<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 August 18, 1995
---------------------------
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
- --------------------------------------------------------------------------------
(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 AUGUST 18, 1995
- ---------------------------------- ------------------------------
<S> <C>
COMMON STOCK:
Class A, par value $1.00 per share 4,953,540
Class B, par value $1.00 per share 5,123,673
</TABLE>
<PAGE> 2
GENOVESE DRUG STORES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Condensed Balance Sheets - August 18, 1995
(Unaudited) and February 3, 1995 2
Condensed Statements of Income - Twelve and
Twenty-Eight Weeks Ended August 18, 1995 and
August 12, 1994 (Unaudited) 3
Condensed Statements of Cash Flows -
Twenty-Eight Weeks Ended August 18, 1995
and August 12, 1994 (Unaudited) 4
Notes to Unaudited Condensed Financial Statements 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-7
PART II. OTHER INFORMATION AND SIGNATURES 8
Exhibit 11 - Statement Re: Computation of Net Income
Per Common Share 9
</TABLE>
<PAGE> 3
GENOVESE DRUG STORES, INC.
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
August 18, February 3,
1995 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash $ 1,300 $ 2,229
Receivables, net 12,030 13,966
Merchandise inventory 90,968 92,969
Prepaid expenses and other 2,772 4,650
-------- --------
Total Current Assets 107,070 113,814
-------- --------
Property and equipment, net 67,591 65,001
-------- --------
Deferred charges and other assets 4,976 3,963
-------- --------
Total Assets $179,637 $182,778
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, accrued expenses and other $ 54,711 $ 66,028
Current portion of long-term debt 847 847
Notes payable to banks 18,350 11,100
-------- --------
Total Current Liabilities 73,908 77,975
-------- --------
Long-term liabilities 33,692 34,314
-------- --------
Deferred income taxes payable 5,981 5,981
-------- --------
Stockholders' Equity:
Common stock - $1.00 par value, 32,000,000
shares authorized, 10,184,295 shares and
10,174,968 shares issued at August 18, 1995
and February 3, 1995, respectively 10,184 10,174
Capital in excess of par value 45,529 45,443
Retained earnings 11,492 9,885
-------- --------
67,205 65,502
Less: Common stock in treasury at cost -
107,082 shares at August 18, 1995 and 92,348
at February 3, 1995 1,149 994
-------- --------
Total Stockholders' Equity 66,056 64,508
-------- --------
Total Liabilities and Stockholders'
Equity $179,637 $182,778
======== ========
</TABLE>
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 Twenty-Eight Weeks Ended
-------------------------- ------------------------
August 18, August 12, August 18, August 12,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $ 138,266 $ 125,381 $ 317,249 $ 284,837
----------- ----------- ----------- -----------
Cost and expenses:
Cost of merchandise sold 98,369 88,484 226,608 201,446
Selling, general and
administrative expenses 36,643 33,737 84,796 76,520
----------- ----------- ----------- -----------
135,012 122,221 311,404 277,966
----------- ----------- ----------- -----------
Operating profit 3,254 3,160 5,845 6,871
Gain on sale of the
nursing home division --- --- 1,300 ---
Interest expense, net (940) (545) (2,025) (1,169)
----------- ----------- ----------- -----------
Income before income taxes 2,314 2,615 5,120 5,702
Income taxes 1,041 1,177 2,304 2,566
----------- ----------- ----------- -----------
Net income $ 1,273 $ 1,438 $ 2,816 $ 3,136
=========== =========== =========== ===========
Net income per common share (a) $ .13 $ .14 $ .28 $ .31
=========== =========== =========== ===========
Average number of common shares
outstanding (a) 10,077,000 10,058,000 10,076,000 10,055,000
=========== =========== =========== ===========
Cash dividends paid per common
share (a) $ .06 $ .05 $ .12 $ .11
=========== =========== =========== ===========
</TABLE>
(a) Adjusted, where appropriate, to retroactively reflect the effect
of a 10 percent stock dividend distributed on January 5, 1995.
