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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
----------------------
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1996
( ) 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 1-10717
E-Z SERVE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 72-2168773
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2550 N. Loop West, Suite 600, Houston, TX 77092
(Address of principal executive offices, including ZIP code)
713/684-4300
(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, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
---------------------
Common Stock $.01 par value: 69,118,530
(Number of shares outstanding as of November 11, 1996)
=========================================================================<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
September 29, 1996 and December 31, 1995 3
Consolidated Statements of Operations for the
Three Months ended September 29, 1996 and
September 24, 1995 5
Consolidated Statements of Operations for the
Nine Months ended September 29, 1996 and
September 24, 1995 6
Consolidated Statements of Stockholders' Equity for
the Year ended December 31, 1995 and Nine Months
ended September 29, 1996 7
Consolidated Statements of Cash Flows for the
Nine Months ended September 29, 1996 and
September 24, 1995 8
Notes to Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 2. Changes in Securities 27
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of
Security Holders 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 28
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
E-Z SERVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 29, December 31,
1996 1995
------------- ------------
ASSETS
- ------
Current Assets:
Cash and temporary investments $ 9,777 $ 15,759
Receivables, net of allowance for
doubtful accounts 9,428 9,136
Inventory 38,066 37,078
Environmental receivables 13,547 13,828
Prepaid expenses and other current assets 1,849 2,783
-------- --------
Total Current Assets 72,667 78,584
--------- ---------
Property and equipment, net of accumulated
depreciation 142,352 143,144
Environmental receivables 27,965 32,428
Other assets 5,190 6,419
--------- ---------
$ 248,174 $ 260,575
========= =========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these Statements.
3
<PAGE>
<PAGE>
E-Z SERVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited and In thousands)
September 29, December 31,
1996 1995
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Trade payables $ 24,261 $ 28,958
Accrued liabilities and other 25,570 28,127
Current portion of environmental liability 13,417 14,057
Current portion of long-term obligations 8,705 5,794
--------- ---------
Total Current Liabilities 71,953 76,936
--------- ---------
Long-Term Obligations:
Payable to banks 71,480 74,450
Payable to related parties - 25
Obligations under capital leases 1,189 1,389
Other 258 318
Environmental liability 25,683 30,043
Deferred income taxes 3,401 3,661
Other liabilities 2,694 3,593
Commitments and contingencies - -
--------- ---------
Total Long-Term Liabilities 104,705 113,479
--------- ---------
Stockholders' Equity:
Preferred stock, $.01 par value; authorized
3,000,000 shares; 75,656 shares
Series C issued and outstanding at
September 29, 1996 and December 31, 1995,
respectively 1 1
Common stock, $.01 par value; authorized
100,000,000 shares: 69,118,530 and
67,854,159 shares issued and outstanding at
September 29, 1996 and December 31, 1995,
respectively 691 679
Additional paid-in capital 57,069 56,340
Retained earnings subsequent to March 28, 1993,
date of quasi-reorganization (total deficit
eliminated $86,034) 13,755 13,140
--------- ---------
Total Stockholders' Equity 71,516 70,160
--------- ---------
$ 248,174 $ 260,575
========= =========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these Statements.
4<PAGE>
E-Z SERVE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and In thousands except per share amounts)
Three Months Ended
-----------------------------
September 29, September 24,
1996 1995
------------- -------------
Revenues:
Motor fuels (Includes excise taxes of
approximately $40,600 and $38,781
for the three month 1996 and 1995
periods, respectively) $ 138,146 $ 125,719
Convenience store 83,485 76,438
Other income, net 3,662 3,164
---------- ---------
225,293 205,321
---------- ---------
Cost and Expenses:
Cost of sales:
Motor fuels 123,165 108,266
Convenience store 59,182 52,262
Operating expenses 29,249 28,670
Selling, general & administrative
expenses 5,686 7,094
Depreciation and amortization 3,584 3,177
Interest expense 2,130 1,727
---------- ----------
222,996 201,196
---------- ----------
Income before income taxes 2,297 4,125
Income tax expense (benefit) (63) 1,506
Provision (benefit) in lieu of taxes 866 (29)
---------- ----------
Net income $ 1,494 $ 2,648
========== ==========
Primary earnings per common
and common equivalent share $ .02 $ .03
========== ==========
Fully diluted earnings per common
and common equivalent share $ .02 $ .03
========== ==========
Weighted average common and common
equivalent shares outstanding:
Primary 79,551,398 77,698,165
========== ==========
Fully diluted 79,551,398 78,570,257
========== ==========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these Statements
5
<PAGE>
E-Z SERVE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and In thousands except per share amounts)
Nine Months Ended
------------------------------
September 29, September 24,
1996 1995
------------- ------------
Revenues:
Motor fuels (Includes excise taxes of
approximately $118,560 and $103,327
for the nine month 1996 and 1995
periods, respectively) $ 400,940 $ 333,425
Convenience store 240,768 187,194
Other income, net 10,814 9,094
---------- ----------
652,522 529,713
---------- ----------
Cost and Expenses:
Cost of sales:
Motor fuels 358,876 293,013
Convenience store 169,525 127,471
Operating expenses 87,758 71,450
Selling, general & administrative
expenses 18,235 18,393
Depreciation and amortization 10,839 7,917
Interest expense 6,345 3,853
---------- ----------
651,578 522,097
---------- ----------
Income before income taxes 944 7,616
Income tax expense (benefit) (250) 1,506
Provision in lieu of taxes 579 1,158
---------- ----------
Net income $ 615 $ 4,952
========== ==========
Primary earnings per common
and common equivalent share $ .01 $ .06
========== ==========
Fully diluted earnings per
common and common equivalent share $ .01 $ .06
========== ==========
Weighted average common and common
equivalent shares outstanding:
Primary 78,884,565 77,269,556
========== ==========
Fully diluted 79,209,732 74,949,412
========== ==========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these Statements
6<PAGE>
<PAGE>
E-Z SERVE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited and In thousands)
Additional Retained
Preferred Common Paid-In Earnings
Stock Stock Capital (Deficit) Total
--------- ------ ---------- --------- --------
Balance,
December 25, 1994 $ 1 $ 673 $ 52,932 $ 8,969 $ 62,575
Net income - - - 5,264 5,264
Exercise of
stock options - 1 5 - 6
Deferred compensation-
stock options - - 188 - 188
Conversion of Series C
Preferred Stock to
Common Stock - 5 (5) - -
Series C Preferred Stock
Dividend - - 1,093 (1,093) -
Provision in lieu
of taxes - - 2,127 - 2,127
--------- ------ ---------- --------- --------
Balance,
December 31, 1995 1 679 56,340 13,140 70,160
Net income - - - 615 615
Exercise of stock
options - - 54 - 54
Exercise of stock
warrants - 12 (12) - -
Deferred compensation -
stock options - - 108 - 108
Provision in lieu
of taxes - - 579 - 579
--------- ------ ---------- --------- --------
Balance,
September 29, 1996 $ 1 $ 691 $ 57,069 $ 13,755 $ 71,516
========= ====== ========== ========= ========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these Statements.
