SOUTHLAND REPORTS THIRD QUARTER, NINE MONTHS RESULTS
SOUTHLAND REPORTS THIRD QUARTER, NINE MONTHS RESULTS DALLAS, Nov. 11 /PRNewswire/ -- The Southland Corporation today
reported net earnings of $5.8 million for the quarter ended Sept. 30, 1991, vs. a loss of $122.8 million last year. Net earnings per share for the quarter, both primary and diluted, were $.01. Revenues for the period of $2.15 billion were down 4.71 percent compared to the same period last year, due to approximately 180 fewer 7-Eleven and other convenience stores, lower outside sales for the company's distribution and food centers, and a lower average retail price for gasoline.
For the nine months ended Sept. 30, net earnings were $116.7 million, compared to a loss of $278.1 million during the prior year, and revenues were $6.16 billion vs. $6.35 billion. Results for the nine months include a nontaxable extraordinary gain of $156.8 million reflected in the first half of the year and related to the company's financial restructuring, which was consummated March 5, 1991. Earnings per share for the nine months, both primary and fully diluted, were $.37, including the extraordinary gain of $.49 per share. During the third quarter and nine months, the company's 7-Eleven and other convenience stores increased average merchandise sales per store by 1.51 percent and 1.72 percent, respectively. Both total and per- store merchandise gross profits decreased during the third quarter compared to the same prior-year period. The effects of the recession and continued fierce competition were exacerbated by unseasonably cool and/or wet weather on the West Coast and in parts of Florida, which slowed sales of high-margin items such as fountain soft drinks. The company's 7-Eleven stores that sell gasoline achieved the best per-store gallonage increase in more than a year, despite aggressive pricing from some competitors. The cents-per-gallon gross profit margin was $.10 for the quarter, compared to $.11 during the same period in 1990. Clark Matthews, Southland's president and chief executive officer, said, "The recession has outlasted most people's expectations, including ours, and has affected areas which had been somewhat resistant to prior downturns, notably California. The economy and weather also resulted in a slowdown in tourism in that state and Florida, both of which are important markets for 7-Eleven. "We took these factors into consideration when we said in our second quarter earnings release that we expected lower-than-anticipated EBITDA (earnings before interest, taxes, depreciation and amortization) for the rest of 1991," he continued. "Our EBITDA for the first nine months was approximately $255 million, about equal to last year after adjusting for unusual items, but $20 million below our expectations at the time we filed our plan of reorganization. "Given the economic outlook and intense competition, we do not foresee any improvement in operating results for the rest of 1991 and 1992. In addition, we plan to implement certain business strategies that we feel are vital to our long-term competitive position and profitability, but which will probably have an initial negative effect on earnings during their start-up in 1992," he said. "Although we were disappointed with our results this summer, we began some important marketing tests around the country, in addition to inventory management processes aimed at improving our merchandising. These actions resulted from an ongoing intensive business review that began in May. We're gratified that our very strong cash position, together with the long-term outlook and valuable input from our majority owners, give us the resources to make the changes we think are necessary to becoming profitable and more aggressive retailers," he said. Matthews noted that continued softness in EBITDA could result in the company's failure to meet certain covenants under its senior bank credit agreement. However, he said that although there can be no assurance, the company believes that the bank group members will agree to amend those covenants so that the company can remain in compliance under the current operating environment. Matthews also added that due to the lead time required to accelerate the capital expenditure program after the restructuring, only about $50 million will be expended in 1991. The company expects to invest significantly more than that in 1992. The company is required to prepare its financial statements since completing its reorganization in accordance