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 28, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF1934
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 25, 1995, 34,955,158 shares of Common Stock, $.01 par value,
were outstanding.
<PAGE>
<TABLE>
<CAPTION>
ECKERD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
Unaudited Audited
ASSETS 10/28/95 1/28/95
<S> <C> <C>
Current assets:
Cash and short-term interest bearing deposits $ 9,373 8,898
Receivables, less allowance for doubtful
receivables of $3,000 67,049 52,487
Merchandise inventories 883,862 771,122
Prepaid expenses and other current assets 3,598 2,366
----------- -----------
Total current assets 963,882 834,873
----------- -----------
Property, plant and equipment, at cost 614,849 542,191
Less accumulated depreciation 277,365 249,214
----------- -----------
Net property, plant and equipment 337,484 292,977
----------- -----------
Excess of cost over net assets acquired, less
accumulated amortization 62,756 27,667
Favorable lease interests, less accumulated amortization 139,063 153,664
Unamortized debt expense 8,109 10,138
Other assets 27,530 23,028
----------- -----------
$ 1,538,824 1,342,347
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank debit balances $ 19,169 44,373
Current installments of long-term debt 1,456 1,452
Accounts payable 332,848 287,551
Accrued expenses 226,643 221,208
----------- -----------
Total current liabilities 580,116 554,584
----------- -----------
Other noncurrent liabilities 141,340 124,944
Long-term debt, excluding current installments 813,834 785,561
Stockholders' equity (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 34,950,857
and 32,105,774 349 321
Nonvoting common stock of $.01 par value
Authorized 3,518,728 shares; none issued -- --
Capital in excess of par value 318,086 234,027
Retained deficit (314,901) (357,090)
----------- -----------
Total stockholders'equity (deficit) 3,534 (122,742)
----------- -----------
$ 1,538,824 1,342,347
=========== ===========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
ECKERD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------------- --------------------------
10/28/95 10/29/94 10/28/95 10/29/94
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales and other operating revenue $ 1,164,907 1,071,036 3,523,225 3,274,121
----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales, including store
occupancy, warehousing and
delivery expense 915,137 831,513 2,739,733 2,517,877
Operating and administrative expenses 224,301 215,476 666,724 649,089
----------- ----------- ----------- -----------
Earnings before interest expense 25,469 24,047 116,768 107,155
Interest expense:
Interest expense, net 18,266 21,514 57,147 66,515
Amortization of original issue discount
and deferred debt expenses 454 1,896 1,522 5,287
----------- ----------- ----------- -----------
Total interest expense 18,720 23,410 58,669 71,802
----------- ----------- ----------- -----------
Earnings before income taxes
and extraordinary items 6,749 637 58,099 35,353
Income tax provision 1,147 32 9,877 1,782
----------- ----------- ----------- -----------
Earnings before extraordinary
items 5,602 605 48,222 33,571
Extraordinary item-early retirement of debt
net of tax benefit of $947, $1,401,
$1,236 and $1,401 (5,012) (26,620) (6,033) (26,620)
----------- ----------- ----------- -----------
Net earnings for the period $ 590 (26,015) 42,189 6,951
=========== =========== =========== ===========
Earnings per common share:
Earnings before extraordinary item $ .16 .02 1.43 1.04
Extraordinary item (.14) (.82) (.18) (.82)
----------- ----------- ----------- -----------
Net earnings per common share $ .02 (.80) 1.25 .22
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
ECKERD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Thirty-Nine Weeks Ended
----------------------
10/28/95 10/29/94
Cash flows from operating activities: --------- ---------
<S> <C> <C>
Net earnings for the period $ 42,189 6,951
Adjustments to reconcile net earnings for the period to net cash provided
by operating activities:
Extraordinary charge related to early
retirement of debt 7,269 28,021
Depreciation and amortization 61,460 57,331
Amortization of original issue discount
and deferred debt expenses 1,522 5,287
Increase in receivables, merchandise
inventories and prepaid expenses (111,044) (76,737)
Increase (decrease) in accounts payable and
accrued expenses 51,900 (1,880)
--------- ---------
Net cash provided by operating activities 53,296 18,973
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment* (69,301) (36,883)
Sale of property, plant and equipment 4,482 1,484
