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Rite Aid Corporation Reports Fiscal 2020 Third Quarter Results

December 19, 2019 GMT

CAMP HILL, Pa.--(BUSINESS WIRE)--Dec 19, 2019--

Rite Aid Corporation (NYSE: RAD) today reported operating results for its third fiscal quarter ended November 30, 2019.

For the third quarter, the company reported net income from continuing operations of $52.3 million, or $0.98 per share, Adjusted net income from continuing operations of $29.1 million, or $0.54 per share, and Adjusted EBITDA from continuing operations of $158.1 million, or 2.9 percent of revenues.

“Our team delivered a strong quarter that provides us with momentum as we prepare to roll out our long-term strategy and position Rite Aid Corporation as an innovative leader in our industry,” said Rite Aid Corporation CEO Heyward Donigan. “Adjusted EBITDA grew in our retail business due to tight expense control and prescription count growth in our retail pharmacies, which benefited from solid growth in immunizations. At the same time, we saw improved pharmacy network management at EnvisionRxOptions.

“While we are pleased with these results, we have important work ahead of us to put our company on a path to long-term sustainable growth. We will soon reveal our comprehensive strategy that revitalizes Rite Aid retail pharmacies as fresh and relevant, leveraging the trust and expertise of our pharmacists in meeting the unique health and wellbeing needs of our communities. We are also investing in the expansion and integration of EnvisionRxOptions, particularly its services, technologies and clinical offerings. This will provide us scale to deliver lower total cost of care, an enhanced client experience and heightened consumer engagement. We are making great progress, and we are excited to share more details at our upcoming Analyst Day on March 16.”

Third Quarter Summary

Revenues from continuing operations for the quarter were $5.46 billion compared to revenues from continuing operations of $5.45 billion in the prior year’s quarter. Retail Pharmacy Segment revenues were $3.91 billion and decreased 1.7 percent compared to the prior year period due to a reduction in store count. Revenues in the Pharmacy Services Segment were $1.61 billion, an increase of 5.7 percent compared to the prior year period, which was due to an increase in Medicare Part D membership.

Retail Pharmacy Segment same store sales from continuing operations for the third quarter decreased 0.1 percent over the prior year period, consisting of a 0.1 percent increase in pharmacy sales and a 0.5 percent decrease in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 1.0 percent. Pharmacy sales were negatively impacted by approximately 331 basis points as a result of new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 2.8 percent over the prior year period resulting primarily from the company’s continued emphasis on driving clinical services, including immunizations. Prescription sales from continuing operations accounted for 67.7 percent of total drugstore sales.

Net income from continuing operations was $52.3 million or $0.98 per share compared to last year’s third quarter net loss from continuing operations of $17.3 million or $0.33 per share. The increase in net income was due primarily to a $55.7 million gain on debt retirements and an increase in Adjusted EBITDA.

Adjusted EBITDA from continuing operations was $158.1 million or 2.9 percent of revenues for the third quarter compared to last year’s third quarter Adjusted EBITDA from continuing operations of $142.8 million or 2.6 percent of revenues, an increase of $15.3 million. Retail Pharmacy Segment Adjusted EBITDA from continuing operations increased $7.4 million due to strong labor and benefits expense control. These improvements were partially offset by a reduction in gross profit and a reduction in Transition Service Agreement fee income from Walgreens Boots Alliance. The Pharmacy Services Segment Adjusted EBITDA increased $7.9 million compared to the prior year due to improvements in pharmacy network management.

Outlook for Fiscal 2020

Rite Aid Corporation is updating its fiscal 2020 outlook, which includes narrowing its guidance for Adjusted EBITDA. The company’s outlook assumes continued prescription count growth, improvements in generic drug costs and strong SG&A expense control, offset by a decline in prescription reimbursement rates. The fiscal 2020 guidance for EnvisionRxOptions assumes sustained improvements in pharmacy network management and initial results of SG&A reduction, benefits integration and restructuring initiatives.

