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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 1, 1996 Commission File Number 1-5025
REVCO D.S., INC.
(Exact name of registrant as specified in its charter)
DELAWARE 34-1527876
(State of incorporation) I.R.S. Employer Identification No.)
1925 ENTERPRISE PARKWAY
TWINSBURG, OHIO 44087
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 216/425-9811
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Common Stock, par value $.01 per share (New York Stock Exchange)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of August 19, 1996 was $1,246,995,169 (based on total shares
outstanding reduced by the number of shares held by directors and officers, at
the last sale price as reported on the New York Stock Exchange Composite Tape
on August 19, 1996).
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 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 ___
The following documents are incorporated herein by reference: the Registrant's
Annual Report to Stockholders for the fiscal year ended June 1, 1996 (into Part
II of this report); and the Registrant's Proxy Statement for the 1996 Annual
Meeting of Stockholders (into Part III of this report).
As of August 19, 1996, there were 68,561,049 shares of Common Stock outstanding.
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REVCO D.S., INC.
FORM 10-K ANNUAL REPORT
Fiscal Year Ended June 1, 1996
PART I: Page:
Item 1 Business........................................................................................1
Item 2 Properties......................................................................................5
Item 3 Legal Proceedings...............................................................................7
Item 4 Submission of Matters to a Vote of Security Holders.............................................7
PART II:
Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters....................................................................13
Item 6 Selected Financial Data........................................................................13
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................................13
Item 8 Financial Statements and Supplementary Data....................................................13
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.........................................................13
PART III:
Item 10 Directors and Executive Officers of the Registrant.............................................14
Item 11 Executive Compensation.........................................................................14
Item 12 Security Ownership of Certain Beneficial Owners and Management.................................14
Item 13 Certain Relationships and Related Transactions.................................................14
PART IV:
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K...............................14
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PART I
Item 1. Business
--------
(a) General
-------
Revco D.S., Inc., a corporation organized under Delaware law ("Revco"
or the "Company"), operates the second largest, in store count, and
third largest, in sales volume, retail drugstore chain in the United
States. As of June 1, 1996, the Company operated 2,184 stores,
averaging approximately 9,000 square feet per store in size, in
fourteen contiguous Midwestern, Eastern and Southeastern states, and
employed over 32,000 employees. The Company's stores are
high-quality, health-oriented neighborhood pharmacies offering
pharmaceuticals and related merchandise. Revco competes primarily on
the basis of convenient store locations, competitive pricing, and an
orientation toward its pharmacy operations designed to provide a high
level of customer service and product information. The stores
typically feature prescription and over-the-counter ("OTC") drugs,
health and beauty aids, toiletries, vitamins, cosmetics and sundries,
and a broad line of consumer products.
The Company's principal executive offices are located at 1925
Enterprise Parkway, Twinsburg, Ohio 44087. The Company's operations
are highly centralized, with purchasing, pricing, advertising,
merchandising, accounting and supervisory activities directed from
the corporate headquarters. The Company purchases substantially all
of its merchandise either directly from manufacturers or from
wholesalers under various types of purchase arrangements.
The following is a breakdown by state of the locations of the 2,184
Company operated stores:
Georgia 181 North Carolina 301
Illinois 69 Ohio 374
Indiana 301 Pennsylvania 111
Kentucky 65 South Carolina 182
Maryland 49 Tennessee 121
New Jersey 24 Virginia 233
New York 115 West Virginia 58
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The following is the approximate percentage of sales by principal
category for the five most recent fiscal years:
Fiscal Year Ended
-----------------
Category 1996 1995 1994 1993 1992
-------- ---- ---- ---- ---- ----
OTC(1) 41.9 % 43.7% 46.7% 49.8% 53.0%
Prescription 58.1 56.3 53.3 50.2 47.0
============ ============ ============ ============ ============
Total retail sales 100.0% 100.0% 100.0% 100.0% 100.0%
============ ============ ============ ============ ============
<FN>
---------------
(1) Includes sales of non-prescription drugs, health and beauty
aids, toiletries, vitamins, cosmetics and sundries and
general merchandise.
The following table summarizes the change in the drugstore chain from
June 2, 1991 to June 1, 1996, the end of the Company's most recently
completed fiscal year.
