UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Thirty-Nine Weeks Ended October 29, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- ---------
Commission File No. 1-4844
ECKERD CORPORATION
(Exact name of registrant as specified in charter)
DELAWARE 13-3302437
(State of incorporation) (I.R.S. Employer Identification No.)
8333 Bryan Dairy Road
Largo, Florida 34647
(Address and zip code of principal executive offices)
(813) 399-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
As of November 26, 1994 the following number of shares of Common Stock, $.01
par value, were outstanding: 32,104,727 (including 605,022 shares of
Non-Voting Common Stock)
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<PAGE>
<TABLE>
ECKERD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<CAPTION>
Unaudited Audited
ASSETS 10/29/94 1/29/94
- ------ --------- ---------
<S> <C> <C>
Current assets:
Cash and short-term interest bearing deposits $ 12,380 12,110
Receivables, less allowance for doubtful
receivables of $5,000 and $5,000 98,894 92,672
Merchandise inventories 825,984 765,653
Prepaid expenses and other current assets 5,269 6,232
--------- ---------
Total current assets 942,527 876,667
--------- ---------
Property, plant and equipment, at cost 545,505 516,361
Less accumulated depreciation 248,553 239,025
--------- ---------
Net property, plant and equipment 296,952 277,336
Excess of cost over net assets acquired, less --------- ---------
accumulated amortization 33,526 31,594
Favorable lease interests, less accumulated amortization 159,785 177,803
Unamortized debt expense 39,142 38,779
Other assets 20,436 18,225
--------- ---------
$1,492,368 1,420,404
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
Current liabilities:
Bank debit balances $ 16,180 40,974
Current installments of long-term debt 2,063 1,905
Accounts payable 326,700 363,136
Accrued expenses 207,210 164,064
--------- ---------
Total current liabilities 552,153 570,079
--------- ---------
Other non-current liabilities 98,934 76,361
Long-term debt, excluding current installments 978,653 952,986
Stockholders' deficit:
Preferred stock of $.01 par value.
Authorized 20,000,000 shares; none issued - -
Voting common stock of $.01 par value.
Authorized 96,481,272 shares; issued 31,463,033
and 31,031,811 315 310
Non-voting common stock of $.01 par value.
Authorized 3,518,728 shares; issued 605,022 shares 6 6
Capital in excess of par value 233,634 225,560
Retained deficit (371,327) (404,898)
--------- ---------
Total stockholders' deficit (137,372) (179,022)
--------- ---------
$1,492,368 1,420,404
========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
ECKERD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------- -----------------------
10/29/94 10/30/93 10/29/94 10/30/93
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales and other operating revenue $1,061,704 972,675 3,246,434 3,009,022
--------- ------- --------- ---------
Costs and expenses:
Cost of sales, including store
occupancy, warehousing and
delivery expense 822,181 744,906 2,490,190 2,280,907
Operating and administrative
expenses 215,476 212,200 649,089 632,146
--------- ------- --------- ---------
Earnings before interest
expense 24,047 15,569 107,155 95,969
Interest expense:
Interest expense, net 21,514 23,296 66,515 83,249
Amortization of original issue
discount and deferred debt
expenses 1,896 1,865 5,287 5,442
--------- ------- --------- ---------
Total interest expense 23,410 25,161 71,802 88,691
--------- ------- --------- ---------
Earnings (loss) before income
taxes and extraordinary item 637 (9,592) 35,353 7,278
Income tax provision 32 (455) 1,782 1,800
--------- ------- --------- ---------
Earnings (loss) before
extraordinary item 605 (9,137) 33,571 5,478
Extraordinary item-early retirement
of debt and preferred stock, net
of taxes - (2,421) - (30,084)
--------- ------- --------- ---------
Net earnings (loss) for the
period 605 (11,558) 33,571 (24,606)
Preferred stock dividends - - - 4,924
--------- ------- --------- ---------
Net earnings (loss) available
to common shares $ 605 (11,558) 33,571 (29,530)
========= ======= ========= =========
Earnings (loss) per common share:
Earnings (loss) before
extraordinary item $ .02 (.29) 1.04 .02
Extraordinary item - (.08) - (1.06)
