<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 14, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DUANE READE INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 04-3164702 5912
(State or other jurisdiction (I.R.S. Employer (Primary Standard Industrial
of incorporation or organization) Identification No.) Classification Code Number)
</TABLE>
------------------------
440 NINTH AVENUE
NEW YORK, NEW YORK 10001
TELEPHONE: 212-273-5700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
MR. ANTHONY J. CUTI
DUANE READE INC.
440 NINTH AVENUE
NEW YORK, NEW YORK 10001
TELEPHONE: 212-273-5700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
STEVEN DELLA ROCCA, ESQ.
LATHAM & WATKINS
885 THIRD AVENUE, SUITE 1000
NEW YORK, NEW YORK 10022
TELEPHONE: 212-906-1200
TELECOPY: 212-751-4864
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from time
to time after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE PER AGGREGATE OFFERING OF REGISTRATION
SECURITIES TO BE REGISTERED TO BE REGISTERED SHARE(1) PRICE FEE
<S> <C> <C> <C> <C>
common stock, par value $.01 per share 506,329 $29.625 $15,000,000 $4,170.00
</TABLE>
- ------------------------------
1 Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 based on the average of the high and low prices
reported on the composite tape of the New York Stock Exchange, Inc. as of
September 13, 1999.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
, 1999
506,329 SHARES
DUANE READE INC.
COMMON STOCK
- ----------------------------------------------------------------------
THE COMPANY:
- We are the largest drug store chain in metropolitan New York. Our growth
strategy includes making opportunistic acquisitions of independent drug
stores.
- Duane Reade Inc.
440 Ninth Avenue
New York, New York 10001
(212) 273-5700.
- Our Common Stock is currently traded on the New York Stock Exchange under
the symbol DRD.
THE TRANSACTION:
- This Prospectus registers stock we may issue in opportunistic acquisitions
of independent drug stores that we may make from time to time. These
acquisitions of businesses or assets will be made at negotiated prices.
The total number of shares issued to consummate any of these acquisitions
will be dependent on the prevailing market price of our stock at the time
of acquisition.
- We do not expect to receive any cash proceeds when we issue Common Stock
registered by this prospectus.
- --------------------------------------------------------------------------------
THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 2.
The Common Stock has not been approved or disapproved by the Securities and
Exchange Commission or by any State Securities Commission. Neither the
Securities and Exchange Commission nor any State Securities Commission has
passed upon the accuracy or adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION.................................................... ii
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS...................................... ii
PROSPECTUS SUMMARY..................................................................... 1
RISK FACTORS........................................................................... 2
INFORMATION ABOUT DUANE READE INC. INCORPORATED BY REFERENCE........................... 8
LEGAL MATTERS.......................................................................... 8
EXPERTS................................................................................ 9
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION
Duane Reade files annual, quarterly and special reports, as well as proxy
statements and other information with the SEC. You may read and copy any of the
documents Duane Reade files with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549 or at its Regional Offices
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. You may obtain further information about the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0300. Duane Reade's SEC filings
are also available to the public over the Internet at the SEC's web site at
http://www.sec.gov, which contains reports, proxy statements and other
information regarding registrants like Duane Reade that file electronically with
the SEC.
This prospectus is part of a registration statement on Form S-4 filed by
Duane Reade with the SEC under the Securities Act of 1933, as amended. As
permitted by SEC rules, this prospectus does not contain all of the information
included in the registration statement and the accompanying exhibits filed with
the SEC. You may refer to the registration statement and its exhibits for more
information.
You should rely only on the information provided in this prospectus. We have
not authorized anyone to provide you with different information. You should not
assume that the information in this prospectus is accurate as of any date other
than the date on the first page of the prospectus. Duane Reade is not making
this offer of securities in any state or country in which the offer or sale is
not permitted.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements of our intentions, beliefs, expectations or predictions for the
future, denoted by the words "believes," "expects," "may," "will," "should,"
"seeks," "pro forma," "anticipates," "intends" and similar expressions are
forward-looking statements that reflect our current views about future events
and are subject to risks, uncertainties and assumptions. Such risks,
uncertainties and assumptions include those identified in the "Risk Factors"
section of this Prospectus and the following:
- our ability to compete in the drugstore industry and in metropolitan New
York market,
- matters affecting retail drugstore businesses generally, such as
demographic changes, changes in costs of goods and services, and labor
disturbances,
- changes in prevailing interest rates and the availability of and terms of
financing to fund growth in our business,
- liability and other claims against us,
- changes in our operating strategy or development plans,
- our ability to attract and retain qualified personnel,
- management of our cash resources, particularly in light of our substantial
leverage,
ii
<PAGE>
- changes in our acquisition strategy and capital expenditure plans,
- regulatory and other similar changes affecting the health care industry,
and
- industry-wide market facts and other general economic and business
conditions.
