ITEM 1. BUSINESS.
				 GENERAL
	The Southland Corporation ("Southland," the "Company" or "Registrant"), conducting business principally under the name 7-Eleven, is the largest convenience store chain in the world, with over 14,600 Company-operated, franchised and licensed locations worldwide, and is among the nation's largest retailers.
	The 7-Eleven trademark has been registered since 1961 and is well known throughout the United States and in many other parts of the world. The Company believes that 7-Eleven is the leading name in the convenience store industry. Notwithstanding its divestitures of stores and other businesses since 1987, the Company remains geographically diversified. The Company has, over the past several years, implemented its strategic plan to divest all its non-convenience store operations, and has trimmed its store operations by consolidating its efforts in certain market areas and by closing less profitable stores. Convenience retailing is now the Company's only business focus.
	The Company, with executive offices at 2711 North Haskell Avenue, Dallas, Texas 75204 (telephone 214/828-7011), was incorporated in Texas in 1961 as the successor to an ice business organized in 1927. Unless the context otherwise requires, the terms "Company," "Southland" and "Registrant" as used herein include The Southland Corporation and its subsidiaries and predecessors. In 1994, Southland's operations (for financial reporting purposes) were conducted in one business segment: the Operating and Franchising of Convenience Food Stores.
	At December 31, 1994, the Company's operations included 5,541 7- Eleven convenience stores in the United States and Canada, 38 High's Dairy Stores, and 51 Quik Mart and Super-7 high-volume gasoline outlets with mini-convenience stores. The Company also has an equity interest in 213 convenience stores in Mexico (most of which are now using the 7-Eleven name). Area licensees, or their franchisees, operate additional 7-Eleven stores in certain areas of the United States, in 18 foreign countries and the U.S. territories of Guam and Puerto Rico. As of the end of 1994, the Company has an equity interest in three of the licensees whose area licenses cover six foreign countries and Puerto Rico.
	During 1994, the Company continued to focus on its business concept of providing superior service to its customers through better merchandising, with item-by-item control of inventory at each store, emphasizing the importance of ordering the right products, on an individual store level, to remain in stock, at all times, on each particular store's best-selling items. Through proper ordering and successful implementation of other store functions, the Company continues to work toward providing convenience-oriented customers with the SPEED, QUALITY, SELECTION, PRICE and shopping ENVIRONMENT that will give the Company a sustainable competitive advantage.
	THE RESTRUCTURINGS. During the past eight years, the Company has gone through two financial restructurings -- a leveraged buyout in 1987 (the "LBO") and a voluntary bankruptcy reorganization, emerging from a four-month Chapter 11 proceeding in March 1991, with
a $430 million infusion of capital from its new majority owner, IYG Holding Company, which is jointly owned by Ito-Yokado Co., Ltd. ("Ito- Yokado") and Seven-Eleven Japan Co., Ltd. ("Seven-Eleven Japan"), both Japanese corporations. Seven-Eleven Japan is the Company's largest area licensee.
	On February 21, 1991, the U.S. Bankruptcy Court for the Northern District of Texas issued an order (the "Confirmation Order") confirming the Company's Plan of Reorganization (the "Plan") and on March 4, 1991, the Confirmation Order became final and non-appealable. (See "Legal Proceedings," below.) The Plan provided for holders of the Company's then outstanding debt and equity securities (the "Old Securities") to receive new debt securities, common stock and, in certain cases, cash, in exchange for their Old Securities and, pursuant to a Stock Purchase Agreement, for Ito-Yokado and Seven-Eleven Japan to acquire approximately 70% of the Company for $430 million in cash. In addition, among other things, the Plan provided for the amendment and restatement of the Company's Credit Agreement with its Senior Lenders (the "Credit Agreement") and for the Company to effect a one-for-ten reverse stock split of its common stock (the "Stock Split"). The closing (the "Closing") under the Stock Purchase Agreement (the "Stock Purchase Agreement"), occurred on March 5, 1991, and the Company issued 286,634,619 shares of common stock, $.0001 par value (the "Common Stock"), to IYG Holding Company, a Delaware corporation, jointly owned by Ito Yokado and Seven-Eleven Japan, and received $430 million in cash. In connection with the Closing, the Company entered into a Shareholders Agreement, a Warrant Agreement and Employment Agreements with the Thompsons (described below, see "Other Business Information").
	Pursuant to the Plan, holders of the Company's Old Securities were entitled to exchange, until March 5, 1993, their Old Securities for new debt, equity and, in some cases, cash, and newly issued warrants (the "Thompson Warrants"), exercisable (through February 23, 1996) to acquire certain shares of common stock owned by the Thompsons and certain other old common stock shareholders of the Company (the "Warrant Shareholders"), at $1.75 per share pursuant to a Warrant Agreement with Wilmington Trust Company as Warrant Agent (the "Warrant Agreement").
	THE PURCHASER. IYG Holding Company, a Delaware corporation (the "Purchaser" or "IYG"), is a jointly owned subsidiary of Ito-Yokado and Seven-Eleven Japan, formed for the specific purpose of purchasing the Common Stock of the Company pursuant to the Stock Purchase Agreement. Ito-Yokado owns 51% and Seven-Eleven Japan owns 49%, respectively, of IYG.
	ITO-YOKADO. Ito-Yokado is among the largest retailing companies in Japan. Its principal business consists of the operation of 153 superstores that sell a broad range of food, clothing and household goods. In addition, its activities include operating two restaurant chains doing business under the names "Denny's" and "Famil" and a chain of supermarkets. All of Ito-Yokado's operations are located in Japan except for some limited purchasing activities. Prior to the execution of the March 21, 1990 stock purchase agreement, Ito-Yokado had no affiliation with the Company, other than through its majority-owned subsidiary, Seven-Eleven Japan (see below). On July 18, 1990, however, the Company borrowed $25 million pursuant to a term loan agreement with Ito-Yokado in order to obtain short-term liquidity. This term loan, plus interest, was repaid on March 5, 1991. In addition, in 1992 Ito-Yokado guaranteed the Company's $400 million commercial paper facility.
	SEVEN-ELEVEN JAPAN. Seven-Eleven Japan is the largest convenience store chain in Japan. Seven-Eleven Japan is a 50.3%- owned subsidiary of Ito-Yokado. Seven-Eleven Japan is the largest area licensee of the Company with 5,809 stores in Japan and owns Seven- Eleven (Hawaii), Inc., which, as of year-end 1994, operated an additional 47 7-Eleven stores in Hawaii under a separate area license agreement covering that state.
REFINANCING OF BANK DEBT. On December 21, 1994, the Company refinanced all of its remaining debt under the Credit Agreement, originally entered into in 1987, pursuant to an amendment to the Credit Agreement with a modified group of lenders. The bank group, led by Citicorp North America, Inc., as Agent, and The Sakura Bank, Limited, as Co-Agent, is comprised of six Japanese banks, four American banks and one Canadian bank. The amended Credit Agreement, which will mature at the end of 1999, provides for a $300 million term loan, $150 million letter of credit facility and a $150 million revolving credit facility. There are no scheduled term loan principal repayments until the first quarter of 1996. The term loans and any revolver borrowings carry a floating interest rate of either the Citibank, N.A. base rate or a reserve-adjusted Eurodollar rate plus .975%.
	OPERATING AND FRANCHISING OF CONVENIENCE FOOD STORES
	7-ELEVEN STORES. On December 31, 1994, there were 5,541 7- Eleven convenience stores included in the Company's operations and 694 stores (in the United States) operated by area licensees. Such stores are operated principally under the name 7-Eleven and are located in 41 states, the District of Columbia, and five provinces of Canada. During 1994, the Company opened 18 convenience stores (of which 10 were rebuilds or relocations of existing stores) and closed 184 convenience stores, due to changing market patterns, lease expirations and the closing of selected stores that were not profitable. The Company may, and currently intends to, close approximately 150 additional stores in 1995.
	The Company's convenience stores are extended-hour retail stores, emphasizing convenience to the customer and providing groceries, take- out foods and beverages, gasoline (at many locations), dairy products, non-food merchandise, specialty items and incidental services. Generally, the Company's stores are open every day of the year and are located in neighborhood areas, on main thoroughfares, in shopping centers, or on other sites where they are easily accessible and have ample parking facilities for quick in-and-out shopping. Stores are generally from 2,400-3,100 square feet in size and carry 2,300-2,600 items. The vast majority of the stores operate 24 hours a day, with virtually all of the Company's stores open at least from 7 a.m. until 11 p.m. The stores attract lunch-time customers, early and late shoppers, weekend and holiday shoppers and customers who may need only a few items at any one time and desire rapid service. The Company has been emphasizing its new product mix of fresher, higher quality foods to encourage existing customers to increase their shopping frequency and to appeal to new customers, and has taken a new approach to providing fresh food merchandise to the stores, through the introduction of daily delivery of freshly made sandwiches and bakery products from commissaries and newly opened baking facilities operated to serve the needs of 7-Eleven stores and distributed from local area combined distribution centers that serve only 7-Eleven stores. In addition, there has been an increased focus on novelty and seasonal items to spur impulse buying around each holiday, sport season or other types of occasions, such as graduation or Mother's Day, which are designed to appeal to a broader mix of customers.
	Substantially all convenience store sales are for cash (including sales for which checks are accepted), although major credit cards, along with the "Citgo Plus" credit card, are accepted in most markets, for purchases of both merchandise and gasoline. Credit card sales currently account for approximately 6% of sales, including gasoline.
	REMODELING OF STORES. During 1994, the Company remodeled approximately 1,200 stores, and anticipates remodeling an additional 1,400 stores in 1995. By the end of 1995, over 4,000 stores will have been remodeled, with virtually all stores scheduled to be completed by the end of 1996, to conform to the new store image which includes increased interior and exterior lighting, wider aisles, shopper- friendly aisle markers, lower shelf heights to help shoppers locate items faster, less cluttered aisles and counters, upgraded gasoline island equipment, and a new tri-striped exterior store facade that replaces the mansard roofs of many existing stores. The remodeling process was streamlined in 1994, both to be less disruptive of the store's business and to focus on the changes that customers notice and appreciate most, such as brighter lighting and more user-friendly store layouts.
	MERCHANDISING. During 1994, the Company further intensified its focus on better inventory control at the store level and provided all levels of its field organization with training and constant reinforcement of the principles necessary to accomplish accurate order forecasting to avoid lost sales opportunities. Through case studies and other examples, the entire field organization has been kept informed on ways to identify and track each store's best-selling items in each product category and avoid out-of-stock conditions by proper order forecasting. Store employees are responsible for placing orders with a view toward forecasting the demand for the highest selling items in the store, based on specific local conditions.
	Each store's merchandise must include a selection of core items as well as optional items selected by store operators to meet their customers' local needs and preferences. During 1994, the Company assisted the store operators by providing a new approach to seasonal and novelty items, taking advantage of each holiday or other identifiable event (such as graduation time, start of the football or baseball season, etc.) with a preplanned mix of merchandise made available to the stores on attractive end cap merchandisers in anticipation of possible impulse or last-minute shopping at such times as Valentine's Day, Mother's Day and Halloween. These new items were provided in a different merchandising format during 1994 to appeal to a broader range of customers and further enhance 7-Eleven's image as a convenient place to shop for last-minute needs.
	During 1994, as part of the Company's new merchandising focus, between 25 and 30 new items were made available to the stores each week. Store operators were encouraged to try new items and, through case study experiments, store operators were able to see the incremental benefits derived by offering the new items in the stores.
	In addition, during 1994 the Company continued to implement its everyday-fair-price strategy, which minimizes discounting, but lowers prices on some items to provide consistent, competitive prices throughout the store. The Company is applying a more flexible approach to pricing on different products in different markets, while working with suppliers to find ways to lower costs to the Company, so that any savings can be reflected in the price to the customer.
	NEW PRODUCTS. During 1994, the Company continued its programs to introduce more fresh food products of a higher quality into the stores. In addition, the Company continued to expand its "New Age" beverages with the introduction of its own corporate brand "Classic Selection" spring water and soft drinks which were introduced nationally during 1994. In addition, as a complement to its gourmet- flavored coffees, the Company introduced its own proprietary regular and sugar-free "Cafe Select"-TM- gourmet hot chocolate and cappuccino, which added hot beverages that had appeal throughout the day, in addition to the traditional peak morning coffee hours. By year-end 1994, approximately 95% of the stores were offering the new hot chocolate and cappuccino products.
	During 1994, Prime Deli Corporation opened a fresh food commissary in Dallas, Texas to serve 7-Eleven stores. This commissary is designed to provide a wide range of freshly prepared food, using the new "Deli Central" name, including fresh sandwiches, salads and desserts that are delivered daily to the stores. By year-end, this commissary was servicing approximately 240 stores. (See "Distribution - Fresh Products," below). In late 1994, with the help of Pillsbury, "World Ovens"-TM- fresh bakery products were developed and introduced to 7-Eleven stores in Texas. These high-quality products are proprietary to 7-Eleven and are manufactured in a new bakery facility in Texas specifically opened and operated to serve 7-Eleven's needs.
	In addition, during 1994, deliveries began from a newly built commissary facility in the Philadelphia/New Jersey market area to approximately 400 stores (both corporate and franchised) in that market area. A commissary is also servicing approximately 160 franchised stores in the Long Island, New York market area. In addition, "World Ovens"-TM- products are also being supplied to stores in the Philadelphia/New Jersey market area from a bakery facility in Baltimore.
	During 1994, 7-Eleven increased the range of non-food services available when it began offering prepaid telephone cards, for long distance use, which were introduced in November. By year end, over 5,000 stores were selling the "phone cards" for prepaid long distance calling in 15-, 30- and 60-minute increments, and the Company plans to introduce a 90-minute card, as well as a collector card, during 1995.
	During 1993, the Company entered into a ten-year agreement with Electronic Data Systems Corporation ("EDS") for the installation and operation of automated teller machines (ATMs) in 7-Eleven stores, nationwide, in areas not already covered by other ATM agreements. As of year-end 1994, ATMs had been installed in over 3,200 stores under this agreement, with a total of approximately 4,500 ATMs in 7-Eleven stores around the country. EDS pays the Company a flat fee per month per ATM as well as transaction-based fees dependent upon the number of transactions per month.
	GASOLINE. In 1994, the Company sold approximately 1.40 billion gallons of gasoline at retail at approximately 2,000 7-Eleven stores and other Southland self-serve outlets. The Company monitors gasoline sales to maintain a steady supply of petroleum products to the Company's stores, to determine competitive retail pricing, to provide the appropriate product mix at each location and to manage inventory levels, based on market conditions. During 1994, the Company continued its program to upgrade the gasoline pump area of the stores, by adding canopies and new equipment. Approximately 700 stores are now equipped to accept credit cards for the purchase of gasoline at the pump, which makes gasoline shopping at 7-Eleven even more
convenient for the credit customer. Almost all of the Company's stores offer CITGO-branded gasoline.
	During 1994, the Company discontinued the sale of gasoline at approximately 40 locations (due, in many cases, to the closing or divestiture of the entire store, with the others eliminated due to the strategic decision to discontinue the sale of gasoline at the particular location). The Company currently anticipates that gasoline sales may be discontinued at about 30 additional locations in 1995.
	The Company has a long-term product purchase agreement with Citgo Petroleum Corporation ("Citgo") under which Southland purchases substantially all its U.S. gasoline requirements from Citgo at market- related prices through the year 2006.
	Holders of the "Citgo Plus" credit card can use the card to finance purchases of gasoline, as well as other merchandise, at 7-Eleven stores. At year-end, there were over 1.33 million active "Citgo Plus" credit card accounts.
DISTRIBUTION. Fresh Products - During 1994, the Company began to utilize a local distribution system for delivery of fresh food products (such as Deli Central-TM- sandwiches and salads and World Ovens-TM- bakery products) as well as for fresh produce, dairy products, bread and other packaged bakery items and items that had previously been provided to the store by vendors through "store door delivery." The Company entered into a five-year agreement with E. A. Sween Company for E.A. Sween to provide distribution services through operation of (i) a Combined Distribution Center ("CDC") facility in the Dallas/Fort Worth area to service approximately 250 stores in that area and (ii) a CDC facility in the Austin market area to service approximately 50 stores in that area. Included in the products distributed by E.A. Sween through the CDCs are those produced by Prime Deli Corporation from its commissary and the World Ovens-TM- products from Southbury Bakery, both in the Dallas area, and products from the commissary facility in Austin, which has now been open and serving 7-Elevens since 1992. In addition, pending finalization of long-term arrangements, the Company has entered into interim agreements with (i) AMR Distribution Systems (an operating division of AMR Services Corporation) to provide distribution services, through operation of a CDC facility, to approximately 400 (both corporate and franchised) stores in the Philadelphia/New Jersey market area, for distribution of the products produced by the commissary in that market area and (ii) The Constance Food Group, Inc., to provide distribution services, through operation of a CDC facility, to the approximately 160 stores it supplies with commissary products in the Long Island, New York area.
	Warehouse Products - The Company continued to utilize the distribution services of McLane Company Inc., pursuant to a ten-year contract entered into in 1992, for delivery of warehouse products to all of the Company's corporate stores and those franchise stores that utilize McLane for distribution services. McLane serves Southland using two former Southland distribution centers and eight additional distribution centers throughout the country. The Company has worked with McLane to minimize out of stocks and be increasingly responsive to individual store's needs.
	Franchisees are required only to carry merchandise of a type, quality, quantity and variety consistent with the 7-Eleven image. Except for consigned merchandise and certain proprietary items, franchisees
are not required to purchase merchandise from the Company or vendors it recommends, or to sell their merchandise at prices suggested by the Company.
	SUPPLY AGREEMENTS. In connection with the sale of the Company's Reddy Ice and Dairies Group divisions, both in 1988, the Company entered into long-term contracts to purchase the products historically supplied to the Company's stores by such divested operations.
	PRODUCT CATEGORIES. The Company does not record sales on the basis of product categories. However, based upon the total dollar volume of store purchases, management estimates that the percentages of its 7-Eleven convenience store sales in the United States by principal product categories for the last five years were as follows:
	LOCAL REGULATIONS. In certain areas where stores are located, state or local laws limit the hours of operation or the sale of certain products, the most significant of which limit or govern the sale of alcoholic beverages. State and local regulatory agencies have the authority to approve, revoke, suspend or deny applications for and renewals of permits and licenses relating to the sale of alcoholic beverages or to seek other remedies. In most states, such agencies have discretion to determine if a licensee is qualified to be licensed, and denials may be based on past noncompliance with applicable statutes and regulations as well as on the involvement of the licensee in criminal proceedings or activities which in such agencies' discretion are determined to adversely reflect on the licensee's qualifications. Product categories that are affected by these types of regulations are alcoholic beverages, tobacco, lottery tickets and other similarly state-regulated products. Such regulation is subject to legislative and administrative change from time to time. The Company is the largest seller, nationwide, of state-sponsored lottery tickets.
	FRANCHISES. At December 31, 1994, 2,962 7-Eleven stores were operated by independent franchisees under the Company's franchise program for individual 7-Eleven stores. Sales by stores operated by franchisees (which are included in the Company's net sales) were $2,820,685,000 for the year ended December 31, 1994.
	In its franchise program for individual 7-Eleven stores, the Company selects qualified applicants and trains the individuals who will participate personally in operating the store. The franchisee pays the Company an initial fee, which varies by store, and is generally calculated based upon gross profit experience for the store or market area, to cover certain costs including: training; an allowance for travel; meals and lodging for
the trainees; and other costs relating to the franchising of the store. Under the standard form of franchise agreement, the Company leases or subleases, to the franchisee, a ready-to-operate 7-Eleven store that has been fully equipped and stocked. The Company bears the costs of acquiring the land, building and equipment, as well as most utility costs and property taxes.
	Under the standard franchise arrangement, which typically has an initial term of 10 years, the franchisee pays for all business licenses and permits, as well as all in-store selling expenses, including: payroll; inventory and cash variations; supplies; inventory, payroll and other business taxes; certain repairs and maintenance; and other controllable in-store expenses, and is required to invest an amount equal to the cost of the store's inventory and cash register fund. The Company finances a portion of the cost of business licenses and permits and of the investment in inventory, as well as the ongoing operating expenses and purchases of inventory.
	Under the standard franchise agreements currently in effect, the Company shares in the gross profit of the store (ranging from 50% to 58%, depending on the hours of store operation, adjusted if necessary to assure the franchisee a specified gross income before selling expenses), based on all sales of merchandise and services except those on which the Company pays the franchisee a commission (such as consigned gasoline). The Company's share of gross profit, called the "7-Eleven Charge," is its continuing royalty charge to the franchisee for the license to use the 7-Eleven operating system and trademarks, for the lease and use of the store premises and equipment and for continuing services provided by the Company. These services include merchandising, advertising, recordkeeping, store audits, contractual indemnification, business counseling services and preparation of financial statements. Other optional services are available from or through the Company for additional fees.
	The Company is currently offering agreements that provide a three- tiered structure for calculating the 7-Eleven Charge, in Washington, Idaho and Oregon, under which the 7-Eleven Charge is based on the particular store's level of gross profit for the preceding 12 months. In March 1993, the Company also announced that it intends to revise its standard form of franchise agreement, but has postponed the anticipated roll-out of a new agreement indefinitely as a result of currently pending litigation (see "Legal Proceedings," below).
	Under Southland's standard franchise agreement, the franchise may be terminated by the franchisee at any time or by the Company for the causes, and upon the notices, as specified in the franchise agreement and as provided by applicable law. In the event of expiration or termination of the franchise, the Company has the right to (i) acquire the franchisee's interest in inventory of a type, quantity, quality and variety consistent with the 7-Eleven image and the other tangible assets in the franchise business; and, (ii) take possession of the real property on which the store is located, and the franchisee has no continuing lease obligations.
	Many states in which the Company franchises individual 7-Eleven stores have enacted legislation governing the offer, sale, termination and/or renewal of franchises, and the Federal Trade Commission has a trade regulation rule regarding required disclosures to prospective franchisees. These requirements are subject to amendment and similar legislation is contemplated at the federal level and pending at the state level.
	AREA LICENSES. As of December 31, 1994, the Company had granted domestic area licenses to ten companies which were operating 694 convenience stores using the 7-Eleven system and name in certain areas of Alaska, Arkansas, Hawaii, Indiana (using the name Super-7 in Indianapolis), Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, West Virginia and Wyoming. Although parts of both Nevada and Virginia are also covered by area licenses, there are no stores currently operated under the area licenses in those states. The 47 stores in Hawaii are operated under an area license agreement with Seven-Eleven (Hawaii), Inc. (a subsidiary of Seven-Eleven Japan).
	As of the end of 1994, foreign area license agreements covered the operation of 5,809 7-Eleven stores in Japan, 925 in Taiwan, 399 in Thailand, 310 in Hong Kong, 153 in Australia, 87 in Malaysia, 84 in Singapore, 75 in South Korea, 69 in Spain, 66 in the Philippines, 51 in the United Kingdom, 37 in Norway, 22 in Sweden, 19 in China, 14 in Brazil, 13 in Puerto Rico, 10 in Turkey, nine in Guam and eight in Denmark. In connection with the granting of area licenses in Brazil, Norway (which license now also includes Denmark, Finland and Sweden), the Philippines and Puerto Rico, the Company acquired an equity interest in those area licensees.
	During 1994, the area license covering Panama was terminated. In addition, a license covering Guangdong Province in China is now in effect, and stores there should be under construction and open within the next year.
	Stores operating under area licenses are not included in the number of Company operating units, and their sales are not included in the Company's revenue. Revenues from initial fees paid for area licenses and continuing royalties based on the sales volume of the stores are included in Other Income.
