NATIONAL CONVENIENCE STORES INC /DE/, 10-K, 1994-09-28

NATIONAL CONVENIENCE STORES INC /DE/
10-K, 1994-09-28
CONVENIENCE STORES

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1994

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________

Commission File Number 1-7936

NATIONAL CONVENIENCE STORES INCORPORATED
(Exact name of registrant as specified in its charter)

Delaware 74-1361734
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

100 Waugh Drive
Houston, Texas 77007
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (713) 863-2200

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

TITLE OF EACH CLASS

Common Stock, $.01 par value
Warrants to Purchase Common Stock

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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
-----

At September 15, 1994, 6,050,075 shares of the registrant's common stock,
par value $.01 per share (the "Common Stock"), were outstanding and the
aggregate market value (based on the closing price quoted on the Nasdaq
National Market System) of the voting stock of the Company, excluding shares
held by affiliates, was approximately $51,309,630.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes X No
----- -----

DOCUMENTS INCORPORATED BY REFERENCE:

(1) Portions of the Company's Annual Report to Shareholders for the fiscal
year ended June 30, 1994 (Part II--Items 6-8; Part IV--Item 14).

(2) Portions of the Company's definitive Proxy Statement dated September 27,
1994 for its Annual Meeting of Shareholders (Part III--Items 10- 13).

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TABLE OF CONTENTS

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Page
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PART I

ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Store Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Chapter 11 Bankruptcy Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Executive Officers of Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Stores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Corporate Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Support Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Reorganization Proceedings Under Chapter 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Other Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . 17

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . 17
</TABLE>

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 18

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>

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PART I

ITEM 1. BUSINESS

GENERAL

National Convenience Stores Incorporated (the "Company") is the largest
operator of convenience stores in the state of Texas and one of the twenty
largest in the United States. At June 30, 1994, the Company operated 709
specialty convenience stores in four cities in the state of Texas under the
name Stop N Go(SM). Eighty percent of the Company's stores are located in the
Houston and San Antonio, Texas areas where the Company is the largest
convenience store operator. The stores sell fresh foods, traditional fast
foods, alcoholic and nonalcoholic beverages, tobacco products, groceries,
lotto/lottery tickets, health and beauty aids and other nonfood merchandise,
specialty items and incidental services. Approximately 90% of the Company's
stores are equipped with self-serve gasoline dispensing facilities. The
Company originally organized as a Texas corporation in 1959 and was
reincorporated in Delaware in 1979. As more fully described below under
"Chapter 11 Bankruptcy Reorganization", the Company filed for voluntary Chapter
11 bankruptcy reorganization on December 9, 1991 and emerged from such on March
9, 1993 as a result of the confirmation of the Company's Revised Fourth Amended
and Restated Joint Plan of Reorganization (the "Plan of Reorganization"). In
the fourth quarter of fiscal 1994, the Company divested its 80 operating
convenience stores in the states of California and Georgia and acquired 88
stores in the Houston and Dallas/Fort Worth areas. With the consummation of
this transaction the Company attained its goal of geographically consolidating
its operations to within the state of Texas.

The following table sets forth the distribution of the Company's stores by
market as of June 30, 1994:

<TABLE>
<CAPTION>
Stores
% Selling
Stores of Total Gasoline
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<S> <C> <C> <C>
Texas
Houston/Gulf Coast . . . . . . . . . . . . . . . . . . . . . . . 425 59.9% 371
San Antonio . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 20.2 137
Dallas/Fort Worth . . . . . . . . . . . . . . . . . . . . . . . . 113 15.9 105
Austin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4.0 25
--- ----- ---
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 100.0% 638
=== ===== ===
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STORE OPERATIONS

The Company's convenience stores are extended-hour retail facilities,
emphasizing convenience to the customer. Substantially all the stores are open
every day of the year and 608 operate 24 hours a day. Typically, the Company's
stores are located in residential areas, on main

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thoroughfares, in small shopping centers or on other sites selected for easy
accessibility and customer convenience. The stores' exteriors are of a similar
design and color making them easily recognizable. The Company emphasizes
high-quality products, personal and courteous service, and clean and modern
stores. The stores attract lunch-time customers, early and late shoppers,
weekend and holiday shoppers and customers who need only a few items at any
time and desire rapid service. Approximately fifty of the stores are also
targeted to attract the fast-food take- out customer via easily recognized
national brand name "eatery" fast-food offerings.

The Company's stores offer a diverse range of over 3,000 high-traffic consumer
items including take-out foods, traditional fast-foods, fountain beverages,
alcoholic beverages, tobacco products, soft drinks, candy, snacks, groceries,
health and beauty aids, magazines and newspapers, automotive products, seasonal
and promotional items, and school supplies. The Company sells lottery tickets
in all of its stores and lotto tickets in most of its stores. Substantially
all of the Company's stores sell money orders. Approximately 90% of the
Company's stores are equipped with self-serve gasoline-dispensing facilities.

The following table sets forth certain statistical information regarding the
Company's sales for the periods indicated:

<TABLE>
<CAPTION>
Year Ended June 30,
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Combined
1994 1993(1) 1992
--------- ------------ --------
(Dollar amounts expressed in millions)
<S> <C> <C> <C>
Sales.................................................... $880.5 $878.9 $958.5
Percentage of sales
contributed by:
Gasoline.............................................. 41.8% 42.4% 40.5%
Alcoholic beverages................................... 13.2% 13.9% 15.2%
Tobacco products...................................... 14.2% 15.2% 14.9%
Other categories not individually
contributing more than 10%........................... 30.8% 28.5% 29.4%
------- ------- -------
100.0% 100.0% 100.0%
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</TABLE>

__________________
(1) Reflects the combining of the four months ended June 30, 1993
(reorganized company) and the eight months ended February 28, 1993
(predecessor company).

The Company is continuing with its Neighborstore(R) concept merchandising
strategy, whereby each store's product mix is linked directly to its local
demographics and customer purchasing patterns. In certain instances the
stores' product display and general appearance have been changed to match the
demographics. Additionally, in fiscal 1991, the Company successfully pioneered
the offering of national brand name fast-foods in "eateries" within the
Company's convenience stores. The Company's "eateries" are a smaller scale
version of the branded food kiosks found in shopping malls and airports. The
national brand name fast-food items are prepared in-store with identical
ingredients, packaging, procedures and quality standards as are used in the
branded partners' own free-standing restaurants. The Company currently
operates 53 fast food "eateries" in 50 of its stores. Brands represented in
these stores include: Taco

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Bell(R), Kentucky Fried Chicken(R), Burger King(R), Pizza Hut(R), Dunkin
Donuts(R), and Earl Campbell's Barbecue Express(R).

In addition, the Company has a program for the continual updating of its older
stores. Consistent with the Neighborstore concept, the policy is flexible in
both layout and product mix.

The Company recognizes that its future operations will be dependent in part
on the continual remodeling and upgrading of its store base. A store
replacement program will also eventually be required in
order for the Company's stores to continue to be geographically located near
its target customers' residences and workplaces.

The Company estimates that it serves, on average, an aggregate of approximately
600,000 customers per day. The Company's operations are benefitted by warm,
dry weather since a large part of the Company's product mix is concentrated in
items that are consumed during periods when leisure-time activities are more
prevalent.

The Company's stores vary in terms of layout, size and quantity of items
carried. The Company's basic design is a 2,600 square-foot,
rectangularly-shaped store. In 1984, the Company developed a hexagonally-shaped
3,100 square-foot store (the "Hex"). These stores are generally built on a
readily accessible corner location at a major intersection in an area of high
population density. Approximately 85% of the Company's stores are of the basic
rectangular shape and 13% are of the Hex design. The Company also operates 20
"Superstores," a 3,600 square-foot store design which was superseded by the Hex
store.

As is the norm in the convenience store industry, prices on most items are
somewhat higher than in supermarkets and certain other retail outlets; however,
the value placed by the customer on easy accessibility and convenience has
historically enabled the Company to receive premium prices for its products.
The Company does price-promote certain items in various key merchandise
categories to aid in building customer traffic. Most of the items sold are
nationally or locally advertised brands, which includes the Company's own
private label cigarette. Substantially all sales are for cash or check,
although the Company also accepts credit cards (VISA and MasterCard) and debit
cards.

During the fourth quarter of fiscal 1994 the Company began the implementation
of a program to enhance and redefine the Company's focus on customer service
and employee effectiveness. This program is the result of an extensive review
by management and outside consultants. An integral component of the program
involves the upgrading of equipment and technology through the installation of
integrated state-of-the-art sales and inventory management systems. These
systems will significantly automate store operations by capturing data on
point-of-sale and scanning equipment. The program will also install
pay-at-the-pump fueling stations at 60 of its stores which sell gasoline. The
Company initiated the program in its Dallas/Fort Worth stores in early fiscal
1995 and estimates that it will incur in the aggregate capital expenditures of
approximately $10.0 million in such market by mid fiscal 1995. Additionally,
the Company estimates that it will incur approximately $3.2 million in
consulting expenses in conjunction with the program, $1.3 million of which were
incurred in fiscal 1994. The Company will evaluate

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the success of the program in the Dallas/Fort Worth test market before making
the decision to expand it to all of the Company's stores.

