-----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, EcPRIVO29e+ck2hT0KMTZT3EtR/N/fXTtfPCeJ8FTajiAYSGSYXfWCVpfk4/pP7r qGCQX6HfLshlcFOwOxwSPw== 0000031364-98-000005.txt : 19981216 0000031364-98-000005.hdr.sgml : 19981216 ACCESSION NUMBER: 0000031364-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ECKERD CORP CENTRAL INDEX KEY: 0000031364 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 510378112 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04844 FILM NUMBER: 98770081 BUSINESS ADDRESS: STREET 1: 8333 BRYAN DAIRY RD CITY: LARGO 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 THIRD QUARTER FORM 10-Q ECKERD CORP 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 Thirty-Nine Weeks Ended October 31, 1998 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 its 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) (727) 395-6000 (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 30, 1998 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 (A wholly-owned subsidiary of J. C. Penney Company, Inc.) CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
Unaudited Audited 10/31/98 1/31/98 --------- --------- ASSETS Current assets: Cash (including short-term investments of $57,500 and $0) $ 188,640 24,883 Receivables 258,590 141,954 Merchandise inventories 1,303,491 1,290,708 Prepaid expenses and other current assets 7,751 4,995 --------- --------- Total current assets 1,758,472 1,462,540 --------- --------- Property and equipment, at cost 1,068,440 951,597 Less accumulated depreciation 434,629 384,630 --------- --------- Net property and equipment 633,811 566,967 --------- --------- Excess of cost over net assets acquired, less accumulated amortization 136,628 123,962 Favorable lease interests, less accumulated amortization 66,392 82,918 Deferred income taxes 34,119 34,119 Due from affiliates 517,866 292,162 Other assets 67,868 57,412 --------- --------- $3,215,156 2,620,080 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Bank debit balances $ 12,566 53,580 Current installments of long-term debt 1,419 16,898 Accounts payable 499,946 393,195 Accrued expenses 423,657 367,965 --------- --------- Total current liabilities 937,588 831,638 --------- --------- Other noncurrent liabilities 142,076 141,895 Long-term debt, excluding current installments 224,177 223,931 Intercompany loan payable to J. C. Penney Company, Inc. 1,565,000 1,155,000 Stockholder's 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 equity (deficit) 25,061 (53,638) --------- --------- Total stockholder's equity 346,315 267,616 --------- --------- $3,215,156 2,620,080 ========= =========
See accompanying notes to condensed consolidated financial statements. 2 ECKERD CORPORATION AND SUBSIDIARIES (A wholly-owned subsidiary of J. C. Penney Company, Inc.) CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (IN THOUSANDS)
Thirty-Nine Thirty-Eight Thirteen Weeks Ended Weeks Ended Weeks Ended ------------------------- --------- --------- 10/31/98 10/25/97 10/31/98 10/25/97 -------- -------- --------- --------- Sales and other operating revenue $1,662,776 1,467,190 5,038,216 4,276,610 --------- --------- --------- --------- Costs and expenses: Cost of sales, including store occupancy, warehousing and delivery expense 1,314,098 1,165,450 3,930,507 3,347,352 Operating and administrative expenses 310,157 266,194 912,516 746,393 --------- --------- --------- --------- Earnings before interest expense 38,521 35,546 195,193 182,865 Interest expense: Interest expense on intercompany loan with J. C. Penney Company, Inc. 18,984 12,909 54,002 31,496 Interest expense, net 4,312 5,198 13,865 14,645 Amortization of original issue discount and deferred debt expenses 131 133 394 402 --------- --------- --------- --------- Total interest expense 23,427 18,240 68,261 46,543 --------- --------- --------- --------- Earnings before income taxes 15,094 17,306 126,932 136,322 Income tax expense 5,735 5,194 48,234 41,310 --------- --------- --------- --------- Net earnings $ 9,359 12,112 78,698 95,012 ========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements. 3 ECKERD CORPORATION AND SUBSIDIARIES (A wholly-owned subsidiary of J. C. Penney Company, Inc.) