<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBERS 0-676 AND 0-16626
__________________
THE SOUTHLAND CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-1085131
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
2711 NORTH HASKELL AVE., DALLAS, TEXAS 75204-2906
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code, 214/828-7011
_________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No __
APPLICABLE ONLY TO CORPORATE ISSUERS:
409,922,935 shares of common stock, $.0001 par value (the issuer's only
class of common stock), were outstanding as of March 31, 1995.
<PAGE>
THE SOUTHLAND CORPORATION
INDEX
PAGE
NO.
----
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 ....................... 1
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1995 and 1994 ................. 2
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 ................. 3
Note to Condensed Consolidated Financial Statements .......... 4
Report of Independent Accountants............................. 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ................................... 6
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS .................................... 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ..................... 11
SIGNATURES ........................................................... 12
Exhibit (11) - Statement re Computation of Per-Share Earnings ........ Tab 1
Exhibit (15) - Letter re Unaudited Interim Financial Information ..... Tab 2
Exhibit (27) - Financial Data Schedule................................ *
*Submitted in electronic format only
(i)
<PAGE>
<TABLE>
THE SOUTHLAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . $ 27,909 $ 59,288
Accounts and notes receivable. . . . . . . . . . . . . . 95,820 102,230
Inventories. . . . . . . . . . . . . . . . . . . . 101,483 101,468
Other current assets. . . . . . . . . . . . . . . . . 40,351 40,411
------------ ------------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . 265,563 303,397
PROPERTY, PLANT AND EQUIPMENT. . . . . . . . . . . . . . . 1,312,962 1,314,499
OTHER ASSETS. . . . . . . . . . . . . . . . . . . . . 371,501 382,698
------------ ------------
$ 1,950,026 $ 2,000,594
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Trade accounts payable . . . . . . . . . . . . . . . . $ 179,742 $ 203,315
Accrued expenses and other liabilities. . . . . . . . . . . 298,642 316,183
Commercial paper . . . . . . . . . . . . . . . . . . 47,653 41,322
Long-term debt due within one year . . . . . . . . . . . . 146,069 123,989
------------ ------------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . 672,106 684,809
DEFERRED CREDITS AND OTHER LIABILITIES. . . . . . . . . . . . 240,339 245,807
LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . . 2,198,369 2,227,209
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, $.0001 par value . . . . . . . . . . . . . 41 41
Additional capital . . . . . . . . . . . . . . . . . 625,574 625,574
Accumulated deficit . . . . . . . . . . . . . . . . . (1,786,403) (1,782,846)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) . . . . . . . . . . (1,160,788) (1,157,231)
------------ ------------
$ 1,950,026 $ 2,000,594
============ ============
See note to condensed consolidated financial statements.
1
</TABLE>
<PAGE>
<TABLE>
THE SOUTHLAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
(UNAUDITED)
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
REVENUES:
Net sales (including $228,199 and $235,083 in excise taxes) . . . $ 1,544,779 $ 1,511,977
Other income . . . . . . . . . . . . . . . . . . . 19,291 16,909
------------ ------------
1,564,070 1,528,886
COST OF GOODS SOLD AND EXPENSES:
Cost of goods sold . . . . . . . . . . . . . . . . . 1,203,114 1,179,471
Selling, general and administrative expenses . . . . . . . . 329,989 326,995
Interest expense. . . . . . . . . . . . . . . . . . 26,733 25,852
Contributions to Employees' Savings and Profit Sharing Plan . . . 3,146 3,249
------------ ------------
1,562,982 1,535,567
------------ ------------
EARNINGS (LOSS) BEFORE INCOME TAXES . . . . . . . . . . . . . 1,088 (6,681)
INCOME TAXES. . . . . . . . . . . . . . . . . . . . . 2,050 1,450
------------ ------------
NET LOSS . . . . . . . . . . . . . . . . . . . . . . $ (962) $ (8,131)
============ ============
NET LOSS PER COMMON SHARE (Primary and Fully Diluted) . . . . . . . $ - $(.02)
====== ======
See note to condensed consolidated financial statements.