Our actual results could differ materially from those projected in these
forward-looking statements as a result of these factors, many of which are
beyond our control.
iii
<PAGE>
PROSPECTUS SUMMARY
This document serves as a prospectus of Duane Reade Inc. to register 506,329
shares of our Common Stock that we plan to use to acquire the assets of various
independent drug stores from time to time. We may offer Common Stock from time
to time in connection with our acquisition of the assets or stock of individual
drug stores or small drug store chains throughout the greater New York City
area. The consideration for the acquisition of these assets or stock may consist
of the assumption of liabilities, issuances of our Common Stock, and in certain
cases, a de minimus amount of cash, or any combination of these items.
The Common Stock we issue pursuant to this prospectus and applicable
prospectus supplement or post-effective amendment to acquire the assets or stock
of individual drug stores or small drug store chains throughout the greater New
York City area may be reoffered pursuant to this prospectus by the holders
thereof from time to time in transactions on the New York Stock Exchange, in
negotiated transactions, through the writing of options on securities, or a
combination of these methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices relating to the
prevailing market prices, or at negotiated prices. These selling holders may
sell their shares of Common Stock to or through broker-dealers, and the
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling holders or the purchasers of shares for whom the
broker-dealer may act as agent or to whom they may sell as principal or both.
We will not receive any part of the proceeds from the resale by selling
holders of any Common Stock pursuant to this prospectus. We will bear all
expenses in connection with the registration of the Common Stock being reoffered
by selling holders, other than selling discounts and commissions and fees and
expenses of the selling holders. The terms for the issuance of Common Stock may
include provisions for the indemnification of the selling holders for specified
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
DUANE READE INC.
We are the largest drugstore chain in metropolitan New York, based on sales
volume, with 85 of our 142 stores located in Manhattan's high-traffic business
and residential districts as of June 26, 1999. Since opening our first store in
1960, we have successfully tailored our marketing and operating strategy to the
unique characteristics of New York, the largest and most densely populated
market in the United States.
1
<PAGE>
RISK FACTORS
THIS PROSPECTUS INCLUDES "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ALTHOUGH
WE BELIEVE THAT OUR PLANS, INTENTIONS AND EXPECTATIONS REFLECTED IN OR SUGGESTED
BY SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CAN GIVE NO ASSURANCE THAT
SUCH PLANS, INTENTIONS OR EXPECTATIONS WILL BE ACHIEVED. IMPORTANT FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FORWARD LOOKING
STATEMENTS WE MAKE IN THIS PROSPECTUS ARE SET FORTH BELOW AND ELSEWHERE IN THIS
PROSPECTUS. ALL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR
PERSONS ACTING ON OUR BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE
FOLLOWING CAUTIONARY STATEMENTS.
SUBSTANTIAL LEVERAGE--OUR SUBSTANTIAL INDEBTEDNESS REQUIRES US TO COMPLY WITH
VARIOUS FINANCIAL AND OPERATING RESTRICTIONS, AND MAY ADVERSELY AFFECT OUR
ABILITY TO OBTAIN FINANCING IN THE FUTURE AND REACT TO CHANGES IN OUR BUSINESS.
We have now and will continue to have a significant amount of indebtedness.
