<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________
Commission file number 0-16998
-------
A. Full title of the plan:
DRUG EMPORIUM, INC.
EMPLOYEES 401(K) PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Drug Emporium, Inc.
155 Hidden Ravines Drive
Powell, OH 43065
<PAGE> 2
REQUIRED INFORMATION
In lieu of the requirements of Items 1-3 of Form 11-K, the Drug
Emporium, Inc. Employees 401(k) Plan which is subject to the requirements of
the Employee Retirement Income Security Act of 1974, ("ERISA"), is filing
herewith the plan financial statements and schedules in accordance with the
financial reporting requirements of ERISA.
a) Financial Statements
Independent Auditors' Report
Statement of Net Assets Available
for Plan Benefits
Statement of Changes in Net Assets
Available for Plan Benefits
Notes to Financial Statements
Schedules:
Assets Held for Investment
Transactions or Series of Transactions
in Excess of 5% of the Current Value
of Plan Assets
b) Exhibits
(24.1) Independent Auditors' Consent
Ernst & Young
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
DRUG EMPORIUM, INC. EMPLOYEES 401(K) PLAN
Date: June 30, 1995 /s/ Jane H. Lagusch
------------- -------------------------------
Jane H. Lagusch, Vice President
<PAGE> 3
Audited Financial Statements
and Schedules
Drug Emporium, Inc.
Employees 401(k) Plan
Years ended December 31, 1994 and 1993
with Report of Independent Auditors
<PAGE> 4
Drug Emporium, Inc. Employees 401(k) Plan
Audited Financial Statements
and Schedules
Years ended December 31, 1994 and 1993
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Audited Financial Statements
Statements of Net Assets Available for Plan Benefits . . . . . . . . . . . . . . . 2
Statements of Changes in Net Assets Available for Plan Benefits . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Schedules
Assets Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Transactions or Series of Transactions in Excess of 5%
of the Current Value of Plan Assets . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE> 5
Report of Independent Auditors
Participants of the
Drug Emporium, Inc.
Employees 401(k) Plan
We have audited the accompanying statements of net assets available for plan
benefits of the Drug Emporium, Inc. Employees 401(k) Plan (the Plan) as of
December 31, 1994 and 1993, and the related statements of changes in net assets
available for plan benefits for the years then ended. These financial
statements are the responsibility of the Plan'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, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan
at December 31, 1994 and 1993, and the changes in its net assets available for
plan benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedules
of Assets Held for Investment as of December 31, 1994 and Transactions or
Series of Transactions in Excess of 5% of the Current Value of Plan Assets for
the year then ended, are presented for purposes of complying with the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974 and are not a required part
of the financial statements. The supplemental schedules have been subjected to
the auditing procedures applied in our audit of the 1994 financial statements
and, in our opinion, are fairly stated in all material respects in relation to
the 1994 financial statements taken as a whole.
June 16, 1995
Columbus, Ohio
<PAGE> 6
Drug Emporium, Inc. Employees 401(k) Plan
Statements of Net Assets Available for Plan Benefits
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED FUNDS
YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------------------
CASH RETIREMENT INCOME AND
MANAGEMENT PRESERVATION GROWTH
TOTAL FUND TRUST FUND
---------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments - at fair value
(Notes 1, 2 and 3) $1,966,427 $45,740 $249,376 $425,847
Receivables:
Contributions from participants 38,211 5,112 6,191 12,139
Accrued investment income 91 13 78 -
Participants loans receivable 30,027 - - -
---------------------------------------------------------------
Total assets 2,034,756 50,865 255,645 437,986
LIABILITIES
Benefit claims payable - - - -
Contributions due employees - - - -
---------------------------------------------------------------
Total liabilities - - - -
---------------------------------------------------------------
Net assets available for plan
benefits $2,034,756 $50,865 $255,645 $437,986
===============================================================
</TABLE>
2
<PAGE> 7
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED FUNDS
YEAR ENDED DECEMBER 31, 1994
------------------------------------------------ NON-
PARTICIPANT
DRUG DIRECTED
EMPORIUM, FUNDS
GROWTH INC. YEAR ENDED
OPPORTUNITIES COMMON LOAN DECEMBER 31,
FUND STOCK FUND 1993
------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments - at fair value
(Notes 1, 2 and 3) $501,204 $744,260 $ - $918,528
Receivables:
Contributions from participants 14,769 - - 15,128
Accrued investment income - - - 24
Participants loans receivable - - 30,027 -
--------------------------------------------------------------
Total assets 515,973 744,260 30,027 933,680
LIABILITIES
Benefit claims payable - - - 20,982
Contributions due employees - - - 1,645
--------------------------------------------------------------
Total liabilities - - - 22,627
--------------------------------------------------------------
Net assets available for plan
benefits $515,973 $744,260 $30,027 $911,053
==============================================================
</TABLE>
See accompanying notes.