2
</TABLE>
<PAGE>
<TABLE>
THE SOUTHLAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . . . $ (962) $ (8,131)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization of property, plant and equipment . . . . 34,857 35,535
Other amortization. . . . . . . . . . . . . . . . . . . 4,534 4,757
Deferred income taxes. . . . . . . . . . . . . . . . . . 272 -
Noncash interest expense. . . . . . . . . . . . . . . . . 738 2,295
Other noncash (income) expense . . . . . . . . . . . . . . (224) 440
Net gain on property, plant and equipment . . . . . . . . . . . (3,642) (3,881)
Decrease in accounts and notes receivable . . . . . . . . . . . 9,895 6,028
(Increase) decrease in inventories . . . . . . . . . . . . . (15) 4,066
Decrease (increase) in other assets . . . . . . . . . . . . . 398 (4,065)
Decrease in trade accounts payable and other liabilities . . . . . . (42,050) (27,686)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES. . . . . . . . 3,801 9,358
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property, plant and equipment . . . . . . . . (37,899) (34,530)
Proceeds from sale of property, plant and equipment . . . . . . . . . 2,820 3,651
Other . . . . . . . . . . . . . . . . . . . . . . . . 528 499
Net currency exchange principal transactions . . . . . . . . . . . - (4,662)
Cash utilized by distribution and food center assets. . . . . . . . . - 481
Proceeds from sale of distribution and food center assets . . . . . . . - 6,305
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . (34,551) (28,256)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from commercial paper and revolving credit facilities . . . . . 1,085,171 1,091,346
Payments under commercial paper and revolving credit facilities . . . . . (1,076,930) (1,053,099)
Principal payments under long-term debt agreements . . . . . . . . . (8,213) (21,406)
Other . . . . . . . . . . . . . . . . . . . . . . . . (657) -
------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES . . . . (629) 16,841
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . (31,379) (2,057)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . . . 59,288 13,486
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . $ 27,909 $ 11,429
============ ============
RELATED DISCLOSURES FOR CASH FLOW REPORTING:
Interest paid, excluding SFAS No.15 Interest . . . . . . . . . . . $ (21,839) $ (22,937)
============ ============
Net income taxes paid . . . . . . . . . . . . . . . . . . . $ (3,717) $ (1,823)
============ ============
See note to condensed consolidated financial statements.
3
</TABLE>
<PAGE>
THE SOUTHLAND CORPORATION AND SUBSIDIARIES
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
1. BASIS OF PRESENTATION:
The condensed consolidated balance sheet as of March 31, 1995, and the
condensed consolidated statements of operations and cash flows for the
three-month periods ended March 31, 1995 and 1994, have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
included only normal, recurring adjustments) necessary to present fairly the
financial position at March 31, 1995, and the results of operations and cash
flows for all periods presented have been made. The results of operations for
the interim periods are not necessarily indicative of the operating results
for the full year.
The condensed consolidated balance sheet as of December 31, 1994, is derived
from the audited financial statements but does not include all disclosures
required by generally accepted accounting principles. The notes accompanying
the consolidated financial statements in the Company's Annual Report on Form
10-K for the year ended December 31, 1994, include accounting policies and
additional information pertinent to an understanding of both the December 31,
1994, balance sheet and the interim financial statements. The information has
not changed except as a result of normal transactions in the three months ended
March 31, 1995.