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>
Twenty-Eight Weeks Ended
--------------------------
August 18, August 12,
1995 1994
----------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 2,816 $ 3,136
Adjustments to reconcile net income to
net cash provided by (used for) operating
activities:
Depreciation and amortization 4,924 4,390
Provision for LIFO inventory valuation 1,800 1,800
Gain on the sale of the nursing home
division (1,300) ---
Provision for other noncash expenses-net 214 151
Changes in certain assets and liabilities:
Receivables 1,368 2,651
Merchandise inventory (184) (5,893)
Prepaid expenses and other 1,850 477
Deferred charges and other assets (1,381) (535)
Accounts payable, accrued expenses
and other (11,317) (4,749)
-------- --------
Net cash (used for) provided by operating
activities (1,210) 1,428
-------- --------
Cash Flows From Investing Activities:
Purchase of property and equipment, net (7,651) (11,687)
Proceeds from the sale of the nursing
home division 2,719 ---
-------- --------
Net cash used for investing activities (4,932) (11,687)
-------- --------
Cash Flows From Financing Activities:
Net increase in debt 7,250 12,100
Repayments of long term liabilities (622) (418)
Treasury stock purchased (227) (238)
Payment of cash dividends (1,209) (1,097)
Issuance of common stock under the Employee
Stock Option and Rights Appreciation Plan 21 ---
-------- --------
Net cash provided by financing activities 5,213 10,347
-------- --------
Net Increase (Decrease) in Cash (929) 88
Cash at beginning of period 2,229 1,012
-------- --------
Cash at end of period $ 1,300 $ 1,100
======== ========
Supplemental Disclosure:
Interest paid $ 2,113 $ 1,159
Income taxes paid $ 3,791 $ 3,473
</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 condensed balance sheet as of August 18, 1995, the condensed
statements of income for the twelve and twenty-eight week periods ended
August 18, 1995 and August 12, 1994 and the condensed statements of cash
flows for the twenty-eight week periods ended August 18, 1995 and August
12, 1994 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 by the
Company, without audit. The condensed balance sheet as of February 3,
1995 was derived from the audited balance sheet included in the Company's
Annual Report on Form 10-K. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the financial condition, results of operations and cash flows at
August 18, 1995 and for the periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on
Form 10-K for the year ended February 3, 1995.
Certain amounts in the August 12, 1994 financial statements have been
reclassified to conform with the August 18, 1995 presentation.
2. The results of operations for the twelve and twenty-eight weeks ended
August 18, 1995 and August 12, 1994 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 18, 1995 and February 3, 1995,
inventories would have been greater by $21,248,000 and $19,448,000,
respectively, if they had been valued at replacement costs.
4. On September 7, 1995 the Company's Board of Directors declared a cash
dividend of $.06 per common share payable on October 10, 1995 to holders
of record as of September 27, 1995.
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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 18, 1995
Sales increased by 10.3% for the second quarter and 11.4% for the first half. On
a comparable store basis (stores opened more than one year), sales increased by
5.9% for the quarter and 7.0% for the half. The sales contribution of the stores
opened during fiscal 1996 and 1995 in addition to the continued maturation of
stores were the main components of the sales increase.
Cost of merchandise sold, expressed as a percentage of sales, increased to 71.1%
for the second quarter versus 70.6% last year. The results for the first half
followed the same trend with the cost of merchandise sold at 71.4% versus 70.7%
last year. The primary cause for the reduction in gross margin is the continued
downward trend in third party reimbursement rates which was partially offset by
higher gross profit rates achieved on non-pharmacy merchandise.
Selling, general and administrative expenses were 26.5% of sales for the quarter
versus 26.9% last year. The first half reflected the same trend with these
expenses at 26.7% of sales versus 26.9%. These reductions are primarily the
result of stringent controls over expenditures.
