<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 24, 1996
COMMISSION FILE NUMBER 1-5025
REVCO D.S., INC.
----------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 34-1527876
-------- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1925 ENTERPRISE PARKWAY, TWINSBURG, OHIO 44087
- ---------------------------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(216) 425-9811
--------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTIONS 12, 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT. YES X NO
--- ---
AS OF OCTOBER 4, 1996, THERE WERE 68,669,342 SHARES OF COMMON STOCK
OUTSTANDING.
<PAGE> 2
REVCO D.S., INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
August 24, 1996 and June 1, 1996 3
Condensed Consolidated Statements of Income -
Twelve Weeks Ended August 24, 1996
and August 26, 1995 4
Condensed Consolidated Statements of Cash Flows -
Twelve Weeks Ended August 24, 1996
and August 26, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures
</TABLE>
2
<PAGE> 3
REVCO D.S., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
(UNAUDITED)
AUGUST 24, JUNE 1,
ASSETS 1996 1996
------ ---------- -------
<S> <C> <C>
Current assets:
Cash, including temporary cash investments $ 5.5 $ 8.4
Accounts receivable, net 145.8 120.6
Inventories 972.7 968.4
Prepaid expenses 24.7 19.4
-------- --------
Total current assets 1,148.7 1,116.8
Property, equipment and leasehold improvements, net 312.6 320.1
Leasehold interests, net 48.1 51.3
Goodwill, net 365.0 367.2
Reorganization value in excess of amounts
allocable to identifiable assets, net 195.7 205.0
Net deferred tax asset 13.6 13.6
Other assets 67.5 59.5
-------- --------
$2,151.2 $2,133.5
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Bank debit balances $ 19.2 $ 52.5
Accounts payable 375.1 335.7
Accrued liabilities 303.2 315.3
-------- --------
Total current liabilities 697.5 703.5
Long-term debt 533.1 514.9
Long-term liabilities 46.4 46.5
Stockholders' equity:
Common stock .7 .7
Additional paid-in capital 695.7 693.3
Retained earnings 201.8 187.4
Treasury stock (24.0) (12.8)
-------- --------
Total stockholders' equity 874.2 868.6
-------- --------
$2,151.2 $2,133.5
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
REVCO D.S., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
------------------------------
AUGUST 24, AUGUST 26,
1996 1995
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<S> <C> <C>
Net sales $1,179.6 $1,076.7
Cost of sales 836.6 755.9
Operating expenses 279.5 264.2
Depreciation and amortization 25.6 25.6
-------- --------
Operating profit 37.9 31.0
Interest expense 11.3 15.1
Interest income (.1) (.3)
-------- --------
Income before income taxes 26.7 16.2
Income tax provision 12.3 7.8
-------- --------
Net income $ 14.4 $ 8.4
======== ========
Net income per share $ .21 $ .13
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
REVCO D.S., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
-----------------------------------
AUGUST 24, AUGUST 26,
1996 1995
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<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14.4 $ 8.4
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 25.6 25.6
Deferred income taxes -- 2.7
Net operating loss carryforwards utilized 5.2 2.1
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable, net (25.2) (22.6)
(Increase) decrease in inventories (4.3) (52.8)
(Increase) decrease in prepaid expenses (5.3) 7.2
(Increase) decrease in other assets 4.6 (1.3)
Increase (decrease) in accounts payable 37.3 9.7
Increase (decrease) in accrued liabilities (8.3) (2.9)
------- ------
Net cash flows provided (used) by operating activities 44.0 (23.9)
------- ------
NET CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, equipment and leasehold improvements (14.6) (31.0)
Purchase of Big B common stock (9.5) --
------- ------
Net cash flows used by investing activities (24.1) (31.0)
------- ------
NET CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in bank debit balances (33.3) (32.2)
Proceeds from issuance of long-term debt 18.2 82.1
Purchase of treasury stock (11.2) --
Proceeds from common stock issued under employee benefit plans 3.5 4.9
------- ------
Net cash flows provided (used) by financing activities (22.8) 54.8
------- ------
Net decrease in cash and temporary cash investments (2.9) (.1)
Cash and temporary cash investments at beginning of period 8.4 3.4
------- ------
Cash and temporary cash investments at end of period $ 5.5 $ 3.3
======= ======
SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS FOR:
Interest $ 17.1 $ 13.2
Income taxes 1.2 2.3
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
REVCO D.S., INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The accompanying condensed consolidated financial statements have been prepared
without audit, in accordance with the rules of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in accordance with such rules and
regulations, although the Company believes that the disclosures herein are
adequate to make the information not misleading. These statements should be
read in conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal
year ended June 1, 1996.