	INTERNATIONAL AFFILIATES. The Company also has an equity interest in 213 convenience stores in Mexico operated by an affiliate. These stores, which feature merchandise and services essentially the same as 7-Eleven, had been operating under the name "Super Siete" until 1991, when a program began to change their name to 7-Eleven, and now almost all stores are using the 7-Eleven name.
	Sales from the stores in Mexico are not included in Southland's revenues, but Southland's equity in their operating results is included in Other Income and has not been material.
	HIGH'S DAIRY STORES. As of December 31, 1994, the Company operated 38 High's Dairy Stores located primarily in Maryland and Virginia, which are similar in size and location to 7-Eleven stores and feature a product mix that emphasizes a variety of dairy products.
	QUIK MART AND SUPER-7. At December 31, 1994, 51 Quik Mart and Super-7 units were in operation in nine states. A typical Quik Mart is a high-volume gasoline outlet combined with a mini-convenience store ranging in size from 300 to 1,600 square feet of sales space stocked primarily with snack food, candy, cold drinks and other immediately consumable items, while a Super-7 is a high-volume, multi-pump, self- service gasoline-dispensing operation.
	CORPORATE
	CITYPLACE. The Company's headquarters are located in "Cityplace Center East," its 42-story office tower located on the east side of Dallas' Central Expressway north of Dallas' central business district. The Company currently occupies approximately 600,000 square feet, about one-half of Cityplace Center East.
	During 1994, leases covering approximately 281,000 square feet were signed with third party tenants, for occupancy to commence under such leases in 1994 and 1995. The building is now 97% leased or reserved for expansion under current leases.
	DIVESTITURES
	During 1994, the Company sold its former distribution centers in Champaign, Illinois and Tyler, Texas.
OTHER INFORMATION ABOUT THE COMPANY
	CREDIT AGREEMENT AND DEBT COVENANTS. The Company's Amended Credit Agreement contains a number of financial and operating covenants requiring, among other things, the maintenance of certain financial ratios, including interest coverage, fixed-charge coverage, and senior indebtedness to EBITDA (defined in the Credit Agreement as earnings before interest, income taxes, depreciation and amortization, with adjustments for certain extraordinary and unusual gains and losses). The covenant levels established by the Credit Agreement generally require a continuing improvement in the Company's financial condition. The Credit Agreement also contains various covenants which, among other things, (a) limit the Company's ability to incur or guarantee indebtedness or other liabilities other than under the Credit Agreement, (b) restrict the Company's ability to engage in asset sales and sale/leaseback transactions, (c) restrict the types of investments the Company can make and (d) restrict the Company's ability to pay cash dividends, redeem or prepay principal and interest on any subordinated debt and certain senior debt. These covenants contain exceptions that are customary in credit agreements associated with financings of companies having creditworthiness similar to Southland's, as well as exceptions consistent with the specific nature of the business and financial operations of the Company.
	The Company's outstanding Debt Securities contain certain covenants which, among other things, (i) limit the payment of dividends and certain other restricted payments by both the Company and its subsidiaries, (ii) require the purchase by the Company of the Debt Securities at the option of the holder upon a change of control (as defined in the indentures governing the Debt Securities), (iii) limit additional indebtedness, (iv) limit future exchange offers, (v) limit the repayment of subordinated indebtedness, (vi) require board approval of certain asset sales, (vii) limit transactions with certain stockholders and affiliates and (viii) limit consolidations, mergers and the conveyance of all or substantially all of the Company's assets.
	In addition, the warrants that were issued by the Company in 1987 in connection with the LBO (the "Old Warrants"), expired in 1992 without becoming exercisable. Pursuant to the terms of the Warrant Agreement relating to the Old Warrants, the Company offered to repurchase such Old Warrants at their independently determined fair value of $0. The repurchase offer expired, and all of the Old Warrants were cancelled as of March 15, 1993.
	SHAREHOLDERS AGREEMENT. Upon the Closing, the Company, the Purchaser, Ito-Yokado and various holders of the Company's common stock who held the common stock prior to the Closing (the "Existing Shareholders") entered into a shareholders agreement (the "Shareholders Agreement") pursuant to which the parties may not offer, sell, assign, transfer, grant a participation in, pledge or otherwise dispose of any shares of Common Stock except in compliance with the Shareholders Agreement. Although transfers are permitted to certain permitted transferees or pursuant to Rule 144 under the Securities Act of 1933, other transfers are subject to the Purchaser's right of first refusal.
	The Shareholders Agreement provides each of the Existing Shareholders (and any persons who hold employee options or employee convertible debentures to purchase shares of Common Stock as a result of employment with the Company) with the right and option to require the Purchaser to purchase up to all of the shares of Common Stock held by such person on the fifth anniversary of the date of the Shareholders Agreement at the fair market value (to be determined in accordance with the terms of the Shareholders Agreement) of such shares on such date. In addition, the Shareholders Agreement, as amended on December 30, 1992, provides that the parties to the agreement shall cause Southland's Board of Directors to consist of, and shall vote their shares as to the election of directors so that the Board shall consist of, (i) two individuals designated by Existing Shareholders holding a majority of shares held by the Existing Shareholders, (ii) ten individuals selected by the Purchaser, (iii) two individuals initially designated by the Official Committee of Bondholders appointed by the Bankruptcy Court and, from and after the next annual or special meeting of the Company's shareholders at which the election of directors occurs, designated by the holders (the "Other Shareholders") of shares of Common Stock other than the Purchaser and the Existing Shareholders (the "Other Shareholder Nominees") and (iv) although no such obligation currently exists, two independent directors if, and to the extent, required to meet the listing or quotation requirements of any exchange or quotation system upon which the Common Stock is or shall be listed or traded (and only if, and to the extent that, the Other Shareholder Nominees fail to qualify as such independent directors).
	In addition, the Shareholders Agreement provides the Existing Shareholders with certain registration rights (if no exemption from registration is applicable for their sales), parallel exit rights and preemptive rights in certain circumstances.
	Moreover, under the Shareholders Agreement, Ito-Yokado has provided the Thompsons and certain of the parties to the Shareholders Agreement (other than participants in the Company's Grant Stock Plan with respect to shares acquired pursuant to participation in such Grant Stock Plan) with certain loans (the "Loans") based on the pledge of shares of Common Stock as collateral for the Loans (the "Collateral Shares"). Such loans are a nonrecourse obligation of the borrower except to the extent of the Collateral Shares. Such Collateral Shares may not be sold unless the Loan secured by such Shares is repaid simultaneously with such sales.
	THE WARRANT AGREEMENT. As part of the Plan and the Closing on March 5, 1991, Thompson Brothers, L.P., The Hayden Company, The Philp Co., The Williamsburg Corporation and Thompson Capital Partners, L.P. (collectively, the "Warrant Shareholders") entered into a Warrant Agreement with Wilmington Trust Company as Warrant Agent, the Company and Ito-Yokado. Pursuant to the Plan, the Company agreed to issue, on behalf of the Warrant Shareholders, the Thompson Warrants exercisable by the holder thereof to purchase up to an aggregate of 10,214,842 shares of Common Stock owned by the Warrant Shareholders.
	Under the Warrant Agreement, each Thompson Warrant entitles the holder to purchase, at the exercise price (the "Exercise Price") of $1.75 per Thompson Warrant, one of the underlying common shares, subject to adjustment as provided in the Warrant Agreement, during the period beginning three months after the date of the Warrant Agreement and ending on February 23, 1996. As of March 3, 1995, a total of 5,843,785 Thompson Warrants had been exercised.
	Until the termination of the Warrant Agreement, the underlying common shares will be issued to and held by the Warrant Agent (i) as trustee for the benefit of the appropriate Warrant Shareholder and the holders of the Thompson Warrants or (ii) if a secured loan is made pursuant to the terms of the Shareholders Agreement, as collateral agent solely on behalf of Ito-Yokado.
	Until the termination or expiration of the Warrant Agreement, neither a Warrant Shareholder nor the Warrant Agent may, among other things, dispose of or pledge the underlying common shares except in connection with (i) the exercise of the Thompson Warrants, (ii) a secured loan to a Warrant Shareholder or (iii) a sale of any pledged underlying common shares pursuant to, and in accordance with, a Pledge Agreement (the "Pledge Agreement").
	At all times during the term of the Warrant Agreement, all underlying common shares held by the Warrant Agent as trustee, unless an event of default shall occur under a Pledge Agreement, shall be voted, on any matters submitted to the holders of record of Common Stock, in the same manner as a majority of the votes cast by the holders of record of the Common Stock other than Ito-Yokado and the Warrant Shareholders. If an event of default occurs under a Pledge Agreement, all underlying common shares held as security shall be voted, pursuant to the terms of such pledge agreement, in accordance with the instructions of Ito-Yokado.
				
	THE EMPLOYMENT AGREEMENTS. As a condition to the Closing, the Company entered into five-year Employment Agreements with Messrs. John P. Thompson, Jere W. Thompson and Joe C. (Jodie) Thompson, Jr. As of December 30, 1992, the Employment Agreement with Joe C. Thompson, Jr. was terminated and Mr. Thompson was paid the present discounted value of the remaining balance payable to him under the Employment Agreement. The Employment Agreements were effective upon the Closing and provide for an annual base salary of $600,000 and an annual bonus equal to $360,000 under each agreement. In addition, under the Employment Agreements the Thompsons will have such duties and responsibilities as are agreed upon from time to time by them and the Board. In addition, John P. Thompson and Jere W. Thompson will participate in employee benefit plans and arrangements offered to key management employees of the Company during the term of the agreement. The Employment Agreements also provide vacation, holidays and expense reimbursement in accordance with current Company policy. In early 1995, the Thompsons' Employment Agreements were modified to provide for them to relinquish their office space in Cityplace but retain certain personal property used in their offices.
	RESEARCH AND DEVELOPMENT
	The Company did not incur any significant expenses for product testing or traditional research and development activities in 1993 or 1994. During 1994, the Company's Strategic Planning Department conducted certain market research studies, which include concept tests, consumer preference tests, and tracking of changes in image and store usage patterns. In addition, the Company's test kitchen spent approximately $60,000 for new product development and taste testings and to test equipment used for cooking and displaying food products.
	RETAIL AUTOMATION
	In December 1993, the Company signed agreements with Electronic Data Systems Corporation, AT&T Global Information Solutions Company (formerly NCR Corporation) and Canmax Retail Systems, Inc. for the automation of certain business functions for both corporate and franchisee-operated convenience stores and to provide an automated information link among the stores, Southland's division and accounting offices and its corporate headquarters. The retail automation project is expected to be completed in phases over the next four years, and, when completed, will be specifically designed to provide information about every important detail of the store's operations and to facilitate inventory tracking. The first phase, implementation of which began at the end of 1993, provided for the roll out of hardware with application software to automate certain store accounting functions and other store level tasks. By year-end 1994, the hardware was installed in about 35% of the Company's stores.
	TRADEMARKS
	The Company's 7-Eleven-R- trademark has been registered since 1961 and is well known throughout the United States and in many other parts of the world. Other trademarks and service marks owned by the Company include Super-7-R-, Slurpee-R-, Big Gulp-R- and Big Bite-R-, as well as many additional trade names, marks and slogans relating to other individual types of food and beverage items. In connection with the Company's emphasis on the introduction of more fresh food items, the "Deli Central"-TM- and "World Ovens"-TM- trademarks are being
introduced in stores nationwide, along with the "Classic Selection"-TM- trademark, covering the Company's corporate brand spring water and soft drink products, and "Cafe Select"-TM-, covering the Company's gourmet coffees, cappuccino and hot chocolate products. As part of the collateral securing the Credit Agreement, the Company granted the lenders a security interest in its various trademarks.
	ADVERTISING
	During 1994, the Company continued its very successful "Comedians" campaign, which first aired in December 1993. This campaign delivered the message of "So many changes it"s not even funny" and emphasized the store remodeling program and daily distribution of fresh food items. The Company also utilized several promotional and seasonal advertising campaigns such as the "Monsters of the Gridiron" during the football season, the Slurpee Brain Freeze commercials during the Summer selling season, the Super Bowl Bash Contest, in which the lucky winner was awarded ten consecutive annual trips to the Super Bowl, various radio promotions that highlighted specific promotions for ATMs, fountain soft drinks, gasoline pay-at-the-pump convenience, hot dogs and the introduction of 7-Eleven's proprietary phone card, and, beginning in early 1995, promotions that reminded customers that there are a "hundred ways to start the day" at 7-Eleven.
	Advertising to support the introduction of new items was provided both on television and radio in 1994 and, in 1995, the Company is planning to continue this advertising and to add a new focus to highlight the "convenience" aspects of finding fresh food at 7-Eleven rather than at any of the Company's competitors, such as traditional delis or bakeries.
	COMPETITION
	During the past few years the Company, like other traditional convenience retailers, has experienced increased competitive pressures from supermarkets and drug stores offering extended hours and services, as well as from an increasing number of convenience-type stores built by the oil companies. The convenience retailing industry is also being negatively impacted by demographic factors (such as an aging population) and an erosion of demand for certain of its traditional core products, including cigarettes, soft drinks and beer.
	The Company's convenience retailing operations represent only a very small percentage of the highly competitive food retailing industry. Independent industry sources estimate that in the United States annual sales in 1993 for the convenience store industry were approximately $86.3 billion (including $43.9 billion of gasoline) and that over 66,300 store units were in operation. The industry traditionally has narrow net profit margins. In addition, the Company's stores compete with a number of national, regional, local and independent retailers, including grocery and supermarket chains, grocery wholesalers and buying clubs, other convenience store chains, oil company gasoline/mini-convenience "g-stores," independent food stores, and fast food chains as well as variety, drug and candy stores. In sales of gasoline, the Company's stores compete with other food stores and service stations and generate only a very small percentage of the gasoline sales in the United States. Each store's ability to compete is dependent on its location, accessibility and individual service. Growing competitive pressures from new participants in the convenience retailing industry and the rapid growth in numbers of convenience-type stores opened by oil companies over the past few years have intensified competitive pressures for the Company.
	Cityplace Center East, the Company's headquarters office building in Dallas, Texas, is occupied by the Company and other third party tenants, with the Company having the right to sublease the remaining space (see "Cityplace," above). During 1994, the Company entered into subleases with new tenants covering about 281,000 square feet. The building is now approximately 97% leased or reserved for expansion under current leases. In seeking tenants, this project competes with other downtown, Oak Lawn, North Dallas and North Central Expressway luxury office space developments. The Dallas real estate market currently has many office and retail sites available for lease. It is anticipated that competition for tenants will remain strong in the Dallas commercial real estate market.
	ENVIRONMENTAL MATTERS
	The operations of the Company are subject to various federal, state and local laws and regulations relating to the environment. Certain of the more significant federal laws are described below. The implementation of these laws by the United States Environmental Protection Agency ("EPA") and the states will continue to affect the Company's operations by imposing increased operating and maintenance costs and capital expenditures required for compliance. Additionally, the procedural provisions of these laws can result in increased lead times and costs for new facilities.
	The Resource Conservation and Recovery Act ("RCRA") of 1976, as amended, affects the Company through its substantial reporting, recordkeeping and waste management requirements. In addition, standards for underground fuel storage tanks and associated equipment may increase operating expenses and the costs of marketing petroleum products. In response to this legislation, and various state and local regulations, the Company has developed a comprehensive tank and associated equipment management program that established procedures for tank testing, repair and corrective action.
	The Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"), as amended, creates the potential for substantial liability for the costs of study and clean-up of waste disposal sites and includes various reporting requirements. This Act may result in joint and several liability even for parties not primarily responsible for hazardous waste disposal sites. As a consequence of past waste disposal, the Company may be potentially liable for cleanup costs at several sites which are being considered or which may be considered for federal clean-up action under CERCLA. Additional requirements imposed by the Superfund Amendments and Reauthorization Act of 1986 also have resulted in additional reporting duties.
	Violation of any federal environmental statutes or regulations or orders issued thereunder, as well as relevant state and local laws and regulations, could result in civil or criminal enforcement actions.
	CURRENT ENVIRONMENTAL PROJECTS AND PROCEEDINGS. As previously reported, in December 1988, the Company closed its chemical manufacturing facility in Great Meadows, New Jersey ("Great Meadows"). The Company had previously been issued an Administrative Consent Order relating to groundwater conditions at this facility by the New Jersey Department of Environmental Protection ("NJDEP"). The Administrative Consent Order required the Company to
pay a civil penalty of $50,000, to conduct a remedial investigation/feasibility study ("RI/FS") and to provide financial assurance for the ultimate clean-up.
	The Company has submitted a proposed clean-up plan to the NJDEP, which provides for remediation at the site for an approximate 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 NJDEP, a final clean-up plan has not been finalized. At December 31, 1994, the Company's recorded liability is $39.3 million, which represents its best estimate of the clean-up and treatment costs to be incurred. Some remedial actions have commenced.
	As previously reported, the Company filed suit in the United States District Court for the District of New Jersey against a large chemical company that formerly owned the Great Meadows property. In 1991, the parties executed a final settlement agreement pursuant to which the former owner agreed to pay a substantial portion of the cleanup costs described above. The Company has recorded a receivable of $23.0 million, at year-end 1994, representing the former owner's portion of the accrued clean-up costs.
	As of December 31, 1994, the Company had approximately 2,000 operating retail outlets involved in the sale of gasoline and other motor fuels. In the ordinary course of business, the Company occasionally discovers and repairs leaks in the underground storage tanks and piping systems associated with these retail outlets. The Company has established a comprehensive program to manage underground storage tanks and associated equipment and to ensure compliance with applicable laws.
	The Company anticipates that it will spend approximately $14 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 $25 million on such capital improvements from 1996 through 1998.
	Additionally, the Company accrues for the anticipated future costs of environmental clean-up activities (consisting of contamination 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 December 31, 1994, the Company has an accrued liability of $63.4 million for such activities and anticipates that 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 analysis of such factors as the age of the tanks, location of tank sites and experience with contractors who perform contamination assessment and remedial work.
	The Company is eligible to receive reimbursement for a large portion of these remediation costs under state reimbursement programs and has recorded a gross receivable of $76.1 million (a net receivable of $57.2 million after an allowance of $18.9 million) for the estimated probable state reimbursement of paid and accrued assessment and remediation expenses. The Company reduced the estimated net environmental cost reimbursements at the end of 1994 by approximately $6.0 million as a result of the Company's ongoing review of state reimbursement programs. 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 incurring eligible assessment and remediation expenses, assuming that the state administrative procedures for processing such reimbursements have been fully developed. The estimated future remediation expenditures and related state reimbursement amounts could change as governmental requirements and state reimbursement programs change in future years.
	In general, the Company's capital expenditures for environmental matters will continue to be affected by federal, state and local environmental laws and regulations. It is possible that future environmental requirements may be more stringent than current requirements, thereby requiring additional expenditures. As described above, the Company also anticipates future maintenance expenditures in connection with environmental requirements relating to continuing upkeep of gasoline storage tank systems at store locations.
	EMPLOYEES
	At December 31, 1994, the Company had 30,417 employees, of whom approximately 29 percent were considered to be either temporary or part-time employees. None of the Company's employees were subject to collective bargaining agreements at year-end, although a few employees in one store in Canada have joined a union.
	The Company has in the past been able to satisfy substantially all of its requirements for managerial personnel from within its organization. The Company's store managers and supervisory staff personnel are compensated on some form of incentive basis.
EXECUTIVE OFFICERS OF THE REGISTRANT
	The names, ages, positions and offices with the registrant of all current executive officers of the Company are shown in the following chart. The term of office of each executive officer is at the pleasure of the board of directors. The business experience of each such executive officer for at least the last five years, and the period during which he or she served in office, as well as the date each was employed by the Company, are reflected in the applicable footnotes to the chart. All executive officers of Southland named herein (other than Mr. Ito and Mr. Suzuki) were officers or employees of the Company at the time Southland filed its voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code, as described above.
________________________
	(1) Chairman of the Board and Director of the Company since March 5, 1991. Founder, Director and Advisor of Ito-Yokado Group, which includes Ito-Yokado Co., Ltd., Seven-Eleven Japan Co., Ltd. and Denny's Japan Co., Ltd., as well as other companies. Ito-Yokado Co., Ltd. is one of Japan's leading diversified retailing companies which, together with its subsidiaries and affiliates, operates superstores, convenience stores, department stores, supermarkets, specialty shops and discount stores. President of Ito-Yokado Co., Ltd. from 1958 to 1992. Chairman of Seven-Eleven Japan Co., Ltd. from 1978 to 1992, and President from 1973 to 1978. Chairman of Denny's Japan Co., Ltd. from 1981 to 1992, and President from 1973 to 1981. Chairman of Famil Co., Ltd. since 1979. Chairman of York Mart Co., Ltd. since 1979. President of York Matsuzakaya Co., Ltd. since 1979. President of Robinson's Japan Co., Ltd. since 1984. Chairman of Maryann Co., Ltd. since 1977. President of Oshman's Japan Co., Ltd. since 1984. Chairman of Steps Co., Ltd. since 1981. Chairman of York-Keibi Co., Ltd. since 1977. President of Union Lease Co., Ltd. since 1975. Statutory Auditor of Daikuma Co., Ltd. since 1982. Chairman of Marudai Co., Ltd. since 1989. Director of Seven-Eleven (Hawaii), Inc. since 1989. Chairman of Umeya Co., Ltd. since 1977. Director of Shop America Limited since 1990. Director and Chairman of the Board of IYG Holding Company since 1990.
	(2) Vice Chairman of the Board and Director of the Company since March 5, 1991. President and Chief Executive Officer of Ito-Yokado Co., Ltd., one of Japan's leading diversified retailing companies which, together with its subsidiaries and affiliates, operates superstores, convenience stores, department stores, supermarkets, specialty shops and discount stores, since October 1992 and Director since 1971; Executive Vice President from 1985 to 1992; Senior Managing Director from 1983 to 1985; Managing Director from 1977 to 1983; employee since 1963. Chairman of the Board and Chief Executive Officer of Seven-Eleven Japan Co., Ltd. since October 1992 and Director since 1973; President from 1975 to 1992; Senior Managing Director from 1973 to 1975. Statutory Auditor of Robinson's Japan Co., Ltd. since 1984. Chairman of Daikuma Co., Ltd. since 1978. President of Seven-Eleven (Hawaii), Inc. since 1989. President of Shop America Limited since 1990. President and Director of IYG Holding Company since 1990.
	(3) Director since March 5, 1991, and from 1981 until December 15, 1987; President and Chief Executive Officer since March 5, 1991; Executive Vice President (or Senior Executive Vice President) and Chief Financial Officer from 1979 to 1991; Vice President and General Counsel from 1973 to 1979; employee of the Company since 1965.
	(4) Executive Vice President and Chief Operating Officer since June 1993; Senior Vice President, Operations, from August 1992 to June 1993. Senior Vice President, 7-Eleven Stores Operations, from 1990 to August 1992; Vice President, Marketing, from 1989 to 1990; Vice President, Northern Region, 7-Eleven Stores, from January 1989 to October 1989; Vice President, Northwest Region, 7-Eleven Stores, from 1987 to 1988; Division Manager, Mountain Division, 7-Eleven Stores, from 1986 to 1987; Regional Marketing Manager from 1981 to 1986; employee of the Company since 1972.
	(5) Senior Vice President, Distribution and Foodservice, since June 1993; Vice President, Merchandising, from February 1992 to June 1993; Vice President, Marketing, from 1990 to 1992; Vice President, Northwest Region, 7-Eleven Stores, from 1989 to 1990; National Marketing Manager from 1986 to 1989; Division Manager, Central Pacific Division, 7-Eleven Stores, from 1979 to 1986; employee of the Company since 1972.
