<PAGE> 1
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
---------------
FORM 10-Q
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X Quarterly Report Pursuant to Section 13 or 15 (d) of
--- the Securities Exchange Act of 1934
For the quarterly period ended September 30, 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 Number 1-7936
NATIONAL CONVENIENCE STORES INCORPORATED
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 74-1361734
----------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
100 Waugh Drive, Houston, Texas 77007
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(713) 863-2200
----------------------------------------------------
(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
--- ---
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
--- ---
At November 1, 1994, the number of shares of Common Stock outstanding was
6,050,075.
- - --------------------------------------------------------------------------------
<PAGE> 2
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited):
Independent Accountants' Review Report . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
Three Months Ended September 30, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Balance Sheets
September 30, 1994 and June 30, 1994 . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended September 30, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . . . . . 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 13
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 24
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 25
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
2
<PAGE> 3
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Shareholders and
Board of Directors of
National Convenience Stores Incorporated
Houston, Texas
We have reviewed the accompanying condensed consolidated balance sheet of
National Convenience Stores Incorporated and subsidiaries as of September 30,
1994, and the related statements of condensed consolidated operations and
condensed consolidated cash flows for the three months ended September 30,
1994 and 1993. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of the interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the condensed consolidated balance sheet of National Convenience
Stores Incorporated and subsidiaries as of June 30, 1994 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended (not presented herein); and in our report dated August 9,
1994, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of June 30, 1994 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
Deloitte & Touche LLP
Houston, Texas
October 26, 1994
3
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------
1994 1993
--------- ---------
<S> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . $ 235,281 $ 234,280
Costs and Expenses:
Cost of sales . . . . . . . . . . . . . . . . . 175,796 171,419
Operating expenses . . . . . . . . . . . . . . 43,841 42,991
General and administrative expenses . . . . . . 11,448 9,729
--------- ---------
231,085 224,139
--------- ----------
Operating Income . . . . . . . . . . . . . . . . 4,196 10,141
Other Income (Expense):
Interest expense . . . . . . . . . . . . . . . (2,380) (2,748)
Interest income . . . . . . . . . . . . . . . . 416 280
--------- ---------
Earnings Before Income Taxes . . . . . . . . . . 2,232 7,673
Income Tax Expense . . . . . . . . . . . . . . . 1,089 2,958
--------- ---------
Net Earnings . . . . . . . . . . . . . . . . . . $ 1,143 $ 4,715
========= =========
Earnings Per Share . . . . . . . . . . . . . . . $ 0.19 $ 0.73
========= =========
Weighted Average Common and Common
Equivalent Shares Outstanding . . . . . . . . . 6,050 6,562
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, June 30,
1994 1994
------------ ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents, $13,326 and
$13,557 reserved . . . . . . . . .. . . . . $ 31,251 $ 41,142
Accounts receivable, net . . . . . . . . . . . 5,815 5,449
Inventories . . . . . . . . . . . . . . . . . . 36,874 39,626
Prepaid expenses . . . . . . . . . . . . . . . 4,040 4,775
--------- ---------
Total Current Assets . . . . . . . . . . . 77,980 90,992
Property and Equipment, net . . . . . . . . . . . 159,766 158,075
Reorganization Value in Excess of
Amounts Allocable to Identifiable
Assets, net . . . . . . . . .. . . . . . . . 34,079 34,542
Deferred Tax Asset, net . . . . . . . . . . . . . 5,147 6,071
Other Assets, net . . . . . . . . . . . . . . . . 9,900 9,842
--------- ---------
$ 286,872 $ 299,522
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses . . . . . $ 57,877 $ 69,611
Current portion of long-term debt . . . . . . . 12,299 12,103
--------- ---------
Total Current Liabilities . . . . . . . . 70,176 81,714
Long-Term Debt . . . . . . . . . . . . . . . . . 104,957 106,976
Other Liabilities . . . . . . . . . . . . . . . . 35,848 36,084
Commitments and Contingent Liabilities . . . . . - -
Stockholders' Equity:
Common Stock, par value $.01 per share;
50,000,000 shares authorized; 6,050,075 and
6,050,069 shares issued and outstanding .. 61 61
Additional paid-in capital . . . . . . . . . . 63,463 63,463
Retained earnings . . . . . . . . . . . . . . . 12,367 11,224
--------- ---------
Total Stockholders' Equity . . . . . . . . 75,891 74,748
--------- ---------
$ 286,872 $ 299,522
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------
1994 1993
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,143 $ 4,715
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 3,551 4,317
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 924 2,868
Changes in operating assets and liabilities, net
of sales of stores:
Decrease in accounts and notes
receivable and prepaid expenses . . . . . . . . . . . . . . . . . . 369 236
(Increase) decrease in inventories . . . . . . . . . . . . . . . . . 2,737 (1,833)
Decrease in accounts payable and
accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . (11,663) (4,817)
Increase in income taxes . . . . . . . . . . . . . . . . . . . . . . 112 33
--------- ---------
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . . . . . (2,827) 5,519
--------- ---------
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . (4,103) (1,522)
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . 227 249
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 (850)
--------- ---------
Net cash used in investing
activities . . . . . . . . . . . . . . . . . . . . . . . . . (3,638) (2,123)
--------- ---------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . . . . . . . . . . (3,426) (3,088)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (100)
--------- ---------
Net cash used in financing activities . . . . . . . . . . . . . . (3,426) (3,188)
--------- ---------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . (9,891) 208
Cash and cash equivalents - beginning of period . . . . . . . . . . . . . 41,142 46,032
--------- ---------
- end of period . . . . . . . . . . . . . . . $ 31,251 $ 46,240
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE> 7
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Significant Accounting Policies
Basis of Presentation - The condensed consolidated financial statements include
the accounts of National Convenience Stores Incorporated and its wholly-owned
subsidiaries (the "Company") with all significant intercompany accounts and
transactions eliminated in consolidation. The financial information presented
for the interim periods is unaudited and the interim period operating results
are not necessarily indicative of the results to be expected for the full
fiscal year. The balance sheet at June 30, 1994 has been taken from the
audited Consolidated Financial Statements at that date and condensed. The
interim period financial statements reflect all adjustments which are, in the
opinion of management, of a normal recurring nature and necessary for a fair
presentation of financial position as of September 30, 1994, the results of
operations for the three months ended September 30, 1994 and 1993 and the cash
flows for the three months ended September 30, 1994 and 1993. Certain prior
year amounts have been reclassified to conform to the current year
presentation.