In the opinion of management, the accompanying condensed consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) which are necessary for a fair statement of results for the
interim periods presented. The results of operations for the twelve week period
ended August 24, 1996 are not necessarily indicative of the results to be
expected for the full year.
(1) COMPANY
Revco D.S., Inc. ("Revco" or the "Company") operates 2,202 retail
drugstores in fourteen contiguous Midwestern, Southeastern and Eastern
states. The Company's stores are health-oriented neighborhood
pharmacies offering pharmaceuticals and related merchandise.
(2) INVENTORIES
Inventories are stated at the lower of cost or market. The cost of
substantially all inventories is determined on a last-in, first-out
("LIFO") basis.
If the first-in, first-out ("FIFO") method of inventory valuation had
been used, inventories would have been approximately $62.0 million and
$55.8 million higher than reported at August 24, 1996 and June 1,
1996, respectively. Since the LIFO valuation can only be determined at
the end of each fiscal year when inflation rates and inventory levels
are finalized, estimates of LIFO inventory costs are required for
interim financial statements.
(3) RECLASSIFICATION
Certain balances have been reclassified to conform to the presentation
at August 24, 1996.
(4) EARNINGS PER SHARE
Earnings per share were computed using the weighted average number of
shares of common stock outstanding of 67,589,012 and 66,370,868 for
the twelve weeks ended August 24, 1996 and August 26, 1995,
respectively.
6
<PAGE> 7
(5) BIG B TENDER OFFER
On September 9, 1996, Revco announced that it had commenced a tender
offer (the "Tender") for all of the outstanding shares of Big B, Inc.
("Big B") at a price of $15 per share, giving the transaction a total
equity value of approximately $330.0 million. The Company intends to
consummate a merger in which all remaining Big B shareholders, after
consummation of the Tender, will receive the same cash price paid in
the Tender. Big B is a drugstore chain based in Bessemer, Alabama
operating 397 stores in the states of Alabama, Georgia, Tennessee,
Mississippi and Florida.
Prior to the Tender and through August 24, 1996, the end of the
Company's first quarter, the Company had purchased in the open market,
as part of the Company's efforts to acquire all of Big B's outstanding
shares of common stock, 850,000 shares of Big B common stock at a total
cost of $9.5 million. From the end of the first quarter through the
Tender date, the Company purchased an additional 340,000 shares of Big
B common stock increasing its investment to its present level of
1,190,000 shares at a total cost of $13.4 million. This investment
represents approximately 6.4% ownership of the total shares of Big B
common stock outstanding, and 5.6% ownership on a fully diluted basis.
On September 23, 1996, Big B (i) announced that its Board of Directors
adopted a "poison pill" shareholders rights plan (the "Rights Plan"),
(ii) filed a Tender Offer Solicitation / Recommendation Statement on
Schedule 14D-9 rejecting the Tender and recommending that the Big B
shareholders not tender their shares pursuant to the Tender, and (iii)
announced that it was actively exploring alternatives to maximizing
shareholder value. See Part II, Item 5 of this report for a discussion
of the status of certain proceedings relating to the Rights Plan.
