AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 7, 1999
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(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, 1997
[ ] 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, 1998:
3,090,984.
<PAGE>
EVANS SYSTEMS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Financial Statements (Unaudited) Page Number
Condensed Consolidated Balance Sheet as of
December 31, 1997 and September 30, 1997 3
Condensed Consolidated Statement of Income for the
Three Months Ended December 31, 1997 and 1996 4
Condensed Consolidated Statement of Cash Flows for the
Three Months Ended December 31, 1997 and 1996 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 13
B. Reports on Form 8-K 13
Signatures 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
EVANS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------- --------------
ASSETS (As restated)
<S> <C> <C>
Current Assets:
Cash and cash equivalents .......................... $ 169 $ 1,297
Trade receivables, net of allowance for doubtful
accounts of $302,000 and $340,000, respectively 4,613 4,584
Inventory .......................................... 6,539 7,962
Income taxes receivable ............................ 310 310
Prepaid expenses and other current assets .......... 619 618
Deferred income taxes .............................. 191 191
-------- --------
Total current assets .......................... 12,441 14,962
Property and equipment, net .............................. 21,496 21,551
Investment in marketable securities
Other assets ............................................. 921 1,035
Deferred income taxes .................................... 1,209 670
-------- --------
Total assets ............................. $ 36,067 $ 38,218
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses .............. $ 8,367 $ 9,496
Current portion of long-term debt .................. 7,944 7,837
-------- --------
Total current liabilities ..................... 16,311 17,333
Long-term debt ........................................... 5,231 5,401
-------- --------
Total liabilities ............................. 21,542 22,734
-------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 15,000,000 shares
authorized 3,163,573 shares issued ................. 32 32
Additional paid-in capital ......................... 12,297 12,297
Retained earnings .................................. 2,630 3,589
Treasury stock, 72,589 shares, at cost ............. (434) (434)
-------- --------
Total stockholders' equity .................... 14,525 15,484
-------- --------
Total liabilities and stockholders' equity $ 36,067 $ 38,218
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
EVANS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
(As restated)
1997 1996
-------- --------
Revenue:
Refined product sales .................... $ 23,382 $ 31,340
Other sales and services ................. 5,387 4,724
-------- --------
Total revenue ............................ 28,769 36,064
Cost of sales ............................... 24,958 32,120
-------- --------
Gross profit ................................ 3,811 3,944
-------- --------
Operating expenses:
Employment expenses ...................... 2,237 2,230
Other operating expenses ................. 946 963
General & administrative expenses ........ 665 784
Depreciation and amortization ............ 473 399
-------- --------
Total operating expenses ................. 4,321 4,376
-------- --------
Operating loss .............................. (510) (432)
Other income (expense)
Interest expense, net .................... (338) (223)
Gain on sale of assets ................... (7) (32)
Other, net ............................... (43) (366)
-------- --------
Loss before benefit from income taxes ....... (898) (1,053)
Benefit from income taxes ................... 324 374
-------- --------
Loss from continuing operations ............. (574) (679)
Discontinued operations:
Loss from discontinued operations of
ChemWay, net of tax benefit .............. (385) (373)
-------- --------
Net loss .................................... $ (959) $ (1,052)
======== ========
Basic and diluted earnings (loss) per share:
Continuing operations .................... $ (.19) $ (.23)
Discontinued operations .................. (.12) (.12)
-------- --------
Net income (loss) ........................ $ (.31) $ (.35)
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
EVANS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
---------------------------------
1997 1996
------- -------
(As restated)
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................... $ (959) $(1,052)
Adjustments:
Depreciation and amortization .......................... 527 439
Deferred income taxes .................................. (539) (566)
Loss on sale of fixed assets ........................... 7 32
Loss on reclassification of securities ................. -- 375
Changes in working capital:
Current assets .................................... 1,393 1,604
Current liabilities ............................... (1,022) 1,184
------- -------
Total adjustments ........................................... 366 3,068
------- -------
Net cash provided (used) by operating activities .................. (593) 2,016
------- -------
Cash flows from investing activities:
Capital expenditures ........................................ (565) (640)
Proceeds from sale of property and equipment ................ 86 --
Other, net .................................................. 7 7
------- -------
Net cash provided (used) by investing activities .................. (472) (633)
------- -------
Cash flows from financing activities:
Repayment on notes payable, net ............................. (63) (161)
Deferred revenue ............................................ -- 103
------- -------
Net cash used by financing activities ............................. (63) (58)
------- -------
Net increase (decrease) in cash ................................... (1,128) 1,325
Cash and cash equivalents, beginning of period .................... 1,297 2,793
------- -------
Cash and cash equivalents, end of period .......................... $ 169 $ 4,118
------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
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.