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Thirty-Nine Weeks Thirty-Eight Weeks Ended 10/31/98 Ended 10/25/97 -------------- -------------- Cash flows from operating activities: Net earnings $ 78,698 95,012 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 84,403 74,917 Amortization of original issue discount and deferred debt expenses 394 402 Increase in receivables, merchandise inventories and prepaid expenses (49,218) (253,474) Increase in accounts payable and accrued expenses 166,887 77,743 Increase in due from affiliate (225,700) (290,822) -------- -------- Net cash provided by (used in) operating activities 55,464 (296,222) -------- -------- Cash flows from investing activities: Additions to property, plant and equipment (135,822) (115,967) Sale of property, plant and equipment 7,816 4,809 Acquisition of certain drugstore assets (18,647) (84,618) Other (20,427) (2,431) -------- -------- Net cash used in investing activities (167,080) (198,207) -------- -------- Cash flows from financing activities: Decrease in bank debit balances (41,014) (38,763) Additions to long-term debt - 22 Reductions of long-term debt (15,233) (34,543) Net additions under intercompany note to J. C. Penney Company, Inc. 410,000 535,000 Redemption of 9.25% Senior Subordinated Notes - (1,327) Termination of sales of receivables program (78,380) - -------- -------- Net cash provided by financing activities 275,373 460,389 -------- -------- Net increase (decrease) in cash and short-term investments 163,757 (34,040) Cash and short-term investments at beginning of period 24,883 71,874 -------- -------- Cash and short-term investments at end of period $ 188,640 37,834 ======== ========
See accompanying notes to condensed consolidated financial statements. 4 ECKERD CORPORATION AND SUBSIDIARIES (A wholly-owned subsidiary of J. C. Penney Company, Inc.) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AMOUNTS) Note 1. - ------- On November 2, 1996, the predecessor Eckerd Corporation ("Old Company") 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 Company debt and the cash out of certain outstanding Old Company 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 the Old Company, which was completed in December 1996, and (ii) the February 27, 1997 exchange in which Old Company stockholders received 0.6604 of a share of JCPenney common stock for each share of Old Company common stock. After completing the acquisition of Old Company on February 27, 1997, Omega changed its name to Eckerd Corporation (the "Company"). References to the Company regarding time periods prior to February 27, 1997 are to the Old Company. Note 2. - -------- The interim condensed consolidated financial information is unaudited but, in the opinion of the Company, includes all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation. The condensed consolidated financial information should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K405 for the 52 weeks ended January 31, 1998. The results of operations of the periods indicated should not be considered as necessarily indicative of operations for the full year. The Company also manages approximately 850 drugstores which are indirectly wholly-owned by JCPenney and operated under the Eckerd name. A management fee which is netted against operating and administrative expenses totaling $33,194 and $29,046 for the thirty-nine and thirty-eight week periods ended October 31, 1998 and October 25, 1997, respectively, has been charged to affiliates. In addition, for the thirty-eight week period ended October 25, 1997, $19,586 of certain business integration expenses were charged to affiliates. The results of the managed stores are not included in the financial results of the Company. Prior to the acquisition, Old Company'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 twelve weeks ended April 26, 1997, the second quarter consisted of thirteen weeks ended July 26, 1997, the third quarter consisted of thirteen weeks ended October 25, 1997 with a year-to-date total of thirty-eight weeks ended October 25, 1997. Note 3. - ------- Substantially all inventories are determined on a last-in, first-out (LIFO) cost basis. At October 31, 1998 and January 31, 1998, inventories would have been greater by approximately $147,300 and $128,900, 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. 5 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. The following narrative analysis of the Company's results of operations is presented pursuant to the reduced disclosure format provided for in General Instruction H to Form 10-Q. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In Thousands)
