<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 24, 1996
--------------------------
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
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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 MAY 24, 1996
- ---------------------------------- ----------------------------------
COMMON STOCK:
Class A, par value $1.00 per share 5,535,636
Class B, par value $1.00 per share 5,569,393
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GENOVESE DRUG STORES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION
Condensed Balance Sheets - May 24, 1996
(Unaudited) and February 2, 1996 2
Condensed Statements of Income - Sixteen Weeks
Ended May 24, 1996 and May 26, 1995
(Unaudited) 3
Condensed Statements of Cash Flows -
Sixteen Weeks Ended May 24, 1996
and May 26, 1995 (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>
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GENOVESE DRUG STORES, INC.
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
May 24, February 2,
1996 1996
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(Unaudited) (Note 1)
<S> <C> <C>
Assets
Current Assets:
Cash $ 1,600 $ 2,251
Receivables 16,432 14,396
Merchandise inventory 102,136 104,855
Prepaid expenses and other 3,413 5,089
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Total Current Assets 123,581 126,591
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Property and Equipment, net 73,487 71,637
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Other Assets 6,516 5,813
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Total Assets $203,584 $204,041
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, accrued expenses and other $ 58,147 $ 69,651
Current portion of long-term debt 798 798
Notes payable to banks 23,350 15,250
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Total Current Liabilities 82,295 85,699
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Long-Term Liabilities 43,779 41,455
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Deferred Income Taxes Payable 7,219 7,219
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Stockholders' Equity:
Common stock - $1.00 par value, 32,000,000
shares authorized, 11,237,673 shares and
11,236,673 shares issued at May 24, 1996
and February 2, 1996, respectively 11,238 11,237
Capital in excess of par value 56,186 56,182
Retained earnings 4,175 3,556
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71,599 70,975
Less: Common stock in treasury at cost -
132,644 shares and 132,512 shares at May 24, 1996
and February 2, 1996, respectively 1,308 1,307
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Total Stockholders' Equity 70,291 69,668
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Total Liabilities and Stockholders'
Equity $203,584 $204,041
======== ========
</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 24, May 26,
1996 1995
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<S> <C> <C>
Sales $ 200,823 $ 178,983
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Costs and Expenses:
Cost of merchandise sold 143,725 128,239
Selling, general and
administrative expenses 53,555 48,153
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197,280 176,392
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Operating Profit 3,543 2,591
Interest Expense (1,249) (1,085)
Gain on sale of the
nursing home division --- 1,300
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Income Before Income Taxes 2,294 2,806
Income Taxes 1,009 1,263
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Net Income $ 1,285 $ 1,543
=========== ===========
Net Income Per Common Share (a) $ .12 $ .14
=========== ===========
Average Number of Common Shares
Outstanding (a) 11,105,000 11,092,000
=========== ===========
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, 1996.
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 24, May 26,
1996 1995
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<S> <C>
Cash Flows From Operating Activities:
Net income $ 1,285 $ 1,543
Adjustments to reconcile net income to
net cash provided by (used for) operating
activities:
Depreciation and amortization 3,397 2,813
Provision for LIFO inventory valuation 1,200 1,100
Gain on the sale of the nursing home
division --- (1,300)
Provision for other noncash expenses 93 317
Changes in certain assets and liabilities:
Receivables (2,129) 1,142
Merchandise inventory 1,519 1,541
Prepaid expenses and other 1,676 324
Deferred charges and other assets (965) (348)
Accounts payable, accrued expenses
and other (11,458) (16,279)
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Net cash used for operating activities (5,382) (9,147)
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Cash Flows From Investing Activities:
Purchase of property and equipment (4,985) (5,169)
Proceeds from the sale of the nursing home division --- 2,719
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Net cash used for investing activities (4,985) (2,450)
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Cash Flows From Financing Activities:
Net increase in debt 10,600 11,750
Repayments of long term liabilities (222) (211)
Issuance of Common Stock - Employee Stock
Ownership and Appreciation Rights Plan 5 ---
Treasury stock purchased (1) (206)
Payment of cash dividends (666) (605)
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Net cash provided by financing activities 9,716 10,728
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Net Increase (Decrease) in Cash (651) (869)
Cash at Beginning of Period 2,251 2,229
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Cash at End of Period $ 1,600 $ 1,360
======= =======
Supplemental Disclosure:
Interest paid $ 1,186 $ 1,150
Income taxes paid $ 3,422 $ 3,753
</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 24, 1996, the condensed
statements of income for the sixteen week periods ended May 24, 1996
and May 26, 1995 and the condensed statements of cash flows for the
sixteen week periods ended May 24, 1996 and May 26, 1995 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 2, 1996 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 24, 1996 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 2, 1996.