4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of
The Southland Corporation
We have reviewed the accompanying condensed consolidated balance sheet of
The Southland Corporation and Subsidiaries as of March 31, 1995, and the
related condensed consolidated statements of operations and cash flows for the
three-month periods ended March 31, 1995 and 1994. These financial statements
are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements of The Southland Corporation
and Subsidiaries for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1994, and the
related consolidated statements of operations, shareholders' equity (deficit),
and cash flows for the year then ended (not presented herein); and in our
report dated February 23, 1995, which included an explanatory paragraph
describing the change in method of accounting for postemployment benefits and
for income taxes in 1993, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of
December 31, 1994, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
April 24, 1995
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1995
SUMMARY OF RESULTS OF OPERATIONS
The Company's net loss for the first quarter of 1995 was $1.0 million
(-$.00 per share) compared to a net loss of $8.1 million (-$.02 per share) for
the same period in 1994. This improvement was primarily due to increased
merchandise and gasoline gross profits.
(EXCEPT WHERE NOTED, ALL PER-STORE NUMBERS BELOW REFER TO AN AVERAGE
OF ALL STORES RATHER THAN ONLY STORES OPEN MORE THAN ONE YEAR)
SALES
The Company recorded net sales of $1.54 billion for the three months ended
March 31, 1995, compared to sales of $1.51 billion during the same period in
1994. The improvement in 1995 is attributable to gasoline sales, as
merchandise sales declined slightly as a result of store closures, lowering the
average number of convenience stores for the quarter by 193 compared to the
same period in 1994. The first quarter of 1995 produced a same-store (stores
open more than one year) merchandise sales increase of 2.3% and is the fifth
consecutive quarter of such increases. After adjusting for first quarter
inflation of 1.9%, same-store merchandise sales real growth was .4%. The
Company believes the improvement is a result of its new merchandising processes
and everyday-fair-pricing and store-remodeling strategies (see Key Management
Strategies).
Gasoline sales dollars per store increased 10.1% for the first quarter of
1995, due to per store gallonage improvement of 3.1% and an average increase
in sales price of 7.4 cents per gallon. The continuing improvement in
gallonage reflects favorable market conditions, as well as the impact of
several successful business strategies: ongoing remodeling to enhance the
appeal and convenience of the Company's gasoline facilities; promoting high
quality CITGO-brand gasoline; the closing of low-volume locations; and managing
gasoline prices, inventories and product mix on a by-store basis.
KEY MANAGEMENT STRATEGIES
The Company is committed to several key strategies that it believes, over
the long term, will further differentiate it from its competitors and allow
7-Eleven to maintain its position as the premier convenience store chain in the
industry. These strategies include:
- Strengthening the Company's store base through an extensive remodeling
plan and pruning its store base of underachieving stores.
- A customer-driven approach to merchandising which focuses on providing
an expanded selection of quality products at a good value to satisfy the
ever-changing preferences of our customers.
6
<PAGE>
- Everyday fair pricing to provide consistent prices on all items by
reducing reliance on discounting of some products and lowering prices on
others.
- Daily delivery of fresh perishable items and ready-to-eat foods that
provides fresher products, improved in-stock conditions and lower
product costs.
- Implementation of a retail automation system with an initial phase
involving automating accounting and other store-level tasks and future
phases which will provide each store and its suppliers and distributors
with information to make better decisions in anticipating customer
needs.
GROSS PROFITS
Consolidated gross profits were $341.7 million for the first three months
of 1995, $9.2 million above the same period in 1994, reflecting growth for
two consecutive quarters for the first time since the first quarter of 1990.
Merchandise gross profits per store rose for the ninth consecutive quarter,
with a 4.5% increase in the first quarter of 1995 due to a .45 of a percentage
point increase in margins and higher per store merchandise sales. The
improvement in margins was primarily a result of the Company's ongoing
negotiations with manufacturers to reduce product costs. However, the Company
believes that margins for the year will remain relatively flat when compared to
last year.
