<PAGE>
[LONGS DRUGS LOGO]
"THE SUCCESSFUL INITIATIVES OF
THE PAST TWO YEARS HAVE SET A STRONG FOUNDATION
FOR CONTINUED GROWTH AT LONGS"
A n n u a l R e p o r t 1 9 9 7
<PAGE>
[MAP]
NUMBER OF STORES AT FISCAL YEAR END
- ------------------------------------
California 291
Hawaii 32
Nevada 8
Colorado 6
- ------------------------------------
Total 337
COMPANY-OWNED
PROPERTIES AT FISCAL YEAR END
- ------------------------------------
Store Building and Land 121
Store Building on Leased Land 43
Corporate Offices 2
Warehouses 2
C O R P O R A T E P R O F I L E
Longs Drug Stores is one of the largest drug store chains in North America,
operating 337 stores in California, Hawaii, Nevada and Colorado. The
Company offers a uniquely broad assortment of merchandise--including
pharmaceutical products, personal care items, photography supplies and greeting
cards--along with excellent value and a high degree of customer service.
Longs common stock is traded on the New York Stock Exchange under the
symbol LDG.
- ---------------------------------------
TABLE OF CONTENTS
- ---------------------------------------
1 Financial Highlights
3 Message to Stockholders
8 Internal Initiatives
11 External Expansion
12 Management's Discussion & Analysis
14 Financial Review
21 Board of Directors and Officers
<PAGE>
[Longs Drugs logo]
F I N A N C I A L H I G H L I G H T S
(MILLIONS EXCEPT SALES PER SQUARE FT., PER SHARE DATA AND NUMBER OF STORES)
- ----------------------------------------------------------------------------
FY 1997 FY 1996 FY 1995
Sales $ 2,828 $ 2,644 $ 2,558
Net Income $ 59 $ 55(1) $ 49
PER SHARE DATA (2)
Net Income $ 1.49 $ 1.35(1) $ 1.18
Dividends $ 0.56 $ 0.56 $ 0.56
BALANCE SHEET DATA
Total Assets $ 880 $ 854 $ 828
Stockholders' Equity $ 554 $ 523 $ 524
KEY FINANCIAL RATIO
Return on Average Stockholders' Equity 10.9% 10.4%(1) 9.5%
STORE DATA
Number of Stores at Year End 337 328 317
Selling Square Footage at Year End 5.4 5.2 5.1
Sales Per Selling Square Foot (52-week basis) $ 518 $ 505 $ 506
(1) Excluding $14 million lawsuit settlement in FY 1996 which reduced after tax
net income by $8.4 million, or $.21 per share.
(2) Reflects 2-for-1 stock dividend on January 10, 1997
SALES
95 . . . . . . . $2.56 Billion
96 . . . . . . . . . . . $2.64 Billion
97 . . . . . . . . . . . . . . $2.83 Billion
EARNINGS PER SHARE
95 . . . . . . . $1.18
96 . . . . . . . . . . . $1.35(1)
97 . . . . . . . . . . . . . . $1.49
LONGS DRUG STORES 1
<PAGE>
[LOGO]
"SHARPER MARKETING,
A CUTTING EDGE PHARMACY AND UNSURPASSED SERVICE
ARE FUELING OUR GROWTH"
LONGS DRUG STORES 2
<PAGE>
Bob Long
Chairman of the Board
Chief Executive Officer
[PHOTO]
Steve Roath
President
M E S S A G E T O S T O C K H O L D E R S
Fiscal 1997 was an excellent year for Longs. The many strategic
initiatives we began implementing two years ago continued to drive improved
performance at all levels of the Company. We achieved solid revenue and
earnings growth, as well as increases in same store sales, pharmacy sales,
customer count, average transaction and sales per square foot.
Beyond these important financial measures, Longs has also grown stronger
in the key elements that underlie any successful retailer. By applying
customer-focused category management techniques, upgrading our information
technologies and significantly strengthening our pharmacy operations, we've
given our store management and employees the tools they need to do their jobs
better. And it shows, in the excitement and enthusiasm of Longs employees, in
the positive remarks we hear from our customers, and in our improved sales
performance.
Today, Longs is a stronger, better positioned, and more competitive
chain than it was just two and a half years ago, and we intend to continue
building on the momentum we have established.
STRONG SALES AND EARNINGS GROWTH
For the 53 weeks ended January 30, 1997, Longs sales were $2.8 billion, up 7%
from $2.6 billion in the 52 weeks of fiscal 1996. On a 52-week comparable
basis, same store sales rose 4.1% in fiscal 1997, and pharmacy sales
increased 9.0%. We are especially encouraged by the strong performance in
pharmacy, as this category represents 33% of our total sales.
LONGS DRUG STORES 3
<PAGE>
[PHOTO]
Net income grew to $58.6 million, or $1.49 per share, from $46.2 million a
year ago when we took a one-time pre-tax charge of $14 million to settle a
lawsuit. Without the charge, our fiscal 1996 earnings would have been $54.6
million, or $1.35 per share. These earnings per share figures reflect the
two-for-one stock split that we declared in January 1997.
This solid 7% growth in Longs' sales and profitability--which we achieved
despite a weaker than expected holiday selling season for Longs and most
retailers and a still sluggish economy in Hawaii that held back our sales
growth in the state--was in line with our goals for the year, and we feel our
results illustrate how our initiatives to enhance value, convenience and the
overall shopping experience for our customers have translated into strong
performance throughout our chain.
MEETING AND EXCEEDING CUSTOMER EXPECTATIONS
Longs has always had a tradition of decentralized decision making, giving
store managers broad authority to stock selected merchandise based on their
knowledge of local customer demand. Over the past two years, we have begun
augmenting this proven approach with more active management of core
categories by our merchandising team at the corporate office.
In this program--which has been a tremendous success--category managers at
our corporate headquarters analyze customer buying behavior throughout our
339 store chain and develop fact-based strategies for enhancing core product
selection, display and promotion. With store managers and employees doing an
excellent job tailoring execution of these plans to their stores, the result
has been a product offering that provides greater focus and consumer appeal.
LONGS DRUG STORES 4
<PAGE>
Category management leverages our greatly enhanced management information
system, which enables us to track chainwide sales through our checkout
scanning system, analyze operating data at both the store and regional level,
develop detailed product layout designs, and much more. It has significantly
strengthened sales in each of the categories under management, including
cosmetics/toiletries, photo and over-the-counter drugs.