Number of Stores Gross Retail Footage
---------------- --------------------
Beginning Period-
of End of End %
Period Period Opened Acquired Closed Sold Period (000's) Increase
------ ------ ------ -------- ------ ---- ------ ------- ----------
Fiscal 1992 1,125 16 32 27 3 1,143 9,682 3
Fiscal 1993 1,143 18 38 8 1 1,190 10,020 3
Fiscal 1994 1,190 42 43 23 4 1,248 10,545 5
Fiscal 1995 1,248 75 822* 27 -- 2,118 18,801 78
Fiscal 1996 2,118 85 16 35 -- 2,184 19,655 5
<FN>
* Includes 801 stores acquired as part of the Hook-SupeRx., Inc. acquisition.
(b) Acquisition of HSI by Revco
---------------------------
On July 15, 1994, the Company consummated its acquisition of
Hook-SupeRx, Inc. ("HSI"). The HSI acquisition is further described
in the Company's Annual Report to Stockholders for the fiscal year
ended June 1, 1996, including the financial statements and notes
included therein, a copy of which is included as Exhibit 13.1 to this
Report.
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(c) Business Strategy
-----------------
Management is committed to enhancing its market share and
profitability by pursuing a number of strategies including: (i)
aggressive marketing efforts with respect to its managed care
business, (ii) improved market penetration through new store openings
and strategic acquisitions within its current markets, (iii)
continued utilization of its advanced management information systems
to modify the product mix, pricing and promotional activities, and
(iv) the expanded provision of patient counseling for prescription
drugs. The Company's business strategy was developed by analyzing the
industry and its trends, the Company's markets and their potential,
and the desires of the consumer determined through extensive consumer
research.
Pharmacy Sales/Managed Care
Based upon demographic changes (the "graying of America"), new drug
introductions, an increased trend toward preventive medication,
increased pressure to provide health benefits to all employees, and a
continuing inflation factor, prescription drug sales will provide the
most significant growth opportunities for the future. Within that
category, the most rapidly growing segment is managed care or third
party business. Managed care business involves the collection of the
majority of the cost of the drug from someone other than the customer
(i.e., an HMO, a PPO, an insurance company, employer, or state
agency). Revco has designed and implemented chain-wide an on-line
interactive pharmacy computer system called "Prescription Access
Link" ("PAL"). Revco's PAL system is one of the first systems of its
kind to be implemented in the retail drugstore industry. PAL was
designed to efficiently handle the dispensing of drugs and
appropriate billing to third-party payors. PAL checks for drug
interaction and drug overlap, maintains patient profile information
and is an on-line system so that every pharmacist within the chain,
regardless of location, can access any Revco patient's information
instantaneously. PAL enhances customer service and counseling of
patients by pharmacists through, among other features, a personalized
patient advisory leaflet describing each drug at the time it is
dispensed. Additional benefits of PAL include on-line adjudication of
managed care prescriptions, paperless claim filing for managed care
programs, and drug utilization review reports. The Company believes
PAL is a significant marketing tool.
OTC Sales
OTC encompasses all products sold within the store other than
prescription drugs. Revco competes through product breadth,
assortment, and convenience of store location. Using the information
made available by the Company's point-of-sale ("POS") scanning cash
registers, the Company is able to determine what products are being
sold through each of its 2,184 outlets. With that information,
adjustments can be made to product mix, product pricing, promotional
efforts, shelf allocation, purchasing, and distribution. The Company
is constantly developing new ways to utilize this POS information to
improve sales and profits.
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New Stores and Remodels
The Company intends to expand its existing store base through new
store development and strategic acquisitions. Acquisition candidates
would include either independent drugstore operators or stores
currently operated by other chains that have decided to exit a store
or market. These acquisitions could take the form of either the
purchase of the store operation to be converted to a Revco store or
the purchase of only the pharmacy inventory and prescription files to
be transferred into a nearby existing Revco location. In addition to
new stores and acquisitions, Revco refreshes its existing store base
through a remodeling program.
During fiscal 1996, the Company reinvested $110.7 million in its
operations, of which $61.0 million represented the Company's
investment in new stores and the upgrade through relocation or
expansion of its existing drugstore base. During fiscal 1996, the
Company opened 85 new stores and relocated 54 stores. The Company
spent $13.4 million to upgrade POS registers with improved
technology in existing core Revco drugstores. An additional $16.4
million was spent on the HSI store base during fiscal 1996 to
install anti-theft detection systems in all of the remaining HSI
stores and to continue remodeling the HSI stores to Revco's store
design and decor package. During fiscal 1996, the Company completed
the remodeling of 149 acquired HSI stores, bringing the total number
of former HSI stores remodeled since the HSI acquisition to 304
stores. Finally, the Company invested $16.0 million in its
distribution centers to expand and upgrade its facilities.