7
<PAGE>
<PAGE>
E-Z SERVE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and In Thousands)
Nine Months Ended
----------------------------
September 29, September 24,
1996 1995
------------- -------------
Cash flows from operating activities:
Net income $ 615 $ 4,952
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 11,268 7,917
(Gain) on sale of assets (254) (145)
Payments for environmental remediation (1,601) (2,213)
Payments for removal of underground
storage tanks (356) (231)
Provision in lieu of taxes 579 1,158
Stock option expense 108 141
Changes in assets and liabilities:
(Increase) in accounts and notes receivable (11) (739)
(Increase) decrease in inventory (988) 72
Decrease in prepaid expenses and other 934 660
Increase (decrease) in accounts payable
and accruals (7,254) 1,977
Proceeds from environmental settlement - 5,725
Other - net 19 (283)
------- --------
Net cash provided by operating activities 3,059 18,991
------- --------
Cash flows from investing activities:
Proceeds from sale of assets 776 643
Payment for purchase of companies net
of cash acquired - (43,721)
Capital expenditures and other asset additions (9,527) (8,903)
------- --------
Net cash used by investing activities (8,751) (51,981)
------- --------
The accompanying Notes to Consolidated Financial Statements
are an integral part of these Statements.
8<PAGE>
<PAGE>
E-Z SERVE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited and In Thousands)
Nine Months Ended
----------------------------
September 29, September 24,
1996 1995
------------- -------------
Cash flows from financing activities:
Net borrowings under revolving line of credit 5,400 60,581
Repayment of long-term debt (5,744) (14,770)
Issuance of Common Stock 54 4
Payments for deferred financing costs - (2,567)
------- --------
Net cash provided (used) by financing
activities (290) 43,248
------- --------
Net increase (decrease) in cash and
temporary investments (5,982) 10,258
Cash and temporary investments at beginning
of period 15,759 12,963
------- --------
Cash and temporary investments at end of period $ 9,777 $ 23,221
======= ========
Supplemental cash flow information:
Net cash paid during the period for:
Interest $ 7,485 $ 2,700
Income taxes - 843
The accompanying Notes to Consolidated Financial Statements
are an integral part of these Statements.
9<PAGE>
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in Thousands)
NOTE (1) BASIS OF PRESENTATION
- ------------------------------
The consolidated financial statements presented herein include the accounts
of E-Z Serve Corporation and its wholly-owned operating subsidiaries, E-Z
Serve Convenience Stores, Inc. ("EZCON") and E-Z Serve Petroleum Marketing
Company ("EZPET"). The Statements of Operations include the results of Time
Saver Stores, Inc. ("Time Saver") since January 17, 1995 and Sunshine-Jr.
Stores, Inc. ("SJS") since July 20, 1995. On March 31, 1995, Time Saver was
merged into EZCON and on October 2, 1995 SJS was merged into EZCON. Unless
the context indicates to the contrary, the term of "Company" as used herein
should be understood to include subsidiaries of E-Z Serve Corporation and
predecessor corporations.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the nine month period ended September 29, 1996 are not necessarily indicative
of the results that may be expected for the year ended December 29, 1996. It
is suggested that these condensed consolidated financial statements be read
in conjunction with the consolidated financial statements and the notes
thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 1995.
Certain items in the September 24, 1995 consolidated financial statements
have been reclassified to conform with the presentations in the September 29,
1996 consolidated financial statements.
NOTE (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Reference is made to the Notes to Consolidated Financial Statements included
in the Company's annual report on Form 10-K for the year ended December 31,
1995.
The computation of earnings per common share is based upon the weighted
average number of common shares outstanding during the period plus (in
periods in which they have a dilutive effect) the effect of common equivalent
shares arising from convertible preferred stock using the if-converted method
and dilutive stock options and warrants using the treasury stock method.
10
<PAGE>
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars in Thousands)
During the nine month periods ended September 29, 1996 and September 24,
1995, the Company had average outstanding Common Stock Equivalents of
10,344,556 and 9,491,861 respectively, for primary earnings per share and
10,669,723 and 10,171,717 respectively, for fully diluted earnings per share
which relate to its Series C Convertible Preferred Stock, its 1991 Stock
Option Plan, its 1994 Stock Option Plan and warrants issued as part of the
April, 1993 debt restructuring.