Interest expense was $940,000 versus $545,000 for the second quarter and
$2,025,000 versus $1,169,000 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 decreased 11.5% to $1,273,000 or $.13 per share versus
$1,438,000 or $.14 per share for the second quarter and decreased 10.2% to
$2,816,000 or $.28 per share versus $3,136,000 or $.31 per share for the first
half. The decrease in earnings was mainly attributable to reduced margins in the
pharmacy department, expenses incurred in connection with the opening of new
stores, the added cost of converting certain stores to 24 hour operations and
higher interest expense.
FINANCIAL CONDITION
The Company's operating, investing and financing activities for the twenty-eight
weeks ended August 18, 1995 utilized net cash of $929,000 as follows:
- - Operating activities utilized $1,210,000 primarily due to the reduction
of accounts payable and other current liability balances which was
partially offset by a reduction in accounts receivable.
- - Investing activities utilized $4,932,000 due to purchases of property and
equipment offset by proceeds from the sale of the nursing home division.
- - Financing activities provided $5,213,000 primarily from short-term
borrowings partially offset by the repayment of long-term debt, the
purchase of treasury stock and the payment of cash dividends.
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<PAGE> 8
Working capital at August 18, 1995 was $33.2 million. The working capital ratio
was 1.45 to 1.0 at August 18, 1995 versus of 1.46 to 1.0 at February 3, 1995.
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 August 18, 1995 the registrant had $13.7 million in unused credit lines
and was negotiating with the banks to increase such credit facility to allow for
aggregate borrowings of $70.0 million.
The Company anticipates that its working capital needs for the remainder of
fiscal 1996 will be satisfied through operating results and, as necessary,
through borrowings under the credit facility.
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<PAGE> 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The following exhibit is included herein:
(11) Statement re: computation of net income per common share.
There were no reports on Form 8-K filed during the twelve week period ended
August 18, 1995.
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: October 2, 1995 By: /s/ Jerome Stengel
--------------------------- -----------------------------
Jerome Stengel
(Vice President & Treasurer)
(Principal Financial Officer)
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<PAGE> 10
EXHIBIT INDEX
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Exhibit Index Description
- ------------- ------------
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
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-Eight Weeks Ended
------------------------ ------------------------
August 18, August 12, August 18, August 12,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary:
Weighted average shares
outstanding (A) 10,077 10,058 10,076 10,055
Equivalent shares--
dilutive stock options (B) -- -- -- --
------- ------- ------- -------
10,077 10,058 10,076 10,055
------- ------- ------- -------
Net income $ 1,273 $ 1,438 $ 2,816 $ 3,136
------- ------- ------- -------
Net income per common
share (A) $ .13 $ .14 $ .28 $ .31
======= ======= ======= =======
</TABLE>
(A) Adjusted, where appropriate, to reflect the effect of the 10 percent stock
dividend distributed on January 5, 1995.
(B) The effect of equivalent shares of dilutive stock options is not
significant to net income per common share for any period presented.
There is no significant difference between primary and fully diluted net income
per common share.
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> FEB-02-1996
<PERIOD-START> FEB-04-1995
<PERIOD-END> AUG-18-1995
<CASH> 1,300
<SECURITIES> 0
<RECEIVABLES> 12,030
<ALLOWANCES> 0
<INVENTORY> 90,968
<CURRENT-ASSETS> 107,070
<PP&E> 123,012
<DEPRECIATION> 55,421
<TOTAL-ASSETS> 179,637
<CURRENT-LIABILITIES> 73,908
<BONDS> 33,692
<COMMON> 10,184
0
0
<OTHER-SE> 57,021
<TOTAL-LIABILITY-AND-EQUITY> 179,637
<SALES> 317,249
<TOTAL-REVENUES> 317,249
<CGS> 226,608
<TOTAL-COSTS> 226,608
<OTHER-EXPENSES> 84,796
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,025
<INCOME-PRETAX> 5,120
<INCOME-TAX> 2,304
<INCOME-CONTINUING> 2,816
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,816
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