During fiscal 1995, the Company reinvested $138.4 million in its
operations, $38.4 million of which represented the capitalizable
costs of installing Revco's PAL, POS scanning and distribution
systems in the retained HSI operations. An additional $32.1 million
was spent on the HSI store base during fiscal 1995 to remodel the
HSI stores. During fiscal 1995, the Company completed the remodeling
of 155 HSI stores. In addition to the HSI stores, the Company
reinvested $67.9 million in its core Revco business, the majority of
which was used to expand and upgrade the Revco store base. In
addition to other store improvements, the Company opened 75 new
stores and relocated 37 stores.
During fiscal 1994, the Company reinvested $36.0 million in its
operations to, among other improvements, expand and upgrade the
Company's store base. During fiscal 1994, the Company opened or
acquired 85 stores and relocated 29 stores.
During fiscal 1997, the Company intends to open 60 new stores and
relocate 60 existing stores. More than 70% of these store projects
will be the Company's larger, freestanding units. The Company also
intends to continue its remodeling program in the HSI stores, with
150 store projects planned for fiscal 1997. The Company has no
material commitments in connection with these planned capital
expenditures. Funds for these
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expenditures are expected to be provided from the Company's revolving
credit facility and cash generated internally.
Merchandising/Pricing/Advertising
Revco has established a merchandise mix of products typically found
in a traditional retail drugstore. Three pricing strategies are used
for the Company's OTC products: everyday low pricing (the product is
offered at a consistent low price); value pricing (products are
offered at low everyday prices and occasionally on ad at lower
prices); and promotional pricing (products are promoted at
significant discounts from their regular prices). Products are
advertised in weekly circulars. Prescriptions are priced aggressively
with up to ten possible price zones within a market. Revco's
philosophy is that it will not lose a prescription customer based on
price. The pharmacy is advertised on television and radio with
particular emphasis on PAL and the PAL leaflet.
(d) Competition
-----------
The retail drugstore business is highly competitive. The Company
experiences active competition not only from independent and other
chain drugstores, but also from health maintenance organizations,
hospitals, mail order organizations, supermarkets, discount
drugstores and discount general merchandisers. Among major drug
chains, some competitors have greater financial resources than the
Company and have used such resources, in some instances, to improve
their competitive position through modernized store systems,
aggressive remodeling, new store openings and acquisitions. The deep
discount drug segment has experienced significant growth over the
past several years as drug chains, food, discount and specialty
retailers have entered the business. Major retail companies now
operate deep discount drugstores in the most competitive retailing
markets. So-called "combo" stores, which consist of grocery,
drugstore and several other operations under the same roof, have also
experienced significant growth over the past several years as
consumers have become more attracted to one-stop shopping. Retail
mass merchandisers with prescription departments have also grown in
popularity. The Company believes, based on publicly available
information, that, as of June 1, 1996, it ranked second on a
store-count basis and third on an annual sales-volume basis among
chain drugstores.
Item 2. Properties
----------
Company Leased
--------------
In general, most stores are located within shopping centers in leased
premises ranging in size from less than 2,000 to more than 25,000
gross square feet, with a typical drugstore location averaging
approximately 9,000 square feet. New store locations are larger than
the chain average, averaging approximately 10,400 square feet due to
new
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store development being concentrated in free-standing
prototypes in either 10,700 or 12,600 square foot configurations.
The equipment, furniture, fixtures and signs in the leased premises
are owned or leased by the Company and its subsidiaries and are
considered by the Company to be well-maintained and in good operating
condition. Virtually all inventory in the stores and distribution
centers is owned by the Company and is considered by the Company to
be in good condition.
The Company leases a 227,000 square foot distribution center located
in Pittsburgh, Pennsylvania, which the Company closed in June 1996.
The term of the lease expires on April 30, 1997.
Company Owned
-------------
The following table reflects, as of June 1, 1996, the location,
character and size of principal real properties owned by the Company
and its subsidiaries.
Location Approximate Size and Description
-------- --------------------------------
Distribution Centers
--------------------
Knoxville, Tennessee 273,000 sq. ft. distribution center situated on an 18.5 acre site
Aiken County, South Carolina 272,000 sq. ft. distribution center situated on a 30.0 acre site
Henderson, North Carolina 218,000 sq. ft. distribution center situated on a 9.9 acre site
Somerset, Pennsylvania 361,000 sq. ft. distribution center situated on a 30.5 acre site
Indianapolis, Indiana 912,600 sq. ft. distribution center situated on a 34.2 acre site
Executive Offices and Land.
