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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



FORM 10-Q



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(Mark One)



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | ----------------------------------------------------------------------------------------



For the quarterly period ended April 28, 2005



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -----------------------------------------------------------------------------------------



For the transition period from
 to



Commission file number 1-8978



LONGS DRUG STORES CORPORATION

(Exact name of registrant as specified in its charter)



|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Maryland                                                      |  | 68-0048627                         
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification No.)
|                                                              | 
|141 North Civic Drive Walnut Creek, California                |  | 94596                              
|(Address of principal executive offices)                      |  | (Zip Code)                         



Registrants
telephone number, including area code: (925) 937-1170



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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ̈



There were 37,421,938 shares of common stock, $.50 par value, outstanding as of May 26, 2005.



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CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS



This quarterly report
contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements relate to, among other things, pharmacy and front-end sales and gross
profits; cost reductions; changes in supply chain practices; workers compensation costs; liquidity and cash requirements; working capital reductions; the number of store openings, closures and remodels; the level of capital expenditures;
contractual commitments; third-party sales as a percentage of total pharmacy sales; and our effective tax rate and are indicated by words or phrases such as continuing, expects, estimates, believes,
plans, anticipates, will and other similar words or phrases.



These forward-looking statements are based on our current plans and expectations and involve risks and uncertainties that could cause actual events and
results to vary materially from those included in or contemplated by forward-looking statements we make. These risks and uncertainties include, but are not limited to, those set forth below:



| |  |  | Changes in economic conditions generally or in the markets we serve;
| | - |  | --------------------------------------------------------------------



| |  |  | Economic softness and unemployment;
| | - |  | -----------------------------------



| |  |  | Consumer preferences and spending patterns;
| | - |  | -------------------------------------------



| |  |  | Competition from other drugstore chains, supermarkets, mass merchandisers, discount retailers, on-line retailers, other retailers and pharmacy benefit management companies;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The growth of mail order pharmacies, and changes in some third-party health plans requiring mail order fulfillment of certain medications;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The frequency and rate of introduction of successful new prescription drugs;
| | - |  | ----------------------------------------------------------------------------



| |  |  | The introduction of lower priced generic drugs;
| | - |  | -----------------------------------------------



| |  |  | The efforts of third-party payers to reduce prescription drug costs;
| | - |  | --------------------------------------------------------------------



| |  |  | The impact of rising gasoline prices on consumer spending and the economy in general;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | The effects of war and terrorism on economic conditions and consumer spending patterns;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | Continued good relationships with our employees;
| | - |  | ------------------------------------------------



| |  |  | Labor unrest in the same or competitive industries;
| | - |  | ---------------------------------------------------



| |  |  | The impact of rising workers compensation, health and welfare and energy costs on our operations;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | The success of our advertising and merchandising strategies;
| | - |  | ------------------------------------------------------------



| |  |  | Our ability to integrate our pharmacy, mail-order and pharmacy benefit management capabilities;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | Interest rate fluctuations and changes in capital market conditions or other events affecting our ability to obtain necessary financing on favorable terms;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Consumer reaction to our remodeled stores;
| | - |  | ------------------------------------------



| |  |  | Our relationships with our suppliers;
| | - |  | -------------------------------------



| |  |  | Our ability to obtain adequate insurance coverage;
| | - |  | --------------------------------------------------



| |  |  | Our ability to hire and retain pharmacists and other store and management personnel;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | The availability and cost of real estate for new stores;
| | - |  | --------------------------------------------------------



| |  |  | The impact of pending or future litigation;
| | - |  | -------------------------------------------



| |  |  | The impact of state and federal budget deficits on government healthcare spending and on economic conditions generally;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | The impact of Medicare, Medi-Cal and similar government-sponsored health plans on our pharmacy sales and profitability;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | The effectiveness of workers compensation reform efforts, especially in California;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | Changes in state or federal legislation or regulations affecting our businesses;
| | - |  | --------------------------------------------------------------------------------



| |  |  | Our ability to execute our previously announced initiatives;
| | - |  | ------------------------------------------------------------



| |  |  | Changes in internal business processes associated with supply chain and other initiatives;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Our ability to successfully implement new technology, including a perpetual inventory system;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Disruption in our supply chain due to system conversions;
| | - |  | ---------------------------------------------------------



| |  |  | Our ability to increase self-distribution, including locating or building a new front-end distribution center;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Our ability to improve our purchasing of front-end and pharmacy products;
| | - |  | -------------------------------------------------------------------------



| |  |  | Changes to accounting policies and practices or internal controls; and
| | - |  | ----------------------------------------------------------------------



| |  |  | Other factors discussed in this report under Risk Factors and elsewhere or in any of our other SEC filings.
| | - |  | -------------------------------------------------------------------------------------------------------------



In addition, because we lack a perpetual inventory system, our ability to
accurately forecast and track our gross profits and inventory levels during periods between our quarterly physical inventories is limited. Therefore, our actual gross profits and inventory levels may vary materially from the gross profits and
inventory levels included in or contemplated by forward-looking statements we make.



We assume no obligation to update our forward-looking statements to reflect subsequent events or circumstances.





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TABLE OF CONTENTS



|           |  |                                                                                       |  |     
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                       |  | Page
|PART I     |  | FINANCIAL INFORMATION                                                                 |  |     
|           |  |                                                                                      
|Item 1     |  | Condensed Consolidated Financial Statements                                           |  | 1   
|           |  |                                                                                      
|Item 2     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 11  
|           |  |                                                                                      
|Item 3     |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 17  
|           |  |                                                                                      
|Item 4     |  | Controls and Procedures                                                               |  | 17  
|           |  |                                                                                      
|PART II    |  | OTHER INFORMATION                                                                     |  |     
|           |  |                                                                                      
|Item 2     |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 18  
|           |  |                                                                                      
|Item 6     |  | Exhibits and Reports on Form 8-K                                                      |  | 18  
|           | 
|Signatures |  | 20                                                                                   





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PART I - FINANCIAL INFORMATION



|Item 1. | Condensed Consolidated Financial Statements
|------- | -------------------------------------------



LONGS DRUG STORES CORPORATION



CONDENSED STATEMENTS OF CONSOLIDATED INCOME (unaudited)



|                                               |  |                                    |           |   |                |   |           |  
|---------------------------------------------- |  | ---------------------------------- | --------- | - | -------------- | - | --------- | -
|                                               |  | For the 13 weeks ended             |          
|                                               |  | April 28, 2005                     |           |   | April 29, 2004 |  
|                                               |  | Thousands Except Per Share Amounts |          
|Sales                                          |  | $                                  | 1,150,428 |   |                | $ | 1,159,696 |  
|Cost of sales                                  |  |                                    | 847,484   |   |                |   | 866,739   |  
|                                               |  |                                    |           |   |                |   |           |  
|Gross profit                                   |  |                                    | 302,944   |   |                |   | 292,957   |  
|Operating and administrative expenses          |  |                                    | 258,601   |   |                |   | 253,023   |  
|Depreciation and amortization                  |  |                                    | 21,503    |   |                |   | 21,517    |  
|                                               |  |                                    |           |   |                |   |           |  
|Operating income                               |  |                                    | 22,840    |   |                |   | 18,417    |  
|Interest expense                               |  |                                    | 2,450     |   |                |   | 3,750     |  
|Interest income                                |  |                                    | (299      | ) |                |   | (152      | )
|                                               |  |                                    |           |   |                |   |           |  
|Income before income taxes                     |  |                                    | 20,689    |   |                |   | 14,819    |  
|Income taxes                                   |  |                                    | 7,842     |   |                |   | 5,572     |  
|                                               |  |                                    |           |   |                |   |           |  
|Net income                                     |  | $                                  | 12,847    |   |                | $ | 9,247     |  
|                                               |  |                                    |           |   |                |   |           |  
|                                               |  |                                   
|Earnings per common share:                     |  |                                    |           |   |                |   |           |  
|Basic                                          |  | $                                  | 0.34      |   |                | $ | 0.25      |  
|Diluted                                        |  |                                    | 0.34      |   |                |   | 0.25      |  
|                                               |  |                                   
|Dividends per common share                     |  | $                                  | 0.14      |   |                | $ | 0.14      |  
|                                               |  |                                   
|Weighted average number of shares outstanding: |  |                                    |           |   |                |   |           |  
|Basic                                          |  |                                    | 37,383    |   |                |   | 37,226    |  
|Diluted                                        |  |                                    | 38,102    |   |                |   | 37,450    |  



See notes to condensed
consolidated financial statements.