with Statement of Financial Accounting Standards No. 15 (SFAS No. 15). If the company were not so required, its reported earnings would be lower. Under SFAS No. 15, the liability for the company's restructured public debt as recorded on the balance sheet includes all future undiscounted cash payments, both principal and interest. For that reason, no interest expense will be recognized over the life of these securities, although the interest payments are tax deductible. The liability is reduced by the amount of the interest payments at the time they are disbursed. Those cash interest payments will aggregate $97 million during 1991 and $65 million during 1992 and are paid semiannually. With more than 13,000 convenience stores around the world, 7-Eleven is the premier name and largest chain in the convenience retailing industry. Almost 6,600 7-Eleven stores are operated or franchised in the United States and Canada by the Southland Corporation. Southland is 70-percent owned by IYG Holding Company, a jointly-owned subsidiary of Ito-Yokado Co., Ltd., and Seven-Eleven Japan Co., Ltd. Seven-Eleven Japan operates over 4,500 7-Eleven stores under an area license agreement with Southland. Another 2,300 7-Eleven stores are operated by area licensees of Southland in parts of the United States and 19 other countries. THE SOUTHLAND CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited) (Dollars in thousands, except per share data) Periods ended Three Months Nine Months Sept. 30 1991 1990 1991 1990 Total revenues $2,150,332 $2,256,595 $6,162,897 $6,349,049 Cost of sales and exps.: Cost of goods sold 1,681,455 1,763,507 4,852,109 5,019,355 Selling, general and admn. expenses 411,628 430,331 1,196,811 1,258,104 Loss on assets sold -- 41,000 -- 41,000 Interest expense 41,780 126,078 137,236 380,801 Contribution to Employees' Savings & Profit Sharing Plan 3,632 2,676 10,892 10,304 Total 2,138,495 2,363,592 6,197,048 6,709,564 Earnings (loss) before income taxes, extraord. items and cum. effect of acct. change for post- retirement medical benefits 11,837 (106,997) (34,151) (360,515) Income tax (benefit) 6,000 15,805 6,000 (57,525) Earnings (loss) before extraordinary items and cumulative effect of acct. change for postretirement medical benefits 5,837 (122,802) (40,151) (302,990) Extraordinary items: Gain on debt restructuring -- -- 156,824 -- Tax benefits from utilization of net operating loss carryforwards -- -- -- 52,040 Cumulative effect of accounting change for postretirement medical benefits -- -- -- (27,163) Net earnings (loss) $ 5,837 ($122,802) $116,673 ($278,113) Earnings (loss) per average common share outstanding: Before extraordinary items and cumulative effect of accounting change - primary & fully diluted $0.01 ($6.12) ($0.12) ($15.18) Extraordinary items -- -- 0.49 2.54 Cumulative effect of accounting change -- -- -- (1.33) Net earnings (loss) - primary & fully diluted $0.01 ($6.12) $0.37 ($13.97) Avg. primary & diluted shares 409,728 20,481 317,600 20,494 THE SOUTHLAND CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Dollars in thousands, except per share data) 9/30/91 12/31/90 (Unaudited) ASSETS Current assets: Cash and short-term investments $ 320,236 $ 108,294 Accounts and notes receivable 120,161 161,778 Inventories 263,522 301,756 Deposits and prepaid expenses 51,827 64,075 Total current assets 755,746 635,903 Property, plant and equipment 1,590,156 1,715,501 Other assets 395,340 447,638 Total $2,741,242 $ 2,799,042 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 578,614 $ 766,327 Income taxes 3,624 9,145 Long-term debt due within one year 225,176 3,522,647 Total current liabilities 807,414 4,298,119 Deferred credits and other liabilities 145,337 142,315 Long-term debt 2,937,635 182,536 Redeemable preferred stock, 15 pct. cum. exch. pref. stock, series one -- 148,496 Redeemable common stock purchase warrants 26,136 26,136 Commitments and contingencies Shareholders' equity (deficit): Common stock, $.0001 par value 41 2 Additional capital 599,577 20,364 Accumulated deficit (1,774,898) (2,018,926) Total shareholders' equity (deficit) (1,175,280) (1,998,560) Total $ 2,741,242 $ 2,799,042 -0- 11/11/91 /CONTACT: Cecilia Norwood, 214-828-7272, or Markeeta McNatt, 214-828-7209, both of Southland, or recorded update, 214-828-7587/ CO: Southland Corporation ST: Texas IN: REA SU: ERN GK -- NY051 -- 3079 11/11/91 14:00 EST
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|Date:||Nov 11, 1991|
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