NOTE (3) BUSINESS ACQUISITIONS
- ------------------------------
Time Saver - On January 17, 1995, the Company, through its wholly-owned
subsidiary EZCON, acquired all of the capital stock of Time Saver from Dillon
Companies, Inc. At the date of acquisition, Time Saver operated 102 and
franchised 14 convenience stores in the New Orleans, Louisiana area, and was
the dominant independent convenience store chain in New Orleans. Under the
terms of the agreement with the seller, EZCON made a payment at closing of
$29,960 for the properties and, based on Time Saver's closing balance sheet,
made an additional payment of $7,000 on February 28, 1995 for the nonproperty
net assets. The Company financed the transaction through a new Credit and
Guaranty Agreement with a group of banks (See Note 5 - Long Term Obligations
and Credit Arrangements). On March 31, 1995, Time Saver was merged into
EZCON.
SJS - On June 15, 1995, the Company, its wholly-owned subsidiary EZS
Acquisition Corporation ("EZS") and SJS entered into an Agreement and Plan of
Merger whereby EZS agreed to make a tender offer for all 1,701,650
outstanding shares of common stock of SJS at $12.00 per share net to the
sellers in cash for an aggregate purchase price of $20,420. The tender offer
expired on July 20, 1995, which was the effective date of the acquisition.
Effective July 21, 1995, EZS merged with and into SJS thereby converting all
shares of SJS not tendered into the right to receive $12.00 per share, net in
cash. At such time, SJS became a wholly-owned subsidiary of the Company. At
the date of acquisition, SJS operated 205 convenience stores in five states
with 120 of the stores in Florida, 52 stores in Alabama, 27 stores in
Mississippi, 5 stores in Georgia, and 1 store in Louisiana. EZS obtained the
funds necessary for the acquisition from a capital contribution by the
Company. The Company, through its subsidiary EZCON, obtained $15,400 of the
acquisition price pursuant to an amendment to its Credit and Guaranty
Agreement (See Note 5 - Long-Term Obligations and Credit Arrangements) with
the remainder coming from funds generated internally by the Company and its
subsidiaries. On October 2, 1995, SJS was merged into EZCON.
11<PAGE>
<PAGE>
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars in Thousands)
NOTE (4) QUASI-REORGANIZATION
- -----------------------------
With the acquisitions of Taylor Petroleum, Inc. and EZCON in 1992, and with
the April 21, 1993 debt restructuring, the Company was recapitalized and its
primary business changed from that of a gasoline marketer to a convenience
store operator. Accordingly, effective March 28, 1993, the Company's Board
of Directors authorized management to effect a quasi-reorganization. In this
regard, the Company recognized a write down of $12,997 in the value of
management information systems, convenience stores assets, securities of
related parties, and the future liabilities associated with the Marketer
locations.
As part of the quasi-reorganization, the deficit in retained earnings was
eliminated against additional paid-in capital. Retained earnings in the
future will be dated to reflect only the results of operations subsequent to
March 28, 1993. Any future tax benefits of operating loss and tax credit
carryforward items which arose prior to the quasi-reorganization will be
reported as a direct credit to paid-in capital. During the first three
quarters of 1996 the Company recorded a benefit for these carryforward items
since the Company anticipates a net profit position for fiscal 1996.
12<PAGE>
<PAGE>
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars in Thousands)
NOTE (5) LONG-TERM OBLIGATIONS AND CREDIT ARRANGEMENTS
- ------------------------------------------------------
Long-term obligations consist of the following:
September 29, December 31,
1996 1995
------------- ------------
Revolving lines of credit payable to banks $ 5,400 $ -
Term notes payable to banks 74,450 80,000
Current portion (8,370) (5,550)
-------- --------
71,480 74,450
-------- --------
Note payable to major stockholder 25 25
Current portion (25) -
-------- --------
- 25
-------- --------
Capital lease obligations 1,419 1,557
Current portion (230) (168)
-------- --------
1,189 1,389
-------- --------
Long-term obligation - other 338 394
Current portion (80) (76)
-------- --------
258 318
-------- --------
Total long-term obligations $ 72,927 $ 76,182
======== ========
On January 17, 1995, EZCON entered into a Credit and Guaranty Agreement ("C &
G Agreement") with a group of banks (the "Lenders") with Societe Generale as
Agent. The C & G Agreement replaced the credit facilities previously utilized
by the Company. The C & G Agreement provided for a term loan of $45,000
("Term Loan") and a $15,000 revolving line of credit ("Revolver"). At
closing, the Term Loan was fully drawn and the proceeds were used (a) to repay
in full the outstanding amounts owed under the previous credit agreement, (b)
to finance the initial payment for the Time Saver acquisition, and ( c) for
working capital purposes. On July 21, 1995 the C & G Agreement was amended
whereby the Lenders increased the Term Loan available to the Company to
$60,400. The Company fully drew the additional $15,400 and the proceeds were
used for the acquisition of SJS.
13
<PAGE>
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars in Thousands)
With the acquisition of SJS, the Company assumed the indebtedness of SJS
which, at July 21, 1995, consisted of (as defined by the SJS Plan of
Reorganization) notes payable to holders of Class 7 General Unsecured Claims
of $13,962, notes payable to holders of Class 2 Priority Tax Claims of $2,789
and notes payable for the purchase of 10 previously leased stores of $2,409.
On October 2, 1995, EZCON entered into an Amended and Restated Credit and
Guaranty Agreement ("Amended C & G Agreement") whereby the Term Loan limit was
increased to $80,000, the Revolver limit was increased to $25,000 and the
letter of credit sublimit was increased to $15,000. The Company fully drew
the additional $19,600 available on the Term Loan and used the proceeds to
retire all of the outstanding debt of SJS. Concurrently with the signing of
the Amended C & G Agreement SJS was merged into EZCON.