1



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LONGS DRUG STORES CORPORATION



CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)



|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | --------- | - | -------------- | - | --------- | ---------------- |  | - | --------- | -
|                                                                                                                                 |  | April 28, 2005                     |           |   | April 29, 2004 |   |           | January 27, 2005 | 
|                                                                                                                                 |  | Thousands Except Share Information |          
|Assets                                                                                                                           |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Current Assets:                                                                                                                  |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Cash and cash equivalents                                                                                                        |  | $                                  | 56,518    |   |                | $ | 54,757    |                  |  | $ | 53,890    |  
|Pharmacy and other receivables, net                                                                                              |  |                                    | 161,561   |   |                |   | 156,444   |                  |  |   | 158,345   |  
|Merchandise inventories, net                                                                                                     |  |                                    | 434,829   |   |                |   | 466,627   |                  |  |   | 433,280   |  
|Deferred income taxes                                                                                                            |  |                                    | 43,987    |   |                |   | 41,660    |                  |  |   | 43,074    |  
|Prepaid expenses and other current assets                                                                                        |  |                                    | 11,383    |   |                |   | 11,300    |                  |  |   | 11,990    |  
|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Total current assets                                                                                                             |  |                                    | 708,278   |   |                |   | 730,788   |                  |  |   | 700,579   |  
|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  
|                                                                                                                                 |  |                                    |          
|Property:                                                                                                                        |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Land                                                                                                                             |  |                                    | 107,451   |   |                |   | 107,175   |                  |  |   | 108,198   |  
|Buildings and leasehold improvements                                                                                             |  |                                    | 578,397   |   |                |   | 552,798   |                  |  |   | 577,773   |  
|Equipment and fixtures                                                                                                           |  |                                    | 575,838   |   |                |   | 544,418   |                  |  |   | 565,161   |  
|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Total                                                                                                                            |  |                                    | 1,261,686 |   |                |   | 1,204,391 |                  |  |   | 1,251,132 |  
|Less accumulated depreciation                                                                                                    |  |                                    | 650,445   |   |                |   | 590,128   |                  |  |   | 632,778   |  
|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Property, net                                                                                                                    |  |                                    | 611,241   |   |                |   | 614,263   |                  |  |   | 618,354   |  
|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  
|                                                                                                                                 |  |                                    |          
|Goodwill                                                                                                                         |  |                                    | 82,085    |   |                |   | 82,085    |                  |  |   | 82,085    |  
|Intangible assets, net                                                                                                           |  |                                    | 6,189     |   |                |   | 6,821     |                  |  |   | 6,354     |  
|Other non-current assets                                                                                                         |  |                                    | 3,739     |   |                |   | 3,551     |                  |  |   | 3,791     |  
|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Total                                                                                                                            |  | $                                  | 1,411,532 |   |                | $ | 1,437,508 |                  |  | $ | 1,411,163 |  
|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  
|                                                                                                                                 |  |                                    |          
|Liabilities and Stockholders Equity                                                                                             |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Current Liabilities:                                                                                                             |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Accounts payable and accrued expenses                                                                                            |  | $                                  | 311,284   |   |                | $ | 305,694   |                  |  | $ | 273,957   |  
|Employee compensation and benefits                                                                                               |  |                                    | 123,179   |   |                |   | 112,845   |                  |  |   | 129,214   |  
|Taxes payable                                                                                                                    |  |                                    | 48,817    |   |                |   | 47,353    |                  |  |   | 52,999    |  
|Current maturities of debt                                                                                                       |  |                                    | 8,870     |   |                |   | 101,870   |                  |  |   | 8,870     |  
|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Total current liabilities                                                                                                        |  |                                    | 492,150   |   |                |   | 567,762   |                  |  |   | 465,040   |  
|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  
|                                                                                                                                 |  |                                    |          
|Long-term debt                                                                                                                   |  |                                    | 120,818   |   |                |   | 109,688   |                  |  |   | 145,688   |  
|Deferred income taxes and other long-term liabilities                                                                            |  |                                    | 70,005    |   |                |   | 47,491    |                  |  |   | 73,298    |  
|Commitments and Contingencies                                                                                                    |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Stockholders Equity:                                                                                                            |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Common stock: par value $0.50 per share, 120,000,000 shares authorized, 37,349,000, 37,258,000 and 37,418,000 shares
outstanding |  |                                    | 18,674    |   |                |   | 18,629    |                  |  |   | 18,709    |  
|Additional capital                                                                                                               |  |                                    | 192,621   |   |                |   | 170,016   |                  |  |   | 180,072   |  
|Unearned compensation                                                                                                            |  |                                    | (2,050    | ) |                |   | (2,106    | )                |  |   | (1,528    | )
|Retained earnings                                                                                                                |  |                                    | 519,314   |   |                |   | 526,028   |                  |  |   | 529,884   |  
|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Total stockholders equity                                                                                                       |  |                                    | 728,559   |   |                |   | 712,567   |                  |  |   | 727,137   |  
|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  
|Total                                                                                                                            |  | $                                  | 1,411,532 |   |                | $ | 1,437,508 |                  |  | $ | 1,411,163 |  
|                                                                                                                                 |  |                                    |           |   |                |   |           |                  |  |   |           |  



See notes to condensed
consolidated financial statements.



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LONGS DRUG STORES CORPORATION



CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (unaudited)



|                                                                                  |  |                        |         |   |                |   |         |  
|--------------------------------------------------------------------------------- |  | ---------------------- | ------- | - | -------------- | - | ------- | -
|                                                                                  |  | For the 13 weeks ended |        
|                                                                                  |  | April 28, 2005         |         |   | April 29, 2004 |  
|                                                                                  |  | Thousands              |        
|Operating Activities:                                                             |  |                        |         |   |                |   |         |  
|Net income                                                                        |  | $                      | 12,847  |   |                | $ | 9,247   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                        |         |   |                |   |         |  
|Depreciation and amortization                                                     |  |                        | 21,503  |   |                |   | 21,517  |  
|Deferred income taxes and other                                                   |  |                        | (4,186  | ) |                |   | (3,369  | )
|Stock awards and options, net                                                     |  |                        | 4,229   |   |                |   | (106    | )
|Common stock contribution to benefit plan                                         |  |                        | 3,735   |   |                |   | 2,004   |  
|Changes in assets and liabilities:                                                |  |                        |         |   |                |   |         |  
|Pharmacy and other receivables                                                    |  |                        | (3,216  | ) |                |   | 7,506   |  
|Merchandise inventories                                                           |  |                        | (1,549  | ) |                |   | 10,495  |  
|Other assets                                                                      |  |                        | 659     |   |                |   | 2,186   |  
|Current liabilities and other                                                     |  |                        | 27,745  |   |                |   | (5,322  | )
|                                                                                  |  |                        |         |   |                |   |         |  
|Net cash provided by operating activities                                         |  |                        | 61,767  |   |                |   | 44,158  |  
|                                                                                  |  |                        |         |   |                |   |         |  
|                                                                                  |  |                       
|Investing Activities:                                                             |  |                        |         |   |                |   |         |  
|Capital expenditures and acquisitions                                             |  |                        | (19,818 | ) |                |   | (23,588 | )
|Proceeds from property dispositions                                               |  |                        | 4,938   |   |                |   | 1,334   |  
|                                                                                  |  |                        |         |   |                |   |         |  
|Net cash used in investing activities                                             |  |                        | (14,880 | ) |                |   | (22,254 | )
|                                                                                  |  |                        |         |   |                |   |         |  
|                                                                                  |  |                       
|Financing Activities:                                                             |  |                        |         |   |                |   |         |  
|Proceeds from (repayments of) revolving line of credit borrowings, net            |  |                        | (20,000 | ) |                |   | 10,000  |  
|Repayments of private placement notes and other borrowings                        |  |                        | (4,870  | ) |                |   | (4,870  | )
|Repurchase of common stock                                                        |  |                        | (21,281 | ) |                |   | (7,236  | )
|Dividend payments                                                                 |  |                        | (5,257  | ) |                |   | (5,263  | )
|Exercise of stock options                                                         |  |                        | 7,149   |   |                |   |        |  
|                                                                                  |  |                        |         |   |                |   |         |  
|Net cash used in financing activities                                             |  |                        | (44,259 | ) |                |   | (7,369  | )
|                                                                                  |  |                        |         |   |                |   |         |  
|                                                                                  |  |                       
|Increase in cash and cash equivalents                                             |  |                        | 2,628   |   |                |   | 14,535  |  
|Cash and cash equivalents at beginning of period                                  |  |                        | 53,890  |   |                |   | 40,222  |  
|                                                                                  |  |                        |         |   |                |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                      | 56,518  |   |                | $ | 54,757  |  
|                                                                                  |  |                        |         |   |                |   |         |  
|                                                                                  |  |                       
|Supplemental disclosure of cash flow information:                                 |  |                        |         |   |                |   |         |  
|Cash paid for interest                                                            |  | $                      | 2,968   |   |                | $ | 3,643   |  
|Cash paid for income taxes                                                        |  |                        | 10,048  |   |                |   | 20,370  |  



See notes to condensed
consolidated financial statements.



