<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 May 20, 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)
DELAWARE 11-1556812
- - - - - ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT MAY 20, 1994
- - - - - ---------------------------------- ---------------------------
<S> <C>
COMMON STOCK:
Class A, par value $1.00 per share 4,426,412
Class B, par value $1.00 per share 4,724,421
</TABLE>
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GENOVESE DRUG STORES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Condensed Balance Sheets - May 20, 1994
(Unaudited) and January 28, 1994 2
Condensed Statements of Income - Sixteen Weeks
Ended May 20, 1994 and May 21, 1993
(Unaudited) 3
Condensed Statements of Cash Flows -
Sixteen Weeks Ended May 20, 1994
and May 21, 1993 (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
</TABLE>
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GENOVESE DRUG STORES, INC.
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
May 20, January 28,
1994 1994
----------- -----------
(Unaudited) (Note)
<S> <C> <C>
Assets
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Current Assets:
Cash $ 4,440 $ 1,012
Receivables, net 12,592 14,761
Merchandise inventory 83,411 80,679
Prepaid expenses and other 2,954 3,155
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Total Current Assets 103,397 99,607
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Property and Equipment, net 56,832 52,584
-------- --------
Deferred Charges and Other Assets 3,238 3,253
-------- --------
Total Assets $163,467 $155,444
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Accounts payable, accrued expenses and other $ 46,497 $52,235
Current portion of long-term debt 777 777
Notes payable to banks 15,000 2,300
-------- --------
Total Current Liabilities 62,274 55,312
-------- --------
Long-Term Liabilities 36,008 36,247
-------- --------
Deferred Income Taxes Payable 6,405 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 May 20, 1994
and January 28, 1994, respectively 9,177 9,170
Capital in excess of par value 36,427 36,341
Retained earnings 13,435 12,285
-------- --------
59,039 57,796
Less: Common stock in treasury at cost -
26,560 shares at May 20, 1994 and 33,546
January 28, 1994 259 316
-------- --------
Total Stockholders' Equity 58,780 57,480
-------- --------
Total Liabilities and Stockholders'
Equity $163,467 $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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<PAGE> 4
GENOVESE DRUG STORES, INC.
CONDENSED STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Sixteen Weeks Ended
--------------------------------
May 20, May 21,
1994 1993
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<S> <C> <C>
Sales $ 159,456 $ 142,642
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Cost and Expenses:
Cost of merchandise sold 112,962 101,029
Selling, general and
administrative expenses 42,783 38,467
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155,745 139,496
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Operating Profit 3,711 3,146
Interest Expense 624 452
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Income Before Income Taxes 3,087 2,694
Income Taxes 1,389 1,212
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Net Income $ 1,698 $ 1,482
========== ==========
Net Income Per Common Share (a) $ .19 $ .16
========== ==========
Average Number of Common Shares
Outstanding (a) 9,138,000 9,129,000
========= =========
Cash Dividends Paid Per Common
Share (a) $ .06 $ .05
========= =========
</TABLE>
(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)
<TABLE>
<CAPTION>
Sixteen Weeks Ended
---------------------------------
May 20, May 21,
1994 1993
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<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,698 $ 1,482
Adjustments to reconcile net income to
net cash provided by (used for) operating
activities:
Depreciation and amortization 2,509 2,151
Provision for other noncash expenses-net 20 80
Changes in certain assets and liabilities:
Receivables 2,169 1,235
Merchandise inventory (2,732) (4,597)
Prepaid expenses and other 201 709
Deferred charges and other assets (174) (402)
Accounts payable, accrued expenses
and other (5,738) (3,911)
------- -------
Net cash used for operating activities (2,047) (3,253)
------- -------
Cash Flows From Investing Activities:
Purchase of property and equipment (6,568) (3,427)
------- -------
Net cash used for investing activities (6,568) (3,427)
------- -------
Cash Flows From Financing Activities:
Net increase in notes payable to banks 12,700 5,000
Long-term liabilities:
Proceeds --- 2,500
Repayments (239) (239)
Payment of cash dividends (548) (498)
Treasury stock contributed to the Employee
Stock Ownership Plan 130 ---
------- -------
Net cash provided by financing activities 12,043 6,763
------- -------
Net Increase in Cash 3,428 83
Cash at Beginning of Period 1,012 692
------- -------
Cash at End of Period $ 4,440 $ 775
======= =======
Supplemental Disclosure:
Interest paid $ 590 $ 530
Income taxes paid $ 3,273 $ 2,721
</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 sixteen weeks ended May 20, 1994 and May
21, 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 May 20, 1994 and January 28, 1994, inventories would have
been greater by $21,491,000 and $20,391,000, respectively, if they had
been valued at replacement costs.
4. On June 13, 1994, the Company's Board of Directors declared a cash
dividend of $.06 per common share payable on July 7, 1994 to holders of
record as of June 30, 1994.
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<PAGE> 7
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FOR THE SIXTEEN WEEKS ENDED MAY 20, 1994
Sales increased by 11.8% for the first quarter. On a comparable store basis
(stores opened more than one year), sales increased by 7.4%. The sales
contribution of the eight 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, was consistent at
70.8% for the first quarter in both years. 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. However, the gross margins on all other sales were higher
and able to offset the decline in the pharmacy gross margins.
Selling, general and administrative expenses were 26.8% of sales for the
quarter versus 27.0% last year. 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 $624,000 versus $452,000 in the prior year. This increase
was due to higher levels of borrowings and higher interest rates experienced in
this year's quarter.
Net income increased 14.6% to $1,698,000 or $.19 per share versus $1,482,000 or
$.16 per share for the first quarter. 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 decreased to $2.0 million for the sixteen
weeks ended May 20, 1994 versus $3.3 in the comparable period last year. The
registrant made capital expenditures of $6.6 million for the sixteen weeks
ended May 20, 1994 versus $3.4 million last year.
Working capital levels decreased to $41.1 million at May 20, 1994 compared to
$44.3 million at January 28, 1994. The current ratio at May 20, 1994 was 1.7
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 $50.0
million. As of May 20, 1994 the registrant had $5.0 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 sixteen weeks ended May 20,
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 6/17/94 By: /s/ Jerome Stengel
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Jerome Stengel
(Vice President & Treasurer)
(Principal Financial Officer)
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<PAGE> 9
EXHIBIT INDEX
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Exhibit Page
No. Description No.
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11 Statement re: computation of net income 8
per common share.
<PAGE> 1
GENOVESE DRUG STORES, INC.
Exhibit 11
STATEMENT RE: COMPUTATION OF NET INCOME PER COMMON SHARE
(000'S OMITTED, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Sixteen Weeks Ended
--------------------------------
May 20, May 21,
1994 1993
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<S> <C> <C>
Primary:
Weighted average shares
outstanding (A) 9,138 9,129
Equivalent shares--dilutive
stock options--based on
treasury stock method using
average market price (B) (B)
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9,138 9,129
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Net income $ 1,698 $ 1,482
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Net income per common share $ .19 $ .16
===== =====
</TABLE>
(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.
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