3
<PAGE> 8
Drug Emporium, Inc. Employees 401(k) Plan
Statements of Changes in Net Assets Available for Plan Benefits
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED FUNDS
YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------------------
CASH RETIREMENT INCOME AND
MANAGEMENT PRESERVATION GROWTH
TOTAL FUND TRUST FUND
---------------------------------------------------------------
<S> <C> <C> <C> <C>
ADDITIONS
Employee contributions $1,179,435 $135,913 $185,276 $388,272
Interest and dividends 45,971 2,397 9,653 6,298
Net realized and unrealized
appreciation (depreciation) in fair
value of investments 55,515 - - (20,854)
---------------------------------------------------------------
1,280,921 138,310 194,929 373,716
DEDUCTIONS
Benefit payments 157,218 109,665 6,124 15,736
---------------------------------------------------------------
157,218 109,665 6,124 15,736
---------------------------------------------------------------
Transfers from (to) other funds - 22,220 66,840 80,006
Net assets available for plan
benefits at beginning of year 911,053 - - -
---------------------------------------------------------------
Net assets available for plan
benefits at end of year $2,034,756 $ 50,865 $255,645 $437,986
===============================================================
</TABLE>
4
<PAGE> 9
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED FUNDS
YEAR ENDED DECEMBER 31, 1994
------------------------------------------------
NON-
PARTICIPANT
DRUG DIRECTED
EMPORIUM, FUNDS
GROWTH INC. YEAR ENDED
OPPORTUNITIES COMMON LOAN DECEMBER 31,
FUND STOCK FUND 1993
------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADDITIONS
Employee contributions $469,974 $ - $ - $ 397,255
Interest and dividends 27,623 - - 771
Net realized and unrealized
appreciation (depreciation) in fair
value of investments (29,862) 106,231 - (124,082)
-----------------------------------------------------------------
467,735 106,231 - 273,944
DEDUCTIONS
Benefit payments 23,670 - 2,023 202,394
-----------------------------------------------------------------
23,670 - 2,023 202,394
-----------------------------------------------------------------
Transfers from (to) other funds 71,908 (273,024) 32,050 -
Net assets available for plan
benefits at beginning of year - 911,053 - 839,503
-----------------------------------------------------------------
Net assets available for plan
benefits at end of year $515,973 $ 744,260 $ 30,027 $ 911,05
=================================================================
</TABLE>
See accompanying notes.
5
<PAGE> 10
Drug Emporium, Inc. Employees 401(k) Plan
Notes to Financial Statements
December 31, 1994
1. DESCRIPTION OF THE PLAN
The following description of the Drug Emporium, Inc. Employees 401(k) Plan
(Plan) provides only general information. Participants should refer to the
Plan agreement for a more complete description of the Plan's provisions
GENERAL
The Plan is a defined contribution plan covering all employees of the Company
who have at least one year of service, are age twenty-one or older and have
worked 1,000 hours or more. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
CONTRIBUTIONS
Participants may contribute up to 15% of annual compensation limited to the
maximum permitted by the Internal Revenue Code. The Company may make
discretionary contributions, as approved by the Company's Board of Directors.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions,
allocations of the Company's discretionary contributions and Plan earnings.
Forfeited balances of terminated participants' nonvested accounts are used to
reduce future company contributions.
VESTING
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Company contribution portion of their accounts plus
actual earnings thereon is based on years of vesting service. A participant is
100 percent vested after seven years of vesting service.
6
<PAGE> 11
Drug Emporium, Inc. Employees 401(k) Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
INVESTMENT OPTIONS
Beginning in 1994, upon enrollment in the Plan, a participant may direct
contributions in 10% increments in any of four investment options.
- - Retirement Preservation Trust - Funds are invested in units of a registered
investment company that invests in Guaranteed Investment Contracts, U.S.
Government and U.S. Government agency securities.
- - Income and Growth Fund - Funds are invested in shares of a registered
investment company that invests in U.S. Government bonds, corporate bonds
and a diversified selection of common stocks.
- - Growth Opportunities Fund - Funds are invested in shares of a registered
investment company that invests in growth, cyclical and value stocks, and
securities convertible to common stocks.