Except as disclosed herein, there has been no material change in the information
disclosed in the notes to the consolidated financial statements included in the
annual report on Form 10-K of Evans Systems, Inc. (the "Company") for the year
ended September 30, 1997. 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, 1997 are not necessarily indicative of the results which may
be expected for the year ending September 30, 1998.
NOTE B - SEASONAL NATURE OF BUSINESS
The refined petroleum products market customarily experiences competitive
margins in the fall and winter months followed by increased demand during spring
and summer when construction, travel, and recreational activities increase.
NOTE C -- LONG-TERM DEBT
Certain of the Company's notes payable to banks require maintenance of financial
covenants, including current, debt to equity, tangible net worth and debt
service coverage ratios. At September 30, 1997 and December 31, 1997, the
Company was in violation of certain of these covenants. In addition, the Company
was out of compliance with the borrowing base limits with one bank. The banks
have waived these covenant defaults at September 30, 1997 but not as of December
31, 1997. With respect to the out of compliance with the borrowing base limits,
the bank has agreed to a standstill of the breach of the borrowing base limits.
In exchange for these waivers and the standstill agreement, the Company has
pledged the stock of its subsidiaries, pledged the proceeds of the sale of
non-income producing assets, provided the bank a second lien on its office
facility and agreed to a maturity date on April 30, 1998. Long-term debt of
$6,400,000 was reclassified to short-term at September 30, 1997 and December 31,
1997. As of December 31, 1997, ESI had $ 2,563,000 available in unused lines of
credit, however, due to borrowing base limits these unused lines of credit were
not currently available for use.
The Company is in the process of seeking long-term senior debt and replacement
for the current lines of credit. The Company has hired an investment banking
firm to work with management to obtain this senior debt financing. The
investment banker and management believe this financing can be obtained prior to
the current credit lines expiring.
NOTE D -- SUBSEQUENT EVENTS
On February 11, 1998, the Company sold its investment in 5 leased convenience
stores for net cash of approximately $350,000. There was no material charge
related to this transaction.
6
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On February 13, 1998, the Company temporarily suspended further production
activities at its Chemway operation. On May 12, 1998 the Company's Board of
Directors determined that the Company would dispose of ChemWay. The ChemWay
operating results are presented as discontinuing operations on the Condensed
Consolidated Statement of Income.
NOTE E -- BASIC AND DILUTED LOSS PER SHARE
Basic and diluted loss per share for the quarters ending December 31, 1997 and
December 31, 1996 were computed using 3,090,984 and 3,032,973 weighted average
common shares outstanding, respectively.
NOTE F - RESTATEMENT
The Company has restated previously reported annual and interim financial
results of fiscal years 1998 and 1997. Unaudited quarterly financial data for
1998 and 1997 have also been restated. All disclosures related to 1998 and 1997
have been amended, as appropriate to reflect the restatement.