Acquisition of certain drug store assets (69,628) (4,446)
Net cash proceeds from sale of Vision Group 5,231 22,624
Other (4,224) 2,633
--------- ---------
Net cash used in investing activities (133,440) (14,588)
--------- ---------
Cash flows from financing activities:
Decrease in bank debit balances (25,204) (24,794)
Additions to long-term debt 667 842
Reductions of long-term debt (1,292) (1,554)
Net additions under current credit agreement 117,860 25,811
Common stock sold in a public offering, net of
expenses of sale 82,322 --
Redemption of 11.125% subordinated debentures (95,500) --
Other 1,766 (4,420)
--------- ---------
Net cash provided by (used in) financing
activities 80,619 (4,115)
--------- ---------
Net increase in cash and cash equivalents 475 270
Cash and short-term interest bearing deposits
at beginning of period 8,898 12,110
--------- ---------
Cash and short-term interest bearing deposits
at end of period $ 9,373 12,380
========= =========
</TABLE>
* Total capital expenditures for thirty-nine weeks ended October 28, 1995 and
October 29, 1994 were $85,883 and $68,356, of which $16,582 and $31,473 were
acquired under a deferred payment arrangement.
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Note 1.
-------
The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries, 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-K405 report for the
fiscal year ended January 28, 1995. 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 28, 1995 and January 28, 1995 inventories
would have been greater by approximately $86,700 and $76,900,
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.
-------
The weighted average number of shares outstanding for thirteen weeks
and thirty-nine weeks ended October 28, 1995 and October 29, 1994 were
35,621 and 33,777 in 1995 and 32,422 and 32,297 in 1994.
Note 4.
-------
Certain amounts have been reclassified in the fiscal 1994 condensed
consolidated statements of operations and statements of cash flows to
conform to the fiscal 1995 condensed consolidated financial statement
presentation.
Note 5.
-------
On August 2, 1995 the Company completed the public offering of
6,175,500 shares of Company common stock, par value $.01 per share, for
$32.25 per share. Of the shares offered, 2,675,000 shares were sold by
the Company and 3,500,500 shares were sold by certain stockholders of
the Company. The net proceeds to the Company after the underwriting
discount of $1.27 per share and other expenses related to the public
offering was approximately $82,322.
5
<PAGE>
<TABLE>
<CAPTION>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 6. ECKERD CORPORATION AND SUBSIDIARIES
- ------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------------------------- -------------------------------------
October 28, 1995 October 29, 1994 October 29, 1994 October 28, 1995
---------------- ---------------- ---------------- -------------------
Actual Actual(A) Adjusted(B) Actual Actual(A) Adjusted(B)
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales and other operating revenue $ 1,164,907 1,071,036 1,042,707 3,523,225 3,274,121 3,190,081
Cost of sales 915,137 831,513 812,853 2,739,733 2,517,877 2,461,912
Operating and administrative
expenses 215,229 206,995 198,960 641,980 624,830 601,353
Amortization of intangibles 9,072 8,481 8,395 24,744 24,259 24,007
----------- ---------- ---------- ---------- ---------- ----------
Operating profit 25,469 24,047 22,499 116,768 107,155 102,809
Interest expense 18,720 23,410 21,273 58,669 71,802 65,398
----------- ---------- ---------- ---------- ---------- ----------
Earnings before income taxes
and extraordinary item 6,749 637 1,226 58,099 35,353 37,411
Income taxes 1,147 32 106 9,877 1,782 1,916
----------- ---------- ---------- ---------- ---------- ----------
Earnings before extraordinary item 5,602 605 1,120 48,222 33,571 35,495
Extraordinary item (5,012) (26,620) (26,620) (6,033) (26,620) (26,620)
----------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss) $ 590 (26,015) (25,500) 42,189 6,951 8,875
=========== ========== ========== ========== ========== ==========
Earnings per common share before
extraordinary item $ .16 .02 .03 1.43 1.04 1.10
Net earnings (loss) per common
share $ .02 (.80) (.79) 1.25 .22 .27
Weighted average number of shares
outstanding 35,621 32,422 32,422 33,777 32,297 32,297
Earnings before interest, income
taxes, extraordinary item,
depreciation and amortization $ 47,368 44,085 42,046 178,228 164,486 158,788
(EBITDA)
</TABLE>
(A) Certain amounts have been reclassified to conform to the 1995 actual
financial statement presentation.