Gasoline gross profits per store were 6.0% higher, compared to the
preceding year, for the first quarter of 1995. This improvement is due to the
combination of an increase in gallons sold and higher cents per gallon gross
profit, which was 14.3 cents per gallon for the quarter, an increase of .4
cents compared to the same period in 1994. This increase is attributed to
favorable market conditions, the positive impact of capital expenditure
programs and the continued improvement in by-store management of gasoline
merchandising strategies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A")
SG&A expenses increased $3.0 million in the first quarter of 1995 compared
to the same period in 1994. The ratio of SG&A expenses to sales was 21.4% in
the first three months of 1995, a decrease of .2 percentage points from the
same period in 1994. For the first quarter of 1994, SG&A increased from
previously reported amounts, with a corresponding decrease in cost of goods
sold, due to the expense reclassification noted in the December 31, 1994
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
INTEREST EXPENSE
The Company's total interest expense in the first three months of 1995
increased $.9 million over the same period in 1994, primarily due to an
increase in interest rates. The weighted average interest rate on the
Company's floating rate debt was 6.78% for the first quarter of 1995 versus
4.67% for the same period in 1994. Since 32% of the Company's debt contains
floating rates that are unfavorably impacted by rising interest rates, cash
interest expense is expected to increase in 1995. However, total interest
expense is expected to decline when compared to 1994 due to a combination of
the factors noted below and the write-off of $3.0 million of deferred loan
costs as a result of refinancing the Company's bank debt in December 1994.
7
<PAGE>
On December 21, 1994, the Company refinanced its bank debt under the senior
bank credit agreement ("Credit Agreement") and obtained, among other things, a
reduction in its borrowing spreads. As a result of this refinancing, the
Company expects to save approximately $7 million in interest expense in 1995
over what it would have incurred under the previous terms of the facility. In
February 1995, the Company extended the repayment of the debt relating to its
headquarters facilities (Cityplace) at a lower interest rate, which will result
in approximately $2.8 million of cash interest savings in 1995 (see Liquidity
and Capital Resources - Financing Activities).
LIQUIDITY AND CAPITAL RESOURCES
The majority of the Company's working capital is provided from three
sources: i) cash flows generated from its operating activities; ii) a $400
million commercial paper facility (guaranteed by Ito-Yokado Co., Ltd.); and
iii) short-term seasonal borrowings of up to $150 million under its revolving
credit facility. The Company believes that its operating activities coupled
with its available short-term working capital facilities will provide sufficient
liquidity for it to fund its current operating and capital expenditure programs
as well as to service debt requirements.
FINANCING ACTIVITIES
In December 1994, the Company amended its Credit Agreement, refinancing its
old term loans ($281.7 million) and revolving credit facility, with a new term
loan ("Term Loan") and new revolving credit facility. The term of the new
revolving credit facility extends through December 31, 1999 and contains both a
revolving loan ("Revolver") and letter of credit subfacility; these two
facilities each have a maximum limit of $150 million. The Term Loan ($300
million) has scheduled quarterly repayments of $18.75 million commencing
March 31, 1996 through December 31, 1999. Interest on the Revolver and Term
Loan is generally based on a variable rate equal to the administrative agent
bank's base rate or, at the Company's option, at a rate equal to the Eurodollar
rate plus .975% per year (see Results of Operations - Interest Expense).
The Credit Agreement contains certain financial and operating covenants
requiring, among other things, the maintenance of certain financial ratios,
including interest coverage, fixed charge coverage and senior indebtedness to
earnings before interest, taxes, depreciation, and amortization ("EBITDA").
The covenant levels established by the Credit Agreement generally require
continuing improvement in the Company's financial condition.
For the period ended March 31, 1995, the Company was in compliance with
all of the covenants required under the Credit Agreement. The Company complied
with the principal financial and operating covenants, which are calculated over
the latest 12-month period, as follows:
<TABLE>
<CAPTION>
Requirements:
-------------------------
Covenants Actuals Minimum Maximum
- --------- ------- ------- -------
<S> <C> <C> <C>
Interest coverage * 2.62 to 1.0 2.35 to 1.0
Fixed charge coverage .89 to 1.0 .60 to 1.0
Senior indebtedness to EBITDA 4.24 to 1.0 4.85 to 1.0
* INCLUDES EFFECTS OF THE SFAS NO. 15 INTEREST PAYMENTS.