The following chart shows certain important credit statistics:
<TABLE>
<CAPTION>
AT JUNE 26, 1999
(DOLLARS IN
THOUSANDS)
--------------------
<S> <C>
Total indebtedness (including capital leases)............................................... $ 335,534
Stockholders' equity........................................................................ $ 30,732
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 26, 1998 AT JUNE 26, 1999
--------------------- -----------------
<S> <C> <C>
Debt to equity ratio....................................................... 13.65x 10.92
</TABLE>
Our substantial indebtedness could have important consequences to you. These
consequences include:
- Our ability to obtain financing in the future for capital expenditures,
acquisitions, working capital or other purposes may be limited;
- A material portion of our cash flow from operations will be dedicated to
the payment of principal of and interest on our debt; and
- This indebtedness may limit our ability to withstand competitive pressures
and reduce our flexibility in responding to changing business and economic
conditions.
In addition, such indebtedness subjects us and each of our subsidiaries to
various financial and operating restrictions and covenants which could limit our
ability to compete as well as our ability to expand. Such covenants, among other
things, include:
- A limit on the amount of additional indebtedness that may be incurred and
the ability to pay dividends or make capital contributions to our
subsidiaries;
- A limit on investments, loans and other payments, transactions with
related parties and mergers and acquisitions; and
- A requirement to maintain specified financial ratios and meet financial
tests.
Our and our subsidiaries' ability to comply with such restrictions and
covenants can be affected by events beyond our control, and there can be no
assurance that we or our subsidiaries will achieve operating results that would
permit compliance with such terms. A failure to comply with the covenants and
other terms of the indebtedness could result in events of default, which could
permit acceleration of the debt.
ADDITIONAL BORROWINGS AVAILABLE--DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND OUR
SUBSIDIARIES MAY STILL BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT. THIS COULD
FURTHER INCREASE THE RISKS DESCRIBED ABOVE.
2
<PAGE>
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. As of June 26, 1999, our senior credit agreement
would permit additional borrowings of up to $20.5 million. If new debt is added
to our and our subsidiaries' current debt levels, the related risks that we and
they now face could increase.
ABILITY TO SERVICE DEBT--TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A
SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness and to
fund planned capital expenditures will depend on our ability to generate cash in
the future. This, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control.
Based on our current level of operations and anticipated growth, we believe
our cash flow from operations, available cash and available borrowings under our
senior credit agreement will be adequate to meet our future liquidity needs for
at least the next two years.
We cannot assure you, however, that we will be able to generate sufficient
cash flow from operations or that future borrowings will be available to us
under our senior credit agreement in an amount we will need to pay our
indebtedness or to fund our other liquidity needs. We may need to refinance all
or a portion of our indebtedness on or before maturity. We cannot assure you
that we will be able to refinance any of our indebtedness, including our senior
credit agreement, on commercially reasonable terms or at all.
Furthermore, our agreements with respect to our indebtedness, including the
senior credit agreement, contain numerous covenants that, among other things,
restrict our ability to:
- pay dividends and make certain other payments and investments;
- borrow additional funds;
- create liens; and
- sell our assets.
Failing to make debt payments or comply with our covenants could result in
an event of default which, if not cured or waived, could have a material adverse
effect on us.
HOLDING COMPANY STRUCTURE--WE ARE DEPENDENT ON THE CASH FLOW OF OUR SUBSIDIARIES
AND DISTRIBUTIONS FROM OUR SUBSIDIARIES TO SERVICE OUR DEBT.
We are a holding company and do not have any material operations or assets
other than ownership of a 99% general partnership interest of Duane Reade, a New
York general partnership, and 100% of the outstanding common stock of DRI I Inc.
DRI I Inc. owns the remaining 1% general partnership interest in Duane Reade. We
depend on the cash flow of our subsidiaries and distributions from our
subsidiaries to service our debt.
Any right that we have to participate in any distribution of the assets of
any of our subsidiaries upon liquidation, reorganization or insolvency (and your
consequent right to participate in the distribution of those assets) will be
subject to the prior claims of such subsidiary's creditors. Duane Reade is the
borrower under our senior credit agreement. All obligations of Duane Reade under
our senior credit agreement are secured by substantially all of our assets and
the assets of Duane Reade and DRI I Inc.
COMPETITION--THE HIGH LEVEL OF COMPETITION IN OUR MARKETS COULD ADVERSELY AFFECT
OUR BUSINESS.