(B) The adjusted financial data is based on the historical financial
statements of the Company (after the reclassification in (A) above),
adjusted to give effect to the Company's sale of the Insta-Care Pharmacy
Services operations which was sold effective November 15, 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 29, 1994.
6
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The Company sold its Insta-Care Pharmacy Services, Inc. ("Insta-Care")
operations effective November 15, 1994. The following results of
operations discussion will compare the third quarter and thirty-nine
weeks of fiscal 1995 to the adjusted third quarter and thirty-nine
weeks of fiscal 1994 (thirteen and thirty-nine weeks ended October 28,
1995 and October 29, 1994) which gives effect to the Company's sale of
the Insta-Care operations and reflects the reclassification of certain
amounts to conform to the 1995 financial statement presentation. See
Note 6 of Notes to Condensed Consolidated Financial Statements.
The Company's sales and other operating revenue for the third quarter
and thirty-nine weeks of fiscal 1995 were $1,164.9 million and $3,523.2
million, an 11.7% and 10.4% increase over the third quarter and
thirty-nine weeks of fiscal 1994, respectively. Sales benefited from
significant increases in prescription sales in the third quarter and
thirty-nine weeks as well as from increases in front end sales and from
the acquisition of certain Florida drug stores from Rite Aid (the
"Florida Rite Aid Acquisition") at the beginning of the third quarter.
Prescription sales for the third quarter and thirty-nine weeks of
fiscal 1995 were $652.6 million and $1,909.5 million, an 18.5% and
16.7% increase over the third quarter and thirty-nine weeks of fiscal
1994, respectively. In addition, front end sales increased to $510.2
million and $1,607.0 million, a 4.2% and 3.9% increase over the third
quarter and thirty-nine weeks of fiscal 1994, respectively. Front end
sales in the third quarter and thirty-nine weeks of fiscal 1995 were
positively affected primarily by increased sales of non-prescription
items in the health, greeting card, convenience food and photofinishing
categories. Comparable drug store sales (stores open for one year or
more, excluding relocated stores open less than one year) increased
10.2% and 9.2% for the third quarter and thirty-nine weeks of fiscal
1995, compared to a 9.4% and 8.4% increase for the third quarter and
thirty-nine weeks of fiscal 1994.
Prescription sales as a percentage of drug store sales were
approximately 56.1% and 54.3% for the third quarter and thirty-nine
weeks of fiscal 1995 as compared with approximately 52.9% and 51.4% for
the third quarter and thirty-nine weeks of fiscal 1994, respectively.
The growth in prescription sales for the third quarter and thirty-nine
weeks of fiscal 1995 was primarily the result of increased third-party
prescription sales, the Company's competitive cash pricing strategy and
the Florida Rite Aid Acquisition.
7
<PAGE>
These strong sales were aided by a more severe cough, cold and flu
season in the first quarter of fiscal 1995 compared to the first
quarter of fiscal 1994. Third-party prescription sales increased to
approximately 71.1% and 70.0% of the Company's prescription sales for
the third quarter and thirty-nine weeks of fiscal 1995 from
approximately 65.2% and 63.9% in fiscal 1994. 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 1995 and for the foreseeable future. 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. However, contracts with
third-party payors generally increase the volume of prescription sales
and gross profit dollars.