A PHARMACY "BETTER THAN THE BEST"
Technology is also key to the improvements we have made in our pharmacy
departments. For example, in fiscal 1997 we completed testing and began
rolling out our new computer-aided prescription filling system, which frees
our pharmacists to spend more time consulting with customers. And our
automated Pharmacy Replenishment Ordering System has greatly increased the
efficiency and speed of re-stocking pharmaceutical products.
Fiscal 1997 was also the first full year of our Integrated Health Concepts
(IHC) subsidiary. IHC is designed to maintain Longs' leadership in the
rapidly changing healthcare marketplace by marketing value-added pharmacy
services to managed care providers, including large employer groups, HMOs,
insurance companies and others. Response to IHC has been excellent, and, as
the managed care revolution has put inevitable downward pressure on
pharmaceutical prices, we believe Longs will be well positioned to offset
much of this margin decline with both growing sales and enhanced service
offerings.
[PHOTO]
LONGS DRUG STORES 5
<PAGE>
AN EXPANDING MARKET PRESENCE
In addition to improving our sales performance and operating efficiency over
the past 24 months, we continued to broaden our store base. In fiscal 1997,
we opened ten new stores, relocated one store and closed one underperforming
unit.
Our growth strategy requires an expansion into markets other than those in
which we already have stores. Such an opportunity is Las Vegas. With our
strong presence in Southern California and seven successful stores in and
around Reno, Nevada, Las Vegas is a natural extension for Longs. We are now
developing a presence in Las Vegas and plan to have a total of six stores
there by the end of this fiscal year. Overall, our expansion plans for fiscal
1998 are to open a total of 15 to 17 new stores.
GROWING MOMENTUM IN FISCAL 1998 AND BEYOND
Longs has accomplished a great deal in the past year, but we believe there is
still plenty of room for further improvement. In fiscal 1998 we will continue
to refine our category management implementation to fuel our same store sales
growth. We will also assess other customer-service initiatives, such as
increasing the number of stores that offer either extended hours or 24-hour
operation. We will implement new applications to maximize the value of our
information systems investment. And we will continue to hire and train the
best managers and employees in the industry.
[PHOTO]
LONGS DRUG STORES 6
<PAGE>
[PHOTOS]
Indeed, people have always been the key to Longs' success, and we want to
thank each of the 16,500 individuals in the Longs family for their
contributions to our past and future accomplishments. We also thank you, our
stockholders--including the nearly 11,000 Longs employees who are members of
the Company's profit sharing plan--for your continued support.
/s/ S.D. Roath /s/ Bob Long
-------------------- ------------------------------
S.D. Roath R. M. Long
President Chief Executive Officer
April 7, 1997
LONGS DRUG STORES 7
<PAGE>
I N T E R N A L I N I T I A T I V E S
Longs' success begins with store-level performance. A fast, friendly and
fruitful shopping experience has been the hallmark of Longs stores for almost
six decades. Today we are building on that tradition with a variety of
initiatives designed to ensure that our customers find what they want and
find it easily, while receiving unsurpassed service and value.
CATEGORY MANAGEMENT
Longs stores are well known for carrying unique and often unusual merchandise
that reflects the particular needs of local customers. To accomplish this,
our store managers have the authority to make independent buying decisions.
This autonomy is a key reason why our customers think of Longs as their local
corner drug store and why they make us a regular stop on their weekly
shopping trips. It is an aspect of our Company that will never change.
[PHOTO]
Recently, however, we have added a valuable element of control in managing
the standard core product categories in all our stores. Category managers at
our headquarters now use information gathered from our entire 339 store chain
to develop successful product mix, to position categories effectively on the
sales floor, and to carry out traffic building promotions.
TECHNOLOGY-DRIVEN PRODUCTIVITY
Controlling core categories from the corporate office also improves our
purchasing efficiency. It leverages our buying clout and enhances our ability
to negotiate consistent supply and better costs of goods. In addition,
automated repurchasing systems help reduce inventory costs while improving
the speed of our replenishment capability. It has also improved our ability
to maintain in-stock positions throughout the chain.
We now have approximately 11,000 stock keeping units available for rapid
replenishment--more than 25% of the non-prescription items we carry in our
stores. Equally encouraging, we are steadily increasing the share of our
product volume that is controlled by our own distribution system--in fiscal
1997, we surpassed 45%--a trend that improves our gross margin and inventory
control.
LONGS DRUG STORES 8
<PAGE>
[LOGO]
"WE HAVE STEADILY
IMPROVED OUR STORE-LEVEL PRODUCTIVITY AND
OVERALL OPERATING EFFICIENCY"
LONGS DRUG STORES 9
<PAGE>
[LOGO]
"LONGS IS EXTENDING
ITS PRESENCE IN BOTH NEW AND
EXISTING MARKETS"
LONGS DRUG STORES 10
<PAGE>
E X T E R N A L E X P A N S I O N
As we have strengthened our internal performance, Longs has also
continued to expand its store base. Our strategy has been to focus on finding
high quality sites in our existing markets that enhance our strong position
in our four-state operating area. At the same time, we continue to assess
opportunities to expand into new markets. As we do so, we often seek multiple
unit acquisitions that will give us an immediate strong market presence and
enable us to capitalize on economies of scale in distribution, marketing and
training.
EXISTING MARKETS
While Longs has a very strong presence and name recognition in California,
there are still opportunities to add new stores, as well as to upgrade and
expand existing units. In fiscal 1997, we added nine new stores in the state,
both in urban markets as well as smaller towns. To serve the thriving San
Diego metropolitan area, for example, we added three stores. At the same
time, we also entered the smaller Central Valley ranching town of Prather,
and expanded the size of an existing store in the growing community of
Orcutt, near Santa Maria.
Before opening any new store, we conduct extensive research to evaluate
market demand and existing store capacity. And, of course, we always hit the
ground running by stocking key local items--such as fishing tackle at our new
Reno store--to serve the unique needs of the local customer base.
NEW MARKETS
When we enter new operating areas, we choose markets that are logical
extensions of our established operations, such as communities near or
contiguous to current markets. We followed this strategy in fiscal 1997 when
we entered Las Vegas, which is between Reno, Nevada, where we now have a
strong base of seven stores, and Southern California. We entered this new
market by acquiring three stores from local retailers Rainbow Drugs and Drug
Emporium. Although not yet open as Longs units, these new stores provide us a
strong initial foundation on which to build. Based on our market research we
are very optimistic about this move. We believe Longs' proven combination of
service-oriented pharmacy, broad selection and unique merchandise mix will be
very well received in Las Vegas.
