<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 May 26, 1995
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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
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(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 26, 1995
- ---------------------------------- ---------------------------
<S> <C>
COMMON STOCK:
Class A, par value $1.00 per share 4,942,471
Class B, par value $1.00 per share 5,133,673
</TABLE>
<PAGE> 2
GENOVESE DRUG STORES, INC.
INDEX
<TABLE>
<CAPTION> PAGE
PART I. FINANCIAL INFORMATION ----
<S> <C>
Condensed Balance Sheets - May 26, 1995
(Unaudited) and February 3, 1995 2
Condensed Statements of Income - Sixteen Weeks
Ended May 26, 1995 and May 20, 1994
(Unaudited) 3
Condensed Statements of Cash Flows -
Sixteen Weeks Ended May 26, 1995
and May 20, 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>
May 26, February 3,
1995 1995
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(Unaudited)
Assets
<S> <C> <C>
Current Assets:
Cash $ 1,360 $ 2,229
Receivables, net 12,256 13,966
Merchandise inventory 89,943 92,969
Prepaid expenses and other 4,298 4,650
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Total Current Assets 107,857 113,814
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Property and Equipment, net 67,075 65,001
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Deferred Charges and Other Assets 4,088 3,963
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Total Assets $179,020 $182,778
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, accrued expenses and other $ 49,749 $ 66,028
Current portion of long-term debt 847 847
Notes payable to banks 24,850 11,100
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Total Current Liabilities 75,446 77,975
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Long-Term Liabilities 32,103 34,314
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Deferred Income Taxes Payable 5,981 5,981
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Stockholders' Equity:
Common stock - $1.00 par value, 24,000,000
shares authorized, 10,181,367 shares and
10,174,968 shares issued at May 26, 1995
and February 3, 1995, respectively 10,181 10,174
Capital in excess of par value 45,511 45,443
Retained earnings 10,823 9,885
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66,515 65,502
Less: Common stock in treasury at cost -
105,223 shares at May 26, 1995 and 92,348
February 3, 1995 1,025 994
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Total Stockholders' Equity 65,490 64,508
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Total Liabilities and Stockholders'
Equity $179,020 $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>
Sixteen Weeks Ended
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May 26, May 20,
1995 1994
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<S> <C> <C>
Sales $ 178,983 $ 159,456
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Cost and Expenses:
Cost of merchandise sold 128,239 112,962
Selling, general and
administrative expenses 48,153 42,783
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176,392 155,745
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Operating Profit 2,591 3,711
Gain on sale of the
nursing home division 1,300 --
Interest Expense, net (1,085) (624)
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Income Before Income Taxes 2,806 3,087
Income Taxes 1,263 1,389
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Net Income $ 1,543 $ 1,698
=========== ===========
Net Income Per Common Share (a) $ .15 $ .17
=========== ===========
Average Number of Common Shares
Outstanding (a) 10,084,000 10,052,000
=========== ===========
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 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>
Sixteen Weeks Ended
-----------------------
May 26, May 20,
1995 1994
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<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,543 $ 1,698
Adjustments to reconcile net income to
net cash provided by (used for) operating
activities:
Depreciation and amortization 2,813 2,509
Provision for LIFO inventory valuation 1,100 1,100
Gain on the sale of the nursing home
division (1,300) --
Provision for other noncash expenses-net 317 150
Changes in certain assets and liabilities:
Receivables 1,142 2,169
Merchandise inventory 1,541 (3,832)
Prepaid expenses and other 324 201
Deferred charges and other assets (348) (174)
Accounts payable, accrued expenses
and other (16,279) (5,738)
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Net cash used for operating activities (9,147) (1,917)
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Cash Flows From Investing Activities:
Purchase of property and equipment (5,169) (6,568)
Proceeds from the sale of the nursing home division 2,719 --
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Net cash used for investing activities (2,450) (6,568)
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Cash Flows From Financing Activities:
Net increase in debt 11,750 12,700
Repayments of long term liabilities (211) (239)
Treasury stock purchased (206) --
Payment of cash dividends (605) (548)
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Net cash provided by financing activities 10,728 11,913
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Net Increase (Decrease) in Cash (869) 3,428
Cash at Beginning of Period 2,229 1,012
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Cash at End of Period $ 1,360 $ 4,440
======== =======
Supplemental Disclosure:
Interest paid $ 1,150 $ 590
Income taxes paid $ 3,753 $ 3,273
</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 May 26, 1995, the condensed statements
of income for the sixteen week periods ended May 26, 1995 and May 20,
1994 and the condensed statements of cash flows for the sixteen week
periods ended May 26, 1995 and May 20, 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 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 May 26, 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.