	(6) Senior Vice President, Finance, since June 1993; Vice President, Planning and Finance, from August 1992 to June 1, 1993; Vice President and/or Vice President, National Gasoline, from August 1991 to August 1992; General Manager, National Gasoline, from 1986 to 1991; employee of the Company since 1985.
	(7) Vice President, Corporate Tax, since May 1993; Corporate Tax Manager from March 1983 to May 1993. Partner, Touche Ross & Co., from 1978 to 1983; employee of the Company since 1983.
	(8) Vice President, Construction and Maintenance, since August 1992. Vice President, Stores Development, from January 1989 to August 1992; Vice President, Mid-America Region, 7-Eleven Stores, from 1987 to 1988; Vice President, Central Stores Region, from 1980 to 1987; Central Stores Regional Manager from 1978 to 1980; Division Manager, Canada, from 1976 to 1978; employee of the Company from 1962 to 1972 and since 1975.
	(9) Vice President, Human Resources, since December 1987; Manager, Stores Human Resources, January 1987 to December 1987; Manager, Organizational Research & Development, from 1985 to 1987; Department Manager, Organizational Research and Development, from 1984 to 1985; Manager, Organizational Research and Development, from 1982 to 1984; employee of the Company since 1977.
	(10) Vice President, International and Real Estate, since May 1, 1994; Vice President Real Estate and Licensed Operations, from August 1992 until May 1994; Vice President, Atlantic Region, 7-Eleven Stores, from 1990 to 1992; Vice President, Chesapeake Region, 7-Eleven Stores, from 1987 to 1990; Regional Manager, Chesapeake Stores Region, in 1987; Division Manager, Capitol Stores Division, from 1986 to 1987; Division Manager, Great Lakes Stores Division, from 1984 to 1986; Operations Manager, Great Lakes Stores Division, from 1981 to 1984; employee of the Company since 1975.
	(11) Vice President since April 1992. Controller since December 1987; Assistant Corporate Controller from 1977 to 1987; employee of the Company since 1973.
	(12) Vice President and General Counsel since August 1992. Assistant General Counsel from January 1990 to July 1992; Associate General Counsel from January 1987 to December 1989; employee of the Company since 1980.
	(13) Vice President, Planning and Treasurer since August 1992; Vice President since April 1992 and Treasurer since December 16, 1987; Deputy Treasurer from 1984 to 1987; Assistant Treasurer from 1983 to 1984; employee of the Company since 1970.
FORMER OFFICERS.
	The names, ages, positions and offices formerly held with the registrant and the business experience for at least the five years preceding their departure from Southland of all persons who served as officers of the Company during 1994 but who no longer serve as such are shown below. Also shown for each such person is the period during which he or she served in his or her office, as reflected in the footnotes to the following chart.
	(1) Executive Vice President from June 1993, Chief Administrative Officer from 1991 and Secretary of the Company from 1987 until February 1995; Senior Vice President from 1987 to June 1993; General Counsel from 1979 to 1992; Vice President from 1980 to 1987; employee of the Company from 1973 to 1995.
	(2) Senior Vice President, Merchandising, from June 1993 until February 1995; Vice President, Line Management, from August 1992 to June 1993. Vice President, Central Region, 7-Eleven Stores, from October 1990 to August 1992; Vice President, Northeast Region or Eastern Region, 7-Eleven Stores, from 1987 to 1990; Division Manager, Northeast Stores Region, from 1984 to 1987; Vice President, Retail Marketing, of Citgo Petroleum Corporation from 1983 to 1984; Marketing Manager, Eastern Stores Region, 7-Eleven Stores, from 1981 to 1983; employee of the Company from 1966 to 1995.
	(3) Vice President, Corporate Communications, from August 1991 until July 1994; Manager, Corporate Communications, from 1989 to 1991; employee of the Company from 1982 to 1994.
ITEM 2.
ITEM 2. PROPERTIES
	Under the Credit Agreement, virtually all the Company's assets, not previously subject to liens, are encumbered, including both tangible and intangible property rights, as well as stock in the Company's non-foreign subsidiaries, where such encumbrance is not otherwise prohibited. As of December 31, 1994, there were approximately 3,898 operating 7-Eleven stores, 182 non-operating stores and 13 other properties throughout the United States subject to mortgages (including both owned and leased properties). The lien against the Company's ownership or leasehold interest in any property will be released, with the consent of the Company's Senior Lenders, if the Company sells the property, the lease to the Company terminates or upon payment by the Company of the amounts due under the Credit Agreement.
	OPERATING AND FRANCHISING OF CONVENIENCE FOOD STORES
	7-ELEVEN. At the end of 1994, the 7-Eleven stores group utilizes 93 offices in 21 states and Canada. The following table shows the location and number of the Company's 7-Eleven convenience stores (excluding stores under area licenses and of certain affiliates) in operation on December 31, 1994.
	(a) Of the 7-Eleven convenience stores set forth in the foregoing table, 818 are leased by the Company from The Southland Corporation Employees' Savings and Profit Sharing Plan (the "Savings and Profit Sharing Plan"). As of year-end 1994, the Company also leased one location under construction and 81 closed convenience stores or office locations from the Savings and Profit Sharing Plan. 	(b) The above numbers include 17 stores in Canada that operate under a management contract and five stores in New York operating under a new franchise agreement ("Genesis"), one of which has subsequently closed. The Company has no interest in the real property on which those stores are located.
	OTHER RETAIL. As shown in the following table, at year-end 1994, the Company operated 48 Quik Mart stores in Illinois, Indiana, Maryland, Massachusetts, Missouri, New Hampshire, Texas, Virginia and Wisconsin and 38 High's Dairy Stores located in Maryland, Virginia, Pennsylvania and West Virginia. As of December 31, 1994, the Company also operated three Super-7 gasoline stations in California, which are all owned by the Company.
	The following table shows the location and number of the Company's Quik Mart, High's and Super-7 locations in operation on December 31, 1994.
	OTHER INFORMATION ABOUT PROPERTIES AND LEASES. At December 31, 1994, there were four 7-Eleven stores in various stages of construction (on property leased by the Company), and the Company owned 19, and had leases on 9, undeveloped convenience store sites. In addition, the Company held 183 7-Eleven, High's and Quik Mart properties available for sale consisting of 100 unimproved parcels of land, 65 closed store locations and 18 parcels of excess property adjoining store locations. At December 31, 1994, 43 of these properties were under contract for sale. 	 	On December 31, 1994, the Company held leases on 504 closed store or other non-operating facilities, 78 of which were leased from the Savings and Profit Sharing Plan. Of these, 357 were subleased to outside parties. 	 	Generally, the Company's store leases are for primary terms of from 14 to 20 years, with options to renew for additional periods. Many leases contain provisions granting the Company a right of first refusal in the event the lessor decides to sell the property. Many of the Company's store leases, in addition to minimum annual rentals, provide for percentage rentals based upon gross sales in excess of a specified amount and for payment of taxes, insurance and maintenance.
	OTHER PROPERTIES. The Company leases a 10,700-square-foot satellite commissary constructed in 1991 in Austin, Texas, for fresh deli-style food preparation and distribution. The Company also leases 102,000-square-feet of office/warehouse space and an additional 43,600-square-feet of land in Denver, Colorado, for a regional equipment warehouse and service center.
	The Company owns residual property from its distribution and food processing operations that were divested in late 1992 and plans to dispose of the following properties: (1) a five-acre tract of land in Delanco, New Jersey, on which is located a 19,000-square-foot branch distribution facility and (2) a 21.5-acre tract of land in Salt Lake City, Utah, on which is located a leased 77,000-square-foot food processing plant (which includes 6,930 square feet of office space). The Salt Lake City, Utah, location is currently subleased to McLane on an interim basis and the Company intends to dispose of the facility in 1995.
	The Company also owns a 287-acre tract in Great Meadows, New Jersey, with a closed chemical plant, a part of which is currently involved in environmental clean-up. (See "Current Environmental Projects and Proceedings," pages 15 through 17, above.)
	CORPORATE
	The Company's corporate office headquarters is in Dallas, Texas in a 42- story office building, known as Cityplace Center East. The Company's lease covers the entire Cityplace Tower, but gives the Company the right to sublease to other parties. As of early 1995, subleases had been signed with third parties so that (including the space leased by Southland) the building is 97% leased or reserved for expansion under current leases. The Company currently utilizes other office space in and around Dallas (although most corporate office space is consolidated in Cityplace Center East). The Company also holds tracts in Dallas, Texas, not included in Cityplace, totaling about 30 acres.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
	As previously reported, on October 24, 1990, the Company filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, Case No. 390-37119-HCA-11. The Company's Plan of Reorganization was confirmed by the Court on February 21, 1991. Subsequent to the Company's bankruptcy filing, the Company's senior lenders under the Credit Agreement filed a proof of claim demanding, among other things, default interest, as a result of the Company's failure to make an interest payment due June 15, 1990. The Bankruptcy Court issued its opinion, on March 17, 1992, awarding approximately $12.2 million in additional interest to the Credit Agreement Banks. The Company has appealed this decision but recognized the approximately $12.2 million of additional interest expense in its financial statements for 1991. There were no material developments in this matter in 1994. However, during 1994 and in connection with the amendment of the Credit Agreement, the Company and the Old Senior Lenders negotiated an out-of-court arrangement whereby a letter of credit was issued for the account of the Company to provide to the Old Senior Lenders assurance of payment of such additional interest expense if the Old Senior Lenders are successful in the appeal.
	As previously reported, on September 23, 1993, the Company was served with a Summons and Complaint in a purported class action lawsuit entitled 7-Eleven Owners for Fair Franchising, et, al. v. The Southland Corporation, et al., Case No. 722272-6, in the Superior Court for Alameda County, California. Also named as defendants in the Complaint are Southland's majority owners and approximately 16 vendors who supply goods to 7-Eleven franchisees in the State of California. The named plaintiffs purportedly represent all current 7-Eleven franchisees in the State of California and all former 7-Eleven franchisees in the State of California for the past six years. The Complaint alleges a variety of violations of California state antitrust laws, breaches of contract and other claims relating to discounts and allowances, vendor-supplied equipment, Southland's accelerated inventory management program and the 24-hour operation of 7-Eleven stores. Discovery in this matter is proceeding. The Company intends to contest the certification of a class in this litigation and to defend vigorously against all of the plaintiffs' allegations.
	On August 17, 1990, the Superior Court for Alameda County, California approved the settlement of a class action suit filed against the Company. The suit was consolidated under the title Market Franchise Cases (Jud. Council Dkt. No. 387). The plaintiff class consisted of all persons who owned 7-Eleven franchises in California at any time from May 24, 1973, to June 15, 1990. To date, the Company has made settlement payments and credits (including attorneys' fees and litigation expenses awarded to class counsel) totalling $16.5 million. Class members' claims totalling less than $50,000 remain to be resolved.
	On June 11, 1993, the Company filed a lawsuit in the United States District Court for the Northern District of Texas, Dallas Division, against Occidental Petroleum Corporation and OXY Oil and Gas USA, Inc. ("OXY"), seeking damages pursuant to contractual indemnification provisions for present and future expenses that have been incurred (or are anticipated) by the Company associated with pre-existing environmental conditions at Quik Mart locations which the Company acquired from OXY in 1983. The lawsuit is still in the discovery phase and the Company is diligently prosecuting its claim.
	In the second quarter of 1994, Southland was served with a lawsuit (which was subsequently amended in July 1994) entitled Emil V. Sparano, et al., Plaintiffs, v. The Southland Corporation, a Texas corporation, IYG Holding Company, a Delaware corporation, Ito-Yokado, Ltd., a foreign corporation, Seven-Eleven Japan Co., Ltd., a foreign corporation, John P. Thompson, Jere W. Thompson, Joe C. (a/k/a "Jodie") Thompson, Jr., Clark J. Matthews, II, Walton Grayson, III, John H. Rodgers, and Frank Gangi, Defendants, Case No. 94 C 2098, in the U.S. District Court for the Northern District of Illinois. The plaintiffs, several current or former 7-Eleven franchisees, seek to represent a class, purportedly consisting of all persons or entities who owned one or more 7-Eleven convenience store franchises since 1987.
	Of the named defendants, Clark J. Matthews, II is a current officer and director of the Company; John H. Rodgers, Walton Grayson, III and Frank Gangi are former officers of the Company, and Mr. Grayson is also a former director; John P. Thompson and Jere W. Thompson have been directors both prior to, and at all times since, 1987; Joe C. Thompson is a former director of the Company (hereafter John P. Thompson, Jere W. Thompson and Joe C. Thompson, Jr., collectively, the "Thompsons"); IYG Holding Company holds approximately 64% of the shares of the Company and is a jointly owned subsidiary of Ito-Yokado Co., Ltd. and Seven-Eleven Japan Co., Ltd.
	The second amended complaint alleges that, starting with the leveraged buyout of Southland in 1987, and continuing until the present time, Southland has breached its contractual obligations to 7-Eleven franchisees under the 7- Eleven Franchise Agreements by failing to spend adequate sums of money for advertising and other services and for maintaining and remodeling 7- Eleven stores and the equipment therein. In addition to alleging breach of contract, the second amended complaint includes claims against Southland for alleged breach of fiduciary duty, breach of an alleged covenant of good faith and fair dealing, fraudulent conveyance of corporate assets, fraudulent misrepresentations, conversion and unjust enrichment. Additional claims have been asserted against the individual defendants for alleged breach of fiduciary duty and breach of duties of competence, due care and loyalty. The second amended complaint requests damages, interest, costs and attorneys' fees "in excess of $1 billion."
	Southland has filed a motion to dismiss all claims asserted against it, except the breach of contract claim. The individual defendants and the foreign companies have filed motions to dismiss for lack of personal jurisdiction and for failure to state any claims upon which relief could be granted. None of these motions have been decided by the court, and the court has not yet decided whether the case will be permitted to proceed as a class action.
	Southland intends to contest plaintiffs' effort to prosecute the lawsuit as a class action, and it also intends to defend vigorously all of the claims on the merits. Southland believes that it has meritorious defenses to each of the claims.
	Information concerning other legal proceedings is incorporated herein from "Environmental Matters," pages 15 through 17, above.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	No matters were submitted to a vote of security holders during the fourth quarter of 1994.
				 PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	The Company's Common Stock, $.0001 par value per share, is the only class of common equity of the Company and represents the only voting securities of the Company. There are 409,922,935 shares of Common Stock issued and outstanding and, as of March 3, 1995, there were 3,060 record holders of the Common Stock. The Company's Common Stock is traded on the NASDAQ Small-Cap Market.
(a) These quotations reflect inter-dealer prices without retail mark-up, 	mark-down or commission and may not necessarily represent actual 	transactions.
	The indentures governing the Company's outstanding debt securities do not permit the payment of cash dividends except in limited circumstances. The Credit Agreement also restricts the Company's ability to pay cash dividends on the Common Stock.
	Under Texas law, cash dividends may only be paid (a) out of the surplus of a corporation, which is defined as the excess of the total value of the corporation's assets over the sum of its debt, the par value of its stock and the consideration fixed by the corporation's board of directors for stock without par value, and (b) only if, after giving effect thereto, the corporation would not be insolvent, which is defined to mean the inability of a corporation to pay its debts as they become due in the usual course. Surplus may be determined by a corporation's board of directors by, among other things, the corporation's financial statements or by a fair valuation or information from any other method that is reasonable in the circumstances. No assurances can be given that the Company will have sufficient surplus to pay any cash dividends even if the payment thereof is not otherwise restricted.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 	AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SUMMARY OF RESULTS OF OPERATIONS 	 	The Company's net earnings for 1994 were $92.0 million, compared to net earnings of $71.2 million in 1993 and a net loss of $131.4 million in 1992. The Company showed marked improvement in its earnings before income taxes, extraordinary gain and cumulative effect of accounting change as reflected below:
Each years' results included a number of special or unusual items which included among other things:
	In addition to the special and unusual items noted above, the Company's improvement in 1994 earnings was primarily due to savings in selling, general and administrative expenses, offset by lower merchandise gross profit due to fewer stores. Although merchandise gross profit declined in total, merchandise sales and gross profits per store were favorable in 1994 compared to 1993 and 1992 and have been improving each quarter during 1994 over 1993.
(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 $6.68 billion for the year ended December 31, 1994, compared to sales of $6.74 billion in 1993 and $7.43 billion in 1992. The 1994 sales decline is primarily the result of fewer convenience stores due to closures (see Management Strategies). Sales also declined in 1993 and 1992, primarily due to fewer stores, lower same-store (stores open more than one year) merchandise sales and the September 1992 disposition of the Company's distribution and food center assets (see Liquidity and Capital Resources-Other). Merchandise sales for 1994 and 1993 were also affected by the deflationary effect of cigarette price reductions (on certain premium brands) associated with manufacturers' cost reductions starting in August 1993. Merchandise sales increases or (decreases) as compared to the prior year and inflation information is detailed below:
	Until 1994, same-store merchandise sales real growth (adjusted to exclude inflation) had declined since early 1989 primarily due to competitive pressures. This negative trend began to reverse in 1993, and in 1994 the Company achieved its first full year of same-store real growth in merchandise sales since 1988. The 1994 results also reflect the first four consecutive quarters of positive same-store merchandise sales growth (including the effects of deflation or inflation) since the third quarter of 1990. The Company believes the improvement is a result of its new merchandising processes, everyday-fair-pricing and store-remodeling strategies (see Management Strategies).
	Gasoline sales dollars per store increased 8.7%, 9.1% and 6.5% in 1994, 1993 and 1992, respectively. This increase is primarily due to per store gallonage improvement of 7.8% in 1994, 11.1% in 1993 and 6.3% in 1992. This continuing improvement 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 gas facilities; promoting the high quality of CITGO-brand gasoline; the closing of low-volume locations; and managing gasoline prices, inventories and product mix on a by- store basis.
MANAGEMENT STRATEGIES 	 	Since 1992, the Company has been 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: the extensive remodeling of its store base; a customer-driven approach to product selection; an everyday-fair-pricing policy on all items; the daily delivery of fresh perishable items; the introduction of quality, ready-to-eat fresh foods; and the implementation of a retail automation system. 	 	The Company has been devoting the majority of its capital resources over the last couple of years toward the most extensive remodeling of its existing store base ever undertaken. In conjunction with the remodeling program, the Company has been pruning its store base as it identifies stores, which can be closed or disposed of, that are not expected to achieve an acceptable level of profitability in the future or meet minimum image standards. As a result, the Company closed 184 stores in 1994, 401 in 1993 and 358 in 1992. However, as the Company approaches completion of the remodeling program, it plans to strengthen its position in existing markets by expanding its store base. The planning process for this new store development is underway and new store openings should outpace store closures by 1997. 	 	The customer-driven approach to merchandising, which was adopted by the Company in 1992, continues to focus on providing the customer an expanded selection of quality products at a good value. This is being accomplished by prioritizing the importance of ordering at the store level, removing slow- moving items and aggressively introducing new products in the early stages of their life cycle. This process, which has contributed to improved sales and profits, will be an ongoing part of managing our business in order to satisfy the ever-changing preferences of our customers. 	 	The Company's everyday-fair-pricing strategy has provided consistent prices on all items by reducing its reliance on discounting of some products and lowering prices on others since its inception in 1992. Going forward, the Company will continue to migrate toward lower retail prices as the Company achieves decreased product costs through strategic alliances with its suppliers and distributors.
	Daily delivery of fresh perishable items and high-quality ready-to-eat foods is another key management strategy. Implementation of this strategy includes third-party development and operation of combined distribution centers, fresh-food commissaries and bakery facilities in most of the Company's markets around the country. The commissary and bakery ready-to- eat items, like fresh sandwiches and pastries, along with goods from multiple vendors such as dairy products, produce and other perishable goods, are "combined" at a distribution center and delivered daily to each store. In addition to providing fresher products and improving in-stock conditions from daily deliveries, the combined distribution is also intended to lower product costs in part from vendor's savings on direct store deliveries. The Company expects the freshness and flexibility of the products from these operations to improve sales and gross profits.
	The implementation of a retail automation system was begun by the Company in 1994. The initial phase involves installing in-store processors, which will automate accounting and other store-level tasks. After future phases are complete, the system will provide each store and its suppliers and distributors with information to make better decisions in anticipating customer
needs. The in-store processors currently being installed will meet the demands of future phases of the automation process.
GROSS PROFITS 	 	Consolidated gross profits were $1.54 billion for 1994, $32.9 million below 1993, which was $32.4 million below 1992, reflecting lower merchandise gross profits because of fewer stores. Even though total merchandise gross profits have declined, merchandise gross profit per store has consistently improved over prior year results for the last eight quarters. Also, the fourth quarter of 1994 showed growth in total merchandise gross profits over prior year results, for the first time since the first quarter of 1990. The following chart highlights the percent change in merchandise gross profit per store and the components thereof:
	 	Merchandise gross profit margins were greatly affected, beginning in 1992, by the implementation of the everyday-fair-price strategy, which reduced discounting and promotional activities, increasing the margins in 1992 and 1993 (see Management Strategies). The margins also benefited from lower cigarette costs (beginning in August 1993) and lower costs of products under the Company's supply agreement with McLane (see Liquidity and Capital Resources - Other). In 1994, with the reduction of discounting in place, the Company tested lower prices in certain parts of the country as part of a more aggressive everyday-fair-price strategy. These lower prices, combined with increased costs for disposal of slow moving merchandise was primarily responsible for the decrease in 1994 merchandise margins.
	Gasoline gross profits per store were 12.8%, 29.8% and 28.0% higher, compared to the preceding year, for 1994, 1993 and 1992, respectively. Gross profits improved due to the combination of an increase in gallons sold and higher margins. Gross profit margin on gasoline sales was 14.5 cents per gallon for 1994, an increase of .6 cents compared to 1993, which was 2.0 cents higher than 1992. The increase in margins 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")
* ADJUSTED TO EXCLUDE SEVERANCE AND RELATED COSTS AND THE LOSS FOR STORE CLOSINGS AND DISPOSITIONS OF PROPERTIES, INCLUDING CITIJET (SEE SUMMARY OF RESULTS OF OPERATIONS).
	The majority of the decrease in SG&A expense, as adjusted, resulted from cost savings realized from reductions in force that began late in 1992 and continued through 1994, combined with the effect of having fewer stores (see Management Strategies). Also, in the fourth quarter, the Company included 1994 year-to-date amounts of certain expenses, totaling approximately $20 million (approximately $15 million through September 30th) in selling, general and administrative expenses rather than in cost of goods sold where they had been included in prior periods.
	In 1993 and 1992, after reviewing the functions necessary to enable its stores to respond faster, more creatively and more cost efficiently to rapidly changing customer needs and preferences, the Company implemented certain reorganization plans. During the third quarter of 1994, the Company began a similar review that was completed in December. The Company anticipates that the latest review will result in approximately $18 million in annual savings beginning in 1995. The resultant plan will both realign and reduce personnel and will require changes in the location and size of office facilities. Approximately 335 employees throughout the Company will be terminated during 1995. In addition, one office facility will be sold at a loss and space at several leased facilities will be terminated or subleased. The $7.4 million cost of the plan was accrued in SG&A expense, and is comprised of $5.7 million for severance benefits and $1.7 million for changes in office facilities. Management intends for the review process to be ongoing, but currently can not predict what further recommendations will be made nor the timing of their implementation.