SUPPLIERS

The Company purchases a substantial portion of its groceries, candy, tobacco
and health and beauty aids through wholesale grocers. Soft drinks, beer, wine,
bakery and dairy products are usually purchased from local suppliers. The
Company also operates a Corporate Kitchen in Houston, Texas where it prepares
and packages sandwiches, salads, snacks and other prepackaged foods for
distribution to its stores in the Texas markets via two of its major suppliers.

The Company purchases substantially all of its gasoline supplies from
independent petroleum refiners and some gasoline supplies from major oil
companies in the wholesale markets. The Company's inventories of gasoline turn
over approximately every seven days, and the Company does not engage in
speculative gasoline trading transactions or otherwise assume unusual market
risks with respect thereto.

REGULATORY MATTERS

In certain of the Company's market areas, federal, state or local laws regulate
the hours of operation and the sale of certain products, typically including
alcoholic beverages, gasoline, tobacco products and lottery and lotto tickets.
The most significant of such regulations limits or governs the sale of
alcoholic beverages and the storage and sale of gasoline.

Sale of Alcoholic Beverages - State and local regulatory agencies have the
authority to approve, revoke, suspend or deny applications for and renewals of
permits and licenses relating to the sale of alcoholic beverages and to impose
various restrictions and sanctions. In many states, retailers of alcoholic
beverages have been held responsible for damages caused by intoxicated
individuals who purchased alcoholic beverages from them. While the potential
exposure to the Company as a seller of alcoholic beverages is substantial, the
Company has adopted procedures to minimize such exposure and, to date,
management believes liability for such sales has not had a material adverse
effect on the Company's financial position or results of operations.

Storage and Sale of Gasoline - The operation and ownership of underground
storage tanks ("USTs") is subject to federal, state and local laws and
regulations. Federal regulations issued in 1984 and amended in 1988 pursuant to
the Resource Conservation and Recovery Act, required the Environmental
Protection Agency (the "EPA") to establish a comprehensive regulatory program
for the detection, prevention and clean-up of leaking USTs.

The EPA has issued regulations, including most recently the 1988 amendment to
the Resource Conservation and Recovery Act, that establish requirements for (i)
maintaining leak detection methods and equipment, (ii) upgrading USTs, (iii)
taking corrective action in response to leaks, (iv) closing USTs to prevent
future leaks, (v) keeping appropriate records and (vi) maintaining evidence of
financial responsibility for taking corrective action and compensating third
parties

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for bodily injury and property damage resulting from releases. These
regulations also empower states to develop, administer and enforce their own
regulatory programs, incorporating requirements which are at least as stringent
as the federal standards. In order to ensure compliance with the federal and
state environmental laws, the Company has developed a comprehensive gasoline
storage and dispensing plan. During fiscal 1993, the Company refined the plan
such that presently its primary focus is on upgrading gasoline dispensing
equipment in accordance with upcoming deadlines imposed by regulatory
authorities and on providing for the clean-up of existing and future
contaminated sites. The gasoline plan generally covers all properties operated
by the Company.

Environmental Capital Commitments - To meet the minimum federal leak detection
requirements, all product lines had to have line leak detectors installed as of
December 22, 1990, and as of December 22, 1993, the Company had adopted
approved tank system leak detection methods on all owned or operated USTs. The
Company chose, in most cases, to meet this requirement by utilizing annual tank
testing with daily inventory reconciliation. The Company installed pressurized
distribution piping with automatic line leak detectors as of December 22, 1990,
in accordance with the regulations. Beginning in fiscal year 1995, the Company
will adopt the Statistical Inventory Reconciliation Method ("SIR") for the
detection of leaking tanks. This method involves statistical analysis of
gasoline inventory changes to detect leaking USTs.

The federal regulations require the Company to have installed spill/overfill
and corrosion protection equipment by December 22, 1998. However, the State of
Texas requires all USTs to be upgraded with the spill/overfill prevention
equipment by December 22, 1994. The Company estimates that, as of June 30,
1994, 82% of its tanks have spill/overfill prevention equipment installed. The
Company's 1995 capital budget contains the necessary funds to upgrade the
remaining tanks with spill/overfill prevention equipment and, consequently, the
Company anticipates it will be in compliance with the December 22, 1994
deadline imposed by the State of Texas. The Company further estimates that 70%
of its USTs are protected from corrosion either by installing fiberglass or
steel fiberglass tanks or by upgrading existing steel tanks with cathodic
protection. Management of the Company believes that the Company's long-range
capital budget contains sufficient funds necessary to upgrade the remaining
tanks prior to the December 22, 1998 deadline.

In addition to the foregoing, the EPA has ranked the air quality in major
cities in the United States based on the level of ozone measured. Two areas in
which the Company currently conducts operations are considered to be ozone
non-attainment areas: Houston and the Dallas/Fort Worth area. The Houston
market is classified in the severe ozone non-attainment category while the
Dallas/Fort Worth area is classified in the moderate ozone non-attainment
category. Under rules promulgated by the EPA and the State of Texas, gasoline
dispensing facilities in the two areas are required to have Stage II Vapor
Recovery Equipment, by November 15, 1994, on all units except those that have
not dispensed more than 10,000 gallons in any one month since January 1991.

During fiscal 1994 and 1993, the Company spent $6.6 million and $4.4 million,
respectively, on environmental capital equipment, including $6.1 million and
$3.1 million, respectively, on

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Stage II Vapor Recovery Equipment. In order to ultimately comply with the
aforementioned regulations by the deadlines described, the Company estimates it
will have to spend approximately $11.8 million on additional equipment and
installation through fiscal 1999, including $6.0 million for Stage II Vapor
Recovery Equipment.

Environmental Remediation Contingency - The majority of the Company's
environmental remediation expenditures relate to the clean-up of contaminated
soil caused by leaking underground gasoline storage tanks and underground
piping systems. During the second quarter of fiscal year 1992 the Company
completed a comprehensive plan covering its underground storage tanks in light
of the expected funding shortfalls in the various state reimbursement programs.
As a result, the Company recorded an increase to the environmental remediation
reserve of $16.8 million in the second quarter of fiscal year 1992. Not
included in this liability is approximately $4.0 million of reimbursements from
established state funds which the Company believes to be probable of recovery.
In connection with an updated environmental remediation cost analysis the
Company increased its liability for future environmental remediation and tank
removal costs by an additional $6.6 million in February 1993. At June 30,
1994, the remediation reserve totalled $21.8 million which included a $4.0
million reclassification, recorded during the third quarter of fiscal year
1994, related to anticipated reimbursements for future expenditures from
established state trust funds which the Company believes to be probable of
recovery. Beginning with the third quarter of fiscal year 1994, this $4.0
million amount is also included as an other asset in the Company's balance
sheet. The states in which the Company operates, or has previously operated,
have established trust funds for the reimbursement of costs related to
remediation activities. The actual cost of remediating contaminated sites and
removing tanks may be substantially lower or higher than that reserved due to
the difficulty in estimating such costs and due to potential changes in the
status of regulation and state reimbursement programs. The Company does not
believe that any such amount below or in excess of that accrued is reasonably
estimable.

Since 1988, the Company has spent approximately $11.4 million for
remediation activities at sites the Company is operating or has previously
operated. Approximately 43% of such costs qualify for reimbursement from the
various trust funds and the Company has been reimbursed $3.7 million for such
costs through June 30, 1994. According to published reports, the Texas
Petroleum Storage Tank Reimbursement Fund was depleted during 1993 which has
necessitated delaying payment on reimbursement applications. As of June 30,
1994, the Company had filed claims with the State of Texas for the reimbursement
of $1.2 million for past expenditures. Such reimbursement is included in other
assets. While the Company believes the reimbursements are collectible, the
Company estimates it could be several years before reimbursement occurs.

The Company is required by state regulations to maintain evidence of
financial responsibility for taking corrective action on remediation
activities. In order to be in compliance with these requirements, the Company
has successfully established that it is self-insured, with verification by the
Texas Natural Resource Conservation Commission.

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EMPLOYEES

As of June 30, 1994, the Company has approximately 5,300 employees, of whom
approximately 230 are executive and supervisory personnel, approximately 4,400
are full-time store employees, and the balance are full-time staff personnel
and part-time store employees. The Company experiences the high rate of
turnover of store employees prevalent in the convenience store industry. The
Company is not a party to any collective bargaining agreement and believes its
relations with its employees to be satisfactory.