--------------------------
Twinsburg, Ohio 173,000 sq. ft. corporate headquarters building on a 13.1 acre site
Twinsburg, Ohio 20.0 acres of vacant land
Waxahachie, Texas 52.0 acres of vacant land
STORES. The Company owns the real estate and facilities housing 30
of its retail stores.
Other
-----
As a result of the HSI acquisition, the Company also owns and leases
additional administrative office and distribution center properties
in Cincinnati, Ohio and Pawtucket, Rhode Island that are not
materially important physical properties of the Company and its
subsidiaries.
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Item 3. 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,
two of the Company's wholly-owned subsidiaries are defendants in
lawsuits in connection with various claims of injuries resulting from
the consumption of L-Tryptophan which was claimed to have been sold
by the defendants. The lawsuits are 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.
On August 21, 1996, the parties to the previously reported purported
class action entitled SILVERT V. REVCO D.S., INC. ET AL., which
related to the proposed merger with Rite Aid Corporation, filed a
stipulation of dismissal with the Delaware Court of Chancery.
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 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
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Executive Officers of the Registrant
- ------------------------------------
(Included pursuant to Instruction 3 to paragraph (b) of Item 401 of Regulation
S-K). Listed below are the names and ages of all executive officers of the
Company as of August 23, 1996. Each executive officer will serve until his
successor is selected by the Board of Directors or until his earlier resignation
or removal. There are no family relationships among these officers.
Name Position Age
- ---- -------- ---
D. Dwayne Hoven President and Chief Executive Officer, and a Director 54
Carl A. Bellini Executive Vice President and Chief Operating Officer, 62
and a Director
James P. Mastrian Executive Vice President, Marketing 53
Clarence D. Nichols Executive Vice President, Stores and Real Estate 49
Brian P. Carney Senior Vice President, Finance 35
Douglas W. Coffey Senior Vice President, Human Resources 55
Wilson A. Lester, Jr. Senior Vice President, Logistics 44
William D. Russell Senior Vice President, Real Estate 49
Bruce E. Schwallie Senior Vice President, Marketing 41
Jack A. Staph Senior Vice President, Secretary and General Counsel 51
George T. Watt Senior Vice President, Managed Care 52
Dante R. Barone Vice President, Pharmacy Marketing 52
Charles W. Breckenridge Vice President, Control Support Services 54
Richard M. Mergo Vice President, Store Operations 51
Carl E. Palmiter Vice President, Advertising 43
Robert T. Raaf Vice President, Taxes 50
Jay E. Ross Vice President, Merchandising 44
Robert A. Tamplin Vice President, Store Operations 49
Robert I. Thompson Vice President, Pharmacy Operations 43
Hanley H. Wheeler, III Vice President, Store Operations 37
Joseph E. Williams Vice President, Controller 41
Paul N. Harris Assistant Secretary 38
Gregory G. Wilson Assistant Controller 47
D. Dwayne Hoven was elected Chief Executive Officer of the Company
effective August 1993 and was elected President of the Company in July 1992.
From July 1992 to August 1993, Mr. Hoven served as Chief Operating Officer of
the Company. From December 1991 to July 1992, Mr. Hoven served as Executive Vice
President, Marketing and Stores for the Company. From June 1992 to July 1992,
Mr. Hoven served as a member of the interim office of the President of the
Company. From July 1989 to December 1991, Mr. Hoven served as Executive Vice
President of Stores for the Company. From January 1988 to June 1989, Mr. Hoven
served as Senior Vice President of Distribution for the Company. Mr. Hoven is
also a director of OfficeMax, Inc. Mr. Hoven was selected, effective August 27,
1992, by the Board of Directors to become a member of the Board to fill a
vacancy.
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Carl A. Bellini was elected Executive Vice President and Chief
Operating Officer of the Company on October 13, 1993. From August 18, 1992 to
October 13, 1993, Mr. Bellini served as Executive Vice President of Marketing
and Stores. From approximately December 1991 to April 1992, Mr. Bellini served
as Acting Chief Operating Officer of Standard Brands Paint Co., which filed a
bankruptcy proceeding in March 1992 and emerged from bankruptcy during 1993.