--------- ------- --------- ---------
Net earnings (loss) per
common share $ .02 (.37) 1.04 (1.04)
========= ======= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
ECKERD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<CAPTION>
Thirty-Nine Weeks Ended
-------------------------
10/29/94 10/30/93
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) for the period $ 33,571 (24,606)
Adjustments to reconcile net earnings (loss) for the
period to net cash provided by operating
activities:
Extraordinary charge related to early
retirement of debt and preferred stock - 31,184
Depreciation and amortization 57,784 65,194
Amortization of original issue discount
and deferred debt expenses 5,287 5,442
Increase in receivables, merchandise
inventories and prepaid expenses (76,737) (71,439)
Increase (decrease) in accounts payable and
accrued expenses (479) 85,289
Net cash provided by operating -------- -------
activities 19,426 91,064
-------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (69,382) (30,925)
Sale of property, plant and equipment 1,484 37,419
Acquisition of certain drug store assets (12,022) (670)
Net cash proceeds from sale of Vision Group 22,624 -
Other 2,779 (4,765)
Net cash from (used in) investing -------- -------
activities (54,517) 1,059
-------- -------
Cash flows from financing activities:
Decrease in bank debit balances (24,794) (12,231)
14.5% preferred stock cash dividends - (4,924)
Net additions to deferred payments for equipment 31,900 -
Additions to long-term debt 842 714
Reductions of long-term debt (1,554) (2,626)
Net additions under current credit agreement 25,811 674,211
Net reductions under prior credit agreement - (221,723)
Redemption of 14.5% preferred stock - (75,000)
Common stock sold in a public offering, net of
expenses of sale - 64,868
Redemption of 13% subordinated debentures - (295,165)
Redemption of senior notes - (168,000)
Common stock issued for an acquisition 7,576 -
Other, including deferred financing costs (4,420) (58,777)
-------- -------
Net cash provided by (used in) financing
activities 35,361 (98,653)
-------- -------
Net increase (decrease) in cash and cash equivalents 270 (6,530)
Cash and short-term interest bearing deposits
at beginning of period 12,110 18,642
-------- -------
Cash and short-term interest bearing deposits
at end of period $ 12,380 12,112
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
-------
The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries all of which are wholly owned, and
were prepared from the books and records of the Company without audit
or verification and in the opinion of management include all
adjustments (none of which were other than recurring accruals)
necessary to present a fair statement of results for such periods. It
is suggested that these condensed consolidated financial statements
should be read in conjunction with the financial statements and notes
filed as part of the Form 10-K/A report for the fiscal year ended
January 29, 1994. The results of operations of the periods indicated
should not be considered as necessarily indicative of operations for
the full year.
Note 2.
-------
Substantially all inventories are determined on a last-in, first-out
(LIFO) cost basis. At October 29, 1994 and January 29, 1994
inventories would have been greater by approximately $73.5 million and
$66.1 million, respectively, if inventories were valued on a first-in,
first-out (FIFO) cost basis. The cost of merchandise sold is
calculated primarily on estimated inventory values and inflation rates
based on physical inventories taken at all locations at least once
during the fiscal year.
Note 3.
-------
Net earnings per common share calculations for the periods presented
are after considering any preferred dividends paid on the Company's
14.5% cumulative redeemable preferred stock which was repurchased on
July 15, 1993. The weighted average number of shares outstanding for
the thirteen and thirty-nine weeks ended October 29, 1994 and October
30, 1993 were 32,422,000 and 32,297,000 in 1994 and 31,606,000 and
28,499,000 in 1993, respectively.
Note 4.
-------
Certain amounts have been reclassified in the audited condensed
consolidated balance sheet to conform to the fiscal 1994 condensed
consolidated financial statement presentation.