On September 26, 1996, the Company announced that the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations thereunder, with respect to the Tender
expired at 11:59 p.m., New York City time, on September 25, 1996, and
no request for additional information was issued.
On October 4, 1996, the Company announced that it had entered into a
confidentiality agreement (the "Confidentiality Agreement") with Big B
and, in connection therewith, Big B and the Company agreed to seek
from the relevant courts a stay of the proceedings in the action
entitled BIG B INC. V. REVCO D.S., INC. AND RDS ACQUISITION INC.
(discussed further under Part II, Item 5 of this report) in the
Circuit Court of Jefferson County, Alabama, Bessemer Division as
removed to the United States District Court for the Northern District
Court of Alabama, Southern Division, and to take no action to seek a
lifting of such stay until the Termination Date, as defined in the
Confidentiality Agreement.
The Company remains committed to pursuing a combination of Revco and
Big B, and is currently investigating additional actions in order to
achieve that objective.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion explains material changes in the Company's results of
operations, comparing the twelve week periods ended August 24, 1996 and August
26, 1995 and significant developments affecting financial conditions since the
end of fiscal year 1996. The following discussion should be read in conjunction
with the historical financial statements of the Company.
RESULTS OF OPERATIONS
Comparison of the 12 Weeks ended August 24, 1996 ("first quarter of 1997") and
August 26, 1995 ("first quarter of 1996"):
Net sales increased 9.6% to $1,179.6 million for the first quarter of 1997,
from $1,076.7 million for the first quarter of 1996. On a comparable store
basis, net sales increased 7.9% for the quarter.
Prescription sales, which comprised 59.7% of net sales for the first quarter of
1997, increased $81.3 million, or 13.0%. The increase in prescription sales is
attributable to increases in managed care sales. These sales continue to
outpace the overall growth rate in prescription business. Managed care sales
increased 21.2% and represented 73.2% of total prescription sales for the
quarter, compared to 68.2% in the year ago period.
Over-the-counter ("OTC") sales increased $21.6 million, or 4.8%, to $475.1
million for the first quarter of 1997. The majority of this increase, $11.2
million, is attributable to a 3.7% increase in the number of store locations
from the first quarter of 1996 to the first quarter of 1997.
Cost of sales increased 10.7% to $836.6 million in the first quarter of 1997
from $755.9 million in the first quarter of 1996. Gross margin increased 6.9%
but, as a percentage of sales, decreased to 29.1% versus 29.8% for the first
quarter of 1997 and 1996, respectively. Margin rates associated with
prescription sales declined due to the increase in managed care sales as a
percentage of total prescription sales and the continued pressure on margin
rates within the managed care business. Managed care sales have positively
impacted the Company's net sales and gross margin dollar growth, but yield
lower profit percentages than non-managed care sales. The LIFO charge increased
$2.1 million from $4.1 million in the first quarter of 1996 to $6.2 million in
the first quarter of 1997, increasing as a percentage of sales from .4% to .5%.
The decline in the prescription margin rate and higher LIFO charge was
partially offset by a moderate increase in the OTC gross margin rate due to
continued favorable purchasing terms.
Operating expenses increased $15.3 million, or 5.8%, but decreased as a
percentage of sales to 23.7% in the first quarter of 1997 from 24.5% in the
first quarter of 1996. The dollar increase in operating expenses is
attributable to a 3.7% growth in the number of store locations. The improvement
in operating expenses as a percentage of sales is primarily attributable to
continued focus on comparable store expenses. Management has been effective in
controlling costs at a slower growth rate than the growth in sales and margin.
Also contributing to the improvement in the operating expense percentage is the
leveraging of relatively fixed, non-store expenses over a broader store base.
Interest expense, net of interest income, was $11.2 million in the first
quarter of 1997 compared with $14.8 million in the first quarter of 1996. The
decrease in interest expense was attributable to lower average debt balances
outstanding in the first quarter of 1997 compared to the first quarter of 1996.