We operate in highly competitive markets. In metropolitan New York, we
compete against national, regional and local drugstore chains, discount
drugstores, supermarkets, combination food and
3
<PAGE>
drugstores, discount general merchandise stores, mass merchandisers, independent
drugstores and local merchants. Major chain competitors in the metropolitan New
York market include Rite-Aid, Genovese and CVS. Many of our competitors have
greater financial resources than we do. This competition could adversely affect
our results of operations and financial condition in the future. In addition to
competition from the foregoing, our pharmacy departments also compete with
hospitals, health maintenance organizations and mail order prescription drug
providers. Our drugstores compete, among other things, on the basis of
convenience of location and store layout, product mix, selection, customer
service and price. Competition with our pharmacy departments could also
adversely affect our results of operations and financial condition.
NET LOSSES--WE HAVE A HISTORY OF LOSSES.
We have experienced net losses for the past five fiscal years. We do not
expect to continue to incur net losses in the future, but events and conditions
both within and beyond our control will continue to affect our results of
operations. Factors that will affect our results of operations include,
successfully continuing our growth strategy, continued performance of our
existing stores, competition and economic, financial, business and other
conditions. In the first quarter of fiscal 1998, we realized an extraordinary
loss of $23.6 million as a result of the early retirement of certain debt
securities and the repayment of a senior credit facility. If we had not realized
that loss, we would not have experienced a net loss in fiscal 1998. For the 26
weeks ended June 26, 1999, we had net income of $7.1 million.
ECONOMIC CONDITIONS AND REGIONAL CONCENTRATION--WE ARE HIGHLY DEPENDENT ON THE
ECONOMIC CONDITIONS OF METROPOLITAN NEW YORK.
Substantially all of our stores are located in the metropolitan New York
area. As a result, we are sensitive to economic and competitive conditions, the
regulatory environment and the availability of labor in that area. The success
of our future operations will be substantially affected by our ability to
compete effectively in the metropolitan New York area, and we can make no
prediction as to economic conditions in this region.
UNCERTAINTY OF LEASE RENEWALS--INABILITY TO RENEW OUR LEASES COULD ADVERSELY
AFFECT OUR BUSINESS.
We lease all of our stores. The average year of expiration of leases for
stores operating as of December 26, 1998 is 2008. Leases for six stores that
generated 5.7% of our net sales for fiscal 1998 are scheduled to expire before
the end of 2001. We have succeeded historically in renewing most of our store
leases when they have expired. However, we cannot assure you that we will
continue to be able to renew store leases on acceptable terms or at all. If we
are unable to renew store leases as they expire or find other favorable
locations at acceptable lease rates, our inability may adversely affect our
financial condition and results of operations.
RISKS ASSOCIATED WITH FUTURE GROWTH--WE MAY NOT BE ABLE TO REALIZE OUR PLANS FOR
CONTINUED GROWTH.
We have grown rapidly primarily through acquisitions and opening new stores.
We plan to continue to grow through these methods. Our operating complexity and
management responsibilities have and will continue to increase as we grow. Our
growth also requires that we continue to expand and improve our operating and
financial systems and to expand, train and manage our employee base. In
addition, as we continue to open new stores, we may be unable to hire a
sufficient number of qualified store personnel or successfully integrate them
into our business. Our inability to manage our growth effectively or to hire
additional qualified personnel could adversely affect our business and results
of operations.
Our expansion prospects also depend on a number of other factors, including,
among other things:
- economic conditions,
4
<PAGE>
- competition,
- consumer preferences,
- financing and working capital requirements,
- our ability to negotiate store leases on favorable terms, and
- the availability of additional warehouse space and new store locations.
In addition, as we continue with our plans to open additional stores in
metropolitan New York, sales at existing stores may decrease as customers shop
at our newer stores. We may be unable to effectively realize our plans for
future growth.
RISKS ASSOCIATED WITH REGULATORY AND OTHER CHANGES IN THE HEALTH CARE
INDUSTRY--OUR OPERATIONS ARE SUBJECT TO CERTAIN TRENDS IN THE HEALTH CARE
INDUSTRY.
Pharmacy sales accounted for approximately 28.3% of our total sales for 1998
and approximately 31.1% of our total sales for the 26 weeks ended June 26, 1999.
