-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JgJA+nQLEKx6meR99XcIvDu+NAFx/oWP7QNemv3n3o6aG9cJlgaHaNYY93tUK6Mc TLjVevAJq4X1Ip2bUQNjhQ== 0000031364-97-000005.txt : 19970627 0000031364-97-000005.hdr.sgml : 19970627 ACCESSION NUMBER: 0000031364-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970426 FILED AS OF DATE: 19970610 DATE AS OF CHANGE: 19970626 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ECKERD CORP CENTRAL INDEX KEY: 0000031364 STANDARD INDUSTRIAL CLASSIFICATION: 5912 IRS NUMBER: 133302437 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04844 FILM NUMBER: 97622127 BUSINESS ADDRESS: STREET 1: 8333 BRYAN DAIRY ROAD CITY: LARGOO STATE: FL ZIP: 34647 BUSINESS PHONE: 8133996000 MAIL ADDRESS: STREET 1: JACK ECKERD CORPORATION STREET 2: P O BOX 4689 CITY: CLEARWATER STATE: FL ZIP: 34618 FORMER COMPANY: FORMER CONFORMED NAME: ECKERD DRUGS OF FLORIDA INC DATE OF NAME CHANGE: 19700112 10-Q 1 FIRST QUARTER FORM 10-Q ECKERD CORPORATION 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 the Twelve Weeks Ended April 26, 1997 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 51-0378122 (State of incorporation) (I.R.S. Employer Identification No.) 8333 Bryan Dairy Road Largo, Florida 33777 (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 May 31, 1997 the registrant had 100 shares of common stock outstanding. THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT PROVIDED FOR IN GENERAL INSTRUCTION H TO FORM 10-Q. PART I. FINANCIAL INFORMATION Item 1. Financial Statements
ECKERD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA) ASSETS Unaudited Audited Current assets: 4/26/97 2/1/97 ---------- ---------- Cash (including short-term investments of $47,746 and $57,000) $ 55,686 71,874 Receivables 78,209 102,393 Merchandise inventories 1,011,961 973,265 Prepaid expenses and other current assets 7,393 3,909 ---------- ---------- Total current assets 1,153,249 1,151,441 --------- ---------- Property and equipment, at cost 804,522 775,690 Less accumulated depreciation 343,919 329,490 ---------- ---------- Net property and equipment 460,603 446,200 ---------- ---------- Excess of cost over net assets acquired, less accumulated amortization 84,783 85,656 Favorable lease interests, less accumulated amortization 102,458 108,125 Unamortized debt expenses 3,418 3,553 Other assets 126,175 96,977 --------- ---------- $1,930,686 1,891,952 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank debit balances $ 70,519 54,252 Current installments of long-term debt 782 768 Accounts payable 383,994 404,945 Accrued expenses 314,052 323,717 --------- ---------- Total current liabilities 769,347 783,682 --------- ---------- Other noncurrent liabilities 161,857 168,240 Long-term debt, excluding current installments 791,150 779,951 Stockholders' equity: Voting common stock of $.01 par value. Authorized 1,000 shares; issued 100 - - Capital in excess of par value 321,254 321,254 Retained deficit (112,922) (161,175) --------- ---------- Total stockholders' equity 208,332 160,079 --------- ---------- $1,930,686 1,891,952 ========= ==========
See accompanying notes to condensed consolidated financial statements.
ECKERD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (IN THOUSANDS) Twelve Weeks Thirteen Weeks Ended 4/26/97 Ended 5/4/96 ------------- -------------- Sales and other operating revenue $1,381,638 1,354,619 --------- --------- Costs and expenses: Cost of sales, including store occupancy, warehousing and delivery expense 1,070,108 1,051,423 Operating and administrative expenses 230,099 237,533 --------- --------- Earnings before interest expense 81,431 65,663 Interest expense: Interest expense, net 11,776 14,886 Amortization of original issue discount and deferred debt expenses 135 253 --------- --------- Total interest expense 11,911 15,139 --------- --------- Earnings before income taxes 69,520 50,524 Income tax expense 21,267 11,114 --------- --------- Net earnings $ 48,253 39,410 ========= =========
See accompanying notes to condensed consolidated financial statements.