The Company's effective income tax rate of 46.1% for the first quarter of 1997
differs from the federal income tax statutory rate of 35.0% principally because
of state and local income taxes (5.0%) and permanent differences arising from:
(i) amortization of reorganization value in excess of amounts allocable to
identifiable assets totaling $4.1 million; and (ii) amortization of goodwill
totaling $2.2 million for the quarter.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
The following discussion regarding liquidity and capital resources should be
read in conjunction with the Company's Condensed Consolidated Balance Sheets as
of August 24, 1996 and June 1, 1996 and the Condensed Consolidated Statement of
Cash Flows for the twelve weeks ended August 24, 1996.
Cash, including temporary cash investments, decreased $2.9 million to $5.5
million. Cash generated by operations, before working capital items, totaled
$45.2 million, an improvement of $6.4 million from the $38.8 million generated
during the first quarter of 1996. Net changes in working capital items (and
other operating assets and liabilities) resulted in a $1.2 million use of cash,
compared to a $62.7 million use of cash in the first quarter of 1996.
Cash generated by operations includes $5.2 million of an estimated $36.0
million in tax benefits from the realization of approximately $100.0 million of
net operating loss carryforwards ("NOLs") expected to be utilized on the
Company's 1997 federal income tax return. These NOLs are attributable to the
time period prior to the Company's emergence from Chapter 11 in fiscal 1992.
Accordingly, benefits realized from these pre-Chapter 11 emergence NOLs are
recognized as a reduction in "reorganization value in excess of amounts
allocable to identifiable assets" as realized.
Net cash used for investing activities totaled $24.1 million, consisting of
$14.6 million in capital expenditures and a $9.5 million investment in Big B
common stock as part of the Company's efforts to acquire all of Big B's
outstanding shares of common stock, and as further described in Note 5 and Item
5 of Part II of this report. The majority of the capital expenditures
represented the Company's investment in new stores and the upgrade through
relocation or expansion of its existing drugstore base. During the first
quarter of 1997, the Company opened 43 new stores, of which 20 were relocations
and 5 were acquired stores, and closed 5 stores. During the first quarter of
1997, Revco completed the remodeling of 11 acquired Hook-SupeRx, Inc. ("HSI")
stores, bringing the total number of former HSI stores remodeled to 315 stores.
Net cash used by financing activities was $22.8 million, representing a $15.1
million net decrease in bank debit balances and borrowings outstanding under
the Company's $650.0 million amortizing revolving credit facility (the
"Revolving Credit Facility") and $11.2 million in treasury stock repurchases.
In May 1996, the Company's Board of Directors authorized the repurchase by the
Company of up to three million of the Company's outstanding shares of common
stock. In July 1996, the Company repurchased 502,000 shares at an aggregate
purchase price of $11.2 million.
During the remainder of fiscal 1997, the Company intends to open approximately
42 additional new stores and relocate an additional 40 existing stores. The
Company has no material commitments in connection with these planned capital
expenditures. Funds for these expenditures are expected to be provided from the
Revolving Credit Facility and cash generated internally.
The Company has three principal sources of liquidity: (i) cash and cash
equivalents; (ii) the Revolving Credit Facility; and (iii) cash generated from
operations. Management of the Company believes that the Company's cash on hand
and cash from operations, together with borrowings and letters of credit under
the Revolving Credit Facility, will be sufficient to cover its working capital,
capital expenditure and debt service requirements until the maturity date of
the Revolving Credit Facility.
The Revolving Credit Facility includes minimum interest and lease expense
coverage ratio, maximum total indebtedness to adjusted earnings before
interest, income taxes, depreciation and amortization (EBITDA) ratio, as well
as customary other covenants, representations and warranties, funding
conditions and events of default. The Company does not believe that the
restrictions contained in these financial and operating covenants will cause
significant limitations on the Company's financial flexibility. The Company has
commenced discussion with the agent banks of the Revolving Credit Facility to
potentially increase its borrowing capacity under the Revolving Credit Facility
and to amend the Revolving Credit Facility to make certain technical amendments
desirable in connection with the tender offer for the outstanding shares of Big
B.