The Term Loan matures on January 24, 2002, and the Revolver matures on January
24, 1998. Both loans bear interest, payable quarterly at the prime rate plus
1.25%, and, with proper notice to the Agent, both can be converted to LIBOR
loans at LIBOR plus 2.5%. During the first nine months of 1996, the Term Loan
was converted to a LIBOR loan at the average interest rate of 8.01%.
The Amended C & G Agreement requires that a notional amount of at least
$20,000 of the Term Loan be rate protected, as defined, through January 17,
1998. In this regard, the Company entered into a three-year interest rate
swap in the notional amount of $20,000. The swap agreement is a contract to
exchange floating interest rate payments for fixed rate payments without the
exchange of the underlying notional amount. The notional amount is used to
measure interest to be paid or received and does not represent an exposure to
credit loss. The swap agreement effectively changes $20,000 of the Company's
Term Loan to a fixed rate of 9.345% through April, 1998.
The Company made a scheduled principal payment of $3,550 in July 1996. In
addition, the Term Loan requires semi-annual principal payments each January
24 and July 24, as follows: $3,550 in January 1997; $4,820 in July 1997;
$5,780 in January 1998; $6,280 in July 1998; $6,670 in January 1999; $6,920 in
July 1999; $7,110 in January and July 2000 and January 2001; $7,600 in July
2001; with a final payment of $11,039 in January 2002. The Amended C & G
Agreement further states that 100% of certain transaction proceeds, as
defined, shall be immediately applied as a mandatory prepayment of the Term
Loan in the inverse order of maturity, and further, that 75% of excess cash
flow, as defined, shall be applied 90 days after the end of each fiscal year
as a mandatory prepayment of the Term Loan in the inverse order of maturity.
In this regard, a $461 principal payment was made in October 1996 as
cumulative asset sales in 1996 exceeded the limit allowed in the Amended C & G
Agreement.
14
<PAGE>
<PAGE>
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars in Thousands)
The Revolver can be used for working capital purposes and for issuance of a
maximum of $15,000 of letters of credit. The Revolver has a "clean-down"
provision whereby, during a five consecutive calendar day period of each
calendar month, the aggregate outstanding borrowing cannot exceed $4,000. At
September 29, 1996, there were $5,400 of outstanding borrowings under the
Revolver and there were $9,420 of outstanding letters of credit issued as
collateral for disputed unsecured bankruptcy-related claims and workers
compensation claims.
The Term Loan and Revolver are secured by the Company's pledge of all of the
capital stock of its subsidiaries and by guaranties from EZPET. Further, the
Amended C & G Agreement grants the Lenders, among other things, a security
interest in all of the Company's equipment, inventories and receivables, and a
right to instigate a springing lien, as defined, on all of the Company's real
property, fixtures, buildings and improvements, if certain events, including
any event of default, should occur. Provisions of the Amended C & G Agreement
require the Company to remain within the limits of certain defined financial
covenants, and impose various restrictions on distributions, business
transactions, contractual obligations, capital expenditures and lease
obligations.
On March 31, 1996, the Company was required to make an excess cash flow
payment of $1,619 based on cash flow for the year ended December 31, 1995.
The Company requested from the Lenders, and was granted, a waiver of this
payment. In addition, due to lower than anticipated gross profit margins on
motor fuel sales during the first quarter of 1996, the Company was not, as of
March 31, 1996, in compliance with certain financial covenants of the Amended
C & G Agreement and the "clean-down" provision. On May 6, 1996 an amendment
to the Amended C & G Agreement was signed whereby various financial covenants
for all reporting periods were revised through the term of the loan except for
the fixed charge coverage ratio which was revised through fiscal 1996.
As of September 29, 1996, again primarily due to lower than anticipated gross
profit margins on motor fuel sales, the Company was not in compliance with one
financial covenant of the Amended C & G Agreement and was granted a waiver by
the Lenders.
If the current low level of gasoline margins continues, the Company believes
that it is likely that the Company will not be in compliance with certain
financial covenants of the Amended C & G Agreement during the quarter ended
December 29, 1996. The Company has no reason to believe, however, that such
non-compliance, if it occurs, will not be waived by the Lenders. There can be
no assurance, however, that the Lenders will waive such non-compliance.
Further, the Lenders have indicated that they intend to avail themselves of
their right under the Amended C & G Agreement to instigate the Spring Lien, as
defined, on most of the Company's Real Property, Fixtures, Buildings, and
Improvements.
15
<PAGE>
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars in Thousands)
NOTE (6) COMMITMENTS AND CONTINGENCIES
- --------------------------------------
The Environmental Protection Agency issued regulations in 1988 that
established requirements for underground storage tanks that affect various
aspects of the Company's retail motor fuel operations. The regulations
require assurances of insurance or financial responsibility and will require
the Company to upgrade or replace a certain number of its underground storage
tanks. The Company has elected to self-insure under these regulations. The
Company currently estimates that the future cost of complying with these
regulations and performing remediation on contaminated sites will be
approximately $49,591. The $49,591 consists of $39,100 for anticipated
remediation costs; $9,142 for environmental capital improvements, and $1,349
for tank removal costs. At September 29, 1996 the Company had completed the
necessary remediation and had filed claims totaling $8,165 with the various
states in which it operates. Of the $39,100 gross remediation liability, the
Company expects additional future reimbursements from state trust funds of
$33,347.
Such estimates are based on current regulations, historical results,
assumptions as to the number of tanks to be replaced and certain other
factors. The actual cost of remediating contaminated sites and removing tanks
may be substantially lower or higher than reserved due to the difficulty in
estimating such costs and due to potential changes in regulations or state
reimbursement programs.