Thirteen Weeks Ended Thirty-Nine Weeks Ended --------------------------- ----------------------------- 10/31/98 10/25/97 10/31/98 10/25/97 ---------- ---------- ---------- ---------- Sales and other operating revenue $1,662,776 1,467,190 5,038,216 4,384,276 Costs of sales 1,314,098 1,165,450 3,930,507 3,431,593 Operating and administrative expenses 310,157 266,194 912,516 764,740 --------- --------- --------- --------- Operating earnings 38,521 35,546 195,193 187,943 Total interest expense 23,427 18,240 68,261 47,551 --------- --------- --------- --------- Earnings before income taxes 15,094 17,306 126,932 140,392 Income tax expense 5,735 5,194 48,234 42,116 --------- --------- --------- --------- Net earnings $ 9,359 12,112 78,698 98,276 ========= ========= ========= =========
For comparative purposes only, the above Condensed Consolidated Statements of Earnings and the following analysis of results of operations compares the thirteen and thirty-nine weeks ended October 31, 1998 to the thirteen and thirty-nine weeks ended October 25, 1997. As noted previously, as a result of the change by the Company of its fiscal year, Item 1 Financial Information for 1997 is presented for the thirteen and thirty-eight weeks ended October 25, 1997. Sales and other operating revenue for the third quarter and thirty-nine weeks ended October 31, 1998 increased 13.3% and 14.9% over the 1997 comparable period to $1.663 billion and $5.038 billion. Sales benefited from significant increases in drugstore prescription sales as well as from increases in non-prescription (front end) sales, increased sales in relocated freestanding stores and increases in the first and second quarters from acquired Virginia drugstores purchased in June 1997. Comparable drugstore sales (stores open one year or more) increased 11.5% and 10.5% for the third quarter and thirty-nine week periods compared to a 8.6% and 8.6% increase in the respective 1997 periods. The increases in comparable drugstore sales were primarily attributable to the increase in sales of prescription drugs as well as increased sales of non-prescription items in the photo/electronics and health categories. Prescription sales as a percentage of drugstore sales were 62.8% and 61.6% compared to 59.9% and 58.6% for the comparable third quarter and thirty-nine week 1997 periods. The growth in prescription sales was primarily the result of increased managed care prescription sales and prescription sales in the first and second quarters from the acquired Virginia drugstores. Managed care prescription sales increased to 84.1% and 83.0% of prescription sales compared to 80.9% and 79.3% for the comparable third quarter and thirty-nine week periods in 1997. Managed care payors typically negotiate lower prescription prices than 6 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 79.0% and 78.0% for the third quarter and thirty-nine weeks ended October 31, 1998 compared to 79.4% and 78.3% for the 1997 comparable periods. Cost of sales and related expenses are currently benefiting from improvement in front end gross profit margins while prescription gross profit margins are flat compared to 1997. The LIFO charge for thirty-nine weeks for 1998 was $18.4 million compared to $15.2 million for 1997. During the second quarter, the Company recorded charges to cost of sales of $26.1 million which were incurred related to higher than expected shrinkage rates during the drugstore integration process. Offsetting these losses, the Company received $26.0 million from prescription price litigation settlements in the second quarter. Operating and administrative expenses for the third quarter (net of $12.8 million and $10.2 million of management fees in 1998 and 1997, respectively), as a percentage of sales was 18.7% compared to 18.2% in 1997. Operating and administrative expenses for thirty-nine weeks (net of $33.2 million and $30.5 million of management fees in both 1998 and 1997, respectively, and $19.6 million of business integration costs in 1997 charged to affiliates), as a percentage of sales was 18.1% compared to 17.4% in 1997. The increase for both the third quarter and thirty-nine weeks as a percentage of sales resulted primarily from increased costs as a percentage of sales in such expense categories as information technology, including Year 2000 costs, depreciation, insurance and advertising expenses. Total interest expense for the 1998 third quarter and thirty-nine weeks increased 28.4% and 43.6% over 1997 to $23.4 million and $68.3 million, including $19.0 million and $54.0 million of interest expense from intercompany loans with JCPenney. The increase was due to higher average borrowings during the thirty-nine weeks and higher interest rates in the first quarter compared to 1997. Operating earnings for the third quarter increased to $38.5 million from $35.5 million in 1997 and for