COMPETITION

The convenience store industry is highly competitive, and the Company competes
with other convenience stores, local and national grocery store chains,
gasoline service stations, drug stores, fast food operations, vending machines,
discount stores and other types of retail outlets. The Company is the largest
operator, or among the largest operators, of convenience stores in its major
market areas. Each of the Company's stores competes primarily in its
surrounding neighborhood, and the ability of each store to compete is largely
dependent on location, access, signage, area, population growth, demographics
and product mix.

The Company also encounters competition from gasoline service stations which
have installed facilities for the sale of other consumer items. These gasoline
service stations have become a significant competitor within the convenience
store industry.

Although competition from gasoline retailers has increased in recent years, the
Company's traditional convenience store competitors have significantly
curtailed their new store construction programs in, or withdrawn from, some of
the Company's major market areas as a result of their poor operating
performance. Several of the country's largest convenience store operators have
filed for Chapter 11 bankruptcy court protection in recent years.
Nevertheless, the Company cannot predict the extent to which its major
competitors may further reduce or expand their operations in cities where the
Company operates.

CHAPTER 11 BANKRUPTCY REORGANIZATION

Chapter 11 Bankruptcy Filing - On December 9, 1991, (the "Petition Date") the
Company and substantially all of its wholly-owned active subsidiaries filed
voluntary petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for the Southern District of Texas, Houston Division (the "Bankruptcy Court").
The filing was precipitated by the loss of vendor credit which had become
critical to the Company's financing needs as a result of poor operating
results. In 1987, the Company began experiencing substantial net losses from
its operations which it funded via a series of asset sales and sale and
leaseback transactions. The excess of the sales proceeds over the operating
losses requiring funding was used to reduce the Company's outstanding long-
term debt. Despite the substantial reductions in long-term debt, the net
operating losses resulted in

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the Company being required to obtain amendments to cure defaults of various
financial ratio coverage tests contained in the Company's long-term bank debt
agreements. Subsequently, the Company found it was unable to sell additional
operating assets at prices regarded by management as reasonable. This
combination of events led the Company, in its first quarter of fiscal 1992, to
develop a rigorous cash conservation and liquidity enhancement program in
preparation for the Company's winter third quarter, in which it had
historically experienced substantial negative cash flows. A key ingredient in
the program was the continued supply of vendor trade credit in the range of $30
to $35 million. However, commencing in the fourth week of November 1991, the
Company experienced a rapid multi-million dollar reduction in the availability
of such trade credit. As a result of the virtual elimination of vendor trade
credit and the cutoff of deliveries of goods, the Company decided on December
9, 1991 to seek protection under Chapter 11 of the Bankruptcy Code.

Strategic Review of Company and Store Operations - Immediately upon entering
Chapter 11 bankruptcy reorganization, the Company began implementing a series
of cost reductions aimed at improving operating results. Chief among the cost
reduction programs was a strategic review of store operations that evaluated
each individual store, taking into consideration such factors as historical and
projected cash flows, lease or ownership terms, age and condition of the
property, the nature and amount of insurance claims, competition and the
potential for future changes to any of the foregoing. The objective of the
strategic review was to restructure the operations of the Company in order to
maximize its cash-flow generating capability and achieve its ultimate return to
long-term profitability. Other cost reduction efforts were based on utilizing
the benefits of operating under Chapter 11 of the Bankruptcy Code to reduce
specific expenses.

As a result of the strategic review of store operations, the Company filed
motions to reject 188 leases covering stores already closed as of the Petition
Date. In addition, the review resulted in a 27% downsizing of the Company's
convenience store operations from a 986 store base as of the Petition Date to
the 719 store base at June 30, 1993. The downsizing was accomplished pursuant
to the Bankruptcy Code, wherein the Company had the right to assume or reject
executory contracts, including any unexpired leases. Also, the Company entered
into lease amendments with landlords covering approximately 20% of the
Company's leased stores, as well as other equipment lessors to obtain rent
expense reductions.

As part of the strategic review, on July 10, 1992, the Company consummated the
sale of 21 operating convenience stores located in and around the San Francisco
Bay area. Also, on April 29, 1994, the Company completed the transaction
whereby the Company, (i) exchanged its 53 operating convenience stores in
Southern California, together with related inventories and equipment, for 88
operating convenience stores of The Circle K Corporation in the Dallas/Fort
Worth and Houston, Texas areas, together with related inventories and equipment
and, (ii) sold its 27 operating convenience stores in Atlanta, Georgia,
together with related inventories and equipment, for cash consideration of
$9,150,000. The Company is continuing to pursue the disposition of its
surplus real estate with any resulting net cash proceeds being applied to
reduce the outstanding balances as required under the Company's long-term bank
debt agreements.

Restructuring and Other Special Charges - In connection with the Chapter 11
filing and the

-8-
<PAGE> 12
resultant strategic review of company and store operations, the Company
recorded $168.1 million of Restructuring and Other Special Charges at December
31, 1991, related to store closings, other assets affected by the Chapter 11
filing, insurance and environmental matters. See Note 10 of the Notes to
Consolidated Financial Statements incorporated by reference in Item 8 herein
for a complete description of the various components of the charges.

Plan of Reorganization (Effective March 9, 1993) - As a result of extensive
negotiations held in December 1992, the Company reached a compromise agreement
which was incorporated into and became the Plan of Reorganization. The
Bankruptcy Court entered an order confirming the Plan of Reorganization on
February 25, 1993. The Plan of Reorganization subsequently became effective
March 9, 1993 (the "Effective Date").

The Plan of Reorganization was designed to repay all priority creditors in full
on the Effective Date or thereafter as provided in the Plan of Reorganization
and to repay secured creditors in full over time with interest. Allowed
unsecured claims totalling approximately $137.5 million were canceled in
exchange for $9.3 million of cash, $1.0 million of new indebtedness and 5.91
million shares of newly issued Common Stock, par value $.01 per share, of the
reorganized company. All existing Series E Preferred Stock and existing common
stock of the predecessor company were exchanged for an aggregate distribution
of 90,000 shares of the newly issued Common Stock of the reorganized company.
Consequently, a total of 6.0 million shares of newly issued Common Stock of the
reorganized company were issued under the Plan of Reorganization. In addition,
warrants to purchase up to an additional aggregate 1.35 million shares of newly
issued Common Stock at $17.75 per share were distributed to the holders of the
predecessor company's two publicly-held subordinated debenture series, the
Series E Preferred Stock and the old common stock. All alleged seniority
rights rising under the indentures relating to the publicly-held subordinated
debentures were deemed satisfied and canceled as of the Effective Date. In
addition, the Plan of Reorganization authorized the issuance of stock options
to purchase up to 900,000 shares of Common Stock of the reorganized company to
certain key employees and directors at $10.50 per share.

Even though the Company has successfully emerged from Chapter 11 bankruptcy
protection, the Bankruptcy Court continues to exercise the authority to resolve
disputes on pre-petition claims of creditors, to make rulings on matters
related to the assumption or rejection of executory contracts and leases
pursuant to the Plan of Reorganization and to make judgments on other matters
related to the Plan of Reorganization.

-9-
<PAGE> 13
EXECUTIVE OFFICERS OF REGISTRANT

The following table sets forth the names, ages and certain additional
information regarding the Company's executive officers:

<TABLE>
<CAPTION>
Name (1) Age Position
-------- --- --------
<S> <C> <C>
V.H. Van Horn 56 Director, President and Chief Executive Officer since 1975; employee of the Company since
1966.

A.J. Gallerano 52 Senior Vice President, General Counsel and Secretary since 1989; Vice President, General
Counsel and Secretary from 1979 to 1989.

Arnold Van Zanten 52 Senior Vice President-Administration since April 1992; Vice President-Systems from April
1989. Prior to joining the Company, he was Senior Vice President-Operations Support for
Coastal Mart Incorporated from June 1987.

C.R. Wortham, Jr. 55 Senior Vice President-Real Estate and Gasoline since 1989; Vice President-Real Estate from
1985 to 1989.

F.R. Daily, Jr. (2) 43 Vice President-Marketing since July 1993; Vice President-Advertising and Sales Promotion
from January 1989 to July 1993. Prior to joining the Company, he was Director of Coca-Cola
Brands for Coca-Cola USA from September 1987; prior thereto he was Vice President-
Marketing for Houston Coca-Cola Bottling Company for more than five years.

Brian Fontana 37 Vice President and Chief Financial Officer since December 1993; Vice President and
Treasurer from July 1993 to December 1993; Treasurer from February 1992 to July 1993;
Assistant Treasurer from April 1990 to February 1992. Prior to joining the Company, he
was Vice President of Corporate Banking for NCNB Texas National Bank (currently
NationsBank of Texas, N.A.).

