Stores' profits drive healthy Eckerd LBO - Jack Eckerd Corp.; leveraged buyout - brief article

CLEARWATER, Fla. -- Jack Eckerd Corp. is riding high five years into its leveraged buyout, having built store-level profitability while paying down debt.

During fiscal 1991, ended Feb. 2, cash flow was well ahead of expenses, as sales grew 11.4 percent to $3.45 billion, helped by the acquisition of 223 Revcos.

Eckerd's cash flow to interest expense ratio is 2.6:1, chairman and president Stewart Turley told investors in the company's latest annual report. The reduction of debt principal helped the ratio. Senior debt was $476 million at FY-end, down from $785 million when the company went private.

Cash from operations after expenses, known as "free cash" available for reinvesting, was $169.5 million--65 percent higher than in the prior year. Accounting for non-cash charges, including asset depreciation, the company records a net loss of $35.98 million.

Eckerd reported combined fiscal results for Eckerd Corp. and Eckerd Holdings II, the company formed with Merrill Lynch Capital Partners last year to buy the Revco stores.

Operating profits rose 11.5 percent to $217.7 million, thanks to leaner operating/administrative expenses, at 21 percent of sales versus 21.7 percent a year earlier.

Eckerd operates 98 of the acquired Revcos, having shut the rest and transferred their files. Turley said the Revco integration had minimal interruptions and called for no substantial staff additions to ready the stores for Christmas.

Sales "fell slightly short of performance goals," said Turley, but pharmacy sales grew 16.2 percent to over $1.4 billion.

May 1 marked the fifth anniversary of Eckerd's LBO. Other highlights of the past year:

* Divestiture of 64 stores, ending the year with 1,673.

* Visionworks, the optical super stores, grew by 16 to a total of 44, but sales were dampened in the second half.

* 69 Express Photo minilabs were added, including 23 in the Atlanta market and 29 in Florida, raising the roster to 258 in-store labs.

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