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, 1998
[ ] 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, 1999:
3,932,940.
<PAGE>
EVANS SYSTEMS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Financial Statements (Unaudited) Page Number
Condensed Consolidated Balance Sheet as of
December 31, 1998 and September 30, 1998 3
Condensed Consolidated Statement of Income for the
Three Months Ended December 31, 1998 and 1997 4
Condensed Consolidated Statement of Cash Flows for the
Three Months Ended December 31, 1998 and 1997 5
Notes to the Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Exhibits and Reports on Form 8-K
A. Exhibits Index 19
B. Reports on Form 8-K 19
Signatures 19
2
<PAGE>
PART I. FINANCIAL INFORMATION
EVANS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
------------- -------------
(As restated)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ......................... $ 1,174 $ 831
Trade receivables, net of allowance for doubtful
accounts of $193,000 and $264,000, respectively 2,887 2,751
Inventory ......................................... 3,460 3,714
Income taxes receivable ........................... 128 128
Prepaid expenses and other current assets ......... 801 775
Deferred income taxes ............................. 78
Current assets of ChemWay ......................... -- 1,637
------------- -------------
Total current assets .......................... 8,450 9,914
Property and equipment, net ............................ 16,565 17,037
Investment in marketable securities .................... 9,000
Other assets ........................................... 742 837
Deferred income taxes .................................. 1,125
Noncurrent assets of ChemWay ........................... -- 3,535
------------- -------------
Total assets ............................. $ 34,757 $ 32,448
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ............. $ 6,994 $ 6,019
Current portion of long-term debt ................. 1,698 1,698
Current liabilities of ChemWay .................... -- 2,034
------------- -------------
Total current liabilities ..................... 8,692 9,751
Long-term debt ......................................... 10,920 11,151
------------- -------------
Total liabilities ............................. 19,612 20,902
------------- -------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 15,000,000 shares
authorized, 3,627,486 and 3,268,298 shares issued,
respectively ...................................... 36 33
Additional paid-in capital ........................ 14,344 13,811
Stock subscriptions receivable .................... (132) --
Retained earnings (deficit) ....................... 1,331 (1,864)
Treasury stock, 72,589 shares, at cost ............ (434) (434)
------------- -------------
Total stockholders' equity .................... 15,145 11,546
------------- -------------
Total liabilities and stockholders' equity $ 34,757 $ 32,448
============= =============
</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,
-------------------------------
1998 1997
-------- --------
(As restated)
Revenue:
Refined product sales .................... $ 16,676 $ 23,382
Other sales and services ................. 4,322 5,387
-------- --------
Total revenue ............................ 20,998 28,769
Cost of sales ............................ 17,605 24,958
-------- --------
Gross profit .................................. 3,393 3,811
-------- --------
Operating expenses:
Employment expenses ...................... 2,055 2,237
Other operating expenses ................. 1,002 946
General & administrative expenses ........ 604 665
Depreciation and amortization ............ 427 473
-------- --------
Total operating expenses ................. 4,088 4,321
-------- --------
Operating loss ................................ (695) (510)
Other income (expense)
Interest expense, net .................... (272) (338)
Gain on sale of assets ................... 221 (7)
Other, net ............................... (32) (43)
-------- --------
Loss before benefit from income taxes ......... (778) (898)
Benefit from income taxes ..................... -- 324
-------- --------
Loss from continuing operations ............... (778) (574)
Discontinued operations:
Loss from discontinued operations of
ChemWay, net of tax benefit .............. -- (385)
Gain on disposal of ChemWay, net of
taxes of $1,203 .......................... 3,973 --
-------- --------
Net income (loss) ............................. $ 3,195 $ (959)
======== ========
Basic and diluted earnings (loss) per share:
Continuing operations .................... $ (.22) $ (.19)
Discontinued operations .................. 1.13 (.12)
-------- --------
Net income (loss) ........................ $ 0.91 $ (.31)
======== ========
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>
THREEE MONTHS ENDED DECEMBER 31,
--------------------------------
1998 1997
---------- ----------
(As restated)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................. $ 3,195 $ (959)
Adjustments:
Depreciation and amortization ................. 427 527
Deferred income taxes ......................... 1,203 (538)
Loss (gain) on sale of fixed assets ........... (221) 7
Gain on disposal of discontinued operations ... (5,176) --
Stock option compensation expense ............. 248 --
Changes in working capital:
Current assets ........................... 187 1,392
Current liabilities ...................... 365 (1,022)
---------- ----------
Total adjustments ................................. (2,967) 366
---------- ----------
Net cash provided (used) by operating activities ....... 228 (593)
---------- ----------
Cash flows from investing activities:
Capital expenditures .............................. (166) (565)
Proceeds from sale of property and equipment ...... 432 86
Other, net ........................................ (76) 7
---------- ----------
Net cash provided (used) by investing activities ....... 190 (472)
---------- ----------
Cash flows from financing activities:
Repayment on notes payable, net ................... (231) (63)
Net proceeds from stock issuance .................. 156 --
---------- ----------
Net cash used by financing activities .................. (75) (63)
---------- ----------
Net increase (decrease) in cash ........................ 343 (1,128)
Cash and cash equivalents, beginning of period ......... 831 1,297
---------- ----------
Cash and cash equivalents, end of period ............... $ 1,174 $ 169
---------- ----------
</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, 1998. 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, 1998 are not necessarily indicative of the results which may
be expected for the year ending September 30, 1999.