9
<PAGE> 10
In addition to cash borrowings outstanding, the Company had approximately $27.1
million in outstanding letters of credit issued under the Revolving Credit
Facility at August 24, 1996, to support insurance programs and other general
corporate needs.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In addition to being involved from time to time in the assertion of
claims and in litigation incidental to the normal course of business,
the Company's wholly-owned subsidiary, HSI, is a defendant in a
lawsuit in connection with various claims of injuries resulting from
the consumption of L-Tryptophan which was claimed to have been sold by
HSI. The insurance company for the vendor who sold the product to HSI
has assumed the legal defense of the outstanding lawsuit, which is
further described on Exhibit 99.1.
The Company is also a defendant (i) in a lawsuit filed in the United
States District Court for the Western District of Oklahoma (Case
Number CIV-95-1321-T) by seven plaintiffs, acting individually and as
representatives of five deceased infants, and (ii) in a lawsuit filed
in the District Court of Oklahoma County, State of Oklahoma (Case
Number CJ-95-5737-62) by three plaintiffs, acting individually and as
representatives of a deceased infant, alleging personal injury or
death due to a product, E-Ferol, manufactured by Carter-Glogau
Laboratories, Inc., an inactive subsidiary of the Company now known as
Retrac, Inc., prior to December 1986. The plaintiffs are seeking
unspecified actual and exemplary damages. As of the date of this
report, the case was in the early stages of discovery.
Management is of the opinion that although the ultimate resolution of
such litigation cannot be forecast with certainty, final disposition
of this and other litigation should not materially affect the
consolidated financial position of the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 24, 1996, the Company held its 1996 Annual Meeting of
Stockholders for the following purposes: (i) to elect directors and
(ii) to approve modifications to the bonus component of the Company's
executive compensation program. The stockholders voting in person or
by proxy at the Annual Meeting elected all twelve persons (Carl A.
Bellini, Livio M. Borghese, William H. Campbell, Rod F. Dammeyer,
Talton R. Embry, Ben Evans, John V. Guttag, D. Dwayne Hoven, Walter B.
Reinhold, Sheli Z. Rosenberg, Thomas O. Thorsen and Sam Zell)
nominated by the Board of Directors to the Board, and approved the
modifications to the bonus component of the Company's executive
compensation program, as set forth in Exhibit 22, which is hereby
incorporated into this report by reference.
ITEM 5. OTHER INFORMATION
On September 9, 1996, the Company, on behalf of itself and its
wholly-owned subsidiary, RDS Acquisition Inc. (the "Purchaser")
announced that it (i) had commenced a cash tender offer (the "Tender")
for all of the outstanding shares of Big B, Inc. ("Big B"), and (ii)
intends to consummate a merger in which all remaining Big B
shareholders, after consummation of the Tender, will receive the same
cash price paid in the Tender. On September 23, 1996, Big B (i)
announced that its Board of Directors adopted a "poison pill"
shareholders rights plan (the "Rights Plan"), (ii) filed a Tender
Offer Solicitation/Recommendation Statement on Schedule 14D-9
rejecting the Tender and recommending that the Big B shareholders not
tender their shares pursuant to the Tender, and (iii) announced that
it was actively exploring alternatives to maximizing shareholder
value.
On September 23, 1996, Big B filed a complaint in the action entitled
BIG B, INC. V. REVCO D.S., INC. AND RDS ACQUISITION INC. in the
Circuit Court of Jefferson County, Alabama, Bessemer Division
(the "Court") requesting the Court to declare the Rights Plan valid
and lawful and to enjoin temporarily, preliminarily and permanently
the Purchaser and all others acting in concert with it from
11
<PAGE> 12
bringing any action attacking the Rights Plan or adopting the Rights
Plan by Big B. On September 23, 1996, the Purchaser filed a notice of
removal (this "Notice of Removal") removing the matter before the
Court to the federal district court located in the Northern District
of Alabama.