With respect to the unaudited condensed consolidated financial information of
the Company as of September 30, 1994, Deloitte & Touche LLP has made a review
(based on procedure adopted by the American Institute of Certified Public
Accountants) and not an audit, as set forth in their separate report appearing
herein.
Significant Accounting Policies - Reference is made to the Notes to
Consolidated Financial Statements appearing in the Company's Annual Report to
Shareholders incorporated by reference in the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1994.
2. Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows
"Net cash provided by (used in) operating activities" includes the following
cash payments and receipts (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------------------
1994 1993
----------- -----------
<S> <C> <C>
Cash paid (received) for:
Interest expense . . . . . . . . . . . . . . . . . . . . . $2,561 $2,806
Interest income . . . . . . . . . . . . . . . . . . . . . (431) (226)
Income taxes, net of refunds . . . . . . . . . . . . . . . 53 56
Reorganization items:
Professional fees . . . . . . . . . . . . . . . . . . . . 1,888 1,204
</TABLE>
7
<PAGE> 8
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. Income Taxes
On March 15, 1994, the Company filed its federal income tax return for the year
ended June 30, 1993, which reflected net operating loss carryforwards of $55.8
million plus tax credits $7.1 million. The net operating losses expire in
varying amounts in fiscal years 2003 to 2007 and the tax credits expire in
fiscal years 2000 to 2009. These figures reflect the adjustments required by
Section 382 of the Internal Revenue Code after an ownership change in the
Company's stock. Section 382 will also require the Company to reduce the tax
basis of its assets by approximately $40.0 million. An ownership change is
defined as occurring when, during any three year period, the Company's 5%
shareholders (as defined in the Internal Revenue Code) increase their ownership
in the Company's stock by more than 50 percentage points. The Plan of
Reorganization, adopted with the Company's emergence from bankruptcy March 9,
1993, resulted in an ownership change since substantially all of the new stock
was issued to the creditors of the Company.
As of September 30, 1994, the net operating loss carryforward is estimated to
have been reduced to $27.1 million as a result of the application of the losses
to reduce taxable income. The Company expects the remaining net operating
losses, tax credits and other tax attributes to be available to offset future
income tax payments, subject to applicable limits. However, should a second
ownership change occur within two years of the first ownership change, all of
the remaining pre-confirmation net operating losses, tax credits and other tax
attributes would be eliminated. The Plan of Reorganization provided for the
Company's Restated Certificate of Incorporation dated March 9, 1993 to contain
restrictions through June 30, 1996 on the transfer of stock to the reorganized
company's 5% stockholders (as defined in the Plan of Reorganization) or those
that would become 5% stockholders as a result of the purported transfer.
In the opinion of management, adequate provision has been made for income taxes
and any adjustments which have been or may be determined to be necessary will
not materially affect the Company's financial position.
8
<PAGE> 9
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. Debt
As of September 30, 1994 and June 30, 1994, long-term debt consisted of the
following (Dollars in thousands):
<TABLE>
<CAPTION>
September 30, 1994 June 30, 1994
------------------ -------------
<S> <C> <C>
Term Loan, due 2000 $ 51,995 $ 53,578
Revolving credit agreement - -
Letter of credit agreement, due 2000 - -
Mortgage notes on real estate, due 2003 59,255 59,586
Other notes payable, due through 2000 6,006 5,915
-------- --------
117,256 119,079
Less amounts due within one year 12,299 12,103
-------- --------
$104,957 $106,976
======== ========
</TABLE>
Revolving Credit Agreement - The Revolving Credit Agreement provides for the
borrowing and/or issuance of letters of credit in the aggregate of up to $8.0
million, increasing to $11.0 million during the period from November 1 through
May 1 of each year. The Revolving Credit Agreement requires that, during each
fiscal year, the Company pay off all outstanding cash borrowings thereunder for
a period of 30 consecutive days. The Company had no outstanding borrowings
during the three months ended September 30, 1994 and has therefore satisfied
this requirement for fiscal 1995. Letter of credit issuances cannot exceed
$8.0 million and cash borrowings are limited to the commitment limit less
letters of credit outstanding. Cash borrowings under the Revolving Credit
Agreement bear interest at 1% above the prime rate of the Lender. Any
remaining outstanding principal balance becomes due and payable on September
30, 1995.