(Continued)
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<TABLE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5. ECKERD CORPORATION AND SUBSIDIARIES
- ------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------------------- --------------------------------
10/29/94 10/30/93 10/29/94 10/30/93
---------- --------------------- --------- ---------------------
Actual Actual Adjusted(A) Actual Actual Adjusted(A)
---------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sales $1,061,704 972,675 957,851 3,246,434 3,009,022 2,963,078
Cost of sales 822,181 744,906 737,584 2,490,190 2,280,907 2,255,223
Operating and admin-
istrative expenses 206,995 204,849 198,205 624,830 606,096 589,385
Amortization of
intangibles 8,481 7,351 7,317 24,259 26,050 25,947
--------- --------- --------- --------- --------- ---------
Operating profit 24,047 15,569 14,745 107,155 95,969 92,523
Interest expense 23,410 25,161 24,686 71,802 88,691 87,266
Income taxes 32 (455) (732) 1,782 1,800 1,300
Earnings (loss) before --------- --------- --------- --------- --------- ---------
extraordinary items 605 (9,137) (9,209) 33,571 5,478 3,957
Extraordinary items - (2,421) (2,421) - (30,084) (30,084)
--------- --------- --------- --------- --------- ---------
Net earnings (loss) 605 (11,558) (11,630) 33,571 (24,606) (26,127)
Preferred stock
dividends - - - - 4,924 4,924
Net earnings(loss) --------- --------- --------- --------- --------- ---------
available to common
shares $ 605 (11,558) (11,630) 33,571 (29,530) (31,051)
========= ========= ========= ========= ========= =========
Net earnings (loss) per
common share before
extraordinary item $ .02 (.29) (.29) 1.04 .02 (.03)
Net earnings (loss) per ===== ===== ===== ==== ==== ====
common share $ .02 (.37) (.37) 1.04 (1.04) (1.10)
===== ===== ===== ==== ==== ====
Weighted average number
of shares outstanding 32,422 31,606 31,606 32,297 28,499 28,251
Earnings before interest,
income taxes,
depreciation and
amortization (EBITDA) $ 44,343 34,725 33,294 164,939 161,163 155,901
EBITDA, adjusted for
comparability (B) $ 48,420 38,627 37,196 176,421 168,226 162,964
(A) The adjusted financial data is based on the historical financial statements of the
Company, adjusted to give effect to the Company's sale of the Vision Group operations
which was sold effective January 30, 1994, and the use of the net proceeds therefrom
as if such transaction had occurred as of the beginning of the thirty-nine week
period ended October 30, 1993.
(B) Two financing transactions entered into in April and June of last year relating to
the placement of certain inventory on consignment and the sale and leaseback of
certain photo processing equipment negatively impacted the comparability of third
quarter and thirty-nine weeks EBITDA with last year by approximately $175 for the
third quarter and $4,419 for the thirty-nine weeks, respectively.
</TABLE>
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<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The Company sold its Vision Group operations effective January 30, 1994. The
following results of operations discussion will compare the third quarter and
year-to-date of fiscal 1994 to the adjusted third quarter and year-to date of
fiscal 1993 (thirteen and thirty-nine weeks ended October 29, 1994 and October
30, 1993) which gives effect to the Company's sale of the Vision Group
operations. See "footnote 5 of Notes to Condensed Consolidated Financial
Statements." Since the sale of Insta-Care Holdings, Inc. ("Insta-Care") was
not consummated until November 15, 1994, the following results of operations
discussion includes the operations of Insta-Care.
The Company's sales and other operating revenue for the third quarter and
year-to-date of fiscal 1994 were $1,061.7 million and $3,246.4 million compared
to $957.9 million and $2,963.1 million in fiscal 1993, respectively, an
increase of 10.9% for the third quarter and 9.6% year-to-date. Drug store
prescription sales for the third quarter and year-to-date of fiscal 1994 were
$550.3 million and $1,633.9 million, an increase of 16.7% and 16.1% over the
third quarter and year-to-date of fiscal 1993. In addition, drug store front
end sales increased 5.3% and 3.7% for the third quarter and year-to-date of
fiscal 1994 over the same periods of fiscal 1993. Comparable drug store sales
(stores open for one year or more) increased 9.4% and 8.4% for the third
quarter and year-to-date of fiscal 1994, compared to a 5.2% and 5.4% increase
for the third quarter and year-to-date of fiscal 1993. The increase in
comparable drug store sales for third quarter and year-to-date was due to the
increase in sales of prescription drugs resulting from sales related to
third-party prescription plans and the Company's competitive cash pricing
strategy. In addition, comparable drug store sales growth was positively
affected by increased sales of non prescription items in the health, skincare,
stationery and greeting card, convenience food and photofinishing categories
resulting from increased marketing emphasis and shelf space for these
categories. Total sales growth for the third quarter and year-to-date was
positively affected by the growth in comparable drug store sales.