Rite Aid Corporation expects revenues to be between $21.5 billion and $21.9 billion in fiscal 2020 with same store sales expected to range from an increase of 0.0 percent to an increase of 1.0 percent over fiscal 2019.

Net loss is expected to be between $174.0 million and $204.0 million.

Adjusted EBITDA is expected to be between $515.0 million and $545.0 million.

Adjusted net income per share is expected to be between $0.13 and $0.55.

Capital expenditures are expected to be approximately $230 million.

Conference Call Broadcast

Rite Aid Corporation will hold an analyst call at 8:30 a.m. Eastern Time today with remarks by Rite Aid’s management team. The call will be simulcast via the internet and can be accessed at www.riteaid.com in the conference call section of investor information. A playback of the call will also be available by telephone beginning at 12:00 p.m. Eastern Time today until 11:59 p.m. Eastern Time on Dec. 21, 2019. The playback number is 1-855-859-2056 from within the U.S. and Canada or 1-404-537-3406 from outside the U.S. and Canada with the reservation number 6188277.

About Rite Aid Corporation

Rite Aid Corporation is on the front lines of delivering health care services and retail products to over 1.6 million Americans daily. Our pharmacists are uniquely positioned to engage with customers and improve their health outcomes. We provide an array of whole being health products and services for the entire family through over 2,400 retail pharmacy locations across 18 states. Through EnvisionRxOptions, we also deliver pharmacy benefit management to approximately 1,900 clients and 3.4 million members. For more information, visit www.riteaid.com.

Cautionary Statement Regarding Forward-Looking Statements

Statements in this release that are not historical, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements regarding Rite Aid’s outlook and guidance for fiscal 2020; Rite Aid’s competitive position and ability to realize its growth initiatives and operating efficiencies; and any assumptions underlying any of the foregoing. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” and “will” and variations of such words and similar expressions are intended to identify such forward-looking statements.

These forward-looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including, but not limited to, our high level of indebtedness and our ability to make interest and principal payments on our debt and satisfy the other covenants contained in our debt agreements; general economic, industry, market, competitive, regulatory and political conditions; our ability to improve the operating performance of our stores in accordance with our long term strategy; the ongoing impact of private and public third-party payers continued reduction in prescription drug reimbursements and efforts to encourage mail order; our ability to manage expenses and our investments in working capital; outcomes of legal and regulatory matters; changes in legislation or regulations, including healthcare reform; our ability to achieve the benefits of our efforts to reduce the costs of our generic and other drugs; risks related to the pending sale of the remaining Rite Aid distribution center and related assets to Walgreens Boots Alliance, Inc. (“WBA”), including the possibility that the transaction may not close due to the failure to satisfy the minimal remaining conditions; our ability to successfully achieve benefits from our leadership transition plan and organizational restructuring, including managing the transition to our new chief executive officer and other management; the potential for operational disruptions due to, among other things, concerns of management, employees, current and potential customers, other third parties with whom we do business and shareholders; the success of any changes to our business strategy that may be implemented under our new chief executive officer and other management; our ability to achieve cost savings through the organizational restructurings within the anticipated timeframe, if at all; possible changes in the size and components of the expected costs and charges associated with the organizational restructuring plan; and the outlook for and future growth of the Company.

These and other risks, assumptions and uncertainties are more fully described in Item 1A (Risk Factors) of our most recent Annual Report on Form 10-K and in other documents that we file or furnish with the Securities and Exchange Commission, which you are encouraged to read.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Rite Aid expressly disclaims any current intention to update publicly any forward-looking statement after the distribution of this release, whether as a result of new information, future events, changes in assumptions or otherwise.