9
<PAGE> 10
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Below is a table illustrating primary financial ratios and coverage tests
("Covenants") as of September 30, 1994 associated with the Company's long-term
bank debt instruments (all amounts, excluding ratios, are in thousands).
<TABLE>
<CAPTION>
Covenant Required Actual
- - -------------------- ------------ -----------
<S> <C> <C>
Current Ratio (minimum) 90% 111%
Total Borrowed Funds to Consolidated
Net Worth (maximum) 418% 317%
Total Liabilities to Consolidated
Net Worth (maximum) 360% 278%
Consolidated Net Worth (minimum) $61,400 $75,891
Interest Coverage Ratio (minimum) 230% 279%
Consolidated Fixed Charge Coverage
Ratio (minimum) 107% 114%
EBITDA (minimum for latest 4 quarters) $27,300 $28,507
Capital Expenditure (maximum for
the quarter) $ 8,120 $ 4,357
</TABLE>
Covenants noted above are computed as defined per the Company's long-term bank
debt instrument agreements. At September 30, 1994, the Company was in
compliance with such Covenants.
The Company's long-term bank debt agreement limits fiscal 1995 capital
expenditures and environmental remediation expenses to excess cash flow, as
defined, not to exceed $20.3 million. For fiscal 1995 the Company anticipates
it will incur capital expenditures and environmental remediation expenses as
required by environmental regulations, along with upgrading store security
systems, installation of state-of-the-art sales and inventory management
systems, store remodels, new store construction and equipment replacement which
could total up to $30.0 million. The Company is currently in negotiations to
amend the long-term bank debt agreements in order to facilitate such capital
expenditures and environmental remediation expenses noted above. The outcome
of such negotiations cannot be determined at this time.
5. Asset Acquisition/Divestiture
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
10
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NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 now operates only in the state of
Texas.
6. Commitments and Contingencies
The operation and ownership of underground gasoline storage tanks ("USTs") are
subject to federal, state and local laws and regulations.
The Environmental Protection Agency ("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 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 owned by the Company and leases assumed
pursuant to the terms of the Plan of Reorganization. Management believes that
its existing gasoline storage and dispensing procedures and planned capital
expenditures will continue to keep the Company in compliance with all current
federal and state environmental regulations.
Environmental Capital Commitments - The Company's 1995 capital budget contains
$4.7 million for the completion of upgrading gasoline dispensing equipment for
spill/overfill prevention and Stage II Vapor Recovery pursuant to select
environmental regulations which are required to be completed by November 15,
1994 and December 22, 1994. During the first quarter of fiscal 1995, capital
expenditures for these items were $0.9 million. In addition, management of
the Company believes that its long-range capital budget contains sufficient
funds necessary to comply with regulations required by the EPA to be completed
by December 22, 1998.
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. At September 30, 1994 and June 30, 1994, the remediation
liability totalled $21.7 million and $21.8 million, respectively. These
amounts include anticipated and/or filed claims for state reimbursements
11
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NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
of approximately $5.6 million which the Company considers probable of recovery.
Such reimbursements are included in other assets. 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.
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.
Reference is made to Note 11 of the Notes to Consolidated Financial Statements
appearing in the Company's Annual Report to Shareholders incorporated by
reference in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1994.
12
<PAGE> 13
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
The Company earned $1.1 million, or 19 cents per share, for the first quarter
of fiscal 1995, as compared to net earnings of $4.7 million, or 73 cents per
share, for the same period last year. The decrease in net earnings for the
current three month period was primarily due to consulting and other
non-recurring expenses of $1.7 million ($1.1 million, or 18 cents per share, on
an after-tax basis) related to the installation of integrated state-of-the-art
sales and inventory management systems designed to enhance and redefine the
Company's focus on customer service and effectiveness, coupled with increased
labor costs of approximately $1.0 million ($620,000, or 10 cents per share, on
an after-tax basis) related to the addition of approximately 600 full-time
employees to improve customer service. In addition, gross profits were $3.3
million lower in the first quarter of fiscal 1995 as compared to the first
quarter of fiscal 1994 as more fully discussed below.
Weighted average Common and Common Share Equivalents outstanding which provide
a basis for calculation of earnings per share decreased to 6,050,000 for the
quarter ended September 30, 1994 from 6,562,000 for the same quarter of the
prior year. The decrease resulted from Common Share Equivalents becoming
anti-dilutive in the current year because the strike price on Common Stock
Options exceeded the market price for the quarter.