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
At December 31, 1998, the Company was in default of certain financial covenants
contained within its loan agreements with two of its bank lenders. On January
13, 1999, the company received a commitment letter from one of its present bank
lenders (the "Refinancing"), pursuant to which the bank would (i) waive all
previous and continuing covenant defaults; (ii) extend the maturity of its loan
balance to January 31, 2001; and (iii) assume the amounts outstanding under the
other bank lender's loans under their current terms and conditions. Under the
proposed terms of the Refinancing, such bank lender would receive a first lien
position on certain assets of the Company, more specifically, inventories,
accounts receivable, convenience store real estate and equipment. The
Refinancing would contain certain financial covenant obligations, including
minimum net worth, minimum earnings before interest, taxes and depreciation
("EBITDA"), working capital ratio and fixed charge coverage ratio. The Company
is presently in compliance with the proposed financial covenants and management
believes the Company will be able to comply with the proposed financial
covenants during the foreseeable future, however there can be no assurance that
the Company will be able to do so. The effect of the Refinancing was to cure all
outstanding defaults in the Company's credit agreements, and to extend the final
maturity to January 31, 2001, however the Refinancing does not provide any
additional borrowing capacity or liquidity for the Company, and the Company has
no available borrowing capacity at this time. Management intends to replace the
existing bank debt with new financing, discussed below, which would have the
effect of increasing the availability of working capital, however there can be
no assurance that it will be able to do so.
Furthermore, covenants in the Company's loan agreement (i) limit the Company's
ability to make capital expenditures to the greater of $1,000,000 or 25% of
EBITDA, (ii) prohibit the payment of cash dividends and (iii) limit the
Company's ability to incur additional indebtedness. Under the terms of the
Refinancing, interest would be payable monthly at an annual rate of two percent
above the bank's established prime lending rate, in addition to which the
Company would be obligated to make a principal repayment of approximately
$41,000 per month. Although the final maturity date of the loan is January 31,
2001, in the event that the loan is not repaid by June 30, 1999, the Company
will be subject to a fee of $250,000; furthermore, the Company could be
obligated to pay additional fees of $250,000 on August 31, 1999 and December 31,
1999 in the event that the loan obligations are not repaid by those respective
dates. The Company will have no additional availability to borrow funds from the
bank lender; accordingly the Company expects to meet its debt service
requirements through cash flows from (i) operating activities, (ii) additional
sales of nonessential assets and (iii) additional sales of common stock. The
Refinancing was completed on March 31, 1999. The loan agreement under the
Refinancing was
6
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
subsequently amended to change the date of the first $250,000 fee from June 30,
1999 to the earlier of August 31, 1999 or the closing of the B&I Loan, discussed
below.
On July 21, 1999, the Company was notified that it had been approved for term
loans totaling $10 million by the United States Department of Agriculture Rural
Development Business and Industry Guaranteed Loan Program ("B&I Loan".) Proceeds
of the B&I Loan would be used to repay obligations owed under the Refinancing,
and to provide working capital. The closing of the B&I Loan is contingent on,
among other things, the completion of environmental cleanup at several sites and
obtaining a new revolving credit facility in order to provide a minimum of $2.5
million in availability. The environmental cleanup is presently being performed
and the Company believes it will be completed on or before August 31, 1999. The
Company is presently negotiating with a lender to provide revolving debt
sufficient to meet the requirements of the B&I Loan, however there can be no
assurance that it will be successful in obtaining such a loan.
NOTE D - BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE
Basic and diluted earnings (loss) per share for the quarters ending December 31,
1998 and December 31, 1997 were computed using 3,497,853 and 3,090,984 weighted
average common shares outstanding, respectively.
NOTE E - SALE OF DISCONTINUED OPERATION
On December 30, 1998, the Company completed the sale of its subsidiary, ChemWay
Systems, Inc. ("ChemWay") to an unrelated third party, Affiliated Resources
Corporation ("Affiliated"). The Company received 1.5 million shares of common
stock of Affiliated in exchange for all of the common stock of ChemWay. The
number of shares of Affiliated common stock could be subject to a "make whole"
provision whereby the Company could receive up to an additional 1,000,000 shares
of Affiliated common stock should the market value of such stock be below $6
million at the one year anniversary of the closing of the transaction. The
Affiliated common stock is unregistered, however the Company has demand
registration rights with respect to such stock.
Affiliated common stock is currently quoted on the Nasdaq Over-the-Counter
Bulletin Board. In accordance with generally accepted accounting principles, the
Affiliated common stock received in exchange for the common stock of ChemWay was
valued at its "fair value" indicated by the bid price of $6.00 per share at the
transaction date, resulting in a recorded gain of $3,973,000, net of a provision
for income taxes of $1,203,000.