ECKERD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) Twelve Weeks Thirteen Weeks Ended 4/26/97 Ended 5/4/96 ------------- ------------ Cash Flows from operating activities: Net earnings $ 48,253 39,410 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 23,143 22,362 Amortization of original issue discount and deferred debt expenses 135 253 Increase in receivables, merchandise inventories and prepaid expenses (27,127) (39,718) Decrease in accounts payable and accrued expenses (35,028) (2,052) Management fee receivable from affiliate (18,000) - -------- -------- Net cash provided by (used in) operating activities (8,624) 20,255 -------- -------- Cash flows from investing activities: Additions to property, plant and equipment (32,890) (25,804) Sale of property, plant and equipment 1,171 242 Acquisition of certain drug store assets (894) (860) Other (2,433) (2,529) -------- -------- Net cash used in investing activities (35,046) (28,951) -------- -------- Cash flows from financing activities: Increase (decrease) in bank debit balances 16,267 (26,712) Additions to long-term debt 22 - Reductions of long-term debt (32,579) (472) Net additions under intercompany note to J. C. Penney Company, Inc. 45,098 - Net additions under credit agreements - 36,000 Redemption of 9.25% Senior Subordinated Notes (1,327) - Other 1 664 -------- -------- Net cash provided by financing activities 27,482 9,480 -------- -------- Net increase (decrease) in cash and short-term investments (16,188) 784 Cash and short-term investments at beginning of period 71,874 7,922 -------- -------- Cash and short-term investments at end of period $ 55,686 8,706 ======== ========
See accompanying notes to condensed consolidated financial statements. ECKERD CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AMOUNTS) Note 1. On November 2, 1996, Eckerd Corporation ("Old Eckerd") entered into a definitive agreement to be acquired by Omega Acquisition Corporation ("Omega"), a wholly-owned subsidiary of J. C. Penney Company, Inc. ("JCPenney"). The aggregate transaction value, including the assumption of Old Eckerd debt and the cash out of certain outstanding Old Eckerd employee stock options, was approximately $3.3 billion. The transaction was effected through a two-step process consisting of (i) a cash tender offer at $35.00 per share for 50.1% of the outstanding common stock of Old Eckerd, which was completed in December 1996, and (ii) the February 27, 1997 exchange in which Old Eckerd stockholders received 0.6604 of a share of JCPenney common stock for each share of Old Eckerd common stock. After completing the acquisition of Old Eckerd on February 27, 1997, Omega changed its name to Eckerd Corporation (the "Company"). Note 2. 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 normal recurring accruals) necessary to present a fair statement of results for such periods. A management fee and certain business integration expenses totaling $18,000 has been charged to affiliates. The condensed consolidated financial statements should be read in conjunction with the financial statements and notes filed as part of the Company's Annual Report on Form 10-K405 for the fiscal year ended February 1, 1997. The results of operations of the periods indicated should not be considered as necessarily indicative of operations for the full year. Prior to the acquisition, Old Eckerd's fiscal year ended the Saturday closest to January 31st each year. In order to make its fiscal year end conform to that of JCPenney, the Company changed its fiscal year end to the last Saturday in January of each year. Accordingly, to conform to the JCPenney fiscal calendar, the first quarter of fiscal year 1997 consisted of the twelve week period ended April 26, 1997. Certain amounts in the February 1, 1997 condensed consolidated balance sheet have been reclassified to conform to the April 26, 1997 presentation. Note 3. Substantially all inventories are determined on a last-in, first-out (LIFO) cost basis. At April 26, 1997 and February 1, 1997, inventories would have been greater by approximately $115,100 and $109,900, respectively, if inventories were valued on a first-in, first-out (FIFO) cost basis. Since LIFO inventory costs can only be determined at the end of each fiscal year when inflation rates and inventory levels are finalized, estimates of LIFO inventory costs are used for interim financial statements. The cost of merchandise sold is calculated on an estimated basis and adjusted based on inventories taken during the fiscal year. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In Thousands) Thirteen Weeks -------------- Ended 4/26/97 Ended 5/4/96 ----------- ------------ Sales and other operating revenue $1,489,304 1,354,619 Costs of sales 1,154,349 1,051,423 Operating and administrative expenses 248,446 237,533 --------- --------- Operating earnings 86,509 65,663 Total interest expense 12,919 15,139 --------- --------- Earnings before income taxes 73,590 50,524 Income tax expense 22,073 11,114 --------- --------- Net earnings $ 51,517 39,410 ========= ========= For comparative purposes only, the above Condensed Consolidated Statements of Operations and the following analysis of results of operations for the first quarter compares the thirteen weeks ended April 26, 1997 to the thirteen weeks ended May 4, 1996. As noted previously, as a result of the change by the Company of its fiscal year, Item 1 Financial Information is presented for the twelve weeks ended April 26, 1997. Sales