<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended August 12, 1994
OR
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from________to_________
Commission file number 1-7623
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GENOVESE DRUG STORES, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 11-1556812
- - ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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80 Marcus Drive, Melville, New York, 11747
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(Address of principal executive offices)
(Zip Code)
(516) 420-1900
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(Registrant's telephone number, including area code)
NONE
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
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<CAPTION>
CLASS OUTSTANDING AT AUGUST 12, 1994
- - ---------------------------------- ------------------------------
<S> <C>
COMMON STOCK:
Class A, par value $1.00 per share 4,406,412
Class B, par value $1.00 per share 4,724,421
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GENOVESE DRUG STORES, INC.
INDEX
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<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Condensed Balance Sheets - August 12, 1994
(Unaudited) and January 28, 1994 2
Condensed Statements of Income - Twelve and
Twenty-Eight Weeks Ended August 12, 1994 and
August 13, 1993 (Unaudited) 3
Condensed Statements of Cash Flows -
Twenty-Eight Weeks Ended August 12, 1994
and August 13, 1994 (Unaudited) 4
Notes to Unaudited Condensed Financial Statements 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION AND SIGNATURES 7-8
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GENOVESE DRUG STORES, INC.
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
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<CAPTION>
August 12, January 28,
1994 1994
---------- ----------
(Unaudited) (Note)
<S> <C> <C>
Assets
------
Current Assets:
Cash $ 1,100 $ 1,012
Receivables, net 12,110 14,761
Merchandise inventory 84,772 80,679
Prepaid expenses and other 2,678 3,155
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Total Current Assets 100,660 99,607
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Property and Equipment, net 60,226 52,584
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Deferred Charges and Other Assets 3,443 3,253
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Total Assets $164,329 $155,444
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Accounts payable, accrued expenses and other $ 47,486 $ 52,235
Current portion of long-term debt 777 777
Notes payable to banks 14,400 2,300
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Total Current Liabilities 62,663 55,312
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Long-Term Liabilities 35,829 36,247
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Deferred Income Taxes Payable 6,406 6,405
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Stockholders' Equity:
Common stock - $1.00 par value, 24,000,000
shares authorized, 9,177,393 shares and
9,169,557 shares issued at August 12, 1994
and January 28, 1994, respectively 9,177 9,170
Capital in excess of par value 36,427 36,341
Retained earnings 14,324 12,285
-------- --------
59,928 57,796
Less: Common stock in treasury at cost -
46,560 shares at August 12, 1994 and 33,546
at January 28, 1994 497 316
-------- --------
Total Stockholders' Equity 59,431 57,480
-------- --------
Total Liabilities and Stockholders'
Equity $164,329 $155,444
======== ========
</TABLE>
Note: The balance sheet at January 28, 1994 has been derived from the audited
financial statements at that date.
See accompanying notes to unaudited condensed financial statements.
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GENOVESE DRUG STORES, INC.
CONDENSED STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
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<CAPTION>
Twelve Weeks Ended Twenty-Eight Weeks Ended
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August 12, August 13, August 12, August 13,
1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Sales $ 125,381 $ 111,433 $ 284,837 $ 254,075
---------- ---------- ---------- ----------
Cost and Expenses:
Cost of merchandise sold 88,484 78,399 201,446 179,428
Selling, general and
administrative expenses 33,737 30,162 76,520 68,629
---------- ---------- ---------- ----------
122,221 108,561 277,966 248,057
---------- ---------- ---------- ----------
Operating Profit 3,160 2,872 6,871 6,018
Interest Expense 545 360 1,169 812
---------- ---------- ---------- ----------
Income Before Income Taxes 2,615 2,512 5,702 5,206
Income Taxes 1,177 1,130 2,566 2,342
---------- ---------- ---------- ----------
Net Income $ 1,438 $ 1,382 $ 3,136 $ 2,864
========== ========== ========== ==========
Net Income Per Common Share (a) $ .16 $ .15 $ .34 $ .31
========== ========== ========== ==========
Average Number of Common Shares
Outstanding (a) 9,144,000 9,133,000 9,141,000 9,131,000
========== ========== ========== ==========
Cash Dividends Paid Per Common
Share (a) $ .06 $ .05 $ .12 $ .11
========== ========== ========== ==========
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(a) Adjusted, where appropriate, to retroactively reflect the effect of a
10 percent stock dividend distributed on January 4, 1994.