David P. Tusa (3) 34 Vice President and Controller since April 1994. Prior to joining the Company, he was
Corporate Controller at CRSS Inc. from 1990; prior thereto he was a Senior Audit Manager
for KPMG Peat Marwick for more than six years.

M. David Wishard 36 Vice President-Stores since July 1993; prior thereto he served in various management
positions within the Company since 1982.
- - -------------------
</TABLE>
(1) Mr. Van Horn and the Company have entered into a contract pursuant
to which Mr. Van Horn will serve as President until at least June
1999. All other officers serve pursuant to three year contracts
that expire in May 1996. All of the executive officers, except
Messrs. Fontana, Tusa and Wishard were executive officers of the
Company as of December 9, 1991 when the Company and substantially
all of its wholly-owned active subsidiaries filed petitions for
voluntary reorganization under Chapter 11 of the United States
Bankruptcy Code. For a complete description of the events leading
up to and emerging from voluntary reorganization under Chapter 11
see Note 9 of the Notes to Consolidated Financial Statements
incorporated by reference in Item 8 herein.
(2) On July 15, 1994, Mr. Daily terminated his employment with the
Company.
(3) On August 26, 1994, Mr. Tusa terminated his employment with the
Company.

-10-
<PAGE> 14
ITEM 2. PROPERTIES

STORES

The Company had 709 stores in operation at June 30, 1994, of which
approximately 75% were leased. Virtually all of the Company's fee-owned
properties are mortgaged.

CORPORATE OFFICES

The Company leases the building at 100 Waugh Drive, Houston, Texas, in which
its corporate and Gulf Coast Division offices are located pursuant to the terms
of a three year lease effective March 1, 1993. The six-story building contains
approximately 123,800 square feet of net rentable area, of which the Company
utilizes 107,043 square feet and subleases 16,757 square feet to an
unaffiliated company under a lease term expiring February 29, 1996.

SUPPORT FACILITIES

Corporate Kitchen - The Company leases 35,000 square feet in an industrial park
in Houston, Texas, in which its Corporate Kitchen is located. The primary
lease expired in 1991 and the Company exercised its option to extend the lease
through 1996.

Other - The Company also leases various spaces for district/division support in
each of its major markets. The remaining terms of these leases range from one
to five years with options to renew primarily for an additional 5 years per
option. The square footage of the locations ranges from approximately 2,400
square feet to 4,600 square feet.

-11-
<PAGE> 15
ITEM 3. LEGAL PROCEEDINGS

THE DISCUSSION BELOW SETS FORTH VARIOUS ASPECTS OF THE CHAPTER 11 PROCEEDINGS,
BUT IT IS NOT INTENDED TO BE AN EXHAUSTIVE SUMMARY. FOR ADDITIONAL INFORMATION
REGARDING THE EFFECT ON THE DEBTOR GROUP OF THESE PROCEEDINGS, REFERENCE SHOULD
BE MADE TO THE BANKRUPTCY CODE AND THE CHAPTER 11 PROCEEDINGS OF THE DEBTOR
GROUP.

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11

Chapter 11 Filing - On December 9, 1991, the Company and certain of its
subsidiaries (the "Debtor Group") filed separate petitions for reorganization
under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. On December
11, 1991, the Bankruptcy Court entered an order for the cases to be jointly
administered. The cases were jointly administered under Case No.
91-49816-H4-11. A complete list of the Debtor Group which filed petitions for
reorganization is set forth below:

National Convenience Stores Incorporated
Stop N Go Markets of Texas, Inc.
Stop N Go Markets of Georgia, Inc.
Schepps Food Stores, Inc.
Second NCS Realty Company
Third NCS Realty Company
Fourth NCS Realty Company
Sixth NCS Realty Company
Seventh NCS Realty Company
Eighth NCS Realty Company
Ninth NCS Realty Company
Tenth NCS Realty Company
Eleventh NCS Realty Company
Twelfth NCS Realty Company
Thirteenth NCS Realty Company
Kempco Petroleum Company
Hot Stop Foods, Inc.
Texas Super Duper Markets, Inc.
Jay's Washaterias, Inc.

Shortly after the Petition Date, an official unsecured creditors' committee
(the "Committee"), representing all unsecured creditors of the Debtor Group,
including both the publicly-held debentures and the unsecured trade creditors,
was organized. The Committee had the right to review and object to certain
business transactions and participated in the formulation of the Plan of
Reorganization. The Debtor Group was required to pay certain expenses of the
Committee, including legal counsel, accountants and other professional fees, to
the extent approved by the Bankruptcy Court.

Plan of Reorganization - As a result of extensive negotiations held in December
1992, the Company reached a compromise agreement which was incorporated into
and became the Plan of Reorganization. The Bankruptcy Court entered an order
confirming the Plan of

-12-
<PAGE> 16
Reorganization on February 25, 1993. The Plan of Reorganization subsequently
became effective March 9, 1993 (the "Effective Date").

Claims Procedures - Pre-petition claims held by creditors of the Debtor Group
which were contingent or unliquidated at the commencement of the Chapter 11
proceedings were generally allowable against the Debtor Group in amounts fixed
by the Bankruptcy Court or otherwise agreed upon. These claims, including,
without limitation, those which arise in connection with the rejection of
executory contracts and lease obligations and with resolution of litigation,
are expected to be substantial.

The Company is continuing to research and evaluate the proofs of claims
received. As of September 23, 1994, 3,005 proofs of claims had been filed
against the Company which had not been withdrawn and which had a stated
aggregate value of approximately $357.4 million for the proofs of claim
specifying amounts; numerous other proofs of claim do not specify amounts. Of
the total, 2,939 claims valued at $293.5 million had been accepted for
settlement by the Company. The remaining number of claims includes other
unresolved claims, including duplicate claims filed by the same claimant and
also includes duplicate claims filed by separate parties for the same asserted
liability. The Debtor Group considers the amounts claimed in the remaining
unsettled proofs of claim to be an unreliable estimate of their liability. In
the opinion of management, certain of these claims assert unrealistic amounts
of liability, are duplicate claims or have other defects. Consequently, as of
September 23, 1994, the Debtor Group is continuing to prosecute objections in
the Bankruptcy Court for 15 of the remaining disputed claims covering $22.9
million. Of the disputed claims, $6.3 million is the amount the Company
estimates is not covered by insurance. In addition, as of September 23, 1994,
49 claims for $37.1 million had been assigned to a mediation/settlement
procedure outlined in the Plan of Reorganization. The Debtor Group will
continue to reconcile the scheduled claims with the claims asserted in proofs
of claims and will take appropriate steps to eliminate all duplications and
other inaccuracies to ensure that only valid claims are allowed by the
Bankruptcy Court. This process will continue until all claims are resolved and
is expected to last for an extended period of time.

-13-
<PAGE> 17
The majority of outstanding disputed claims are general unsecured claims.
Pursuant to the terms of the Plan of Reorganization, a total of 1,616,559
shares of Common Stock were issued to Boatmen's Trust Company as agent for the
general unsecured creditors, pending allowance of their respective claims. As
of September 20, 1994, Boatmen's had allocated 873,847 shares to individual
unsecured creditors and had issued the appropriate share certificates. The
remaining 742,712 shares will be allocated in the future as additional general
unsecured claims are allowed.

On January 10, 1994, the Bankruptcy Court approved a settlement of the Proofs
of Claim of National Union Fire Insurance Company of Pittsburgh, Pennsylvania
and certain related entities ("National Union"), which settlement provided for
National Union to have an allowed general unsecured claim under the Plan of
Reorganization in the amount of $4,029,319, for the release of $4,494,152 in
Letters of Credit held by National Union and for the reissuance of Letters of
Credit totalling $9,591,925 to National Union. The settlement also
contemplates the payment by National Union of certain proofs of claim by
claimants whose claims are covered by National Union insurance. As a result of
the settlement with National Union, the amount of unresolved general unsecured
claims was substantially reduced.

On September 14, 1994, an Order of the Bankruptcy Court was entered approving a
settlement of the proofs of claim of the current lessors of the Debtors' home
office location. The settlement provides for an aggregate allowed claim in the
amount of $3,516,989. The settlement substantially reduced the amount of
unresolved general unsecured claims. The amount originally claimed by these
lessors, excluding the potentially duplicate claims, was in excess of
$7,900,000.