LONGS DRUG STORES 11
<PAGE>
M A N A G E M E N T ' S D I S C U S S I O N A N D A N A L Y S I S
RESULTS OF OPERATIONS
SEASONAL BUSINESS AND 53 WEEK YEAR
The retail drug store business is seasonal, peaking in the fourth quarter due
to the Thanksgiving and Christmas holidays and the cold and flu season. The
Company's fiscal year ends the last Thursday in January. Fiscal year and
fourth quarter of 1997 had one additional week of operations compared to
fiscal year and fourth quarter of 1996 and 1995. Sales benefited as a result,
offset somewhat by the impact of fewer holiday shopping days between the
Thanksgiving and Christmas holidays.
SALES
(THOUSANDS) FY 1997 FY 1996 FY 1995
- ------------------------------------------------------------------
Total Sales $ 2,828,338 $ 2,644,376 $ 2,558,269
- ------------------------------------------------------------------
Sales Growth - 53rd week
(FY 97 only) 2.1%
Same Store Sales Growth
52 weeks 4.1% 0.7% (1.5%)
New Stores
52 weeks 0.8% 2.7% 3.9%
- ------------------------------------------------------------------
Total Sales Growth 7.0% 3.4% 2.4%
- ------------------------------------------------------------------
New Stores 10 15 18
Closed Stores (1) (4) (6)
- ------------------------------------------------------------------
Number of Stores 337 328 317
- ------------------------------------------------------------------
About one-third of the sales growth is due to an extra week of operations in
fiscal 1997, compared to fiscal 1996 and fiscal 1995. The steady improvement
in same store sales, stores open more than one year, was due to strong
pharmacy sales and successful marketing of non-pharmacy categories. Sales
were negatively impacted by five fewer shopping days between Thanksgiving and
Christmas and severe weather in California in the fourth quarter of fiscal
1997.
PHARMACY SALES
FY 1997 FY 1996 FY 1995
- -----------------------------------------------------
Pharmacy Percent of
Total Sales 33.1% 32.0% 30.1%
- -----------------------------------------------------
Managed Care Percent of
Pharmacy Sales 80.2% 76.5% 71.3%
- -----------------------------------------------------
Pharmacy sales grew slightly as a percentage of total sales as a result of
strong pharmacy sales growth. Pharmacy sales increased 9.0% in fiscal 1997 on
a 52-week comparable basis, 10.7% in fiscal 1996, and 7.2% in fiscal 1995.
Pharmacy sales reimbursed through managed care arrangements continues to
increase but at a lesser rate than prior years.
GROSS MARGIN
FY 1997 FY 1996 FY 1995
- -----------------------------------------------------
Gross Margin Percentage 26.7% 26.4% 26.0%
- -----------------------------------------------------
Increased gross margin in fiscal 1997 over fiscal 1996 was primarily the
result of improved buying, product mix, and promotional strategies. These
increases offset decreases in pharmacy gross margin consistent within the
drug chain industry.
The Company uses the LIFO (last-in first-out) method of accounting for its
inventories. The LIFO provision was $3.4 million in fiscal 1997, compared to
$4.8 million in fiscal 1996 and $1.7 million in fiscal 1995. The LIFO
provision fluctuates with inflation rates and product mix, and is included in
cost of merchandise sold.
OPERATING AND ADMINISTRATIVE EXPENSES
(THOUSANDS) FY 1997 FY 1996 FY 1995
- ---------------------------------------------------------
Operating and
Administrative Expenses $ 656,742 $ 607,157 $ 584,587
- ---------------------------------------------------------
Operating and
Administrative Expenses
as a Percent of Sales 23.2% 23.0% 22.9%
- ---------------------------------------------------------
Operating and administrative expenses as a percent of sales increased to
23.2% in fiscal 1997, compared to 23.0% in fiscal 1996, and 22.9% in fiscal
1995. The increase was primarily due to an increase in wages that resulted
from the new stores, costs related to the implementation of category
management, and other costs which were in line with our expectations.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA)
(THOUSANDS) FY 1997 FY 1996 FY 1995
- ---------------------------------------------------------------
EBITDA $ 141,385 $ 117,184 $ 118,642
- ---------------------------------------------------------------
EBITDA as a Percent
of Sales 5.0% 4.4% 4.6%
- ---------------------------------------------------------------
EBITDA, excluding impact
of lawsuit settlement
in FY 1996 $ 141,385 $ 131,184 $118,642
EBITDA as a Percent
of Sales, excluding
impact of lawsuit settlement
in FY 1996 5.0% 5.0% 4.6%
- ---------------------------------------------------------------
EBITDA as a percent of sales continue to be strong, consistent with preceding
years.
INCOME BEFORE TAXES
FY 1997 FY 1996 FY 1995
- ------------------------------------------------------------------
Income Before Taxes as a
Percent of Sales 3.4% 2.9% 3.2%
- ------------------------------------------------------------------
Income Before Taxes as a
Percent of Sales, excluding impact
of lawsuit settlement in FY 1996 3.4% 3.4% 3.2%
- ------------------------------------------------------------------
Income before taxes as a percent of sales remained consistent with prior year
with an improvement in gross margin offset by increased operating and
administrative expenses.
LAWSUIT SETTLEMENT
In fiscal 1996 the Company had a one-time $14.0 million pre-tax charge to
operations to settle a lawsuit. The after tax impact of the settlement was
$8.4 million or $0.21 per share. The details of the settlement are discussed
in the footnotes to the financial statements. Operating comparisons to prior
year are made with and without the settlement to facilitate analysis.
LONGS DRUG STORES 12
<PAGE>
INCOME TAXES
The Company's effective income tax rates were 39.9% in fiscal 1997, 39.8% in
fiscal 1996 and 39.7% in fiscal 1995. The California corporate tax rate was
reduced from 9.3% to 8.8% for tax years beginning after January 1, 1997.
NET INCOME
FY 1997 FY 1996 FY 1995
- -------------------------------------------------------------
Net Income as a Percent
of Sales 2.1% 1.7% 1.9%
- -------------------------------------------------------------
Net Income as a Percent
of Sales, excluding impact
of lawsuit settlement in
FY 1996 2.1% 2.1% 1.9%
- -------------------------------------------------------------
Net income as a percent of sales is consistent with fiscal 1996 (excluding
the settlement) due to improved gross margins offset by increased operating
and administrative expenses.