The Company has determined that certain expenses were incorrectly reported in
previously issued financial statement. These principally relate to asset
write-downs, unaccrued liabilities and related income taxes. With respect to
asset write-downs, the Company has determined that certain credit card
receivables were uncollectible and that various property and equipment costs
should be written off. The Company has also concluded that certain liabilities
had been incurred that were not properly accrued. The effect of the restatements
discussed above on the statement of operations is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996
--------------------------- ---------------------------
PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Revenue .............................................. $ 28,769 $ 28,769 $ 36,064 $ 36,064
Cost of sales ........................................ 24,943 24,958 31,713 32,120
-------- -------- -------- --------
Gross profit ......................................... 3,826 3,811 4,351 3,944
Operating expense .................................... 4,321 4,321 4,376 4,376
-------- -------- -------- --------
Operating loss ....................................... (495) (510) (25) (432)
Interest expense ..................................... (338) (338) (223) (223)
Other ................................................ (43) (50) (366) (398)
-------- -------- -------- --------
Loss from continuing operations
before taxes ......................................... (876) (898) (614) (1,053)
Income tax benefit ................................... (316) (324) (212) (374)
-------- -------- -------- --------
Loss from continuing operations ...................... (560) (574) (402) (679)
Loss from discontinued operations .................... (385) (385) (373) (373)
-------- -------- -------- --------
Net loss ............................................. $ (945) $ (959) $ (775) $ (1,052)
======== ======== ======== ========
Basic and diluted earnings (loss) per share:
Continuing operations .......................... $ (.19) $ (.19) $ (.14) $ (.23)
Discontinued operations ........................ (.12) (.12) (.12) (.12)
-------- -------- -------- --------
Net loss ....................................... $ (.31) $ (.31) $ (.26) $ (.35)
======== ======== ======== ========
</TABLE>
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Quarterly Report on Form 10-Q contains certain 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, which are
intended to be covered by the safe harbors created thereby. Investors are
cautioned that all forward-looking statements involve risks and uncertainty,
including without limitation, the ability of the Company to successfully
implement its turnaround strategy, changes in costs of raw materials, labor, and
employee benefits, as well as general market conditions, competition and
pricing. Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this Quarterly Report will prove to
be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as representation by the Company or any other person that
the objectives and plans of the Company will be achieved. In assessing
forward-looking statements included herein, readers are urged to carefully read
those statements. When used in the Quarterly Report on Form 10-Q, the words
"estimate," "anticipate," "expect," "believe," and similar expressions are
intended to be forward-looking statements.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the condensed consolidated
unaudited financial statements and notes thereto appearing elsewhere in this
document.
THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following table reflects the operating results of Evans Systems, Inc. ("ESI"
or the "Company") business segments for the three months ended December 31, 1997
and 1996. This is the first quarter of ESI's fiscal year which begins on October
1 and ends on September 30.
THREE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------- ------------------
(In thousands) (In thousands)
PETROLEUM MARKETING(1)
Revenue ............................. $ 20,060 $ 25,979
Gross profit ........................ 1,864 1,707
Operating expenses .................. 2,161 2,140
-------- --------
Operating loss ...................... (297) (433)
CONVENIENCE STORES
Revenue ............................. 8,332 9,586
Gross profit ........................ 1,752 1,907
Operating expenses .................. 1,977 1,997
-------- --------
Operating loss ...................... (225) (90)
EDCO ENVIRONMENTAL
Revenue ............................. 377 499
Gross profit ........................ 195 330
Operating expenses .................. 183 239
-------- --------
Operating income (loss) ............. 12 91
TOTAL
Revenue ............................. $ 28,769 $ 36,064
Gross profit ........................ 3,811 3,944
Operating expenses2 ................. 4,321 4,376
-------- --------
Operating loss ...................... (510) (432)
(1) Includes expenses of the parent company.
The Company's net loss for the quarters ended December 31, 1997 and 1996 was
$959,000 and $1,052,000, respectively. The results of the quarter ended December
31, 1996, included a non-recurring, non-operating loss of $219,000 (net of tax
effect) which resulted from the reclassification of securities available for
sale, a bond fund the Company had held since 1993. 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 losses for the quarters ended December 31, 1997
and 1996 would have been $959,000 and $763,000, respectively. The increased net
loss was primarily incurred within the petroleum marketing and convenience store
segments, as discussed below.
ESI's consolidated revenues for the three months ended December 31, 1997, were
$28,769,000, as compared to $36,064,000 during the comparable period ending
December 31, 1996. The $7,295,000 (20.2%) three-month decrease in this year's
revenues was primarily attributable revenue decreases in the petroleum marketing
and convenience store segments.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ESI's consolidated gross profit for the three months ended December 31, 1997 was
$3,811,000, or approximately 13.2% of consolidated revenues, as compared to
$3,944,000 or approximately 10.9% of consolidated revenues for the three months
ended December 31, 1996. The decreased gross profit is attributable to reduced
revenues in the current year period, discussed above. The higher gross profit as
a percentage of revenues ("Gross Margin") is primarily due to higher margins in
the petroleum marketing segment, discussed below.
The Company's operating expenses were $4,321,000 in the quarter ended December
31, 1997, as compared to $4,376,000 in the quarter ended December 31, 1996. The
Company's operating expenses were approximately 15.0% of revenues in the quarter
ended December 31, 1997 and 12.1% in the quarter ended December 31, 1996.