13
<PAGE> 14
Sales and Gross Profits - The following table sets forth selected information
regarding the results of the Company's operations during the three months ended
September 30, 1994 and 1993:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------
1994 1993
---------- ---------
<S> <C> <C>
Merchandise sales (millions) . . . . $133.6 $139.3
Merchandise gross profit margin . . . 33.8% 34.5%
Merchandise gross profit (millions) . $ 45.1 $ 48.1
Gasoline sales (millions) . . . . . . $101.7 $ 95.0
Gasoline gross profit margin . . . . 14.2% 15.5%
Gasoline gross profit (millions) . . $ 14.4 $ 14.7
Total sales (millions) . . . . . . . $235.3 $234.3
Average gross profit margin . . . . . 25.3% 26.8%
Total gross profit (millions) . . . . $ 59.5 $ 62.8
Average number of stores . . . . . . 707 719
Average sales per store (thousands)
Merchandise . . . . . . . . . . . . $189.0 $193.8
Gasoline . . . . . . . . . . . . . 143.8 132.1
------ ------
Total . . . . . . . . . . . . . $332.8 $325.9
Gasoline gallons sold (millions) . . 93.9 92.8
Average gasoline gallons sold
per average gas store (thousands) . 147.4 149.1
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1993:
Merchandise sales decreased $5.7 million, or 4%, to $133.6 million for the
three months ended September 30, 1994 as compared to $139.3 million for the
corresponding three month period ended September 30, 1993, $2.7 million of
which relates to stores closed since the prior period. On a same-store basis,
merchandise sales decreased 2%. The decrease is primarily due to decreased
sales of fountain drinks and beer partially offset by an increase in cigarette
sales dollars.
Merchandise gross profits decreased $3.0 million, or 6%, in the first quarter
of fiscal 1995 as compared to the first quarter of the prior year. The
decrease in merchandise gross profit was primarily attributable to a decrease
in gross profit from the Texas stores acquired in the April 29, 1994
transaction with The Circle K Corporation ("Circle K Transaction") as compared
to the California and Georgia stores divested in the same transaction, along
with lower merchandise sales levels. Merchandise gross profit margins
decreased 0.7 percentage points from 34.5% in
14
<PAGE> 15
the first quarter of fiscal 1994 to 33.8% in the first quarter of fiscal 1995
for the aforementioned reasons. Merchandise gross margins from same-store
sales remained relatively constant with those of the prior year.
Gasoline sales increased $6.7 million during the first quarter of fiscal 1995
as compared with the same quarter of the previous year due primarily to a 1%
increase in gasoline sales volumes coupled with a 6% increase in the average
retail selling price of gasoline. Gasoline sales volumes on a same-store sales
basis increased 7% from the same period last year, offset in part by a 25%
decrease in gasoline sales volumes from the Texas stores acquired in the Circle
K Transaction as compared to the California and Georgia stores divested in the
same transaction. The increase in gasoline sales volumes were lower than
previously experienced due to gasoline pump "downtime" associated with the
installation of Stage II Vapor Recovery equipment in approximately 120 stores
in September 1994. The gasoline sales volume increase resulted primarily from
the Company's continued emphasis on a volume growth strategy.
Gasoline gross profits decreased $0.3 million in the first quarter of fiscal
1995 as compared to the same period of fiscal 1994, primarily due to lower than
average gasoline margins during the current quarter when compared to higher
than average margins during the same quarter of the prior year. Gasoline gross
profit margins on a volume basis averaged 15.3 cents per gallon for the first
quarter of fiscal 1995 as compared to 15.8 cents per gallon for the same period
of the prior year.
15
<PAGE> 16
An analysis of merchandise sales, gasoline sales and gasoline sales volumes
follows (amounts in millions):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------
1994 1993
---------- ---------
<S> <C> <C>
Merchandise Sales:
Same-stores (a) . . . . . . . . . . . . . . . . . . . . . . . . . . $118.8 $121.0
New stores (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 14.5 -
Stores closed or sold (b) . . . . . . . . . . . . . . . . . . . . . .3 18.3
------ ------
$133.6 $139.3
====== ======
Gasoline Sales:
Same-stores (a) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88.8 $ 78.8
New stores (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 12.8 -
Stores closed or sold (b) . . . . . . . . . . . . . . . . . . . . . .1 16.2
------ ------
$101.7 $ 95.0
====== ======
Gasoline Gallons:
Same-stores (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 82.1 76.6
New stores (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.7 -
Stores closed or sold (b) . . . . . . . . . . . . . . . . . . . . . .1 16.2
------ ------
93.9 92.8
====== ======
</TABLE>
(a) Represents the 619 stores, 553 stores selling gasoline, which opened
prior to July 1, 1993, and continued to operate through September 30,
1994.
(b) Includes the 88 stores acquired (New stores) and the 80 stores
divested (Stores closed or sold) in the April 29, 1994 transaction
with The Circle K Corporation (see Note 5 of the Notes to Condensed
Consolidated Financial Statements).
