THE CIRCLE K CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
January 31, April 30,
1996 1995
----------- -----------
(unaudited)
Assets
Current assets:
Cash and cash equivalents ...................................... $ 31,601 $ 68,575
Receivables .................................................... 42,886 36,432
Inventories .................................................... 153,409 138,042
Prepaid expenses and other current assets ...................... 26,127 26,927
Assets held for sale ........................................... 3,040 9,290
---------- ----------
Total current assets ........................................ 257,063 279,266
Property and equipment, net ...................................... 584,853 576,840
Intangibles (principally trade name), net of accumulated
amortization of $8,540 and $5,841, respectively ............... 117,959 118,608
Other assets ..................................................... 70,954 44,284
---------- ----------
Total assets .............................................. $1,030,829 $1,018,998
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ............................................... $ 165,530 $ 170,112
Accrued liabilities ............................................ 123,033 124,036
Money orders sold .............................................. 32,095 34,687
Current maturities of long-term obligations .................... 25,181 22,571
---------- ----------
Total current liabilities ................................... 345,839 351,406
Long-term obligations ............................................ 172,298 177,487
Other liabilities ................................................ 220,809 227,288
---------- ----------
Total liabilities ........................................... 738,946 756,181
Stockholders' equity:
Common Stock: par value $.01 per share authorized
150,000,000 shares; issued and outstanding 24,380,209
and 24,224,059 shares, respectively ......................... 244 242
Additional paid-in capital ..................................... 237,939 235,763
Retained earnings .............................................. 53,700 26,812
---------- ----------
Total stockholders' equity .................................. 291,883 262,817
---------- ----------
Total liabilities and stockholders' equity ................ $1,030,829 $1,018,998
========== ==========
See notes to consolidated financial statements.
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THE CIRCLE K CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except share data)
(unaudited)
Three Months Nine Months
Ended January 31, Ended January 31,
--------------------------- ----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
Revenues:
Sales ................................................ $ 824,922 $ 847,332 $ 2,619,752 $ 2,646,451
Other ................................................ 14,115 11,920 40,818 35,312
----------- ----------- ----------- -----------
Gross revenues ..................................... 839,037 859,252 2,660,570 2,681,763
----------- ----------- ----------- -----------
Cost of sales and operating expenses:
Cost of sales ........................................ 652,140 662,654 2,057,043 2,085,700
Operating and administrative ......................... 152,023 160,064 480,469 495,395
Depreciation and amortization ........................ 19,739 16,804 55,608 46,391
Non-recurring charge (Note 5) ........................ -- -- 1,950 --
----------- ----------- ----------- -----------
Total cost of sales and operating expenses ......... 823,902 839,522 2,595,070 2,627,486
----------- ----------- ----------- -----------
Operating income .................................. 15,135 19,730 65,500 54,277
Interest expense ........................................ 6,341 9,072 19,137 26,508
----------- ----------- ----------- -----------
Income from continuing operations
before income taxes .................................. 8,794 10,658 46,363 27,769
Income taxes ............................................ 3,702 4,513 19,475 11,596
----------- ----------- ----------- -----------
Income from continuing operations ....................... 5,092 6,145 26,888 16,173
Discontinued operations (net of tax) .................... -- -- -- 280
----------- ----------- ----------- -----------
Net income .............................................. $ 5,092 $ 6,145 $ 26,888 $ 16,453
=========== =========== =========== ===========
Income per common share:
Income from continuing operations .................... $ 0.20 $ 0.33 $ 1.06 $ 0.87
Discontinued operations .............................. -- -- -- 0.02
----------- ----------- ----------- -----------
Net income per share .................................... $ 0.20 $ 0.33 $ 1.06 $ 0.89
=========== =========== =========== ===========
Weighted average common shares and
common share equivalents outstanding ................. 25,496,728 18,527,046 25,434,834 18,527,046
=========== =========== =========== ===========
See notes to consolidated financial statements.
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THE CIRCLE K CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months
Ended January 31,
-----------------------
1996 1995
-------- ---------
Cash flows from operating activities:
Net income ......................................................... $ 26,888 $ 16,453
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization ................................... 55,608 46,391
Deferred income taxes ........................................... 3,165 1,180
Net change in assets and liabilities:
Receivables ................................................... (6,454) 6,714
Inventories ................................................... (20,719) (7,871)
Prepaid expenses and other current assets ..................... 3,847 14,183
Accounts payable .............................................. (4,486) (13,912)
Accrued liabilities ........................................... 752 (27,990)
Money orders sold ............................................. (2,591) 1,473
Other assets and liabilities .................................. (14,210) (3,253)
-------- --------
Net cash provided by operating activities ................... 41,800 33,368
-------- --------
Cash flows from investing activities:
Purchases of property and equipment ................................ (58,665) (46,985)
Proceeds from sale of assets ....................................... 7,219 26,826
Acquisition of stores .............................................. -- (24,643)
Other .............................................................. (3,681) (8,339)
-------- --------
Net cash used in investing activities ....................... (55,127) (53,141)
-------- --------
Cash flows from financing activities:
Proceeds from long-term obligations ................................ 3,000 33,000
Repayments of long-term obligations ................................ (24,317) (11,197)
Sale of common stock under incentive stock and
stock ownership plans ........................................... 1,562 500
Other .............................................................. (3,892) (7,296)
-------- --------
Net cash (used in) provided by financing activities ......... (23,647) 15,007
-------- --------
Net decrease in cash and cash equivalents ............................ (36,974) (4,766)
Cash and cash equivalents, beginning of period ....................... 68,575 39,232
-------- --------
Cash and cash equivalents, end of period ............................. $ 31,601 $ 34,466
======== ========
Supplemental cash flow information:
Equipment acquired under capital leases ............................ $ 16,834 $ 10,333
Cash paid during the period for:
Interest, net of amounts capitalized ............................ $ 18,266 $ 24,985
Income taxes .................................................... 16,370 13,885
See notes to consolidated financial statements.