the thirty-nine weeks increased to $195.2 million from $187.9 million for the comparable period in 1997. Earnings before income taxes for the third quarter and thirty-nine weeks decreased to $15.1 million from $17.3 million and decreased to $126.9 million from $140.4 million for the comparable periods last year. Income tax expense for the 1998 third quarter and thirty-nine weeks were $5.7 million and $48.2 million (38%) compared to $5.2 million and $42.1 million (30%) in 1997. Income tax expense in both periods represent federal and state income taxes. The 1997 periods included the use of alternative minimum tax credits and other tax credit carryforwards. Year 2000 The Year 2000 issue exists because many computer systems store and process dates using only the last two digits of the year. Such systems, if not changed, may interpret "00" as "1900" instead of the year "2000". The Company has been working to identify and address Year 2000 issues since the latter part of 1996. The scope of this effort includes internally developed information technology 7 systems, purchased and leased software, embedded systems, and electronic data interchange transaction processing. During the first quarter of 1997, the Company formed a Year 2000 task force to provide guidance to the Company's operating and support departments and to monitor the progress of efforts to address Year 2000 issues. The Company has also consulted with various third parties, including, but not limited to, outside consultants, outside service providers, infrastructure suppliers, industry groups, and other retail companies and associations to develop industrywide approaches to the Year 2000 issue, to gain insights to problems, and to provide additional perspectives on solutions. It is expected that compliance work will be substantially completed by the end of 1998. Beginning in January 1999, all systems critical to the Company's business will be retested. The Company has also focused on the Year 2000 compliance status of its suppliers, and is participating in a National Retail Federation survey of suppliers and service providers to determine their Year 2000 readiness. Despite the significant efforts to address Year 2000 concerns, the Company could potentially experience disruptions to some of its operations, including those resulting from noncompliant systems used by third party business and governmental entities. The Company has developed contingency plans to address potential Year 2000 disruptions. These plans include business continuity plans that address accessibility and functionality of Company facilities as well as steps to be taken if an event causes failure of a system critical to the Company's core business activities. Through October 31, 1998, the Company has incurred approximately $11 million on a cumulative basis to achieve Year 2000 compliance. The Company's projected cost for Year 2000 remediation including capital expenditures is currently estimated to be $18 million. Total costs have not had, and are not expected to have, a material impact on the Company's financial results. New Accounting Rules The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", which is effective for quarters beginning after June 15, 1999. The Company has no derivative products. The American Institute of Certified Public Accountants has issued Statements of Position (SOP) No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" and No. 98-5, "Reporting on the Costs of Start-up Activities." The new accounting rules, which have been adopted, do not have a material impact on the Company. 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 Independent Auditors' Review is presented on page 9 of this report. 8 Independent Auditors' Review Report ----------------------------------- The Board of Directors Eckerd Corporation: We have reviewed the condensed consolidated balance sheet of Eckerd Corporation and subsidiaries (a wholly-owned subsidiary of J.C. Penney Company, Inc.) as of October 31, 1998, and the related condensed consolidated statements of earnings and cash flows for the thirteen and thirty-nine weeks ended October 31, 1998 and the thirteen and thirty-eight weeks ended October 25, 1997. 