The Company's investment in Affiliated common stock is unregistered and highly
illiquid; in addition, the average trading volume of Affiliated is small in
comparison to the number of shares held by the Company. The trading price of
Affiliated common stock has been very volatile, ranging from a reported low
closing price in the quarter ended June 30, 1998 of $0.88 to a closing price of
$6.00 at December 31, 1998. While the Company does not intend to sell its
Affiliated common stock in the foreseeable future, there can be no assurance
that the Company would be able to realize the recorded value of the Affiliated
common stock.
7
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
At December 31, 1998, Affiliated reported, in its Annual Report on Form 10-K, an
accumulated deficit of $7,630,070 based on historic losses, and a negative
working capital balance of $912,605. Affiliated reported no revenues from
operations during the last six months of 1998, and reported a loss from
operations of $526,843.
NOTE F - STOCKHOLDERS' EQUITY
On June 1, 1998 the Company agreed to issue 350,000 common shares for total
consideration of $262,500 in a private placement to accredited investors. Such
shares were issued on October 27, 1998, and the Company received proceeds of
$131,250. The remaining proceeds are reflected as stock subscriptions receivable
in the Condensed Consolidated Balance Sheet at December 31, 1998. Warrants to
purchase 9,188 shares of common stock were exercised in October 1998.
The Company recorded compensation expense of $205,000 and $43,000 for continuing
and discontinued operations, respectively, for stock options which vested in
November 1998 upon the Company's common stock reaching a market value of $6.50
per share for five consecutive days. Compensation expense represents the
difference in the market price of the Company's common stock at September 30,
1998 and $6.50 for the options that vested.
NOTE G - RESTATEMENT
The Company has restated previously reported annual and interim financial
results of fiscal years 1998 and 1997, and the quarter ended December 31, 1998
to give effect to the write-down of certain assets (including credit card
receivables, property and equipment costs and certain deferred income tax
assets) and the accrual of certain liabilities. All disclosures related to 1998
and 1997 included herein have been amended, as appropriate, to reflect the
restatement. The effect of the restatement discussed above on the statement of
operations is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31,
------------------------------------------------------------------
1998 1997
--------------------------- --------------------------
PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenue ................................ $ 20,998 $ 20,998 $ 28,769 $ 28,769
Cost of sales........................... 17,546 17,605 24,943 24,958
--------- --------- --------- ---------
Gross profit............................ 3,452 3,393 3,826 3,811
Operating expense....................... 3,786 4,088 4,321 4,321
--------- --------- --------- ---------
Operating loss.......................... (334) (695) (495) (510)
Interest expense........................ (272) (272) (338) (338)
Other................................... 326 189 (43) (50)
--------- --------- ---------- ----------
Loss from continuing operations.........
before taxes............................ (280) (778) (876) (898)
Income tax benefit...................... (86) - (316) (324)
---------- ---------- ---------- ----------
Loss from continuing operations......... (194) (778) (560) (574)
Loss from discontinued operations....... (385) (385)
Gain on disposition of discontinued
operations............................ 915 3,973 - -
--------- --------- --------- ---------
Net income (loss)....................... $ 721 $ 3,195 $ (945) $ (959)
========= ========= ========== ==========
</TABLE>
8
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31,
------------------------------------------------------------------
1998 1997
--------------------------- --------------------------
PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Basic and diluted earnings (loss)
per share:
Continuing operations............... $ (.05) $ (.22) $ (.18) $ (.19)
Discontinued operations............. - (.13) (.12)
--------- ---------
Gain on disposal of ChemWay......... .26 1.13
--------- ---------
Net income (loss)................... $ .21 $ 0.91 $ (.31) $ (.31)
========= ========= ========= =========
</TABLE>
NOTE H - SUBSEQUENT EVENTS
In July 1999, two alleged purchasers of ESI common stock, who allegedly bought
their stock between December 29, 1997 and June 8, 1999, brought two purported
class action lawsuits against ESI and several of its current and former officers
and directors in the United States District Court for the Southern District of
Texas. Each of these lawsuits asserted that the defendants violated federal
securities laws by issuing allegedly false and misleading statements in 1997,
1998 and 1999 about ESI's financial condition and results of operations. The
lawsuits demanded, among other relief, unspecified compensatory damages,
attorneys' fees and the costs of conducting the litigation.
It is not possible at this time to predict the impact that the above lawsuits
may have upon the Company, nor is it possible to predict whether any other suits
or claims may arise out of these matters in the future. It is reasonably likely,
however, that the outcome of any present or future litigation may have a
material adverse impact on the Company's financial condition or results of
operations in one or more future periods. ESI intends to defend itself
vigorously in all the above matters.
9
<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, 1998 AND 1997
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
10
<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, 1998
and 1997. 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, 1998 DECEMBER 31, 1997
----------------- -----------------
(In thousands) (In thousands)
PETROLEUM MARKETING(1)
Revenue ............................ $ 13,490 $ 20,060
Gross profit ....................... 1,777 1,864
Operating expenses ................. 2,258 2,161
-------- --------
Operating loss ..................... (481) (297)
CONVENIENCE STORES
Revenue ............................ 7,203 8,332
Gross profit ....................... 1,519 1,752
Operating expenses ................. 1,607 1,977
-------- --------
Operating loss ..................... (88) (225)
EDCO ENVIRONMENTAL
Revenue ............................ 305 377
Gross profit ....................... 97 195
Operating expenses ................. 223 183
-------- --------
Operating income (loss) ............ (126) 12
TOTAL
Revenue ............................ $ 20,998 $ 28,769
Gross profit ....................... 3,393 3,811
Operating expenses(2) .............. 4,088 4,321
-------- --------
Operating loss ..................... (695) (510)
(1) Includes expenses of the parent company.