- - Drug Emporium, Inc. Common Stock - Funds are invested in shares of Drug
Emporium, Inc. Common Stock through an investment company.
Participants may change their investment options quarterly.
PARTICIPANT LOANS RECEIVABLE
The plan was amended in 1994 to allow for participant loans. Participants may
borrow from their accounts a minimum of $1,000 up to a maximum of $50,000 or
50% of their account balance. Loan transactions are treated as transfers
between the investment funds and the loan fund. Principal and interest is paid
ratably, through bi-weekly (payroll) deductions.
7
<PAGE> 12
Drug Emporium, Inc. Employees 401(k) Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
DISTRIBUTION OF BENEFITS
Participants, or their beneficiaries, are entitled to receive 100% of their
vested portion of Company contributions and related earnings thereon upon
termination, normal retirement (age 65), early retirement (age 59 1/2), death,
or total and permanent disability.
PLAN TERMINATION
The Company has the right to discontinue and terminate the Plan. In the event
of a termination or partial termination of the Plan, the right of each
participant to benefits accrued to the date of such termination or partial
termination shall be nonforfeitable.
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF ACCOUNTING AND PRESENTATION
The financial statements of the Plan have been prepared in conformity with
generally accepted accounting principles as applied to defined contribution
employee benefit plans.
The accounting records of the Plan are maintained on an accrual basis. The
Plan includes participants who are employees of Drug Emporium, Inc. and its
subsidiaries (the Company).
ADMINISTRATIVE EXPENSES
Administrative expenses of the Plan are paid by the Company.
8
<PAGE> 13
Drug Emporium, Inc. Employees 401(k) Plan
Notes to Financial Statements (continued)
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value. The shares of registered
investment companies are valued at quoted market prices which represent the net
asset values of shares held by the Plan at year-end. The participant loans
receivable are valued at cost which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
3. INVESTMENTS
The Plan's investments are held and administered by Merrill Lynch Trust Company.
The fair value of individual investments that represent 5% or more of the Plan's
net assets is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
-------------------------
<S> <C> <C>
Merrill Lynch Retirement Preservation Trust $249,376 $ -
Fidelity Advisor Income and Growth Fund 425,847 -
Fidelity Advisor Growth Opportunities Fund 501,240 -
Drug Emporium, Inc. Common Stock 744,260 903,246
</TABLE>
During the years ended December 31, 1994 and 1993, the Plan's investments
(including investments bought and sold, as well as held during the year)
appreciated (depreciated) in fair value as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
--------------------------
<S> <C> <C>
Fidelity Advisor Income and Growth Fund $(20,854) $ -
Fidelity Advisor Growth Opportunities Fund (29,862) -
Drug Emporium, Inc. Common Stock 106,231 (124,082)
--------------------------
Net change in fair value $ 55,515 $(124,082)
==========================
</TABLE>
9
<PAGE> 14
Drug Emporium, Inc. Employees 401(k) Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
At December 31, 1994, the market value of Drug Emporium, Inc. Common Stock was
approximately $5.50 per share.
4. INCOME TAX STATUS
The Internal Revenue Service ruled on January 18, 1995 that the Plan qualifies
under Section 401(a) of the Internal Revenue Code (IRC) and, therefore, the
related trust is not subject to tax under present income tax law.
5. TRANSACTIONS WITH PARTIES-IN-INTEREST
At December 31, 1994 and 1993, the Plan owned 135,320 and 190,157 shares of the
Company's common stock, respectively. The Plan purchased 39,867 and 64,508
shares in 1994 and 1993 for $217,481 and $337,674, respectively. The Plan sold
94,660 and 31,895 shares in 1994 and 1993 for $578,447 and $194,833,
respectively. The market value of the Company's common stock at December 31,
1994 and 1993 was based on quoted market values. There were no cash dividends
received during the years ended December 31, 1994 and 1993 from the Company.