EARNINGS PER SHARE
FY 1997 FY 1996 FY 1995
- ----------------------------------------------------------
Earnings per Share $ 1.49 $ 1.15 $ 1.18
Percent increase in
Earnings per Share 30.2% (2.7%) (8.2%)
- ----------------------------------------------------------
Earnings per Share,
excluding impact of lawsuit
settlement in FY 1996 $ 1.49 $ 1.35 $ 1.18
Percent increase in
Earnings per Share
excluding impact of lawsuit
settlement in FY 1996 10.1% 15.0% (8.2%)
- ----------------------------------------------------------
On January 10, 1997, the Company issued a two-for-one stock split effected in
the form of a stock dividend. All per share amounts have been adjusted to
reflect the split. Earnings per share increased at a greater rate than net
income due to stock repurchases in each of the last three fiscal years.
LIQUIDITY AND CAPITAL RESOURCES
CASH POSITION
(THOUSANDS) FY 1997 FY 1996 FY 1995
- ----------------------------------------------------------
Cash and Cash Equivalents
at Year End $ 22,834 $ 49,314 $ 57,518
- ----------------------------------------------------------
Cash and cash equivalents in fiscal 1997 were lower than fiscal 1996 due to
increased inventories, particularly in the stores' pharmacies and in the
pharmacy distribution warehouse, the purchase of a $12 million warehouse in
fourth quarter, and the actual payment of the lawsuit settlement. Cash and
cash equivalents in fiscal 1996 were lower than fiscal 1995 as a result of
the acquisition of six stores in Hawaii and approximately $25 million more in
stock repurchases in fiscal 1996 over fiscal 1995.
CASH FROM OPERATIONS
(THOUSANDS) FY 1997 FY 1996 FY 1995
- ---------------------------------------------------------
Cash provided by Operating
Activities $ 80,579 $ 94,299 $ 84,069
- ---------------------------------------------------------
The decrease in cash provided by operations was primarily due to the payment
of the lawsuit settlement in fiscal 1997. Offsetting this decrease were
improvements in sales and margins and the benefit from an extra week of
operations in fiscal 1997.
CAPITAL EXPENDITURES
(THOUSANDS) FY 1997 FY 1996 FY 1995
- ----------------------------------------------------------------
Cash used by Investing
Activities $ (65,117) $ (46,093) $ (34,773)
- ----------------------------------------------------------------
Capital expenditures increased in fiscal 1997 primarily due to the
construction and purchase of a $12 million warehouse in Southern California
that replaced a leased facility. Management information systems were also
expanded during fiscal 1997 to extend an open network system between the
corporate offices and all stores. Additionally, the company is continuing its
investment in open technologies to deliver new systems for pharmacy, human
resources management, category management, warehousing and product ordering.
Capital expenditures for fiscal 1998 are expected to rise with additional new
stores and fixture upgrades in existing stores due to category management
initiatives.
During fiscal 1997, the Company opened its first store in the Las Vegas
market. The Company agreed to acquire 3 stores, 2 of which will open in early
fiscal 1998, from existing operators in Las Vegas and will operate them under
the Rainbow Pharmacy name until fall of next year.
In fiscal 1996, the Company purchased the inventory and fixed assets of six
stores and the merchandise inventories of additional stores in Hawaii from
PayLess Drug Stores Northwest, Inc.
FINANCING ACTIVITIES
(THOUSANDS) FY 1997 FY 1996 FY 1995
- -----------------------------------------------------------------
Cash used by Financing
Activities $ (41,942) $ (56,410) $ (34,290)
- -----------------------------------------------------------------
Stock repurchases were $21.9 million in fiscal 1997, $35.7 million in fiscal
1996, and $11.1 million in fiscal 1995, the primary reason for fluctuations
in financing activities. Stock repurchases are at the discretion of the
Board of Directors under an authorization approved in November 1994 and are
impacted by stock price and available cashflow.
Expenditures for capital projects, dividends, and stock repurchases have
been, and are expected to continue to be, funded from operation and cash
reserves. To maintain desired working capital, the Company may periodically
use short-term lines of credit.
LONGS DRUG STORES 13
<PAGE>
STATEMENTS OF CONSOLIDATED INCOME
Years Ended Jan 30, 1997 Jan 25, 1996 Jan 26, 1995
-----------------------------------------------------
THOUSANDS EXCEPT PER SHARE
SALES $ 2,828,338 $ 2,644,376 $ 2,558,269
Cost and Expenses
Cost of merchandise sold 2,074,084 1,946,391 1,892,851
Operating and administrative 656,742 607,157 584,587
Lawsuit settlement 14,000
----------------------------------------
Income before taxes 97,512 76,828 80,831
Taxes on Income 38,900 30,600 32,100
----------------------------------------
NET INCOME $ 58,612 $ 46,228 $ 48,731
----------------------------------------
Per Common Share
Net Income $ 1.49 $ 1.15 $ 1.18
Dividends $ .56 $ .56 $ .56
Weighted Average Number of Shares
Outstanding 39,303 40,364 41,402
----------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
INDEPENDENT AUDITORS' REPORT
LONGS DRUG STORES CORPORATION:
We have audited the accompanying consolidated balance sheets of Longs Drug
Stores Corporation and its subsidiary as of January 30, 1997 and January 25,
1996, and the related statements of consolidated income, consolidated
stockholders' equity and consolidated cash flows for each of the three
fiscal years in the period ended January 30, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the companies at January 30,
1997 and January 25, 1996, and the results of their operations and their cash
flows for each of the three fiscal years in the period ended January 30, 1997
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
San Francisco, California
March 7, 1997
LONGS DRUG STORES 14
<PAGE>
CONSOLIDATED BALANCE SHEETS
JAN 30, 1997 JAN 25, 1996
----------------------------
THOUSANDS
ASSETS
Current Assets
Cash and equivalents $ 22,834 $ 49,314
Pharmacy and other receivables 49,911 54,388
Merchandise inventories 356,933 316,497
Deferred income taxes 19,757 23,640
Other 1,939 2,687
-------------------------
Total current assets 451,374 446,526
-------------------------
Property
Land 88,269 79,998
Buildings and leasehold improvements 337,486 313,766
Equipment and fixtures 270,337 247,831
Beverage licenses 7,240 7,163