(2) Includes non-cash compensation expense of $205,000 related to the vesting
of employee stock options, $196,000 of which was in the Petroleum Marketing
segment.
After sustaining losses during 1997, in early fiscal 1998 the management of ESI
developed and began to implement its turnaround strategy. Among other things,
the strategy included a decision to refocus the Company on its "core" business
segments: petroleum marketing and convenience store operations. Within these
"core" segments, the Company sold or closed lower-volume outlets. The Company
also took actions, including the elimination of nonessential corporate staff, to
reduce overhead expenses.
In February 1998, ESI discontinued operations in the packaging and marketing of
automotive after-market chemical products, previously operated through its
wholly-owned subsidiary, ChemWay Systems, Inc. ("ChemWay"). On December 30,
1998, the Company sold ChemWay to Affiliated Resources Corporation
("Affiliated") in a stock-for- stock transaction. See "ChemWay" below. In
exchange for the common stock of ChemWay, the Company received 1,500,000 shares
of Affiliated common stock; the number of shares of Affiliated common stock
could be subject to a
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
"make whole" provision whereby the Company could receive up to an additional
1,000,000 shares of Affiliated common stock should the market value of such
stock be below $6 million at the one year anniversary of the closing of the
transaction The Company recorded a gain of $3,973,000 (net of a provision for
income taxes of $1,203,000) on the disposition of ChemWay.
The Company's investment in Affiliated common stock is unregistered and highly
illiquid; in addition, the average trading volume of Affiliated is small in
comparison to the number of shares held by the Company. The trading price of
Affiliated common stock has been very volatile, ranging from a reported low
closing price in the quarter ended June 30, 1998 of $0.88 to a closing price of
$6.00 at December 31, 1998 and a closing price of $0.63 at June 30, 1999. While
the Company does not intend to sell its Affiliated common stock in the
foreseeable future, there can be no assurance that the Company would be able to
realize the recorded value of the Affiliated common stock.
At December 31, 1998, Affiliated reported, in its Annual Report on Form 10-K, an
accumulated deficit of $7,630,070 based on historic losses, and a negative
working capital balance of $912,605. Affiliated reported no revenues from
operations during the last six months of 1998, and reported a loss from
operations of $526,843.
Consolidated sales revenues from continuing operations declined to $20,998,000
in the quarter ended December 31, 1998, from $28,769,000 in the comparable prior
year quarter, a decline of $7,771,000 or approximately 27%. During 1998, the
Company implemented its turnaround strategy to rationalize its base of stores
and customers, which resulted in sales declines in each of the Company's
business segments. Additionally, sales of fuels through the Company's terminal
facility during the quarter ended December 31, 1998 declined $2,388,000, as
compared with the quarter ended December 31, 1997, as a result of the
termination of the Company's supply agreement for such facility. See segment
discussions below.
Gross profit in the quarter ended December 31, 1998 was $3,393,000 as compared
with $3,811,000 in the quarter ended December 31, 1997, a decline of $418,000 or
approximately 11.0%. Gross profit expressed as a percentage of sales ("Gross
Margin"), however, increased to approximately 16.2% of sales during the quarter
ended December 31, 1998 as compared with a approximately 13.2% of sales in the
comparable prior year quarter. The improvement in Gross Margin is principally
attributable to the closing of unprofitable stores and improved management of
the Company's daily pricing of fuels.
Operating expenses in the quarter ended December 31, 1998 were $4,088,000, as
compared with $4,321,000 in the quarter ended December 31, 1997, a decrease of
$233,000 or approximately 5.4%. Operating expenses in the quarter ended December
31, 1998 include a noncash charge of $205,000 in compensation expense, as a
result of the application of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") with respect to the
vesting of certain incentive stock options which had previously been awarded to
employees. The decline in operating expenses in the quarter ended December 31,
1998, as compared with the previous year quarter, is primarily due to the
closing of underperforming convenience stores, and to an overall staff
reduction.
Consolidated operating losses from continuing operations increased $185,000;
operating losses on continuing operations were $695,000 in the quarter ended
December 31, 1998 as compared with $510,000 in the quarter ended December 31,
1997. As noted above, current year results include a non-cash charge of $205,000
resulting from the vesting of certain incentive stock options which had
previously been awarded to employees. Adjusted for the effect of the noncash
compensation expense charge, operating losses from continuing operations
declined $20,000. The Convenience Store segment reported reduced operating
losses during the quarter ended December 31, 1998, which was offset by an
increased operating loss in the Petroleum Marketing and Edco Environmental
segments, discussed below.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company reported a net profit of $3,195,000 during the quarter ended
December 31, 1998, as compared with a net loss of $959,000 during the quarter
ended December 31, 1997. The improvement in operating results during the current
fiscal year period is due to a gain of $3,973,000 (net of tax effect) on the
disposition of ChemWay, and to reduced operating losses, after taking into
consideration the $205,000 non-cash compensation expense discussed above.