Cost of sales and related expenses for the third quarter and
thirty-nine weeks of fiscal 1995 were $915.1 million and $2,739.7
million, a 12.6% and 11.3% increase over the third quarter and
thirty-nine weeks of fiscal 1994, respectively. As a percentage of
sales, cost of sales and related expenses were 78.6% and 77.8% compared
to 78.0% and 77.2% for the third quarter and thirty-nine weeks of
fiscal 1995 and 1994, respectively. The increase in cost of sales and
related expenses as a percentage of sales resulted primarily from the
continued increase in third-party prescription sales with typically
lower gross profit margins than non third-party prescription sales. The
LIFO charge was $3.8 million and $9.8 million compared to $2.6 million
and $7.4 million for the third quarter and thirty-nine weeks of fiscal
1995 and 1994, respectively.
Operating and administrative expenses for the third quarter and
thirty-nine weeks of fiscal 1995 were $224.3 million and $666.7
million, an 8.2% and 6.6% increase over the third quarter and
thirty-nine weeks of fiscal 1994, respectively. As a percentage of
sales, operating and administrative expenses decreased to 19.3% and
18.9% for the third quarter and thirty-nine weeks of fiscal 1995 from
19.9% and 19.6% for the third quarter and thirty-nine weeks of fiscal
1994, respectively. The decrease in operating and administrative
expenses as a percentage of sales resulted primarily from operating
efficiencies related to higher sales (including the benefits from the
near completion of the underperforming store closings program), and
cost controls which helped produce lower costs as a percentage of sales
in such expense categories as payroll and insurance. Non-cash tax
deductible amortization of intangibles included in operating and
administrative expenses for the third quarter and thirty-nine weeks of
fiscal 1995 and 1994 was $9.1 million and $24.7 million, compared to
$8.4 million and $24.0 million, respectively, an increase of 8.1% and
3.1%, respectively.
8
<PAGE>
Earnings before interest expense, income taxes and extraordinary item
were $25.5 million and $116.8 million for the third quarter and
thirty-nine weeks of fiscal 1995, a 13.2% and 13.6% increase over the
third quarter and thirty-nine weeks of fiscal 1994, respectively. The
increase in earnings before interest expense, income taxes and
extraordinary item was due primarily to the increase in gross profit
dollars as a result of higher sales and other operating revenue, and
the decrease in operating and administrative expenses as a percentage
of sales in the third quarter and thirty-nine weeks of fiscal 1995
compared to the third quarter and thirty-nine weeks of fiscal 1994.
Total interest expense was $18.7 million and $58.7 million for the
third quarter and thirty-nine weeks of fiscal 1995, a decrease of 12.0%
and 10.3% from the third quarter and thirty-nine weeks of fiscal 1994,
respectively. The decrease was due primarily to lower average
borrowings in the third quarter and thirty-nine weeks of fiscal 1995
compared to the third quarter and thirty-nine weeks of fiscal 1994. The
average interest rate on borrowings in the third quarter and
thirty-nine weeks of fiscal 1995 and 1994 was substantially the same.
Income taxes for the thirty-nine weeks of fiscal 1995 and 1994 were
$9.9 million and $1.9 million, respectively. The effective income tax
rate of 17% for the third quarter and thirty-nine weeks of fiscal 1995
was higher than the third quarter and thirty-nine weeks of fiscal 1994
(5%). Income taxes include 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 item for the third quarter and thirty-nine weeks
of fiscal 1995 of $5.6 million and $48.2 million, compared to $1.1
million and $35.5 million for the third quarter and thirty-nine weeks
of fiscal 1994, an increase of $4.5 million and $12.7 million or 400.2%
and 35.9%, respectively.