3



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LONGS DRUG STORES CORPORATION



CONDENSED STATEMENTS OF CONSOLIDATED STOCKHOLDERS EQUITY (unaudited)



For the 52 weeks ended January 27, 2005 and the 13 weeks ended April 28,
2005



|                                                                |  |              |   |  |                    |        |   |                       |   |         |                   |  |   |                            |   |  |   |         |   |  |   |         |  
|--------------------------------------------------------------- |  | ------------ | - |  | ------------------ | ------ | - | --------------------- | - | ------- | ----------------- |  | - | -------------------------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                |  | Common Stock |   |  | Additional Capital |        |   | Unearned Compensation |   |         | Retained Earnings |  |   | Total Stockholders Equity |  
|                                                                |  | Shares       |   |  | Amount             |        |   |                       |   |        
|                                                                |  | Thousands    |  
|Balance at January 29, 2004                                     |  | 37,544       |   |  | $                  | 18,772 |   |                       | $ | 170,321 |                   |  | $ | (2,525                     | ) |  | $ | 527,353 |   |  | $ | 713,921 |  
|Net income                                                      |  |              |   |  |                    |        |   |                       |   |         |                   |  |   |                            |   |  |   | 36,560  |   |  |   | 36,560  |  
|Dividends ($0.56 per share)                                     |  |              |   |  |                    |        |   |                       |   |         |                   |  |   |                            |   |  |   | (20,948 | ) |  |   | (20,948 | )
|Stock contributions to Employee Savings and Profit Sharing Plan |  | 320          |   |  |                    | 160    |   |                       |   | 6,917   |                   |  |   |                            |   |  |   |         |   |  |   | 7,077   |  
|Stock awards, net of forfeitures                                |  | 2            |   |  |                    | 1      |   |                       |   | (400    | )                 |  |   | (267                       | ) |  |   |         |   |  |   | (666    | )
|Amortization of restricted stock awards                         |  |              |   |  |                    |        |   |                       |   |         |                   |  |   | 1,264                      |   |  |   |         |   |  |   | 1,264   |  
|Stock options exercised                                         |  | 288          |   |  |                    | 144    |   |                       |   | 6,067   |                   |  |   |                            |   |  |   |         |   |  |   | 6,211   |  
|Tax benefit related to stock awards and stock options, net      |  |              |   |  |                    |        |   |                       |   | 573     |                   |  |   |                            |   |  |   |         |   |  |   | 573     |  
|Repurchase of common stock                                      |  | (736         | ) |  |                    | (368   | ) |                       |   | (3,406  | )                 |  |   |                            |   |  |   | (13,081 | ) |  |   | (16,855 | )
|                                                                |  |              |   |  |                    |        |   |                       |   |         |                   |  |   |                            |   |  |   |         |   |  |   |         |  
|Balance at January 27, 2005                                     |  | 37,418       |   |  |                    | 18,709 |   |                       |   | 180,072 |                   |  |   | (1,528                     | ) |  |   | 529,884 |   |  |   | 727,137 |  
|                                                                |  |              |   |  |                    |        |   |                       |   |         |                   |  |   |                            |   |  |   |         |   |  |   |         |  
|                                                                |  |              |   |  |                    |       
|Net income                                                      |  |              |   |  |                    |        |   |                       |   |         |                   |  |   |                            |   |  |   | 12,847  |   |  |   | 12,847  |  
|Dividends ($0.14 per share)                                     |  |              |   |  |                    |        |   |                       |   |         |                   |  |   |                            |   |  |   | (5,257  | ) |  |   | (5,257  | )
|Stock contributions to Employee Savings and Profit Sharing Plan |  | 128          |   |  |                    | 64     |   |                       |   | 3,671   |                   |  |   |                            |   |  |   |         |   |  |   | 3,735   |  
|Stock awards, net of forfeitures                                |  | 74           |   |  |                    | 37     |   |                       |   | 2,620   |                   |  |   | (2,689                     | ) |  |   |         |   |  |   | (32     | )
|Amortization of restricted stock awards                         |  |              |   |  |                    |        |   |                       |   | 460     |                   |  |   | 2,167                      |   |  |   |         |   |  |   | 2,627   |  
|Stock options exercised                                         |  | 317          |   |  |                    | 158    |   |                       |   | 6,991   |                   |  |   |                            |   |  |   |         |   |  |   | 7,149   |  
|Tax benefit related to stock awards and stock options, net      |  |              |   |  |                    |        |   |                       |   | 1,634   |                   |  |   |                            |   |  |   |         |   |  |   | 1,634   |  
|Repurchase of common stock                                      |  | (588         | ) |  |                    | (294   | ) |                       |   | (2,827  | )                 |  |   |                            |   |  |   | (18,160 | ) |  |   | (21,281 | )
|                                                                |  |              |   |  |                    |        |   |                       |   |         |                   |  |   |                            |   |  |   |         |   |  |   |         |  
|Balance at April 28, 2005                                       |  | 37,349       |   |  | $                  | 18,674 |   |                       | $ | 192,621 |                   |  | $ | (2,050                     | ) |  | $ | 519,314 |   |  | $ | 728,559 |  
|                                                                |  |              |   |  |                    |        |   |                       |   |         |                   |  |   |                            |   |  |   |         |   |  |   |         |  



See notes to condensed
consolidated financial statements.



4



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##### Table of Contents

LONGS DRUG STORES CORPORATION



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1. Basis of Presentation



The accompanying interim condensed consolidated financial statements include the financial statements of Longs Drug Stores Corporation (Longs
or the Company) and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated. The interim condensed consolidated financial statements have been prepared on a basis consistent in all
material respects with the accounting policies described and applied in the Annual Report of the Company on Form 10-K for the fiscal year ended January 27, 2005, and reflect all adjustments that are, in managements opinion, necessary for a
fair presentation of the results for the periods presented. The condensed consolidated financial statements as of and for the periods ended April 28, 2005 and April 29, 2004 are unaudited. The condensed consolidated balance sheet as of January 27,
2005, and condensed consolidated statement of stockholders equity for the year then ended, presented herein, have been derived from the audited consolidated financial statements of the Company included in the Form 10-K for the fiscal year
ended January 27, 2005. The interim condensed consolidated financial statements should be read in connection with the financial statements in the Companys Annual Report on Form 10-K for the fiscal year ended January 27, 2005.



2. Stock-Based Compensation



The Company accounts for stock-based employee compensation using the
intrinsic value method in accordance with the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, as allowed by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. Stock awards are valued at fair market value at the date of grant, and are recorded as compensation expense over the vesting period. Compensation expense for performance-based stock awards is estimated until the measurement date,
which is the earliest date at which the Company can determine the number of shares an employee is entitled to receive under the performance-based stock award arrangement. No compensation expense is recognized for employee stock options, because it
is the Companys practice to grant stock options with an exercise price equal to the market price of the underlying common stock on the date of grant.