16
<PAGE>
E-Z SERVE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
------------------------------------
The following is Management's discussion and analysis of certain significant
factors which have affected the Company's results of operations and balance
sheet during the period included in the accompanying consolidated financial
statements. Operating data is presented below:
Results of Operations
-------------------------------------
(In thousands except store counts, per gallon prices and margins)
Three Months Ended Nine Months Ended
--------------------- ---------------------
Sept. 29, Sept. 24, Sept. 29, Sept. 24,
1996 1995 1996 1995
--------- --------- --------- ---------
CONVENIENCE STORE OPERATIONS (1)
- -------------------------------
Merchandise:
Average number of merchandise
stores during the period 714 676 725 577
Merchandise sales $ 83,485 $ 76,438 $ 240,768 $ 187,194
Merchandise sales per
location per month $ 39.0 $ 37.7 $ 36.9 $ 36.0
Gross profit $ 24,303 $ 24,176 $ 71,243 $ 59,723
Gross profit per location
per month $ 11.3 $ 11.9 $ 10.9 $ 11.5
Gross profit percentage 29.11% 31.63% 29.59% 31.90%
Motor Fuels:
Average number of motor fuel
stores during the period 677 626 683 533
Gallons sold 103,750 95,534 300,474 247,552
Gallons sold per location
per month 51.1 50.9 48.9 51.6
Revenues $ 119,710 $ 104,941 $ 345,043 $ 270,810
Price per gallon $ 1.15 $ 1.10 $ 1.15 $ 1.09
Gross profit $ 12,937 $ 14,591 $ 36,328 $ 32,961
Gross profit per location
per month $ 6.4 $ 7.8 $ 5.9 $ 6.9
Gross profit per gallon $ .1247 $ .1527 $ .1209 $ .1331
17
<PAGE>
E-Z SERVE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
-------------------------------------
(In thousands except store counts, per gallon prices and margins)
Three Months Ended Nine Months Ended
---------------------- ----------------------
Sept. 29, Sept. 24, Sept. 29, Sept. 24,
1996 1995 1996 1995
--------- --------- --------- ---------
MARKETER OPERATIONS (2)
- -----------------------
Average number of
operating locations
during the period 187 226 193 231
Gallons sold 15,655 18,355 47,654 55,387
Gallons sold per location
per month 27.9 27.1 27.4 26.6
Revenues $18,437 $20,778 $55,898 $62,615
Price per gallon $ 1.18 $ 1.13 $ 1.17 $ 1.13
Gross profit (3) $ 2,044 $ 2,862 $ 5,736 $ 7,451
Gross profit per location
per month 3.6 $ 4.2 $ 3.3 $ 3.6
Gross profit per gallon $ .1306 $ .1559 $ .1204 $ .1345
(1) At September 29, 1996, there were 702 Company operated convenience
stores (658 of which sold motor fuels) and 10 franchised convenience
stores.
(2) Represents non-company operated motor fuel retail outlets ("Marketers").
At September 29, 1996 there were 186 Marketers.
(3) Gross profit is shown before deducting compensation paid to operators
of locations not operated by the Company of $917,000, $1,248,000,
$2,778,000 and $3,216,000 for the three months and nine months ended
September 29, 1996 and September 24, 1995, respectively.
18
<PAGE>
E-Z SERVE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Overview
- --------
The Company reported net income of $1,494,000 and $615,000 for the three and
nine month periods ended September 29, 1996, respectively as compared to net
income of $2,648,000 and $4,952,000 for the comparable periods of 1995. The
first nine months of 1996 included $392,000, net of tax, from unusual and
non-recurring legal settlements in the Company's favor and the first nine
months of 1995 included $569,000, net of tax, of non-recurring insurance
settlements in the Company's favor. All major components of income,
including revenues, gross profit and operating expenses, increased in the
1996 periods due to the acquisitions of Time Saver on January 17, 1995 and
SJS on July 20, 1995.
Operating Gross Profit
- ----------------------
Convenience store ("C-Store") merchandise sales increased 9.2% in the third
quarter of 1996 compared to the third quarter of 1995 and increased 28.6%
for the nine months ended September 29, 1996 compared to the same period of
1995. The 1996 merchandise sales per location increased 3.4% and 2.4% for
the three and nine month periods of 1996, respectively, as compared to the
same periods of 1995. These increases are largely due to the 1995 additions
of the Time Saver and SJS stores which have a higher proportion of
merchandise sales. For the first nine months of 1996, merchandise revenue
comprised 36.9% of the Company's total revenue as compared to 35.3% for the
first nine months of 1995.
The average merchandise gross profit margin of 29.11% and 29.59% for the
three month and nine month periods of 1996, respectively, is below the 31.63%
and 31.90% for the comparable three and nine month periods of 1995,
respectively. These margin decreases reflect a shift by the Company to a more
aggressive pricing strategy to increase customer traffic and sales.
Motor fuels gallons sold per C-Store location were up 0.41% for the third
quarter of 1996 versus the third quarter of 1995 and were down 5.2% for the
first nine months of 1996 compared to the first nine months of 1995 largely
because Time Saver and SJS motor fuels sales per location are lower than the
Company's previous average. Average gross profit per gallon decreased 2.80
cents to 12.47 cents per gallon in the third quarter of 1996 as compared to
the third quarter of 1995, and decreased 1.22 cents in the first nine months
of 1996 to 12.09 cents per gallon as compared to the similar 1995 period due
to lower industry margins. Industry margins are lower as a result of
increased wholesale prices caused by high crude costs and lower than normal
industry-wide gasoline inventories. Additionally, due to competitive
pressures, the Company was not able to reflect the increased cost in the
selling price.