-------------------------
Total property at cost 703,332 648,758
Less accumulated depreciation 285,943 253,461
-------------------------
Property, net 417,389 395,297
-------------------------
Other Non-Current Assets 10,886 11,734
-------------------------
Total $ 879,649 $ 853,557
-------------------------
-------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 164,369 $ 148,428
Employee compensation and benefits 55,957 59,843
Taxes payable 34,294 37,808
Current portion of guarantee of Profit Sharing
Plan debt 2,363 2,174
Other 29,526 39,094
-------------------------
Total current liabilities 286,509 287,347
-------------------------
Guarantee of Profit Sharing Plan Debt 5,192 8,311
-------------------------
Deferred Income Taxes 34,362 35,132
-------------------------
Stockholders' Equity
Common stock (38,968,000 and 39,632,000 outstanding) 19,484 19,816
Additional capital 109,327 107,608
Common stock contribution to Profit Sharing Plan 9,955 4,550
Guarantee of Profit Sharing Plan debt (7,555) (10,485)
Retained earnings 422,375 401,278
-------------------------
Total stockholders' equity 553,586 522,767
-------------------------
Total $ 879,649 $ 853,557
-------------------------
-------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
LONGS DRUG STORES 15
<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
------------------------------------------------------
YEARS ENDED JAN 30, 1997 JAN 25, 1996 JAN 26, 1995
------------------------------------------------------
THOUSANDS
<S> <C> <C> <C>
OPERATING ACTIVITIES
Receipts from customers $ 2,832,563 $ 2,645,211 $ 2,554,596
Payments for merchandise (2,098,579) (1,968,353) (1,901,012)
Payments for operating and administrative expenses (607,127) (551,179) (541,421)
Income tax payments (46,278) (31,380) (28,094)
----------------------------------------
Net cash provided by operating activities 80,579 94,299 84,069
----------------------------------------
INVESTING ACTIVITIES
Payments for property additions and other assets (70,023) (49,174) (39,195)
Receipts from property dispositions 4,906 3,081 4,422
----------------------------------------
Net cash used in investing activities (65,117) (46,093) (34,773)
----------------------------------------
FINANCING ACTIVITIES
Proceeds from sale of common stock to Profit Sharing Plan 2,000 2,017
Repurchase of common stock (21,888) (35,730) (11,077)
Dividend payments (22,054) (22,697) (23,213)
----------------------------------------
Net cash used in financing activities (41,942) (56,410) (34,290)
----------------------------------------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (26,480) (8,204) 15,006
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 49,314 57,518 42,512
----------------------------------------
CASH AND EQUIVALENTS AT END OF YEAR $ 22,834 $ 49,314 $ 57,518
----------------------------------------
----------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net income $ 58,612 $ 46,228 $ 48,731
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 43,873 40,356 37,811
Deferred income taxes 3,113 (6,145) (2,968)
Restricted stock awards 1,669 1,478 1,889
Common stock contribution to benefit plans 9,460 4,550 5,515
Tax benefits credited to stockholders' equity 90 127 155
Changes in assets and liabilities:
Pharmacy and other receivables 4,477 (484) (3,265)
Merchandise inventories (40,436) (21,151) (14,822)
Other current assets 748 47 (197)
Current liabilities (1,027) 29,293 11,220
----------------------------------------
Net cash provided by operating activities $ 80,579 $ 94,299 $ 84,069
----------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
LONGS DRUG STORES 16
<PAGE>
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Profit Guarantee
Sharing of Profit Total
Common Stock Additional Plan Sharing Retained Stockholders'
Thousands Shares Amount Capital Contributions Plan Debt Earnings Equity
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 27, 1994 41,308 $20,654 $104,518 $ 5,530 $(15,662) $384,567 $499,607
-----------------------------------------------------------------------------------------------
Net income 48,731 48,731
Dividends ($.56 per share) (23,213) (23,213)
Profit Sharing Plan:
Issuance of stock for FY94
contribution 296 148 5,456 (5,530) (74) 0
Stock portion of FY95
contribution 5,515 5,515
Purchase of stock from plan (210) (105) (3,517) 53 (3,569)
Reduction of plan debt 2,481 2,481
Restricted stock awards 180 90 1,845 (46) 1,889
Tax benefits related to employee
stock plans 155 155
Repurchase of common stock (456) (228) (1,095) (6,185) (7,508)
Acquisition of Bill's Drugs, Inc.,
net of related costs 2 1 9 10
BALANCE AT JANUARY 26, 1995 41,120 $20,560 $107,216 $ 5,515 $(13,181) $403,988 $524,098
-----------------------------------------------------------------------------------------------
Net income 46,228 46,228
Dividends ($.56 per share) (22,697) (22,697)
Profit Sharing Plan:
Issuance of stock for FY95
contribution 352 176 5,427 (5,515) (88) 0
Stock portion of FY96
contribution 4,550 4,550
Sale of stock to plan 118 59 1,988 (30) 2,017
Purchase of stock from plan (228) (114) (4,037) 58 (4,093)
Reduction of plan debt 2,696 2,696
Restricted stock awards 60 30 1,463 (15) 1,478
Tax benefits related to employee
stock plans 127 127
Repurchase of common stock (1,790) (895) (4,449) (26,293) (31,637)
BALANCE AT JANUARY 25, 1996 39,632 $19,816 $107,608 $ 4,550 $(10,485) $401,278 $522,767
-----------------------------------------------------------------------------------------------
Net income 58,612 58,612
Dividends ($.56 per share) (22,054) (22,054)
Profit Sharing Plan:
Issuance of stock for FY96
contribution 181 91 4,010 (4,055) (46) 0
Contribution in cash (495) (495)
Stock portion of FY97
contribution 9,955 9,955
Sale of stock to plan 90 45 1,978 (23) 2,000
Purchase of stock from plan (179) (90) (3,925) 45 (3,970)
Reduction of plan debt 2,930 2,930
Restricted stock awards 72 36 1,651 (18) 1,669
Tax benefits related to employee
stock plans 90 90
Repurchase of common stock (828) (414) (1,995) (15,509) (17,918)
BALANCE AT JANUARY 30, 1997 38,968 $19,484 $109,327 $ 9,955 $ (7,555) $422,375 $553,586
-----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
LONGS DRUG STORES 17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
THE CONSOLIDATED FINANCIAL STATEMENTS include Longs Drug Stores Corporation and
its wholly-owned subsidiary, Longs Drug Stores California, Inc. All inter-
company accounts and transactions have been eliminated.