The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS
No. 123 to all stock-based employee compensation, including stock options:



|                                                                                                                                            |  |                             |        |   |                |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | -------------- | - | ------ | -
|                                                                                                                                            |  | For the 13 weeks ended      |       
|                                                                                                                                            |  | April 28, 2005              |        |   | April 29, 2004 |  
|                                                                                                                                            |  | Thousands, except per share |       
|Net income, as reported                                                                                                                     |  | $                           | 12,847 |   |                | $ | 9,247  |  
|Add: Stock-based employee compensation expense included in reported net income, net of related tax effects                                  |  |                             | 1,558  |   |                |   | 189    |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                             | (1,655 | ) |                |   | (1,044 | )
|                                                                                                                                            |  |                             |        |   |                |   |        |  
|Pro forma net income                                                                                                                        |  | $                           | 12,750 |   |                | $ | 8,392  |  
|                                                                                                                                            |  |                             |        |   |                |   |        |  
|                                                                                                                                            |  |                            
|Basic earnings per share:                                                                                                                   |  |                             |        |   |                |   |        |  
|As reported                                                                                                                                 |  | $                           | 0.34   |   |                | $ | 0.25   |  
|Pro forma                                                                                                                                   |  | $                           | 0.34   |   |                | $ | 0.23   |  
|                                                                                                                                            |  |                            
|Diluted earnings per share:                                                                                                                 |  |                             |        |   |                |   |        |  
|As reported                                                                                                                                 |  | $                           | 0.34   |   |                | $ | 0.25   |  
|Pro forma                                                                                                                                   |  | $                           | 0.33   |   |                | $ | 0.22   |  



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LONGS DRUG STORES CORPORATION



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



3. Earnings Per Share



Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding
during the period. Diluted earnings per share are computed by dividing net income by the weighted average number of common shares and dilutive common equivalent shares (restricted stock awards, including performance-based stock awards, and stock
options) outstanding during the period. The following is a reconciliation of the number of shares used in the Companys basic and diluted earnings per share computations:



|                                                      |  |                |  |               
|----------------------------------------------------- |  | -------------- |  | --------------
|                                                      |  | 13 weeks ended
|                                                      |  | April 28, 2005 |  | April 29, 2004
|                                                      |  | Thousands     
|Basic weighted average number of shares outstanding   |  | 37,383         |  | 37,226        
|Effect of dilution from:                              |  |                |  |               
|Restricted stock awards                               |  | 107            |  | 152           
|Stock options                                         |  | 612            |  | 72            
|                                                      |  |                |  |               
|Diluted weighted average number of shares outstanding |  | 38,102         |  | 37,450        
|                                                      |  |                |  |               



The computation of
diluted earnings per share in the quarter ended April 29, 2004 excluded 3.1 million stock options, because the exercise prices of the stock options were greater than or equal to the average share price for the quarter, and therefore their inclusion
would have been anti-dilutive.



4. Merchandise Inventories



Merchandise inventories are stated at the lower of cost or market value.
Cost is determined using the last-in, first-out (LIFO) method. The excess of current cost over LIFO values was $180.3 million as of April 28, 2005, $174.8 million as of April 29, 2004, and $178.3 million as of January 27, 2005. LIFO costs for
interim financial statements are estimated based on projected annual inflation rates, inventory levels, and merchandise mix. Actual LIFO costs are calculated during the fourth quarter of the fiscal year when final inflation rates, inventory levels
and merchandise mix are determined.



6



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LONGS DRUG STORES CORPORATION



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



5. Goodwill and Intangible Assets



All of the Companys goodwill and other intangible assets are included in the retail drug store segment. Goodwill and
other intangible assets with indefinite useful lives are not amortized, but are subject to annual impairment testing. The Companys intangible assets other than goodwill include the following:



|                                               |  |                        |  |                      |       |                          |   |        |                    |  |   |      
|---------------------------------------------- |  | ---------------------- |  | -------------------- | ----- | ------------------------ | - | ------ | ------------------ |  | - | -----
|                                               |  | Estimated Useful Lives |  | Gross Carrying Value |       | Accumulated Amortization |   |        | Net Carrying Value
|                                               |  |                        |  | Thousands           
|As of April 28, 2005:                          |  |                        |  |                      |       |                          |   |        |                    |  |   |      
|Intangible assets subject to amortization:     |  |                        |  |                      |       |                          |   |        |                    |  |   |      
|Pharmacy customer lists                        |  | 1-5 years              |  | $                    | 2,979 |                          | $ | (1,630 | )                  |  | $ | 1,349
|Non-compete agreements and other               |  | 2-5 years              |  |                      | 50    |                          |   | (36    | )                  |  |   | 14   
|                                               |  |                        |  |                      |       |                          |   |        |                    |  |   |      
|Total                                          |  |                        |  |                      | 3,029 |                          |   | (1,666 | )                  |  |   | 1,363
|Intangible assets not subject to amortization: |  |                        |  |                      |       |                          |   |        |                    |  |   |      
|Beverage licenses                              |  | N/A                    |  |                      | 4,826 |                          |   |       |                    |  |   | 4,826
|                                               |  |                        |  |                      |       |                          |   |        |                    |  |   |      
|Total                                          |  |                        |  | $                    | 7,855 |                          | $ | (1,666 | )                  |  | $ | 6,189
|                                               |  |                        |  |                      |       |                          |   |        |                    |  |   |      
|                                               |  |                        |  |                     
|As of January 27, 2005:                        |  |                        |  |                      |       |                          |   |        |                    |  |   |      
|Intangible assets subject to amortization:     |  |                        |  |                      |       |                          |   |        |                    |  |   |      
|Pharmacy customer lists                        |  | 1-5 years              |  | $                    | 3,020 |                          | $ | (1,502 | )                  |  | $ | 1,518
|Non-compete agreements and other               |  | 2-5 years              |  |                      | 50    |                          |   | (32    | )                  |  |   | 18   
|                                               |  |                        |  |                      |       |                          |   |        |                    |  |   |      
|Total                                          |  |                        |  |                      | 3,070 |                          |   | (1,534 | )                  |  |   | 1,536
|Intangible assets not subject to amortization: |  |                        |  |                      |       |                          |   |        |                    |  |   |      
|Beverage licenses                              |  | N/A                    |  |                      | 4,818 |                          |   |       |                    |  |   | 4,818
|                                               |  |                        |  |                      |       |                          |   |        |                    |  |   |      
|Total                                          |  |                        |  | $                    | 7,888 |                          | $ | (1,534 | )                  |  | $ | 6,354
|                                               |  |                        |  |                      |       |                          |   |        |                    |  |   |      



Amortization expense
for intangible assets with finite useful lives was $0.2 million for each of the 13-week periods ended April 28, 2005 and April 29, 2004. Estimated annual amortization expense on these intangibles for their remaining estimated useful lives is as
follows (in thousands):



|                         |  |   |      
|------------------------ |  | - | -----
|Fiscal year ending:      |  |   |      
|2006 (remainder of year) |  | $ | 478  
|2007                     |  |   | 537  
|2008                     |  |   | 260  
|2009                     |  |   | 88   
|                         |  |   |      
|Total                    |  | $ | 1,363
|                         |  |   |      



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##### Table of Contents

LONGS DRUG STORES CORPORATION



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



6. Debt



Debt at April 28, 2005 and January 27, 2005 consisted of the following:



|                                                                                                                               |  |                |         |                  |   |        
|------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ------- | ---------------- | - | -------
|                                                                                                                               |  | April 28, 2005 |         | January 27, 2005
|                                                                                                                               |  | Thousands     
|Secured revolving line of credit, variable interest (weighted average rate of 3.88% as of April 28, 2005), expires August 2009 |  | $              | 20,000  |                  | $ | 40,000 
|Secured private placement notes, fixed interest rates ranging from 5.85% to 7.85%, mature at various dates through 2014        |  |                | 109,688 |                  |   | 114,558
|                                                                                                                               |  |                |         |                  |   |        
|Total debt                                                                                                                     |  |                | 129,688 |                  |   | 154,558
|Less current maturities                                                                                                        |  |                | 8,870   |                  |   | 8,870  
|                                                                                                                               |  |                |         |                  |   |        
|Long-term portion                                                                                                              |  | $              | 120,818 |                  | $ | 145,688
|                                                                                                                               |  |                |         |                  |   |        



The Companys
debt agreements contain customary restrictions, and the private placement notes also include various customary financial covenants. As of April 28, 2005, the Company was in compliance with the restrictions and limitations included in these
provisions.



7. Store Closure Reserves



The Company regularly reviews store operating results and projections and
periodically makes decisions to close stores in the normal course of business. The Company recognizes costs associated with store closures when the related liabilities are incurred. Such costs are included in the provision for store closures and
asset impairments, a component of operating income.



The following is a summary of the Companys store closure reserves, which are included in long-term liabilities:



|                                                              |  |                        |       |   |                |   |       |  
|------------------------------------------------------------- |  | ---------------------- | ----- | - | -------------- | - | ----- | -
|                                                              |  | For the 13 weeks ended |      
|                                                              |  | April 28, 2005         |       |   | April 29, 2004 |  
|                                                              |  | Thousands              |      
|Reserve balance - beginning of period                         |  | $                      | 7,011 |   |                | $ | 9,544 |  
|Provision for store closures                                  |  |                        |      |   |                |   |      |  
|Reserve accretion                                             |  |                        | 18    |   |                |   | 25    |  
|Cash payments for lease related costs, net of sublease income |  |                        | (579  | ) |                |   | (933  | )
|                                                              |  |                        |       |   |                |   |       |  
|Reserve balance - end of period                               |  | $                      | 6,450 |   |                | $ | 8,636 |  
|                                                              |  |                        |       |   |                |   |       |  



8



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##### Table of Contents

LONGS DRUG STORES CORPORATION



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



8. Commitments and Contingencies



The Company is subject to various lawsuits and claims arising in the normal course of its businesses. In the opinion of
management, after consultation with counsel, the disposition of these matters arising in the normal course of business is not likely to have a material adverse effect, individually or in the aggregate, on the Companys consolidated financial
statements taken as a whole.