Pharmacy sales to managed care organizations, insurance companies, employers and
other third party payors accounted for approximately 77.9% of our total pharmacy
sales for 1998 and approximately 81.4% of our total pharmacy sales for the 26
weeks ended June 26, 1999. The efforts of these third party payors to contain
costs have worked to decrease gross profit margin percentages from sales of
prescription drugs. However, we believe that penetration by such third party
payors in the metropolitan New York market will continue, and the resulting
increase in sales volume should help to mitigate the decrease in gross profit
margin percentages.
Health care reform initiatives of federal and state governments may also
affect our revenues from prescription drug sales. These initiatives include:
- proposals designed to significantly reduce spending on Medicare, Medicaid
and other government programs,
- changes in programs providing for reimbursement for the cost of
prescription drugs by managed care organizations, insurance companies,
employers and other third party payors, and
- regulatory changes relating to the approval process for prescription
drugs.
Such initiatives could lead to the enactment of federal and state
regulations that may adversely impact our prescription drug sales and,
accordingly, our results of operations.
REGULATORY MATTERS--OUR OPERATIONS ARE SUBJECT TO CERTAIN FEDERAL AND STATE LAWS
AND REGULATIONS.
Our business is subject to various federal and state regulations. For
example, the Omnibus Budget Reconciliation Act of 1990 and comparable state
regulations require our pharmacists to offer counseling, without additional
charge, to their customers about medication, dosage, delivery systems, common
side effects and other information the pharmacists deem significant. Our
pharmacists also may have a duty to warn customers regarding any potential
negative effects of a prescription drug if the warning could reduce or negate
these effects.
We are also subject to federal, state and local licensing and registration
regulations relating to, among other things, our pharmacy operations. We believe
that we have satisfied all of our licensing and registration requirements, and
we continue to actively monitor our compliance with such requirements. However,
violations of any of these regulations could result in various penalties,
including suspension or revocation of our licenses or registrations or monetary
fines, which could adversely effect our operations. Additionally, we are subject
to federal Drug Enforcement Agency regulations relating to our pharmacy
operations, including purchasing, storing and dispensing of controlled
substances.
5
<PAGE>
We are also subject to laws governing our employee relations, including
minimum wage requirements, overtime and working conditions. Increases in the
federal minimum wage rate, employee benefit costs or other costs associated with
employees could adversely affect our results of operations.
DEPENDENCE ON KEY PERSONNEL--A LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT US.
Our success depends to a large extent on our executive management team. We
have employment agreements with each of our five executive officers, but it is
possible that members of management may leave our Company, and such departures
could have a negative impact on our business. We do not maintain key-man life
insurance on any of our executive officers.
CONTINUED INFLUENCE OF PRINCIPAL STOCKHOLDERS.
Investment funds affiliated with DLJ Merchant Banking Partners II, L.P., an
affiliate of Donaldson, Lufkin & Jenrette, and certain of its affiliates control
approximately 48% of our outstanding common stock. In addition, two of our six
directors are Managing Directors of DLJ Merchant Banking II, Inc., a general
partner of DLJ Merchant Banking Partners II, L.P., and one director is a
Managing Director of Donaldson, Lufkin & Jenrette. As a result, DLJ Merchant
Banking Partners II, L.P. has the ability (together with a small percentage of
other shareholders) to elect most of our directors and to control the vote on
all matters submitted to a vote of the holders of our common stock, including
any going private transaction, merger, consolidation or sale of all or
substantially all of our assets. Our Amended and Restated Certificate of
Incorporation provides that any action that can be taken by a meeting of the
shareholders may be taken by written consent in lieu of a meeting.
CERTAIN ANTI-TAKEOVER EFFECTS
Certain provisions of our Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws may inhibit changes in control in Duane Reade
not approved by our Board of Directors. These provisions, among other things,
(a) authorize the Board of Directors to issue preferred stock ranking senior to
the Common Stock without any action on the part of the shareholders and (b)
establish certain advance notice procedures for shareholder proposals (including
nominations of directors) to be considered at shareholders' meetings. In
addition, Section 203 of the Delaware General Corporation Law restricts certain
persons from engaging in business combinations with Duane Reade.
RESTRICTIONS ON PAYMENT OF DIVIDENDS ON COMMON STOCK
Since 1993, we have not declared or paid cash or other dividends on the
Common Stock and do not expect to pay dividends for the foreseeable future. Our
senior credit agreement also contains certain covenants that restrict our
ability to pay dividends. If these restrictions are removed, any future cash
dividends will depend upon Duane Reade's results of operations, financial
conditions, cash requirements, the availability of a surplus and other factors.