OTHER LITIGATION

George Shields, Garry Cocker, Michael W. Armstrong & Sheila B. Armstrong, Joint
Tenants, Michael W. Armstrong & Sheila B. Armstrong Revocable Living Trust,
Bobby J. Moon, and Jeannie M. Moon, on behalf of themselves and all others
similarly situated, Plaintiffs v. V. H. Van Horn, Richard C. Steadman, Dunbar
N. Chambers, Jr., Raymond W. Oeland, Jr. and Robert Stobaugh, Defendants; in
the 125th Judicial District Court of Harris County, Texas (the "State Court
Action"). In this action, filed on February 24, 1993, the shareholder
Plaintiffs had sought class certification to assert claims by all shareholders
of the Company prior to the confirmation of the Plan of Reorganization. The
Plaintiffs contended, among other things, that the write-offs which were taken
prior to the confirmation of the Plan of Reorganization were improper and that
the Plan of Reorganization, as approved by order of the Bankruptcy Court,
improperly deprived Plaintiffs of their ownership of the Company. Plaintiffs
had sought unspecified compensatory and punitive damages and costs of defense.

The Company had filed an adversary proceeding against the
shareholders/Plaintiffs styled National Convenience Stores Incorporated v.
George Shields and Garry Cocker, in the Bankruptcy Court, Adversary No. 93-4454
(the "Adversary Proceeding"). The Company's complaint in the Adversary
Proceeding had requested that the Bankruptcy Court enforce its injunction
contained in the Order confirming the Plan of Reorganization since the
Adversary Proceeding, as a collateral attack upon the Order of Confirmation,
contradicts the Order of Confirmation. On October 29, 1993, the Bankruptcy
Court entered judgment for the Company against Messrs. Shields and Cocker. The
judgment enjoined Messrs. Shields and Cocker from prosecuting the State Court
Action and ordered Messrs. Shields and Cocker to dismiss the State Court
Action. The judgment was appealed by Messrs. Shields and Cocker to the United
States

-14-
<PAGE> 18
District Court for the Southern District of Texas, Houston Division.

The Company had filed a further action in Bankruptcy Court against Messrs.
Shields and Cocker styled National Convenience Stores Incorporated v. Shields
and Cocker, Adversary No. 93-4705 (the "Compensation Lawsuit") in which the
Company sought compensation for costs incurred as a result of the violation of
the permanent injunction by the shareholder/Plaintiffs mentioned above.

The Directors, who are Defendants in the State Court Action, and the Company
entered into a settlement agreement with the Plaintiffs, in the State Court
Action, and Messrs. Shields and Cocker with respect to the State Court Action,
the Adversary Proceeding and the Compensation Lawsuit. Under the terms of the
settlement agreement, the Plaintiffs, in the State Court Action, and Messrs
Shields and Cocker agreed (i) to release each of their claims against the
Directors who are Defendants and the Company; (ii) to dismiss the State Court
Action; (iii) to sell any shares of Company stock owned; (iv) not to purchase
any Company stock for ten years; and (v) to pay the Company $1,000. The
Company agreed to dismiss the Adversary Proceeding and the Compensation
Lawsuit. The State Court Action, the Appeal of the Adversary Proceeding and
the Compensation Lawsuit have been dismissed.

There is no other litigation pending or threatened against the Company that
management believes would have a material adverse effect on the financial
position or the business of the Company. See, however, Item 1
"Business--Regulatory Matters" for information relating to the Company's
potential litigation exposure as a retailer of alcoholic beverages and
gasoline.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the fourth
quarter of fiscal 1994.

-15-
<PAGE> 19
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's Common Stock and Warrants to Purchase Common Stock are traded on
the Nasdaq National Market under the symbols "NCSI" and "NCSIW", respectively.
On March 9, 1993, upon emergence from Chapter 11 bankruptcy reorganization, all
authorized and outstanding shares of the predecessor company's publicly-traded
securities, including its common stock, were cancelled and the abovementioned
securities were issued by the reorganized company. The following table sets
forth the high and low sales price of the newly issued Common Stock and
Warrants to Purchase Common Stock as reported by the Nasdaq since the first day
of trading:

<TABLE>
<CAPTION>
Warrants to
Common Stock(1) Purchase Common Stock (2)
---------------- -------------------------
High Low High Low
------ ------ -------- -------
<S> <C> <C> <C> <C>
Year Ended June 30, 1994:
First Quarter $16.75 $13.25 $ 4.75 $3.50
Second Quarter 16.75 14.25 5.75 3.50
Third Quarter 20.00 16.25 7.375 5.00
Fourth Quarter 17.00 10.25 5.75 2.75

Year Ended June 30, 1993:
Third Quarter $16.13 $14.00 - -
Fourth Quarter 16.75 14.25 $ 4.75 $3.50
</TABLE>

(1) The Common Stock began trading on March 10, 1993.
(2) The Warrants to Purchase Common Stock began trading on April 15, 1993.

The number of the Company's common stockholders of record at August 31, 1994
was 1,380. Holders of shares held in "nominee" or street names are not
included in this number.

The Company has not paid a dividend on its Common Stock during its two most
recent fiscal years. Under the terms of certain of the Company's long-term
debt instruments, the Company cannot pay cash dividends on its Common Stock or
purchase any treasury stock.

ITEM 6. SELECTED FINANCIAL DATA

The information required in response to this item is incorporated herein
by reference from page 13 of the Company's 1994 Annual Report to Shareholders.

-16-
<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The information required in response to this item is incorporated herein
by reference from pages 13 through 23 and on page 44 of the Company's 1994
Annual Report to Shareholders.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required in response to this item is incorporated herein
by reference from pages 24 through 44 of the Company's 1994 Annual Report to
Shareholders.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

-17-
<PAGE> 21
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information concerning directors of the Company is incorporated herein
by reference from the section entitled "Information Regarding Directors and
Officers" of the Company's definitive Proxy Statement for the 1994 Annual
Meeting of Stockholders to be held November 10, 1994 in response to this item.
The information concerning executive officers of the Company is included in
Item 1 of Part I of this report pursuant to Instruction 3 to Item 401(b) of
Regulation S-K.

ITEM 11. EXECUTIVE COMPENSATION

The information required in response to this item is incorporated herein
by reference from the section entitled "Executive Compensation and Other
Information" of the Company's definitive Proxy Statement for the 1994 Annual
Meeting of Stockholders to be held November 10, 1994.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The information required in response to this item is incorporated herein
by reference from the sections entitled "Voting Securities and Principal
Holders Thereof" and "Information Regarding Directors and Officers" of the
Company's definitive Proxy Statement for the 1994 Annual Meeting of
Stockholders to be held November 10, 1994.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

-18-
<PAGE> 22
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements, Financial Statement Schedules and Exhibits.

<TABLE>
<CAPTION>
1. Financial Statements and Financial Statement Schedules.
Financial Statements Included as Part II of this report: Page
----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *

Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . *

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *

Consolidated Statements of Stockholders'
Equity (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . *

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . *

Supplemental Quarterly Financial Information
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *

Financial Statement Schedules:

Independent Auditors' Consent and
Report on Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1

Schedule II - Amounts Receivable from
Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2

Schedule V - Property and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6

Schedule VI - Accumulated Depreciation
and Amortization of Property and
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
</TABLE>

* Incorporated herein by reference to the appropriate portions of the
Company's 1994 Annual Report to Shareholders.

-19-
<PAGE> 23
2. Exhibits.

<TABLE>
<CAPTION>
Exhibit
Number Description
- - ------- -----------
<S> <C>
2.1 - Order Preserving Property of the Estate and Declaring Certain Stock Transactions as Void Ab Initio, issued by the United
States Bankruptcy Court for the Southern District of Texas (Houston Division) entered September 8, 1992 - incorporated by
reference from Exhibit 2.1 to Registrant's Current Report on Form 8-K dated September 8, 1992.

2.2 - Supplemental Disclosure Statement Under 11 U.S.C. Section 1125 in connection with Debtor's Revised Fourth Amended and
Restated Joint Plan of Reorganization Under Chapter 11 of the United States Bankruptcy Code dated December 28, 1992, with
Revised Fourth Amended and Restated Joint Plan of Reorganization Under Chapter 11 of the United States Bankruptcy Code
dated December 28, 1992, included therein as Exhibit B - incorporated by reference from Exhibit 2.1 to Registrant's
Current Report on Form 8-K dated December 28, 1992 (Commission File No. 1-7936, filed January 20, 1993).

2.3 - Revised Fourth Amended and Restated Joint Plan of Reorganization Under Chapter 11 of the United States Bankruptcy Code as
Confirmed (Order Entered February 25, 1993) - incorporated by reference from Exhibit 2.1 to Registrant's Current Report on
Form 8-K dated February 25, 1993 (Commission File No. 1-7936, filed March 12, 1993).

3.1 - Restated Certificate of Incorporation of Registrant dated March 9, 1993 - incorporated by reference from Exhibit 2.1 to
Registrant's Current Report on Form 8-A dated March 3, 1993 (Commission File No. 1-7936, filed March 4, 1993).

3.2 - Restated By-Laws of Registrant dated March 9, 1993 - incorporated by reference from Exhibit 2.2 to Registrant's Current
Report on Form 8-A dated March 3, 1993 (Commission File No. 1-7936, filed March 4, 1993).