FISCAL YEARS end the last Thursday of January. Most fiscal years have four
quarters of thirteen weeks each, totaling 52 weeks. Every five to six years
the fourth quarter has an additional week which is the case with the current
fiscal year 1997. References made to the 1997, 1996, and 1995 fiscal years
refer to the 53-week period ended January 30, 1997, and the 52-week periods
ended January 25, 1996, and January 26, 1995. Reclassifications have been
made to certain prior years' financial information to make it comparable to
the current year presentation.
NATURE OF OPERATIONS - The Company operates retail drug stores in California,
Hawaii, Colorado and Nevada with a majority of our sales concentrated in
California. Prescription drugs, over-the-counter health care products, photo
and photo processing, cosmetics and greeting cards are our core merchandise
categories. Additional significant categories include food, toiletries and
seasonal merchandise. Items sold through promotional advertising represent a
significant portion of sales.
STOCK SPLIT - In November 1996, the Board of Directors declared a two-for-one
stock split. The stock split was effected in the form of a two-for-one stock
dividend to shareholders of record at the close of business on December 3, 1996
and was distributed on January 10, 1997. All share and per share amounts
presented in the accompanying consolidated financial statements have been
restated to reflect the stock split.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results may differ from those estimates.
CASH AND EQUIVALENTS include investments with original maturities of three
months or less that are easily convertible to cash.
MERCHANDISE INVENTORIES are valued using the last-in, first-out (LIFO)
method. The excess of specific cost over LIFO values was $133.2 and $129.8
million at the 1997 and 1996 fiscal year ends.
PROPERTY is depreciated using the straight-line method and estimated useful
lives of twenty to thirty-three years for buildings, the shorter of life of
the lease or estimated useful life for leasehold improvements, and three to
twenty years for equipment, fixtures and beverage licenses. Maintenance and
repairs are charged to expense as incurred and major improvements are
capitalized.
Effective at the end of the third quarter of fiscal year 1996, the
Company adopted Statement of Financial Accounting Standards No. 121 which
requires that long-lived assets such as buildings or other property used by
an entity be reviewed to ensure that their current value can be recovered by
the cash flows from future operations. This pronouncement had no material
effect on the Company's financial position or results of operations.
OTHER NON-CURRENT ASSETS consist of purchased pharmacy customer files and
goodwill and are amortized under a straight line method over estimated useful
lives of five to ten years.
NEW STORE OPENING COSTS, primarily labor to stock shelves, pre-opening
advertising, rent and store supplies, are charged to expense as incurred.
ADVERTISING - Advertising costs are expensed as incurred and were $22.5,
$21.9, and $23.3 million for fiscal years 1997, 1996, and 1995.
INCOME TAXES - The Company accounts for its taxes in accordance with SFAS No.
109 which requires the use of the asset and liability method of accounting
for deferred income taxes. Deferred income taxes are recorded based upon the
differences between the financial statement and tax basis of assets and
liabilities.
STOCK-BASED COMPENSATION - The Company adopted the disclosure requirements of
SFAS No. 123 (Accounting for Stock-Based Compensation) in fiscal year 1996.
The Company's only stock-based compensation is restricted stock which is
valued at its fair market value at the date of grant, and recorded as
compensation expense over the vesting period. As a result, there are no
additional required disclosures.
NET INCOME PER COMMON SHARE is calculated by dividing net income by the
weighted average number of shares outstanding.
LEASES AND OTHER OBLIGATIONS
A significant portion of store properties are leased, having original terms
ranging from ten to twenty-five years with renewal options covering up to
twenty additional years in five-year to ten-year increments. Leases provide
for minimum annual rent with provisions for additional rent based on a
percentage of sales. Lease rentals for fiscal years 1997, 1996, and 1995 were
$37.3, $34.5, and $30.9 million, of which $29.6, $27.5, and $23.4 million
represent minimum payments.
Total minimum rental commitments for non-cancelable leases in effect at
1997 year end were $31.1, $31.3, $30.2, $29.4, and $27.8 million for fiscal
years 1998 through 2002, and $286.8 million thereafter.
At fiscal year ends 1997 and 1996, the Company had an unsecured revolving
line of credit of $30.0 million at prevailing interest rates. There was $30.0
million and $29.8 million available for use at the 1997 and 1996 fiscal year
ends. The line of credit expires on June 30, 1998.
Employee Compensation and Benefits
The Company has approximately 16,500 full-time and part-time employees as of
January 30, 1997. Virtually all full-time employees are covered by medical,
dental and life insurance programs paid primarily by the Company. The Company
also has a 401(k) plan under which employees may make voluntary contributions.
LONGS DRUG STORES 18
<PAGE>
Full-time employees with over 1,000 hours of service are entitled to
Profit Sharing Plan benefits that are funded entirely by the Company. Annual
contributions to the plan were $11.0 million for fiscal years 1997, 1996 and
1995. Contributions are made in cash and common stock.
In April 1995, the Board of Directors approved the Longs Drug Stores
Corporation Deferred Compensation Plan of 1995. The plan provides eligible
employees with the opportunity to defer a specified percentage of their cash
compensation. Resulting obligations will be payable on a date selected by the
employee participant in accordance with the terms of the plan. The total
deferred compensation obligations under the plan may not exceed $10.0
million. Deferred compensation was $2.0 million and $0.6 million at the 1997
and 1996 fiscal year ends.
TAXES ON INCOME
Significant components of the Company's deferred tax assets and liabilities
as of January 30, 1997 and January 25, 1996 are as follows:
(Thousands) FY 1997 FY 1996
- --------------------------------------------------------------------------------
Deferred Tax Assets:
Reserve for vacation pay $ 8,327 $ 7,398
Reserve for workers' compensation 6,626 7,493
State income tax 2,425 2,111
Reserve for health benefits 1,679 1,683
Lawsuit settlement 5,600
Other 11,156 9,456
- --------------------------------------------------------------------------------
30,213 33,741
- --------------------------------------------------------------------------------
Deferred Tax Liabilities:
Depreciation 31,742 32,836
Basis of property 3,657 3,664
Inventories 1,347 1,425
Other 8,072 7,308
- --------------------------------------------------------------------------------
44,818 45,233
- --------------------------------------------------------------------------------
Net deferred tax liability $14,605 $11,492
- --------------------------------------------------------------------------------
Income tax expense is summarized as follows:
(Thousands) FY 1997 FY 1996 FY 1995
- --------------------------------------------------------------------------------
CURRENT
Federal $27,849 $28,367 $26,992
State 7,938 8,378 8,076
- --------------------------------------------------------------------------------
35,787 36,745 35,068
DEFERRED 3,113 (6,145) (2,968)
- --------------------------------------------------------------------------------
Total $38,900 $30,600 $32,100
- --------------------------------------------------------------------------------
The reconciliation between the federal statutory tax rate and the Company's
effective tax rates are as follows:
(THOUSANDS) FY 1997 Percent
- --------------------------------------------------------------------------------
Federal income taxes at statutory rate $34,129 35.00%
State income tax net of federal benefits 5,330 5.47%
Benefits of ESOP dividends (1,288) (1.32%)
Other 729 0.74%
- --------------------------------------------------------------------------------
$38,900 39.89%
- --------------------------------------------------------------------------------
The effective tax rate in fiscal years 1996 and 1995 differ from the federal
statutory rate of 35%, primarily due to state income taxes offset by the
benefit of ESOP dividends.