INTEREST EXPENSE 	 	The Company's total interest expense in 1994 increased $14.0 million over 1993, primarily due to the refinancing of the 12% Senior Notes with working capital and bank debt in August 1993. Unlike the interest on the bank debt, interest on the 12% Senior Notes was subject to SFAS No. 15 treatment with interest payments recorded as a reduction of principal rather than interest expense (see Note 9 of "Notes to Consolidated Financial Statements").
	Interest expense in 1993 and 1992 declined $29.1 million and $65.6 million as compared to prior years, respectively. The decline in interest expense in 1993 and 1992 was primarily due to declining interest rates on floating rate debt and lower term loan balances, combined with greater use of commercial paper in 1993, which has lower interest rates than other debt instruments.
	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).
	The weighted average interest rate on the Company's floating rate debt was 5.51% in 1994, 4.52% in 1993 and 6.56% in 1992. Approximately 31% of the Company's debt contains floating rates that will be unfavorably impacted by rising interest rates. However, overall interest expense in 1995 is expected to decline when compared to 1994, as a result of factors noted above.
INCOME TAXES 	 	The Company recorded a tax benefit of $18.5 million in 1994, compared to a tax provision of $8.7 million and $11.5 million in 1993 and 1992, respectively. The 1994 tax benefit is primarily due to the realization of a portion of the Company's net deferred tax asset. Based on a one-year projection of taxable income, the Company has recognized a portion of its net deferred tax asset through a $30.0 million reduction in the valuation allowance with $13.9 million recorded in other current assets and the remainder in other assets. Taxable income for 1995 was projected by utilizing steady state assumptions defined as only inflationary increases in sales and no increase in gross profit margins. If the Company's current trend of profitability continues, then additional deferred tax assets of up to approximately $175 million could be recognized.
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 from 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 and 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 new revolving credit facility was extended 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 amended Credit Agreement has eliminated certain financial and operating covenants required under the old agreement. These include, among other things, the attainment of certain levels of earnings before interest, taxes, depreciation and amortization ("EBITDA") and the ratio of senior indebtedness to subordinated indebtedness.
	Although certain covenants and the required levels have been modified under the amended Credit Agreement, they continue to require ongoing improvement in the Company's financial condition. For the period ended December 31, 1994, the Company was in compliance with all of the covenants required under the Credit Agreement as amended. The Company complied with the principal financial and operating covenants, which are calculated over the latest 12-month period, as follows:
* INCLUDES EFFECTS OF THE SFAS NO. 15 INTEREST PAYMENTS.
	In 1994, the Company paid $400.6 million of debt principal of which $281.7 million related to the amendment of the Credit Agreement. Other principal reductions during the course of the year were $118.9 million of which $83.7 million was for secured indebtedness ($47.3 million on the old term loans) and $35.2 million was SFAS No. 15 interest. Outstanding balances on December 31, 1994 for the commercial paper, the Revolver and the Term Loan were $391.3 million, $50.0 million and $300.0 million, respectively. As of December 31, 1994, outstanding letters of credit related to the Credit Agreement totaled $119.9 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 $271.6 million for 1994 compared to $232.1 million in 1993 and $172.6 million in 1992. In 1994, the majority of cash was provided by operations, combined with a $24.3 million decrease in other assets primarily due to a reduction in cash collateral required for payment of anticipated insurance claims (see Results of Operations).
CAPITAL EXPENDITURES 	 	During 1994, net cash used in investing activities consisted primarily of payments of $171.6 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. In addition, the Company is expected to use approximately 13% of 1995's capital expenditures on the retail automation project (see Management Strategies).
	Through December 31, 1994, approximately 2,700 stores had been remodeled. As in 1994, the 1995 average-per-store capital expenditures and associated upfront expenses will be less than 1993 levels and will focus 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. Reducing the scope of the remodels has also virtually eliminated the need to close stores during construction, which negatively affected merchandise sales at stores remodeled in 1993.
CAPITAL EXPENDITURES - GASOLINE EQUIPMENT 	 	The Company anticipates that it will spend approximately $14 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 $25 million on such capital improvements from 1996 through 1998.
ENVIRONMENTAL COMPLIANCE - STORES 	 	The Company accrues for the anticipated future costs of environmental clean-up activities (consisting of contamination 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 December 31, 1994, the Company has an accrued liability of $63.4 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 analysis of such factors as the age of the tanks, location of tank sites and experience with contractors who perform contamination assessment and remedial work.
	The Company is eligible to receive reimbursement for a large portion of these costs under state reimbursement programs and has recorded a gross receivable of $76.1 million (a net receivable of $57.2 million after an allowance of $18.9 million) for the estimated probable state reimbursement of paid and accrued assessment and remediation expenses. The Company reduced the estimated net environmental cost reimbursements at the end of 1994 by approximately $6.0 million as a result of completing a review of state reimbursement programs. 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 $39.3 million and $38.9 million at December 31, 1994 and 1993, respectively. Of this amount, $34.2 million and $33.8 million are included in deferred credits and other liabilities and the remainder in accrued expenses and other liabilities for the respective years. 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 $23.0 million at December 31, 1994, representing the former owner's portion of the clean-up costs.
	None of the amounts related to environmental liabilities, for the stores or the chemical plant, have been discounted.
OTHER 	 	In November 1992, the McLane Company, Inc. ("McLane"), acquired certain of the Company's distribution and food center assets. In addition, Southland ceased operations in December 1992 at its distribution and food centers in Orlando, Florida and Tyler, Texas and in April 1993 at Champaign, Illinois. The Company disposed of its facility in Orlando in November 1993, its facility in Tyler in March 1994 and the Champaign facility in December 1994. These transactions did not have a material impact on 1994 or 1993 earnings, since they were included in the $45.0 million loss recognized in 1992 resulting from the sale to McLane and related plant closings. Since the transaction, the Company has benefited from lower cost of products purchased under a supply agreement with McLane. In addition to the $141.8 million in gross proceeds received from McLane in connection with the acquisition of the Company's distribution and food processing assets in 1992, $44.9 million of cash was received in 1993, primarily from the sale of inventories to McLane and $6.3 million was received in 1994 related to the sale of the Tyler facility.
	In 1993, the Company disposed of its last non-convenience retailing business, the Citijet fixed-base operation at Dallas Love Field Airport, and recognized a loss of $10.8 million on the transaction.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
		 THE SOUTHLAND CORPORATION AND SUBSIDIARIES
		 CONSOLIDATED FINANCIAL STATEMENTS FOR THE 		YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
THE SOUTHLAND CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 -------------------------------------------------------------------------------
1. ACCOUNTING POLICIES
	PRINCIPLES OF CONSOLIDATION - The Southland Corporation and 	subsidiaries ("the Company") is owned approximately 64% by IYG Holding 	Company, which is jointly owned by Ito-Yokado Co., Ltd. ("IY") and 	Seven-Eleven Japan Co., Ltd.("SEJ").
	The consolidated financial statements include the accounts of The 	Southland Corporation and its subsidiaries. Intercompany transactions 	and account balances are eliminated. Prior-year amounts have been 	reclassified to conform to current-year presentation.
	The Company's net sales are comprised of sales of products and 	services. Net sales and cost of goods sold of stores operated by 	franchisees are consolidated with the results of Company-operated 	stores. Net sales of stores operated by franchisees are $2,820,685,000, 	$2,810,270,000 and $2,931,494,000 from 2,962, 2,998 and 3,011 stores for 	the years ended December 31, 1994, 1993 and 1992, respectively. Under 	the present franchise agreements, initial franchise fees are recognized 	in income currently and are generally calculated based upon gross profit 	experience for the store or market area. These fees cover certain costs 	including training, an allowance for travel, meals and lodging for the 	trainees and other costs relating to the franchising of the store.
	The gross profit of the franchise stores is split between the Company 	and its franchisees. The Company's share of the gross profit of 	franchise stores is its continuing franchise fee, generally ranging from 	50% to 58% of the gross profit of the store, which is charged to the 	franchisee for the license to use the 7-Eleven operating system and 	trademarks, for the lease and use of the store premises and equipment, 	and for continuing services provided by the Company. These services 	include merchandising, advertising, recordkeeping, store audits, 	contractual indemnification, business counseling services, training 	seminars and preparation of financial statements. The gross profit 	earned by the Company's franchisees of $517,955,000, $530,436,000 and 	$539,835,000 for the years ended December 31, 1994, 1993 and 1992, 	respectively, are included in the Consolidated Statements of Operations 	as selling, general and administrative expenses.
	Sales by stores operated under domestic and foreign area license 	agreements are not included in consolidated revenues. All fees or 	royalties arising from such agreements are included in other income. 	Initial fees, which have been immaterial, are recognized when the 	services required under the agreements are performed.
	OTHER INCOME - Other income is primarily comprised of area license 	royalties and interest income. The area license royalties include 	amounts from area license agreements with SEJ of approximately
	$42,000,000, $39,000,000 and $37,000,000 for the years ended December 	31, 1994, 1993 and 1992, respectively.
	COST OF GOODS SOLD - Cost of goods sold includes buying and occupancy 	expenses.
	CASH AND CASH EQUIVALENTS - Cash and cash equivalents include temporary 	cash investments of $3,028,000 and $11,345,000 at December 31, 1994 and 	1993, respectively, stated at cost, which approximates market. The 	Company considers all highly liquid investment instruments purchased 	with maturities of three months or less to be cash equivalents.
	INVENTORIES - Inventories are stated at the lower of cost or market. 	Cost is generally determined by the LIFO method for stores in the United 	States and by the FIFO method for stores in Canada.
	DEPRECIATION AND AMORTIZATION - Depreciation of buildings and equipment 	is based upon the estimated useful lives of these assets using the 	straight-line method. Amortization of capital leases, improvements to 	leased properties and favorable leaseholds is based upon the remaining 	terms of the leases or the estimated useful lives, whichever is shorter.
	Foreign and domestic area license royalty intangibles were recorded in 	1987 at the fair value of future royalty payments and are being 	amortized over 20 years using the straight-line method. The 20-year 	life is less than the estimated lives of the various royalty agreements, 	the majority of which are perpetual.
	STORE CLOSINGS - Provision is made on a current basis for the write-down 	of identified owned-store closings to their net realizable value. For 	identified leased-store closings, provision is made on a current basis 	if anticipated expenses are in excess of expected sublease rental 	income. The recorded value of assets for certain stores with marginal 	financial results is periodically evaluated, and, if necessary, the 	carrying value of the asset is adjusted.
	BUSINESS SEGMENT - The Company operates in a single business segment - 	the operating and franchising of convenience food stores, primarily 	under the 7-Eleven name.
2. ACCOUNTS AND NOTES RECEIVABLE
3. INVENTORIES
	Inventories stated on the LIFO basis that are included in inventories 	in the accompanying Consolidated Balance Sheets were $63,340,000 and 	$65,607,000 at December 31, 1994 and 1993, respectively, which is less 	than replacement cost by $28,286,000 and $25,292,000, respectively. At 	December 31, 1993 and 1992, inventories were reduced resulting in a 	liquidation of LIFO inventory layers recorded at costs that were lower 	than the costs of current purchases. The effects of these reductions 	were to decrease cost of goods sold by approximately $3,900,000 in 1993 	and to decrease the loss on the sale and closing of the distribution and 	food centers by approximately $23,000,000 in 1992.
4. OTHER CURRENT ASSETS
5. PROPERTY, PLANT AND EQUIPMENT
6. DIVESTED ASSETS
	In November 1992, the Company sold two of its five distribution centers 	and three of its six food centers to McLane Company, Inc. ("McLane"). 	The remaining facilities were disposed of in 1993 and 1994. For the 	years ended December 31, 1994, 1993 and 1992, the Company received cash 	proceeds of approximately $6,300,000, $44,900,000 and $141,800,000, 	respectively, from the disposition of distribution and food center 	assets. 	 	The $45 million pre-tax loss on the sale and closing of the distribution 	and food centers in 1992 included the loss from the sale of assets to 	McLane, the expected loss on dispositions of the remaining facilities, 	and the expected net cash outflows on all such facilities subsequent to 	August 31, 1992 (the measurement date), until the expected dates of 	disposition. Operating results prior to the disposition of the 	facilities, which were included in the loss, and adjustments to the loss 	upon final disposition were not material.
7. OTHER ASSETS
8. ACCRUED EXPENSES AND OTHER LIABILITIES
	Other includes accounts payable to The Southland Corporation Employees' 	Savings and Profit Sharing Plan (see Note 13) for contributions and 	contingent rent payables of $13,186,000 and $14,098,000 as of December 	31, 1994 and 1993, respectively.
	In December 1994, the Company completed a review of the functions 	necessary to enable its stores to respond faster, more creatively and 	more cost efficiently to rapidly changing customer needs and 	preferences. The resultant plan will both realign and reduce personnel 	and will require changes in the location and size of office facilities. 	Approximately 335 employees in various positions throughout the Company 	will be terminated during 1995. In addition, one owned office facility 	will be sold at a loss and space at several leased facilities will be 	terminated or subleased. The $7,405,000 cost of the plan was accrued in 	selling, general and administrative expenses, and is comprised of 	$5,668,000 for severance benefits and $1,737,000 for changes in office 	facilities.
9. DEBT
	BANK DEBT - The Company is obligated to a group of lenders under a 	credit agreement ("Credit Agreement") that includes term loans and a 	revolving credit facility (collectively "Bank Debt"). In December 1994, 	the Credit Agreement was amended to extend its maturity through December 	31, 1999, and to change various financial and operating covenants to 	reduce certain restrictions. The financial and operating covenants 	require, among other things, the maintenance of certain financial ratios 	including interest coverage, fixed-charge coverage and senior 	indebtedness to earnings before interest, income taxes, depreciation and 	amortization. The Credit Agreement also contains various covenants
	which, among other things, (a) limit the Company's ability to incur or 	guarantee indebtedness or other liabilities other than under the Credit 	Agreement, (b) restrict the Company's ability to engage in asset sales 	and sale/leaseback transactions, (c) restrict the types of investments 	the Company can make and (d) restrict the Company's ability to pay cash 	dividends, redeem or prepay principal and interest on any subordinated 	debt and certain senior debt (except in connection with certain sinking 	fund obligations under the 5% First Priority Senior Subordinated 	Debentures due 2003). Under the Credit Agreement, all of the assets of 	the Company, with the exception of certain specified property, serve as 	collateral.
	The amendment to the Credit Agreement refinanced the existing term 	loans and revolving credit facility with a new term loan and a new 	revolving credit facility. The new term loan provided proceeds of $300 	million, which were primarily used to retire the existing term loans. 	The new term loan is to be repaid in sixteen quarterly installments of 	$18,750,000 commencing March 31, 1996. The new revolving credit 	facility makes available borrowings and letters of credit totaling a 	maximum of $300 million. Maximum borrowings and letters of credit under 	the revolving credit facility are set at $150 million each. Upon 	expiration of the facility, all the then outstanding letters of credit 	must expire and may need to be replaced, and all other amounts then 	outstanding will be due and payable in full. At December 31, 1994, 	outstanding letters of credit related to the Credit Agreement totaled 	$119,927,000.
	Interest on the Bank Debt is generally payable quarterly and is 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 a reserve-adjusted 	Eurodollar rate plus .975% per year. The weighted-average interest rate 	on the term loan and revolving credit facility borrowings outstanding at 	December 31, 1994, was 7.1% and 8.5%, respectively. A fee of .925% per 	year on the outstanding amount of letters of credit is required to be 	paid quarterly. A .5% per year commitment fee on unadvanced funds, which 	for purposes of this calculation include unissued letters of credit, is 	payable quarterly. The weighted-average interest rate on revolving 	credit facility borrowings outstanding at December 31, 1993, was 7.5%.
	In 1992 and 1993, the Credit Agreement was amended in connection with 	certain activities of the Company. In September 1992, the Company 	entered into an amendment that permitted the establishment of a $400 	million commercial paper facility. In connection with this amendment, 	the Company was required to make a $350 million prepayment on the term 	loans. In addition, as a result of the disposition of the distribution 	and food center assets (see Note 6) and in accordance with an October 	1992 amendment, a $110 million prepayment on the term loans was made in 	December 1992. In August 1993, the Company completed a refinancing of 	its 12% Senior Notes with proceeds from working capital and an 	additional $150 million term loan under the Credit Agreement (the 	"Refinancing"). An amendment was executed to provide for the additional 	term loan, which was subsequently repaid from proceeds of the new term 	loan.
	COMMERCIAL PAPER - In September 1992, the Company obtained a facility 	that provides for the issuance of up to $400 million in commercial 	paper. At December 31, 1994, $350 million of the $391,322,000 	outstanding principal, net of discount, was classified as long-term debt 	since the Company intends to maintain at least this amount outstanding 	during the next year. Such debt is unsecured and is fully and 	unconditionally guaranteed by IY. IY has agreed to continue its 	guarantee of all commercial paper issued through 1996. While it is not 	anticipated that IY would be required to perform under its commercial 	paper guarantee, in the event IY makes any payments under the guarantee, 	the Company and IY have entered into an agreement by which the Company 	is required to reimburse IY subject to restrictions in the Credit 	Agreement. The weighted-average interest rate on commercial paper 	borrowings outstanding at December 31, 1994 and 1993, respectively, was 	6.0% and 3.3%.
	NOTES AND DEBENTURES - The Notes and Debentures are accounted for in 	accordance with SFAS No. 15, "Accounting by Debtors and Creditors for 	Troubled Debt Restructuring," and were initially recorded at an amount 	equal to the future undiscounted cash payments, both principal and 	interest ("SFAS No. 15 Interest"). Accordingly, no interest expense 	will be recognized over the life of these securities, and cash interest 	payments will be charged against the recorded amount of such securities. 	Interest on all of the Notes and Debentures is payable in cash 	semiannually on June 15 and December 15 of each year.
	The 5% First Priority Senior Subordinated Debentures, due December 15, 	2003, with an aggregate principal amount of $450,614,000 at December 31, 	1994, are redeemable at any time at the Company's option at 100% of 	principal amount. Annual sinking fund payments of $27,037,000 are due 	each December 15, commencing 1996 through 2002. These payments retire 	42% of the debt before maturity.
	The Second Priority Senior Subordinated Debentures were issued in three 	series, and each series is redeemable at any time at the Company's 	option at 100% of principal amount and are described as follows:
	- 4-1/2% Series A Debentures, due June 15, 2004, had an aggregate 		principal amount of $206,373,000 at December 31, 1994.
	- 4% Series B Debentures, due June 15, 2004, had an aggregate 		principal amount of $18,766,000 at December 31, 1994.
	- 12% Series C Debentures, due June 15, 2009, had an aggregate 		principal amount of $21,787,000 at December 31, 1994.
	The Debentures contain certain covenants that, among other things, (a) 	limit the payment of dividends and certain other restricted payments by 	both the Company and its subsidiaries, (b) require the purchase by the 	Company of the Debentures at the option of the holder upon a change of 	control, (c) limit additional indebtedness, (d) limit future exchange 	offers, (e) limit the repayment of subordinated indebtedness, (f) 	require board approval of certain asset sales, (g) limit transactions 	with certain stockholders and affiliates, and (h) limit consolidations, 	mergers and the conveyance of all or substantially all of the Company's 	assets.
	The First and Second Priority Senior Subordinated Debentures are 	subordinate to the outstanding Bank Debt and to previously outstanding 	mortgages and notes that are either backed by specific collateral or are 	general unsecured, unsubordinated obligations. The Second Priority 	Debentures are subordinate to the First Priority Debentures. 	 	The Company had an issuance of 12% Senior Notes, which was due December 	15, 1996, with an aggregate principal amount of $250,553,000. These 	notes were redeemed in August 1993, resulting in an extraordinary gain 	of $98,968,000, which had no tax effect.
	YEN LOAN - In March 1988, the Company monetized its future royalty 	payments from SEJ, the area licensee in Japan, through a loan that is
	nonrecourse to the Company as to principal and interest. The debt, 	payable in Japanese yen, was in the amount of 41 billion yen, or 	approximately $327,000,000 (at the exchange rate in March 1988), and is 	collateralized by the Japanese trademarks and a pledge of the future 	royalty payments. The current interest rate of 6-1/4% will be reset 	after March 1998. Payment of the debt is required no later than March 	2006 through future royalties from the Japanese licensee, and the 	Company believes it is a remote possibility that there will be any 	principal balance remaining at that date. By designating its future 	royalty receipts during the term of the loan to service the monthly 	interest and principal payments, the Company has hedged the impact of 	future exchange rate fluctuations. Upon the later of February 28, 2000, 	or the date which is one year following the final repayment of the loan, 	royalty payments from the area licensee in Japan will be substantially 	reduced in accordance with the terms of the license agreement.
	CITYPLACE DEBT - Cityplace Center East Corporation ("CCEC"), a 	subsidiary of the Company, issued $290 million of notes in March 1987 to 	finance the construction of the headquarters tower, a parking garage and 	related facilities of the Cityplace Center development. The interest 	rate on these notes was 7-7/8%, payable semiannually on February 15 and 	August 15, and the principal amount was due on February 15, 1995. 	Because of the application of purchase accounting in 1987, the effective 	interest rate was 9.0%. The principal amount was paid to noteholders on 	February 15, 1995, by drawings under letters of credit issued by The 	Sanwa Bank, Limited, Dallas Agency ("Sanwa"), which has a lien on the 	property financed. At that time, the Company deferred the maturity of 	the debt by exercising its option of extending the term of maturity ten 	years to March 1, 2005, with monthly payments of principal and interest 	to Sanwa based on a 25-year amortization at 7-1/2%, with the remaining 	principal due upon maturity (the "Cityplace Term Loan").
	The Company is occupying part of the building as its corporate 	headquarters and the balance is subleased. As additional consideration through	the extended term of the debt, CCEC will pay to Sanwa an amount that it receives from the Company which is equal to the net sublease income that 	the Company receives on the property and 60% of the proceeds, less $275 	million and permitted costs, upon a sale or refinancing of the building.
	SOUTHLAND CANADA DEBT - During 1988, Southland Canada, Inc. entered 	into a revolving credit facility with a Canadian chartered bank. The 	facility currently provides bank financing of up to Canadian $14,287,000 	(approximately U.S. $10,185,000 at December 31, 1994), which will be 	reduced to Canadian $10,716,000 on June 30, 1995, and will be further 	reduced each year thereafter until June 30, 1998, when the facility will 	expire, and all amounts outstanding will be due and payable in full. At 	December 31, 1994, the Company had borrowings outstanding under this 	facility of Canadian $7,964,000 (approximately U.S. $5,678,000). 	Interest on such facility is generally payable monthly and is based upon 	the Canadian Prime rate (8.0% at December 31, 1994) plus .75% per year 	or a bankers' acceptance rate plus 1.5% per year. The weighted-average 	interest rate on revolving credit facility borrowings outstanding at 	December 31, 1994 and 1993, respectively, was 7.3% and 5.4%.
	MATURITIES - Long-term debt maturities assume the continuance of the 	commercial paper program. The maturities, which include capital lease 	obligations and sinking fund requirements, as well as SFAS No. 15 	Interest accounted for in the recorded amount of the Debentures, are as 	follows (dollars in thousands):
10. PREFERRED STOCK
	The Company has 5,000,000 shares of preferred stock authorized for 	issuance. Any preferred stock issued will have such rights, powers and 	preferences as determined by the Company's Board of Directors.