and other operating revenue for the first quarter of 1997 increased 9.9% over the 1996 first quarter to $1.5 billion. Sales benefited from significant increases in drugstore prescription sales as well as from increases in non-prescription (front end) sales. Drugstore prescription sales increased 13.4% to $852 million and front end sales increased 5.6% to $635 million. Comparable drugstore sales (stores open one year or more) increased 8.0% compared to a 9.6% increase in 1996. The increase in comparable drugstore sales was primarily attributable to the increase in sales of prescription drugs as well as increased sales of non-prescription items in the health and convenience categories. Prescription sales as a percentage of drugstore sales were 57.3% for the quarter compared to 55.6% for the comparable 1996 period. The growth in prescription sales was primarily the result of increased managed care prescription sales. Managed care prescription sales increased to 78.3% of prescription sales compared to 73.9% in 1996. Prescription sales to managed care payors, in terms of both dollar volume and as a percentage of total prescription sales, are expected to continue to increase in the current year and for the foreseeable future. Managed care payors typically negotiate lower prescription prices than those on non-managed care prescriptions, resulting in decreasing gross profit margins on prescription sales. However, contracts with managed care payors generally increase the volume of prescription sales and gross profit dollars. As a percentage of sales, cost of sales and related expenses were 77.5% for the quarter compared to 77.6% for 1996's comparable quarter. The decrease in cost of sales and related expenses is attributable to a slowing in the decline in prescription gross profit margins as well as improvement in front end gross profit margins. The LIFO charge was $5.2 million compared to $4.2 million for 1996's first quarter. Operating and administrative expenses, net of $19.5 million of management fees and business integration costs charged to affiliates, for the first quarter increased 4.6% over 1996 to $248.4 million and decreased as a percentage of sales to 16.7% from 17.5% in 1996. The decrease as a percentage of sales resulted primarily from operating efficiencies, higher sales, and cost controls which helped produce lower costs as a percentage of sales in such expense categories as payroll and insurance, net of increased business integration expenses. Total interest expense for the first quarter decreased 14.7% from 1996 to $12.9 million. The decrease was due to lower average borrowings and lower interest rates on borrowings compared to bank loan interest rate spreads in 1996. Earnings before income taxes for the quarter increased 45.7% to $73.6 million. The increase 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 due to operating efficiencies and expense control. Income tax expense for the first quarter was $22.1 million (30%) compared to $11.1 million (22%) in 1996. Income tax expense in both periods represents federal and state income taxes. In addition, the income tax rate was lower in 1996 when compared to 1997 due to the use of net operating loss carryforwards, which were fully utilized during fiscal year 1996. 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 8 of this report. Accountants' Report The Board of Directors Eckerd Corporation: We have reviewed the condensed consolidated balance sheet of Eckerd Corporation and subsidiaries as of April 26, 1997, and the related condensed consolidated statements of earnings and cash flows for the twelve weeks ended April 26, 1997 and thirteen weeks ended May 4, 1996. 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 February 1, 1997, and the related consolidated statements of earnings, stockholders' equity, and cash flows, for the year then ended (not presented herein); and in our report dated April 15, 1997, 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 February 1, 1997 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ KPMG PEAT MARWICK LLP June 6, 1997 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 twelve weeks ended April 26, 1997. 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) June 10, 1997 /s/ Samuel G. Wright ---------------------- Samuel G. Wright Executive Vice President/ Chief Financial Officer (Principal Accounting Officer) Exhibit Index Eckerd Corporation Form 10-Q Exhibit No. Description of Exhibit 15.1 Letter re unaudited interim financial information 27 Financial Data Schedule EX-15 2 EXHIBIT 15.1 EXHIBIT 15.1 The Board of Directors Eckerd Corporation and Subsidiaries: RE: Registration Statement on Form S-3 (No. 33-50223) With respect to the above referenced registration statement, we acknowledge our awareness of the incorporation by reference therein of our report dated June 6, 1997 related to our review of interim financial information, which report was included in the Form 10-Q of Eckerd Corporation and Subsidiaries for the twelve weeks ended April 26, 1997. 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. /s/ KPMG PEAT MARWICK LLP Tampa, Florida June 6, 1997 EX-27 3 FDS EXHIBIT 27
5 0000031364 Eckerd Corporation 1,000 3-Mos Jan-31-1998 Feb-02-1997 Apr-26-1997 55,686 0 81,209 3,000 1,011,961 1,153,249 804,522 343,919 1,930,686 769,347 791,150 0 0 0 208,332 1,930,686 1,381,638 1,381,638 1,070,108 1,070,108 229,285 814 11,911 69,520 21,267 48,253 0 0 0 48,253 0 0
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