PETROLEUM MARKETING SEGMENT
Petroleum Marketing segment's sales revenues declined $6,570,000 to $13,490,000
in the quarter ended December 31, 1998, as compared with $20,060,000 in the
quarter ended December 31, 1997, a decline of approximately 33%. Fuel sales in
gallons was 13,263,000 in the quarter ended December 31, 1998, as compared with
19,616,000 gallons in the quarter ended December 31, 1997, a decrease of
approximately 32%. The Petroleum Marketing segment distributes to its motor fuel
customers both directly from refinery racks, and through the Company's bulk
plant facilities. The Company, through its wholly-owned subsidiary Way Energy
Systems, Inc. ("Way Energy") also has a 110,000 barrel terminal facility,
located in Bay City, Texas, from which it has historically distributed motor
fuels to the southeast Texas market. During the quarter ended December 31, 1997,
the Company's supply agreement with the primary fuel supplier to the Bay City
terminal facility was terminated. The loss of the fuel supply agreement had an
adverse effect upon the Petroleum Marketing segment's performance during the
remainder of 1998: the Company was unable to sell fuels through its exchange
agreements with other major oil companies. Way Energy had no sales during the
quarter ended December 31, 1998, as compared with sales during the quarter ended
December 31, 1997 of $2,388,000. The Company is presently negotiating with
another supplier, however there can be no assurance whether or when the terminal
facility will be supplied with fuel.
Under regulations issued by the U.S. Environmental Protection Agency ("EPA"),
all underground storage tanks in the State of Texas were required to meet
certain standards of protection as of December 22, 1998. During 1998, the
Company evaluated the revenues generated by its Special Purpose Lease accounts,
and determined that it could not justify further investment at approximately 46
of such locations. Accordingly, management decided to either sell or close those
identified lower-volume Special Purpose Lease facilities. As of December 31,
1998, the Company sold its investment at 30 of the lower-volume Special Purpose
Lease accounts. Additionally, the Company has discontinued the delivery of motor
fuels, and has removed the underground storage tanks at 16 Special Purpose Lease
sites. Revenues at the 16 Special Purpose Lease sites where the underground
storage tanks were removed were immaterial to the Petroleum Marketing Segment,
and management believes the closing of these 16 locations will have an
immaterial effect on the future operating results of the segment. Nineteen of
the Special Purpose Lease locations sold or closed by the Company were
registered as Leaking Petroleum Storage Tank ("LPST") sites with the TNRCC.
Additionally, the Company purchased insurance, effective December 22, 1998,
indemnifying the Company for first party or third party responsibility up to
$1,000,000 per location, arising from future underground storage tank
environmental issues. As such, the Company's potential liability for cleanup is
limited to its deductible amount under either the TNRCC fund, or insurance
coverage carried by the Company. The Company's maximum potential liability for
such 19 locations is $97,500, the sum of the deductible amounts for each
location, however the actual liability could be less, and cannot be determined
at this time. The Special Purpose Lease locations where the Company sold its
investment in equipment are now served by the Company as Open Dealers.
The effect of the conversion of Special Purpose Lease customers into Open
Dealers is to reduce the Company's sales revenues, gross profits, and working
capital requirements. Since the Company's margins on Open Dealer accounts are
contractually fixed, however, the Petroleum Marketing Segment's gross margins
may be less volatile in the future, as a larger percentage of the segment's
business will be at fixed margins.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Gross profit in the Petroleum Marketing Segment was $1,777,000 in the quarter
ended December 31, 1998, as compared with $1,864,000 in the quarter ended
December 31, 1997, a decline of $87,000 or approximately 4.7%. Gross Margin,
however, improved in the quarter ended December 31, 1998, to approximately 13.2%
of sales as compared with approximately 9.3% in the quarter ended December 31,
1997. Gross profit per gallon sold increased in the quarter ended December 31,
1998, to approximately $0.134, as compared to $0.096 in the quarter ended
December 31, 1997, primarily due to improved management of the Company's daily
pricing of fuels.
Operating expenses in the Petroleum Marketing Segment were $2,258,000 in the
quarter ended December 31, 1998, as compared with $2,161,000 in the quarter
ended December 31, 1997, an increase of $97,000 or approximately 4.5%. Included
in the results for the quarter ended December 31, 1998, however, is a noncash
charge of $196,000 for compensation expenses resulting from the vesting of
incentive stock options to employees. In October 1997, management began a
program to reduce the Company's operating expenses, including the termination of
nonessential staff. The effect of those staff reductions began to take effect
during the quarter ended December 31, 1997. The Company further reduced its
staff in February 1998. The effect of the cost reduction programs has slightly
exceeded management's expectations, as additional staff reductions have occurred
through attrition. Management expects to further reduce the Company's operating
expenses during 1999. Operating expenses, adjusted for the non-cash charge
discussed above, decreased $99,000 or approximately 4.6% in the quarter ended
December 31, 1998. Note that the operating expenses of the parent company are
included within the Petroleum Marketing segment results.