2. The results of operations for the sixteen weeks ended May 26, 1995 and
May 20, 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 May 26, 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 June 12, 1995, the Company's Board of Directors declared a cash
dividend of $.06 per common share payable on July 6, 1995 to holders of
record as of June 29, 1995.
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<PAGE> 7
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FOR THE SIXTEEN WEEKS ENDED MAY 26, 1995
Sales increased by 12.2% for the first quarter. On a comparable store basis
(stores opened more than one year), sales increased by 7.8%. The sales
contribution of the twelve 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
71.6% for the first quarter versus 70.8% last year. Gross margins were
effected by many variables. The most significant factor causing the decrease
in gross margins was the decrease in prescription margins caused by reductions
in third party reimbursement rates.
Selling, general and administrative expenses increased primarily due to costs
associated with the opening of new stores. As a percentage of sales, selling
and general and administrative expenses remained relatively constant at 26.9%
for the quarter versus 26.8% last year.
Interest expense was $1,085,000 versus $624,000 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 decreased 9.1% to $1,543,000 or $.15 per share versus $1,698,000 or
$.17 per share for the first quarter. Net income for the current quarter
includes $715,000, or $.07 per common share, from a one-time gain on the sale of
the registrant's nursing home division. Without the one-time gain, net income
was $828,000 or $.08 per common share, a decrease of 51.2% from the prior year's
first quarter results. The decrease in earnings was mainly attributable to
reduced margins in the pharmacy department, expenses incurred in connection with
the opening of 12 new stores in the last 15 months, 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 sixteen
weeks ended May 26, 1995 utilized net cash of $869,000 as follows:
- - Operating activities utilized $9,147,000 primarily due to the reduction
of accounts payable and other current liability balances which was
particularly offset by reductions in the merchandise inventory and
accounts receivable balances.
- - Investing activities utilized $2,450,000 due to purchases of property and
equipment offset by proceeds from the sale of the nursing home division.
- - Financing activities provided $10,728,000 from additional 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 May 26, 1995 was $32.4 million. The working capital ratio
was 1.4 to 1.0 at May 26, 1995 versus of 1.5 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 May 26, 1995 the registrant had $9.2 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 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 26,
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 July 7, 1995 By: /s/ Jerome Stengel
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Jerome Stengel
(Vice President & Treasurer)
(Principal Financial Officer)
-8-
<PAGE> 1
GENOVESE DRUG STORES, INC.
Exhibit 11
STATEMENT RE: COMPUTATION OF NET INCOME PER COMMON SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Sixteen Weeks Ended
------------------------
May 26, May 20,
1995 1994
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<S> <C> <C>
Primary:
Weighted average shares
outstanding (A) 10,084 10,052
Equivalent shares--dilutive
stock options--based on
treasury stock method using
average market price (B) (B)
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10,084 10,052
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Net income $ 1,543 $ 1,698
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Net income per common share (A) $ .15 $ .17
======= =======
</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.
There is no significant difference between primary and fully diluted net income
per common share.
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<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> MAY-26-1995
<CASH> 1,360
<SECURITIES> 0
<RECEIVABLES> 12,256
<ALLOWANCES> 0
<INVENTORY> 89,943
<CURRENT-ASSETS> 107,857
<PP&E> 120,698
<DEPRECIATION> 53,623
<TOTAL-ASSETS> 179,020
<CURRENT-LIABILITIES> 75,446
<BONDS> 32,103
<COMMON> 10,181
0
0
<OTHER-SE> 55,309
<TOTAL-LIABILITY-AND-EQUITY> 179,020
<SALES> 178,983
<TOTAL-REVENUES> 178,983
<CGS> 128,239
<TOTAL-COSTS> 128,239
<OTHER-EXPENSES> 46,853
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,085
<INCOME-PRETAX> 2,806
<INCOME-TAX> 1,263
<INCOME-CONTINUING> 1,543
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,543
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