Prescription sales as a percentage of drug store sales was approximately 53.3%
and 51.7% for the third quarter and year-to-date of fiscal 1994 as compared
with approximately 50.7% and 48.8% for the third quarter and year-to-date of
fiscal 1993. The growth in prescription sales for the third quarter and
year-to-date was primarily the result of increased third-party prescription
sales and the Company's competitive cash pricing strategy. Third-party
prescription sales increased to approximately 65.3% and 63.9% of the Company's
prescription sales for the third quarter and year-to-date of fiscal 1994 from
approximately 59.4% and 57.3% in fiscal 1993, respectively. The Company
expects prescription sales to third-party payors, in terms of both dollar
volume and as a percentage of total prescription sales, to continue to increase
in fiscal 1994 and for the foreseeable future. Although contracts with
third-party payors generally increase the volume of prescription sales and
gross profit dollars, third-party payors typically negotiate lower prescription
prices than those on non third-party prescriptions, resulting in decreasing
gross profit margins on the Company's prescription sales.
-7-
<PAGE>
<TABLE>
<S> <C>
Cost of sales and related expenses for the third quarter and year-to-date of
fiscal 1994 was $822.2 million and $2,490.2 million compared to $737.6 million
and $2,255.2 million in fiscal 1993, respectively, an increase of 11.5% and
10.4% for the third quarter and year-to-date. As a percentage of sales, cost
of sales and related expenses were 77.4% and 76.7% compared to 77.0% and 76.1%
for the third quarter and year-to-date of fiscal 1994 and 1993, respectively.
The increase in cost of sales and related expenses as a percentage of sales
primarily resulted from the continued increase in third-party prescription sales
with typically lower gross profit margins than non third-party prescription
sales. These factors were partially offset by a lower LIFO charge of $7.4
million compared to $9.3 million year-to-date for fiscal 1994 and 1993,
respectively.
Operating and administrative expenses for the third quarter and year-to-date of
fiscal 1994 were $215.5 million and $649.1 million compared to $205.5 million
and $615.3 million in fiscal 1993, respectively, an increase of 4.9% and 5.5%,
respectively. As a percentage of sales, operating and administrative expenses
decreased to 20.3% and 20.0% for the third quarter and year-to-date of fiscal
1994 from 21.5% and 20.8% for the third quarter and year-to-date of fiscal
1993, as a result of the higher sales in fiscal 1994 and lower costs as a
percentage of sales in such expense categories as payroll, advertising and
insurance. Non-cash, tax deductible amortization of intangibles included in
operating and administrative expenses for the third quarter and year-to-date of
fiscal 1994 and 1993 were $8.4 million and $24.2 million, compared to $7.3
million and $25.9 million, respectively, an increase of 15.1% and a decrease of
6.6%, respectively.
Earnings before interest expenses were $24.0 million and $107.2 million for the
third quarter and year-to-date of fiscal 1994, compared to $14.7 million and
$92.5 million for the third quarter and year-to-date of fiscal 1993, an
increase of 63.1% and 15.8%, respectively, primarily due to the increase in
gross profit dollars as a result of higher sales and other operating revenue,
and a decrease in operating and administrative expenses as a percentage of
sales. Two financing transactions entered into in April and June of 1993
relating to the placement of certain inventory on consignment and the sale and
leaseback of certain photo processing equipment negatively impacted the
comparability of year-to-date earnings before interest expenses by $1.7 million
with a corresponding positive impact on interest expense and had no impact on
third quarter earnings comparability.
Total interest expenses were $23.4 million and $71.8 million compared to $24.7
million and $87.3 million for the third quarter and year-to-date of fiscal 1994
and 1993, respectively, a decrease of 5.3% and 17.8%, respectively. The
decrease was due primarily to the lower cost of debt for the Company after the
June 1993 refinancing, the August 1993 initial public offering, the November
1993 9.25% Senior Subordinated Note issuance and the August 1994 amendment to
the Credit Agreement which provided improved pricing.
Income taxes for the third quarter and year-to-date of fiscal 1994 and 1993
were $.0 million and $1.8 million and $(.7) million and $1.3 million,
respectively. Income taxes represent alternative minimum and state income
taxes for the Company, and reflect the utilization of net operating loss
carryforwards.
As a result of the foregoing factors, the Company had net earnings before
extraordinary items for the third quarter and year-to-date of fiscal 1994 of
</TABLE>
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<PAGE>
$.6 million and $33.6 million, or .1% and 1.0% of sales, compared with a net
loss of $9.2 million and net earnings of $4.0 million, or (1.0%) and .1% of
sales for the third quarter and year-to-date of fiscal 1993.
At October 29, 1994 the Company operated 1,724 Eckerd Drug stores and 465
Eckerd Express Photo labs and Insta-Care Pharmacy Services a provider of
pharmaceutical care to institutions.
