<PAGE> 1
UNITED STATES
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 November 4, 1994
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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 NOVEMBER 4, 1994
- - ---------------------------------- --------------------------------
<S> <C> <C>
COMMON STOCK:
Class A, par value $1.00 per share 4,422,463 Class A shares
Class B, par value $1.00 per share 4,712,313 Class B shares
</TABLE>
<PAGE> 2
GENOVESE DRUG STORES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Condensed Balance Sheets - November 4, 1994
(Unaudited) and January 28, 1994 2
Condensed Statements of Income - Twelve and
Forty Weeks Ended November 4, 1994 and
November 5, 1993 (Unaudited) 3
Condensed Statements of Cash Flows -
Forty Weeks Ended November 4, 1994
and November 5, 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
</TABLE>
<PAGE> 3
GENOVESE DRUG STORES, INC.
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
Assets
<TABLE>
<CAPTION>
November 4, January 28,
1994 1994
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(Unaudited) (Note)
<S> <C> <C>
Current Assets:
Cash $ 1,240 $ 1,012
Receivables, net 12,361 14,761
Merchandise inventory 99,582 80,679
Prepaid expenses and other 4,011 3,155
-------- --------
Total Current Assets 117,194 99,607
-------- --------
Property and Equipment, net 62,484 52,584
-------- --------
Deferred Charges and Other Assets 3,342 3,253
-------- --------
Total Assets $183,020 $155,444
======== ========
</TABLE>
Liabilities and Stockholders' Equity
<TABLE>
<S> <C> <C>
Current Liabilities:
Accounts payable, accrued expenses and other $ 59,298 $52,235
Current portion of long-term debt 777 777
Notes payable to banks 20,000 2,300
-------- --------
Total Current Liabilities 80,075 55,312
-------- --------
Long-Term Liabilities 35,649 36,247
-------- --------
Deferred Income Taxes Payable 6,405 6,405
-------- --------
Stockholders' Equity:
Common stock - $1.00 par value, 24,000,000
shares authorized, 9,181,336 shares and
9,169,557 shares issued at November 4, 1994
and January 28, 1994, respectively 9,181 9,170
Capital in excess of par value 36,449 36,341
Retained earnings 15,758 12,285
-------- --------
61,388 57,796
Less: Common stock in treasury at cost -
46,560 shares at November 4, 1994 and
33,546 at January 28, 1994 497 316
-------- --------
Total Stockholders' Equity 60,891 57,480
-------- --------
Total Liabilities and Stockholders'
Equity $183,020 $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>
Twelve Weeks Ended Forty Weeks Ended
-------------------------- -------------------------
November 4, November 5, November 4, November 5,
1994 1993 1994 1993
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Sales $ 126,728 $ 108,838 $ 411,565 $ 362,913
---------- ---------- ----------- ----------
Cost and Expenses:
Cost of merchandise sold 87,655 75,139 289,101 254,567
Selling, general and
administrative expenses 34,816 29,835 111,336 98,464
---------- ---------- ---------- ----------
122,471 104,974 400,437 353,031
---------- ---------- ---------- ----------
Operating Profit 4,257 3,864 11,128 9,882
Interest Expense 653 388 1,822 1,200
---------- ---------- ---------- ----------
Income Before Income Taxes 3,604 3,476 9,306 8,682
Income Taxes 1,622 1,565 4,188 3,907
---------- ---------- ---------- ----------
Net Income $ 1,982 $ 1,911 $ 5,118 $ 4,775
========== ========== =========== ==========
Net Income Per Common Share (a) $ .22 $ .21 $ .56 $ .52
========== ========== =========== ==========
Average Number of Common Shares
Outstanding (a) 9,131,000 9,134,000 9,138,000 9,132,000
========= ========= ========= =========
Cash Dividends Paid Per Common
Share (a) $ .06 $ .05 $ .18 $ .16
========== ========== ========= =========
</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>
Forty Weeks Ended
------------------------
November 4, November 5,
1994 1993
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<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 5,118 $ 4,775
Adjustments to reconcile net income to
net cash provided by (used for) operating
activities:
Depreciation and amortization 6,247 5,263
Provision for other noncash expenses-net 20 79
Changes in certain assets and liabilities:
Receivables 2,400 1,332
Merchandise inventory (18,903) (14,315)
Prepaid expenses and other (856) 1,046
Deferred charges and other assets (588) (634)
Accounts payable, accrued expenses
and other 7,063 5,837
--------- --------
Net cash provided by operating activities 501 3,383
--------- --------
Cash Flows From Investing Activities:
Purchase of property and equipment (15,650) (9,950)
Disposal of property and equipment 2 13
-------- --------
Net cash used for investing activities (15,648) (9,937)
-------- --------
Cash Flows From Financing Activities:
Net increase in notes payable to banks 17,700 1,400
Long-term liabilities:
Proceeds --- 7,500
Repayments (598) (598)
Issuance of common stock under the Employee
Stock Option and Appreciation Rights Plan 25 2
Treasury stock contributed to the Employee
Stock Ownership Plan 131 ---
Treasury stock purchased (238) ---
Payment of cash dividends (1,645) (1,494)
-------- --------
Net cash provided by financing activities 15,375 6,810
-------- --------
Net Increase in Cash 228 256
Cash at Beginning of Period 1,012 692
-------- --------
Cash at End of Period $ 1,240 $ 948
======== ========
Supplemental Disclosure:
Interest paid $ 1,803 $ 1,337
Income taxes paid $ 3,906 $ 5,660
</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 forty weeks
ended November 4, 1994 and November 5, 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 November 4, 1994 and
January 28, 1994, inventories would have been greater by
$20,991,000 and $20,391,000, respectively, if they had been
valued at replacement costs.