11. REDEEMABLE COMMON STOCK PURCHASE WARRANTS
	In 1987, the Company issued 26,135,682 redeemable common stock purchase 	warrants (the "Warrants"). The Warrants were recorded at $1.00 per 	Warrant, which was the amount of proceeds allocated to the Warrants at 	the time of issuance. The Warrants were governed by a warrant agreement 	and were exercisable through December 15, 1992, only upon the occurrence 	of certain specified events. None of the specified events occurred on 	or before December 15, 1992, and all of the warrants expired on December 	16, 1992. Under the provisions of the warrant agreement, the Company 	was obligated to repurchase the Warrants by March 15, 1995, at the fair 	market value of the Warrants as separate securities, as determined by an 	independent financial expert. A fair market value of $0 for the 	Warrants was determined by an independent financial expert in December 	1992. The $26,135,682 difference between the carrying amount of the 	Warrants and their fair value was recorded as an increase in additional 	capital in 1992.
12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
	The following disclosure of the estimated fair value of financial 	instruments is made in accordance with SFAS No. 107, "Disclosures about 	Fair Value of Financial Instruments." The estimated fair-value amounts 	have been determined by the Company using available market information 	and appropriate valuation methodologies.
	The carrying amounts of cash and cash equivalents, trade accounts 	receivable, trade accounts payable and accrued expenses and other 	liabilities are reasonable estimates of their fair values. Letters of 	credit are included in the estimated fair value of accrued expenses and 	other liabilities. The carrying amounts and estimated fair values of
	other financial instruments at December 31, 1994, are listed in the 	following table:
	The methods and assumptions used in estimating the fair value for each 	of the classes of financial instruments presented in the table above are 	as follows:
	- The carrying amount of the Bank Debt approximates fair value because 	 the interest rates are variable.
	- Commercial paper borrowings are sold at market interest rates and 	 have an average remaining maturity of less than 20 days. Therefore, 	 the carrying amount of commercial paper is a reasonable estimate of 	 its fair value. The guarantee of the commercial paper by IY is an 	 integral part of the estimated fair value of the commercial paper 	 borrowings.
	- The fair value of the Debentures is estimated based on December 31, 	 1994, bid prices obtained from investment banking firms where traders 	 regularly make a market for these financial instruments. The carrying 	 amount of the Debentures includes $298,190,000 of SFAS No. 15 	 Interest.
	- The fair value of the Yen Loan is estimated by calculating the 	 present value of the future yen cash flows at current interest and 	 exchange rates.
	In February 1995, the original Cityplace notes were repaid with proceeds 	from the Cityplace Term Loan (see Note 9). At the date of issuance, the 	carrying amount and the fair value of the Cityplace Term Loan was 	$290,000,000 and $269,650,000, respectively. The fair value was 	estimated by calculating the present value of the future cash flows at 	current interest rates.
13. EMPLOYEE BENEFIT PLANS
	PROFIT SHARING PLANS - The Company maintains profit sharing plans for 	its U.S. and Canadian employees. In 1949, the Company excluding its 	Canadian subsidiary ("Southland") adopted The Southland Corporation 	Employees' Savings and Profit Sharing Plan (the "Savings and Profit 	Sharing Plan"), and, in 1970, the Company's Canadian subsidiary adopted 	the Southland Canada, Inc. Profit Sharing Pension Plan. These plans 	provide retirement benefits to eligible employees.
	Contributions to the Savings and Profit Sharing Plan are made by both 	the participants and Southland. Southland contributes the greater of 	approximately 10% of its net earnings before contribution to the Savings 	and Profit Sharing Plan and federal income taxes or an amount determined 	by Southland's president. The contribution by Southland is generally 	allocated to the participants on the basis of their individual 	contribution, years of participation in the Savings and Profit Sharing 	Plan and age. The provisions of the Southland Canada, Inc. Profit 	Sharing Pension Plan are similar to those of the Savings and Profit 	Sharing Plan. Total contributions to these plans for the years ended 	December 31, 1994, 1993 and 1992 were $10,513,000, $11,956,000 and 	$14,647,000 (including amounts allocated to the distribution and food 	centers), respectively.
	POSTRETIREMENT BENEFITS - The Company's group insurance plan (the 	"Insurance Plan") provides postretirement medical and dental benefits 	for all retirees that meet certain criteria. Such criteria include 	continuous participation in the Insurance Plan ranging from 10 to 15 	years depending on hire date, and the sum of age plus years of 	continuous service equal to at least 70. The Company contributes toward 	the cost of the Insurance Plan a fixed dollar amount per retiree based 	on age and number of dependents covered, as adjusted for actual claims 	experience. All other future costs and cost increases will be paid by 	the retirees. The Company continues to fund its cost on a cash basis; 	therefore, no plan assets have been accumulated.
	Net periodic postretirement benefit costs for 1994, 1993 and 1992 	include the following components:
	The weighted-average discount rate used in determining the accumulated 	postretirement benefit obligation was 8% and 7% at December 31, 1994 and 	1993, respectively. Components of the accrual recorded in the Company's 	consolidated balance sheets are as follows:
	POSTEMPLOYMENT BENEFITS - As of January 1, 1993, the Company adopted 	SFAS No. 112, "Employers' Accounting for Postemployment Benefits," and 	recorded an accumulated postemployment benefit obligation of 	$16,537,000. The accumulated postemployment benefit obligation, which 	had no tax effect, was recorded as the cumulative effect of an 	accounting change. The obligation primarily represents future medical 	costs relating to short-term and long-term disability. As of December 	31, 1994 and 1993, the amount of the obligation was $18,460,000 and 	$16,537,000, respectively. 	 	EQUITY PARTICIPATION PLAN - During 1988, the Company adopted The 	Southland Corporation Equity Participation Plan (the "Participation 	Plan"), which provides for the granting of both incentive options and 	nonstatutory options and the sale of convertible debentures to certain 	key employees and officers of the Company. The options were granted at 	the fair market value on the date of grant, which is the same as the 	conversion price provided in the debentures.
	All options expire, and the debentures mature, no later than December 	31, 1997. All options and convertible debentures that were vested 	became exercisable as of December 31, 1994, pursuant to the terms of the 	Participation Plan. In the aggregate, not more than 3,529,412 shares of 	common stock of the Company can be issued pursuant to the Participation 	Plan; however, the Company has no present intent to grant additional 	options under this plan. The shares available for issuance under the 	Participation Plan are reduced by the number of shares issued under the 	Grant Stock Plan. At December 31, 1994, there were vested options 	outstanding to acquire 1,760,803 shares, of which 1,677,128 were at 	$7.50 per share and 83,675 were at $7.70 per share, and vested 	debentures outstanding that were convertible into 17,833 shares. Of the 	options and debentures that were vested as of December 31, 1994, 539,803 	options to acquire 539,803 shares and debentures convertible into 11,167 	shares will expire on March 31, 1995, for those participants who are no 	longer with the Company.
	GRANT STOCK PLAN - During 1988, the Company adopted The Southland 	Corporation Grant Stock Plan (the "Stock Plan"). Under the provisions 	of the Stock Plan, up to 750,000 shares of common stock are authorized 	to be issued to certain key employees and officers of the Company. The 	stock was fully vested upon the date of issuance. As of December 31, 	1994, 480,844 shares had been issued pursuant to the Stock Plan. No 	shares have been issued since 1988, and the Company has no present 	intent to grant additional shares.
14. LEASES, COMMITMENTS AND CONTINGENCIES 	 	LEASES - Certain property, plant and equipment used in the Company's 	business is leased. Generally, real estate leases are for primary terms 	from 14 to 20 years with options to renew for additional periods, and 	equipment leases are for terms from one to ten years. The leases do not 	contain restrictions that have a material effect on the Company's 	operations.
	The composition of capital leases reflected as property, plant and 	equipment in the consolidated balance sheets is as follows:
	The present value of future minimum lease payments for capital lease 	obligations is reflected in the consolidated balance sheets as long-term 	debt. The amount representing imputed interest necessary to reduce net 	minimum lease payments to present value has been calculated generally at 	the Company's incremental borrowing rate at the inception of each lease.
	Future minimum lease payments for years ending December 31 are as 	follows:
	Minimum noncancelable sublease rental income to be received in the 	future, which is not included above as an offset to future payments, 	totals $26,053,000 for capital leases and $26,051,000 for operating 	leases.
	Rent expense on operating leases for the years ended December 31, 1994, 	1993 and 1992, totaled $120,850,000, $124,402,000 and $135,657,000, 	respectively, including contingent rent expense of $8,576,000, 	$8,214,000 and $9,037,000, but reduced by sublease rent income of 	$7,858,000, $8,545,000 and $8,252,000. Contingent rent expense on 	capital leases for the years ended December 31, 1994, 1993 and 1992, was 	$2,822,000, $3,084,000 and $3,964,000, respectively. Contingent rent 	expense is generally based on sales levels or changes in the Consumer 	Price Index.
	LEASES WITH THE SAVINGS AND PROFIT SHARING PLAN - At December 31, 1994, 	the Savings and Profit Sharing Plan owned 253 stores leased to the 	Company under capital leases and 647 stores leased to the Company under 	operating leases at rentals which, in the opinion of management, 	approximated market rates at the date of lease. In addition, 43, 62 and 	31 properties were sold by the Savings and Profit Sharing Plan to third 	parties in 1994, 1993 and 1992, respectively, and at the same time, the 	related leases with the Company were either cancelled or assigned to the 	new owner. Included in the consolidated financial statements are the 	following amounts related to leases with the Savings and Profit Sharing 	Plan:
	COMMITMENTS
	MCLANE - In connection with the 1992 sale of assets to McLane, the 	Company and McLane entered into a ten-year service agreement under which 	McLane is making its distribution services available to 7-Eleven stores 	in the United States. If the Company does not fulfill its obligation to 	McLane during this time period, the Company must reimburse McLane on a 	pro-rata basis for the transitional payment received at the time of the 	transaction. The original payment received of $9,450,000 in 1992 is 	being amortized to income over the life of the agreement. The Company 	has exceeded the minimum annual purchases each year and expects to 	exceed the minimum required purchase levels in future years.
	CITGO PETROLEUM CORPORATION - In 1986, the Company entered into a 	20-year product purchase agreement with Citgo to buy specified 	quantities of gasoline at market prices. These prices are determined 	pursuant to a formula based on the prices posted by gasoline wholesalers 	in the various market areas where the Company purchases gasoline from 	Citgo. Minimum required annual purchases under this agreement are 	generally the lesser of 750 million gallons or 35% of gasoline purchased
	by the Company for retail sale. The Company has exceeded the minimum 	required annual purchases each year and expects to exceed the minimum 	required annual purchase levels in future years.
	CONTINGENCIES
	GASOLINE STORE SITES - The Company accrues future costs, as well as 	records the related probable state reimbursement amounts, for 	remediation of gasoline store sites where releases of regulated 	substances have been detected. At December 31, 1994 and 1993, 	respectively, the Company's estimated liability for sites where releases 	have been detected was $63,424,000 and $59,153,000, of which $32,924,000 	and $35,333,000 is included in deferred credits and other liabilities 	and the remainder in accrued expenses and other liabilities. The Company 	has recorded receivables of $57,246,000 and $57,532,000 (net of 	allowances of $18,890,000 and $12,529,000) for the estimated probable 	state reimbursements, of which $47,746,000 and $52,238,000 is included 	in other assets and the remainder in accounts and notes receivable. The 	Company reduced the estimated net environmental cost reimbursements at 	the end of 1994 by approximately $6,000,000 as a result of completing a 	review of state reimbursement programs. The estimated future 	remediation expenditures and related state reimbursement amounts could 	change as governmental requirements and state reimbursement programs 	change in future years.
	The Company anticipates that substantially all of the future remediation 	costs for sites with detected releases of regulated substances at 	December 31, 1994, will be incurred within the next five years. There 	is no assurance of the timing of the receipt of state reimbursement 	funds. However, based on the Company's experience, the Company expects 	to receive state reimbursement funds within one to four years after 	payment of eligible remediation expenses, assuming that the state 	administrative procedures for processing such reimbursements have been 	fully developed.
	CHEMICAL MANUFACTURING FACILITY - 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 $39,254,000 and 	$38,879,000 at December 31, 1994 and 1993, respectively. Of this 	amount, $34,180,000 and $33,795,000 are included in deferred credits and 	other liabilities and the remainder in accrued expenses and other 	liabilities for the respective years.
	The closed chemical manufacturing facility was previously owned by a 	large chemical company. In 1991, the Company and the former owner 	executed a final settlement agreement pursuant to which the former owner 	agreed to pay a substantial portion of the clean-up costs. The Company
	has recorded receivables of $23,009,000 and $22,800,000 at December 31, 	1994 and 1993, respectively, representing the former owner's portion of 	the clean-up costs. Of this amount, $19,800,000 is included in other 	assets and the remainder in accounts and notes receivable for both 1994 	and 1993. 	 15. INCOME TAXES
	As of January 1, 1993, the Company adopted SFAS No. 109, "Accounting 	for Income Taxes." There was no cumulative effect adjustment upon 	adoption, and there was no effect on net earnings for the year ended 	December 31, 1993. As permitted, the Company has not restated the 	financial statements of prior years. Prior to January 1, 1993, income 	taxes were recorded using the deferred method specified by Accounting 	Principles Board Opinion No. 11, "Accounting for Income Taxes."
	SFAS No. 109 requires the use of the liability method, in which deferred 	tax assets and liabilities are recognized for differences between the 	tax basis of assets and liabilities and their reported amounts in the 	financial statements. Deferred tax assets include tax carryforwards and 	are reduced by a valuation allowance if, based on available evidence, it 	is more likely than not that some portion or all of the deferred tax 	assets will not be realized. 	 	The components of earnings (loss) before income taxes, extraordinary 	gain and cumulative effect of accounting change are as follows:
	The provision for income taxes in the accompanying Consolidated 	Statements of Operations consists of the following:
	Reconciliations of income taxes at the federal statutory rate to the 	Company's actual income taxes provided are as follows:
	At December 31, 1994, the Company had approximately $20,000,000 of 	general business credit carryforwards, $10,800,000 of foreign tax credit 	carryforwards and $17,900,000 of alternative minimum tax ("AMT") credit 	carryforwards. The AMT credits have no expiration date. The general 	business credits expire during the period from 2001 to 2009, and the 	foreign tax credits expire during the period 1998 to 1999. 	 	The valuation allowance for deferred tax assets decreased by $42,078,000 	in 1994 due to changes in the Company's gross deferred tax assets and 	liabilities and the realization of a portion of the Company's net 	deferred tax asset. Based on a one-year projection of taxable income, 	the Company has recognized a portion of its net deferred tax asset 	through a $30 million reduction in the valuation allowance with 	$13,861,000 recorded in other current assets and the remainder in other 	assets. Taxable income for 1995 was projected by utilizing steady state 	assumptions defined as only inflationary increases in sales and no 	increase in gross profit margins. If the Company's current trend of 	profitability continues, then additional deferred tax assets of up to 	approximately $175 million could be recognized in future periods. In 	1993, the valuation allowance decreased by $21,817,000 due to changes in 	the Company's gross deferred tax assets and liabilities.
	Significant components of the Company's deferred tax assets and 	liabilities at December 31, 1994 and 1993, are as follows:
16. EARNINGS (LOSS) PER COMMON SHARE
	Primary earnings (loss) per common share is based on net earnings (loss) 	divided by the weighted average number of shares outstanding during each 	year. The exercise of outstanding stock options would not result in a 	dilution of earnings per share. 	
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
	Summarized quarterly financial data for 1994 and 1993 is as follows:
	The second quarter includes a $4,500,000 recovery on a 1992 insurance 	claim. The fourth quarter includes $30 million of realized deferred tax 	benefit (see Note 15), $7,405,000 of expenses accrued for severance and 	related costs (see Note 8), $7,696,000 of expense related to store 	closings and dispositions of properties, and approximately $6,000,000 in 	expense relating to the reduction of estimated net environmental cost 	reimbursements (see Note 14).
	The first quarter includes $16,537,000 of expense resulting from the 	cumulative effect of an accounting change for postemployment benefits 	(see Note 13). The third quarter includes a $98,968,000 extraordinary 	gain on redemption of debt related to the Refinancing (see Note 9) and a 	$10,300,000 loss on disposition of the Company's aviation facility 	(which was subsequently adjusted to a total loss of $10,814,000 in the 	fourth quarter). The fourth quarter includes a loss of $42,791,000 	related to store closings and dispositions of properties, a LIFO credit 	of $9,051,000 primarily due to lower cigarette and gasoline prices, and 	$5,989,000 of expense resulting from a cost-cutting program associated 	with the Company's 1993 reorganization.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of The Southland Corporation
We have audited the accompanying consolidated balance sheets of The Southland Corporation and Subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of operations, shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Southland Corporation and Subsidiaries as of December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles.
As discussed in Notes 13 and 15 to the financial statements, in 1993 the Company changed its method of accounting for postemployment benefits and for income taxes to conform with Statements of Financial Accounting Standards No. 112 and No. 109, respectively.
Coopers & Lybrand L.L.P. Dallas, Texas February 23, 1995
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	None.
				 PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	Certain of the information required in response to this Item is incorporated by reference from the Registrant's Definitive Proxy Statement for the April 26, 1995 Annual Meeting of Shareholders.
	See also "Executive Officers of the Registrant" beginning on page 17, herein.
ITEM 11. EXECUTIVE COMPENSATION.
	The information required in response to this Item is incorporated herein by reference from the Registrant's Definitive Proxy Statement for the April 26, 1995 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	The information required in response to this Item is incorporated herein by reference from the Registrant's Definitive Proxy Statement for the April 26, 1995 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
	The information required in response to this Item is incorporated herein by reference to the Registrant's Definitive Proxy Statement for the April 26, 1995 Annual Meeting of Shareholders.
				 PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. The Southland Corporation and Subsidiaries' Financial Statements for the three years in the period ended December 31, 1994 are included herein:
									PAGE
Consolidated Balance Sheets - December 31, 1994 and 1993 38 Consolidated Statements of Operations - Years Ended December 31, 1994, 1993 and 1992 39 Consolidated Statements of Shareholders' Equity (Deficit) - Years Ended December 31, 1994, 1993 and 1992 40 Consolidated Statements of Cash Flows - Years Ended December 31, 1994, 1993 and 1992 41 Notes to Consolidated Financial Statements 42 Independent Auditors' Report of Coopers & Lybrand L.L.P. 64
2. The Southland Corporation and Subsidiaries' Financial Statement Schedules, included herein. 									PAGE Independent Auditors' Report of Coopers & Lybrand L.L.P. on Financial Statement Schedule 70
II - Valuation and Qualifying Accounts 71
All other schedules have been omitted because they are not applicable, are not required, or the required information is shown in the financial statements or notes thereto.
3. The following is a list of the Exhibits required to be filed by Item 601 of Regulation S-K.
EXHIBIT NO. 2. PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION 		OR SUCCESSION.
2.(1) Debtor's Plan of Reorganization, dated October 24, 1990, as 		filed in the United States Bankruptcy Court, Northern District 		of Texas, Dallas Division, and Addendum to Debtor's Plan of 		Reorganization dated January 23, 1991, incorporated by reference 		to The Southland Corporation's Current Report on Form 8-K dated 		January 23, 1991, File Numbers 0-676 and 0-16626, Exhibits 2.1 		and 2.2.
2.(2) Stock Purchase Agreement, dated as of January 25, 1991, by and 		among The Southland Corporation, Ito-Yokado Co., Ltd. and 		Seven-Eleven Japan Co., Ltd., incorporated by reference to The 		Southland Corporation's Current Report on Form 8-K dated 		January 23, 1991, File Numbers 0-676 and 0-16626, Exhibit 2.3.
2.(3) Confirmation Order issued on February 21, 1991 by the United 		States Bankruptcy Court for the Northern District of Texas, 		Dallas Division, incorporated by reference to The Southland 		Corporation's Current Report on Form 8-K dated March 4, 1991, 		File Numbers 0-676 and 0-16626, Exhibit 2.1.
3. ARTICLES OF INCORPORATION AND BYLAWS.
3.(1) Second Restated Articles of Incorporation of The Southland 		Corporation, as amended through March 5, 1991, incorporated 		by reference to The Southland Corporation's Annual Report on 		Form 10-K for the year ended December 31, 1990, Exhibit 3.(1).
3.(2) Bylaws of The Southland Corporation, restated as amended 		through March 5, 1991, incorporated by reference to The 		Southland Corporation's Annual Report on Form 10-K for the year 		ended December 31, 1990, Exhibit 3.(2).
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING 		INDENTURES (SEE EXHIBITS (3).(1) AND (3).(2), ABOVE).
4.(i)(1) Specimen Certificate for Common Stock, $.0001 par value, 		incorporated by reference to The Southland Corporation's Annual 		Report on Form 10-K for the year ended December 31, 1990, 		Exhibit 4.(i)(2).
4.(i)(2) Form of Voting Agreement and Stock Transfer Restriction and 		Buy-Back Agreement relating to shares of common stock, $.01 par 		value, issued pursuant to Grant Stock Plan, incorporated by 		reference to Registration Statement on Form S-8, Reg. No. 		33-25327, Exhibits 4.5 and 4.4.
4.(i)(3) Shareholders Agreement dated as of November 1, 1988, by and 		among The Southland Corporation, Thompson Brothers, L.P., 		Thompson Capital Partners, L.P., The Hayden Company, The 		Williamsburg Corporation, Four J Investment, L.P., each Limited 		Partner of Thompson Capital Partners, L.P. as of the date 		thereof, and The Philp Co., incorporated by reference to File 		No. 0-676, Annual Report on Form 10-K for year ended 		December 31, 1988, Exhibit 4(i)(7), Tab 2.
4.(i)(4) Shareholders Agreement dated as of March 5, 1991, among The 		Southland Corporation, Ito-Yokado Co., Ltd., IYG Holding 		Company, Thompson Brothers, L.P., Thompson Capital Partners, 		L.P., The Hayden Company, The Williamsburg Corporation, Four J 		Investment, L.P., The Philp Co., participants in the Company's 		Grant Stock Plan who are signatories thereto and certain 		limited partners of Thompson Capital Partners, L.P. who are 		signatories thereto, incorporated by reference to Schedule 13D 		filed by Ito-Yokado Co., Ltd., Seven-Eleven Japan Co., Ltd. and 		IYG Holding Company, Exhibit A.
4.(i)(5) First Amendment to Shareholders Agreement, dated December 30, 		1992, incorporated by reference to File Nos. 0-676 and 0-16626, 		Annual Report on Form 10-K for year ended December 31, 1992, 		Exhibit 4.(i)(5), Tab 1.
4.(i)(6) Warrant Agreement dated as of March 5, 1991, among certain 		Holders of Common Shares of The Southland Corporation named 		therein, Wilmington Trust Company, as Warrant Agent, The 		Southland Corporation and Ito-Yokado Co., Ltd., incorporated 		by reference to Schedule 13D filed by Ito-Yokado Co., Ltd., 		Seven-Eleven Japan Co., Ltd. and IYG Holding Company, Exhibit B.
4.(i)(7) Specimen Warrant Certificates to Purchase Common Shares of The 		Southland Corporation pursuant to Warrant Agreement dated as of 		March 5, 1991, with Wilmington Trust Company as Warrant Agent, 		incorporated by reference to The Southland Corporation's Annual 		Report on Form 10-K for the year ended December 31, 1990, 		Exhibit 4.(i)(7).
4.(ii)(1) Indenture, including Debenture, with Ameritrust Company National Association, as trustee, providing for 5% First Priority Senior 		Subordinated Debentures due December 15, 2003, incorporated by 		reference to The Southland Corporation's Annual Report on Form 		10-K for the year ended December 31, 1990, Exhibit 4.(ii)(2).
