Longs Drug Stores Corporation Reports Second Quart... (generic utilization increased self-distr...)

Longs Drug Stores Corporation Reports Second Quarter Results

Date:8/20/2008

generic utilization, increased self-distribution of front-end merchandise and improved inventory management, partially offset by changes in the sales mix reflecting increasing price sensitivity among consumers.

The LIFO charge for the 26 weeks ended July 31, 2008 was $7.5 million compared with $5.0 million a year ago.

Prescription Drug Plan Gross Profit

Prescription drug plan gross profit for the 26 weeks ended July 31, 2008 was $18.4 million, or 6.6 percent of prescription drug plan revenues, compared with $15.6 million, or 9.6 percent of prescription drug plan revenues, last year. As expected, the lower gross profit margin rate on increased revenues reflects the Company's bids submitted for the 2008 plan year.

Operating and Administrative Expenses

Operating and administrative expenses for the 26 weeks ended July 31, 2008 were $617.0 million, or 22.5 percent of revenues, compared with $581.3 million, or 22.6 percent of revenues, last year. The decrease in the expense rate reflects increased leverage on higher pharmacy benefit services revenues, partially offset by increased new store activity and reduced leverage on retail drug store sales.

Operating Income

Consolidated operating income for the 26 weeks ended July 31, 2008 was $86.0 million, or 3.1 percent of revenues. Operating income for the 26 weeks ended July 26, 2007 was $72.3 million, or 2.8 percent of revenues, including a $9.6 million pre-tax charge related to the disposition of stores.

Retail drug store operating income was $66.6 million, or 2.8 percent of retail drug store sales, compared with $56.8 million, or 2.4 percent of sales last year, including the charge related to the disposition of stores. Pharmacy benefit services operating income was $19.4 million, or 6.1 percent of pharmacy benefit services revenues, compared with $15.4 million, or 8.1 percent of pharmacy benefit services revenues last year.

Management Outlook

In light of
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