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 condensed consolidated financial statements referred to above 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 of Eckerd Corporation and subsidiaries (a wholly-owned subsidiary of J.C. Penney Company, Inc.) as of January 31, 1998, 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 February 26, 1998, 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 31, 1998, 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 December 14, 1998 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company has no material legal proceedings pending against it. Information regarding certain legal proceedings involving the Company was previously reported in the Company's Annual Report on Form 10-K405 for the fiscal year ended January 31, 1998. As reported in that Form 10-K405, management is of the opinion that such legal proceedings should not have a material adverse effect on the Company's consolidated financial position or results of operations. As reported in that Form 10-K405, on February 4, 1998, a civil complaint was filed jointly in federal court in Tampa, Florida by the Florida Attorney General, the U.S. Department of Justice, and the U.S. Attorney's Office for the Middle District of Florida relating to the partial filling of prescriptions. The Company filed a Motion to Dismiss and to Strike. On September 20, 1998, the court granted the Company's Motion to Dismiss the plaintiffs' claims for unjust enrichment and payment by mistake of fact and denied its Motion to Dismiss the plaintiffs' claims under the Florida and federal False Claims Acts and for breach of contract. The Company's Motion to Strike was denied on grounds of mootness in light of the court's ruling on the Motion to Dismiss. On October 22, 1998 the Company filed an Answer and Counterclaim to the plaintiffs' complaint. The Answer denied the plaintiffs' substantive allegations, raised several affirmative defenses to the plaintiffs' claims and counterclaimed against the State of Florida for breach of contract for failing to pay amounts owed to the Company for prescriptions delivered to beneficiaries of the State of Florida. The Company expects discovery in the lawsuit to begin in the first quarter of 1999. The Company's Form 10-K405 also reported that a purported class action entitled Board of Trustees of the Carpenters & Milwrights of Houston & Vicinity Welfare Trust Fund v. Eckerd Corporation was filed on April 22, 1998 in the U.S. District Court for the Eastern District of Texas, Texarkana Division. The Company filed a Motion to Dismiss the lawsuit. On November 12, 1998 the court denied the Company's Motion to Dismiss and ordered the plaintiffs to replead their claim to comport with the formal requirements of the RICO Act. 10 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10 Eckerd Corporation Loan Agreement, dated as of September 28, 1998, between J.C. Penney Company, Inc., as Lender and Eckerd Corporation, as Borrower (incorporated by reference to Exhibit 10 to the Quarterly Report on Form 10-Q for the 13 and 39 week periods ended October 31, 1998 of J.C. Penney Company, Inc., SEC File No. 1-777). 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 31, 1998. 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 15, 1998 /s/ Samuel G. Wright --------------------- Samuel G. Wright Executive Vice President/ Chief Financial Officer (Principal Accounting Officer) 11 Exhibit Index ------------- Eckerd Corporation Form 10-Q Exhibit No. Description of Exhibit - ----------- ---------------------- 10 Eckerd Corporation Loan Agreement, dated as of September 28, 1998, between J.C. Penney Company, Inc., as Lender and Eckerd Corporation, as Borrower (incorporated by reference to Exhibit 10 to the Quarterly Report on Form 10-Q for the 13 and 39 week periods ended October 31, 1998 of J.C. Penney Company, Inc., SEC File No. 1-777). 15.1 Letter re unaudited interim financial information 27 Financial Data Schedule 12 EX-15 2 EXHIBIT 15.1 EXHIBIT 15.1 Board of Directors Eckerd Corporation: RE: Registration Statement on Form S-3 (No. 33-50223) With respect to the subject registration statement, we acknowledge our awareness of the use therein of our report dated December 14, 1998, related to our review of interim financial information, which report was included in the Form 10-Q of Eckerd Corporation and subsidiaries (a wholly-owned subsidiary of J.C. Penney Company, Inc.) for the thirteen and thirty-nine weeks ended October 31, 1998. 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 December 14, 1998 EX-27 3 FDS EXHIBIT 27
5 0000031364 Eckerd Corporation 1,000 9-MOS JAN-30-1999 FEB-01-1998 OCT-31-1998 188,640 0 261,590 3,000 1,303,491 1,758,472 1,068,440 434,629 3,215,156 937,588 1,789,177 0 0 0 346,315 3,215,156 5,038,216 5,038,216 3,930,507 3,930,507 909,396 3,120 68,261 126,932 48,234 78,698 0 0 0 78,698 0 0
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