COLLECTIVE BARGAINING AGREEMENTS--MOST OF OUR EMPLOYEES ARE REPRESENTED BY
VARIOUS LABOR UNIONS AND ARE COVERED BY COLLECTIVE BARGAINING AGREEMENTS.
As of December 26, 1998, approximately 2,300 of our approximately 3,500
employees were represented by various labor unions and were covered by
collective bargaining agreements. These labor unions include:
- The International Brotherhood of Teamsters, Chauffeurs and Warehousemen
and Helpers of America, Local 815, which represents our distribution
facility employees. Our three year contract with this union expires on
August 31, 2002.
- The Allied Trade Council, which represents most of our store employees.
Our three-year contract with the Allied Trade Council expires on August
31, 2001.
6
<PAGE>
- The National Health and Human Services Employees Union AFL-CIO, Local
1199, which, as a result of our acquisition of the Rock Bottom stores,
represents store employees of 16 stores. We are currently in negotiation
with Local 1199 and expect to have a completed contract within the next
several months. The 16 stores represented by Local 1199 have been
operating uninterrupted without a contract since we acquired them.
- Local 34A New York Joint Board, which, as a result of our acquisition of
the Rock Bottom Stores, represents store employees of 2 stores. The
contract with the Local 34A New York Joint Board expires September 21,
2002.
We have not experienced any material business interruption as a result of
labor disputes within the past 15 years, and we consider our employee relations
to be good. However, upon the expiration of any of our collective bargaining
agreements, we may be unable to negotiate new collective bargaining agreements
on terms favorable to us, and our business operations may be interrupted as a
result of labor disputes or difficulties or delays in the process of
renegotiating our collective bargaining agreements. In such events, our results
of operations could be adversely affected.
POSSIBLE VOLATILITY OF STOCK PRICE
After the Offering, the market price for shares of the Common Stock may be
volatile and may fluctuate based upon a number of factors, including many that
are beyond our control, such as Duane Reade's business performance, general
industry trends, new announcements by competitors, changes in the regulatory
environment or in general, political, market and economic conditions.
SHARES ELIGIBLE FOR FUTURE SALE
As of August 10, the Company had 17,116,008 shares of Common Stock
outstanding. The shares of Common Stock registered by this Prospectus will be
freely tradable without restriction or further registration under the Securities
Act of 1933, as amended (the "Securities Act"), unless held by an "affiliate" of
the Company, as that term is defined under Rule 144 under the Securities Act
("Rule 144"), and those shares will be subject to the resale limitations of Rule
144. In addition, certain stockholders of the Company who own 8,291,763 shares
of Common Stock have the right to require the Company to register the Common
Stock held by them at any time. In addition to these registration rights,
approximately 244,150 shares of Common Stock are eligible for sale subject to
certain volume and other limitations of Rule 144 applicable to "affiliates" of
the Company. We cannot predict the effect, if any, that market sales of shares
of Common Stock or the availability of shares of Common Stock for sale will have
on the market price of the Common Stock from time to time. The sale of a
substantial number of shares held by the existing stockholders, whether pursuant
to a subsequent public offering or otherwise, or the perception that such sales
could occur, could adversely affect the market price of the Common Stock and
could materially impair the Company's future ability to raise capital through an
offering of equity securities.
YEAR 2000--WE COULD BE ADVERSELY AFFECTED IF THE YEAR 2000 PROBLEMS ARE
SIGNIFICANT.
We have implemented a program to ensure that our computer systems and
applications (IT Systems) and non-IT Systems will function properly beyond 1999.
This program includes:
- inventorying year 2000 items;
- assigning priorities to the identified items;
- assessing year 2000 compliance of items determined to be material to the
Company;
- remediating or replacing material items that are not year 2000 compliant;
and
- determining contingency plans that may be required.
7
<PAGE>
We have completed implementing year 2000 compliance for our IT Systems and
are in the process of completing year 2000 compliance for our non-IT Systems,
which includes surveying significant third party vendors. Year 2000 compliance
of our IT Systems has been successfully tested.