4. On December 6, 1994, the Company's Board of Directors
declared a 10% stock dividend payable on January 5, 1995 to
holders of record as of December 22, 1994. The Board also
declared a cash dividend of $.06 per common share payable on
January 5, 1995 to holders of record as of December 23, 1994.
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<PAGE> 7
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FOR THE TWELVE AND FORTY WEEKS ENDED NOVEMBER 4, 1994
Sales increased by 16.4% for the third quarter and 13.4% for the
forty weeks. On a comparable store basis (stores opened more
than one year), sales increased by 9.4% for the quarter and 7.9%
for the forty weeks. The sales contribution of the eleven stores
opened in the past thirteen 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 69.2% for the third quarter versus 69.0% last year.
The results for the forty weeks followed the same trend with the
cost of merchandise sold at 70.2% this year versus 70.1% 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 27.5% of sales
for the quarter versus 27.4% last year. The forty weeks for both
years reflected a consistent level for these expenses at 27.1% of
sales. Increases in wages, rent and depreciation expense for new
stores were the main factors in the higher expense ratio.
Interest expense was $653,000 versus $388,000 for the third
quarter and $1,822,000 versus $1,200,000 for the forty weeks.
These increases are due to higher levels of borrowings and higher
interest rates experienced this year.
Net income was $3,604,000 or $.22 per share versus $3,475,000 or
$.21 per share for the third quarter and $9,306,000 or $.56 per
share versus $8,682,000 or $.52 per share for the forty weeks.
The increase in earnings was mainly attributable to increased
sales at a slightly lower gross margin in addition to consistent
expense to sales ratios somewhat offset by higher interest costs.
FINANCIAL CONDITION
Cash provided by operating activities was $.5 million for the
forty weeks ended November 4, 1994 versus cash provided by of
$3.4 in the comparable period last year. The registrant made
capital expenditures of $15.7 million for the forty weeks ended
November 4, 1994 versus $10.0 million last year.
Working capital levels decreased to $37.1 million at November 4,
1994 compared to $44.3 million at January 28, 1994. The current
ratio at November 4, 1994 was 1.5 to 1.0 compared to 1.8 to 1.0
at January 28, 1994.
The Company 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 November 4, 1994,
the Company had $10.0 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.
(b) There were no reports on Form 8-K filed for the forty weeks
ended November 4, 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 12-13-94 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
No. Description
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11 Statement re: computation of net income per
common share.
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)
<TABLE>
<CAPTION>
Twelve Weeks Ended Forty Weeks Ended
-------------------------- -----------------------------
November 4, November 5, November 4, November 5,
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary:
Weighted average shares
outstanding (A) 9,131 9,134 9,138 9,132
Equivalent shares--dilutive
stock options--based on
Treasury stock method using
average market price (B) (B) (B) (B)
----------- ---------- ---------- -----------
9,131 9,134 9,138 9,132
----------- ---------- ---------- -----------
Net Income $ 1,982 $ 1,911 $ 5,118 $ 4,775
----------- ---------- ---------- -----------
Net Income per common share $ .22 $ .21 $ .56 $ .52
===== ===== ===== ======
</TABLE>
(A) Adjusted, where appropriate, to reflect the effect of a 10
percent stock dividend distributed 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> OTHER
<FISCAL-YEAR-END> FEB-03-1995
<PERIOD-START> JAN-29-1994
<PERIOD-END> NOV-04-1994
<CASH> 1,240
<SECURITIES> 0
<RECEIVABLES> 12,361
<ALLOWANCES> 0
<INVENTORY> 99,582
<CURRENT-ASSETS> 117,194
<PP&E> 112,647
<DEPRECIATION> 50,163
<TOTAL-ASSETS> 183,020
<CURRENT-LIABILITIES> 80,075
<BONDS> 35,649
<COMMON> 9,181
0
0
<OTHER-SE> 51,710
<TOTAL-LIABILITY-AND-EQUITY> 183,020
<SALES> 411,565
<TOTAL-REVENUES> 411,565
<CGS> 289,101
<TOTAL-COSTS> 289,101
<OTHER-EXPENSES> 111,336
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,822
<INCOME-PRETAX> 9,306
<INCOME-TAX> 4,188
<INCOME-CONTINUING> 5,118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,118
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
</TABLE>