19
<PAGE>
E-Z SERVE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Total gallons sold by non-company operated motor fuel retail outlets
("Marketers") decreased 14.7% in the third quarter and 14.0% for the nine
months ended September 29, 1996 versus the same periods of 1995 reflecting
a 16.5% decrease in the average number of operating locations during 1996 as
the Company continues to dispose of or close Marketer locations. The third
quarter 1996 Marketer average gross profit was 2.53 cents per gallon below
the third quarter of 1995, and the first nine months of 1996 were 1.41 cents
per gallon below the first nine months of 1995 due to lower industry margins,
as described above.
Other Income
- ------------
Other income (which includes money order sales income, gross profit from
the sale of lottery tickets, telephone commissions, rental income, interest
income, franchise fee income and other) increased 18.9% in the nine months
ended September 29, 1996 as compared to the first nine months of 1995 and
increased 15.7% in the third quarter of 1996 compared to the third quarter
of 1995. Other income for the first nine months of 1996 included $603,000
of unusual and non-recurring legal settlements in the Company's favor. The
first nine months of 1995 included $875,000 of non-recurring insurance
settlements in the Company's favor. Exclusive of these non-recurring items,
the 1996 increase in other income over the comparable periods of 1995 would
have been 15.7% and 24.2% for the third quarter and first nine months,
respectively, and is primarily due to the Time Saver and SJS acquisitions.
Expenses
- --------
Total operating expenses increased by 2.0% percent for the third quarter of
1996 as compared to the same period in 1995 and increased 22.8% for the first
nine months of 1996 compared to the first nine months of 1995 which is again
due to the increase in the number of operating locations. Operating expenses
as a percentage of total revenues, were 13.0% for the third quarter of 1996 as
compared to 14.0% for the same period in 1995. For the first nine months of
1996 and 1995, operating expenses as a percentage of total revenues, were
13.4% and 13.5% respectively. Operating expenses, as a percent of merchandise
revenue, were 35.0% and 37.5% for the third quarters of 1996 and 1995,
respectively and were 36.5% and 38.2% for the first nine months of 1996 and
1995, respectively.
Selling, General, and Administrative ("S,G&A") expenses for the third quarter
1996 decreased 19.9% versus the third quarter 1995. S,G&A expenses decreased
1.0% for the first nine months of 1996 as compared to the first nine months
20
<PAGE>
E-Z SERVE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
of 1995. S,G&A expenses, as a percent of total revenue, decreased to 2.5% in
the third quarter 1996 from 3.5% in the third quarter 1995 and decreased to
2.8% in the first nine months of 1996 from 3.5% in the first nine months of
1995. These decreases are primarily due to overhead economies of scale as the
Company increased its number of operating locations through the Time Saver and
SJS acquisitions.
Depreciation and amortization expense increased for the three and nine month
periods of 1996 versus 1995 by 12.8% and 36.9% respectively due to the Time
Saver and SJS acquisitions and, to a lesser extent, to the capital additions
made during 1996.
Interest expense increased $403,000 and $2,492,000 for the three month and
nine month periods ended September 29, 1996, as compared to the same 1995
periods, due to the increased level of borrowings as the Company increased
its bank debt in 1995 to acquire Time Saver and SJS.
Inflation
- ---------
The Company believes inflation has not had a material effect on its results
of operations. The Company does, however, experience short term fluctuations
in its motor fuel gross profit margins as a result of changing market
conditions for the supply and demand of gasoline.
Liquidity and Capital Resources
- -------------------------------
The following table sets forth key balance sheet amounts and corresponding
ratios for periods included in the accompanying consolidated financial
statements:
September 29, December 31,
1996 1995
------------ -----------
Current assets $72,667,000 $78,584,000
Current liabilities $71,953,000 $76,936,000
Current ratio 1.01:1 1.02:1
21
<PAGE>
<PAGE>
E-Z SERVE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
September 29, December 31,
1996 1995
------------ -----------
Total debt (including related
parties, capital leases and other) $81,632,000 $81,976,000
Stockholders' equity $71,516,000 $70,160,000
Total debt to total capitalization 0.53:1 0.54:1
Common shares outstanding 69,118,530 67,854,159
Liquidity
- ---------
As of September 29,1996, EZCON had $8,241,000 available on its bank line of
credit. Due to the nature of the Company's business, most sales are for cash,
and cash provided by operations is the Company's primary source of liquidity.
Receivables relate to undeposited sales by Marketers, credit card and lottery
sales, manufacturer rebates and other receivables. In addition, the Company
finances its inventory requirements primarily though normal trade credit
terms. This condition allows the Company to operate with a low level of cash
and working capital. The Company's working capital decreased $934,000 during
the first nine months of 1996 primarily due to $5,550,000 in principal
payments on the Term Loan and an increase in the current portion of long-term
debt largely offset by a decrease in both trade payables and accrued expenses.
During the first nine months of 1996, the Company's major non-operational cash
proceeds were $5,400,000 from temporary borrowings on the Revolver and
$776,000 from disposals of fixed assets. Major non-operational expenditures
included: $5,744,000 for the repayment of long-term debt; $9,527,000 for
capital and environmental upgrade expenditures; $1,601,000 for environmental
remediation and $356,000 for removal of underground storage tanks.
Approximately 62% of the Company's revenues are derived from motor fuel sales
and, because the Company acquires approximately 35% of its product on a spot
basis, gross margins are subject to sudden changes whenever a disproportionate
movement between purchase costs and retail selling prices occurs. Frequently,
these movements are not in line with each other which leads to unusually wide
or narrow margins. Without stability in the marketplace, the Company may
temporarily experience operating results that are unprofitable.