9. Stockholders Equity



In the first quarter of fiscal 2006, the Company repurchased 587,500
shares of its common stock at a total cost of $21.3 million under a share repurchase program authorized by the Board of Directors in March 2003. In the first quarter of fiscal 2005, the Company repurchased 382,600 shares of its common stock at a
total cost of $7.2 million under the same program. The Company is authorized under this program to repurchase up to 167,140 additional shares of its common stock through January 2009, for a maximum additional expenditure of $4.0 million.



In May 2005, the Board of Directors authorized the repurchase of
additional shares of the Companys outstanding common stock for total consideration up to $150 million through May 2008.



10. Segment Information



The Company operates in two business segments, retail drug stores and pharmacy benefit management (PBM). These segments were identified based
on their separate and distinct products and services, technology, marketing strategies and management reporting. Management evaluates the segments operating performance separately and allocates resources based on their respective financial
condition, results of operations and cash flows. Inter-segment transactions and balances are eliminated in consolidation.



Pharmacy is the cornerstone of the retail drug store segment, complemented by such core front-end categories as cosmetics, over-the-counter medications,
photo and photo processing, food and beverage items and health and beauty products. As of April 28, 2005, the retail drug store segment operated 472 retail stores in six western states under the names Longs, Longs Drugs, Longs Drug Stores and Longs
Pharmacy; and one mail order pharmacy under the name American Diversified Pharmacies.



The PBM segment, operated through the Companys RxAmerica subsidiary, contracts with drug manufacturers, third-party health plans and retail pharmacies to provide a range of services to third-party health plan
members, including pharmacy benefit plan design and implementation, formulary management and claims administration.



9



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LONGS DRUG STORES CORPORATION



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following tables summarize significant financial information by segment:



|                                                                          |  |                |           |   |                        |   |           |                  |  |   |           |  
|------------------------------------------------------------------------- |  | -------------- | --------- | - | ---------------------- | - | --------- | ---------------- |  | - | --------- | -
|                                                                          |  |                |           |   | For the 13 weeks ended |  
|                                                                          |  |                |           |   | April 28, 2005         |   |           | April 29, 2004   | 
|                                                                          |  |                |           |   | Thousands              |  
|Sales:                                                                    |  |                |           |   |                        |   |           |                  |  |   |           |  
|Retail Drug Stores                                                        |  |                |           |   |                        | $ | 1,140,819 |                  |  | $ | 1,151,754 |  
|Pharmacy Benefit Management                                               |  |                |           |   |                        |   | 9,609     |                  |  |   | 7,942     |  
|                                                                          |  |                |           |   |                        |   |           |                  |  |   |           |  
|Consolidated Totals                                                       |  |                |           |   |                        | $ | 1,150,428 |                  |  | $ | 1,159,696 |  
|                                                                          |  |                |           |   |                        |   |           |                  |  |   |           |  
|                                                                          |  |                |          
|Operating Income:                                                         |  |                |           |   |                        |   |           |                  |  |   |           |  
|Retail Drug Stores                                                        |  |                |           |   |                        | $ | 19,938    |                  |  | $ | 15,214    |  
|Pharmacy Benefit Management                                               |  |                |           |   |                        |   | 2,902     |                  |  |   | 3,203     |  
|                                                                          |  |                |           |   |                        |   |           |                  |  |   |           |  
|Consolidated Totals                                                       |  |                |           |   |                        | $ | 22,840    |                  |  | $ | 18,417    |  
|                                                                          |  |                |           |   |                        |   |           |                  |  |   |           |  
|                                                                          |  |                |          
|                                                                          |  | April 28, 2005 |           |   | April 29, 2004         |   |           | January 27, 2005 | 
|                                                                          |  | Thousands      |          
|Total Assets:                                                             |  |                |           |   |                        |   |           |                  |  |   |           |  
|Retail Drug Stores                                                        |  | $              | 1,311,368 |   |                        | $ | 1,353,773 |                  |  | $ | 1,325,307 |  
|Pharmacy Benefit Management                                               |  |                | 102,694   |   |                        |   | 85,591    |                  |  |   | 87,259    |  
|Inter-segment Eliminations                                                |  |                | (2,530    | ) |                        |   | (1,856    | )                |  |   | (1,403    | )
|                                                                          |  |                |           |   |                        |   |           |                  |  |   |           |  
|Consolidated Totals                                                       |  | $              | 1,411,532 |   |                        | $ | 1,437,508 |                  |  | $ | 1,411,163 |  
|                                                                          |  |                |           |   |                        |   |           |                  |  |   |           |  
|                                                                          |  |                |          
|Consolidated total sales include the following product and service types: |  |                |           |   |                        |   |           |                  |  |   |           |  
|                                                                          |  |               
|                                                                          |  |                |           |   | For the 13 weeks ended |  
|                                                                          |  |                |           |   | April 28, 2005         |   |           | April 29, 2004   | 
|                                                                          |  |                |           |   | Thousands              |  
|Pharmacy sales                                                            |  |                |           |   |                        | $ | 564,416   |                  |  | $ | 550,052   |  
|Front-end sales                                                           |  |                |           |   |                        |   | 576,403   |                  |  |   | 601,702   |  
|Pharmacy benefit management revenues                                      |  |                |           |   |                        |   | 9,609     |                  |  |   | 7,942     |  
|                                                                          |  |                |           |   |                        |   |           |                  |  |   |           |  
|Consolidated total sales                                                  |  |                |           |   |                        | $ | 1,150,428 |                  |  | $ | 1,159,696 |  
|                                                                          |  |                |           |   |                        |   |           |                  |  |   |           |  



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



The following Managements Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with our consolidated financial statements and the related notes. This discussion contains forward-looking statements based upon our current expectations that involve risks and
uncertainties, such as our plans, objectives, expectations and intentions, as set forth under Cautionary Statement Regarding Forward-Looking Statements. Our actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth in the following discussion and under Risk Factors and elsewhere in this Form 10-Q.



RESULTS OF OPERATIONS

Sales



|                                                         |  |                        |           |    |                |   |           |  
|-------------------------------------------------------- |  | ---------------------- | --------- | -- | -------------- | - | --------- | -
|                                                         |  | For the 13 weeks ended |          
|                                                         |  | April 28, 2005         |           |    | April 29, 2004 |  
|Sales(Thousands)                                         |  | $                      | 1,150,428 |    |                | $ | 1,159,696 |  
|Sales Growth (Decline) over Same Period in Previous Year |  |                        | (0.8      | )% |                |   | 5.1       | %
|Same-Store Sales Growth (Decline)                        |  |                        | (1.2      | )% |                |   | 2.7       | %
|                                                         |  |                       
|Pharmacy Sales Growth                                    |  |                        | 2.6       | %  |                |   | 7.0       | %
|Same-Store Pharmacy Sales Growth                         |  |                        | 2.5       | %  |                |   | 3.7       | %
|Pharmacy as a % of Total Retail Drug Store Sales         |  |                        | 49.5      | %  |                |   | 47.8      | %
|% of Pharmacy Sales Covered by Third Party Health Plans  |  |                        | 92.5      | %  |                |   | 91.7      | %
|                                                         |  |                       
|Front-End Sales Growth (Decline)                         |  |                        | (4.2      | )% |                |   | 3.3       | %
|Same-Store Front-End Sales Growth (Decline)              |  |                        | (4.4      | )% |                |   | 1.9       | %
|Front-End as a % of Total Retail Drug Store Sales        |  |                        | 50.5      | %  |                |   | 52.2      | %



Sales decreased 0.8%
in the first quarter of fiscal 2006 from the same quarter of fiscal 2005, and same-store sales decreased 1.2%. Higher mail-order sales and pharmacy benefit management (PBM) revenues partially offset the decline in same-store sales.



Sales in the first quarter of fiscal 2005 benefited from a
strike against three major grocery chains in Southern California that began in October 2003 and ended on February 26, 2004. We estimated that the strike favorably impacted our first-quarter same-store sales a year ago by 0.6 to 0.7 percentage
points.