</TABLE>
8
<PAGE>
During the first three months of 1995, the Company repaid $8.2 million of
debt. Outstanding balances on March 31, 1995 for the commercial paper, the
Revolver and the Term Loan were $397.7 million, $50.0 million and $300.0
million, respectively. As of March 31, 1995, outstanding letters of credit
issued pursuant to the Credit Agreement totaled $114.5 million.
As a result of an agreement reached in conjunction with the Company's
bankruptcy proceedings in 1990, on February 15, 1995, the 7-7/8% Cityplace
notes, issued by Cityplace Center East Corporation ("CCEC"), a wholly owned
subsidiary of the Company, were repaid under a drawing of a letter of credit
issued by The Sanwa Bank, Ltd. Under such agreement, the term of maturity
of the indebtedness of CCEC resulting from such draw has been extended by ten
years to March 1, 2005. New terms include monthly payments of principal and
interest over the ten year period, based upon a 25-year amortization at 7-1/2%,
with the remaining principal due upon maturity.
CASH FROM OPERATING ACTIVITIES
Net cash provided by operating activities was $3.8 million for the first
quarter of 1995. Historically, the Company's cash flows from operating
activities are lower during the first quarter of the year generally due to the
seasonality of convenience store sales (see Results of Operations) and the
payment of liabilities which are accrued throughout the previous year. Also
contributing to the low level of operating cash flows was the use of $24
million related to the timing of payment of trade payables.
CAPITAL EXPENDITURES
In the first three months, net cash used in investing activities consisted
primarily of payments of $37.9 million for property, plant and equipment, the
majority of which was used for remodeling stores, upgrading retail gasoline
facilities, replacing equipment and complying with environmental regulations.
The Company expects 1995 capital expenditures to be approximately $200 million,
primarily to complete remodels started in 1994 and to remodel about 1,400
additional stores. The Company is also expected to use approximately 13% of its
capital expenditures in 1995 on the retail automation project (see Key
Management Strategies).
Through March 31, 1995, approximately 2,900 stores have been remodeled.
The remodels are focusing on the features that are most noticeable to customers
and have the most immediate and positive impact on store performance, such as
lighting and security, food service equipment, necessary maintenance and
consistent image.
CAPITAL EXPENDITURES - GASOLINE EQUIPMENT
The Company anticipates that it will spend approximately $15 million in
1995 on capital improvements required to comply with environmental regulations
relating to below-ground gasoline storage tank systems as well as above-ground
vapor recovery equipment at store locations and approximately an additional $27
million on such capital improvements from 1996 through 1998.
9
<PAGE>
ENVIRONMENTAL COMPLIANCE - STORES
The Company accrues for the anticipated future costs of environmental
clean-up activities (consisting of environmental assessment and remediation)
relating to detected releases of regulated substances at its existing and
previously operated sites at which gasoline has been sold (including store
sites and other facilities that have been sold by the Company). At March 31,
1995, the Company has an accrued liability of $62.6 million for such activities
and anticipates that substantially all such expenditures will be incurred
within the next five years. This estimate is based on the Company's prior
experience with gasoline sites and its consideration of such factors as the
age of the tanks, location of tank sites and experience with contractors who
perform environmental assessment and remedial work.
The Company is eligible to receive reimbursement for a large portion of
these costs under state reimbursement programs and, at March 31, 1995, has
recorded a gross receivable of $73.6 million (a net receivable of $54.3 million
after an allowance of $19.3 million) for the estimated probable state
reimbursement of paid and accrued assessment and remediation expenses. There is
no assurance of the timing of the receipt of state reimbursement funds;
however, based on its experience, the Company expects to receive state
reimbursement funds within one to four years after payment of eligible
assessment and remediation expenses, assuming that the state administrative
procedures for processing such reimbursements have been fully developed.
The estimated future assessment and remediation expenditures and related
state reimbursement amounts could change as governmental requirements and state
reimbursement programs change in future years.