4.(ii)(2) Indenture, including Debentures, with The Riggs National Bank
		of Washington, D.C., as trustee providing for 4 1/2% Second 		Priority Senior Subordinated Debentures (Series A) due 		June 15, 2004, 4% Second Priority Senior Subordinated 		Debentures (Series B) due June 15, 2004, and 12% Second 		Priority Senior Subordinated Debentures (Series C) due 		June 15, 2009, incorporated by reference to The Southland 		Corporation's Annual Report on Form 10-K for the year ended 		December 31, 1990, Exhibit 4.(ii)(3).
4.(ii)(3) Indenture among Cityplace Center East Corporation, 		Security Pacific National Bank, as trustee, and The 		Sanwa Bank Limited, Dallas Agency, dated as of 		February 15, 1987, providing for 7 7/8% Notes due 		February 15, 1995, incorporated by reference to File 		No. 0-676, Annual Report on Form 10-K for the year ended 		December 31, 1986, Exhibit 4(ii)(8).
4.(ii)(4) Specimen 7 7/8% Note due February 15, 1995, issued by 		Cityplace Center East Corporation, incorporated by 		reference to File No. 0-676, Annual Report on Form 10-K 		for the year ended December 31, 1986, Exhibit 4(ii)(9).
9. VOTING TRUST AGREEMENT. NONE. (EXCEPT SEE EXHIBITS 		4.(i)(2), 4.(i)(4) AND 4.(i)(5), ABOVE.)
10. MATERIAL CONTRACTS.
10.(i)(1) Stock Purchase Agreement among The Southland Corporation, 		Ito-Yokado Co., Ltd. and Seven-Eleven Japan Co., Ltd., 		dated as of January 25, 1991. See Exhibit 2.(2), above.
10.(i)(2) Credit Agreement, dated as of July 31, 1987, amended Tab 1 		and restated as of December 16, 1994, among The 		Southland Corporation, the financial institutions party 		thereto as Senior Lenders, the financial institutions 		party thereto as Issuing Banks, Citicorp North America, 		Inc., as Administrative Agent, and The Sakura Bank, 		Limited, New York Branch, as Co-Agent.*
10.(i)(3) Credit and Reimbursement Agreement by and between Cityplace 		Center East Corporation, an indirect wholly owned 		subsidiary of Southland, and The Sanwa Bank Limited, Dallas 		Agency, dated February 15, 1987, relating to $290 million 		of 7 7/8% Notes due February 15, 1995, issued by Cityplace 		Center East Corporation (to which Southland is not a party 		and which is non-recourse to Southland), incorporated by 		reference to File No. 0-676, Annual Report on Form 10-K 		for the year ended December 31, 1986, Exhibit 10(i)(6).
10.(i)(4) Third Amendment to Credit and Reimbursement Agreement, Tab 2 		dated as of February 10, 1995, by and between The Sanwa 		Bank, Limited, Dallas Agency and Cityplace Center 		East Corporation.*
10.(i)(5) Amended and Restated Lease Agreement between Cityplace 		Center East Corporation and The Southland Corporation 		relating to The Southland Tower, Cityplace Center, Dallas, 		Texas, incorporated by reference to The Southland 		Corporation's Annual Report on Form 10-K for the year 		ended December 31, 1990, Exhibit 10.(i)(7).
10.(i)(6) Limited Recourse Financing for The Southland Corporation 		relating to royalties from Seven-Eleven (Japan) Company, 		Ltd. in the amount of Japanese Yen 41,000,000,000, dated 		March 21, 1988, incorporated by reference to File No. 		0-676, Annual Report on Form 10-K for year ended 		December 31, 1988, Exhibit 10.(i)(6).
10.(ii)(B)(1) Standard Form of 7-Eleven Store Franchise Agreement, 		incorporated by reference to File No. 0-676 and 0-16626, 		Annual Report on Form 10-K for year ended December 31, 		1992, Exhibit 10.(ii)(B)(1).
10.(iii)(A)(1) John P. Thompson Employment Agreement dated as of March 5, 		1991, incorporated by reference to The Southland 		Corporation's Annual Report on Form 10-K for the year 		ended December 31, 1990, Exhibit 10.(iii)(A)(1).
10.(iii)(A)(2) Jere W. Thompson Employment Agreement dated as of 		March 5, 1991, incorporated by reference to The Southland 		Corporation's Annual Report on Form 10-K for the year 		ended December 31, 1990, Exhibit 10.(iii)(A)(2).
10.(iii)(A)(3) The Southland Corporation Executive Protection Plan 		Summary, incorporated by reference to The Southland 		Corporation's Annual Report on Form 10-K for the year 		ended December 31, 1993, Exhibit 10.(iii)(A)(3).
10.(iii)(A)(4) The Southland Corporation Officers' Deferred Compensation 		Plan, sample agreement, incorporated by reference to The 		Southland Corporation's Annual Report on Form 10-K for 		the year ended December 31, 1993, Exhibit 10.(iii)(A)(4).
10.(iii)(A)(5) Executive Interest Differential Reimbursement Program, 		incorporated by reference to File No. 0-676, Annual 		Report on Form 10-K for the year ended December 31, 1982, 		Exhibit 10(iii)(A)(9), Tab 4.
10.(iii)(A)(6) Bonus Deferral Agreement relating to deferral of Bonus 		Payment, incorporated by reference to File No. 0-676, 		Annual Report on Form 10-K for the year ended December 31, 		1988, Exhibit 10(iii)(A)(9), Tab 7.
10.(iii)(A)(7) Form of documents relating to Collateral Assignment of 		Insurance Program, incorporated by reference to File Nos. 		0-676 and 0-16626, Annual Report on Form 10-K for the year 		ended December 31, 1989, Exhibit 10.(iii)(A)(10), Tab 4.
10.(iii)(A)(8) 1993 Performance Plan, as amended January 1994, 		incorporated by reference to The Southland Corporation's 		Annual Report on Form 10-K for the year ended December 31, 		1993, Exhibit 10.(iii)(A)(8).
10.(iii)(A)(9) Consultant's Agreement between The Southland Corporation 		and Timothy N. Ashida, incorporated by reference to File 		No. 0-676, Annual Report on Form 10-K for the year ended 		December 31, 1991, Exhibit 10(iii)(A)(10), Tab 4.
11. STATEMENT RE COMPUTATION OF PER-SHARE EARNINGS. Tab 3 		CALCULATION OF EARNINGS PER SHARE.*
21. SUBSIDIARIES OF THE REGISTRANT AS OF MARCH 1995.* Tab 4
23. CONSENTS OF EXPERTS AND COUNSEL. 		Consent of Coopers & Lybrand L.L.P., Independent Tab 5 		Auditors.*
27. FINANCIAL DATA SCHEDULE. 		FILED ELECTRONICALLY ONLY, NOT ATTACHED TO PRINTED 		REPORTS.
__________________________ File or furnished herewith
(b) Reports on Form 8-K.
	During the fourth quarter of 1994, the Company filed no reports on 	Form 8-K.
(c) The exhibits required by Item 601 of Regulation S-K are attached hereto 	or incorporated by reference herein.
(d)(3) The financial statement schedules for The Southland Corporation and 	Subsidiaries are included herein.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of The Southland Corporation
Our report on the consolidated financial statements of The Southland Corporation and Subsidiaries, which includes an explanatory paragraph describing the changes in methods of accounting for postemployment benefits and income taxes in 1993, is included on page 64 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the index on page 66 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
Coopers & Lybrand L.L.P. Dallas, Texas February 23, 1995
(1) Uncollectible accounts written off, net of recoveries. (2) Represents amounts charged to the reserve for the sale and closing of the distribution and food centers (see Note 6 of Notes to Consolidated Financial Statements). (3) Prior to year ended December 31, 1993, the allowance and related receivables were netted with the environmental liability.
				 SIGNATURES
	Pursuant to the requirements of Section 13 or 15(d) 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) 				 March 28, 1995 /s/ Clark J. Matthews, II________________ 				 Clark J. Matthews, II 				 President and Chief Executive Officer
	Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 	AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SUMMARY OF RESULTS OF OPERATIONS 	 	The Company's net earnings for 1994 were $92.0 million, compared to net earnings of $71.2 million in 1993 and a net loss of $131.4 million in 1992. The Company showed marked improvement in its earnings before income taxes, extraordinary gain and cumulative effect of accounting change as reflected below:
Each years' results included a number of special or unusual items which included among other things:
	In addition to the special and unusual items noted above, the Company's improvement in 1994 earnings was primarily due to savings in selling, general and administrative expenses, offset by lower merchandise gross profit due to fewer stores. Although merchandise gross profit declined in total, merchandise sales and gross profits per store were favorable in 1994 compared to 1993 and 1992 and have been improving each quarter during 1994 over 1993.
(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 $6.68 billion for the year ended December 31, 1994, compared to sales of $6.74 billion in 1993 and $7.43 billion in 1992. The 1994 sales decline is primarily the result of fewer convenience stores due to closures (see Management Strategies). Sales also declined in 1993 and 1992, primarily due to fewer stores, lower same-store (stores open more than one year) merchandise sales and the September 1992 disposition of the Company's distribution and food center assets (see Liquidity and Capital Resources-Other). Merchandise sales for 1994 and 1993 were also affected by the deflationary effect of cigarette price reductions (on certain premium brands) associated with manufacturers' cost reductions starting in August 1993. Merchandise sales increases or (decreases) as compared to the prior year and inflation information is detailed below:
	Until 1994, same-store merchandise sales real growth (adjusted to exclude inflation) had declined since early 1989 primarily due to competitive pressures. This negative trend began to reverse in 1993, and in 1994 the Company achieved its first full year of same-store real growth in merchandise sales since 1988. The 1994 results also reflect the first four consecutive quarters of positive same-store merchandise sales growth (including the effects of deflation or inflation) since the third quarter of 1990. The Company believes the improvement is a result of its new merchandising processes, everyday-fair-pricing and store-remodeling strategies (see Management Strategies).
	Gasoline sales dollars per store increased 8.7%, 9.1% and 6.5% in 1994, 1993 and 1992, respectively. This increase is primarily due to per store gallonage improvement of 7.8% in 1994, 11.1% in 1993 and 6.3% in 1992. This continuing improvement 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 gas facilities; promoting the high quality of CITGO-brand gasoline; the closing of low-volume locations; and managing gasoline prices, inventories and product mix on a by- store basis.
MANAGEMENT STRATEGIES 	 	Since 1992, the Company has been 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: the extensive remodeling of its store base; a customer-driven approach to product selection; an everyday-fair-pricing policy on all items; the daily delivery of fresh perishable items; the introduction of quality, ready-to-eat fresh foods; and the implementation of a retail automation system. 	 	The Company has been devoting the majority of its capital resources over the last couple of years toward the most extensive remodeling of its existing store base ever undertaken. In conjunction with the remodeling program, the Company has been pruning its store base as it identifies stores, which can be closed or disposed of, that are not expected to achieve an acceptable level of profitability in the future or meet minimum image standards. As a result, the Company closed 184 stores in 1994, 401 in 1993 and 358 in 1992. However, as the Company approaches completion of the remodeling program, it plans to strengthen its position in existing markets by expanding its store base. The planning process for this new store development is underway and new store openings should outpace store closures by 1997. 	 	The customer-driven approach to merchandising, which was adopted by the Company in 1992, continues to focus on providing the customer an expanded selection of quality products at a good value. This is being accomplished by prioritizing the importance of ordering at the store level, removing slow- moving items and aggressively introducing new products in the early stages of their life cycle. This process, which has contributed to improved sales and profits, will be an ongoing part of managing our business in order to satisfy the ever-changing preferences of our customers. 	 	The Company's everyday-fair-pricing strategy has provided consistent prices on all items by reducing its reliance on discounting of some products and lowering prices on others since its inception in 1992. Going forward, the Company will continue to migrate toward lower retail prices as the Company achieves decreased product costs through strategic alliances with its suppliers and distributors.
	Daily delivery of fresh perishable items and high-quality ready-to-eat foods is another key management strategy. Implementation of this strategy includes third-party development and operation of combined distribution centers, fresh-food commissaries and bakery facilities in most of the Company's markets around the country. The commissary and bakery ready-to- eat items, like fresh sandwiches and pastries, along with goods from multiple vendors such as dairy products, produce and other perishable goods, are "combined" at a distribution center and delivered daily to each store. In addition to providing fresher products and improving in-stock conditions from daily deliveries, the combined distribution is also intended to lower product costs in part from vendor's savings on direct store deliveries. The Company expects the freshness and flexibility of the products from these operations to improve sales and gross profits.
	The implementation of a retail automation system was begun by the Company in 1994. The initial phase involves installing in-store processors, which will automate accounting and other store-level tasks. After future phases are complete, the system will provide each store and its suppliers and distributors with information to make better decisions in anticipating customer
needs. The in-store processors currently being installed will meet the demands of future phases of the automation process.
GROSS PROFITS 	 	Consolidated gross profits were $1.54 billion for 1994, $32.9 million below 1993, which was $32.4 million below 1992, reflecting lower merchandise gross profits because of fewer stores. Even though total merchandise gross profits have declined, merchandise gross profit per store has consistently improved over prior year results for the last eight quarters. Also, the fourth quarter of 1994 showed growth in total merchandise gross profits over prior year results, for the first time since the first quarter of 1990. The following chart highlights the percent change in merchandise gross profit per store and the components thereof:
	 	Merchandise gross profit margins were greatly affected, beginning in 1992, by the implementation of the everyday-fair-price strategy, which reduced discounting and promotional activities, increasing the margins in 1992 and 1993 (see Management Strategies). The margins also benefited from lower cigarette costs (beginning in August 1993) and lower costs of products under the Company's supply agreement with McLane (see Liquidity and Capital Resources - Other). In 1994, with the reduction of discounting in place, the Company tested lower prices in certain parts of the country as part of a more aggressive everyday-fair-price strategy. These lower prices, combined with increased costs for disposal of slow moving merchandise was primarily responsible for the decrease in 1994 merchandise margins.
	Gasoline gross profits per store were 12.8%, 29.8% and 28.0% higher, compared to the preceding year, for 1994, 1993 and 1992, respectively. Gross profits improved due to the combination of an increase in gallons sold and higher margins. Gross profit margin on gasoline sales was 14.5 cents per gallon for 1994, an increase of .6 cents compared to 1993, which was 2.0 cents higher than 1992. The increase in margins 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")
* ADJUSTED TO EXCLUDE SEVERANCE AND RELATED COSTS AND THE LOSS FOR STORE CLOSINGS AND DISPOSITIONS OF PROPERTIES, INCLUDING CITIJET (SEE SUMMARY OF RESULTS OF OPERATIONS).
	The majority of the decrease in SG&A expense, as adjusted, resulted from cost savings realized from reductions in force that began late in 1992 and continued through 1994, combined with the effect of having fewer stores (see Management Strategies). Also, in the fourth quarter, the Company included 1994 year-to-date amounts of certain expenses, totaling approximately $20 million (approximately $15 million through September 30th) in selling, general and administrative expenses rather than in cost of goods sold where they had been included in prior periods.
	In 1993 and 1992, after reviewing the functions necessary to enable its stores to respond faster, more creatively and more cost efficiently to rapidly changing customer needs and preferences, the Company implemented certain reorganization plans. During the third quarter of 1994, the Company began a similar review that was completed in December. The Company anticipates that the latest review will result in approximately $18 million in annual savings beginning in 1995. The resultant plan will both realign and reduce personnel and will require changes in the location and size of office facilities. Approximately 335 employees throughout the Company will be terminated during 1995. In addition, one office facility will be sold at a loss and space at several leased facilities will be terminated or subleased. The $7.4 million cost of the plan was accrued in SG&A expense, and is comprised of $5.7 million for severance benefits and $1.7 million for changes in office facilities. Management intends for the review process to be ongoing, but currently can not predict what further recommendations will be made nor the timing of their implementation.
INTEREST EXPENSE 	 	The Company's total interest expense in 1994 increased $14.0 million over 1993, primarily due to the refinancing of the 12% Senior Notes with working capital and bank debt in August 1993. Unlike the interest on the bank debt, interest on the 12% Senior Notes was subject to SFAS No. 15 treatment with interest payments recorded as a reduction of principal rather than interest expense (see Note 9 of "Notes to Consolidated Financial Statements").
	Interest expense in 1993 and 1992 declined $29.1 million and $65.6 million as compared to prior years, respectively. The decline in interest expense in 1993 and 1992 was primarily due to declining interest rates on floating rate debt and lower term loan balances, combined with greater use of commercial paper in 1993, which has lower interest rates than other debt instruments.
	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).
	The weighted average interest rate on the Company's floating rate debt was 5.51% in 1994, 4.52% in 1993 and 6.56% in 1992. Approximately 31% of the Company's debt contains floating rates that will be unfavorably impacted by rising interest rates. However, overall interest expense in 1995 is expected to decline when compared to 1994, as a result of factors noted above.
INCOME TAXES 	 	The Company recorded a tax benefit of $18.5 million in 1994, compared to a tax provision of $8.7 million and $11.5 million in 1993 and 1992, respectively. The 1994 tax benefit is primarily due to the realization of a portion of the Company's net deferred tax asset. Based on a one-year projection of taxable income, the Company has recognized a portion of its net deferred tax asset through a $30.0 million reduction in the valuation allowance with $13.9 million recorded in other current assets and the remainder in other assets. Taxable income for 1995 was projected by utilizing steady state assumptions defined as only inflationary increases in sales and no increase in gross profit margins. If the Company's current trend of profitability continues, then additional deferred tax assets of up to approximately $175 million could be recognized.
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 from 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 and 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 new revolving credit facility was extended 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 amended Credit Agreement has eliminated certain financial and operating covenants required under the old agreement. These include, among other things, the attainment of certain levels of earnings before interest, taxes, depreciation and amortization ("EBITDA") and the ratio of senior indebtedness to subordinated indebtedness.
	Although certain covenants and the required levels have been modified under the amended Credit Agreement, they continue to require ongoing improvement in the Company's financial condition. For the period ended December 31, 1994, the Company was in compliance with all of the covenants required under the Credit Agreement as amended. The Company complied with the principal financial and operating covenants, which are calculated over the latest 12-month period, as follows:
* INCLUDES EFFECTS OF THE SFAS NO. 15 INTEREST PAYMENTS.
	In 1994, the Company paid $400.6 million of debt principal of which $281.7 million related to the amendment of the Credit Agreement. Other principal reductions during the course of the year were $118.9 million of which $83.7 million was for secured indebtedness ($47.3 million on the old term loans) and $35.2 million was SFAS No. 15 interest. Outstanding balances on December 31, 1994 for the commercial paper, the Revolver and the Term Loan were $391.3 million, $50.0 million and $300.0 million, respectively. As of December 31, 1994, outstanding letters of credit related to the Credit Agreement totaled $119.9 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 $271.6 million for 1994 compared to $232.1 million in 1993 and $172.6 million in 1992. In 1994, the majority of cash was provided by operations, combined with a $24.3 million decrease in other assets primarily due to a reduction in cash collateral required for payment of anticipated insurance claims (see Results of Operations).
CAPITAL EXPENDITURES 	 	During 1994, net cash used in investing activities consisted primarily of payments of $171.6 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. In addition, the Company is expected to use approximately 13% of 1995's capital expenditures on the retail automation project (see Management Strategies).
	Through December 31, 1994, approximately 2,700 stores had been remodeled. As in 1994, the 1995 average-per-store capital expenditures and associated upfront expenses will be less than 1993 levels and will focus 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. Reducing the scope of the remodels has also virtually eliminated the need to close stores during construction, which negatively affected merchandise sales at stores remodeled in 1993.
CAPITAL EXPENDITURES - GASOLINE EQUIPMENT 	 	The Company anticipates that it will spend approximately $14 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 $25 million on such capital improvements from 1996 through 1998.
ENVIRONMENTAL COMPLIANCE - STORES 	 	The Company accrues for the anticipated future costs of environmental clean-up activities (consisting of contamination 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 December 31, 1994, the Company has an accrued liability of $63.4 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 analysis of such factors as the age of the tanks, location of tank sites and experience with contractors who perform contamination assessment and remedial work.
	The Company is eligible to receive reimbursement for a large portion of these costs under state reimbursement programs and has recorded a gross receivable of $76.1 million (a net receivable of $57.2 million after an allowance of $18.9 million) for the estimated probable state reimbursement of paid and accrued assessment and remediation expenses. The Company reduced the estimated net environmental cost reimbursements at the end of 1994 by approximately $6.0 million as a result of completing a review of state reimbursement programs. 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 $39.3 million and $38.9 million at December 31, 1994 and 1993, respectively. Of this amount, $34.2 million and $33.8 million are included in deferred credits and other liabilities and the remainder in accrued expenses and other liabilities for the respective years. 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 $23.0 million at December 31, 1994, representing the former owner's portion of the clean-up costs.
	None of the amounts related to environmental liabilities, for the stores or the chemical plant, have been discounted.
OTHER 	 	In November 1992, the McLane Company, Inc. ("McLane"), acquired certain of the Company's distribution and food center assets. In addition, Southland ceased operations in December 1992 at its distribution and food centers in Orlando, Florida and Tyler, Texas and in April 1993 at Champaign, Illinois. The Company disposed of its facility in Orlando in November 1993, its facility in Tyler in March 1994 and the Champaign facility in December 1994. These transactions did not have a material impact on 1994 or 1993 earnings, since they were included in the $45.0 million loss recognized in 1992 resulting from the sale to McLane and related plant closings. Since the transaction, the Company has benefited from lower cost of products purchased under a supply agreement with McLane. In addition to the $141.8 million in gross proceeds received from McLane in connection with the acquisition of the Company's distribution and food processing assets in 1992, $44.9 million of cash was received in 1993, primarily from the sale of inventories to McLane and $6.3 million was received in 1994 related to the sale of the Tyler facility.
	In 1993, the Company disposed of its last non-convenience retailing business, the Citijet fixed-base operation at Dallas Love Field Airport, and recognized a loss of $10.8 million on the transaction.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
		 THE SOUTHLAND CORPORATION AND SUBSIDIARIES
		 CONSOLIDATED FINANCIAL STATEMENTS FOR THE 		YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
THE SOUTHLAND CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 -------------------------------------------------------------------------------
1. ACCOUNTING POLICIES
	PRINCIPLES OF CONSOLIDATION - The Southland Corporation and 	subsidiaries ("the Company") is owned approximately 64% by IYG Holding 	Company, which is jointly owned by Ito-Yokado Co., Ltd. ("IY") and 	Seven-Eleven Japan Co., Ltd.("SEJ").
	The consolidated financial statements include the accounts of The 	Southland Corporation and its subsidiaries. Intercompany transactions 	and account balances are eliminated. Prior-year amounts have been 	reclassified to conform to current-year presentation.
	The Company's net sales are comprised of sales of products and 	services. Net sales and cost of goods sold of stores operated by 	franchisees are consolidated with the results of Company-operated 	stores. Net sales of stores operated by franchisees are $2,820,685,000, 	$2,810,270,000 and $2,931,494,000 from 2,962, 2,998 and 3,011 stores for 	the years ended December 31, 1994, 1993 and 1992, respectively. Under 	the present franchise agreements, initial franchise fees are recognized 	in income currently and are generally calculated based upon gross profit 	experience for the store or market area. These fees cover certain costs 	including training, an allowance for travel, meals and lodging for the 	trainees and other costs relating to the franchising of the store.