From June 1989 until June 1991, Mr. Bellini served as President and Chief
Operating Officer of Erol's, Inc., a video and electronics chain based in
Washington, D.C. From December 1987 to June 1989, Mr. Bellini served as
Executive Vice President of Store Operations for the Company. Mr. Bellini was
selected, effective August 1, 1994, by the Board of Directors to become a member
of the Board to fill a vacancy.
James P. Mastrian was elected Executive Vice President, Marketing of
the Company in July 1994. From June 1992 to July 1994, Mr. Mastrian served as
Senior Vice President, Marketing. From September 1990 to June 1992, Mr.
Mastrian served as Vice President and General Manager, Marketing of the
Company. From March 1990 to September 1990, Mr. Mastrian served as Executive
Vice President of Milo Corp., a wholesaler and retailer of professional beauty
and barber products. From October 1989 to March 1990, Mr. Mastrian was
President and Chief Operating Officer of SuperX Drug Company of Arizona. From
July 1987 to October 1989, Mr. Mastrian was Senior Vice President,
Merchandising and Marketing for the Sherwin-Williams Company Paint Stores
Group. Before July 1987, Mr. Mastrian was employed by Gray Drug Fair, a
division of Sherwin-Williams Company, and served as President and General
Manager of Gray Drug Fair from prior to June 1986 to July 1987.
Clarence D. Nichols was elected Executive Vice President, Stores and
Real Estate, in July 1996. From June 1992 to July 1996, Mr. Nichols served as
Senior Vice President, Store Operations. From November 1987 to June 1992, Mr.
Nichols served as Regional Vice President for the Company's southern region.
From August 1986 to November 1987, Mr. Nichols served as a regional merchandise
manager for the Company.
Brian P. Carney was elected Senior Vice President, Finance in May 1996.
From June 1992 to May 1996, Mr. Carney served as Vice President and Controller
of the Company. From October 1989 to June 1992, Mr. Carney served as the
Company's director of general accounting. Prior to October 1989, Mr. Carney was
a manager with the public accounting firm of Arthur Andersen & Co. (now known as
Arthur Andersen LLP).
Douglas W. Coffey was elected Senior Vice President, Human Resources
of the Company in July 1993. For five years prior to July 1993, Mr. Coffey
served as Senior Vice President of Human Resources at Burdine's Department
Stores, a division of Federated Department Stores.
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Wilson A. Lester, Jr. was elected Senior Vice President, Logistics for
the Company in May 1996. From August 1995 to May 1996, Mr. Lester served as
Vice President, Distribution and Transportation. From December 1993 to August
1995, Mr. Lester served as Senior Vice President of Logistics of Fabri-Centers
of America, Inc. From June 1990 to December 1993, Mr. Lester served as Senior
Vice President of Distribution for Phar-Mor, Inc.
William D. Russell was elected Senior Vice President, Real Estate in
July 1996. From March 1996 to July 1996, Mr. Russell served as Senior Vice
President of Development at The Sembler Co., in St. Petersburg, Florida. From
prior to July 1991 to March 1996, Mr. Russell served as Vice President of Real
Estate for Montgomery Ward.
Bruce E. Schwallie was elected Senior Vice President, Marketing in May
1996. From March 1995 to May 1996, Mr. Schwallie served as Vice President,
Marketing. From February 1991 until March 1995, Mr. Schwallie served in various
capacities within the Company's marketing department, most recently as
divisional merchandise manager. From September 1990 until January 1991, Mr.
Schwallie was employed by RDS Acquisition Corp. in Phoenix, Arizona, where he
served as director of merchandising.
Jack A. Staph has been the Company's Senior Vice President, Secretary
and General Counsel since December 1986 and served as a member of the interim
office of the President of the Company from June 1992 to July 1992. Mr. Staph
had been continuously employed as a member of the Company's in-house legal staff
for more than ten years prior to June 1986.
George T. Watt was elected Senior Vice President, Managed Care in
May 1996. From August 1995 to May 1996, Mr. Watt served as Vice President,
Managed Care. Mr. Watt served as a Vice President of the Company from August
1994 until August 1995. From November 1986 until August 1994, Mr. Watt was
employed by Thrift Drug Corporation, where he served as Vice President of Sales
and Client Service for Thrift Drug's subsidiary, TDI Managed Care Services, Inc.
Dante R. Barone was elected Vice President, Pharmacy Marketing of the
Company in May 1989. From March 1988 to May 1989, Mr. Barone served as
divisional Vice President of Pharmacy Marketing for the Company. From prior to
June 1986 to March 1988, Mr. Barone was a senior buyer for Walgreen Drug Co., a
drugstore chain with retail store locations throughout the United States.