Operating Expenses - Operating expenses increased $0.9 million, or 2%, in the
first quarter of fiscal 1995 as compared with the same period of fiscal 1994
primarily due to increased salary costs of $1.3 million related to higher wages
and increased staffing levels resulting from the Company's efforts to improve
customer service, along with $0.8 million of increases in other miscellaneous
operating costs. This increase is partially offset by a $0.8 million decrease
in advertising expense as a result of fewer promotions supported by advertising
and a $0.8 million decrease in depreciation expense from the retirement of
assets. The Company expects the increased salary costs to continue through the
quarter ending December 31, 1994. Management continuously reviews the results
the increased staffing levels have on operating profits to determine the merit
of continuing these related increases in salary costs.
General and Administrative Expenses - General and administrative expenses for
the quarter ended September 30, 1994, increased $1.7 million, or 18%, from the
corresponding quarter for the prior year period, primarily due to consulting
fees and other related expenses of $1.7 million associated with the program to
enhance and redefine the Company's focus on customer service
16
<PAGE> 17
and employee effectiveness.
Interest Expense - Interest expense decreased $368,000 in the first quarter of
fiscal 1995 as compared to the corresponding period of the prior year primarily
due to the decrease in outstanding debt.
Interest Income - Interest income increased $136,000 in the first three months
of fiscal 1995 as compared to the prior year period primarily due to interest
earned from higher rates on short-term investments.
Income Tax Expense - The effective income tax rate of the Company for the three
months ended September 30, 1994 and for the same period ended September 30,
1993 differs from the federal statutory rate primarily because of state income
taxes and the inability to deduct for income tax purposes the amortization of
Reorganization Value in Excess of Amounts Allocable to Identifiable Assets,
offset in part by targeted jobs tax credits.
Seasonality - Sales and gross profits for the quarter ended September 30, 1994
are not necessarily indicative of the entire fiscal year. The convenience
store industry in the Company's market typically experiences higher sales and
gross profits during the summer months than during the winter months.
Historically, the Company has achieved higher earnings in the first and fourth
quarters of its fiscal year, as compared to its second and third quarters.
Inflation - The Company believes inflation has not had a material effect on its
results of operations in recent years. However, the Company has experienced
short-term fluctuations in its gasoline gross profit margins, both positive and
negative, as a result of changing market conditions for the supply and demand
of gasoline.
17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
Key balance sheet figures and ratios are presented in the table below (all
amounts, excluding ratios are in millions):
<TABLE>
<CAPTION>
September 30, 1994 June 30, 1994
------------------ -------------
<S> <C> <C>
Cash (a).............................................. $ 31.3 $ 41.1
Current assets........................................ $ 78.0 $ 91.0
Current liabilities................................... $ 70.2 $ 81.7
Current ratio......................................... 1.11 1.11
Inventory turn ratios (annualized):
Merchandise......................................... 11.5 10.8
Gasoline............................................ 54.8 54.0
Long-term debt........................................ $ 105.0 $107.0
Stockholders' equity.................................. $ 75.9 $ 74.7
Debt/Equity ratio..................................... 1.38 1.43
Common shares outstanding............................. 6.1 6.1
</TABLE>
_____________________
(a) Includes $7.1 million and $7.4 million that has been reserved at the
Company's option related to the remittance of tax and lottery collections
at September 30, 1994 and June 30, 1994, respectively. Also includes $6.2
million being held in escrow pending the resolution of mortgage related
matters associated with the Circle K Transaction completed April 29, 1994
at September 30, 1994 and June 30, 1994.
Liquidity - Working capital totalled $7.8 million at September 30, 1994 and
$9.3 million at June 30, 1994. Cash and equivalents were $31.3 million and
$41.1 million at September 30, 1994 and June 30, 1994, respectively. The $9.8
million decrease in cash is primarily the result of quarterly debt payments,
capital expenditures and the payment of reorganization professional fees.
Cash provided by (used in) operating activities totalled $(2.8) million and
$5.5 million for the three months ending September 30, 1994 and 1993,
respectively. The decrease in the first quarter of fiscal 1995 cash provided
by operating activities versus the prior year period is primarily due to lower
operating earnings and the $1.9 million payment of substantially all remaining
reorganization professional fees. In addition, during the first quarter of
fiscal 1995 the Company reduced vendor trade credit with a major vendor based
on financial incentives. Of the $1.1 million and $3.0 million recorded as
income tax expense for the quarters ended
18
<PAGE> 19
September 30, 1994 and 1993, $165,000 and $90,000 respectively, were payable in
the year reported, with the remainder being deferred as a result of the
application of net operating losses. Operating earnings before interest, income
taxes, depreciation, amortization and other non-recurring items ("EBITDA")
amounted to $7,747,000, or $3,653 per store per month in the three months of
fiscal 1995, compared to $14,458,000 or $6,703 per store per month in the same
period of fiscal 1994. EBITDA is presented to provide additional information
about the Company's ability to meet its future debt service, capital
expenditures and working capital requirements and should not be construed as a
substitute for earnings from operations or as a better indicator of liquidity
than cash flow from operating activities. The decrease in EBITDA is due
principally to lower operating earnings.