3.3 - Form of Permanent Common Stock Certificate of Registrant - incorporated by reference from Exhibit 1.2 to Registrant's
Current Report on Form 8-A dated March 3, 1993 (Commission File No. 1-7936, filed March 4, 1993).

3.4 - Form of Warrant Certificate of Registrant - incorporated by reference from Exhibit 1.3 to Registrant's Current Report on
Form 8-A dated March 3, 1993 (Commission File No. 1-7936, filed March 4, 1993).

4.1 - Revolving Credit Agreement dated as of March 9, 1993, between Registrant, its Subsidiaries Signatory Thereto, the
Financial Institution's Signatory Thereto, and NationsBank of Texas, N.A., as Agent - incorporated by reference to
Exhibit 4(a) to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993 (Commission File No.
1-7936, filed May 13, 1993).

*4.1.1- First Amendment dated as of June 15, 1993 to Revolving Credit Agreement between Registrant, its Subsidiaries Signatory
Thereto, the Financial Institution's Signatory Thereto, and NationsBank of Texas, N.A., as Agent.
</TABLE>

-20-
<PAGE> 24
<TABLE>
<S> <C>
4.2 - Amended and Restated Letter of Credit Agreement dated March 9, 1993, between Registrant and Bank of America National
Trust and Savings Association - incorporated by reference to Exhibit 4(b) to Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1993 (Commission File No. 1-7936, filed May 13, 1993).

4.3 - Second Amended and Restated Credit Agreement dated as of March 9, 1993, between Registrant and NationsBank of Texas, N.A.,
as Agent - incorporated by reference to Exhibit 4(c) to Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1993 (Commission File No. 1-7936, filed May 13, 1993).

*4.3.1 - First Amendment dated as of June 15, 1993 to Second Amended and Restated Credit Agreement between Registrant and
NationsBank of Texas, N.A., as Agent.

*4.4 - Second Amendment dated March 31, 1994 to Second Amended and Restated Credit Agreement between Registrant and NationsBank
of Texas, N.A., as Agent, Second Amendment dated March 31, 1994 to Revolving Credit Agreement between Registrant, its
Subsidiaries Signatory Thereto, the Financial Institution's Signatory Thereto and NationsBank of Texas, N.A., as
Agent and Overriding Amendment To All Other Loan Documents dated March 31, 1994.

*10.1.1 - Twentieth Amendment and Restatement of the Registrant's Profit Sharing Plan and Trust executed December 16, 1993.

*10.1.2 - Twenty-first Amendment and Restatement of the Registrant's Profit Sharing Plan and Trust executed August 9, 1994.

10.2 - Form of Indemnification Agreement for officers and directors of Registrant dated as of July 18, 1986-incorporated by
reference from Exhibit 10.7 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1987 (Commission File
No. 1-7936).

10.3.1 - Registrant's Employee Stock Ownership Plan ("ESOP") dated May 13, 1985-incorporated by reference from Exhibit 28(a) to
Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1985 (Commission File No. 1-7936, filed May 15,
1985).

10.3.2 - First Amendment to ESOP dated June 27, 1985-incorporated by reference from Exhibit 10.8.2 to Registrant's Annual Report on
Form 10-K for the year ended June 30, 1987 (Commission File No. 1-7936).

10.3.3 - Second Amendment to ESOP dated June 20, 1986-incorporated by reference from Exhibit 10.8.3 to Registrant's Annual Report
on Form 10-K for the year ended June 30, 1987 (Commission File No. 1-7936).

10.3.4 - Third Amendment to ESOP dated November 17, 1986-incorporated by reference from Exhibit 10.8.4 to Registrant's Annual
Report on Form 10-K for the year ended June 30, 1987 (Commission File No. 1-7936).
</TABLE>

-21-
<PAGE> 25
<TABLE>
<S> <C>
10.3.5 - Fourth Amendment to Registrant's Employee Stock Ownership Plan executed June 27, 1990-incorporated by reference from
Exhibit 10.7.5 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1990 (Commission File No. 1-7936).

10.3.6 - Fifth Amendment to Registrant's Employee Stock Ownership Plan dated April 5, 1991-incorporated by reference from Exhibit
10.8.6 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1991 (Commission File No. 1 -7936).

10.3.7 - ESOP Stock Purchase Agreement with Registrant dated May 13, 1985-incorporated by reference from Exhibit 28(c) to
Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1985 (Commission File No. 1-7936, filed
May 15, 1985).

10.3.8 - Nonrecourse promissory note dated May 13, 1985, from ESOP to Registrant-incorporated by reference from Exhibit 28(d) to
Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1985 (Commission File No. 1-7936, filed May 15,
1985).

10.4 - Asset Purchase Agreement between Registrant and The Customer Company and Triond dated as of May 19, 1992 - incorporated
by reference from Exhibit 10.12 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992 (Commission
File No. 1-7936, filed September 28, 1992).

10.5 - Warrant Agreement Dated March 9, 1993 between National Convenience Stores Incorporated and Boatmen's Trust Company as
Warrant Agent - incorporated by reference from Exhibit 10.1 to Registrant's Current Report on Form 8-K dated February 25,
1993 (Commission No. 1-7936, filed March 12, 1993).

10.6 - Standstill Agreement dated as of March 22, 1993 between Registrant and Smith Management Company - incorporated by
reference from Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993
(Commission No. 1-7936, filed May 13, 1993).

10.7 - Registrant's 1993 Non-Qualified Stock Option Plan dated as of March 9, 1993 - incorporated by reference from Exhibit 10(b)
to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993 (Commission No. 1-7936, filed May 13,
1993).

10.8 - Asset Exchange Agreement By and Among National Convenience Stores Incorporated, NCS Realty Company, The Circle K
Corporation and Circle K Properties, Inc. dated as of April 20, 1994 and as amended on April 29, 1994 - incorporated by
reference from Exhibit 10.10 to Registrant's Current Report on Form 8-K dated April 29, 1994 (Commission File No. 1-7936,
filed May 13, 1994).

10.9 - Asset Purchase Agreement By and Among National Convenience Stores Incorporated, NCS Realty Company, Stop N Go markets of
Georgia, Inc., The Circle K Corporation and Circle K Properties, Inc. dated as of April 20, 1994 and as amended on April
29, 1994 - incorporated by reference from Exhibit 10.11 to Registrant's Current Report on Form 8-K dated April 29, 1994
(Commission File No. 1-7936, filed May 13, 1994).

*10.10 - Registrant's Officers' Retirement Plan, executed March 31, 1994.

*10.11 - Trust Under National Convenience Stores Incorporated Officers' Retirement Plan, executed June 30, 1994 between
Registrant and Bank One, Texas, N.A..

*10.12 - Registrant's Directors' Retirement Plan, executed March 31, 1994.
</TABLE>

-22-
<PAGE> 26
<TABLE>
<S> <C>
*10.13 - Trust Under National Convenience Stores Incorporated Directors' Retirement Plan, executed June 30, 1994 between
Registrant and Bank One, Texas, N.A..

*10.14 - Employment Agreement between Registrant and Mr. V. H. Van Horn effective July 1, 1994.

*10.15 - Employment Agreement as amended through August 1, 1994 between Registrant and Mr. A. J. Gallerano.

*10.16 - Employment Agreement as amended through August 1, 1994 between Registrant and Mr. Arnold Van Zanten.

*10.17 - Employment Agreement as amended through August 1, 1994 between Registrant and Mr. C. R. Wortham.

*10.18 - Employment Agreement as amended through August 1, 1994 between Registrant and Mr. Brian Fontana.

*10.19 - Employment Agreement as amended through August 1, 1994 between Registrant and Mr. M. David Wishard.

10.20 - Employee Stock Ownership Trust Agreement dated May 13, 1985, between Registrant and InterFirst Bank Houston, N.A., as
Trustee- incorporated by reference from Exhibit 28(b) to Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1985 (Commission File No. 1-7936, filed May 15, 1985).

*11 - Computation of primary and fully diluted earnings per share.

*13 - Pages 13 through 44 of the Annual Report to Shareholders of the Registrant for the fiscal year ended June 30, 1994.

*21 - Subsidiaries of Registrant.

*23 - Independent Auditors' Consent and Report on Schedules of Deloitte & Touche LLP, included as page S-1 in Item 14(a) 1. of
this report.

*27 - Financial Data Schedule
</TABLE>

(b) REPORTS ON FORM 8-K

On May 13, 1994, the Company filed a Current Report on Form 8-K to
disclose that on April 29, 1994, the Company completed a transaction whereby
the Company, (i) exchanged its 53 operating convenience stores in Southern
California, together with related inventories and equipment, for 88 operating
convenience stores of The Circle K Corporation in the Dallas/Fort Worth and
Houston, Texas areas, together with related inventories and equipment and, (ii)
sold its 27 operating convenience stores in Atlanta, Georgia, together with
related inventories and equipment, for cash consideration of $9,150,000.