Operating loss of the Petroleum Marketing Segment increased to $481,000 in the
quarter ended December 31, 1998 as compared with $297,000 in the quarter ended
December 31, 1997. The increased loss is due to lower sales and resulting gross
profits and the $196,000 compensation expense, discussed above, partially offset
by a higher Gross Margin during the quarter ended December 31, 1998.
CONVENIENCE STORE SEGMENT
Sales in the Convenience Store segment were $7,203,000 in the quarter ended
December 31, 1998, as compared with $8,332,000 in the quarter ended December 31,
1997, a decline of approximately 14%. During the quarter ended December 31, 1998
the company operated 26 stores compared to 34 stores during the comparable
quarter ended December 31, 1997. Fuel sales in the quarter ended December 31,
1998 were $3,975,000 as compared with $4,695,000 in the quarter ended December
31, 1997; fuel sales in gallons, however, increased in the quarter ended
December 31, 1998, to 4,075,000 gallons as compared with 4,042,000 gallons in
the comparable prior year quarter. The increase in fuel gallon sales is
attributable to the Company's more aggressive retail pricing strategy during the
quarter ended December 31, 1998. Merchandise sales decreased $378,000 to
$3,079,000 as compared with $3,457,000 in the quarter ended December 31, 1997.
The decline in merchandise sales is primarily due to fewer operating stores
during the current fiscal year.
Gross profit declined to $1,519,000 in the quarter ended December 31, 1998 as
compared with $1,752,000 in the quarter ended December 31, 1997 due to lower
sales revenues during the current fiscal year period. Gross Margin in the
Convenience Store segment was comparable during 1998 and 1997 at approximately
21.1% and 21.0% of sales, respectively.
Operating expenses during the quarter ended December 31, 1998 in the Convenience
Store segment were $1,607,000 as compared with $1,977,000 in the quarter ended
December 31, 1997, a decrease of $370,000 or approximately 18.7%. The decline in
operating expenses is principally attributable to the closing of eight
underperforming stores during 1998, and to an overall reduction in staff during
1998.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Convenience Store segment incurred an operating loss of $88,000 in the
quarter ended December 31, 1998, as compared with a loss of $225,000 in the
quarter ended December 31, 1997. The reduced loss is due to reduced operating
expenses during the current year, partially offset by reduced sales and
resulting gross profits.
EDCO ENVIRONMENTAL
During the quarter ended December 31, 1998, EDCO Environmental focused its
attention on bringing the Company's underground storage tanks into compliance
with the new regulations promulgated by the U.S. Environmental Protection
Agency, which became effective on December 22, 1998. As a result, sales revenues
of Edco Environmental declined $72,000 to $305,000 in the quarter ended December
31, 1998, as compared with $377,000 in the quarter ended December 31, 1997, a
decline of approximately 19.1%. Gross profit was $97,000 in the quarter ended
December 31, 1998 as compared with $195,000 in the comparable prior year fiscal
quarter; the decline is also attributable to management's decision to utilize
the services of EDCO Environmental to bring the Company's facilities into
compliance with the new regulations.
Operating expenses at EDCO Environmental increased $40,000 in the quarter ended
December 31, 1998, to $223,000 as compared with $183,000 in the quarter ended
December 31, 1997, an increase of approximately 21.8%.
EDCO Environmental incurred an operating loss of $126,000 in the quarter ended
December 31, 1998, as compared with an operating profit of $12,000 in the
quarter ended December 31, 1997, primarily due to reduced sales revenues and
resultant gross profits as a result of the utilization of Edco Environmental
personnel to complete projects for the Company's other segments. The work
performed for the Company's other segments, primarily the removal of underground
storage tanks at closed locations, was substantially completed as of December
31, 1998. EDCO Environmental will continue to focus its attention on
environmental remediation projects which have been pre-approved for
reimbursement by the Texas Natural Resource Conservation Commissions' ("TNRCC")
fund.
CHEMWAY
Production activities at the ChemWay facility ceased in February 1998, and the
ChemWay segment was classified as a discontinued operation as of March 31, 1998.
During the quarter ended December 31, 1997, the Company incurred a loss on the
operation of ChemWay of $385,000, net of tax benefit. Costs associated with
ChemWay during the quarter ended December 31, 1998 were recognized as a
reduction of the gain associated with the disposition of ChemWay on December 30,
1998. The Company recognized a gain, net of taxes, of $3,973,000 on the sale of
ChemWay.