Pharmacy sales increased 2.6% in the first quarter of
fiscal 2006 over the same quarter last year, with same-store pharmacy sales increasing 2.5%. Same-store prescription volumes increased, due in part to a late cough, cold and flu season, partially offset by a delayed allergy season. The average
retail price per prescription also increased, but at a lower rate than in recent years, due in part to the increased utilization of lower-priced, high-volume generic drugs. We estimate that generic utilization negatively impacted our same-store
pharmacy sales by 3.0 to 3.5 percentage points. We expect that our pharmacy sales will continue to increase as a result of several industry trends, including an aging U.S. population consuming a greater number of prescription drugs, the growing use
of prescription drugs as preventive therapy by healthcare providers and the introduction of newer and more expensive drugs. Factors that could offset these trends include continuing increases in utilization of generic drugs, increasing competition
and rising prescription drug costs, which could cause consumers to reduce their purchases of prescription drugs or third-party health plans to reduce their coverage of prescription drug costs for their members.



Pharmacy sales were 49.5% of total drug store sales in the first quarter of
fiscal 2006, compared to 47.8% in the first quarter of fiscal 2005. We expect pharmacy sales to continue to increase as a percentage of total drug store sales as pharmacy sales continue to increase faster than front-end sales.



Third-party health plans covered 92.5% of our pharmacy sales in the first
quarter of fiscal 2006, compared to 91.7% in the same quarter last year. We expect third-party sales to remain over 90% of our total pharmacy sales for the foreseeable future due to significant consumer participation in managed care and other
third-party plans. The scheduled addition of a prescription drug benefit to Medicare in 2006 could further increase third-party sales as a percentage of total pharmacy sales.



11



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##### Table of Contents

Front-end sales decreased 4.2% in the first quarter of fiscal 2006 from the same quarter last year, with
same-store front-end sales decreasing 4.4%. The decline in same-store front-end sales was partially due to the Southern California grocery strike, which favorably affected last years front-end sales. In addition, as part of our efforts to
improve our merchandise offering, we have shifted our front-end merchandise mix toward our core categories of health, wellness, beauty and convenience, resulting in lower sales in non-core categories. We will continue to make adjustments to our
front-end merchandise assortments in an effort to further improve our competitive position and profitability.



The west coast economic environment continues to be difficult. Over the past year, U.S. economic growth has improved and unemployment has declined.
However, the recovery in California, our primary market, has been more gradual than that of the broader national economy, and the states unemployment rate remains above the national average. Higher gasoline prices have also had a significant
impact on consumer spending in our markets. We expect these trends to continue throughout fiscal 2006.



Gross Profit



|                           |  |                        |         |   |                |   |         |  
|-------------------------- |  | ---------------------- | ------- | - | -------------- | - | ------- | -
|                           |  | For the 13 weeks ended |        
|                           |  | April 28, 2005         |         |   | April 29, 2004 |  
|                           |  | Thousands              |        
|Gross Profit (Thousands)   |  | $                      | 302,944 |   |                | $ | 292,957 |  
|Gross Profit %             |  |                        | 26.3    | % |                |   | 25.3    | %
|LIFO Provision (Thousands) |  | $                      | 2,000   |   |                | $ | 2,000   |  



Gross profit was 26.3%
of sales in the first quarter of fiscal 2006, compared to 25.3% in the first quarter of fiscal 2005. The increase was primarily due to better buying practices, a more profitable sales mix, improved inventory management and the increased utilization
of generic drugs, which generally have higher gross profit percentages than name-brand drugs.



Continued reductions in prescription drug reimbursement rates from third-party health plans, including government-sponsored plans such as Medi-Cal, partially offset the increase in our gross profit percentage. In
addition, pharmacy sales have lower gross profit percentages than front-end sales, and as pharmacy sales continued to grow as a percent of total sales, our overall gross profit as a percent of sales was adversely affected.



We will continue to make adjustments to our front-end merchandise assortments
in an effort to further improve the profitability of our sales mix. Further, our supply chain initiative includes continuing efforts to improve our buying practices and inventory management and reduce our distribution costs. We also expect that the
utilization of generic drugs will continue to increase. We expect that continuing reductions in third-party reimbursement levels and increasing pharmacy sales as a percent of total sales will at least partially offset these favorable effects on our
gross profit percentage.



Our LIFO provision, which is included
in cost of sales, was $2 million in the first quarter of fiscal 2006 and fiscal 2005. The LIFO provision fluctuates with inflation rates, inventory levels and merchandise mix. We estimate LIFO costs for interim financial statements based on
projected annual inflation rates, inventory levels and merchandise mix. We calculate actual LIFO costs during the fourth quarter of the fiscal year when we determine final inflation rates, inventory levels and merchandise mix.



Operating and Administrative Expenses



Operating and administrative expenses were 22.5% of sales in the first
quarter of fiscal 2006, compared to 21.8% in the first quarter of fiscal 2005. Expenses related to our supply chain improvement efforts and development of our PBM segment and mail-order services to support potential future growth primarily drove the
increase in our operating and administrative expense rate. We also experienced a lack of leverage on expenses against lower sales in the first quarter of fiscal 2006 compared to the same period last year.



Depreciation and Amortization



Depreciation and amortization expenses were $21.5 million in the first
quarter of fiscal 2006 and 2005. Our depreciation and amortization expenses include accelerated depreciation for assets to be retired before the completion of their originally estimated useful lives, including assets to be removed or replaced in our
remodeled stores. The amount of accelerated depreciation expenses related to store remodels will vary based on the level and timing of our remodel activity. We expect depreciation and amortization expense for fiscal 2006 to be in the range of $87 to
$92 million.



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Net Interest Expense



Net interest expense was $2.2 million in the first quarter of fiscal 2006, compared to $3.6 million in the first quarter of
fiscal 2005. The decrease was primarily due to lower average borrowings in fiscal 2006.



Income Taxes



Our effective income tax
rate was 37.9% in the first quarter of fiscal 2006 and 37.6% in the first quarter of 2005.



LIQUIDITY AND CAPITAL RESOURCES



General



Our primary sources of
liquidity are operating cash flows and borrowings on our line of credit. We use cash to provide working capital for our operations, finance capital expenditures and acquisitions, repay debt, pay dividends and repurchase shares of our common stock.



We have a secured $280 million revolving line of credit with a
syndication of banks, which expires in August 2009 and accrues interest at LIBOR-based rates. Borrowings on this line of credit are secured with inventory, accounts receivable and certain intangible assets. As of April 28, 2005, borrowings of $20
million, with a weighted average interest rate of 3.88%, were outstanding on the secured line of credit. The secured revolving line of credit agreement contains customary restrictions but no financial covenants and no limitations on capital
expenditures or share repurchases if availability of credit remains above a minimum level. The agreement also includes an option to increase the credit facilitys borrowing and letter-of-credit capacity from $280 million to $345 million,
subject to certain conditions. Borrowings on the line of credit do not require repayment until the expiration date but may be prepaid by the Company without penalty. We pay a monthly commitment fee of 0.25% per annum on the unused portion of the
line of credit.



Additionally, as of April 28, 2005 we had
$109.7 million in outstanding privately placed promissory notes. These notes, which mature at various dates through 2014, bear interest at fixed rates ranging from 5.85% to 7.85%, and are secured on the same basis as the secured revolving line of
credit. The notes include penalties for repayment prior to their scheduled maturities. Current maturities of $8.9 million as of April 28, 2005 constitute regularly scheduled principal payments, the majority of which are due in the fourth quarter of
fiscal 2006.



The privately placed promissory notes contain
various customary financial covenants and restrictions. Failure to comply with these covenants and restrictions, or with the restrictions included in our secured revolving line of credit, could adversely affect our ability to manage our cash
requirements, and could result in higher interest costs and potentially accelerated repayment requirements. As of April 28, 2005, we were in compliance with the restrictions and limitations included in these provisions.



We believe that cash on hand, together with cash provided by operating
activities and borrowings on our line of credit, will be sufficient to meet our working capital, capital expenditure and debt service requirements beyond the next 12 months.



Operating Cash Flows



Net cash provided by operating activities was $61.8 million in the first quarter of fiscal 2006, compared to $44.2 million in the first quarter of fiscal
2005. Improved management of working capital, primarily receivables, inventory, accounts payable and accrued expenses, favorably affected our operating cash flows by $8.8 million in the first quarter of fiscal 2006 compared to the first quarter of
fiscal 2005. The remainder of the increase was primarily due to higher net income and increased non-cash stock-based compensation expenses.



