 shares at March 26, 1994 and 3,970,211 shares at January 1, 1994, at redemption value 9,313 9,568 Stockholders' equity: Common stock Class A, $.01 par value, authorized - 40,500,000 shares, issued - 31,604,989 shares at March 26, 1994 and 31,498,989 shares at January 1, 1994 outstanding - 30,878,989 shares 316 315 Additional paid-in capital 46,612 46,358 Accumulated deficit (7,346) (7,753) Minimum pension liability adjustment - (572) Treasury stock, 726,000 shares at March 26, 1994 and 620,000 shares at January 1, 1994, at cost (1,743) (1,488) -------- -------- Total stockholders' equity 37,839 36,860 -------- -------- Total liabilities and stockholders' equity $263,932 $270,212 ======== ========
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 March 26, March 27, 1994 1993 -------- -------- Sales, net $184,837 $190,857 Cost of sales 137,699 141,892 -------- -------- Gross profit 47,138 48,965 Selling and administrative 42,017 44,199 -------- -------- Operating profit 5,121 4,766 Interest expense 4,007 5,274 -------- -------- Income (loss) before income taxes and extraordinary items 1,114 (508) Income tax expense 707 1,016 -------- -------- Income (loss) before extraordinary items 407 (1,524) Extraordinary items, net of applicable income taxes of $785 - (3,139) -------- -------- Net income (loss) $ 407 $ (4,663) ======== ======== Income (loss) before extraordinary items per common share $ .01 $ (.04) Extraordinary items per common share - (.09) -------- -------- Net income (loss) per common share $ .01 $ (.13) ======== ======== Weighted average shares outstanding 34,783,617 34,982,843 ========== ========== 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-in Accumulated Liability Treasury Stock Stockholders' Shares Amount Capital Deficit Adjustment Shares Amount Equity ------ ------ --------- --------- ---------- ------ ------- ------- Balance, January 2, 1993 31,364,989 $314 $46,036 $(8,035) $ - 486,000 $(1,165) $37,150 Purchase of treasury stock 4,500 - 11 - - 4,500 (11) - Net loss - - - (4,663) - - - (4,663) ---------- ---- ------- -------- ----- ------- ------- ------- Balance, March 27, 1993 31,369,489 $314 $46,047 $(12,698) $ - 490,500 $(1,176) $32,487 ========== ==== ======= ======== ===== ======= ======= ======= 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 - - - 407 - - - 407 --------- ---- ------- ------- ----- ------- ------- ------- Balance, March 26, 1994 31,604,989 $316 $46,612 $(7,346) $ - 726,000 $(1,743) $37,839 ========== ==== ======= ======= ===== ======= ======= =======
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)
12 weeks 12 weeks ended ended March 26, March 27, 1994 1993 -------- -------- Cash flows from operating activities: Net income (loss) $ 407 $(4,663) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 3,791 3,663 Amortization of financing costs 331 372 (Gain)loss on disposal of assets (27) (20) Amortization of beneficial interest in operating leases 60 60 Write-off of financing costs on long-term debt retired - 1,148 Change in assets and liabilities: Decrease in receivables 72 3,080 Decrease in inventories 865 5,299 Increase in prepaid expenses and other current assets (75) (172) (Increase) decrease in other assets and deferred charges 203 (56) Decrease in accounts payable - trade (909) (1,077) Decrease in salaries and wages (596) (680) Increase (decrease) in taxes 1,004 (2,481) Decrease in accrued interest payable (2,220) (3,429) Increase (decrease) in other current liabilities 381 (2,032) Increase (decrease) in other noncurrent liabilities 53 (520) ------- ------- Net cash provided (used) by operating activities 3,340 (1,508) ------- ------- Cash flows used in investing activities: Capital expenditures (895) (596) ------- ------- Net cash used in investing activities (895) (596) ------- -------
HOMELAND HOLDING CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, except share and per share amounts) (Unaudited)
12 weeks 12 weeks ended ended March 26, March 27, 1994 1993 -------- -------- Cash flows used by financing activities: Payments on subordinated debt $ - $(47,750) Net borrowings (payments) under revolving credit loans (2,250) 29,000 Principal payments under notes payable (1,000) (1,250) Principal payments under capital lease obligations (868) (924) Payments to acquire treasury stock (255) (11) -------- -------- Net cash used by financing activities (4,373) (20,935) -------- -------- Net decrease in cash and cash equivalents (1,928) (23,039) Cash and cash equivalents at beginning of period 2,194 25,855 -------- -------- Cash and cash equivalents at end of period $ 266 $ 2,816 ======== ======== Supplemental information: Cash paid during the period for interest $ 5,856 $ 8,438 ======== ========