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THE CIRCLE K CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. The consolidated balance sheet as of January 31, 1996, the consolidated
statements of operations for the three-month and nine-month periods ended
January 31, 1996 and 1995, and the consolidated statements of cash flows
for the nine-month periods ended January 31, 1996 and 1995, have been
prepared by The Circle K Corporation and Subsidiaries (the "Company"),
without audit. In the opinion of management, all adjustments necessary to
present fairly the Company's financial position at January 31, 1996, and
the results of operations and cash flows for the periods presented have
been made. All such adjustments are of a normal, recurring nature. Certain
reclassifications have been made to prior-year amounts to conform to
current year classifications.
2. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and related notes included in the Company's fiscal 1995 annual
report on Form 10-K.
3. Excise taxes (in 000's) on gasoline gallons sold, included in sales and
cost of sales, were $128,431 and $136,892 for the third quarter of fiscal
1996 and 1995, respectively; and $388,849 and $407,191 for the first nine
months of fiscal 1996 and 1995, respectively.
4. On May 1, 1995, the Company formed a joint venture with Southguard
Corporation, in which 105 of the Company's stores and 59 Southguard stores
operate under the Circle K name in Texas and Oklahoma through a franchising
arrangement with a subsidiary of the Company. The Company's initial
investment in the joint venture of approximately $17.9 million was equal to
the net book value of the inventory, equipment, fee properties and
leaseholds contributed to the venture, less contributed liabilities as
defined by the contribution agreement.
The Company's 50% ownership in the investment is accounted for under the
equity method of accounting and the equity in net income of the joint
venture has been included in the consolidated financial statements since
May 1, 1995. Accordingly, sales in the accompanying consolidated statements
of operations for fiscal 1996 do not include amounts for these stores,
while sales for fiscal 1995 include $15.0 million of merchandise sales and
$17.9 million of gasoline sales (on 17.1 million gallons) for the three
months ended January 31, 1995 and $50.5 million of merchandise sales and
$54.0 million of gasoline sales (on 50.3 million gallons) for the first
nine months of fiscal 1995 for these stores.
5. The non-recurring charge of approximately $2.0 million ($1.1 million after
tax or $0.05 per share) was incurred in the attempted acquisition of
National Convenience Stores Incorporated, and expensed in the second
quarter of fiscal 1996. The charge includes the costs of investment
bankers, legal counsel, and other direct costs.
35
6. Commitments and Contingencies
Status of Bankruptcy Court Actions
The predecessor to the Company (the "Predecessor") emerged from Chapter 11
with a confirmed Plan of Reorganization (the "Plan") on July 26, 1993, and
the Plan was substantially consummated on that date. The following matter
relates to the confirmed Plan: S.N. Phelps & Co., Inc., Commonwealth Oil
Refining Co., Inc. and Realmark Holdings, Inc. (the "Phelps Group") filed
an action in the Bankruptcy Court seeking to revoke the confirmation order
on the grounds that it was procured by fraud. The alleged fraud relates to
the participation by the Predecessor's management in a post-confirmation
stock incentive program that the Phelps Group maintains was not adequately
disclosed. On June 1, 1994, the Bankruptcy Court dismissed the action as
moot. On September 23, 1994, the Bankruptcy Court granted the Phelps
Group's motion to further amend its complaint, pursuant to Section 105 of
the Bankruptcy Code, to seek additional remedies other than revocation. The
Company's motions for summary judgment on and dismissal of the amended
complaint were denied on March 9, 1995. On May 23, 1995, a motion for
intervention and to proceed as a class action was filed by a former
bondholder of the Predecessor. The bondholder alleges to represent the $40
million in bonds of the Predecessor not represented by the Phelps Group. On
August 30, 1995, the Court granted the motion for intervention; class
action status has not yet been decided.
General Litigation
In addition to the above matters, the Company is a party to other lawsuits
which have arisen in the ordinary course of business. Management does not
believe the outcome of any of the litigation matters will have a material
effect on the Company's results of operations, cash flows or financial
position.
36