As filed with the Securities and Exchange Commission on March 18, 1997
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(MARK ONE)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarter ended DECEMBER 31, 1996
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 000-21956
EVANS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1613155
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
720 Avenue F North, Bay City, Texas 77414 (409) 245-2424
(Address including zip code, and telephone number,
including area code, of registrant's principal executive offices)
JERRIEL L. EVANS, SR., PRESIDENT
Mailing Address: P.O. Box 2480, Bay City, Texas 77404-2480 (409) 245-2424
Physical Address: 720 Avenue F North, Bay City, Texas 77414 (409) 245-2424
(Name, address, including zip code,and telephone number,including area code, of
agent for service)
NONE
(Former name, former address and former fiscal year, if changed since last
report)
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 / /
Number of shares of common stock of registrant outstanding exclusive of Treasury
Shares or shares held by subsidiaries of the registrant at February 12, 1997:
3,032,973
<PAGE>
EVANS SYSTEMS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Financial Statements (Unaudited) Page Number
Condensed Consolidated Balance Sheet
December 31, 1996 and September 30, 1996 3
Condensed Consolidated Statement of Income
Three Months Ended December 31, 1996 and 1995 4
Condensed Consolidated Statement of Cash Flows
Three Months Ended December 31, 1996 and 1995 5
Notes to the Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Exhibits and Reports on Form 8-K
A. Exhibits Index 11
B. Reports on Form 8-K 11
Signature 11
2
<PAGE>
PART I. FINANCIAL INFORMATION
EVANS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
---- ----
ASSETS (in thousands) (in thousands)
------
Current Assets:
<S> <C> <C>
Cash and cash equivalents 2,733 $2,793
Marketable equity securities 1,385 1,599
Trade receivables, net of allowance of doubtful
receivable of $87,000 and $50,000 4,962 5,160
Inventory 8,130 8,182
Prepaid expenses and other current assets 1,163 955
Income taxes receivable 37 37
Deferred income taxes 387
-------- --------
Total current assets 18,797 18,726
-------- --------
Property, plant and equipment, net 21,049 20,848
-------- --------
Other assets 1,527 1,499
-------- --------
Total assets 41,373 $41,073
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $6,833 $6,051
Accrued excise and other taxes payable 1,506 1,511
Current portion of long-term debt 2,190 2,145
Deferred income taxes 17
-------- --------
Total current liabilities 10,529 9,724
Long-term debt 10,194 10,400
Deferred income taxes 1,201 1,201
Deferred Revenue 103
-------- --------
Total liabilities 22,027 21,325
-------- --------
Commitments and contingencies
Stockholders' equity:
Common stock $0.01 par value, 15,000,000 shares
authorized, 3,105,562 and 3,105,562 shares issued 31 31
Additional paid-in capital 12,133 12,133
Retained earnings 7,616 8,393
Net unrealized loss on marketable equity securities (375)
Treasury stock, 72,589 common shares at cost (434) (434)
-------- --------
Total stockholders' equity 19,346 19,748
-------- --------
Total liabilities and stockholders' equity $41,373 $41,073
======== ========
</TABLE>
SEE NOTES TO THE CONDENSED FINANCIAL STATEMENTS
3
<PAGE>
EVANS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------
1996 1995
---- ----
(in thousands, except per share amounts)
Revenue:
<S> <C> <C>
Refined product sales $31,340 $ 25,143
Other sales and services 6,334 13,984
-------- ---------
Total revenue 37,674 39,127
Cost of sales: 33,212 34,494
-------- ---------
Gross profit: 4,462 4,633
-------- ---------
Operating expenses:
Employment expenses 2,541 2,230
Other operating expenses 1,087 930
General & administrative expenses 922 852
Depreciation and amortization 439 294
-------- ---------
Total operating expenses 4,989 4,306
-------- ---------
Operating income(loss) (527) 327
Other income/expense
Interest expense (289) (231)
Other income/(loss) net (364) (52)
-------- ---------
Income/(loss) before provision for income taxes (1,180) 44
Provision for/(benefit from) income taxes: (405) 6
-------- ----------
Net income/(loss) $(775) $ 38
-------- ----------
Earnings/(loss) per share ($0.26) $ 0.01
======== ==========
</TABLE>
SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
EVANS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
December 31,
------------
1996 1995
---- ----
(in thousands) (in thousands)
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $(775) $ 38
Non-cash adjustments:
Depreciation and amortization 439 294
Loss on reclassification of securities 375
Changes in:
Current assets 256 (1,405)
Current liabilities 420 2,979
Other, net
------- -------
Net cash provided by operating activities 715 1,906
------- -------
Cash flows from investing activities:
Capital expenditures (640) (1,537)
Other, net (28) (113)
------- -------
Net cash used by investing activities (668) (1,650)
------- -------
Cash flows from financing activities:
Notes payable, net (205) (713)
Deferred Revenue 98
------- -------
Net cash used by
financing activities (107) (713)
------- -------
Net decrease in cash (60) (457)
Cash and cash equivalents, beginning of period 2,793 3,544
------- -------
Cash and cash equivalents, end of period $2,733 $3,087
======= =======
</TABLE>
SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
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 Rule
10-01 of Regulation S-X. They do not include all information and notes required
by generally accepted accounting principles for complete financial statements.