6. NUMBER OF PARTICIPANTS (UNAUDITED)
The number of participants contributing to each of the Plan investment options
as of December 31, 1994 are as follows:
<TABLE>
<S> <C>
Retirement Preservation Trust 359
Income and Growth Fund 483
Growth Opportunities Fund 489
Drug Emporium, Inc. Common Stock 395
</TABLE>
10
<PAGE> 15
SUPPLEMENTAL SCHEDULES
<PAGE> 16
Drug Emporium, Inc. Employee 401(k) Plan
Assets Held for Investment
December 31, 1994
<TABLE>
<CAPTION>
IDENTITY OF ISSUE, BORROWER, DESCRIPTION OF CURRENT
LESSOR OR SIMILAR PARTY INVESTMENT COST VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CMA Money Fund 45,740 shares $ 45,740 $ 45,740
Merrill Lynch Retirement Preservation Fund
249,376 shares 249,376 249,376
Fidelity Advisor Income and Growth Fund
29,655 shares 445,392 425,847
Fidelity Advisor Growth Opportunities Fund
20,542 shares 529,537 501,204
Drug Emporium, Inc. Common Stock 135,320 shares 809,486 744,260
---------------------------
$2,079,531 $1,966,427
===========================
</TABLE>
11
<PAGE> 17
Drug Emporium, Inc. Employees 401(k) Plan
Transactions or Series of Transactions in Excess of 5%
of the Current Value of Plan Assets
Year ended December 31, 1994
<TABLE>
<CAPTION>
IDENTITY OF PARTY DESCRIPTION PURCHASE SELLING
INVOLVED OF ASSET PRICE PRICE
- -------------------------------------------------------------------------------------
Category (i) - Individual transactions in a securities issue aggregating in
excess of 5% of plan assets.
<S> <C> <C> <C>
Merrill Lynch CMA Money Fund, 221,266 shares $221,266 $ -
Merrill Lynch CMA Money Fund, 238,485 shares - 238,485
Merrill Lynch CMA Money Fund, 115,946 shares - 115,946
Merrill Lynch CMA Money Fund, 129,180 shares - 129,180
COMMON STOCK
Drug Emporium, Inc. 44,363 shares of Common Stock - 221,859
</TABLE>
Category (iii) - Series of transactions in a securities issue aggregating in
excess of 5% of plan assets.
<TABLE>
<S> <C> <C> <C>
Drug Emporium, Inc. 53 sales, 94,660 shares - 482,389
18 purchases, 39,867 shares 217,481 -
Fidelity Advisor Growth 17 sales, 2,930 shares - 74,448
Opportunities Fund 24 purchases 23,471 shares 605,453 -
</TABLE>
12
<PAGE> 18
<TABLE>
<CAPTION>
CURRENT
VALUE
OF ASSET ON NET
COST OF TRANSACTION GAIN
ASSET DATE (LOSS)
- --------------------------------------------
<S> <C> <C>
$221,266 $221,266 $ -
238,485 238,485 -
115,946 115,946 -
129,180 129,180 -
273,117 273,117 (51,258)
578,447 578,447 (96,058)
217,481 217,481 -
75,915 75,915 (1,467)
605,453 605,453 -
</TABLE>
13
<PAGE> 19
Transactions or Series of Transactions in Excess of 5%
of the Current Value of Plan Assets (continued)
<TABLE>
<CAPTION>
IDENTITY OF PARTY DESCRIPTION PURCHASE SELLING
INVOLVED OF ASSET PRICE PRICE
- ---------------------------------------------------------------------------------------
Category (iii) - Series of transactions in a securities issue aggregating in
excess of 5% of plan assets (continued)
<S> <C> <C> <C>
Fidelity Advisor Income 15 sales, 3,213 shares - 47,752
& Growth Fund 26 purchases, 32,868 shares 494,515 -
ML RP Trust 11 sales, 13,823 shares - 13,823
243 purchases, 263,199 shares 263,199 -
CMA Money Fund 58 sales, 1,268,957 shares - 1,268,957
76 purchases, 1,308,168 shares 1,308,168 -
</TABLE>
There were no Category (ii) or (iv) transactions or series of transactions in
excess of 5% of plan assets which occurred during 1994.
14
<PAGE> 20
<TABLE>
<CAPTION>
CURRENT
VALUE
OF ASSET ON NET
COST OF TRANSACTION GAIN
ASSET DATE (LOSS)
- ------------------------------------------
<S> <C> <C>
49,123 49,123 (1,371)
494,515 494,515 -
13,823 13,823 -
263,199 263,199 -
1,268,957 1,268,957 -
1,308,168 1,308,168 -
</TABLE>
15
<PAGE> 21
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-25768) pertaining to the Drug Emporium, Inc.
Employees 401(k) Plan of our report dated June 16, 1995, with respect to the
financial statements and schedules of Drug Emporium, Inc. Employees 401(k) Plan
included in this Annual Report (Form 11-K) for the year ended December 31,
1994.
ERNST & YOUNG LLP
Columbus, Ohio
June 27, 1995