	The gross profit of the franchise stores is split between the Company 	and its franchisees. The Company's share of the gross profit of 	franchise stores is its continuing franchise fee, generally ranging from 	50% to 58% of the gross profit of the store, which is charged to the 	franchisee for the license to use the 7-Eleven operating system and 	trademarks, for the lease and use of the store premises and equipment, 	and for continuing services provided by the Company. These services 	include merchandising, advertising, recordkeeping, store audits, 	contractual indemnification, business counseling services, training 	seminars and preparation of financial statements. The gross profit 	earned by the Company's franchisees of $517,955,000, $530,436,000 and 	$539,835,000 for the years ended December 31, 1994, 1993 and 1992, 	respectively, are included in the Consolidated Statements of Operations 	as selling, general and administrative expenses.
	Sales by stores operated under domestic and foreign area license 	agreements are not included in consolidated revenues. All fees or 	royalties arising from such agreements are included in other income. 	Initial fees, which have been immaterial, are recognized when the 	services required under the agreements are performed.
	OTHER INCOME - Other income is primarily comprised of area license 	royalties and interest income. The area license royalties include 	amounts from area license agreements with SEJ of approximately
	$42,000,000, $39,000,000 and $37,000,000 for the years ended December 	31, 1994, 1993 and 1992, respectively.
	COST OF GOODS SOLD - Cost of goods sold includes buying and occupancy 	expenses.
	CASH AND CASH EQUIVALENTS - Cash and cash equivalents include temporary 	cash investments of $3,028,000 and $11,345,000 at December 31, 1994 and 	1993, respectively, stated at cost, which approximates market. The 	Company considers all highly liquid investment instruments purchased 	with maturities of three months or less to be cash equivalents.
	INVENTORIES - Inventories are stated at the lower of cost or market. 	Cost is generally determined by the LIFO method for stores in the United 	States and by the FIFO method for stores in Canada.
	DEPRECIATION AND AMORTIZATION - Depreciation of buildings and equipment 	is based upon the estimated useful lives of these assets using the 	straight-line method. Amortization of capital leases, improvements to 	leased properties and favorable leaseholds is based upon the remaining 	terms of the leases or the estimated useful lives, whichever is shorter.
	Foreign and domestic area license royalty intangibles were recorded in 	1987 at the fair value of future royalty payments and are being 	amortized over 20 years using the straight-line method. The 20-year 	life is less than the estimated lives of the various royalty agreements, 	the majority of which are perpetual.
	STORE CLOSINGS - Provision is made on a current basis for the write-down 	of identified owned-store closings to their net realizable value. For 	identified leased-store closings, provision is made on a current basis 	if anticipated expenses are in excess of expected sublease rental 	income. The recorded value of assets for certain stores with marginal 	financial results is periodically evaluated, and, if necessary, the 	carrying value of the asset is adjusted.
	BUSINESS SEGMENT - The Company operates in a single business segment - 	the operating and franchising of convenience food stores, primarily 	under the 7-Eleven name.
2. ACCOUNTS AND NOTES RECEIVABLE
3. INVENTORIES
	Inventories stated on the LIFO basis that are included in inventories 	in the accompanying Consolidated Balance Sheets were $63,340,000 and 	$65,607,000 at December 31, 1994 and 1993, respectively, which is less 	than replacement cost by $28,286,000 and $25,292,000, respectively. At 	December 31, 1993 and 1992, inventories were reduced resulting in a 	liquidation of LIFO inventory layers recorded at costs that were lower 	than the costs of current purchases. The effects of these reductions 	were to decrease cost of goods sold by approximately $3,900,000 in 1993 	and to decrease the loss on the sale and closing of the distribution and 	food centers by approximately $23,000,000 in 1992.
4. OTHER CURRENT ASSETS
5. PROPERTY, PLANT AND EQUIPMENT
6. DIVESTED ASSETS
	In November 1992, the Company sold two of its five distribution centers 	and three of its six food centers to McLane Company, Inc. ("McLane"). 	The remaining facilities were disposed of in 1993 and 1994. For the 	years ended December 31, 1994, 1993 and 1992, the Company received cash 	proceeds of approximately $6,300,000, $44,900,000 and $141,800,000, 	respectively, from the disposition of distribution and food center 	assets. 	 	The $45 million pre-tax loss on the sale and closing of the distribution 	and food centers in 1992 included the loss from the sale of assets to 	McLane, the expected loss on dispositions of the remaining facilities, 	and the expected net cash outflows on all such facilities subsequent to 	August 31, 1992 (the measurement date), until the expected dates of 	disposition. Operating results prior to the disposition of the 	facilities, which were included in the loss, and adjustments to the loss 	upon final disposition were not material.
7. OTHER ASSETS
8. ACCRUED EXPENSES AND OTHER LIABILITIES
	Other includes accounts payable to The Southland Corporation Employees' 	Savings and Profit Sharing Plan (see Note 13) for contributions and 	contingent rent payables of $13,186,000 and $14,098,000 as of December 	31, 1994 and 1993, respectively.
	In December 1994, the Company completed a review of the functions 	necessary to enable its stores to respond faster, more creatively and 	more cost efficiently to rapidly changing customer needs and 	preferences. The resultant plan will both realign and reduce personnel 	and will require changes in the location and size of office facilities. 	Approximately 335 employees in various positions throughout the Company 	will be terminated during 1995. In addition, one owned office facility 	will be sold at a loss and space at several leased facilities will be 	terminated or subleased. The $7,405,000 cost of the plan was accrued in 	selling, general and administrative expenses, and is comprised of 	$5,668,000 for severance benefits and $1,737,000 for changes in office 	facilities.
9. DEBT
	BANK DEBT - The Company is obligated to a group of lenders under a 	credit agreement ("Credit Agreement") that includes term loans and a 	revolving credit facility (collectively "Bank Debt"). In December 1994, 	the Credit Agreement was amended to extend its maturity through December 	31, 1999, and to change various financial and operating covenants to 	reduce certain restrictions. The financial and operating covenants 	require, among other things, the maintenance of certain financial ratios 	including interest coverage, fixed-charge coverage and senior 	indebtedness to earnings before interest, income taxes, depreciation and 	amortization. The Credit Agreement also contains various covenants
	which, among other things, (a) limit the Company's ability to incur or 	guarantee indebtedness or other liabilities other than under the Credit 	Agreement, (b) restrict the Company's ability to engage in asset sales 	and sale/leaseback transactions, (c) restrict the types of investments 	the Company can make and (d) restrict the Company's ability to pay cash 	dividends, redeem or prepay principal and interest on any subordinated 	debt and certain senior debt (except in connection with certain sinking 	fund obligations under the 5% First Priority Senior Subordinated 	Debentures due 2003). Under the Credit Agreement, all of the assets of 	the Company, with the exception of certain specified property, serve as 	collateral.
	The amendment to the Credit Agreement refinanced the existing term 	loans and revolving credit facility with a new term loan and a new 	revolving credit facility. The new term loan provided proceeds of $300 	million, which were primarily used to retire the existing term loans. 	The new term loan is to be repaid in sixteen quarterly installments of 	$18,750,000 commencing March 31, 1996. The new revolving credit 	facility makes available borrowings and letters of credit totaling a 	maximum of $300 million. Maximum borrowings and letters of credit under 	the revolving credit facility are set at $150 million each. Upon 	expiration of the facility, all the then outstanding letters of credit 	must expire and may need to be replaced, and all other amounts then 	outstanding will be due and payable in full. At December 31, 1994, 	outstanding letters of credit related to the Credit Agreement totaled 	$119,927,000.
	Interest on the Bank Debt is generally payable quarterly and is 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 a reserve-adjusted 	Eurodollar rate plus .975% per year. The weighted-average interest rate 	on the term loan and revolving credit facility borrowings outstanding at 	December 31, 1994, was 7.1% and 8.5%, respectively. A fee of .925% per 	year on the outstanding amount of letters of credit is required to be 	paid quarterly. A .5% per year commitment fee on unadvanced funds, which 	for purposes of this calculation include unissued letters of credit, is 	payable quarterly. The weighted-average interest rate on revolving 	credit facility borrowings outstanding at December 31, 1993, was 7.5%.
	In 1992 and 1993, the Credit Agreement was amended in connection with 	certain activities of the Company. In September 1992, the Company 	entered into an amendment that permitted the establishment of a $400 	million commercial paper facility. In connection with this amendment, 	the Company was required to make a $350 million prepayment on the term 	loans. In addition, as a result of the disposition of the distribution 	and food center assets (see Note 6) and in accordance with an October 	1992 amendment, a $110 million prepayment on the term loans was made in 	December 1992. In August 1993, the Company completed a refinancing of 	its 12% Senior Notes with proceeds from working capital and an 	additional $150 million term loan under the Credit Agreement (the 	"Refinancing"). An amendment was executed to provide for the additional 	term loan, which was subsequently repaid from proceeds of the new term 	loan.
	COMMERCIAL PAPER - In September 1992, the Company obtained a facility 	that provides for the issuance of up to $400 million in commercial 	paper. At December 31, 1994, $350 million of the $391,322,000 	outstanding principal, net of discount, was classified as long-term debt 	since the Company intends to maintain at least this amount outstanding 	during the next year. Such debt is unsecured and is fully and 	unconditionally guaranteed by IY. IY has agreed to continue its 	guarantee of all commercial paper issued through 1996. While it is not 	anticipated that IY would be required to perform under its commercial 	paper guarantee, in the event IY makes any payments under the guarantee, 	the Company and IY have entered into an agreement by which the Company 	is required to reimburse IY subject to restrictions in the Credit 	Agreement. The weighted-average interest rate on commercial paper 	borrowings outstanding at December 31, 1994 and 1993, respectively, was 	6.0% and 3.3%.
	NOTES AND DEBENTURES - The Notes and Debentures are accounted for in 	accordance with SFAS No. 15, "Accounting by Debtors and Creditors for 	Troubled Debt Restructuring," and were initially recorded at an amount 	equal to the future undiscounted cash payments, both principal and 	interest ("SFAS No. 15 Interest"). Accordingly, no interest expense 	will be recognized over the life of these securities, and cash interest 	payments will be charged against the recorded amount of such securities. 	Interest on all of the Notes and Debentures is payable in cash 	semiannually on June 15 and December 15 of each year.
	The 5% First Priority Senior Subordinated Debentures, due December 15, 	2003, with an aggregate principal amount of $450,614,000 at December 31, 	1994, are redeemable at any time at the Company's option at 100% of 	principal amount. Annual sinking fund payments of $27,037,000 are due 	each December 15, commencing 1996 through 2002. These payments retire 	42% of the debt before maturity.
	The Second Priority Senior Subordinated Debentures were issued in three 	series, and each series is redeemable at any time at the Company's 	option at 100% of principal amount and are described as follows:
	- 4-1/2% Series A Debentures, due June 15, 2004, had an aggregate 		principal amount of $206,373,000 at December 31, 1994.
	- 4% Series B Debentures, due June 15, 2004, had an aggregate 		principal amount of $18,766,000 at December 31, 1994.
	- 12% Series C Debentures, due June 15, 2009, had an aggregate 		principal amount of $21,787,000 at December 31, 1994.
	The Debentures contain certain covenants that, among other things, (a) 	limit the payment of dividends and certain other restricted payments by 	both the Company and its subsidiaries, (b) require the purchase by the 	Company of the Debentures at the option of the holder upon a change of 	control, (c) limit additional indebtedness, (d) limit future exchange 	offers, (e) limit the repayment of subordinated indebtedness, (f) 	require board approval of certain asset sales, (g) limit transactions 	with certain stockholders and affiliates, and (h) limit consolidations, 	mergers and the conveyance of all or substantially all of the Company's 	assets.
	The First and Second Priority Senior Subordinated Debentures are 	subordinate to the outstanding Bank Debt and to previously outstanding 	mortgages and notes that are either backed by specific collateral or are 	general unsecured, unsubordinated obligations. The Second Priority 	Debentures are subordinate to the First Priority Debentures. 	 	The Company had an issuance of 12% Senior Notes, which was due December 	15, 1996, with an aggregate principal amount of $250,553,000. These 	notes were redeemed in August 1993, resulting in an extraordinary gain 	of $98,968,000, which had no tax effect.
	YEN LOAN - In March 1988, the Company monetized its future royalty 	payments from SEJ, the area licensee in Japan, through a loan that is
	nonrecourse to the Company as to principal and interest. The debt, 	payable in Japanese yen, was in the amount of 41 billion yen, or 	approximately $327,000,000 (at the exchange rate in March 1988), and is 	collateralized by the Japanese trademarks and a pledge of the future 	royalty payments. The current interest rate of 6-1/4% will be reset 	after March 1998. Payment of the debt is required no later than March 	2006 through future royalties from the Japanese licensee, and the 	Company believes it is a remote possibility that there will be any 	principal balance remaining at that date. By designating its future 	royalty receipts during the term of the loan to service the monthly 	interest and principal payments, the Company has hedged the impact of 	future exchange rate fluctuations. Upon the later of February 28, 2000, 	or the date which is one year following the final repayment of the loan, 	royalty payments from the area licensee in Japan will be substantially 	reduced in accordance with the terms of the license agreement.
	CITYPLACE DEBT - Cityplace Center East Corporation ("CCEC"), a 	subsidiary of the Company, issued $290 million of notes in March 1987 to 	finance the construction of the headquarters tower, a parking garage and 	related facilities of the Cityplace Center development. The interest 	rate on these notes was 7-7/8%, payable semiannually on February 15 and 	August 15, and the principal amount was due on February 15, 1995. 	Because of the application of purchase accounting in 1987, the effective 	interest rate was 9.0%. The principal amount was paid to noteholders on 	February 15, 1995, by drawings under letters of credit issued by The 	Sanwa Bank, Limited, Dallas Agency ("Sanwa"), which has a lien on the 	property financed. At that time, the Company deferred the maturity of 	the debt by exercising its option of extending the term of maturity ten 	years to March 1, 2005, with monthly payments of principal and interest 	to Sanwa based on a 25-year amortization at 7-1/2%, with the remaining 	principal due upon maturity (the "Cityplace Term Loan").
	The Company is occupying part of the building as its corporate 	headquarters and the balance is subleased. As additional consideration through	the extended term of the debt, CCEC will pay to Sanwa an amount that it receives from the Company which is equal to the net sublease income that 	the Company receives on the property and 60% of the proceeds, less $275 	million and permitted costs, upon a sale or refinancing of the building.
	SOUTHLAND CANADA DEBT - During 1988, Southland Canada, Inc. entered 	into a revolving credit facility with a Canadian chartered bank. The 	facility currently provides bank financing of up to Canadian $14,287,000 	(approximately U.S. $10,185,000 at December 31, 1994), which will be 	reduced to Canadian $10,716,000 on June 30, 1995, and will be further 	reduced each year thereafter until June 30, 1998, when the facility will 	expire, and all amounts outstanding will be due and payable in full. At 	December 31, 1994, the Company had borrowings outstanding under this 	facility of Canadian $7,964,000 (approximately U.S. $5,678,000). 	Interest on such facility is generally payable monthly and is based upon 	the Canadian Prime rate (8.0% at December 31, 1994) plus .75% per year 	or a bankers' acceptance rate plus 1.5% per year. The weighted-average 	interest rate on revolving credit facility borrowings outstanding at 	December 31, 1994 and 1993, respectively, was 7.3% and 5.4%.
	MATURITIES - Long-term debt maturities assume the continuance of the 	commercial paper program. The maturities, which include capital lease 	obligations and sinking fund requirements, as well as SFAS No. 15 	Interest accounted for in the recorded amount of the Debentures, are as 	follows (dollars in thousands):
10. PREFERRED STOCK
	The Company has 5,000,000 shares of preferred stock authorized for 	issuance. Any preferred stock issued will have such rights, powers and 	preferences as determined by the Company's Board of Directors.
11. REDEEMABLE COMMON STOCK PURCHASE WARRANTS
	In 1987, the Company issued 26,135,682 redeemable common stock purchase 	warrants (the "Warrants"). The Warrants were recorded at $1.00 per 	Warrant, which was the amount of proceeds allocated to the Warrants at 	the time of issuance. The Warrants were governed by a warrant agreement 	and were exercisable through December 15, 1992, only upon the occurrence 	of certain specified events. None of the specified events occurred on 	or before December 15, 1992, and all of the warrants expired on December 	16, 1992. Under the provisions of the warrant agreement, the Company 	was obligated to repurchase the Warrants by March 15, 1995, at the fair 	market value of the Warrants as separate securities, as determined by an 	independent financial expert. A fair market value of $0 for the 	Warrants was determined by an independent financial expert in December 	1992. The $26,135,682 difference between the carrying amount of the 	Warrants and their fair value was recorded as an increase in additional 	capital in 1992.
12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
	The following disclosure of the estimated fair value of financial 	instruments is made in accordance with SFAS No. 107, "Disclosures about 	Fair Value of Financial Instruments." The estimated fair-value amounts 	have been determined by the Company using available market information 	and appropriate valuation methodologies.
	The carrying amounts of cash and cash equivalents, trade accounts 	receivable, trade accounts payable and accrued expenses and other 	liabilities are reasonable estimates of their fair values. Letters of 	credit are included in the estimated fair value of accrued expenses and 	other liabilities. The carrying amounts and estimated fair values of
	other financial instruments at December 31, 1994, are listed in the 	following table:
	The methods and assumptions used in estimating the fair value for each 	of the classes of financial instruments presented in the table above are 	as follows:
	- The carrying amount of the Bank Debt approximates fair value because 	 the interest rates are variable.
	- Commercial paper borrowings are sold at market interest rates and 	 have an average remaining maturity of less than 20 days. Therefore, 	 the carrying amount of commercial paper is a reasonable estimate of 	 its fair value. The guarantee of the commercial paper by IY is an 	 integral part of the estimated fair value of the commercial paper 	 borrowings.
	- The fair value of the Debentures is estimated based on December 31, 	 1994, bid prices obtained from investment banking firms where traders 	 regularly make a market for these financial instruments. The carrying 	 amount of the Debentures includes $298,190,000 of SFAS No. 15 	 Interest.
	- The fair value of the Yen Loan is estimated by calculating the 	 present value of the future yen cash flows at current interest and 	 exchange rates.
	In February 1995, the original Cityplace notes were repaid with proceeds 	from the Cityplace Term Loan (see Note 9). At the date of issuance, the 	carrying amount and the fair value of the Cityplace Term Loan was 	$290,000,000 and $269,650,000, respectively. The fair value was 	estimated by calculating the present value of the future cash flows at 	current interest rates.
13. EMPLOYEE BENEFIT PLANS
	PROFIT SHARING PLANS - The Company maintains profit sharing plans for 	its U.S. and Canadian employees. In 1949, the Company excluding its 	Canadian subsidiary ("Southland") adopted The Southland Corporation 	Employees' Savings and Profit Sharing Plan (the "Savings and Profit 	Sharing Plan"), and, in 1970, the Company's Canadian subsidiary adopted 	the Southland Canada, Inc. Profit Sharing Pension Plan. These plans 	provide retirement benefits to eligible employees.
	Contributions to the Savings and Profit Sharing Plan are made by both 	the participants and Southland. Southland contributes the greater of 	approximately 10% of its net earnings before contribution to the Savings 	and Profit Sharing Plan and federal income taxes or an amount determined 	by Southland's president. The contribution by Southland is generally 	allocated to the participants on the basis of their individual 	contribution, years of participation in the Savings and Profit Sharing 	Plan and age. The provisions of the Southland Canada, Inc. Profit 	Sharing Pension Plan are similar to those of the Savings and Profit 	Sharing Plan. Total contributions to these plans for the years ended 	December 31, 1994, 1993 and 1992 were $10,513,000, $11,956,000 and 	$14,647,000 (including amounts allocated to the distribution and food 	centers), respectively.
	POSTRETIREMENT BENEFITS - The Company's group insurance plan (the 	"Insurance Plan") provides postretirement medical and dental benefits 	for all retirees that meet certain criteria. Such criteria include 	continuous participation in the Insurance Plan ranging from 10 to 15 	years depending on hire date, and the sum of age plus years of 	continuous service equal to at least 70. The Company contributes toward 	the cost of the Insurance Plan a fixed dollar amount per retiree based 	on age and number of dependents covered, as adjusted for actual claims 	experience. All other future costs and cost increases will be paid by 	the retirees. The Company continues to fund its cost on a cash basis; 	therefore, no plan assets have been accumulated.
	Net periodic postretirement benefit costs for 1994, 1993 and 1992 	include the following components:
	The weighted-average discount rate used in determining the accumulated 	postretirement benefit obligation was 8% and 7% at December 31, 1994 and 	1993, respectively. Components of the accrual recorded in the Company's 	consolidated balance sheets are as follows:
	POSTEMPLOYMENT BENEFITS - As of January 1, 1993, the Company adopted 	SFAS No. 112, "Employers' Accounting for Postemployment Benefits," and 	recorded an accumulated postemployment benefit obligation of 	$16,537,000. The accumulated postemployment benefit obligation, which 	had no tax effect, was recorded as the cumulative effect of an 	accounting change. The obligation primarily represents future medical 	costs relating to short-term and long-term disability. As of December 	31, 1994 and 1993, the amount of the obligation was $18,460,000 and 	$16,537,000, respectively. 	 	EQUITY PARTICIPATION PLAN - During 1988, the Company adopted The 	Southland Corporation Equity Participation Plan (the "Participation 	Plan"), which provides for the granting of both incentive options and 	nonstatutory options and the sale of convertible debentures to certain 	key employees and officers of the Company. The options were granted at 	the fair market value on the date of grant, which is the same as the 	conversion price provided in the debentures.
	All options expire, and the debentures mature, no later than December 	31, 1997. All options and convertible debentures that were vested 	became exercisable as of December 31, 1994, pursuant to the terms of the 	Participation Plan. In the aggregate, not more than 3,529,412 shares of 	common stock of the Company can be issued pursuant to the Participation 	Plan; however, the Company has no present intent to grant additional 	options under this plan. The shares available for issuance under the 	Participation Plan are reduced by the number of shares issued under the 	Grant Stock Plan. At December 31, 1994, there were vested options 	outstanding to acquire 1,760,803 shares, of which 1,677,128 were at 	$7.50 per share and 83,675 were at $7.70 per share, and vested 	debentures outstanding that were convertible into 17,833 shares. Of the 	options and debentures that were vested as of December 31, 1994, 539,803 	options to acquire 539,803 shares and debentures convertible into 11,167 	shares will expire on March 31, 1995, for those participants who are no 	longer with the Company.
	GRANT STOCK PLAN - During 1988, the Company adopted The Southland 	Corporation Grant Stock Plan (the "Stock Plan"). Under the provisions 	of the Stock Plan, up to 750,000 shares of common stock are authorized 	to be issued to certain key employees and officers of the Company. The 	stock was fully vested upon the date of issuance. As of December 31, 	1994, 480,844 shares had been issued pursuant to the Stock Plan. No 	shares have been issued since 1988, and the Company has no present 	intent to grant additional shares.
14. LEASES, COMMITMENTS AND CONTINGENCIES 	 	LEASES - Certain property, plant and equipment used in the Company's 	business is leased. Generally, real estate leases are for primary terms 	from 14 to 20 years with options to renew for additional periods, and 	equipment leases are for terms from one to ten years. The leases do not 	contain restrictions that have a material effect on the Company's 	operations.
	The composition of capital leases reflected as property, plant and 	equipment in the consolidated balance sheets is as follows:
	The present value of future minimum lease payments for capital lease 	obligations is reflected in the consolidated balance sheets as long-term 	debt. The amount representing imputed interest necessary to reduce net 	minimum lease payments to present value has been calculated generally at 	the Company's incremental borrowing rate at the inception of each lease.
	Future minimum lease payments for years ending December 31 are as 	follows:
	Minimum noncancelable sublease rental income to be received in the 	future, which is not included above as an offset to future payments, 	totals $26,053,000 for capital leases and $26,051,000 for operating 	leases.