Charles W. Breckenridge was elected Vice President, Control Support
Services of the Company in June 1992. Mr. Breckenridge served as the Company's
director of internal audit from August 1989 to June 1992. From February 1986 to
August 1989, Mr. Breckenridge served as director of business investigation
services at the public accounting firm of Coopers & Lybrand.
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Richard M. Mergo was elected Vice President, Store Operations of the
Company in March 1995. Mr. Mergo served as a regional vice president for the
Company from 1986 to March 1995.
Carl E. Palmiter was elected Vice President, Advertising of the Company
in July 1996. From July 1994 to June 1996, Mr. Palmiter served as Director of
Advertising of the Company. From prior to 1991 to July 1994, Mr. Palmiter was
employed by Hook-SupeRx, Inc. ("HSI"), where he served as assistant vice
president of advertising at the time of the Company's acquisition of HSI.
Robert T. Raaf assumed duties as Vice President, Taxes of the Company
in July 1994. From July 1993 to July 1994, Mr. Raaf served as Vice President and
Treasurer. From September 1989 to July 1993, Mr. Raaf was Vice President, Tax of
the Company. For more than three years prior to September 1989, Mr. Raaf was a
tax partner with the public accounting firm of Arthur Andersen & Co. (now
known as Arthur Andersen LLP).
Jay E. Ross was elected Vice President, Merchandising of the Company in
March 1995. Mr. Ross has been continuously employed by the Company since 1969,
most recently as director of merchandising.
Robert A. Tamplin was elected Vice President, Store Operations of
the Company in March 1995. Mr. Tamplin has been continuously employed by the
Company for more than 25 years, most recently as a regional vice president.
Robert I. Thompson was elected Vice President, Professional Operations
of the Company in August 1995, and currently is responsible for the Company's
pharmacy operations under the title Vice President, Pharmacy Operations.
Mr. Thompson has been continuously employed by the Company since 1978, most
recently as regional director of pharmacy operations.
Hanley H. Wheeler, III was elected Vice President, Store Operations of
the Company in August 1995. Mr. Wheeler has been continuously employed by the
Company since 1981, most recently as regional director of operations.
Joseph E. Williams was elected Vice President, Controller of the
Company in July 1996. From October 1992 to June 1996, Mr. Williams served as
controller for The Limited Stores, Inc. From prior to 1991 to July 1992,
Mr. Williams served as Senior Vice President and Controller for Fabri-Centers
of America, Inc.
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Paul N. Harris was elected Assistant Secretary of the Company in July
1993. From prior to May 1989 to July 1993, Mr. Harris served as senior counsel
for the Company.
Gregory G. Wilson was elected Assistant Controller of the Company in
June 1992. From February 1988 to June 1992, Mr. Wilson served as director of
financial planning and analysis for the Company, and from prior to June 1986 to
February 1988, he served as director of investor relations for the Company.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------
As of August 19, 1996, there were 6,514 record holders of the
Company's outstanding Common Stock. The other information required
by this item is set forth under the heading "Financial Highlights"
on page 1 of the Company's Annual Report to Stockholders for the
fiscal year ended June 1, 1996, which disclosures are incorporated
in this report by reference.
Item 6. Selected Financial Data
-----------------------
The information required by this item is set forth under the heading
"Selected Financial Data" on page 39 of the Company's Annual Report
to Stockholders for the fiscal year ended June 1, 1996, which
disclosures are incorporated in this report by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------
Results of Operations
---------------------
The information required by this item is set forth under the heading
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 18 through 22 of the Company's
Annual Report to Stockholders for the fiscal year ended June 1,
1996, which disclosures are incorporated in this report by reference.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The information required by this item is set forth under the headings
"Consolidated Statements of Income", "Consolidated Balance Sheets",
"Consolidated Statements of Changes in Stockholders' Equity",
"Consolidated Statements of Cash Flows", "Notes to Consolidated
Financial Statements" and "Report of Independent Public Accountants"
on pages 23 through 38 of the Company's Annual Report to Stockholders
for the fiscal year ended June 1, 1996, which disclosures are
incorporated in this report by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
The information as to executive officers is set forth in Part I
hereof under the caption "Executive Officers of the Registrant". The
information regarding directors is set forth under the caption "The
Board of Directors" on pages 1 through 7 of the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held on
September 24, 1996, which disclosures are incorporated in this report
by reference.