________________
*Filed Herewith

-23-
<PAGE> 27
On July 13, 1994, the Company filed a Current Report on Form 8-K/A to
amend the Current Report on Form 8-K filed on May 13, 1994 to provide the
audited financial statements of the business acquired and the related pro forma
financial information required for the aforementioned transaction between the
Company and The Circle K Corporation.

-24-
<PAGE> 28
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

National Convenience Stores
Incorporated
(Registrant)

By: A.J. GALLERANO
A.J. Gallerano
Senior Vice President-
General Counsel and
Secretary

September 27, 1994

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on September 27, 1994, by the following persons on
behalf of the Registrant and in the capacities indicated.

Name Title
---- -----

V.H. VAN HORN President, Chief Executive
V.H. Van Horn Officer and Director
(Principal Executive Officer)

BRIAN FONTANA Vice President - Chief Financial Officer
Brian Fontana (Principal Accounting Officer)

RICHARD C. STEADMAN Chairman of the Board and
Richard C. Steadman Director

DUNBAR N. CHAMBERS, JR. Director
Dunbar N. Chambers, Jr.

CHARLES J. LUELLEN Director
Charles J. Luellen

-25-
<PAGE> 29

LIONEL SOSA Director
Lionel Sosa

RAYMOND W. OELAND, JR. Director
Raymond W. Oeland, Jr.

ROBERT B. STOBAUGH Director
Robert B. Stobaugh

WILLIAM KEY WILDE Director
William Key Wilde

-26-
<PAGE> 30

INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES

To the Board of Directors and Stockholders of
National Convenience Stores Incorporated and Subsidiaries
Houston, Texas

We consent to the incorporation by reference in the Registration
Statements of National Convenience Stores Incorporated and Subsidiaries (the
"Company") on Form S-3 (No. 33-3433) and on Forms S-8 (Nos. 227583 and
33-52449), of our report dated August 9, 1994, appearing in this Annual Report
on Form 10-K of the Company for the year ended June 30, 1994.

Our audits of the consolidated financial statements referred to in our
aforementioned report also included the consolidated financial statement
schedules of the Company, listed in Item 14(a)1. These consolidated financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.

DELOITTE & TOUCHE LLP

Houston, Texas
September 27, 1994

S-1
<PAGE> 31

National Convenience Stores Incorporated and Subsidiaries
Schedule II - Amounts Receivable from Related Parties

<TABLE>
<CAPTION>
Predecessor Company
-----------------------------------------------------------------
Balance Balance
Beginning End
Name of Debtor of Period Additions Deductions of Period
- - -------------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended June 30, 1992

A.J. Gallerano $ 352,000 $ --- $ 352,000 $ ---
Patricia A. Raybon 176,000 --- 176,000 ---
John C. Brewster 527,000 --- 527,000 ---
Michael C. Kearney 264,000 --- 264,000 ---
Jerry M. Comstock 264,000 --- 264,000 ---
C.R. Wortham 264,000 --- 264,000 ---
V.H. Van Horn 1,758,000 --- 1,758,000 ---
Dunbar N. Chambers, Jr. 264,000 --- 264,000 ---
Raymond W. Oeland, Jr. 264,000 --- 264,000 ---
Richard C. Steadman 264,000 --- 264,000 ---
Robert B. Stobaugh 264,000 --- 264,000 ---
William Key Wilde 264,000 --- 264,000 ---
F.R. Daily, Jr. 348,000 --- 348,000 ---
Arnold Van Zanten 175,000 --- 175,000 ---
Texas Commerce Bank N.A.,
as Trustee under the
Company's Employee
Stock Ownership
Plan 23,167,000 --- --- 23,167,000
----------- -------- ---------- -----------

$28,615,000 $ --- $5,448,000 (1) $23,167,000
=========== ======== ========== ===========
</TABLE>

S-2
<PAGE> 32
National Convenience Stores Incorporated and Subsidiaries
Schedule II - Amounts Receivable from Related Parties
(Continued)

<TABLE>
<CAPTION>
Predecessor Company | Reorganized Company
---------------------------------------------- | -----------------------------
Balance Balance at |
Beginning Additions February | Additions Balance at
Name of Debtor of Period (Deductions) 28, 1993 | (Deductions) June 30, 1993
- - -------------- --------- ------------ ---------- | ------------ -------------
<S> <C> <C> <C> | <C> <C>
Year ended June 30, 1993 |
|
Texas Commerce Bank, N.A., |
as Trustee under the |
Company's Employee |
Stock Ownership |
Plan 23,167,000 (23,167,000) (2) --- | --- ---
========== =========== ========= | ========= =========
</TABLE>

S-3
<PAGE> 33
National Convenience Stores Incorporated and Subsidiaries
Schedule II - Amounts Receivable from Related Parties
(Continued)

<TABLE>
<CAPTION>
Reorganized Company
-------------------------------------------------------------------
Balance Balance
Beginning End
Name of Debtor of Period Additions Deductions of Period
- - -------------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended June 30, 1994

V.H. Van Horn $ -0- $300,000(3) $ 375 $ 299,625
=========== ======== ========== ===========
</TABLE>

S-4
<PAGE> 34
National Convenience Stores Incorporated and Subsidiaries
Schedule II - Amounts Receivable from Related Parties

(Continued)

(1) During the year ended June 30, 1987, the predecessor company issued
floating interest rate subordinated debentures to all of its officers and
directors and during the year ended June 30, 1989, the predecessor company
issued floating interest rate subordinated debentures to those officers
currently employed with the predecessor company who had not been issued
debentures during the year ended June 30, 1987. The purchases of both
issuances of debentures were financed pursuant to promissory notes payable
executed by such officers and directors. As a result of the ratification
of the 1989 Equity Incentive Plan on October 25, 1989, no additional
debentures were allowed to be issued thereafter. During fiscal 1992,
certain officers and directors of the predecessor company exercised their
right to exchange the outstanding $5,448,000 of promissory notes payable
held by the predecessor company for the related floating interest rate
subordinated debentures.

(2) For financial reporting purposes, the Company wrote off the Employee Stock
Ownership Plan (the "ESOP") receivable upon emerging from Chapter 11
bankruptcy reorganization and adopting "fresh-start reporting" as set
forth in the American Institute of Certified Public Accountants' Statement
of Position 90-7 "Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code". Concurrently with emergence from Chapter 11
bankruptcy reorganization, the Company proposed termination of the ESOP
and filed for a ruling from the Internal Revenue Service regarding the tax
consequences of the proposed termination of the ESOP. To date the Company
has not received such ruling.

(3) During the fourth quarter of fiscal 1994 the Company extended a three-year
$300,000 unsecured loan with interest payable at 8 1/2% annually to Mr. V.
H. Van Horn, who serves as a director and as President and Chief Executive
Officer of the Company. The loan is payable in 35 monthly installments of
$2,500 of principal and interest and a final payment of the then unpaid
principal and interest. The terms of the loan also require that any bonus
compensation earned by Mr. V. H. Van Horn while the loan is outstanding be
applied as a mandatory prepayment of the loan.

S-5
<PAGE> 35
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
Schedule V - Property and Equipment

<TABLE>
<CAPTION>
Balance Balance
Classification Beginning Retirements End
Period of Period Additions or Sales Other (1) of Period
-------------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY
Year ended June 30, 1992:
Land.............................. $ 48,320,000 $ --- $ 306,000 $ (5,368,000) $ 42,646,000
Buildings......................... 78,623,000 --- 680,000 (10,290,000) 67,653,000
Leasehold improvements............ 56,815,000 2,072,000 16,577,000 (9,996,000) 32,314,000
Equipment and fixtures............ 147,518,000 1,458,000 8,784,000 (35,058,000) 105,134,000
Store property under
capital leases................... 24,990,000 --- 7,790,000 --- 17,200,000
Investment in store property...... 312,000 27,000 --- (339,000) ---
------------ ----------- ----------- ------------ ------------

Totals............................ $356,578,000 $ 3,557,000 $34,137,000 $(61,051,000) (2) $264,947,000
============ =========== =========== ============ ============

Period ended February 28, 1993:
Land.............................. $ 42,646,000 $ 109,000 $ 282,000 $ (1,278,000) $ 41,195,000
Buildings......................... 67,653,000 --- 410,000 (27,649,000) 39,594,000
Leasehold improvements............ 32,314,000 1,090,000 1,358,000 (15,638,000) 16,408,000
Equipment and fixtures............ 105,134,000 1,855,000 8,883,000 (42,197,000) 55,909,000
Store property under
capital leases................... 17,200,000 --- 6,078,000 (11,122,000) ---
------------ ----------- ----------- ------------ ------------