We are using both internal and external resources to address year 2000
issues and believe that the cost of any required modifications will be
approximately $600,000. Approximately $250,000 of these costs includes system
upgrades that we had previously identified for operational enhancements. We
regularly monitor the status of our year 2000 compliance process.
The failure to correct a material year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. These failures could materially and adversely affect our results of
operations, financial condition and liquidity. We may be unable to identify and
address all year 2000 issues due to their complexity as well as to our
dependence on the technical skills of employees and independent contractors and
on the representations and preparedness of third parties with which we do
business. Although we believe that our program is designed to appropriately
identify and address year 2000 issues that are subject to our reasonable
control, year 2000 issues could still adversely affect our business, financial
condition and results of operations.
INFORMATION ABOUT DUANE READE INC. INCORPORATED BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated by reference in this Prospectus:
(1) the Company's Annual Report on Form 10-K for the year ended December 26,
1998;
(2) the Company's Quarterly Reports on Form 10-Q for the quarters ended March
27, 1999 and June 26, 1999.
(3) all other documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus which shall be deemed to be a part hereof from the date of filing
such documents.
(4) the description of Duane Reade Inc. common stock as set forth in Duane Reade
Inc.'s Registration Statement on Form S-1, which was filed on November 29,
1997 pursuant to Section 12 of the Exchange Act, and any amendment or report
filed for the purpose of updating such description.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon request, a copy of
any documents incorporated into this Prospectus by reference but not delivered
with the Prospectus.
REQUESTS FOR DOCUMENTS SHOULD BE SUBMITTED TO JOHN HENRY, SENIOR VICE
PRESIDENT, DUANE READE INC., 440 NINTH AVENUE, NEW YORK, NEW YORK 10001, (212)
273-5700.
LEGAL MATTERS
The validity of the shares being offered hereby will be passed upon for us
by Latham & Watkins, New York, New York. Latham & Watkins also represented DLJ
Merchant Banking Partners II, L.P. in connection with our recapitalization in
June 1997.
8
<PAGE>
EXPERTS
The consolidated financial statements incorprated in this prospectus by
reference to the Annual Report on Form 10-K of Duane Reade Inc. for the year
ended December 26, 1998 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on authority of said
firm as experts in auditing and accounting.
9
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
DUANE READE INC.
506,327 SHARES OF COMMON STOCK
---------------------
PROSPECTUS
---------------------
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF
THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY
SALE OF COMMON STOCK.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Duane Reade Inc. (the "Company") is incorporated under the laws of the State
of Delaware. Section 145 of the General Corporation Law of the State of Delaware
("Section 145") provides that a Delaware corporation may indemnify any person
who is, or is threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person was an officer, director, employee or agent
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was illegal. A
Delaware corporation may indemnify any person who is, or is threatened to be
made, a party to any threatened, pending or completed action or suit by or in
the right of the corporation by reason of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
The Company's Amended and Restated Certificate of Incorporation provides for
the indemnification of directors and officers of the Company to the fullest
extent permitted by Section 145.
In that regard, the Amended and Restated Certificate of Incorporation
provides that the Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director or officer of such corporation, or is or was
serving at the request of such corporation as a director, officer or member of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of such
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Indemnification in
connection with an action or suit by or in the right of such corporation to
procure a judgment in its favor is limited to payment of settlement of such an
action or suit except that no such indemnification may be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
indemnifying corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine that, despite the adjudication of liability but in consideration of
all the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the court shall deem proper.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as a part of this report:
Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
5.1 Opinion of Latham & Watkins.
24.1 Consent of PricewaterhouseCoopers LLP.
24.5 Consent of Latham & Watkins (contained in Exhibit 5.1).
25.1(I) Power of Attorney for Anthony J. Cuti, John K. Henry, Nicole S. Arnaboldi, David L. Jaffe, David W.
Johnson, Andrew J. Nathanson and Kevin Roberg.
</TABLE>
(b) Financial Statement Schedules:
Schedules for which provision is made in the applicable accounting
regulations of the SEC are either not required under the related instructions,
are inapplicable or not material, or the information called for thereby is
otherwise included in the financial statements incorporated by reference and
therefore has been omitted.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to the registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registration hereby undertakes:
(1) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 and
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof;
(2) That every prospectus that (i) is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-2
<PAGE>
(g) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through the use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by Form S-4 with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
Form S-4.