Investing Cash Flows



Net cash used in investing activities was $14.9 million in the first quarter of fiscal 2006, compared to $22.3 million in the same period last year. The
decrease was primarily due to cash receipts of $4.9 million from property dispositions in the first quarter of fiscal 2006. We expect net capital expenditures in fiscal 2006 to be between $120 million and $130 million, primarily for new store
investments, remodels and improvements to existing stores, technology and supply chain improvements. We plan to open or relocate 5 to 10 new stores and remodel up to 40 stores during the year. In addition, in the ordinary course of business we may
acquire stores, store-related assets including pharmacy customer lists, or other complementary businesses.



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Financing Cash Flows



Net cash used in financing activities was $44.3 million in the first quarter of fiscal 2006, compared to $7.4 million in the
first quarter of fiscal 2005. Our financing activities primarily consist of long-term borrowings and repayments, repurchases of common stock, dividend payments and proceeds from the exercise of stock options.



Net repayments on our revolving line of credit were $20 million in the first
quarter of fiscal 2006, compared to borrowings of $10.0 million in the same period last year. We used these borrowings, together with cash flows from operations, to finance capital expenditures, stock repurchases and dividend payments. We also made
regularly scheduled principal payments of $4.9 million on our private placement notes in the first quarter of both fiscal 2006 and fiscal 2005.



In the first quarter of fiscal 2006, we repurchased 587,500 shares of our common stock at a total cost of $21.3 million under a share repurchase program
authorized by the Board of Directors in March 2003. In the first quarter of fiscal 2005, we repurchased 382,600 shares of our common stock at a total cost of $7.2 million under the same program. We are authorized under this program to repurchase up
to 167,140 additional shares of our common stock through January 2009, for a maximum additional expenditure of $4.0 million. In May 2005, the Board of Directors authorized the repurchase of additional shares of our common stock for total
consideration up to $150 million through May 2008. Any future repurchase of our common stock will depend on existing market conditions, our financial position, and other capital requirements.



Our Board of Directors makes decisions about the declaration of quarterly
dividends based on, among other things, our results of operations and financial position. We paid quarterly dividends of $0.14 per share, or $5.3 million, in the first quarter of both fiscal years 2006 and 2005.



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RISK FACTORS



You should carefully read the following risk factors.



Our ability to successfully implement significant
organizational changes, including new supply chain systems and processes, is critical to the ongoing success of our business.



We are currently undertaking a series of initiatives designed to help us respond to the changing needs of our customers while improving our productivity
and profitability. These initiatives include a program to upgrade our supply chain, primarily through technology systems changes. Such organizational and technology systems changes are complex and could cause disruptions that would adversely affect
our sales, gross profit and operating and administrative expenses. Our ability to successfully implement these organizational, systems and process changes, which are significant to our operations and business, is critical to our future
profitability. We cannot assure you that we will be able to execute these changes successfully and without significant disruption to our business. If we are not successful, we may not achieve the expected benefits from these initiatives, despite
having expended significant capital and human effort. Furthermore, we may encounter difficulties implementing this amount of change in our organization that could have a negative impact on our implementation plans and project budgets. We may also
determine that additional investment is required to bring our supply chain and related systems to their desired state; this could result in a significant additional investment of time and money and increased implementation risk.



Changes in economic conditions could adversely affect consumer buying
practices and reduce our sales and profitability.



Over the
past year, the U.S. economic growth has improved and unemployment has declined. However, the recovery in California, our primary market, has been slower, and the states unemployment rate remains above the national average. Higher gasoline
prices have also had a significant impact on consumer spending in our markets. Deterioration in economic conditions, particularly in California, could adversely affect our sales and profitability. For example, an increase in unemployment could cause
consumers to lose their health insurance, which could in turn adversely affect our pharmacy sales, or a significant increase in prescription co-payments could cause consumers not to buy medications. Further, a decrease in overall consumer spending
as a result of changes in economic conditions could adversely affect our front-end sales. Our profit margins are higher on our front-end sales than our pharmacy sales and therefore any decrease in our sales of front-end products would have a
disproportionate negative impact on our profitability.



The
retail drug store and pharmacy benefit management industries are highly competitive, and further increases in competition could adversely affect us.



We face intense competition with local, regional and national companies, including other drug store chains, independent drug stores, on-line retailers,
supermarket chains and mass merchandisers, many of whom are aggressively expanding in markets we serve. In addition, competition from mail order pharmacies is rapidly intensifying, and some third-party health plans require mail-order fulfillment of
certain medications. In the PBM industry, our competitors include large national and regional PBMs, some of which are owned by our retail drug store competitors. Many of our competitors have substantially greater resources, including name
recognition and capital resources, than we do. As competition increases in the markets in which we operate, a significant increase in general pricing pressures could occur, which could require us to reduce prices, purchase more effectively and
increase customer service to remain competitive. We cannot assure you that we will be able to continue to compete effectively in our markets or increase our sales volume or margins in response to further increased competition.



Changes in third-party reimbursement levels for prescription drugs
continue to reduce our margins on pharmacy sales and could have a material adverse effect on our overall performance.



We are wholly or partially reimbursed by third-party health plans for more than 90% of all the prescription drugs that we sell. Pharmacy sales reimbursed
by third parties have lower gross margins than non third-party pharmacy sales, and third-party health plans continue to reduce the levels at which they reimburse us for the prescription drugs that we provide to their members. Furthermore,
government-sponsored health plans such as Medicare and Medicaid are making continuing efforts to reduce their costs, including prescription drug reimbursements. For example, last year the State of California adopted a budget that reduced Medi-Cal
reimbursements to health care providers including pharmacies effective September 1, 2004. If third-party health plans, including government-sponsored plans, continue to reduce their reimbursement levels, our sales and gross profits could be
significantly adversely affected. In addition, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 included new prescription drug benefits and discounts for Medicare participants. If these changes result in lower reimbursement
levels for Medicare participants, our sales and gross profits could be adversely affected.



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Structural changes in the retail pharmacy and related industries could adversely affect our
operations.



The pharmacy industry is undergoing
significant structural changes, including declining third-party reimbursement levels, significant changes to government-sponsored health plans such as Medicare and Medicaid, legislative and other initiatives to permit re-importation of prescription
drugs from foreign countries, and mandatory mail-order fulfillment of prescriptions by certain health plans. These changes could adversely affect our sales and profitability by reducing prescription drug reimbursement levels or by causing consumers
to purchase their prescription drugs from other sources.



The significant investments we are making in our stores may not increase our sales and profitability, which could adversely affect our results of operations, financial condition and cash flows.



We have recently made and are continuing to make significant investments in
our stores in an effort to increase our sales and profitability. These investments include the installation of new digital photo equipment, pharmacy and other technology, and remodels and other improvements to some existing stores. These investments
require significant capital expenditures and human effort and are largely unprecedented at our company. We are uncertain about consumer reaction to these changes and therefore we cannot assure you that they will result in increased sales and
profitability. A failure to increase our sales and profitability would adversely affect our results of operations, financial condition and cash flows.



Continued volatility in insurance related expenses and the markets for insurance coverage could have a material adverse effect on us.



The costs of many types of insurance, especially workers
compensation, employee medical and others have been highly volatile in recent years. These conditions have been exacerbated by rising health care costs, legislative changes, economic conditions, terrorism and heightened scrutiny of insurance brokers
and insurance providers. If our insurance-related costs increase significantly, or if we are unable to obtain adequate levels of insurance, our financial position and results of operations could be adversely affected.



We are substantially dependent on a single supplier of pharmaceutical
products to sell products to us on satisfactory terms. A disruption in our relationship with this supplier could have a material adverse effect on our business.



We obtain approximately half of our total merchandise, including over 90% of our pharmaceuticals, from a single supplier,
AmerisourceBergen, with whom we have a long-term supply contract that is scheduled to expire in fiscal 2007. Any significant disruptions in our relationship with AmerisourceBergen, deterioration in AmerisourceBergens financial condition, or
industry-wide changes in wholesaler business practices, including those of AmerisourceBergen, could have a material adverse effect on us. Failure to renew or replace our supply contract with AmerisourceBergen or another supplier upon its expiration
under similar terms and conditions, or to increase our self-distribution capabilities relative to the products we currently purchase under this contract, could significantly disrupt our operations and adversely affect our sales and profitability.



Our ability to attract and retain pharmacy personnel or
develop alternate fill sources is important to the continued success of our business.