However, except as disclosed herein, there has been no material change in the
information disclosed in the notes to the consolidated financial statements
included in Form 10-K of Evans Systems, Inc. (the Company) for the year ended
September 30, 1996. 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 three month period ended December
31, 1996 are not necessarily indicative of the results that may be expected for
the year ending September 30, 1997.
NOTE B -- ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued FAS 123,
Accounting for Awards of Stock-Based Compensation to Employees. The Statement
encourages the fair value based method of accounting for an employee stock
option; however, the Statement allows entities to continue to measure
compensation costs for plans using the intrinsic value based method of
accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees. Under the fair value based method, compensation
cost is measured at the grant date based on the value of the award and is
recognized over the service period. The Company has adopted FAS123 for fiscal
1997. The Company will continue using the intrinsic value method to value stock
options and believes that the effect of this Statement on future results of
operations will not be material.
In March 1995, Financial Accounting Standards Board issued Statement 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", was issued and is effective for the Company in fiscal year
1997. The adoption of FAS 121 in fiscal 1997 did not have a material impact on
the Company's consolidated financial position or operating results.
NOTE C -- SEASONAL NATURE OF BUSINESS
The refined petroleum products market customarily experiences competitive
margins in the fall and winter months followed by increased demand during the
spring and summer when construction, travel, and recreational activities
increase.
6
<PAGE>
NOTE D -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 September 30, 1996
----------------- ------------------
(in thousands) (in thousands)
PETROLEUM MARKETING
<S> <C> <C>
Refined Petroleum Products 3,385 3,197
Non-Petroleum Products 606 638
CONVENIENCE STORES
Refined Petroleum Products 589 492
Non-Petroleum Products 1,020 1,049
CHEMWAY
Aerosol Chemical Products 1,977 2,257
Liquid Automotive Products 413 412
EDCO ENVIRONMENTAL
Environmental Remediation Products 140 137
----- -----
TOTAL INVENTORIES 8,130 8,182
</TABLE>
NOTE E -- EARNINGS PER SHARE
Earnings (loss) per common and common equivalent share for the quarters ended
December 31, 1996 and 1995 were computed using 3,032,973 and 3,063,693 weighted
average common and dilutive common equivalent shares outstanding respectively.
NOTE F -- RECLASSIFICATIONS
Certain reclassifications have been made to prior year amounts in order to
conform to the current year presentation.
THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK
7
<PAGE>
ANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
The following table reflects the operating results of the Company's business
segments for the Three Months ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, 1996 December 31, 1995
----------------- -----------------
(in thousands) (in thousands)
PETROLEUM MARKETING(1)
<S> <C> <C>
Revenue $25,979 $20,373
Operating Income (Loss) ($26) $21
CONVENIENCE STORES
Revenue 9,586 8,999
Operating Income (Loss) (90) 8
CHEMWAY
Revenue 1,610 9,151
Operating Income (Loss) (502) 410
EDCO ENVIRONMENTAL
Revenue 499 604
Operating Income (Loss) 91 (112)
TOTAL
Revenue $37,674 $39,127
Operating Income (Loss) $(527) $327
</TABLE>
(1) Includes the Parent Company
The Company's net income (loss) for the quarters ended December 31, 1996 and
1995 was ($775,000) and $38,000. The quarter ended December 31, 1996, includes a
non-recurring, non-operating loss of $219,000 (net of tax effect) related to the
reclassification of securities available for sale, a bond fund the Company has
held since 1993 to trading securities. In addition, the Company recorded a
non-operating loss of $70,000 (net of tax effect) related to the decision by the
Board of Directors to liquidate its trading portfolio. Without these
non-recurring items net income (loss) for the quarters ended December 31, 1996
and 1995 would have been ($486,000) and $38,000.