Management took action, including the elimination of nonessential staff, to
reduce its overall levels of operating expenses during October 1997, however the
effect of such reductions did not occur until late in the fiscal quarter ending
December 31, 1997.
PETROLEUM MARKETING SEGMENT
The petroleum marketing segment sales were $20,060,000 in the quarter ended
December 31, 1997, as compared to $25,979,000 in the quarter ended December 31,
1996, a $5,919,000 (22.8%) decrease. Fuel sales gallonage were 19,616,000
gallons in the quarter ended December 31, 1997, as compared to 22,885,000 in the
quarter ended December 31, 1996, a 3,269,000 (14.3%) decrease. Gross profits for
the quarters ended December 31, 1997 and 1996 were $1,864,000 and $1,707,000
respectively. Gross Margin increased to approximately 9.3% in the quarter ended
December 31, 1997, as compared to approximately 6.6% in the quarter ended
December 31, 1996. Operating expenses increased $21,000 in the quarter ended
December 31, 1997, as compared to the quarter ended December 31, 1996. Operating
expenses were 10.8% of revenues in the quarter ended December 31, 1997, and 8.2%
in quarter ended December 31, 1996. Certain expenses of ESI, the parent company,
are included in the petroleum marketing results. Operating losses were $297,000
in the quarter ended December 31, 1997, as compared to losses of $433,000 in the
quarter ended December 31, 1996. The decrease in operating losses is primarily
due to the improved Gross Margin in the current year, partially offset by the
reduction in sales revenue in the quarter ended December 31, 1997.
During the first fiscal quarter of 1998, the Company terminated its supply
agreement with the primary fuel supplier to the Company's Bay City terminal
facility. The Company is presently seeking a new supplier for its terminal
operation.
In October 1997, management began a program to reduce its operating expenses,
including the termination of certain nonessential staff, however, the effect of
such reductions did not occur until late in the quarter ended December 31, 1997.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CONVENIENCE STORE SEGMENT
The convenience store segment sales were $8,332,000 in the quarter ending
December 31, 1997, as compared to $9,586,000 in the quarter ended December 31,
1996; a $1,254,000 (13.1%) decrease. Fuel sales decreased to $4,695,000 in the
quarter ended December 31, 1997, as compared to $5,753,000 in the quarter ended
December 31, 1996. Fuel sales gallonage decreased to 4,042,000 gallons in the
quarter ended December 31, 1997, as compared to 5,496,000 in the quarter ended
December 31, 1996; a 1,454,000 (26.5%) decrease. Merchandise sales decreased to
$3,457,000 in in the quarter ended December 31, 1997, as compared to $3,698,000
in the quarter ended December 31, 1996 and other income increased to $180,000 in
the quarter ended December 31, 1997, as compared to $135,000 in the quarter
ended December 31, 1996. Management attributes the decrease in sales to
operating 5 fewer stores in the fiscal 1998 quarter. The Company operated 34
stores during the current fiscal quarter compared with 39 stores in the quarter
ended December 31, 1996.
Gross profit for the quarters ended December 31, 1997 and 1996 were $1,752,000
and $1,907,000 respectively. Gross Margins increased to 21.0% in the quarter
ended December 31, 1997, as compared to 19.9% in the quarter ended December
31,1996. Management attributes the increase in gross profit margins mainly to
divesting of lower margin stores during fiscal 1997.
Operating expenses were $1,977,000 in the quarter ended December 31, 1997
compared to $1,997,000 in the quarter ended December 31, 1996. Operating losses
were $225,000 during the quarter ended December 31, 1997, as compared to losses
of $90,000 during the quarter ended December 31, 1996.
During the first quarter of fiscal 1998, management implemented certain cost
reduction programs, including improvements in labor scheduling and control, and
reductions in administrative expenses, in order to reduce the convenience
stores' overall operating expenses. Management is continually evaluating its
store operations, and intends to manage its store portfolio to maximize
profitability. Accordingly, the Company has subsequently sold an additional 5
under performing stores in February 1998.
