<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 10, 1995
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
GENOVESE DRUG STORES, INC.
(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
(Address of principal executive offices)
(Zip Code)
(516) 420-1900
(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.
CLASS OUTSTANDING AT NOVEMBER 10, 1995
COMMON STOCK:
Class A, par value $1.00 per share 4,954,040 Class A shares
Class B, par value $1.00 per share 5,123,173 Class B shares
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GENOVESE DRUG STORES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Condensed Balance Sheets - November 10, 1995
(Unaudited) and February 3, 1995 2
Condensed Statements of Income - Twelve and
Forty Weeks Ended November 10, 1995 and
November 4, 1994 (Unaudited) 3
Condensed Statements of Cash Flows -
Forty Weeks Ended November 10, 1995
and November 4, 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)
Assets
<TABLE>
<CAPTION>
November 10, February 3,
1995 1995
------------ -----------
(Unaudited) (Note 1)
<S> <C> <C>
Current Assets:
Cash $ 1,550 $ 2,229
Receivables, net 14,445 13,966
Merchandise inventory 106,980 92,969
Prepaid expenses and other 2,821 4,650
-------- --------
Total Current Assets 125,796 113,814
-------- --------
Property and Equipment, net 69,757 65,001
-------- --------
Deferred Charges and Other Assets 5,035 3,963
-------- --------
Total Assets $200,588 $182,778
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, accrued expenses and other $ 66,451 $ 66,028
Current portion of long-term debt 847 847
Notes payable to banks 26,550 11,100
-------- --------
Total Current Liabilities 93,848 77,975
-------- --------
Long-Term Liabilities 33,520 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 November 10, 1995
and February 3, 1995, respectively 10,184 10,174
Capital in excess of par value 45,529 45,443
Retained earnings 12,675 9,885
-------- --------
68,388 65,502
Less: Common stock in treasury at cost -
107,082 shares at November 10, 1995 and
92,348 at February 3, 1995 1,149 994
-------- --------
Total Stockholders' Equity 67,239 64,508
-------- --------
Total Liabilities and Stockholders'
Equity $200,588 $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 Forty Weeks Ended
-------------------------------- --------------------------------
November 10, November 4, November 10, November 4,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 137,719 $ 126,728 $ 454,968 $ 411,565
------------ ------------ ------------ ------------
Cost and Expenses:
Cost of merchandise sold 95,744 87,655 322,352 289,101
Selling, general and
administrative expenses 37,932 34,816 122,728 111,336
------------ ------------ ------------ ------------
133,676 122,471 445,080 400,437
------------ ------------ ------------ ------------
Operating Profit 4,043 4,257 9,888 11,128
Gain on the sale of the
nursing home division -- -- 1,300 --
Interest Expense (793) (653) (2,818) (1,822)
------------ ------------ ------------ ------------
Income Before Income Taxes 3,250 3,604 8,370 9,306
Income Taxes 1,462 1,622 3,766 4,188
------------ ------------ ------------ ------------
Net Income $ 1,788 $ 1,982 $ 4,604 $ 5,118
============ ============ ============ ============
Net Income Per Common Share (a) $ .18 $ .20 $ .46 $ .51
============ ============ ============ ============
Average Number of Common Shares
Outstanding (a) 10,077,000 10,044,000 10,076,000 10,052,000
============ ============ ============ ============
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 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>
Forty Weeks Ended
------------------------
November 10, November 4,
1995 1994
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 4,604 $ 5,118
Adjustments to reconcile net income to
net cash provided by (used for) operating
activities:
Depreciation and amortization 6,889 6,247
Provision for LIFO inventory valuation 1,100 600
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 (1,047) 2,400
Merchandise inventory (15,496) (19,503)
Prepaid expenses and other 1,801 (856)
Deferred charges and other assets (1,440) (588)
Accounts payable, accrued expenses
and other 463 7,063
-------- --------
Net cash (used for) provided by operating
activities (4,212) 632
-------- --------
Cash Flows From Investing Activities:
Purchase of property and equipment, net (11,782) (15,648)
Proceeds from the sale of the nursing
home division 2,719 --
-------- --------
Net cash used for investing activities (9,063) (15,648)
-------- --------
Cash Flows From Financing Activities:
Net increase in debt 15,450 17,700
Repayments of long term liabilities (834) (598)
Issuance of common stock under the Employee
Stock Option and Appreciation Rights Plan 21 25
Treasury stock purchased (227) (238)
Payment of cash dividends (1,814) (1,645)
-------- --------
Net cash provided by financing activities 12,596 15,244
-------- --------
Net (Decrease) Increase in Cash (679) 228
Cash at Beginning of Period 2,229 1,012
-------- --------
Cash at End of Period $ 1,550 $ 1,240
======== ========
Supplemental Disclosure:
Interest paid $ 2,941 $ 1,803
Income taxes paid $ 5,826 $ 3,906
</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 November 10, 1995, the condensed
statements of income for the twelve and forty week periods ended
November 10, 1995 and November 4, 1994 and the condensed statements of
cash flows for the forty week periods ended November 10, 1995 and
November 4, 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 November 10, 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 November 4, 1994 financial statements have been
reclassified to conform with the November 10, 1995 presentation.