	Rent expense on operating leases for the years ended December 31, 1994, 	1993 and 1992, totaled $120,850,000, $124,402,000 and $135,657,000, 	respectively, including contingent rent expense of $8,576,000, 	$8,214,000 and $9,037,000, but reduced by sublease rent income of 	$7,858,000, $8,545,000 and $8,252,000. Contingent rent expense on 	capital leases for the years ended December 31, 1994, 1993 and 1992, was 	$2,822,000, $3,084,000 and $3,964,000, respectively. Contingent rent 	expense is generally based on sales levels or changes in the Consumer 	Price Index.
	LEASES WITH THE SAVINGS AND PROFIT SHARING PLAN - At December 31, 1994, 	the Savings and Profit Sharing Plan owned 253 stores leased to the 	Company under capital leases and 647 stores leased to the Company under 	operating leases at rentals which, in the opinion of management, 	approximated market rates at the date of lease. In addition, 43, 62 and 	31 properties were sold by the Savings and Profit Sharing Plan to third 	parties in 1994, 1993 and 1992, respectively, and at the same time, the 	related leases with the Company were either cancelled or assigned to the 	new owner. Included in the consolidated financial statements are the 	following amounts related to leases with the Savings and Profit Sharing 	Plan:
	COMMITMENTS
	MCLANE - In connection with the 1992 sale of assets to McLane, the 	Company and McLane entered into a ten-year service agreement under which 	McLane is making its distribution services available to 7-Eleven stores 	in the United States. If the Company does not fulfill its obligation to 	McLane during this time period, the Company must reimburse McLane on a 	pro-rata basis for the transitional payment received at the time of the 	transaction. The original payment received of $9,450,000 in 1992 is 	being amortized to income over the life of the agreement. The Company 	has exceeded the minimum annual purchases each year and expects to 	exceed the minimum required purchase levels in future years.
	CITGO PETROLEUM CORPORATION - In 1986, the Company entered into a 	20-year product purchase agreement with Citgo to buy specified 	quantities of gasoline at market prices. These prices are determined 	pursuant to a formula based on the prices posted by gasoline wholesalers 	in the various market areas where the Company purchases gasoline from 	Citgo. Minimum required annual purchases under this agreement are 	generally the lesser of 750 million gallons or 35% of gasoline purchased
	by the Company for retail sale. The Company has exceeded the minimum 	required annual purchases each year and expects to exceed the minimum 	required annual purchase levels in future years.
	CONTINGENCIES
	GASOLINE STORE SITES - The Company accrues future costs, as well as 	records the related probable state reimbursement amounts, for 	remediation of gasoline store sites where releases of regulated 	substances have been detected. At December 31, 1994 and 1993, 	respectively, the Company's estimated liability for sites where releases 	have been detected was $63,424,000 and $59,153,000, of which $32,924,000 	and $35,333,000 is included in deferred credits and other liabilities 	and the remainder in accrued expenses and other liabilities. The Company 	has recorded receivables of $57,246,000 and $57,532,000 (net of 	allowances of $18,890,000 and $12,529,000) for the estimated probable 	state reimbursements, of which $47,746,000 and $52,238,000 is included 	in other assets and the remainder in accounts and notes receivable. The 	Company reduced the estimated net environmental cost reimbursements at 	the end of 1994 by approximately $6,000,000 as a result of completing a 	review of state reimbursement programs. The estimated future 	remediation expenditures and related state reimbursement amounts could 	change as governmental requirements and state reimbursement programs 	change in future years.
	The Company anticipates that substantially all of the future remediation 	costs for sites with detected releases of regulated substances at 	December 31, 1994, will be incurred within the next five years. There 	is no assurance of the timing of the receipt of state reimbursement 	funds. However, based on the Company's experience, the Company expects 	to receive state reimbursement funds within one to four years after 	payment of eligible remediation expenses, assuming that the state 	administrative procedures for processing such reimbursements have been 	fully developed.
	CHEMICAL MANUFACTURING FACILITY - 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 $39,254,000 and 	$38,879,000 at December 31, 1994 and 1993, respectively. Of this 	amount, $34,180,000 and $33,795,000 are included in deferred credits and 	other liabilities and the remainder in accrued expenses and other 	liabilities for the respective years.
	The closed chemical manufacturing facility was previously owned by a 	large chemical company. In 1991, the Company and the former owner 	executed a final settlement agreement pursuant to which the former owner 	agreed to pay a substantial portion of the clean-up costs. The Company
	has recorded receivables of $23,009,000 and $22,800,000 at December 31, 	1994 and 1993, respectively, representing the former owner's portion of 	the clean-up costs. Of this amount, $19,800,000 is included in other 	assets and the remainder in accounts and notes receivable for both 1994 	and 1993. 	 15. INCOME TAXES
	As of January 1, 1993, the Company adopted SFAS No. 109, "Accounting 	for Income Taxes." There was no cumulative effect adjustment upon 	adoption, and there was no effect on net earnings for the year ended 	December 31, 1993. As permitted, the Company has not restated the 	financial statements of prior years. Prior to January 1, 1993, income 	taxes were recorded using the deferred method specified by Accounting 	Principles Board Opinion No. 11, "Accounting for Income Taxes."
	SFAS No. 109 requires the use of the liability method, in which deferred 	tax assets and liabilities are recognized for differences between the 	tax basis of assets and liabilities and their reported amounts in the 	financial statements. Deferred tax assets include tax carryforwards and 	are reduced by a valuation allowance if, based on available evidence, it 	is more likely than not that some portion or all of the deferred tax 	assets will not be realized. 	 	The components of earnings (loss) before income taxes, extraordinary 	gain and cumulative effect of accounting change are as follows:
	The provision for income taxes in the accompanying Consolidated 	Statements of Operations consists of the following:
	Reconciliations of income taxes at the federal statutory rate to the 	Company's actual income taxes provided are as follows:
	At December 31, 1994, the Company had approximately $20,000,000 of 	general business credit carryforwards, $10,800,000 of foreign tax credit 	carryforwards and $17,900,000 of alternative minimum tax ("AMT") credit 	carryforwards. The AMT credits have no expiration date. The general 	business credits expire during the period from 2001 to 2009, and the 	foreign tax credits expire during the period 1998 to 1999. 	 	The valuation allowance for deferred tax assets decreased by $42,078,000 	in 1994 due to changes in the Company's gross deferred tax assets and 	liabilities and the realization of a portion of the Company's net 	deferred tax asset. Based on a one-year projection of taxable income, 	the Company has recognized a portion of its net deferred tax asset 	through a $30 million reduction in the valuation allowance with 	$13,861,000 recorded in other current assets and the remainder in other 	assets. Taxable income for 1995 was projected by utilizing steady state 	assumptions defined as only inflationary increases in sales and no 	increase in gross profit margins. If the Company's current trend of 	profitability continues, then additional deferred tax assets of up to 	approximately $175 million could be recognized in future periods. In 	1993, the valuation allowance decreased by $21,817,000 due to changes in 	the Company's gross deferred tax assets and liabilities.
	Significant components of the Company's deferred tax assets and 	liabilities at December 31, 1994 and 1993, are as follows:
16. EARNINGS (LOSS) PER COMMON SHARE
	Primary earnings (loss) per common share is based on net earnings (loss) 	divided by the weighted average number of shares outstanding during each 	year. The exercise of outstanding stock options would not result in a 	dilution of earnings per share. 	
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
	Summarized quarterly financial data for 1994 and 1993 is as follows:
	The second quarter includes a $4,500,000 recovery on a 1992 insurance 	claim. The fourth quarter includes $30 million of realized deferred tax 	benefit (see Note 15), $7,405,000 of expenses accrued for severance and 	related costs (see Note 8), $7,696,000 of expense related to store 	closings and dispositions of properties, and approximately $6,000,000 in 	expense relating to the reduction of estimated net environmental cost 	reimbursements (see Note 14).
	The first quarter includes $16,537,000 of expense resulting from the 	cumulative effect of an accounting change for postemployment benefits 	(see Note 13). The third quarter includes a $98,968,000 extraordinary 	gain on redemption of debt related to the Refinancing (see Note 9) and a 	$10,300,000 loss on disposition of the Company's aviation facility 	(which was subsequently adjusted to a total loss of $10,814,000 in the 	fourth quarter). The fourth quarter includes a loss of $42,791,000 	related to store closings and dispositions of properties, a LIFO credit 	of $9,051,000 primarily due to lower cigarette and gasoline prices, and 	$5,989,000 of expense resulting from a cost-cutting program associated 	with the Company's 1993 reorganization.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of The Southland Corporation
We have audited the accompanying consolidated balance sheets of The Southland Corporation and Subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of operations, shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Southland Corporation and Subsidiaries as of December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles.
As discussed in Notes 13 and 15 to the financial statements, in 1993 the Company changed its method of accounting for postemployment benefits and for income taxes to conform with Statements of Financial Accounting Standards No. 112 and No. 109, respectively.
Coopers & Lybrand L.L.P. Dallas, Texas February 23, 1995
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	None.
				 PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	Certain of the information required in response to this Item is incorporated by reference from the Registrant's Definitive Proxy Statement for the April 26, 1995 Annual Meeting of Shareholders.
	See also "Executive Officers of the Registrant" beginning on page 17, herein.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
	The information required in response to this Item is incorporated herein by reference from the Registrant's Definitive Proxy Statement for the April 26, 1995 Annual Meeting of Shareholders.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	The information required in response to this Item is incorporated herein by reference from the Registrant's Definitive Proxy Statement for the April 26, 1995 Annual Meeting of Shareholders.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
	The information required in response to this Item is incorporated herein by reference to the Registrant's Definitive Proxy Statement for the April 26, 1995 Annual Meeting of Shareholders.
				 PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. The Southland Corporation and Subsidiaries' Financial Statements for the three years in the period ended December 31, 1994 are included herein:
									PAGE
Consolidated Balance Sheets - December 31, 1994 and 1993 38 Consolidated Statements of Operations - Years Ended December 31, 1994, 1993 and 1992 39 Consolidated Statements of Shareholders' Equity (Deficit) - Years Ended December 31, 1994, 1993 and 1992 40 Consolidated Statements of Cash Flows - Years Ended December 31, 1994, 1993 and 1992 41 Notes to Consolidated Financial Statements 42 Independent Auditors' Report of Coopers & Lybrand L.L.P. 64
2. The Southland Corporation and Subsidiaries' Financial Statement Schedules, included herein. 									PAGE Independent Auditors' Report of Coopers & Lybrand L.L.P. on Financial Statement Schedule 70
II - Valuation and Qualifying Accounts 71
All other schedules have been omitted because they are not applicable, are not required, or the required information is shown in the financial statements or notes thereto.
3. The following is a list of the Exhibits required to be filed by Item 601 of Regulation S-K.
EXHIBIT NO. 2. PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION 		OR SUCCESSION.
2.(1) Debtor's Plan of Reorganization, dated October 24, 1990, as 		filed in the United States Bankruptcy Court, Northern District 		of Texas, Dallas Division, and Addendum to Debtor's Plan of 		Reorganization dated January 23, 1991, incorporated by reference 		to The Southland Corporation's Current Report on Form 8-K dated 		January 23, 1991, File Numbers 0-676 and 0-16626, Exhibits 2.1 		and 2.2.
2.(2) Stock Purchase Agreement, dated as of January 25, 1991, by and 		among The Southland Corporation, Ito-Yokado Co., Ltd. and 		Seven-Eleven Japan Co., Ltd., incorporated by reference to The 		Southland Corporation's Current Report on Form 8-K dated 		January 23, 1991, File Numbers 0-676 and 0-16626, Exhibit 2.3.
2.(3) Confirmation Order issued on February 21, 1991 by the United 		States Bankruptcy Court for the Northern District of Texas, 		Dallas Division, incorporated by reference to The Southland 		Corporation's Current Report on Form 8-K dated March 4, 1991, 		File Numbers 0-676 and 0-16626, Exhibit 2.1.
3. ARTICLES OF INCORPORATION AND BYLAWS.
3.(1) Second Restated Articles of Incorporation of The Southland 		Corporation, as amended through March 5, 1991, incorporated 		by reference to The Southland Corporation's Annual Report on 		Form 10-K for the year ended December 31, 1990, Exhibit 3.(1).
3.(2) Bylaws of The Southland Corporation, restated as amended 		through March 5, 1991, incorporated by reference to The 		Southland Corporation's Annual Report on Form 10-K for the year 		ended December 31, 1990, Exhibit 3.(2).
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING 		INDENTURES (SEE EXHIBITS (3).(1) AND (3).(2), ABOVE).
4.(i)(1) Specimen Certificate for Common Stock, $.0001 par value, 		incorporated by reference to The Southland Corporation's Annual 		Report on Form 10-K for the year ended December 31, 1990, 		Exhibit 4.(i)(2).
4.(i)(2) Form of Voting Agreement and Stock Transfer Restriction and 		Buy-Back Agreement relating to shares of common stock, $.01 par 		value, issued pursuant to Grant Stock Plan, incorporated by 		reference to Registration Statement on Form S-8, Reg. No. 		33-25327, Exhibits 4.5 and 4.4.
4.(i)(3) Shareholders Agreement dated as of November 1, 1988, by and 		among The Southland Corporation, Thompson Brothers, L.P., 		Thompson Capital Partners, L.P., The Hayden Company, The 		Williamsburg Corporation, Four J Investment, L.P., each Limited 		Partner of Thompson Capital Partners, L.P. as of the date 		thereof, and The Philp Co., incorporated by reference to File 		No. 0-676, Annual Report on Form 10-K for year ended 		December 31, 1988, Exhibit 4(i)(7), Tab 2.
4.(i)(4) Shareholders Agreement dated as of March 5, 1991, among The 		Southland Corporation, Ito-Yokado Co., Ltd., IYG Holding 		Company, Thompson Brothers, L.P., Thompson Capital Partners, 		L.P., The Hayden Company, The Williamsburg Corporation, Four J 		Investment, L.P., The Philp Co., participants in the Company's 		Grant Stock Plan who are signatories thereto and certain 		limited partners of Thompson Capital Partners, L.P. who are 		signatories thereto, incorporated by reference to Schedule 13D 		filed by Ito-Yokado Co., Ltd., Seven-Eleven Japan Co., Ltd. and 		IYG Holding Company, Exhibit A.
4.(i)(5) First Amendment to Shareholders Agreement, dated December 30, 		1992, incorporated by reference to File Nos. 0-676 and 0-16626, 		Annual Report on Form 10-K for year ended December 31, 1992, 		Exhibit 4.(i)(5), Tab 1.
4.(i)(6) Warrant Agreement dated as of March 5, 1991, among certain 		Holders of Common Shares of The Southland Corporation named 		therein, Wilmington Trust Company, as Warrant Agent, The 		Southland Corporation and Ito-Yokado Co., Ltd., incorporated 		by reference to Schedule 13D filed by Ito-Yokado Co., Ltd., 		Seven-Eleven Japan Co., Ltd. and IYG Holding Company, Exhibit B.
4.(i)(7) Specimen Warrant Certificates to Purchase Common Shares of The 		Southland Corporation pursuant to Warrant Agreement dated as of 		March 5, 1991, with Wilmington Trust Company as Warrant Agent, 		incorporated by reference to The Southland Corporation's Annual 		Report on Form 10-K for the year ended December 31, 1990, 		Exhibit 4.(i)(7).
4.(ii)(1) Indenture, including Debenture, with Ameritrust Company National Association, as trustee, providing for 5% First Priority Senior 		Subordinated Debentures due December 15, 2003, incorporated by 		reference to The Southland Corporation's Annual Report on Form 		10-K for the year ended December 31, 1990, Exhibit 4.(ii)(2).
4.(ii)(2) Indenture, including Debentures, with The Riggs National Bank
		of Washington, D.C., as trustee providing for 4 1/2% Second 		Priority Senior Subordinated Debentures (Series A) due 		June 15, 2004, 4% Second Priority Senior Subordinated 		Debentures (Series B) due June 15, 2004, and 12% Second 		Priority Senior Subordinated Debentures (Series C) due 		June 15, 2009, incorporated by reference to The Southland 		Corporation's Annual Report on Form 10-K for the year ended 		December 31, 1990, Exhibit 4.(ii)(3).
4.(ii)(3) Indenture among Cityplace Center East Corporation, 		Security Pacific National Bank, as trustee, and The 		Sanwa Bank Limited, Dallas Agency, dated as of 		February 15, 1987, providing for 7 7/8% Notes due 		February 15, 1995, incorporated by reference to File 		No. 0-676, Annual Report on Form 10-K for the year ended 		December 31, 1986, Exhibit 4(ii)(8).
4.(ii)(4) Specimen 7 7/8% Note due February 15, 1995, issued by 		Cityplace Center East Corporation, incorporated by 		reference to File No. 0-676, Annual Report on Form 10-K 		for the year ended December 31, 1986, Exhibit 4(ii)(9).
9. VOTING TRUST AGREEMENT. NONE. (EXCEPT SEE EXHIBITS 		4.(i)(2), 4.(i)(4) AND 4.(i)(5), ABOVE.)
10. MATERIAL CONTRACTS.
10.(i)(1) Stock Purchase Agreement among The Southland Corporation, 		Ito-Yokado Co., Ltd. and Seven-Eleven Japan Co., Ltd., 		dated as of January 25, 1991. See Exhibit 2.(2), above.
10.(i)(2) Credit Agreement, dated as of July 31, 1987, amended Tab 1 		and restated as of December 16, 1994, among The 		Southland Corporation, the financial institutions party 		thereto as Senior Lenders, the financial institutions 		party thereto as Issuing Banks, Citicorp North America, 		Inc., as Administrative Agent, and The Sakura Bank, 		Limited, New York Branch, as Co-Agent.*
10.(i)(3) Credit and Reimbursement Agreement by and between Cityplace 		Center East Corporation, an indirect wholly owned 		subsidiary of Southland, and The Sanwa Bank Limited, Dallas 		Agency, dated February 15, 1987, relating to $290 million 		of 7 7/8% Notes due February 15, 1995, issued by Cityplace 		Center East Corporation (to which Southland is not a party 		and which is non-recourse to Southland), incorporated by 		reference to File No. 0-676, Annual Report on Form 10-K 		for the year ended December 31, 1986, Exhibit 10(i)(6).
10.(i)(4) Third Amendment to Credit and Reimbursement Agreement, Tab 2 		dated as of February 10, 1995, by and between The Sanwa 		Bank, Limited, Dallas Agency and Cityplace Center 		East Corporation.*
10.(i)(5) Amended and Restated Lease Agreement between Cityplace 		Center East Corporation and The Southland Corporation 		relating to The Southland Tower, Cityplace Center, Dallas, 		Texas, incorporated by reference to The Southland 		Corporation's Annual Report on Form 10-K for the year 		ended December 31, 1990, Exhibit 10.(i)(7).
10.(i)(6) Limited Recourse Financing for The Southland Corporation 		relating to royalties from Seven-Eleven (Japan) Company, 		Ltd. in the amount of Japanese Yen 41,000,000,000, dated 		March 21, 1988, incorporated by reference to File No. 		0-676, Annual Report on Form 10-K for year ended 		December 31, 1988, Exhibit 10.(i)(6).
10.(ii)(B)(1) Standard Form of 7-Eleven Store Franchise Agreement, 		incorporated by reference to File No. 0-676 and 0-16626, 		Annual Report on Form 10-K for year ended December 31, 		1992, Exhibit 10.(ii)(B)(1).
10.(iii)(A)(1) John P. Thompson Employment Agreement dated as of March 5, 		1991, incorporated by reference to The Southland 		Corporation's Annual Report on Form 10-K for the year 		ended December 31, 1990, Exhibit 10.(iii)(A)(1).
10.(iii)(A)(2) Jere W. Thompson Employment Agreement dated as of 		March 5, 1991, incorporated by reference to The Southland 		Corporation's Annual Report on Form 10-K for the year 		ended December 31, 1990, Exhibit 10.(iii)(A)(2).
10.(iii)(A)(3) The Southland Corporation Executive Protection Plan 		Summary, incorporated by reference to The Southland 		Corporation's Annual Report on Form 10-K for the year 		ended December 31, 1993, Exhibit 10.(iii)(A)(3).
10.(iii)(A)(4) The Southland Corporation Officers' Deferred Compensation 		Plan, sample agreement, incorporated by reference to The 		Southland Corporation's Annual Report on Form 10-K for 		the year ended December 31, 1993, Exhibit 10.(iii)(A)(4).
10.(iii)(A)(5) Executive Interest Differential Reimbursement Program, 		incorporated by reference to File No. 0-676, Annual 		Report on Form 10-K for the year ended December 31, 1982, 		Exhibit 10(iii)(A)(9), Tab 4.
10.(iii)(A)(6) Bonus Deferral Agreement relating to deferral of Bonus 		Payment, incorporated by reference to File No. 0-676, 		Annual Report on Form 10-K for the year ended December 31, 		1988, Exhibit 10(iii)(A)(9), Tab 7.
10.(iii)(A)(7) Form of documents relating to Collateral Assignment of 		Insurance Program, incorporated by reference to File Nos. 		0-676 and 0-16626, Annual Report on Form 10-K for the year 		ended December 31, 1989, Exhibit 10.(iii)(A)(10), Tab 4.
10.(iii)(A)(8) 1993 Performance Plan, as amended January 1994, 		incorporated by reference to The Southland Corporation's 		Annual Report on Form 10-K for the year ended December 31, 		1993, Exhibit 10.(iii)(A)(8).
10.(iii)(A)(9) Consultant's Agreement between The Southland Corporation 		and Timothy N. Ashida, incorporated by reference to File 		No. 0-676, Annual Report on Form 10-K for the year ended 		December 31, 1991, Exhibit 10(iii)(A)(10), Tab 4.
11. STATEMENT RE COMPUTATION OF PER-SHARE EARNINGS. Tab 3 		CALCULATION OF EARNINGS PER SHARE.*
21. SUBSIDIARIES OF THE REGISTRANT AS OF MARCH 1995.* Tab 4
23. CONSENTS OF EXPERTS AND COUNSEL. 		Consent of Coopers & Lybrand L.L.P., Independent Tab 5 		Auditors.*
27. FINANCIAL DATA SCHEDULE. 		FILED ELECTRONICALLY ONLY, NOT ATTACHED TO PRINTED 		REPORTS.
__________________________ File or furnished herewith
(b) Reports on Form 8-K.
	During the fourth quarter of 1994, the Company filed no reports on 	Form 8-K.
(c) The exhibits required by Item 601 of Regulation S-K are attached hereto 	or incorporated by reference herein.
(d)(3) The financial statement schedules for The Southland Corporation and 	Subsidiaries are included herein.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of The Southland Corporation
Our report on the consolidated financial statements of The Southland Corporation and Subsidiaries, which includes an explanatory paragraph describing the changes in methods of accounting for postemployment benefits and income taxes in 1993, is included on page 64 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the index on page 66 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
Coopers & Lybrand L.L.P. Dallas, Texas February 23, 1995
(1) Uncollectible accounts written off, net of recoveries. (2) Represents amounts charged to the reserve for the sale and closing of the distribution and food centers (see Note 6 of Notes to Consolidated Financial Statements). (3) Prior to year ended December 31, 1993, the allowance and related receivables were netted with the environmental liability.
				 SIGNATURES
	Pursuant to the requirements of Section 13 or 15(d) 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) 				 March 28, 1995 /s/ Clark J. Matthews, II________________ 				 Clark J. Matthews, II 				 President and Chief Executive Officer
	Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.