EDCO ENVIRONMENTAL
EDCO Environmental sales were $377,000 in the quarter ended December 31, 1997 as
compared to $499,000 in the quarter ended December 31, 1996; a $122,000 (24.4%)
decrease. Gross profits for the quarters ended December 31, 1997, and 1996 were
$195,000 and $330,000 respectively. Gross profit margins decreased to 51.7% in
the quarter ended December 31, 1997, as compared to 66.2% in the quarter ended
December 31, 1996.
EDCO's operating expenses decreased $56,000 in the quarter ended December 31,
1997, as compared to the quarter ended December 31, 1996. The decrease was
mainly attributable to the transfer of EDCO's service department to the
petroleum marketing segment. Operating income was $12,000 in the quarter ended
December 31, 1997, as compared to $91,000 in in the quarter ended December 31,
1996. Operating income declined due to lower sales and gross margins, partially
offset by reduced operating expenses.
CAPITAL RESOURCES AND LIQUIDITY
Cash, cash equivalents and marketable securities were $169,000 as of December
31, 1997, as compared to $1,297,000 at September 30, 1997. Working capital
deficit was $3,870,000 as of December 31, 1997, an increase from $2,371,000 as
of September 30, 1997. The net decrease in working capital was largely
attributable to a decrease in inventories of $1,423,000 and cash used to finance
operations of $1,128,000 offset by a decrease in payables of $1,129,000.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Cash provided (used) by operations was $(593,000) for the quarter ending
December 31, 1997, as compared to $2,016,000 for the quarter ending December 31,
1996. ESI's current ratio, the ratio of current assets to current liability, was
0.76 at December 31, 1997 and .86 at September 30, 1997.
Certain of the Company's notes payable to banks require maintenance of financial
covenants, including current, debt to equity, tangible net worth and debt
service coverage ratios all as defined in the respective loan agreements. At
September 30, 1997 and December 31, 1997, the Company was in violation of
certain of these covenants. In addition, the Company was out of compliance with
the borrowing base limits with one bank. The bank has waived these covenant
defaults at September 30, 1997 but not at December 31, 1997. The bank has agreed
to a standstill of the breach of the borrowing base limits. In exchange for
these waivers at September 30, 1997 and the standstill agreement, the Company
has pledged the stock of its subsidiaries, pledged the proceeds of the sale of
non-income producing assets, provided the bank a second lien on its office
facility and agreed to a maturity date on April 30, 1998. As of February 13,
1998, ESI had $ 2,160,000 available in unused lines of credit, however, due to
borrowing base limits these unused lines of credit were not currently available
for use.
The Company is presently evaluating alternatives including the refinancing of
its senior debt and current lines of credit; to assist in this endeavor, the
Company retained an investment banking firm in December 1997. Management
believes that such additional financing can be obtained prior to the April 30,
1998 expiration of its current credit facility.
The Company has also identified certain nonessential assets which it intends to
sell. In February 1998, the Company sold its investment in 5 under performing
convenience stores to an unrelated party.
12
<PAGE>
PART II. OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS INDEX PAGE
27. Financial Data Schedule 14
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: September 3, 1999 By: /s/ J.L. EVANS, SR.
J.L. Evans, Sr.
Chairman of the Board and
Chief Executive Officer
And authorized to sign on
behalf of the registrant
By: /s/ RICHARD A. GOEGGEL
Richard A. Goeggel
Vice president and
Chief Financial Officer
And authorized to sign on
behalf of the registrant.
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM BALANCE SHEET AND STATEMENT OF INCOME 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-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 169
<SECURITIES> 0
<RECEIVABLES> 4,915
<ALLOWANCES> 302
<INVENTORY> 6,539
<CURRENT-ASSETS> 12,441
<PP&E> 35,373
<DEPRECIATION> 13,877
<TOTAL-ASSETS> 36,067
<CURRENT-LIABILITIES> 16,311
<BONDS> 0
0
0
<COMMON> 32
<OTHER-SE> 14,493
<TOTAL-LIABILITY-AND-EQUITY> 36,067
<SALES> 28,769
<TOTAL-REVENUES> 28,769
<CGS> 24,958
<TOTAL-COSTS> 4,321
<OTHER-EXPENSES> 50
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 338
<INCOME-PRETAX> (898)
<INCOME-TAX> (324)
<INCOME-CONTINUING> (574)
<DISCONTINUED> (385)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (959)
<EPS-BASIC> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