Financial Condition and Liquidity
With respect to the balance sheet at October 29, 1994 compared to the balance
sheet at January 29, 1994, merchandise inventories increased $60.3 million (net
of the LIFO charge of $7.4 million) to $826.0 million, accounts receivable
increased $6.2 million to $98.9 million and property, plant and equipment
increased $29.1 million to $545.5 million. The sale of the Vision Group
operations reduced inventories, receivables and property, plant and equipment
by approximately $12.5 million, $2.6 million and $26.7 million, respectively.
The inventory increase is a result of additional inventory needed to support
strong sales and for the customary Christmas seasonal inventory buildup. The
receivables increase is attributable primarily to the increase in third-party
prescription sales and vendor promotions and allowances receivables. Additions
to property, plant and equipment of $69.4 million were primarily due to the
installation of point-of-sale product scanning equipment and satellite
communications equipment along with other improvements to existing stores and
facilities and the addition of new stores. Sales and retirements of fully
depreciated assets were $13.5 million.
On August 3, 1994, the Company completed an amendment to the Credit Agreement.
The $850 million facility does not provide any additional proceeds to the
Company, but it does provide improved pricing and increased operating
flexibility with respect to acquisitions, capital expenditures and lease
payments. The Revolving Loan facility was increased to $350.0 million and the
six year amortizing Term Facility combined the Tranche A and B loans and was
reduced to $500.0 million. The Term Facility is currently priced at LIBOR plus
1.5% (compared to 2.75% and 3.00% over LIBOR before the amendment) with future
reductions in rates if the Company achieves certain debt levels and performance
goals.
At October 29, 1994, the Company had $602.0 million in borrowings outstanding
under the Credit Agreement ($490.0 million under Term Loan borrowings, $90.0
million Revolving Loan borrowings and $22.0 million of banker's acceptances)
and the Company had unused and available borrowing commitments thereunder of
$157.7 million which is net of $80.3 million of letters of credit. The Term
Loan commitment of $490.0 million amortizes in unequal quarterly payments and
matures in full in July 2000. The Revolving Loan commitment of $350.0 million
matures in full at the end of July 2000. At October 29, 1994 the Company had
excess availability under the Revolving Loan commitment and accordingly did not
treat the required amortization repayments as current.
On October 29, 1994 the Company had working capital of $390.4 million and a
current ratio of 1.7 to 1 compared to $306.6 million and 1.5 to 1 at January
29, 1994. Including the Company's year-to-date net earnings of $33.6 million
and net loss of $24.6 million for fiscal years 1994 and 1993, respectively,
cash flow provided by operating activities declined $71.6 million for fiscal
-9-
<PAGE>
1994 compared with fiscal 1993. This decline was principally due to the
initiation of the inventory consignment program of approximately $52 million in
the first quarter of fiscal 1993, the increase in accounts receivable related
to third-party prescription sales and vendor promotions and allowances, and
higher than normal cash payments to merchandise vendors in fiscal 1994
resulting in the reduction of accounts payable from an abnormally high balance
at January 29, 1994 primarily from the timing of vendor payment due dates.
Net cash from investing activities year-to-date for fiscal 1994 and 1993 used
$54.5 million and provided $1.1 million, respectively. Uses of cash were
principally for capital expenditures of $69.4 million and $30.9 million for
fiscal 1994 and 1993, respectively, for additions to the Company's drug stores,
and Express Photo units and improvements to existing stores. In addition, in
fiscal 1994, additions to property, plant and equipment were for the
installation of point-of-sale product scanning equipment and satellite
communication equipment. In fiscal 1994, a source of cash to the Company from
investing activities was provided by a partial payment for the sale of the
Vision Group operations. In fiscal 1993 a source of cash to the Company from
investing activities was provided by a sale and leaseback arrangement of
photoprocessing equipment for approximately $35.0 million. Capital
expenditures for fiscal 1994 are expected to total approximately $92 million.
Funds for the cash capital expenditures are expected to come from cash flow
from operating activities and available borrowings and other existing financing
sources, if necessary. In addition, the Company is financing expansion or
upgrade of photoprocessing equipment through five-year operating leases.
Approximately $8.8 million has been financed as operating leases year-to-date
for fiscal 1994. Such items were capital expenditures during the first quarter
and part of the second quarter of fiscal 1993.