ENVIRONMENTAL COMPLIANCE - CHEMICAL PLANT
In December 1988, the Company closed its chemical manufacturing facility
in New Jersey. As a result, the Company is required to conduct environmental
remediation at the facility and has accrued a liability for this purpose. As
required, the Company has submitted a clean-up plan to the New Jersey
Department of Environmental Protection (the "State"), which provides for
remediation of the site for approximately a three-to-five year period, as well
as continued groundwater treatment for a projected 20-year period. While
the Company has received initial comments from the State, the clean-up plan has
not been finalized. The Company has recorded liabilities representing its best
estimates of the clean-up costs of $38.6 million at March 31, 1995. Of this
amount, $32.9 million was included in deferred credits and other liabilities
and the remainder in accrued expenses and other liabilities. In 1991, the
Company entered into a settlement agreement with a large chemical company that
formerly owned the facility. Under the settlement agreement, the former owner
agreed to pay a substantial portion of the clean-up costs described above.
The Company has recorded a receivable of $22.6 million at March 31, 1995,
representing the former owner's portion of the clean-up costs.
None of the amounts related to environmental liabilities have been
discounted.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SOUTHLAND CORPORATION
(Registrant)
Date: May 1, 1995 /s/ Clark J. Matthews, II
-----------------------------
(Officer)
Clark J. Matthews, II
President and Chief Executive
Officer
Date: May 1, 1995 /s/ Vernon P. Lotman
------------------------------
(Principal Accounting Officer)
Vernon P. Lotman
Vice President and Controller
12
<PAGE>
<TABLE>
EXHIBIT 11
THE SOUTHLAND CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER-SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
<CAPTION>
CALCULATION OF EARNINGS (LOSS) PER COMMON SHARE
THREE MONTHS
ENDED MARCH 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Net loss for earnings (loss) per-share calculation. . . . . $ (962) $ (8,131)
========== ==========
Average number of common shares outstanding . . . . . . . 409,923 409,923
========== ==========
Net loss per common share (Primary and Fully Diluted). . . . $ - $(.02)
====== ======
Tab 1
</TABLE>
<PAGE>
Exhibit 15
Securities and Exchange Commission
450 Fifth Street, Northwest
Washington, D.C. 20549
Attention: Document Control
RE: The Southland Corporation Form 10-Q
We are aware that our report dated April 24, 1995 on our review of the
condensed consolidated balance sheet of The Southland Corporation and
Subsidiaries as of March 31, 1995, and the condensed consolidated statements
of operations and cash flows for the three-month period then ended, included
in this Form 10-Q, is incorporated by reference in the following registration
statements:
REGISTRATION NO.
On Form S-8 for:
Post-Effective Amendment No. 3 to The Southland
Corporation Equity Participation Plan 33-23312
Post-Effective Amendment No. 1 to The Southland
Corporation Grant Stock Plan 33-25327
Pursuant to Rule 436(c) under the Securities Act of 1933, this report should
not be considered a part of the registration statement prepared or certified
by us within the meaning of Sections 7 and 11 of that Act.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
April 28, 1995
Tab 2
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 27,909
<SECURITIES> 0
<RECEIVABLES> 102,653
<ALLOWANCES> 6,833
<INVENTORY> 101,483
<CURRENT-ASSETS> 265,563
<PP&E> 2,378,612
<DEPRECIATION> 1,065,650
<TOTAL-ASSETS> 1,950,026
<CURRENT-LIABILITIES> 672,106
<BONDS> 2,198,369
<COMMON> 41
0
0
<OTHER-SE> (1,160,829)
<TOTAL-LIABILITY-AND-EQUITY> 1,950,026
<SALES> 1,544,779
<TOTAL-REVENUES> 1,564,070
<CGS> 1,203,114
<TOTAL-COSTS> 1,203,114
<OTHER-EXPENSES> 333,135
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,733
<INCOME-PRETAX> 1,088
<INCOME-TAX> 2,050
<INCOME-CONTINUING> (962)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (962)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