The Company believes that cash flow from operations and available working
capital will provide the Company with sufficient liquidity to conduct its
business in an ordinary manner. Unanticipated events or a prolonged motor
fuel margin squeeze could occur which may cause cash shortfalls to exist and
require the Company to increase its borrowing on the revolving line of credit.
22<PAGE>
<PAGE>
E-Z SERVE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
However, shrinking gasoline margins could cause the Company to not be in
compliance with certain financial covenants of the Amended C & G Agreement.
If such violations occur and are not waived, the Company will be unable to
borrow additional amounts on the revolving line of credit.
Capital Resources
- -----------------
On January 17, 1995, EZCON entered into a Credit and Guaranty Agreement ("C &
G Agreement") with a group of banks (the "Lenders") with Societe Generale as
agent (the "Agent"). The C & G Agreement provided for a term loan of
$45,000,000 ("Term Loan") and a $15,000,000 revolving line of credit
("Revolver"). At closing, the Term Loan was fully drawn and the proceeds were
used (a) to repay in full the outstanding amounts owed under the Company's
previous credit agreement, (b) to finance the initial payment for the Time
Saver acquisition and ( c) for working capital purposes. On July 21, 1995,
the C & G Agreement was amended whereby the Lenders increased the Term Loan
available to the Company to $60,400,000. The Company fully drew the
additional $15,400,000 and the proceeds were used for the acquisition of SJS.
With the acquisition of SJS, the Company assumed the indebtedness of SJS. On
October 2, 1995, the C & G Agreement was amended and restated ("Amended C & G
Agreement"). The Term Loan limit was increased to $80,000,000 and the
Revolver limit was increased to $25,000,000. The Company drew the additional
$19,600,000 available on the Term Loan and used the proceeds to retire the
outstanding debt of SJS.
The Company made a principal payment of $3,550,000 in July 1996. The Term
Loan requires semi-annual payments each January 24 and July 24, as follows:
$3,550,000 in January 1997; $4,820,000 in July 1997; $5,780,000 in January
1998; $6,280,000 in July 1998; $6,670,000 in January 1999; $6,920,000 in July
1999; $7,110,000 in January and July 2000 and January 2001; $7,600,000 in July
2001; with a final payment of $11,039,354 in January 2002.
The Amended C & G Agreement further states that 100% of certain transaction
proceeds, as defined, shall be immediately applied as a mandatory prepayment
of the Term Loan in the inverse order of maturity, and further, that 75% of
excess cash flow, as defined, shall be applied 90 days after the end of each
fiscal year as a mandatory prepayment of the Term Loan in the inverse order
of maturity. In this regard, a $461,000 principal payment was made in October
1996 as cumulative asset sales in 1996 exceeded the limit allowed in the
Amended C & G Agreement.
The Revolver can be used for working capital purposes and for issuance of a
maximum of $15,000,000 of letters of credit. The Revolver has a "clean-down"
provision whereby, during a five consecutive calendar day period of each
calendar month, the aggregate outstanding borrowing cannot exceed $4,000,000.
23
<PAGE>
E-Z SERVE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
At September 29, 1996, there were $5,400,000 of outstanding borrowings under
the Revolver and there were $9,420,000 of outstanding letters of credit
issued as collateral for disputed unsecured bankruptcy-related claims and
workers compensation claims.
On March 31, 1996, the Company was required to make an excess cash flow
payment of $1,619,000 based on cash flow for the year ended December 31,
1995. The Company requested from the Lenders, and was granted, a waiver of
this payment. In addition, due to lower than anticipated gross profit
margins on motor fuel sales during the first quarter of 1996, the Company
was not, as of March 31, 1996, in compliance with certain financial covenants
of the Amended C & G Agreement and the "clean-down" provision. On May 6, 1996
an amendment to the Amended C & G Agreement was signed whereby various
financial covenants for all reporting periods were revised through the term
of the loan except for the fixed charge coverage ratio which was revised
through fiscal 1996.
As of September 29, 1996, again primarily due to lower than anticipated gross
profit margins on motor fuel sales, the Company was not in compliance with one
financial covenant of the Amended C & G Agreement, and was granted a waiver by
the Lenders.
If the current low level of gasoline margins continues, the Company believes
that it is likely that the Company will not be in compliance with certain
financial covenants of the Amended C & G Agreement during the quarter ended
December 29, 1996. The Company has no reason to believe, however, that such
non-compliance, if it occurs, will not be waived by the Lenders. There can be
no assurance, however, that the Lenders will waive such non-compliance.
Further, the Lenders have indicated that they intend to avail themselves of
their right under the Amended C & G Agreement to instigate the Spring Lien, as
defined, on most of the Company's Real Property, Fixtures, Buildings, and
Improvements.
The Environmental Protection Agency requires that facility owners test
underground tanks for leaks and repair or replace leaking tanks with new or
upgraded corrosion protected tanks. The Company currently estimates that
complying with these regulations will cost an additional $16,244,000 (net of
anticipated reimbursements from state environmental trust funds), through
1998. This estimate is based upon assumptions as to the number of tanks to
be replaced and certain other factors. The assumptions on which the cost
estimates are based may not materialize, and unanticipated events and
circumstances may occur. As a result, the actual cost of complying with
these requirements may be substantially lower or higher than the estimated
costs. The Company anticipates that required expenditures relating to
compliance with these regulations will be funded from cash flow from its
current operations.
24
<PAGE>
E-Z SERVE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Due to capital constraints brought about largely by operating losses and by
the environmental expenditure requirements discussed above, the Company was
unable to properly upgrade its facilities prior to 1994. However, as a
result of improved operating results, during 1994 the Company began to make
capital expenditures and improvements beyond maintenance capital requirements.
During the first nine months of 1996 the Company made capital expenditures
and improvements of $9,042,000 (exclusive of environmental requirements).