At October 28, 1995 the Company operated 1,704 Eckerd Drug stores and
510 Eckerd Express Photo labs.
Financial Condition and Liquidity
With respect to the balance sheet at October 28, 1995 compared to the
balance sheet at January 28, 1995, merchandise inventories increased
$112.7 million (net of the LIFO charge of $9.8 million) to $883.9
million, accounts receivable increased $14.6 million to $67.0 million
9
<PAGE>
and property, plant and equipment increased $72.7 million to $614.8
million. The inventory increase is a result of higher inventory to
support strong sales in the first three quarters of fiscal 1995, but is
primarily from the customary Christmas seasonal inventory buildup. The
receivables increase is attributable primarily to the increase in
receivables from third-party prescription sales and the timing of cash
collections on such receivables. Additions to property, plant and
equipment of $85.9 million were primarily due to the installation of
point-of-sale product scanning equipment along with other improvements
to existing stores and facilities, relocation of stores and the
addition of new and acquired stores.
At October 28, 1995, the Company had $573.2 million in borrowings
outstanding under its bank credit agreement ($405.7 million under the
term loan facility and $167.5 million under the revolving loan
facility) and the Company had unused and available borrowing
commitments under the revolving loan facility of $94.5 million which is
net of $88.0 million of letters of credit. On November 29, 1995, the
Company completed an amendment to the credit agreement. Pursuant to the
amended credit agreement, the principal amount of the term and
revolving loan borrowings available is $750.0 million. The term loan
facility of $405.7 million was decreased to $250.0 million and the
revolving loan facility of $350.0 million was increased to $500.0
million. Certain of the financial and restrictive covenants were
revised, and the calculation of the interest rate was adjusted. As a
result of such adjustment, the Company's interest rate in the last two
months of the fourth quarter of fiscal 1995 will be LIBOR plus .625
percent, compared to LIBOR plus 1.250 percent prior to the amendment to
the credit agreement. The term loan facility of $250.0 million
amortizes in quarterly payments of $10.0 million at the end of each of
the first three quarters and $20.0 million at the end of the fourth
quarter of each fiscal year for a total amortization of $50.0 million
annually, and matures in full in November 2000. The revolving loan
facility of $500.0 million matures in full in November 2000. At October
28, 1995 the Company had excess availability under the revolving loan
commitment and accordingly did not treat the required amortization
repayments as current.
On October 28, 1995 the Company had working capital of $383.8 million
and a current ratio of 1.7 to 1 compared to $280.3 million and 1.5 to 1
at January 28, 1995. Cash flow provided by operating activities
increased $34.3 million to $53.3 million for thirty-nine weeks of
fiscal 1995 compared to $19.0 million for thirty-nine weeks of fiscal
1994. This increase was due to higher earnings for the thirty-nine
weeks of fiscal 1995 compared to fiscal 1994. In addition, the increase
was due to the impact of the higher than normal cash payments to
merchandise vendors in the first quarter of fiscal 1994, resulting in
the reduction of accounts payable from an abnormally high balance at
10
<PAGE>
January 29, 1994 primarily from the timing of vendor payment due dates.
This increase was offset partially by an increase in inventory and
receivables from third-party prescription sales in fiscal 1995.
Investing activities for the thirty-nine weeks of fiscal 1995 and 1994
used $133.4 million and $14.6 million of cash, respectively. Uses of
cash were principally for capital expenditures of $69.3 million and
$36.9 million for fiscal 1995 and 1994, respectively, for point-of-sale
product scanning equipment along with other improvements to existing
stores and facilities, relocation of stores and the addition of new
stores. In addition, in fiscal 1995, $69.6 million of cash was used for
the acquisition of drug store assets including the Florida Rite Aid
Acquisition. Also, in fiscal 1994, additions to property, plant and
equipment included the installation of satellite communication
equipment, and a source of cash to the Company from investing
activities was provided by a partial payment for the sale of the Vision
Group operations. Capital improvements for fiscal 1995, including those
to be acquired under a deferred payment arrangement and through
operating leases, which total $85.9 million for thirty-nine weeks, are
expected to total approximately $119.0 million on an annual basis.
Funds for the cash capital expenditures are expected to come from cash
flow from operating activities and available borrowings, if necessary.
Financing activities for the thirty-nine weeks of fiscal 1995 provided
$80.6 million. A source of cash to the Company came from the August 2,
1995 public offering (discussed below) which provided $82.3 million.