GUARANTEE OF PROFIT SHARING PLAN DEBT
In March 1989, the Company sold 1,393,728 shares of Longs' common stock to
the Profit Sharing Plan for $25.0 million. The Plan financed this purchase
with a ten-year loan guaranteed by Longs Drug Stores California, Inc. The
Company has no obligation to repurchase outstanding shares held by the Plan.
Consequently, a Guarantee of Profit Sharing Plan debt is shown on the
accompanying balance sheets with a corresponding reduction of Stockholders'
Equity.
Loan repayments are made with dividends on allocated and unallocated
shares held by the Plan and with Company contributions. It is expected that
all shares will be allocated within the term of the loan. Members are
allocated shares of Longs' common stock equal in value to the cash dividends
on their allocated shares used to repay the loan. Periodically, the Company
has been willing to repurchase shares to provide the Plan with needed
liquidity. Plan shares of the leveraged Employee Stock Ownership Plan (ESOP)
were as follows:
FY 1997 FY 1996
- --------------------------------------------------------------------------------
Allocated shares 1,075,552 955,434
Unallocated shares 318,176 438,294
- --------------------------------------------------------------------------------
Total 1,393,728 1,393,728
- --------------------------------------------------------------------------------
Loan payments are made in equal quarterly installments of $930,000,
which includes interest at 8.4% per year.
Dividends paid to the Plan, and used in part to repay principal and
interest on the loan totaled $3.2 million for fiscal years 1997, 1996 and
1995.
STOCKHOLDERS' EQUITY
Authorized capital stock consists of 120 million shares of
common stock, $.50 par value, and 30 million shares of preferred stock.
Each outstanding share of common stock has a Preferred Stock Purchase
Right (expiring in September 2006) which is exercisable only upon the
occurrence of certain changes in control events. These new rights replaced
previous rights which expired in September 1996. There have been no events
that would allow these rights to be exercised.
The Company has a Restricted Stock Award program in which certain
individuals may be granted stock in the Company, with some restrictions.
Recipients have voting rights to the shares and dividends are credited to the
shares during the restriction period. However, transfer of ownership of the
shares is dependent on continued employment for periods of one to five years.
The compensatory portion not yet expensed for these programs ($2.6 million)
at January 30, 1997, has been netted against Additional Capital. During
fiscal years 1997, 1996, and 1995; 73,600 69,200 and 186,800 shares were
awarded under these programs.
In November 1994, the Board of Directors authorized a plan to repurchase
up to four million shares of the Company's outstanding
LONGS DRUG STORES 19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
common stock. As of fiscal year 1997, the Company has repurchased 1,739,000
shares at a cost of $32.6 million in connection with the repurchase plan.
During fiscal year 1997, the Company also repurchased 179,000 common
shares from the Profit Sharing Plan at market values totaling $4.0 million
and 438,000 common shares from the T.J. and J.M. Long charitable foundations
at market values totaling $9.4 million.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's current financial assets and liabilities,
and Guarantee of Profit Sharing Plan debt approximates the estimated fair
value.
SETTLEMENT OF LAWSUIT
The Company's subsidiary, Longs Drug Stores California, Inc. ("Subsidiary"),
was named as one of a large number of defendants in two lawsuits filed in
United States District Court for the Southern District of Florida, Harvey S.
Tropin, as Receiver of Lone Star Trading Company and its subsidiaries and
affiliates, as Trustee of Premium Sales Corporation, Plaza Trading
Corporation and as the designated corporate representative of Windsor
Wholesale Corporation v. Kenneth Thenen, et al. ("Tropin"), and Walco
Investments, Inc., et al. v. Kenneth Thenen, et al. ("Walco"). In addition,
Subsidiary was named in three cross-complaints by certain co-defendants in
Walco. The cases alleged that investors invested in partnerships involved in
the business of "diverting" grocery products. It was alleged that many of the
diverting transactions were fictitious. The complaints further alleged that a
former employee of Subsidiary received bribe payments in return for his
willingness to confirm fraudulent transactions, and they claimed that the
Subsidiary was secondarily liable for damages based on the acts of its former
employee. Several other retailers involved in the grocery business, as well
as law firms and banks, were co-defendants in the actions. Plaintiffs in both
actions sought damages for the investors' losses, which were alleged to have
been several hundred million dollars.
In February 1996, the Company concluded settlement negotiations with
representatives of the plaintiffs in these actions whereby claims against the
Company and its affiliates will be released in exchange for the Company's
cash payment of $14 million, in addition to certain contingent insurance
proceeds. The Company elected to settle these lawsuits to avoid the expense
and the uncertainty of a trial. The after-tax impact of this settlement was
$8.4 million, or $.21 per share, and was accrued for in the fourth quarter of
fiscal year 1996. The final settlement amount was $13 million and has been
paid into an escrow account. This settlement has received final court
approval and is the subject of a definitive settlement agreement, but will
not become finally effective until required releases are delivered and other
contingencies have been resolved, which could occur as early as July 1997.