(h) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(i) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the city of New York, New York on
September 14, 1999.
<TABLE>
<S> <C> <C>
DUANE READE INC.
(Registrant)
By: /s/ JOHN K. HENRY
-----------------------------------------
John K. Henry
Name: John K. Henry
Title: Senior Vice President
and Chief Financial Officer
</TABLE>
II-4
<PAGE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Anthony J. Cuti and John K. Henry and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Duane Reade Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney have been signed on September 14,
1999 by the following persons in the capacities indicated with respect to Duane
Reade Inc.:
<TABLE>
<CAPTION>
SIGNATURES CAPACITIES
- ------------------------------ --------------------------
<C> <S>
President and Chief
/s/ ANTHONY J. CUTI Executive Officer and
- ------------------------------ Director (Principal
Anthony J. Cuti Executive Officer)
Senior Vice
/s/ JOHN K. HENRY President--Chief
- ------------------------------ Financial Officer (Chief
John K. Henry Accounting Officer)
/s/ NICOLE S. ARNABOLDI
- ------------------------------ Director
Nicole S. Arnaboldi
/s/ DAVID L. JAFFE
- ------------------------------ Director
David L. Jaffe
/s/ DAVID W. JOHNSON
- ------------------------------ Director
David W. Johnson
/s/ ANDREW J. NATHANSON
- ------------------------------ Director
Andrew J. Nathanson
/s/ KEVIN ROBERG
- ------------------------------ Director
Kevin Roberg
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
The following documents are the exhibits to this Registration Statement on
Form S-4. For convenient reference, each exhibit is listed according to the
Exhibit Table of Regulation S-K. The page number, if any, listed opposite an
exhibit indicates the page number in the sequential numbering system in the
manually signed original of this Registration Statement on Form S-4 where such
exhibit can be found.
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER EXHIBIT NUMBER
- ----------- -------------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
5.1 Opinion of Latham & Watkins
24.1 Consent of PricewaterhouseCoopers LLP.
</TABLE>
II-6
<PAGE>
Exhibit 5.1
[LETTERHEAD OF LATHAM & WATKINS]
September 14, 1999
uane Reade Inc.
440 Ninth Avenue
New York, New York 10001
Re: Duane Reade Inc.
506,329 Shares of Common Stock, Par Value $.01 Per Share
--------------------------------------------------------
Ladies and Gentlemen:
In connection with the registration of 506,329 shares of common stock,
par value $.01 per share (the "Shares") of Duane Reade Inc., a Delaware
corporation (the "Company"), under the Securities Act of 1933, as amended (the
"Act"), by the Company on Form S-4 filed with the Securities and Exchange
Commission (the "Commission") on September 14, 1999 (the "Registration
Statement"), you have requested our opinion with respect to the matters set
forth below.
In our capacity as your special counsel in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization, issuance and sale of
the Shares. In addition, we have made such legal and factual examinations and
inquiries, including an examination of originals or copies certified or
otherwise identified to our satisfaction of such documents, corporate records
and instruments, as we have deemed necessary or appropriate for purposes of this
opinion.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic original documents of all documents submitted to us as
copies.
<PAGE>
LATHAM & WATKINS
September 13, 1999
Page 2
We are opining herein as to the effect on the subject transaction only
of the internal laws of the State of New York and the General Corporation Law of
the State of Delaware, and we express no opinion with respect to the
applicability thereto, or the effect thereon, of the laws of any other
jurisdiction or, in the case of Delaware, any other laws, or as to any matters
of municipal law or the laws of any local agencies within any state.
Subject to the foregoing, it is our opinion that, as of the date
hereof, the Shares have been duly authorized, and, upon issuance, delivery and
payment therefor in the manner contemplated by the Registration Statement and/or
the applicable Prospectus Supplement relating to such Sahres, will be validly
issued, fully paid and nonassessable.
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters."
Very truly yours,
/s/ Latham & Watkins
<PAGE>
Exhibit 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Duane Reade Inc. of our report dated February 8,
1999 relating to the consolidated financial statements which appear in Duane
Reade Inc.'s Annual Report on Form 10-K for the year ended December 26, 1998.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
September 8, 1999