Financing activities year-to-date for fiscal 1994 provided $35.4 million. Uses
of cash were primarily for the reduction of $24.8 million of bank debit
balances. Funds were provided by bank borrowings, the issuance of $7.6 million
in common stock as partial payment for a drug store acquisition and $31.9
million deferred payments for equipment in fiscal 1994. Financing activities
year-to-date for fiscal 1993 used $98.7 million. The primary use of funds
relates to the net repayment of $12.6 million of debt, the redemption of the
Company's 14.5% cumulative redeemable preferred stock and payment of dividends
on such stock for an aggregate of $80.0 million, approximately $51.0 million in
costs associated with the refinancing and 9.25% note issuance and the $12.2
million decrease in bank debit balances. These uses of funds were partially
offset by $64.8 million of net proceeds from the initial public offering.
The Company anticipates that the combination of amortization of intangibles and
interest on debt will have a negative impact upon future earnings and, to a
lesser degree, cash flow from operating activities. The Company does not
believe, however, that the impact of such planned amortization and interest
expenses upon earnings indicates a present or future impairment of liquidity.
Based upon the Company's ability to generate cash flow from operating
activities, the available unused portion of the working capital revolving
credit loans under the Credit Agreement and other existing financing sources,
the Company believes that it will have the funds necessary to meet the
principal and interest payments on its debt as they become due and to operate
and expand its businesses.
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<PAGE>
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company's independent public accountants have made a limited review of the
financial information furnished herein in accordance with standards established
by the American Institute of Certified Public Accountants. The Auditors'
Report is presented on page 12 of this report.
-11-
<PAGE>
Auditors' Report
----------------
The Board of Directors
Eckerd Corporation:
We have reviewed the condensed consolidated balance sheet of Eckerd
Corporation and subsidiaries as of October 29, 1994 and the related condensed
consolidated statements of operations and cash flows for the thirteen and
thirty-nine weeks ended October 29, 1994. These condensed consolidated
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial
statements for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of January 29, 1994, and the
related consolidated statements of operations, stockholders' equity
(deficit), and cash flows, for the year then ended (not presented herein);
and in our report dated March 18, 1994, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet as of
January 29, 1994 is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
KPMG PEAT MARWICK LLP
November 29, 1994
-12-
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
- --------------------------
On November 16, 1994 the Company announced that on November 15, 1994 it
had completed its previously announced agreement to sell its Insta-Care
subsidiary. Insta-Care supplies pharmaceutical services including
prescription drugs and patient-record and consulting services to long
term care institutions in New England and the Sunbelt. Insta-Care was
sold to Pharmacy Corporation of America for a total consideration of $112
million in cash. The Company used the net proceeds of approximately $94
million, to reduce outstanding indebtedness. Of this amount the Company
expects to redeem $50 million principal amount of the 11.125%
Subordinated Debentures.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
15.1 Letter re unaudited interim financial information
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the thirteen
weeks ended October 29, 1994.
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.
ECKERD CORPORATION
-----------------------
(Registrant)
/s/Samuel G. Wright
December 12, 1994
- ----------------- -----------------------------------
Date Samuel G. Wright
Senior Vice President-Finance
(Principal Accounting Officer)
-13-
<PAGE>
Exhibit Index
-------------
Eckerd Corporation
Form 10-Q
Exhibit No Description of Exhibit Page
- ---------- ---------------------- ----
15.1 Letter re unaudited interim financial information 15
27 Financial Data Schedule 16
-14-
EXHIBIT 15.1
Eckerd Corporation and Subsidiaries
8333 Bryan Dairy Road
Largo, FL 34647
Gentlemen:
Re: Registration Statement on Form S-3 (No. 33-50223)
Registration Statement on Form S-8 (No. 33-49977)
Registration Statement on Form S-3 (No. 33-10721)
Registration Statement on Form S-8 (No. 33-50755)
Registration Statement on Form S-3 (No. 33-56261)
With respect to the above referenced registration statements, we acknowledge
our awareness of the incorporation by reference therein of our report dated
November 29, 1994 related to our review of interim financial information,
which report was included in the Form 10-Q of Eckerd Corporation and
Subsidiaries for the thirty-nine weeks ended October 29, 1994.
Pursuant to Rule 436(c) under the Securities Act of 1993, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
Very truly yours,
KPMG PEAT MARWICK LLP
Tampa, Florida
November 29, 1994
-15-
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