Reconciliation of Non-GAAP Financial Measures

Rite Aid separately reports financial results on the basis of Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Adjusted EBITDA which are non-GAAP financial measures. See the attached tables for a reconciliation of Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Adjusted EBITDA to net income (loss), and net income (loss) per diluted share, which are the most directly comparable GAAP financial measures. Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share exclude amortization expense, merger and acquisition-related costs, non-recurring litigation settlement, gains and losses on debt retirements, LIFO adjustments, goodwill and intangible asset impairment charges, restructuring-related costs and the WBA merger termination fee. The current calculations of Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share reflect a modification made in the second quarter of fiscal 2019 to add back all amortization expenses rather than the amortization of EnvisionRx intangible assets only. Adjusted EBITDA is defined as net income (loss) excluding the impact of income taxes, interest expense, depreciation and amortization, LIFO adjustments, charges or credits for facility closing and impairment, goodwill and intangible asset impairment charges, inventory write-downs related to store closings, gains or losses on debt retirements, the WBA merger termination fee, and other items (including stock-based compensation expense, merger and acquisition-related costs, non-recurring litigation settlement, severance, restructuring-related costs and costs related to facility closures and gain or loss on sale of assets). The current calculation of Adjusted EBITDA reflects a modification made in the second quarter of fiscal 2019 to eliminate the add back of revenue deferrals related to our customer loyalty program and to present amounts previously included within other as separate reconciling items. We further note that the add back of LIFO (credit) charge when calculating Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share removes the entire impact of LIFO (credits) charges, and effectively reflects Rite Aid’s results as if the company was on a FIFO inventory basis.

In addition to Adjusted EBITDA, Adjusted Net (Loss) Income and Adjusted Net (Loss) Income per Diluted Share, we occasionally refer to several other Non‑GAAP measures, on a less frequent basis, in order to describe certain components of our business and how we utilize them to describe our results. Adjusted EBITDA Gross Profit includes LIFO adjustments, depreciation and amortization (COGS portion only) and other items. The presentation includes a reconciliation of Adjusted EBITDA Gross Profit to Revenue, which is the most directly comparable GAAP financial measure. Adjusted EBITDA SG&A excludes depreciation and amortization (SG&A portion only), stock-based compensation expense, merger and acquisition-related costs, litigation settlement, restructuring-related costs and other items. The presentation includes a reconciliation of Adjusted EBITDA SG&A to Revenue, which is the most directly comparable GAAP financial measure.

RITE AID CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)

 
 
 
November 30, 2019March 2, 2019
ASSETS
Current assets:
Cash and cash equivalents

$

289,498

 

$

144,353

 

Accounts receivable, net

 

1,689,838

 

 

1,788,712

 

Inventories, net of LIFO reserve of $611,997 and $604,444

 

1,957,045

 

 

1,871,941

 

Prepaid expenses and other current assets

 

178,292

 

 

179,132

 

Current assets held for sale

 

101,594

 

 

117,581

 

Total current assets

 

4,216,267

 

 

4,101,719

 

Property, plant and equipment, net

 

1,254,234

 

 

1,308,514

 

Operating lease right-of-use assets

 

2,935,104

 

 

-

 

Goodwill

 

1,108,136

 

 

1,108,136

 

Other intangibles, net

 

374,660

 

 

448,706

 

Deferred tax assets

 

382,105

 

 

409,084

 

Other assets

 

158,285

 

 

215,208

 

Total assets

$

10,428,791

 

$

7,591,367

 

 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and lease financing obligations

$

9,486

 

$

16,111

 

Accounts payable

 

1,534,302

 

 

1,618,585

 

Accrued salaries, wages and other current liabilities

 

806,739

 

 

808,439

 

Current portion of operating lease liabilities

 

493,699

 

 

-

 

Current liabilities held for sale

 

42,422

 

 

-

 

Total current liabilities

 

2,886,648

 

 

2,443,135

 

Long-term debt, less current maturities

 

3,566,261

 

 

3,454,585

 

Long-term operating lease liabilities

 

2,732,339

 

 

-

 

Lease financing obligations, less current maturities

 

20,607

 

 

24,064

 

Other noncurrent liabilities

 

207,078

 

 

482,893

 

Total liabilities

 

9,412,933

 

 

6,404,677

 

 
Commitments and contingencies

 

-

 

 

-

 

Stockholders' equity:
Common stock

 

54,862

 

 

54,016

 

Additional paid-in capital

 

5,888,870

 

 

5,876,977

 