During the fourth quarter of fiscal 1994, the Company began 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 Company began the initiation of the
program in its Dallas/Fort Worth stores during the first half of fiscal 1995.
The Company estimates that it will incur capital expenditures of approximately
$10.0 million for the total program development and initiation into the
Dallas/Fort Worth stores. As of September 30, 1994 the Company had incurred
$2.3 million of these capital expenditures, with the remaining $7.7 million to
be incurred by the end of the second quarter of fiscal 1995. Additionally,
the Company estimates that it will incur approximately $3.2 million in
consulting expenses in conjunction with the program of which $1.3 million and
$1.2 million were incurred in fiscal 1994 and the first quarter of fiscal 1995,
respectively. The costs have been and will be funded by cash generated from
operations as well as cash on hand.
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.
Management continually evaluates the profitability of its open stores taking
into consideration the cost/benefit justification for investment required for
upgrading equipment and technology through the installation of state-of-the-art
inventory management system and Stage II Vapor Recovery environmental
expenditures. Based on this evaluation, management plans during the next four
months to divest approximately 40 stores that do not qualify under this
investment criteria. The Company does not expect to incur a loss in connection
with these planned store divestitures.
The Company has historically maintained a portfolio of surplus and excess real
estate properties
19
<PAGE> 20
in anticipation of expansion. During the period of Chapter 11 bankruptcy
reorganization, the Company eliminated its new store development program and
began selling parcels of surplus real estate. Net proceeds from such sales,
and any sales in the future, are generally required to be applied against
mortgage or long-term bank debt. As of September 30, 1994, 44 parcels of
surplus real estate were held by the Company.
Insurance liabilities totalled $18.2 million and $17.5 million at September 30,
1994 and June 30, 1994, respectively. The liabilities were increased for
accruals of $4.1 million and decreased for payments of $3.4 million during the
three months ended September 30, 1994.
Because substantially all of the Company's sales are for cash and total
inventories are converted to cash approximately once a month, the Company
considers its cash flows adequate to satisfy its daily working capital
requirements. However, in order to further enhance its liquidity the Company
has a Revolving Credit Agreement which provides for the borrowing and/or
issuance of letters of credit in the aggregate of up to $8.0 million,
increasing to $11.0 million during the period from November 1 through May 1 of
each year. The Revolving Credit Agreement requires that, during each fiscal
year, the Company pay off all outstanding cash borrowings thereunder for a
period of 30 consecutive days. The Company had no outstanding borrowings
during the three months ended September 30, 1994 and has therefore satisfied
this requirement for fiscal 1995. Letter of credit issuances cannot exceed
$8.0 million and cash borrowings are limited to the commitment limit less
letters of credit outstanding. The facility terminates on September 30, 1995.
At September 30, 1994, no borrowings or letters of credit were outstanding
under this facility.
Capital Resources - The Company incurred $4.1 million of capital expenditures
through September 30, 1994 compared to $1.5 million for the corresponding
period of the prior fiscal year. During the first three months of fiscal 1995,
the capital expenditures consisted of $1.5 million associated with the
implementation of point-of-sale and scanning equipment in Dallas/Fort Worth,
$1.1 million of gasoline dispensing equipment and installation of underground
piping required to comply with environmental laws (the "Stage II Vapor Recovery
Equipment"), $0.6 million in equipment replacement and store improvements,
$0.5 million on signage and security for the acquired Circle K stores and $0.4
million on miscellaneous projects.
The Company's long-term bank debt agreement contains limits on the amount of
capital expenditures and environmental remediation expenses the Company can
incur. For fiscal 1995 the Company's long-term bank debt agreements limit
capital expenditures/remediation to excess cash flow, as defined, not to exceed
$20.3 million. The Company anticipates it will incur capital
expenditures/remediation as required by environmental regulations, along with
upgrading store security systems, installation of state-of-the-art sales and
inventory management systems, store remodels, new store construction and
equipment replacement which could total up to $30.0 million. The Company is
currently in negotiations to amend the long-term bank debt agreements in order
to facilitate such capital expenditures/remediation noted above. The outcome
of such negotiations cannot be determined at this time.
20
<PAGE> 21
Under the terms of certain of the Company's long-term bank debt agreements, the
Company cannot pay cash dividends on its Common Stock or purchase any treasury
stock.
Below is a table illustrating primary financial ratios and coverage tests
("Covenants") as of September 30, 1994 associated with the Company's long-term
bank debt instruments (all amounts, excluding ratios are in thousands).
<TABLE>
<CAPTION>
Covenant Required Actual
- - -------------------- ------------ ----------
<S> <C> <C>
Current Ratio (minimum) 90% 111%
Total Borrowed Funds to Consolidated
Net Worth (maximum) 418% 317%
Total Liabilities to Consolidated
Net Worth (maximum) 360% 278%
Consolidated Net Worth (minimum) $61,400 $75,891
Interest Coverage Ratio (minimum) 230% 279%
Consolidated Fixed Charge Coverage
Ratio (minimum) 107% 114%
EBITDA (minimum for latest 4 quarters) $27,300 $28,507
Capital Expenditure (maximum for
the quarter) $ 8,120 $ 4,357
</TABLE>
Covenants noted above are computed as defined per the Company's long-term bank
debt instrument agreements. At September 30, 1994, the Company was in
compliance with such Covenants.