Funds were also provided by $117.9 million of bank borrowings which
were primarily used to redeem an aggregate of $95.5 million of the
11-1/8% Subordinated Debentures due 2001 ("11-1/8% Debentures"), of
which $16.6 million was redeemed on May 12, 1995 and $78.9 million was
redeemed on September 5, 1995 (discussed below), and for the reduction
of $25.2 million of bank debit balances. Financing activities for the
thirty-nine weeks of fiscal 1994 used $4.1 million primarily for the
reduction of $24.8 million of bank debit balances, of which funds were
provided for by $25.8 million of bank borrowings.
On August 2, 1995 the Company completed the public offering of
6,175,500 shares of Company common stock for $32.25 per share. Of the
shares offered, 2,675,000 shares were sold by the Company and 3,500,500
shares were sold by certain stockholders of the Company. The net
proceeds to the Company after the underwriting discount of $1.27 per
share and other expenses related to the public offering was
approximately $82.3 million.
11
<PAGE>
On September 5, 1995 the Company redeemed the remaining $78.9 million
of the 11-1/8% Debentures with proceeds from the August 2, 1995 public
offering and bank borrowings, which proceeds were also used to finance
the Florida Rite Aid Acquisition.
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 expense 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 revolving loan facility under the bank credit
agreement and other existing 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.
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 Accountants' Report is presented on page 13 of this
report.
12
<PAGE>
Accountants' Report
The Board of Directors
Eckerd Corporation:
We have reviewed the condensed consolidated balance sheet of Eckerd
Corporation and subsidiaries as of October 28, 1995, and the related
condensed consolidated statements of operations and cash flows for the
thirteen and thirty-nine weeks ended October 28, 1995 and 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 28,
1995, 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 20, 1995, 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 28,
1995 is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
KPMG PEAT MARWICK LLP
December 6, 1995
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
4.1 Amendment Agreement dated as of November 29, 1995 to
the Credit Agreement dated as of June 14, 1993, as
amended and restated as of August 3, 1994, among the
Company, the lenders named therein, Chemical Bank and
NationsBank of Florida, N.A., as managing agents and
swingline lenders, and Chemical Bank as
administrative agent and NationsBank of Florida, N.A.
as documentation agent (incorporated by reference to
Exhibit 4.4 to the Registration Statement on Form S-3
of the Company (No. 33-64409)).
15.1 Letter re unaudited interim financial information
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated November 28, 1995
incorporating the Company's press release which announced
earnings for the thirteen and thirty-nine weeks ended October
28, 1995.
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)
December 12, 1995 /s/ Samuel G. Wright
----------------------
Samuel G. Wright
Executive Vice President/
Chief Financial Officer
(Principal Accounting Officer)
14
<PAGE>
Exhibit Index
Eckerd Corporation
Form 10-Q
Exhibit No. Description of Exhibit Page
----------- ---------------------- ----
4.1 Amendment Agreement dated as of
November 29, 1995 to the Credit Agreement
dated as of June 14, 1993, as amended and
restated as of August 3, 1994. *
15.1 Letter re unaudited interim financial information
27 Financial Data Schedule
- ---------------------
*Previously filed by incorporation by reference.
15
<PAGE>
EXHIBIT 15.1
Eckerd Corporation and Subsidiaries
8333 Bryan Dairy Road
Largo, Florida 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-8 (No. 33-50755)
Registration Statement on Form S-3 (No. 33-56261)
Registration Statement on Form S-8 (No. 33-60175)
Registration Statement on Form S-3 (No. 33-64409)
Registration Statement on Form S-3 (No. 33-64837)
With respect to the above referenced registration statements, we
acknowledge our awareness of the incorporation by reference therein of
our report dated December 6, 1995 related to our review of interim
financial information, which report was included in the Form 10-Q of
Eckerd Corporation and Subsidiaries for the thirteen and thirty-nine
weeks ended October 28, 1995.
Pursuant to Rule 436(c) under the Securities Act of 1933, 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.
KPMG PEAT MARWICK LLP
Tampa, Florida
December 11, 1995
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