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 January 1, 1994 and the notes thereto. 2. ACCOUNTING POLICIES. The policies of the Company are summarized in the consolidated financial statements of the Company for the 52 weeks ended January 1, 1994 and the notes thereto. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS COMPARISON OF TWELVE WEEKS ENDED MARCH 26, 1994 WITH TWELVE WEEKS ENDED MARCH 27, 1993. SALES. Net sales for the 12 weeks ended March 26, 1994 decreased 3.2% over the net sales of the corresponding period of 1993. The decrease in net sales was primarily attributable 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 late 1993 and early 1994. (One Wal-Mart supercenter store and one Albertson's store opened in the Company's market area during the first quarter of 1994). Although the Company does not know how many stores Wal-Mart ultimately will open in the Company's market area and the Company is taking steps to respond competitively, including increased promotions (see Cost and Expenses below), Wal-Mart's entry into the Company's market area may continue to have an adverse effect on the Company's operations in the future. Net sales for the 12 weeks ended March 26, 1994 for the Company's continuing stores decreased 3.1% over the comparable 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 March 26, 1994 decreased to 25.5% compared to 25.7% for the corresponding period of 1993. The decrease in gross profit margin is due to increased markdowns in response to the increased competition in the Company's market area in an effort to remain price competitive and retain market share. This decrease was offset in part by higher vendor retail allowances than in the corresponding period of 1993. During the first quarter of 1994, additional emphasis was placed on obtaining vendor retail allowances, which resulted in the Company's receiving more such allowances during such period than in the first quarter of 1993. Gross profit without regard to warehouse and transportation costs as a percentage of sales decreased slightly to 27.8% for the 12 weeks ended March 26, 1994 compared to 27.9% for the comparable prior period. This decrease is due to the increased markdowns as a result of the Company's response to increased competition, offset in part by higher vendor retail allowances during the first quarter of 1994 compared to the corresponding period of 1993. Selling and administrative expenses as a percentage of sales decreased to 22.7% for the 12 weeks ended March 26, 1994 from 23.2% for the comparable prior period. This decrease was primarily due to a reduction in retail wages and benefits resulting from the modified collective bargaining agreement entered into with the United Food and Commercial Workers of North America in December 1993. There was also a decrease in net advertising costs during the 12 weeks ended March 26, 1994 compared to the prior period. This reduction in net advertising costs was a result of the Company's on-going cost containment program in an effort to reduce less effective forms of advertising. OPERATING INCOME. Operating income for the 12 weeks ended March 26, 1994 increased to $5.1 million compared to $4.8 million in the corresponding period of 1993. This increase was the result of the decrease in selling and administrative expenses offset by a decrease in sales and gross profit margin. INTEREST EXPENSE. Interest expense for the 12 weeks ended March 26, 1994 decreased to $4.0 million from $5.3 million in the corresponding period of 1993, due to the redemption of the Company's 15-1/2% Subordinated Notes due November 1, 1997 (the "Subordinated Notes"). All outstanding Subordinated Notes were redeemed by the Company on March 1, 1993. See "Liquidity and Capital Resources." INCOME TAX PROVISION. The income tax provision for the 12 weeks ended March 26, 1994 was $707,000, compared to $231,000 (including the net effects of the extraordinary items discussed below) for the corresponding period of the prior year. The income tax provision is principally comprised of alternative minimum tax expense. The Company received an additional 30-day extension to June 1, 1994 to file its protest to the Internal Revenue Service ("IRS") Appeals Office in response to the IRS Revenue Agent's Report issued on January 31, 1994. EXTRAORDINARY ITEMS. There were no extraordinary items incurred during the 12 weeks ended March 26, 1994. Extraordinary items for the 12 weeks ended March 27, 1993 consisted of the payment of $2.776 million in premiums on the redemption of $47.750 million in aggregate principal amount of the Subordinated Notes at a purchase price of 105.8% of the outstanding principal amount and $1.148 million in unamortized financing costs related to the redemption of the Subordinated Notes. The extraordinary items for such 1993 period have been shown in the financial statements net of income taxes of $785,000. INCOME OR LOSS. The Company recorded net income of $407,000 during the 12 weeks ended March 26, 1994, compared to a net loss of $4.7 million for the comparable prior period, due to the decrease in selling and administrative expenses, interest expense and the extraordinary items recognized in the 12 weeks ended March 27, 1993, offset in part by a decrease in sales and gross profit margin. LIQUIDITY AND CAPITAL RESOURCES The major sources of liquidity for the Company's operations and expansion have been internally generated funds and borrowings under revolving credit facilities. In March 1992, the Company refinanced its indebtedness through the issuance of $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 are 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 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. At May 6, 1994, $75 million of New Fixed Rate Notes, $33 