See accompanying notes to unaudited condensed financial statements.
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<PAGE> 5
GENOVESE DRUG STORES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
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<CAPTION>
Twenty-Eight Weeks Ended
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August 12, August 13,
1994 1993
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Cash Flows From Operating Activities:
Net income $ 3,136 $ 2,864
Adjustments to reconcile net income to
net cash provided by (used for) operating
activities:
Depreciation and amortization 4,390 3,709
Provision for other noncash expenses-net 21 80
Changes in certain assets and liabilities:
Receivables 2,651 1,110
Merchandise inventory (4,093) (6,365)
Prepaid expenses and other 477 1,398
Deferred charges and other assets (535) (468)
Accounts payable, accrued expenses
and other (4,749) (1,866)
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Net cash provided by (used for) operating activities (1,838) 462
------- -------
Cash Flows From Investing Activities:
Purchase of property and equipment (11,690) (6,185)
Disposal of property equipment 3 14
------- -------
Net cash used for investing activities (11,687) (6,171)
------- -------
Cash Flows From Financing Activities:
Net increase in notes payable to banks 12,100 10,000
Long-term liabilities:
Proceeds --- 2,500
Repayments (418) (419)
Payment of cash dividends (1,097) (996)
Treasury stock contributed to the Employee
Stock Ownership Plan 130 ---
Treasury Stock Purchased (238) ---
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Net cash provided by financing activities 10,477 11,085
------- -------
Net Increase in Cash 88 5,376
Cash at Beginning of Period 1,012 692
------- -------
Cash at End of Period $ 1,100 $ 6,068
======= =======
Supplemental Disclosure:
Interest paid $ 1,159 $ 911
Income taxes paid $ 3,473 $ 3,056
</TABLE>
See the accompanying notes to unaudited condensed financial statements.
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<PAGE> 6
GENOVESE DRUG STORES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the financial
statements and footnotes thereto included in the Registrant's Annual
Report on Form 10-K for the year ended January 28, 1994.
2. The results of operations for the twelve and twenty-eight weeks ended
August 12, 1994 and August 13, 1993 are not necessarily indicative of
the results to be expected for the full year.
3. Merchandise inventory is valued at the lower of cost or market, cost
being determined by the last in first out (LIFO) method. LIFO
inventory costs are determined at the end of each fiscal year when
inflation rates are finalized. Therefore, LIFO inventory costs and
cost of merchandise sold for interim periods are estimated and
adjusted based on periodic physical inventories. At August 12, 1994
and January 28, 1994, inventories would have been greater by
$22,191,000 and $20,391,000, respectively, if they had been valued at
replacement costs.
4. On September 8, 1994, the Company's Board of Directors declared a cash
dividend of $.06 per common share payable on October 5, 1994 to
holders of record as of September 26, 1994.
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<PAGE> 7
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FOR THE TWELVE AND TWENTY-EIGHT WEEKS ENDED AUGUST 12, 1994
Sales increased by 12.5% for the second quarter and 12.1% for the first half.
On a comparable store basis (stores opened more than one year), sales increased
by 7.1% for the quarter and 7.2% for the half. The sales contribution of the
eleven stores opened in the past fifteen months in addition to the seasoned
stores sales growth were the main components of the sales increase.
Cost of merchandise sold, expressed as a percentage of sales, increased to
70.6% for the second quarter versus 70.4% last year. The results for the first
half followed the same trend with the cost of merchandise sold at 70.7% versus
70.6% last year. Gross margins on pharmacy sales continued to erode due to the
continued upward trend in third party plan prescriptions which are yielding
lower gross margins due to reduced third party reimbursement rates.
Selling, general and administrative expenses were 26.9% of sales for the
quarter versus 27.1% last year. The first half reflected the same trend with
these expenses at 26.9% of sales versus 27.0%. A decrease in store salaries,
as a percentage of sales, was the main component of the lower expense to sales
ratio realized this year.