Totals............................ $264,947,000 $ 3,054,000 $17,011,000 $(97,884,000) (3) $153,106,000
============ =========== =========== ============ ============

REORGANIZED COMPANY
Period from Inception (March 1, 1993)
through June 30, 1993:
Land.............................. $ 41,195,000 $ --- $ --- $ (603,000) $ 40,592,000
Buildings......................... 39,594,000 --- 104,000 619,000 40,109,000
Leasehold improvements............ 16,408,000 1,444,000 571,000 191,000 17,472,000
Equipment and fixtures............ 55,909,000 7,363,000 115,000 1,204,000 64,361,000
------------ ----------- ----------- ------------ ------------

Totals............................ $153,106,000 $ 8,807,000 $ 790,000 $ 1,411,000 $162,534,000
============ =========== =========== ============ ============

Year ended June 30, 1994:
Land.............................. $ 40,592,000 $ 1,389,000 $ 1,715,000 $ 204,000 $ 40,470,000
Buildings......................... 40,109,000 1,382,000 3,659,000 (119,000) 37,713,000
Leasehold improvements............ 17,472,000 5,396,000 2,536,000 (273,000) 20,059,000
Equipment and fixtures............ 64,361,000 19,194,000 5,488,000 981,000 79,048,000
------------ ----------- ----------- ------------ ------------

Totals............................ $162,534,000 $27,361,000 (4) $13,398,000 (4) $ 793,000 $177,290,000
============ =========== =========== ============ ============

</TABLE>

(1) Represents land and buildings transferred from (to) the other
asset accounts.
(2) Includes the write-off of costs for closed stores and
nonperforming leaseholds (see Note 10 of the Notes to
Consolidated Financial Statements incorporated by reference in
Item 8 herein).
(3) Effective March 1, 1993, the Company emerged from Chapter 11
bankruptcy reorganization and adopted SOP 90-7. Accordingly,
accumulated depreciation was reclassified to property and
equipment, as follows, in order to restate property and
equipment at fair market value as of the Effective Date:
buildings-$22,414,000, leasehold improvements-$16,117,000,
equipment and fixtures-$34,117,000 and store property under
capital leases-$7,839,000.
(4) Includes the addition of $1,356,000 for Land, $1,382,000 for
Buildings, $2,097,000 for Leasehold Improvements and $582,000
for equipment and fixtures and the retirement of $1,679,000
for Land, $3,642,000 for Buildings, $1,132,000 for Leasehold
Improvements and $2,449,000 for Equipment and Fixtures
resulting from assets acquired/disposed through a transaction
with The Circle K Corporation (See Note 2 of the Notes to
Consolidated Financial Statements incorporated by reference in
Item 8 herein).

S-6
<PAGE> 36
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
Schedule VI - Accumulated Depreciation and Amortization of
Property and Equipment

<TABLE>
<CAPTION>
Balance Balance
Classification Beginning Retirements End
Period of Period Additions or Sales Other (1) of Period
-------------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY
Year ended June 30, 1992:
Buildings......................... $ 19,525,000 $ 2,945,000 $ 114,000 $ (2,914,000) $ 19,442,000
Leasehold improvements............ 24,246,000 4,233,000 10,475,000 (5,446,000) 12,558,000
Equipment and fixtures............ 70,171,000 11,854,000 13,595,000 (16,749,000) 51,681,000
Store property under
capital leases................... 16,426,000 1,084,000 5,849,000 --- 11,661,000
------------ ------------ ------------ ------------ ------------

Totals............................ $130,368,000 $ 20,116,000 $ 30,033,000 $(25,109,000) (3) $ 95,342,000
============ ============ ============ ============ ============

Period ended February 28, 1993:
Buildings......................... $ 19,442,000 $ 1,630,000 $ 1,302,000 $(19,770,000) $ ---
Leasehold improvements............ 12,558,000 1,938,000 1,160,000 (13,336,000) ---
Equipment and fixtures............ 51,681,000 6,768,000 4,588,000 (53,861,000) ---
Store property under
capital leases................... 11,661,000 --- --- (11,661,000) ---
------------ ------------ ------------ ------------ ------------

Totals............................ $ 95,342,000 $ 10,336,000 $ 7,050,000 $(98,628,000) (4) $ ---
============ ============ ============ ============ ============

REORGANIZED COMPANY
Period from Inception (March 1, 1993)
through June 30, 1993:
Buildings......................... $ --- $ 799,000 $ 156,000 $ 121,000 $ 764,000

Leasehold improvements............ --- 1,003,000 221,000 204,000 986,000
Equipment and fixtures............ --- 3,283,000 (312,000) 661,000 4,256,000
------------ ------------ ------------ ------------ ------------

Totals............................ $ --- $ 5,085,000 $ 65,000 $ 986,000 $ 6,006,000
============ ============ ============ ============ ============

Year ended June 30, 1994:
Buildings......................... $ 764,000 $ 2,362,000 $ 292,000 $ (121,000) $ 2,713,000
Leasehold improvements............ 986,000 3,183,000 1,080,000 (204,000) 2,885,000
Equipment and fixtures............ 4,256,000 10,616,000 594,000 (661,000) 13,617,000
------------ ------------ ------------ ------------ ------------

Totals............................ $ 6,006,000 $ 16,161,000 $ 1,966,000(5) $ (986,000) $ 19,215,000
============ ============ ============ ============ ============
</TABLE>

(1) The annual provision for depreciation has been computed
principally in accordance with the following rates and ranges
of rates applied on the straight-line method: Buildings, 4%;
Leasehold improvements, 7%-10%; Equipment and fixtures,
11%-17%; Store property under capital leases, 4%-5%.
(2) Represents land and buildings transferred from (to) the other
asset accounts.
(3) Includes write-off of accumulated depreciation for closed
stores and nonperforming leaseholds, offset by a reserve for
market divestitures identified by the Company's strategic
review (see Note 4 of the Notes to Consolidated Financial
Statements incorporated by reference in Item 8 herein).
(4) Effective March 1, 1993, the Company emerged from Chapter 11
bankruptcy reorganization and adopted SOP 90-7. Accordingly,
accumulated depreciation was reclassified to property and
equipment, as follows, in order to restate property and
equipment at fair market value as of the Effective Date:
buildings-$22,414,000, leasehold improvements-$16,117,000,
equipment and fixtures-$34,117,000 and store property under
capital leases-$7,839,000.
(5) Includes the retirement of $217,000 for Buildings, $223,000
for Leasehold Improvements and $586,000 for Equipment and
Fixtures resulting from the disposition through a transaction
with The Circle K Corporation.

S-7
<PAGE> 37
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number
- - -------
<S> <C>
2.1 - Order Preserving Property of the Estate and Declaring Certain Stock Transactions as Void Ab Initio, issued by the United
States Bankruptcy Court for the Southern District of Texas (Houston Division) entered September 8, 1992 - incorporated by
reference from Exhibit 2.1 to Registrant's Current Report on Form 8-K dated September 8, 1992.

</TABLE>
<PAGE> 38
<TABLE>
<S> <C>
4.2 - Amended and Restated Letter of Credit Agreement dated March 9, 1993, between Registrant and Bank of America National
Trust and Savings Association - incorporated by reference to Exhibit 4(b) to Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1993 (Commission File No. 1-7936, filed May 13, 1993).

*4.3.1 - First Amendment dated as of June 15, 1993 to Second Amended and Restated Credit Agreement between Registrant and
NationsBank of Texas, N.A., as Agent.

*10.1.1 - Twentieth Amendment and Restatement of the Registrant's Profit Sharing Plan and Trust executed December 16, 1993.

*10.1.2 - Twenty-first Amendment and Restatement of the Registrant's Profit Sharing Plan and Trust executed August 9, 1994.

<PAGE> 39
<TABLE>
<S> <C>
10.3.5 - Fourth Amendment to Registrant's Employee Stock Ownership Plan executed June 27, 1990-incorporated by reference from
Exhibit 10.7.5 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1990 (Commission File No. 1-7936).

10.4 - Asset Purchase Agreement between Registrant and The Customer Company and Triond dated as of May 19, 1992 - incorporated by
reference from Exhibit 10.12 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992 (Commission
File No. 1-7936, filed September 28, 1992).

*10.10 - Registrant's Officers' Retirement Plan, executed March 31, 1994.

*10.11 - Trust Under National Convenience Stores Incorporated Officers' Retirement Plan, executed June 30, 1994 between
Registrant and Bank One, Texas, N.A..

*10.12 - Registrant's Directors' Retirement Plan, executed March 31, 1994.
</TABLE>

<PAGE> 40
<TABLE>
<S> <C>
*10.13 - Trust Under National Convenience Stores Incorporated Directors' Retirement Plan, executed June 30, 1994 between
Registrant and Bank One, Texas, N.A..