Accumulated deficit

 

(4,897,473

)

 

(4,713,244

)

Accumulated other comprehensive loss

 

(30,401

)

 

(31,059

)

Total stockholders' equity

 

1,015,858

 

 

1,186,690

 

Total liabilities and stockholders' equity

$

10,428,791

 

$

7,591,367

 

RITE AID CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)

 
 
 
Thirteen weeks ended
November 30, 2019
Thirteen weeks ended
December 1, 2018
Revenues

$

5,462,298

 

$

5,450,060

 

Costs and expenses:
Cost of revenues

 

4,273,323

 

 

4,267,972

 

Selling, general and administrative expenses

 

1,134,854

 

 

1,142,555

 

Lease termination and impairment charges

 

166

 

 

2,628

 

Interest expense

 

57,856

 

 

56,008

 

Gain on debt retirements, net

 

(55,692

)

 

-

 

Gain on sale of assets, net

 

(1,371

)

 

(382

)

 

 

5,409,136

 

 

5,468,781

 

 
Income (loss) from continuing operations before income taxes

 

53,162

 

 

(18,721

)

Income tax expense (benefit)

 

876

 

 

(1,471

)

Net income (loss) from continuing operations

 

52,286

 

 

(17,250

)

Net (loss) income from discontinued operations, net of tax

 

(801

)

 

12,740

 

Net income (loss)

$

51,485

 

$

(4,510

)

 
 
 
Basic and diluted income (loss) per share:
 
Numerator for income (loss) per share:
Net income (loss) from continuing operations attributable to common stockholders - basic and diluted

$

52,286

 

$

(17,250

)

Net (loss) income from discontinued operations attributable to common stockholders - basic and diluted

 

(801

)

 

12,740

 

Income (loss) attributable to common stockholders - basic and diluted

$

51,485

 

$

(4,510

)

 
 
 
Denominator:
Basic weighted average shares

 

53,310

 

 

52,920

 

Outstanding options and restricted shares, net

 

274

 

 

-

 

Diluted weighted average shares

 

53,584

 

 

52,920

 

 
Basic income (loss) per share
Continuing operations

$

0.98

 

$

(0.33

)

Discontinued operations

$

(0.01

)

$

0.24

 

Net basic income (loss) per share

$

0.97

 

$

(0.09

)

 
Diluted income (loss) per share
Continuing operations

$

0.98

 

$

(0.33

)

Discontinued operations

$

(0.02

)

$

0.24

 

Net diluted income (loss) per share

$

0.96

 

$

(0.09

)

RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
Thirty-nine weeks ended
November 30, 2019
Thirty-nine weeks ended
December 1, 2018
Revenues

$

16,201,151

 

$

16,259,912

 

Costs and expenses:
Cost of revenues

 

12,741,014

 

 

12,747,924

 

Selling, general and administrative expenses

 

3,433,036

 

 

3,449,173

 

Lease termination and impairment charges

 

2,115

 

 

52,096

 

Goodwill and intangible asset impairment charges

 

-

 

 

375,190

 

Interest expense

 

176,228

 

 

175,033

 

(Gain) loss on debt retirements, net

 

(55,692

)

 

554

 

Gain on sale of assets, net

 

(5,670

)

 

(11,206

)

 

 

16,291,031

 

 

16,788,764

 

 
Loss from continuing operations before income taxes

 

(89,880

)

 

(528,852

)

Income tax expense (benefit)

 

35,878

 

 

(117,527

)

Net loss from continuing operations

 

(125,758

)

 

(411,325

)

Net (loss) income from discontinued operations, net of tax

 

(1,695

)

 

262,091

 

Net loss

$

(127,453

)

$

(149,234

)

 
 
 
Basic and diluted loss per share:
 
Numerator for loss per share:
Net loss from continuing operations attributable to common stockholders - basic and diluted

$

(125,758

)

$

(411,325

)

Net (loss) income from discontinued operations attributable to common stockholders - basic and diluted

 

(1,695

)

 

262,091

 