However, according to the terms of the Amended C & G Agreement, if projected
levels of profitability are not maintained, the Company's capital expenditures
can be constrained. In this regard, based on reduced cash flow projections
for 1996, the Amendment to the Amended C & G Agreement signed on May 6, 1996
reduced the level of allowed capital expenditures for 1996 from $18,800,000
to $11,400,000. Although this curtailment will reduce the intended level of
higher return discretionary expenditures in 1996, the Company does not believe
this to be a significant impairment to its future earnings potential unless
the restrictions are imposed in future periods.
Under federal tax law, the amount and availability of net operating loss
carryforwards ("NOL") are subject to a variety of interpretations and
restrictive tests, under which the utilization of such NOL carryforwards
could be limited or effectively lost upon certain changes in ownership.
After an ownership change, utilization of a loss corporation's NOL was
limited annually to a prescribed rate times the value of a loss corporation's
stock immediately before the ownership change. During 1992, the Company
experienced an "ownership change" as defined by the Internal Revenue Code of
1986. The Company's NOL available under the ownership change rules was
approximately $34,000,000 at December 31, 1995. The NOL will expire if not
utilized by 2006. Approximately $17,000,000 of the NOL was acquired with
the acquisition of EZCON and can only be used to offset future income of
EZCON. In addition, the Company has alternative minimum tax NOL carry-forwards
of approximately $34,000,000, which are available over an indefinite
period, that can be utilized should the Company's alternative minimum tax
liability exceed its regular tax liability.
The Company's ability to expand further is dependent upon several factors,
including adequacy of acquisition opportunities and sufficient capital
resources. The Company believes that possible acquisition candidates will
continue to exist as the major oil companies re-evaluate and reduce their
company operated presence, as the convenience store industry continues to
contract due to competitive pressures and the financial difficulties
experienced by some of its members, and as small independent operators have
difficulty meeting growing environmental requirements. While cash flow and
capital availability are currently sufficient to fund operations, it will be
necessary for the Company to fund any identified acquisitions with new
capital which may not be available on terms acceptable to the Company.
25<PAGE>
<PAGE>
E-Z SERVE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Although it is the Company's intention to grow through strategic acquisitions,
recent acquisitions in the convenience store industry have caused the Company
to evaluate, preliminarily, various alternatives to maximize stockholder
value. In connection therewith, the Company has engaged Donaldson, Lufkin &
Jenrette Securities Corporation to act as the Company's exclusive financial
advisor in connection with such efforts for which it shall be compensated
based on a percentage of the dollar value of a chosen alternative, if any,
and shall be reimbursed for out-of-pocket expenses.
Disclosure Regarding Forward Looking Statements
- -----------------------------------------------
Item 2 of this document includes forward looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. Although the Company
believes that the expectations reflected in such forward looking statements
are based upon reasonable assumptions, the Company can give no assurance that
these expectations will be achieved. Important factors that could cause
actual results to differ materially from the Company's expectations include
general economic, business and market conditions, the volatility of the price
of oil, competition, development and operating costs and the factors that are
disclosed in conjunction with the forward looking statements included herein
and in the Company's most recent 10K filed with the Securities and Exchange
Commission ("Cautionary Disclosures"). Subsequent written and oral forward
looking statements attributable to the Company or persons acting on its behalf
are expressly qualified in their entirety by the Cautionary Disclosures.
26
<PAGE>
<PAGE>
E-Z SERVE CORPORATION
PART II - OTHER INFORMATION
- ---------------------------
Item 1 - Legal Proceedings
- --------------------------
The Company and its subsidiaries are involved in various lawsuits incidental
to its business. The Company's internal legal counsel monitors all such
claims and the Company has accrued for those which it believes are probable of
payment. In management's opinion, an adverse determination against the
Company or any of its subsidiaries relating to these suits would not have a
material adverse effect on the Company and its subsidiaries, taken as a whole.
In the case of administrative proceedings related to environmental matters
involving governmental authorities, management does not believe that any
imposition of monetary sanctions would exceed $100,000.
Item 2 - Changes in Securities
- ------------------------------
None.
Item 3 - Defaults Upon Senior Securities
- ----------------------------------------
(b) Arrearage in the Payment of Dividends
During the nine months ended September 29, 1996, the Company had outstanding
75,656 shares of its $6.00 Convertible Preferred Stock, Series C ("Series C
Preferred Stock"). As of October 1, 1996, which is the last dividend
cumulation date, the Company had cumulative but unpaid dividends on the
Series C Preferred Stock of $683,000.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
27 Financial Data Schedule for the period ended September 29, 1996.
(b) The Company did not file any reports on Form 8-K during the three months
ended September 29, 1996.
27<PAGE>
<PAGE>
E-Z SERVE CORPORATION
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.
E-Z SERVE CORPORATION
---------------------
(Registrant)
Date: November 13, 1996 /s/ John T. Miller
----------------- -------------------------------
John T. Miller
Senior Vice President
Chief Financial Officer
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FROM THE
COMPANY'S REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 29, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> SEP-29-1996
<CASH> 9,777
<SECURITIES> 0
<RECEIVABLES> 9,428
<ALLOWANCES> 0
<INVENTORY> 38,066
<CURRENT-ASSETS> 72,667
<PP&E> 172,045
<DEPRECIATION> 29,693
<TOTAL-ASSETS> 248,174
<CURRENT-LIABILITIES> 71,953
<BONDS> 72,927
0
1
<COMMON> 691
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<TOTAL-LIABILITY-AND-EQUITY> 248,174
<SALES> 641,708
<TOTAL-REVENUES> 652,522
<CGS> 528,401
<TOTAL-COSTS> 616,159
<OTHER-EXPENSES> 29,074
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