Item 11. Executive Compensation
----------------------
The information required by this item is set forth on pages 11
through 20 of the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held on September 24, 1996 under the caption
"Executive Compensation", which disclosures are incorporated in this
report by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The information required by this item is set forth on pages 8 through
10 of the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held on September 24, 1996 under the caption
"Security Ownership of Certain Persons", which disclosures are
incorporated in this report by reference.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The information required by this item is set forth on page 6 of the
Company's Proxy Statement for the Annual Meeting of Stockholders to
be held on September 24, 1996 under the caption "Certain
Relationships and Related Transactions", which disclosures are
incorporated in this report by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a) Documents filed as part of this report:
1. Financial Statements: The audited consolidated balance
sheets of the Registrant and subsidiaries as of June 1,
1996 and June 3, 1995, and the related consolidated
statements of income, changes in stockholders' equity and
cash flows of the Registrant and subsidiaries for the
three fiscal years ended June 1, 1996, are set forth on
pages 23 through 38 of the Registrant's Annual Report
14
17
to Stockholders for the fiscal year ended June 1, 1996,
which statements are incorporated in this report by
reference.
2. Financial Statement Schedules: None.
3. Exhibits:
EXHIBIT INDEX
Exhibit Page
Number Exhibit Description Number
------ ------------------- ------
2.1 -Plan of Reorganization (incorporated by reference to Exhibit --
2.1 to the Company's Registration Statement on Form 10 dated
April 2, 1992)
2.2 -April 16, 1992 Modification to Plan of Reorganization --
(incorporated by reference to Exhibit 2.2 to the Company's
Registration Statement on Form 10, as amended, dated
May 19, 1992)
2.3 -Agreement and Plan of Merger between the Registrant, HSX --
Acquisition Corp. and HSI dated as of March 31, 1994
(incorporated by reference to Exhibit 2.1 to the Registrant's
Registration Statement on Form S-3, dated May 6, 1994
(Registration No. 33-78588))
3.1 -Amended and Restated Certificate of Incorporation --
(incorporated by reference to Exhibit 3.1 to the Company's
Form 10-K for the year ended May 30, 1992)
3.2 -Certificate of Amendment of Amended and Restated Certificate --
of Incorporation (incorporated by reference to Exhibit 3.2 to the
Company's Form 10-K for the year ended May 28, 1994)
3.3 -Amended and Restated By-Laws (incorporated by reference --
to Exhibit 3.2 to the Company's Form 10-K for the year ended
May 30, 1992)
4.1 -Stockholder's Agreement (incorporated by reference to Exhibit --
4.1 to the Company's Form 10-K for the year ended
May 30, 1992)
15
18
4.2 -Specimen of Common Stock Certificate (incorporated by --
reference to Exhibit 4.6 to the Company's Form 10-K for
the year ended May 30, 1992)
4.3 -Registration Rights Agreement between the Company and --
Zell/Chilmark Fund, L.P. (incorporated by reference to Exhibit
4.8 to the Company's Form 10-K for the year ended May 30, 1992)
4.4 -Registration Rights Agreement between the Company and --
Magten Asset Management Corporation dated January 20, 1993
(incorporated by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-1 dated April 23,
1993 (Reg. No. 33-51930))
4.5 -Senior Note Indenture and Specimen of Senior Note --
(incorporated by reference to Exhibit 4.5 to the Company's
Registration Statement on Form S-1 dated April 23, 1993
(Reg. No. 33-51930))
4.6 -First Amendment to the Senior Note Indenture, dated as of April --
20, 1994, between the Company and First Fidelity Bank,
National Association (incorporated by reference to Exhibit 4.6
to the Company's Registration Statement on Form S-3 dated
May 6, 1994 (Commission File No. 33-78588))
4.7 -HSI Senior Note Indenture relating to its 10-1/8% Senior Notes --
due 2002 (incorporated by reference to Exhibit 4.3 to the Company and
HSI's Registration Statement on Form S-4 dated September 9, 1994
(Reg. No. 33-83806))
4.8 -Form of First Amendment to the HSI Senior Note Indenture --
(incorporated by reference to Exhibit 4.4 to the Company and
HSI's Registration Statement on Form S-4 dated October 7, 1994
(Reg. No. 33-83806))
10.1 -Forms of Employment Agreement between Revco D.S., Inc.
and certain executive officers.