CAPITAL RESOURCES AND LIQUIDITY
At December 31, 1998, the Company was in default of certain financial covenants
contained within its loan agreements with two of its bank lenders. On January
13, 1999, the company received a commitment letter from one of its present bank
lenders (the "Refinancing"), pursuant to which the bank would (i) waive all
previous and continuing covenant defaults; (ii) extend the maturity of its loan
balance to January 31, 2001; and (iii) assume the amounts outstanding under the
other bank lender's loans under their current terms and conditions. Under the
proposed terms of the Refinancing, such bank lender would receive a first lien
position on certain assets of the Company, more specifically, inventories,
accounts receivable, convenience store real estate and equipment. The
Refinancing would contain certain financial covenant obligations, including
minimum net worth, minimum earnings before interest, taxes and depreciation
("EBITDA"), working capital ratio and fixed charge coverage ratio. The
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Company is presently in compliance with the proposed financial covenants and
management believes the Company will be able to comply with the proposed
financial covenants during the foreseeable future, however there can be no
assurance that the Company will be able to do so. Furthermore, covenants in the
Company's loan agreement (i) limit the Company's ability to make capital
expenditures to the greater of $1,000,000 or 25% of EBITDA, (ii) prohibit the
payment of cash dividends and (iii) limit the Company's ability to incur
additional indebtedness. Under the terms of the Refinancing, interest would be
payable monthly at an annual rate of two percent above the bank's established
prime lending rate, in addition to which the Company would be obligated to make
a principal repayment of approximately $41,000 per month. Although the final
maturity date of the loan is January 31, 2001, in the event that the loan is not
repaid by June 30, 1999, the Company will be subject to a fee of $250,000;
furthermore, the Company could be obligated to pay additional fees of $250,000
on August 31, 1999 and December 31, 1999 in the event that the loan obligations
are not repaid by those respective dates. The Company will have no additional
availability to borrow funds from the bank lender; accordingly the Company
expects to meet its debt service requirements through cash flows from (i)
operating activities, (ii) additional sales of nonessential assets and (iii)
additional sales of common stock. The Refinancing was completed on March 31,
1999. The loan agreement under the Refinancing was subsequently amended to
change the date of the first $250,000 fee from June 30, 1999 to the earlier of
August 31, 1999 or the closing of the B&I Loan, discussed below.
On July 21, 1999, the Company was notified that it had been approved for term
loans totaling $10 million by the United States Department of Agriculture Rural
Development Business and Industry Guaranteed Loan Program ("B&I Loan".) Proceeds
of the B&I Loan would be used to repay obligations owed under the Refinancing,
and to provide working capital. The closing of the B&I Loan is contingent on,
among other things, the completion of environmental cleanup at several sites and
obtaining a new revolving credit facility in order to provide a minimum of $2.5
million in availability. The environmental cleanup is presently being performed
and the Company believes it will be completed on or before August 31, 1999. The
Company is presently negotiating with a lender to provide revolving debt
sufficient to meet the requirements of the B&I Loan, however there can be no
assurance that it will be successful in obtaining such a loan.
The Company presently plans to spend approximately $1,000,000 in capital
expenditures during its fiscal year ended September 30, 1999, primarily to
upgrade existing facilities. The Company plans to finance such expenditures
through operating cash flows, proceeds from the sales of nonessential assets and
lease financing.
Cash and cash equivalents were $1,174,000 and $831,000 at December 31, 1998 and
September 30, 1998, respectively. The Company had a working capital deficit of
$242,000 at December 31, 1998, as compared with net working capital of $163,000
at September 30, 1998.
Cash provided by operating activities was $228,000 in the quarter ended December
31, 1998, as compared with cash used by operating activities of $593,000 in the
comparable previous fiscal year period. The improvement in cash from operating
activities is primarily due to the improved working capital utilization during
the current fiscal year; the Company's investment in net working capital
declined $405,000 during the quarter ended December 31, 1998. Pre-tax loss on
continuing operations, net of the noncash charge for stock option compensation
expense, declined from $898,000 in the quarter ended December 31, 1997 to
$731,000 in the quarter ended December 31, 1998.
The Company identified certain nonessential assets which it sold during the
quarter ended December 31, 1998; assets disposed of during the current fiscal
year period included the Company's investment in certain of its Special Purpose
Lease locations, and assets utilized in the Company's propane business. The
Company received cash proceeds of $339,000 and notes of $119,000 from the sale
of such assets during the quarter ended December 31, 1998, and recorded a gain
of $221,000 on the sales of such assets. Cash provided by investing activities
was $190,000 in the
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
quarter ended December 31, 1998, as compared with cash used by investing
activities of $472,000 during the quarter ended December 31, 1997; the
improvement is attributable to lower capital expenditures and sales of assets
during the quarter ended December 31, 1998.
In December 1998, the Company completed the sale of its ChemWay subsidiary, in a
stock-for-stock exchange with Affiliated. Although the Company did not receive
any cash consideration in the transaction, Affiliated agreed to repay
outstanding trade credit liabilities of ChemWay of approximately $2,100,000.
On October 27, 1998, the Company issued 350,000 shares in a private placement to
private, accredited investors, pursuant to a purchase agreement dated June 1,
1998, for total consideration of $262,500.
In July 1999, two alleged purchasers of ESI common stock, who allegedly bought
their stock between December 29, 1997 and June 8, 1999, brought two purported
class action lawsuits against ESI and several of its current and former officers
and directors in the United States District Court for the Southern District of
Texas. Each of these lawsuits asserted that the defendants violated federal
securities laws by issuing allegedly false and misleading statements in 1997,
1998 and 1999 about ESI's financial condition and results of operations. The
lawsuits demanded, among other relief, unspecified compensatory damages,
attorneys' fees and the costs of conducting the litigation.
It is not possible at this time to predict the impact that the above lawsuits
may have upon the Company, nor is it possible to predict whether any other suits
or claims may arise out of these matters in the future. It is reasonably likely,
however, that the outcome of any present or future litigation may have a
material adverse impact on the Company's financial condition or results of
operations in one or more future periods. ESI intends to defend itself
vigorously in all the above matters.