2. The results of operations for the twelve and forty weeks ended November
10, 1995 and November 4, 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 November 10, 1995 and February 3,
1995, inventories would have been greater by $20,548,000 and
$19,448,000, respectively, if they had been valued at replacement
costs.
4. On December 4, 1995, the Company's Board of Directors declared a 10%
stock dividend payable on January 4, 1996 to holders of record as of
December 21, 1995.
The Board of Directors also declared a cash dividend of $.06 per common
share payable on January 4, 1996 to holders of record as of December
22, 1995. The cash dividend will be payable on the shares represented
by the stock dividend.
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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 10, 1995
Sales increased by 8.7% for the third quarter and 10.5% for the forty weeks.
On a comparable store basis (stores opened all of last year), sales increased
by 6.0% for the quarter and 6.7% for the forty weeks. The sales contribution
of the twelve 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
69.5% for the third quarter versus 69.2% last year. The results for the forty
weeks followed the same trend with the cost of merchandise sold at 70.9% this
year versus 70.2% last year. The primary cause of 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 remained constant at 27.5% of
sales for the quarter versus last year. The forty weeks selling, general
administrative expenses were 27.0% of sales versus 27.1% last year.
Interest expense was $793,000 versus $653,000 for the third quarter and
$2,818,000 versus $1,822,000 for the forty weeks. These increases are due to
higher levels of borrowings and higher interest rates experienced this year.
Net income was $1,788,000 or $.18 per share versus $1,982,000 or $.20 per share
for the third quarter and $4,604,000 or $.46 per share versus $5,118,000 or
$.51 per share for the forty weeks. The decrease in earnings was primarily
attributable to reduced margins in the pharmacy department, expenses incurred
in connection with the opening of new stores, the costs incurred related to the
conversion of certain stores to 24 hour operations and higher interest costs.
FINANCIAL CONDITION
The Company's operating, investing and financing activities for the forty weeks
ended November 10, 1995 utilized net cash of $679,000 as follows:
- Operating activities utilized $4,212,000 primarily due to the
increase in merchandise inventory which was offset primarily by
the cash generated by operations.
- Investing activities utilized $9,063,000 due to the purchase of
property and equipment offset by proceeds from the sale of the
nursing home division.
- Financing activities provided $12,596,000 primarily from short-
term borrowings partially offset by the repayment of long-term
debt and the payment of cash dividends.
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<PAGE> 8
Working capital at November 10, 1995 was $31.9 million. The working capital
ratio was 1.34 to 1.0 at November 10, 1995 versus 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 allows for aggregate borrowings of $60.0
million. As of November 10, 1995 the Company had $5.5 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 credit facilities.
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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
November 10, 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: December 22, 1995 By: /s/ Jerome Stengel
--------------------- ----------------------------------
Jerome Stengel
(Vice President & Treasurer)
(Principal Financial Officer)
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<PAGE> 10
EXHIBIT INDEX
-------------
Exhibit
No. Description
- ------- -----------
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
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Twelve Weeks Ended Forty Weeks Ended
------------------------ -----------------------
November 10, November 4, November 10, November 4,
1995 1994 1995 1994
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary:
Weighted average shares
outstanding (A) 10,077 10,044 10,076 10,052
Equivalent shares--
dilutive stock options (B) - - - -
------- ------- ------- -------
10,077 10,044 10,076 10,052
------- ------- ------- -------
Net income $ 1,788 $ 1,982 $ 4,604 $ 5,118
------- ------- ------- -------
Net income per common
share (A) $ .18 $ .20 $ .46 $ .51
======= ======= ======= =======
</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.
<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> NOV-10-1995
<CASH> 1,550
<SECURITIES> 0
<RECEIVABLES> 14,445
<ALLOWANCES> 0
<INVENTORY> 106,980
<CURRENT-ASSETS> 125,796
<PP&E> 127,143
<DEPRECIATION> (57,386)
<TOTAL-ASSETS> 200,588
<CURRENT-LIABILITIES> 93,848
<BONDS> 33,520
<COMMON> 10,184
0
0
<OTHER-SE> 58,204
<TOTAL-LIABILITY-AND-EQUITY> 200,588
<SALES> 454,968
<TOTAL-REVENUES> 454,968
<CGS> 322,352
<TOTAL-COSTS> 322,352
<OTHER-EXPENSES> 122,728
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,818
<INCOME-PRETAX> 8,370
<INCOME-TAX> 3,766
<INCOME-CONTINUING> 4,604
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,604
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