10.2 -The 1992 Long-Term Incentive Plan of Revco D.S., Inc. --
(incorporated by reference to Exhibit 10.8 to the Company's
Form 10-K for the year ended May 30, 1992)
16
19
10.3 -Amendment No. 1 to the 1992 Long-Term Incentive Plan of --
Revco D.S., Inc. (incorporated by reference to Exhibit 4.5
to the Company's Registration Statement on Form S-8 dated
May 1, 1995 (Registration No. 33-91774))
10.4 -The 1992 Non-Employee Directors' Stock Option Plan of --
Revco D.S., Inc. (incorporated by reference to Exhibit 10.9
to the Company's Form 10-K for the year ended May 30, 1992)
10.5 -Amendment No. 1 to the 1992 Non-Employee Directors' Stock --
Option Plan of Revco D.S., Inc. (incorporated by reference to
Exhibit 4.7 to the Company's Registration Statement on Form S-8
dated May 1, 1995 (Registration No. 33-91774))
10.6 -Amendment No. 2 to the 1992 Non-Employee Directors' Stock --
Option Plan of Revco D.S., Inc. (incorporated by reference to
Exhibit 4.8 to the Company's Registration Statement on Form
S-8 dated May 1, 1995 (Registration No. 33-91774))
10.7 -Form of Split Dollar Agreement between the Company and
each of its executive officers
10.8 -Revco D.S., Inc. Supplemental Retirement and Survivor Benefit --
Plan (incorporated by reference to Exhibit 10.11 to the
Company's Registration Statement on Form S-1 dated
September 14, 1992 (Reg. No. 33-51930))
10.9 -Amended and Restated Credit Agreement (incorporated by --
reference to Exhibit 10.10 to the Company's Form 10-K for
the year ended June 3, 1995)
10.10 -Description of Modified Economic Value Added-Based
Incentive Plan
13.1 -1996 Annual Report to Stockholders
21.1 -Subsidiaries of Revco
23.1 -Consent of Arthur Andersen LLP, independent public
accountants
23.2 -Consent of Arthur Andersen LLP, independent public
accountants, with respect to Registration Statement
Nos. 33-54592, 33-67816 and 33-91774
17
20
27 -Financial Data Schedule
99.1 -Certain Pending Litigation (Part I)
(b) Reports on Form 8-K
-------------------
On April 26, 1996, the Registrant filed a Current Report on Form 8-K
with the Commission reporting, under item 5, Rite Aid Corporation's
withdrawal of its previously announced tender offer to purchase 50.1
percent of the Company's outstanding shares of Common Stock, and the
related termination of the Merger Agreement pursuant to which the
tender offer was made.
18
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
Date: August 23, 1996 By: /s/ JACK A. STAPH
---------------------------
Jack A. Staph,
Senior Vice President,
Secretary and General Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ D. DWAYNE HOVEN President and Chief Executive Officer August 23, 1996
- ------------------------ and a Director
D. Dwayne Hoven
/s/ BRIAN P. CARNEY Senior Vice President, Finance August 23, 1996
- ------------------------
Brian P. Carney
/s/ JOSEPH WILLIAMS Vice President and Controller August 23, 1996
- ------------------------
Joseph Williams
/s/ CARL A. BELLINI Executive Vice President and Chief August 23, 1996
- ------------------------ Operating Officer and a Director
Carl A. Bellini
/s/ LIVIO M. BORGHESE Director August 23, 1996
- ------------------------
Livio M. Borghese
/s/ ROD F. DAMMEYER Director August 23, 1995
- ------------------------
Rod F. Dammeyer
/s/ TALTON R. EMBRY Co-Chairman of the Board August 23, 1996
- ------------------------ and a Director
Talton R. Embry
/s/ BEN EVANS Director August 23, 1996
- ------------------------
Ben Evans
/s/ JOHN V. GUTTAG Director August 23, 1996
- ------------------------
John V. Guttag
/s/ WALTER B. REINHOLD Director August 23, 1996
- ------------------------
Walter B. Reinhold
/s/ SHELI Z. ROSENBERG Director August 23, 1996
- ------------------------
Sheli Z. Rosenberg
/s/ DAVID M. SCHULTE Director August 23, 1996
- ------------------------
David M. Schulte
/s/ THOMAS O. THORSEN Director August 23, 1996
- ------------------------
Thomas O. Thorsen
/s/ SAMUEL ZELL Co-Chairman of the Board August 23, 1996
- ------------------------ and a Director
Samuel Zell