ESI's revenues for the Three Months ended December 31, 1996, were $37,674,000
compared o $39,127,000 for the comparable period ending December 31, 1995. The
$1,453,000 (3.7%) three-month decrease in this year's revenues was mainly
attributable to $7,541,000 decrease in ChemWay revenues partially offset by
increases in the petroleum marketing and convenience store segments.
ESI's gross profit for the Three Months ended December 31, 1996 was $4,462,000
(11.8%) compared to $4,633,000 (11.8%) for the comparable Three Months ended
December 31, 1995.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS-CONTINUED
Operating expenses increased to $4,989,000 in 1996 compared to $4,306,000 in
1995. Operating expenses increased $683,000 in 1996 as described in the
following sections. Operating expenses were 13.2 percent of revenues in 1996 and
11.0 percent in 1995
PETROLEUM MARKETING
The Petroleum Marketing segment sales were $25,979,000 in 1996 compared to
$20,373,000 in 1995, a $5,606,000 (27.5%) increase. Fuel sales gallonage
increased to 22,885,000 gallons compared to 20,855,000 in 1995, a 2,030,000
(9.7%) increase. Gross profits for 1996 and 1995 were $2,113,000 and $1,927,000
respectively. Gross profit margins decreased to 8.1 percent compared to 9.5
percent in 1995. Management attributes the decrease in margins to higher average
selling prices per gallon of fuel of $1.08 in 1996 compared to $.91 in 1995
while the cents per gallon profit was $.075 and $.07 respectively. This and
lower margins on other petroleum products contributed to a 1.4 percent decline
in gross profit margins. Operating expenses increased $233,000 in 1996.
Operating expenses were 8.2 percent of revenues in 1996, and 9.4 percent in
1995. Management attributes the increase in operating expenses to employment
expenses $110,000, (mainly centered in insurance health cost); transportation
$113,000; depreciation $73,000; and decreases in general administrative expenses
($50,000); and repairs to buildings and fuel dispensing equipment of $13,000.
ESI, the parent company, is included in the Petroleum Marketing results.
Operating income (loss) was ($26,000) compared to $21,000 in 1995.
CONVENIENCE STORES
The Convenience Store segment sales were $9,586,000 in 1996 compared to
$8,999,000 in 1995; a $587,000 (6.5%) increase. Fuel sales increased to
$5,753,000 in 1996 compared to $5,129,000. Fuel sales gallonage increased to
5,496,000 gallons compared to 4,638,000 in 1995; a 858,000 (18.5%) increase.
Merchandise sales decreased to $3,698,000 in 1996 compared to $3,712,000 and
other income decreased to $135,000 compared to $158,000. Management attributes
the increase in sales to fuel $624,000 and decreases in merchandise $14,000 and
other income of $23,000. Gross profit for 1996 and 1995 was $1,907,000 and
$1,804,000 respectively. Gross profit margins decreased to 19.9% in 1996
compared to 22.0%. Management attributes the decline in gross profit margins
mainly to its Louisiana operations which declined to a 14.4% margin compared to
17.7% in 1995.
Operating expenses increased to $201,000 in 1996. Operating income(loss) was
($90,000) compared to $8,000 in 1995. The most significant factor contributing
to the decrease in operating income was $118,000 loss in its Louisiana
operations.
CHEMWAY
ChemWay sales were $1,610,000 in 1996 compared to $9,151,000 in 1995; a
$7,541,000 (82%) decrease. The decline was caused by the aerosol production line
being out of service in late November through December for complete refurbishing
and a seasonal decrease in the automotive aftermarket refrigerant business.
Gross profit for 1996 and 1995 was $111,000 and $799,000 respectively. Gross
profit margins decreased to 6.9% compared to 8.7% in 1995. Management attributes
the decrease in margins mainly to lower margin sales from the refrigerant
reclamation division.