Our industry is continuing to experience a shortage of licensed pharmacists in the markets in which we operate. If we are unable to attract and retain pharmacists, our business could be adversely affected. In order to
mitigate this risk we have established centralized prescription fill centers, including one that we operate under a joint venture with AmerisourceBergen, and have also installed robotic prescription fill equipment in many of our pharmacies. The
success of these efforts, which cannot be assured, is important to our ability to address the shortage of pharmacists, but additional efforts may be necessary to address this business issue. Other options may be costly, and could adversely affect
our results of operations, financial condition and cash flows.



We are subject to governmental regulations, procedures and requirements. Our noncompliance with, or a significant change in, these regulations could have a material adverse effect on us.



Our pharmacy and PBM businesses are subject to numerous federal, state and
local regulations, many of which are new and developing. These include, but are not limited to, local registrations of pharmacies in the states where our pharmacies are located and applicable Medicare and Medicaid regulations. In addition, the
Health Insurance Portability and Accountability Act, or HIPAA, imposes certain requirements regarding the protection of confidential patient medical records and other information. Compliance with these regulations, particularly HIPAA, requires that
we implement complex changes to our systems and processes. Failure to adhere to these and other applicable regulations could result in the imposition of civil and



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criminal penalties. Furthermore, any new federal or state regulations or reforms, including healthcare reform initiatives or pharmacy benefit management
regulation, could adversely affect us.



Certain risks are
inherent in providing pharmacy services, and our insurance may not be adequate to cover some claims against us.



Pharmacies are exposed to risks inherent in the packaging and distribution of pharmaceuticals and other healthcare products and are significantly
dependent upon suppliers to provide safe, government-approved and non-counterfeit products. Although we maintain professional liability and errors and omissions liability insurance, should a product liability issue arise, we cannot assure you that
the coverage limits under our insurance programs will be adequate to protect us against future claims, that we will be able to maintain this insurance on acceptable terms in the future or that the damage to our reputation in the event of a product
liability issue will not have a material adverse effect on our business.



Our geographic concentration in the western United States presents certain risks that could adversely affect us.



Our stores, distribution centers and corporate offices are located in the western United States. Risks prevalent in this region include, but are not
limited to, major earthquakes, periodic energy shortages and rising energy costs, and shipping and other transportation-related disruptions. Because of our geographic concentration, these risks could result in significant disruptions to our business
or increased operating expenses.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------



Our major market risk exposure is changing interest rates. We use debt financing in combination with operating cash flows to
support capital expenditures, acquisitions, working capital needs, dividend payments, share repurchases and other general corporate purposes. A portion of our debt ($20 million at April 28, 2005) bears interest at LIBOR-based rates, and therefore an
increase in interest rates could increase our interest expense. We do not currently undertake any specific actions to cover our exposure to interest rate risk and we are not currently a party to any interest rate risk management transactions. We
have not purchased and do not currently hold any derivative financial instruments. Depending on the interest rate environment and subject to approval by our Board of Directors, we may make use of derivative financial instruments or other interest
rate management vehicles in the future.



A 10% change in
interest rates (39 basis points on our floating-rate debt as of April 28, 2005) would have an immaterial effect on our earnings and cash flows and on the fair value of our fixed rate debt.



|Item 4. | Controls and Procedures
|------- | -----------------------



We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure.



As of April 28, 2005, the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and
our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective and adequate to provide reasonable assurance that material information relating to our company would be made known to them on a timely basis.



There have been no changes in our internal controls over financial reporting that occurred during the quarter covered by
this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



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PART II  OTHER INFORMATION



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------



We made the following repurchases of our common stock during the quarter ended April 28, 2005:



|                                     |  |                                  |  |                              |       |                                                                                      |         |                                                                                |        
|------------------------------------ |  | -------------------------------- |  | ---------------------------- | ----- | ------------------------------------------------------------------------------------ | ------- | ------------------------------------------------------------------------------ | -------
|Period                               |  | Total Number of Shares Purchased |  | Average Price Paid per Share |       | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(1) |         | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
|Month #1                             |  |                                  |  |                              |       |                                                                                      |         |                                                                                |        
|January 28, 2005 - February 24, 2005 |  |                                 |  |                              |      |                                                                                      |        |                                                                                | 754,640
|                                     |  |                                  |  |                             
|Month #2                             |  |                                  |  |                              |       |                                                                                      |         |                                                                                |        
|February 25, 2005 - March 31, 2005   |  |                                 |  |                              |      |                                                                                      |        |                                                                                | 754,640
|                                     |  |                                  |  |                             
|Month #3                             |  |                                  |  |                              |       |                                                                                      |         |                                                                                |        
|April 1, 2005 - April 28, 2005       |  | 587,500                          |  | $                            | 36.18 |                                                                                      | 587,500 |                                                                                | 167,140
|                                     |  |                                  |  |                              |       |                                                                                      |         |                                                                                |        
|                                     |  |                                  |  |                             
|Total                                |  | 587,500                          |  | $                            | 36.18 |                                                                                      | 587,500 |                                                                                | 167,140



|(1) | In March 2003, our Board of Directors authorized the repurchase of up to 2,000,000 shares of our common stock through January 2009, for a maximum total purchase
price of $50 million. Through April 28, 2005, we repurchased 1,832,860 shares under this authorization at a total cost of $46 million. All of the shares repurchased during the quarter ended April 28, 2005 were under the March 2003 authorization by
the Board of Directors.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------



|(a) | EXHIBITS
|--- | --------



|            |  |                                                                                                                                                                             
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  |                                                                                                                                                                             
|            | 
|10.1        |  | Form of Restricted Stock Award Agreement for Senior Officers under the Longs Drug Stores Corporation 1995 Long-Term Incentive Plan.*                                        
|            | 
|10.2        |  | Form of Restricted Stock award Agreement for Non-Senior Officers under the Longs Drug Stores Corporation 1995 Long-Term Incentive Plan.*                                    
|            | 
|10.3        |  | Form of Restricted Stock Award Agreement under the Longs Drug Stores Corporation Non-Executive Long-Term Incentive Plan.*                                                   
|            | 
|31.         |  | Certification of the Chief Executive Officer and the Chief Financial Officer of Longs Drug Stores Corporation, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **
|            | 
|32.         |  | Certification of the Chief Executive Officer and the Chief Financial Officer of Longs Drug Stores Corporation, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

---

|* | Indicates a management contract or compensatory plan or arrangement.
|- | --------------------------------------------------------------------



|** | These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. §1350, and are not being filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference to any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(b) | REPORTS ON FORM 8-K
|--- | -------------------



On February 4, 2005, we filed a Current Report on Form 8-K related to a press release regarding our January 2005 sales results.



On March 2, 2005, we filed a Current Report
on Form 8-K related to a press release regarding our fourth quarter and full year fiscal 2005 financial results and first quarter and full year fiscal 2006 financial projections.



On March 2, 2005 we filed a Current Report on Form 8-K related to our payment of fiscal 2005 bonuses to
executive officers and the approval of certain performance-based restricted stock grants and a press release regarding the departure and election of certain members of the Board of Directors.



On March 3, 2005 we filed a Current Report on Form 8-K/A
related to options granted to certain executive officers.



On March 4, 2005, we filed a Current Report on Form 8-K related to a press release regarding our February 2005 sales results.



On March 7, 2005 we filed a Current Report on Form 8-K/A related to our payment of fiscal 2005 bonuses to executive officers.



On April 7, 2005, we filed a Current Report
on Form 8-K related to a press release regarding our March 2005 sales results.



On April 11, 2005, we filed a Current Report on Form 8-K related to a press release regarding the results of our review of certain lease
accounting matters.



On April 14, 2005, we
filed a Current Report on Form 8-K related to the approval of fiscal 2006 bonus targets and restricted stock granted to certain executive officers.



On April 18, 2005, we filed a Current Report on Form 8-K related to restricted stock grants to certain executive officers.



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SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                   |  |  |  |                                                                                                          
|------------------ |  |  |  | ---------------------------------------------------------------------------------------------------------
|                   |  |  |  | LONGS DRUG STORES CORPORATION (Registrant)                                                               
|                   |  | 
|Date: June 2, 2005 |  |  |  | /s/    S. F. MCCANN                                                                                      
|                   |  |  |  | (S. F. McCann) Executive Vice President, Chief Financial Officer and Treasurer                           
|                   |  | 
|Date: June 2, 2005 |  |  |  | /s/    R. L. CHELEMEDOS                                                                                  
|                   |  |  |  | (R. L. Chelemedos) Group Vice PresidentController and Assistant Secretary (Principal Accounting Officer)



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