million of New Floating Rate Notes and $12 million of Old Floating Rate Notes are outstanding. Also in March 1992, the Company entered into a Revolving Credit Agreement (the "Revolving Credit Agreement") with Union Bank of Switzerland, New York Branch ("UBS"), as agent and as lender, and any other lenders and other financial institutions thereafter parties thereto. As a result of the Company's redemption of the remaining outstanding Subordinated Notes on March 1, 1993, and satisfying certain other conditions, the Revolving Credit Agreement provides a commitment of up to $50 million in secured revolving credit loans, including a swing loan and certain letters of credit (the "Revolving Credit Facility"). Borrowings under the Revolving Credit Agreement bear interest at the UBS Base Rate plus 1.5% or at an adjusted Eurodollar Rate plus 2.5%, which rates are subject to increase upon certain conditions. All borrowings under the Revolving Credit Agreement are subject to a borrowing base and mature no later than February 25, 1997. At May 4, 1994, $15 million was outstanding under the Revolving Credit Facility which represents a $5 million reduction compared to the balance outstanding at January 1, 1994. On March 1, 1993, the Company redeemed all remaining outstanding Subordinated Notes ($47.75 million principal amount), at the optional redemption price (including a premium of $2.8 million or 5.8% of the outstanding principal amount) specified in the Subordinated Notes, together with accrued interest of $2.5 million. The Company borrowed $32 million under its Revolving Credit Facility and used $21 million of the remaining net proceeds from the issuance of the Old Notes to redeem the Subordinated Notes. In April 1994, the Revolving Credit Agreement was amended by the Company and its lenders to reduce the required amounts of the Interest Coverage Ratio calculation (as defined) in 1993, to reduce the required amounts of the EBITDA calculation (as defined) and the Net Worth calculation (as defined) in 1993 and 1994, and to increase the permitted Leverage Ratio (as defined) in 1994. Permitted Net Capital Expenditures (as defined) were increased to $7,750,000 in 1993, and to $7,000,000 for 1994, with the amount of capital leases permitted in 1994 reduced to $4,000,000. The asset sale limitations were amended to permit additional sales and other dispositions of certain land and stores, and Homeland was permitted to prepay at a discount a note payable to Furr's, Inc. The amendment also included certain technical corrections, such as moving the maturity date of the Revolving Credit Facility to February 25, 1997. During the period in which such amendment was pending, the Company's lenders waived compliance with certain financial covenant requirements in effect as of fiscal year end 1993. If the Company fulfills management's strategic plan for 1994, management believes that the Company will be in compliance with its amended financial covenants under its financing agreements at fiscal year end 1994. Nonetheless, the Company has failed to meet its strategic plan in prior periods, and there is no assurance that it will meet its plan in 1994. The Company has engaged outside advisors to assist with the sale of all or a substantial portion of the operations of the Company. Such a transaction would involve the assumption by the other party of certain liabilities of the Company, including long-term contractual liabilities relating to the affected operations, for liabilities under contracts for the purchase of product, computer services, transportation services and lease obligations. It is management's intention to negotiate and consummate a transaction during 1994. Based on the information currently available to management, it is management's judgment that it is more likely than not that the sale of a substantial portion of the operations of the Company will be agreed upon and consummated. If such a sale is not completed, management would pursue other strategic alternatives, including but not limited to mergers, joint ventures or further outsourcing. Further, the Company may have to amend certain financial covenants under its Revolving Credit Agreement in 1995 unless it exceeds management's strategic plan for 1994 or it is able to pursue successfully one of its alternative strategic options as described in the preceding paragraph. Although the Company has been successful in obtaining amendments to its Revolving Credit Agreement in the past, there is no assurance that it will be able to do so in the future. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: No exhibits are filed as part of this Report. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended March 26, 1994. 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: May 10, 1994 By: Max E. Raydon Max E. Raydon, President, Chief Executive Officer and Director (Principal Executive Officer) Date: May 10, 1994 By: Mark S. Sellers Mark S. Sellers, Executive Vice President/Finance, Treasurer, Chief Financial Officer and Secretary (Principal Financial Officer) Date: May 10, 1994 By: Mary Mikkelson Mary Mikkelson, Chief Accounting Officer, Assistant Treasurer and Assistant Secretary (Principal Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----