Loss attributable to common stockholders - basic and diluted

$

(127,453

)

$

(149,234

)

 
 
 
Denominator:
Basic and diluted weighted average shares

 

53,159

 

 

52,824

 

 
Basic and diluted loss per share
Continuing operations

$

(2.37

)

$

(7.79

)

Discontinued operations

$

(0.03

)

$

4.96

 

Net basic and diluted loss per share

$

(2.40

)

$

(2.83

)

RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
 
 
Thirteen weeks ended
November 30, 2019
Thirteen weeks ended
December 1, 2018
 
 
OPERATING ACTIVITIES:
Net income (loss)

$

51,485

 

$

(4,510

)

Net (loss) income from discontinued operations, net of tax

 

(801

)

 

12,740

 

Net income (loss) from continuing operations

$

52,286

 

$

(17,250

)

Adjustments to reconcile to net cash provided by operating activities of continuing operations:
Depreciation and amortization

 

82,007

 

 

86,685

 

Lease termination and impairment charges

 

166

 

 

2,628

 

LIFO (credit) charge

 

(7,440

)

 

5,987

 

Gain on sale of assets, net

 

(1,371

)

 

(382

)

Stock-based compensation expense

 

3,506

 

 

1,317

 

Gain on debt retirements, net

 

(55,692

)

 

-

 

Changes in deferred taxes

 

-

 

 

(1,295

)

Changes in operating assets and liabilities:
Accounts receivable

 

252,767

 

 

318,287

 

Inventories

 

19,333

 

 

(46,839

)

Accounts payable

 

47,378

 

 

(26,446

)

Operating lease right-of-use assets and operating lease liabilities

 

(12,179

)

 

-

 

Other assets

 

1,959

 

 

(1,072

)

Other liabilities

 

40,993

 

 

29,501

 

Net cash provided by operating activities of continuing operations

 

423,713

 

 

351,121

 

INVESTING ACTIVITIES:
Payments for property, plant and equipment

 

(45,075

)

 

(46,653

)

Intangible assets acquired

 

(17,727

)

 

(11,054

)

Proceeds from dispositions of assets and investments

 

51,548

 

 

72

 

Net cash used in investing activities of continuing operations

 

(11,254

)

 

(57,635

)

FINANCING ACTIVITIES:
Net payments to revolver

 

(115,000

)

 

(90,000

)

Principal payments on long-term debt

 

(101,251

)

 

(3,851

)

Change in zero balance cash accounts

 

(66,461

)

 

1,137

 

Net proceeds from the issuance of common stock

 

-

 

 

992

 

Payments for taxes related to net share settlement of equity awards

 

(587

)

 

(175

)

Financing fees paid for early debt redemption

 

(518

)

 

-

 

Net cash used in financing activities of continuing operations

 

(283,817

)

 

(91,897

)

Cash flows from discontinued operations:
Operating activities of discontinued operations

 

(4,876

)

 

14,735

 

Investing activities of discontinued operations

 

23,551

 

 

61,251

 

Net cash provided by discontinued operations

 

18,675

 

 

75,986

 

Increase in cash and cash equivalents

 

147,317

 

 

277,575

 

Cash and cash equivalents, beginning of period

 

142,181

 

 

132,468

 

Cash and cash equivalents, end of period

$

289,498

 

$

410,043

 

RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
 
 
Thirty-nine weeks ended
November 30, 2019
Thirty-nine weeks ended
December 1, 2018
 
 
OPERATING ACTIVITIES:
Net loss

$

(127,453

)

$

(149,234

)

Net (loss) income from discontinued operations, net of tax

 

(1,695

)

 

262,091

 

Net loss from continuing operations

$

(125,758

)

$

(411,325

)

Adjustments to reconcile to net cash provided by operating activities of continuing operations:
Depreciation and amortization

 

248,977

 

 

270,957

 

Lease termination and impairment charges

 

2,115

 

 

52,096

 

Goodwill and intangible asset impairment charges

 

-

 

 

375,190

 

LIFO charge

 

7,553

 

 

19,311

 