YEAR 2000
As many computer systems and other equipment with embedded chips or processors
(collectively, "Business Systems") use only two digits to represent the year,
they may be unable to process accurately certain data before, during or after
the year 2000. As a result, business and governmental entities are at risk for
possible miscalculations or systems failures causing disruptions in their
business operations. This is commonly known as the Year 2000 ("Y2K") issue. The
Y2K issue can arise at any point in the Company's supply, processing,
distribution and financial systems.
The Company is in the process of implementing a Y2K readiness program with the
objective of having all of the Company's significant Business Systems
functioning properly with respect to the Y2K before January 1, 2000.
The first component of the Y2K readiness program is to identify the internal
Business Systems of the Company that are susceptible to system failures or
processing errors as a result of the Y2K issue. This effort is substantially
complete; management believes it has identified the Business Systems that may
require remediation or replacement. Management is presently assessing the
priority of each Business System remediation or replacement project.
The second component of the Y2K readiness program involves the actual
remediation and replacement of Business Systems. The Company is primarily
utilizing internal resources to complete this project. The Company's objective
is to complete substantially all remediation and replacement of internal
Business Systems by September 1999.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
As part of the Y2K readiness program, significant service providers, vendors,
suppliers, customers and governmental entities ("Key Business Partners") that
are believed to be critical to business operations after January 1, 2000 are
being identified and steps are being undertaken in an attempt to reasonably
ascertain their stage of Y2K readiness.
The Company utilizes a limited number of Business Systems in the conduct of its
operations, however due to the significant number of Key Business Partners, the
Company presently believes that it may experience some disruption in its
business due to the Y2K problem. More specifically, the Company could be
materially adversely affected if utilities, private businesses and governmental
entities with which it does business or that provide essential services are not
Y2K ready. The possible consequences of the Company or Key Business Partners not
being fully Y2K compliant by January 1, 2000 include, among other things, delays
in the delivery of products, delays in the receipt of supplies, invoice and
collection errors, and inventory and supply obsolescence. Consequently, the
business and results of operations of the Company could be materially adversely
affected by a temporary inability of the Company to conduct its business in the
ordinary course for a period of time after January 1, 2000. However, the Company
believes that its Y2K readiness program, including the contingency planning
discussed below, should significantly reduce the adverse effect any such
disruptions may have.
Concurrently with the Y2K readiness measures described above, the Company is
developing contingency plans intended to mitigate the possible disruption in
business operations that may result from the Y2K issue. Contingency plans may
include stockpiling supplies, increasing inventory levels, and securing
alternate sources of supply. Once developed, contingency plans and related cost
estimates will be continually refined as additional information becomes
available.
Since much of the Company's cost of its Y2K readiness program has been internal
resources, who are also involved in other duties related to the Company's
ongoing operations, the cost of the Y2K readiness program is not known, however
the Company does not believe that such costs are material. The costs are being
expressed as they are incurred, and are being funded through operating cash
flow. The costs associated with the replacement of computer systems, hardware or
equipment, if necessary, substantially all of which would be capitalized, is not
presently available.
The Company's Y2K readiness program is an ongoing process; the estimated
completion dates and costs of the Y2K readiness program is subject to change.
THE ESTIMATES AND CONCLUSIONS HEREIN CONTAIN FORWARD-LOOKING STATEMENTS AND ARE
BASED ON MANAGEMENT'S BEST ESTIMATES OF FUTURE EVENTS. RISKS TO COMPLETING THE
PLAN INCLUDE THE AVAILABILITY OF RESOURCES, OUR ABILITY TO DISCOVER AND CORRECT
THE POTENTIAL YEAR 2000 SENSITIVE PROBLEMS WHICH COULD HAVE A MATERIAL ADVERSE
EFFECT ON SPECIFIC FACILITIES, AND THE ABILITY OF KEY BUSINESS PARTNERS TO BRING
THEIR SYSTEMS INTO YEAR 2000 COMPLIANCE.
18
<PAGE>
PART II. OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS INDEX PAGE
27. Financial Data Schedule 20
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 7, 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.
19
<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-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 1,174
<SECURITIES> 0
<RECEIVABLES> 3,080
<ALLOWANCES> 193
<INVENTORY> 3,460
<CURRENT-ASSETS> 8,450
<PP&E> 29,170
<DEPRECIATION> 12,605
<TOTAL-ASSETS> 34,757
<CURRENT-LIABILITIES> 8,692
<BONDS> 0
0
0
<COMMON> 36
<OTHER-SE> 15,109
<TOTAL-LIABILITY-AND-EQUITY> 34,757
<SALES> 20,998
<TOTAL-REVENUES> 20,998
<CGS> 17,605
<TOTAL-COSTS> 4,088
<OTHER-EXPENSES> 31
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 272
<INCOME-PRETAX> (778)
<INCOME-TAX> 0
<INCOME-CONTINUING> (778)
<DISCONTINUED> 3,973
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,195
<EPS-BASIC> 0.91
<EPS-DILUTED> 0.91
</TABLE>