During the three months ended September 30, 1994, long-term debt decreased by
$2.0 million primarily as a result of principal payments and application of
proceeds from asset sales.
The Company's environmental remediation exposure is related primarily to the
clean up of contaminated soil caused by leaking underground gasoline storage
tanks and underground piping systems. The Company spent $254,000 in the first
three months of fiscal 1995 on environmental remediation activities compared to
$644,000 in the same period of fiscal 1994. The Company's environmental
remediation liability totalled $21.7 million and $21.8 million at September 30,
1994 and June 30, 1994, respectively. These amounts include state
reimbursements of approximately $4 million which the Company considers probable
of recovery. The reduction in the environmental remediation liability is a
result of the expenditures noted above, offset by additional state
reimbursements which the Company considers probable of recovery.
On March 15, 1994, the Company filed its federal income tax return for the year
ended June 30, 1993, which reflected net operating loss carryforwards of $55.8
million plus tax credits $7.1 million. The net operating losses expire in
varying amounts in fiscal years 2003 to 2007 and the tax credits expire in
fiscal years 2000 to 2009. These figures reflect the adjustments required by
Section 382 of the Internal Revenue Code after an ownership change in the
21
<PAGE> 22
Company's stock. Section 382 will also require the Company to reduce the tax
basis of its assets by approximately $40.0 million. An ownership change is
defined as occurring when, during any three year period, the Company's 5%
shareholders (as defined in the Internal Revenue Code) increase their ownership
in the Company's stock by more than 50 percentage points. The Plan of
Reorganization resulted in an ownership change since substantially all of the
new stock was issued to the creditors of the Company.
As of September 30, 1994, the net operating loss carryforward is estimated to
have been reduced to $27.1 million as a result of the application of the losses
to reduce taxable income. The Company expects the remaining net operating
losses, tax credits and other tax attributes to be available to offset future
income tax payments, subject to applicable limits. However, should a second
ownership change occur within two years of the first ownership change, all of
the remaining pre-confirmation net operating losses, tax credits and other tax
attributes would be eliminated. The Plan of Reorganization provided for the
Company's Restated Certificate of Incorporation dated March 9, 1993 to contain
restrictions through June 30, 1996 on the transfer of stock to the reorganized
company's 5% stockholders (as defined in the Plan of Reorganization) or those
that would become 5% stockholders as a result of the purported transfer.
Risks and Uncertainties - During the year ended June 30, 1994 the sale of
gasoline products, tobacco products and alcoholic beverages comprised
approximately 42%, 14% and 13%, respectively, of total Company sales. Under
the Clinton Administration numerous proposals have been made recently that
would result in increased excise taxes on alcoholic beverages and tobacco
products. Several of these proposals have sought substantial increases on
state and federal excise taxes, as well as additional state taxes on tobacco
products in particular. While the Company cannot predict whether the remaining
tax proposals will become law, similar previous tax increases on such products
have generally had a negative impact on the sales and results of operations of
the Company. Additionally, numerous governmental entities are considering
various regulations related to the sale of tobacco products which, if
implemented, could adversely affect the sales and results of operations of the
Company.
The Company's environmental remediation exposure is related primarily to the
clean up of contaminated soil caused by leaking underground gasoline storage
tanks and underground piping systems. The Company is subject to additional
regulatory matters including environmental capital commitments and
environmental remediation, as further discussed in the Company's Annual Report
on Form 10-K. The actual cost of remediating contaminated sites and removing
tanks may be substantially lower or higher than the related accrued
liabilities.
World gasoline markets have historically been subject to periods of sudden and
extreme volatility as a result of changing supply and demand conditions for
crude oil and gasoline. The Company's liquidity and gross profits could be
adversely affected in the future should such conditions occur, and such adverse
effects could be significant.
The Clinton Administration and many members of the Congress have proposed
various
22
<PAGE> 23
legislative measures to change existing health care programs. Due to the labor
intensive nature of the convenience store business, any legislation or
regulation which increases the Company's labor costs could have a significant
adverse effect on the results of operations of the Company. As a result of the
significant amount of uncertainty surrounding any potential changes in health
care programs, the Company is unable to predict the outcome of any of these
proposals.
23
<PAGE> 24
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Chapter 11 Reorganization Status - The Company's Revised Fourth Amended and
Restated Joint Plan of Reorganization (the "Plan of Reorganization") was
substantially consummated shortly after the effective date of March 9, 1993.
The principal hearings since that time and presently scheduled on the docket of
the United States Bankruptcy Court for the Southern District of Texas (Houston
Division) (the "Bankruptcy Court") relate to the resolution of the disputed
proofs of claim.