Operating expense increased $224,000 in 1996 compared to 1995. The increases in
operating expenses were primarily employment $116,000; transportation $34,000;
general administrative expenses $79,000, mainly attributable to insurance, taxes
and computer systems; depreciation $12,000 and a decrease in repairs and
maintenance of $17,000. Operating income (loss) was ($502,000) compared to
$410,000 in 1995.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS- CONTINUED
EDCO ENVIRONMENTAL
EDCO Environmental sales were $499,000 compared to $604,000 in 1995; a $105,000
(17.4%) decrease. Gross profit for 1996 and 1995 was $330,000 and $103,000
respectively. Gross profit margins increased to 66.2 percent compared to 17.1
percent in 1995. Management attributes the increase in margins mainly to a
change in its business plan began in August 1996 to concentrate solely on
environmental remediation which produces high margins and discontinue additional
equipment sales and construction projects which were characterized by low
margins due to intense competition.
Operating expenses increased $24,000 in 1996 compared to 1995. Increases in
operating expenses were mainly attributable to selling and marketing $37,000;
office equipment and vehicle leases $9,000; Insurance $4,000; operating supplies
$8,000; and depreciation $15,000; and decreases in employment $29,000 and
equipment cost of $20,000. Operating income (loss) was $91,000 compared to
($112,000) in 1995.
CAPITAL RESOURCES AND LIQUIDITY
Cash, cash equivalents and marketable securities were $4,118,000 as of December
31, 1996 compared to $4,392,000 for September 30, 1996. Working capital was
$8,268,000 as of December 31, 1996, a decrease from $9,002,000 as of September
30, 1996. The net decrease in working capital was largely attributable to an
increase in accounts payable and accrued expenses.
Cash provided from operations was $715,000 as of December 31, 1996 compared to
$1,906,000 for the same period ending December 31, 1995.
ESI's current ratio, the ratio of current assets to current liability, was 1.79
as of December 31, 1996 and 1.93 as of September 30, 1996.
ESI utilized proceeds from its $7,200,000 line of credit up to a maximum of
$5,404,000 in 1996 to fund operations. ESI's line of credit in the amount of
$6,900,000 with one financial institution will expire in August 1999 and a
$300,000 line of credit with another financial institution expires in March
1997. The $300,000 line of credit is currently in the process of renewal and
management does not anticipate any problems with its renewal and extension. As
of December 31, 1996, ESI had $1,796,000 available in unused lines of credit.
The Company anticipates that existing sources of liquidity and cash flow from
operations will be sufficient to satisfy continued operations; however,
additional sources of capital may be required to finance new acquisitions.
THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK
10
<PAGE>
PART II. OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
Exhibit 27: Financial Data Schedule
B. REPORTS ON FORM 8-K
No report on Form 8-K has been filed during the quarter for which this report is
filed.
SIGNATURE
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.
EVANS SYSTEMS, INC.
(REGISTRANT)
Date: March 14, 1997 By: /s/ Charles N. Way
-----------------------------------
Charles N. Way
Vice President and Chief Financial Officer
And authorized to sign on behalf of
the Registrant
By: /s/ Denis J. Waldron
------------------------------------
Denis J. Waldron
Corporate Controller And
authorized to sign on
behalf of the Registrant
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-Q/A for the quarter ended December 31, 1996 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> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 2,733
<SECURITIES> 1,385
<RECEIVABLES> 5,049
<ALLOWANCES> 87
<INVENTORY> 8,130
<CURRENT-ASSETS> 18,797
<PP&E> 33,501
<DEPRECIATION> 12,453
<TOTAL-ASSETS> 41,373
<CURRENT-LIABILITIES> 10,529
<BONDS> 0
0
0
<COMMON> 31
<OTHER-SE> 19,315
<TOTAL-LIABILITY-AND-EQUITY> 41,373
<SALES> 37,674
<TOTAL-REVENUES> 37,674
<CGS> 33,212
<TOTAL-COSTS> 38,201
<OTHER-EXPENSES> 364
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 289
<INCOME-PRETAX> (1,180)
<INCOME-TAX> (405)
<INCOME-CONTINUING> (775)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (775)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> 0
</TABLE>