Interest expense was $545,000 versus $360,000 for the second quarter and
$1,169,000 versus $812,000 for the first half. This increase was due to higher
levels of borrowings and higher interest rates experienced in this year's
quarter and first half.
Net income increased 4.1% to $1,438,000 or $.16 per share versus $1,382,000
or $.15 per share for the second quarter and increased 9.5% to $3,136,000 or
$.34 per share versus $2,864,000 or $.31 per share for the first half. The
increase in earnings was mainly attributable to increased sales at the same
gross margin as well as a lower expense to sales ratio somewhat offset by
higher interest costs.
FINANCIAL CONDITION
Cash used for operating activities was $1.8 million for the twenty-eight weeks
ended August 12, 1994 versus cash provided by of $0.5 million in the comparable
period last year. The registrant made capital expenditures of $11.7 million
for the twenty-eight weeks ended August 12, 1994 versus $6.2 million last year.
Working capital levels decreased to $38.0 million at August 12, 1994 compared
to $44.3 million at January 28, 1994. The current ratio at August 12, 1994 was
1.6 to 1.0 compared to 1.8 to 1.0 at January 28, 1994.
The registrant maintains revolving term loan agreements as well as short-term
lines of credit with two banks which allow for aggregate borrowings of $60.0
million. As of August 12, 1994 the registrant had $15.6 million in unused
credit lines.
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<PAGE> 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
(11) Statement re: computation of net income per common share.
There were no reports on Form 8-K filed during the twelve weeks ended August
12, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENOVESE DRUG STORES, INC.
--------------------------
(Registrant)
Date 9/19/94 By: /s/ Jerome Stengel
----------------- -----------------------------
Jerome Stengel
(Vice President & Treasurer)
(Principal Financial Officer)
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EXHIBIT INDEX
Exhibit No. Description Page No.
- - ----------------------------------------------------------------------------
Ex-11 Statement re: computation of net income per common share
Ex-27 Financial Data Schedule
<PAGE> 1
GENOVESE DRUG STORES, INC.
Exhibit 11
STATEMENT RE: COMPUTATION OF NET INCOME PER COMMON SHARE
(000'S OMITTED, EXCEPT PER SHARE DATA)
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<CAPTION>
Twelve Weeks Ended Twenty-Eight Weeks Ended
-------------------------- ----------------------------
August 12, August 13, August 12, August 13,
1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Primary:
Weighted average shares
outstanding (A) 9,144 9,133 9,141 9,131
Equivalent shares--dilutive
stock options--based on
Treasury stock method using
average market price (B) (B) (B) (B)
----------- ---------- ---------- -----------
9,144 9,133 9,141 9,131
----------- ---------- ---------- -----------
Net Income $ 1,438 $ 1,382 $ 3,136 $ 2,864
----------- ---------- ---------- -----------
Net Income per common share $ .16 $ .15 $ .34 $ .31
===== ===== ===== ======
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(A) Adjusted, where appropriate, to reflect the effect of the 10 percent stock
dividend on January 4, 1994.
(B) The effect of equivalent shares of dilutive stock options is not
significant to net income per common share.
There is no significant difference between primary and fully diluted net income
per common share.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-03-1995
<PERIOD-START> JAN-29-1994
<PERIOD-END> AUG-12-1994
<CASH> 1,100
<SECURITIES> 0
<RECEIVABLES> 12,110
<ALLOWANCES> 0
<INVENTORY> 84,772
<CURRENT-ASSETS> 100,660
<PP&E> 108,687
<DEPRECIATION> 48,461
<TOTAL-ASSETS> 164,329
<CURRENT-LIABILITIES> 62,663
<BONDS> 34,005
<COMMON> 9,177
0
0
<OTHER-SE> 50,254
<TOTAL-LIABILITY-AND-EQUITY> 164,329
<SALES> 284,837
<TOTAL-REVENUES> 284,837
<CGS> 201,446
<TOTAL-COSTS> 201,446
<OTHER-EXPENSES> 76,520
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,169
<INCOME-PRETAX> 5,702
<INCOME-TAX> 2,566
<INCOME-CONTINUING> 3,136
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,136
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