On September 26, 1996, the Company announced that it had elected, as
contemplated by the Offer to Purchase, to require that any person
tendering shares shall also be required to tender all the associated
common stock purchase rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of September 23, 1996, between Big B and
First National Bank of Boston, and amended the Tender to add as a
condition to the Purchaser's obligation to purchase shares pursuant to
the Tender that the Rights shall have been redeemed by the Board of
Directors of Big B or the Purchaser shall be satisfied, in its sole
discretion, that the Rights have been invalidated or are otherwise
inapplicable to the Tender and the proposed merger. The Company also
announced that the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the regulations
thereunder, with respect to the Tender expired at 11:59 p.m., New York
City time, on September 25, 1996, and no request for additional
information was issued.
On September 30, 1996, the Purchaser and the Company filed (i) an
Answer and Counterclaims of the Company and the Purchaser in response
to the action filed by Big B on September 23, 1996 seeking declaratory
and injunctive relief, (ii) a Motion for Preliminary Injunction
seeking to enjoin the operation and enforcement of the Rights
agreement and the continuing breaches of fiduciary duties, and an
order compelling the Company to redeem the Rights associated with the
Rights agreement, (iii) the Company's Memorandum in Support of the
Motion for Preliminary Injunction with supporting affidavits, and (iv)
a Motion for Expedited Hearing.
On October 1, 1996, Big B filed a Motion to Remand the matter before
the United States District Court for the Northern District of Alabama,
Southern Division, to the Circuit Court for Jefferson County, Alabama,
Bessemer Division. On October 2, 1996, the Company and the Purchaser
filed a Response in Opposition to Big B's Motion to Remand. At a
hearing held on October 2, 1996, the Honorable Judge William M. Acker,
Jr., heard arguments with respect to the Motion to Remand and on
October 3, 1996, the Court entered an order denying the Motion to
Remand.
On October 4, 1996, the Company announced that it had entered into a
confidentiality agreement (the "Confidentiality Agreement") with Big B
and, in connection therewith, Big B and the Company agreed to seek
from the relevant courts a stay of the proceedings in the action
entitled BIG B INC. V. REVCO D.S., INC. AND RDS ACQUISITION INC. in
the Circuit Court of Jefferson County, Alabama, Bessemer Division as
removed to the United States District Court for the Northern District
Court of Alabama, Southern Division, and to take no action to seek a
lifting of such stay until the Termination Date, as defined in the
Confidentiality Agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
22 - Certificate and Report of Inspector of Elections
27 - Financial Data Schedule
99.1 - Certain Litigation
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter for which this report is filed. On September 12,
1996, the Company filed, under Item 5, a Form 8-K dated
September 11, 1996 reporting the Company's announcement, on
September 9, 1996, of the commencement of the Tender.
12
<PAGE> 13
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.
REVCO D.S., INC.
(Registrant)
Dated: October 8, 1996 By: /s/ JACK A. STAPH
------------------------
Jack A. Staph
Senior Vice President,
Secretary and General Counsel
Dated: October 8, 1996 By: /s/ BRIAN P. CARNEY
------------------------
Brian P. Carney
Senior Vice President, Finance
(principal financial officer)
13
<PAGE> 1
Exhibit 22
CERTIFICATE AND REPORT OF INSPECTOR OF ELECTIONS
I, the undersigned, duly appointed Inspector of Election of Revco D.
S., Inc., DO HEREBY CERTIFY that:
An Annual Meeting of Stockholders of Revco D. S., Inc. (the "Company")
was held at The Ritz-Carlton located in Cleveland, Ohio on Tuesday, September
24, 1996, at 11:30 a.m., pursuant to due notice.