2. During the sixteen weeks ended May 26, 1995, the Company sold the
assets of its nursing home pharmacy division to a third party and
record a gain of $1,300,000.
3. The results of operations for the sixteen weeks ended May 24, 1996 and
May 26, 1995 are not necessarily indicative of the results to be
expected for the full year.
4. 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 24, 1996 and February
2, 1996, inventories would have been greater by $20,150,000 and
$18,950,000, respectively, if they had been valued at replacement costs.
5. On June 17, 1996, the Company's Board of Directors declared a cash
dividend of $.06 per common share payable on July 9, 1996 to holders of
record as of July 2, 1996.
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<PAGE> 7
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FOR THE SIXTEEN WEEKS ENDED MAY 24, 1996
Sales increased by 12.2% for the first quarter. On a comparable store basis
(stores opened during all of fiscal 1995 and 1996), sales increased by 7.8%.
The sales contribution of the 18 stores opened in the past two fiscal years 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, remained
constant at 71.6% for the first quarter versus last year. The most significant
factors effective gross margins were decreases in gross margins related to
pharmacy merchandise caused by reductions in third party reimbursement rates
which were offset by higher margins in non-pharmacy departments.
Selling general and administrative expenses as a percentage of sales decreased
to 26.7% this year versus 26.9% in the prior year. This decrease was the
result of cost controls put in place during the past few years.
Interest expense was $1,249,000 versus $1,085,000 in the prior year. This
increase was due to higher levels of borrowings and higher interest rates
experienced in this year's quarter.
Operating profit increased 36.7% to $3,543,000 from $2,591,000 last year. Net
income for the first quarter was $1,285,000 or $.12 per share. Last year's net
income for the quarter, which included $722,000 ($.07 per share) related to a
gain from the sale of the Company's nursing home division was $1,543,000 or
$.14 per share. Excluding the one-time gain on the sale, the Company's net
income increased 56.5%.
FINANCIAL CONDITION
The Company's operating, investing and financing activities for the sixteen
weeks ended May 24, 1996 utilized net cash of $651,000 as follows:
- - Operating activities utilized $5,382,000 primarily due to the reduction
of accounts payable and other current liability balances and an
increase in accounts receivable which was particularly offset by
reductions in the merchandise inventory and cash generated by
operations.
- - Investing activities utilized $4,985,000 due to purchases of property
and equipment.
- - Financing activities provided $9,716,000 from additional 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 May 24, 1996 increased to $41.3 million. The working
capital ratio was 1.50 to 1.0 at May 24, 1996 versus of 1.48 to 1.0 at February
2, 1996.
The Company is currently restructing its debt. The Company has received a
commitment from two banks to enter into a revolving term loan agreement and a
short-term line of credit which will allow for aggregate borrowings of $50
million and has engaged an investment banking firm related to the placement of
$40 million in fixed rate notes payable.
The Company anticipates that its working capital needs for the remainder of
fiscal 1997 will be satisfied through operating results and, as necessary,
through borrowings under facilities available to the Company.
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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.
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(Registrant)
Date: June 24, 1996 By: /s/ Jerome Stengel
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Jerome Stengel
(Vice President & Treasurer)
(Principal Financial Officer)
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<PAGE> 10
EXHIBITS INDEX
Exhibit No. Description
- ----------- -----------
11 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>
Sixteen Weeks Ended
-------------------------
May 24, May 26,
1996 1995
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<S> <C> <C>
Primary:
Weighted average shares
outstanding (A) 11,105 11,092
Equivalent shares--dilutive
stock options--based on
treasury stock method using
average market price (B) (B)
-------- --------
11,105 11,092
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Net income $ 1,285 $ 1,543
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Net income per common share (A) $ .12 $ .14
======== ========
</TABLE>
(A) Adjusted, where appropriate, to reflect the effect of the 10 percent stock
dividend distributed on January 4, 1996.
(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> 4-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-03-1996
<PERIOD-END> MAY-24-1996
<CASH> 1,600
<SECURITIES> 0
<RECEIVABLES> 16,432
<ALLOWANCES> 0
<INVENTORY> 102,136
<CURRENT-ASSETS> 123,581
<PP&E> 136,314
<DEPRECIATION> (62,827)
<TOTAL-ASSETS> 203,584
<CURRENT-LIABILITIES> 82,295
<BONDS> 43,779
0
0
<COMMON> 11,238
<OTHER-SE> 60,361
<TOTAL-LIABILITY-AND-EQUITY> 203,584
<SALES> 200,823
<TOTAL-REVENUES> 200,823
<CGS> 143,725
<TOTAL-COSTS> 143,725
<OTHER-EXPENSES> 53,555
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,249
<INCOME-PRETAX> 2,294
<INCOME-TAX> 1,009
<INCOME-CONTINUING> 1,285
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,285
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