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(Thousands except Earnings Dividends Stock Price
share data) Sales Gross Profit Net Income Per Share(3) Per Share (3) Range (3)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Quarter 1 $ 665,408 $ 180,831 $ 14,048 $ .35 $ .14 $ 22-24
Quarter 2 681,503 181,719 13,512 .34 .14 19-23
Quarter 3 666,909 176,458 9,374 .24 .14 19-23
Quarter 4 814,518 215,246 21,678 .56 .14 22-25
- -----------------------------------------------------------------------------------------------------------------------------------
FY 1997 $2,828,338 $ 754,254 $ 58,612 $1.49 $ .56 $ 19-25
- -----------------------------------------------------------------------------------------------------------------------------------
Quarter 1 639,801 169,232 13,304 .33 .14 16-17
Quarter 2 646,359 171,012 12,486 .31 .14 17-19
Quarter 3 628,900 166,643 8,815 .22 .14 18-21
Quarter 4 729,316 191,098 11,623(1) .29(1) .14 19-24
- -----------------------------------------------------------------------------------------------------------------------------------
FY 1996 $2,644,376 $ 697,985 $ 46,228(1) $1.15(1) $ .56 $ 16-24
- -----------------------------------------------------------------------------------------------------------------------------------
FIVE YEAR SELECTED FINANCIAL DATA
(THOUSANDS EXCEPT SHARE DATA) FY 1997 FY 1996 FY 1995 FY 1994 FY 1993
- -----------------------------------------------------------------------------------------------------------------------------------
Sales $ 2,828,338 $ 2,644,376 $ 2,558,269 $ 2,499,224 $ 2,475,475
Net Income $ 58,612 $ 46,228(1) $ 48,731 $ 52,782(2) $ 52,993
Net Income per Share (3) $ 1.49 $ 1.15(1) $ 1.18 $ 1.28 $ 1.29
Dividends per Share (3) $ .56 $ .56 $ .56 $ .56 $ .56
Total Assets $ 879,649 $ 853,557 $ 827,961 $ 794,804 $ 726,190
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes $14 million lawsuit settlement in fourth quarter and fiscal year
1996, reducing after-tax net income by $8.4 million, or $ .21 per share.
(2) Includes cumulative effect of accounting change, increasing net income by
$3 million, or $ .08 per share.
(3) Per share data restated for two-for-one stock split as of January
10, 1997.
LONGS DRUG STORES 20
<PAGE>
BOARD OF DIRECTORS AND OFFICERS OF LONGS DRUG STORES
BOARD OF DIRECTORS
Robert M. Long
Chairman of the Board and Chief Executive Officer
Richard M. Brooks*
Financial Consultant
William G. Combs
Vice President, Administration (retired)
David G. DeSchane
Vice President/District Manager (retired)
Edward E. Johnston*
Insurance Consultant
Mary S. Metz, Ph.D.*
Dean
U.C. Berkeley Extension
Ronald A. Plomgren
Senior Vice President, Development
and Chief Financial Officer
Stephen D. Roath
President
Gerald H. Saito
Senior Vice President/District Manager
Harold R. Somerset*
Business Consultant
Donald L. Sorby, Ph.D.*
Pharmaceutical Consultant
Thomas R. Sweeney
Vice President/District Manager (retired)
Frederick E. Trotter*
President,
F.E. Trotter Inc.
SENIOR OFFICERS OF LONGS DRUG STORES CALIFORNIA, INC.
Robert M. Long**
Chairman of the Board and Chief Executive Officer
Stephen D. Roath**
President
Bill M. Brandon
Senior Vice President/Regional Manager
George A. Duey
Senior Vice President/Regional Manager
David J. Fong
Senior Vice President, Pharmacy
Orlo D. Jones**
Senior Vice President, Properties and Secretary
Ronald A. Plomgren**
Senior Vice President, Development
and Chief Financial Officer
Gerald H. Saito
Senior Vice President/District Manager
Dan R. Wilson
Senior Vice President, Marketing
OFFICERS OF LONGS DRUG STORES CALIFORNIA, INC.
Leslie C. Anderson
Vice President, Personnel
Al A. Arrigoni
Vice President, Construction and Assistant Secretary
Martin A. Bennett
Vice President/District Manager
Terry D. Burnside
Vice President, Merchandise
John G. Daleth, Jr.
Vice President/District Manager
Donald D. England
Vice President/District Manager
James L. Famini
Vice President/District Manager
Stephen W. Fryslie
Vice President/District Manager
J. Richard Johnston
Vice President/District Manager
Brian E. Kilcourse
Vice President and Chief Information Officer
Ronald E. Lovelady
Vice President/District Manager
Sal Petrucelli
Vice President/District Manager
Michael K. Raphel
Vice President, Real Estate
and Assistant Secretary
Clay E. Selland**
Treasurer and Assistant Secretary
Kyle J. Westover
Vice President, Training
Grover L. White**
Vice President, Controller and Assistant Secretary
Robert W. Wilson
Vice President/District Manager
TRANSFER AGENT & REGISTRAR
ChaseMellon Shareholder Services
San Francisco, CA
INDEPENDENT AUDITORS
Deloitte & Touche LLP
San Francisco, CA
GENERAL COUNSEL
Bell, Rosenberg & Hughes LLP
Oakland, CA
INQUIRIES
Communications concerning stock transfer requirements, lost certificates and
changes of address should be directed to the Transfer Agent. Other
stockholder or investor inquiries should be directed to:
Investor Relations
Longs Drug Stores Corporation
P.O. Box 5222
Walnut Creek, CA 94596
(510) 937-1170
FORM 10-K
The Company's Form 10-K as filed with the Securities and Exchange Commission
is available without charge by writing to the Corporate Treasurer. Company
financial information is also available on the World Wide Web at
HTTP://WWW.SHAREHOLDER.COM/LONGS and through our toll-free telephone service,
1-888-LDG-NEWS.
ANNUAL MEETING
The Company's annual meeting of stockholders will be held at 11:00 a.m., on
May 20, 1997, at the Regional Center for the Arts, 1601 Civic Drive, Walnut
Creek, CA. All stockholders are cordially invited to attend.
FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements regarding the
Company's expected performance for future periods including same store sales
and new store openings. Actual results for such periods may materially
differ. Such forward-looking statements involve risks and uncertainties,
including risks of changing market conditions in the overall economy and the
retail industry, consumer demand, the opening of new stores, actual
advertising expenditures by the Company, the success of the Company's
advertising and merchandising strategy and other factors detailed from time
to time in the Company's annual and other reports filed with the Securities
and Exchange Commission.
Credits:
Design-Vargas Marketing Group
* Member of Audit Committee
** Also an officer of Longs Drug Stores Corporation
<PAGE>
LONGS DRUGS
141 North Civic Drive
P.O. Box 5222
Walnut Creek, CA 94596
(510) 937-1170