Pre-petition claims held by creditors of the Company which were contingent or
unliquidated at the commencement of the Chapter 11 proceedings were generally
allowable against the Company 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 October 28, 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 Company 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
October 28, 1994, the Company is continuing to prosecute objections in the
Bankruptcy Court for 14 of the remaining disputed claims covering $21.9
million. Of the disputed claims, $6.3 million is the amount the Company
estimates is not covered by insurance. In addition, as of October 28, 1994, 50
claims for $38.1 million had been assigned to a mediation/settlement procedure
outlined in the Plan of Reorganization. The Company 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.
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
24
<PAGE> 25
their respective claims. As of October 11, 1994, Boatmen's had allocated
967,285 shares to individual unsecured creditors and had issued the appropriate
share certificates. The remaining 649,274 shares will be allocated in the
future as additional general unsecured claims are allowed.
Other Litigation - There is no other litigation pending or threatened against
the Company that management believes is likely to have a material adverse
effect on the financial position or the business of the Company.
ITEM 6. Exhibits and Reports on Form 8-K
a) Exhibits
See Index to Exhibits on Page 27.
b) Reports on Form 8-K
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 transaction
between the Company and The Circle K Corporation.
25
<PAGE> 26
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.
NATIONAL CONVENIENCE STORES INCORPORATED
(Registrant)
Date November 14, 1994 /s/ A. J.Gallerano
________________________________________
A. J. Gallerano - Senior Vice President,
General Counsel and Secretary
Date November 14, 1994 /s/ Brian Fontana
________________________________________
Brian Fontana - Vice President - Chief
Financial Officer
26
<PAGE> 27
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION> Page
Number
------
<S> <C> <C>
EXHIBITS:
*11 Computation of primary and fully diluted
earnings per share for the three months
ended September 30, 1994 and 1993 . . . 28
*27 Financial Data Schedule . . . . . . . . . 29
</TABLE>
_____________
*Filed Herewith
27
<PAGE> 1
EXHIBIT 11
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Primary Earnings Per Share
- - -------------------------- Three Months Ended
September 30,
------------------------------
1994 1993
---------- ----------
<S> <C> <C>
Net Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,143,000 $4,715,000
Interest expense adjustment
assuming conversion of options, net of tax . . . . . . . . . . . . . . - 53,000
---------- ----------
Net earnings applicable to
common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,143,000 $4,768,000
========== ==========
Average Common Shares and
Common Share Equivalents:
Average shares outstanding . . . . . . . . . . . . . . . . . . . . . . 6,050,000 6,000,000
Common Share Equivalents
assuming conversion of options . . . . . . . . . . . . . . . . . . . - 562,000
---------- ----------
Average number of common shares
and common share equivalents . . . . . . . . . . . . . . . . . . . . . 6,050,000 6,562,000
========== ==========
Primary Earnings Per Common Share
and Common Share Equivalents . . . . . . . . . . . . . . . . . . . . . $ 0.19 $ 0.73
========== ==========
Fully Diluted Earnings Per Share
- - --------------------------------
Net Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,143,000 $4,715,000
Interest expense adjustment
assuming conversion of options, net of tax . . . . . . . . . . . . . . - 53,000
---------- ----------
Net earnings applicable to
common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,143,000 $4,768,000
========== ==========
Average Common Shares and
Common Share Equivalents:
Average shares outstanding . . . . . . . . . . . . . . . . . . . . . . 6,050,000 6,000,000
Common Share Equivalents
assuming conversion of options . . . . . . . . . . . . . . . . . . . - 562,000
---------- ----------
Average number of common shares
and common share equivalents . . . . . . . . . . . . . . . . . . . . . 6,050,000 6,562,000
========== ==========
Fully Diluted Earnings Per Common Share
and Common Share Equivalents . . . . . . . . . . . . . . . . . . . . . $ 0.19 $ 0.73
========== ==========
</TABLE>
Pursuant to Accounting Principles Board Opinion No. 15, "Earnings Per Share",
earnings per share have been calculated using a combination of the "if
converted" method and the "Treasury Stock" method due to requirements under the
Company's debt instruments that limit the purchase of treasury stock and
require remaining proceeds from the sale of stock to be applied toward the
retirement of debt.
See Notes to Consolidated Financial Statements.
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
NATIONAL CONVENIENCE STORES INCORPORATED AND SUBSIDIARIES
This schedule contains summary financial information extracted from the
consolidated financial statements and related notes of National Convenience
Stores Incorporated and Subsidiaries for the three months ended September 30,
1994 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1994
<CASH> $31,251
<SECURITIES> 0
<RECEIVABLES> 5,815
<ALLOWANCES> 0
<INVENTORY> 36,874
<CURRENT-ASSETS> 77,980
<PP&E> 180,819
<DEPRECIATION> 21,053
<TOTAL-ASSETS> 286,872
<CURRENT-LIABILITIES> 70,176
<BONDS> 104,957
0
0
<COMMON> 61,000
<OTHER-SE> 75,830
<TOTAL-LIABILITY-AND-EQUITY> 286,872
<SALES> 235,281
<TOTAL-REVENUES> 235,281
<CGS> 175,796
<TOTAL-COSTS> 219,637
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,964
<INCOME-PRETAX> 2,232
<INCOME-TAX> 1,089
<INCOME-CONTINUING> 1,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,143
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