According to the certified list of stockholders which was presented at
the Meeting, there were 67,861,049 shares of Common Stock of the Company
outstanding and entitled to vote at the Annual Meeting of Stockholders.
There were present at the Meeting in person or by proxy the holders of
58,012,966 votes, said votes constituting a quorum and more than a majority of
the outstanding shares entitled to vote.
The undersigned inspected the signed proxies and ballots used at the
Meeting and found the same to be in proper form. The following is a record of
the votes cast in the Election of Directors of the Company:
<TABLE>
<CAPTION>
Votes For Votes Withheld % Voting For
--------- -------------- ------------
<S> <C> <C> <C>
Carl A. Bellini 57,369,844 643,122 98.89%
Livio M. Borghese 57,836,354 176,612 99.70%
William Campbell 57,838,917 174,049 99.70%
Rodney F. Dammeyer 57,359,084 653,882 98.87%
Talton R. Embry 57,769,661 243,305 99.58%
Ben Evans 57,840,380 172,586 99.70%
John V. Guttag 57,838,683 174,283 99.70%
D. Dwayne Hoven 57,593,166 419,800 99.28%
Walter B. Reinhold 57,616,630 396,336 99.32%
Sheli Z. Rosenberg 57,198,916 814,050 98.60%
Thomas O. Thorsen 57,612,052 400,914 99.31%
Samuel Zell 56,455,409 1,557,557 97.32%
</TABLE>
Accordingly, the individuals named above were declared to be duly
elected Directors of the Company until the next Annual Meeting of Stockholders
or until their earlier resignation or removal.
The following is a record of the votes cast in respect of the proposal
to approve modifications to the Bonus Component of the Revco D. S., Inc.
Executive Compensation Program:
<TABLE>
<CAPTION>
Number of Eligible Actually
Votes Cast to be Cast Cast
---------- ---------- --------
<S> <C> <C> <C>
For 55,619,458 81.96% 95.87%
Against 2,217,029 3.27% 3.82%
Abstain 176,479 0.26% 0.30%
Broker Non-Vote 0 0.00% 0.00%
</TABLE>
Accordingly, the proposal described above was declared to be duly
adopted by the stockholders of the Company.
<PAGE> 2
IN WITNESS WHEREOF, I have made this Certificate and have hereunto set
my hand this 24th day of September, 1996.
/s/ KATHRYN M. GALLAGHER
--------------------------------------------
Kathryn M. Gallagher, Inspector of Elections
STATE OF OHIO )
)
COUNTY OF CUYAHOGA )
On this 24th day of September, 1996, before me personally appeared
Kathryn M. Gallagher, known to me to be the individual described in and who
executed the foregoing certificate, and she duly acknowledged to me that she
executed the same.
/s/ Debra A. Kindred
--------------------------------------------
Notary Public - State of Ohio
My Commission Expires: 10/23/99
----------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-02-1996
<PERIOD-END> AUG-24-1996
<CASH> 6
<SECURITIES> 0
<RECEIVABLES> 172
<ALLOWANCES> 26
<INVENTORY> 973
<CURRENT-ASSETS> 1,149
<PP&E> 487
<DEPRECIATION> 174
<TOTAL-ASSETS> 2,151
<CURRENT-LIABILITIES> 698
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 873
<TOTAL-LIABILITY-AND-EQUITY> 2,151
<SALES> 1,180
<TOTAL-REVENUES> 1,180
<CGS> 837
<TOTAL-COSTS> 837
<OTHER-EXPENSES> 305
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 27
<INCOME-TAX> 13
<INCOME-CONTINUING> 14
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
<PAGE> 1
EXHIBIT 99.1
1. CHARLES R. DEXTER AND CHARLOTTE L. DEXTER V. BROOKS DRUG, INC.,
GOLDLINE LABORATORIES, INC., SHOWA DENKO OF AMERICA, INC., ET AL.
United States District Court for the District of New Hampshire Civil
Action No. C 92-584-M