Gain on sale of assets, net

 

(5,670

)

 

(11,206

)

Stock-based compensation expense

 

13,598

 

 

11,563

 

(Gain) loss on debt retirements, net

 

(55,692

)

 

554

 

Changes in deferred taxes

 

26,979

 

 

(126,102

)

Changes in operating assets and liabilities:
Accounts receivable

 

99,498

 

 

(5,437

)

Inventories

 

(92,657

)

 

(78,489

)

Accounts payable

 

(38,245

)

 

181,497

 

Operating lease right-of-use assets and operating lease liabilities

 

22,803

 

 

-

 

Other assets

 

(42,715

)

 

(12,304

)

Other liabilities

 

32,889

 

 

(216,086

)

Net cash provided by operating activities of continuing operations

 

93,675

 

 

50,219

 

INVESTING ACTIVITIES:
Payments for property, plant and equipment

 

(129,135

)

 

(139,218

)

Intangible assets acquired

 

(33,435

)

 

(31,573

)

Proceeds from dispositions of assets and investments

 

55,971

 

 

15,801

 

Proceeds from sale-leaseback transactions

 

-

 

 

2,587

 

Net cash used in investing activities of continuing operations

 

(106,599

)

 

(152,403

)

FINANCING ACTIVITIES:
Net proceeds from revolver

 

260,000

 

 

1,245,000

 

Principal payments on long-term debt

 

(104,702

)

 

(437,597

)

Change in zero balance cash accounts

 

(11,749

)

 

(15,964

)

Net proceeds from the issuance of common stock

 

-

 

 

2,294

 

Payments for taxes related to net share settlement of equity awards

 

(1,573

)

 

(2,419

)

Financing fees paid for early debt redemption

 

(518

)

 

(13

)

Deferred financing costs paid

 

(315

)

 

-

 

Net cash provided by financing activities of continuing operations

 

141,143

 

 

791,301

 

Cash flows from discontinued operations:
Operating activities of discontinued operations

 

(7,148

)

 

(47,268

)

Investing activities of discontinued operations

 

24,074

 

 

664,653

 

Financing activities of discontinued operations

 

-

 

 

(1,343,793

)

Net cash provided by (used in) discontinued operations

 

16,926

 

 

(726,408

)

Increase (decrease) in cash and cash equivalents

 

145,145

 

 

(37,291

)

Cash and cash equivalents, beginning of period

 

144,353

 

 

447,334

 

Cash and cash equivalents, end of period

$

289,498

 

$

410,043

 

RITE AID CORPORATION AND SUBSIDIARIES
 
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 
 
Thirteen weeks ended
November 30, 2019
Thirteen weeks ended
December 1, 2018
 
Retail Pharmacy Segment
Revenues from continuing operations (a)

$

3,909,946

 

$

3,976,719

 

Cost of revenues from continuing operations (a)

 

2,839,094

 

 

2,897,135

 

Gross profit from continuing operations

 

1,070,852

 

 

1,079,584

 

LIFO (credit) charge from continuing operations

 

(7,440

)

 

5,987

 

FIFO gross profit from continuing operations

 

1,063,412

 

 

1,085,571

 

Adjusted EBITDA gross profit from continuing operations

 

1,065,523

 

 

1,088,213

 

 
Gross profit as a percentage of revenues - continuing operations

 

27.39%

 

27.15%

LIFO (credit) charge as a percentage of revenues - continuing operations

 

-0.19%

 

0.15%

FIFO gross profit as a percentage of revenues - continuing operations

 

27.20%

 

27.30%

Adjusted EBITDA gross profit as a percentage of revenues - continuing operations

 

27.25%

 

27.36%

 
Selling, general and administrative expenses from continuing operations

 

1,044,236

 

 

1,062,598

 

Adjusted EBITDA selling, general and administrative expenses from continuing operations

 

956,944

 

 

986,988

 

Selling, general and administrative expenses as a percentage of revenues - continuing operations

 

26.71%

 

26.72%

Adjusted EBITDA selling, general and administrative expenses as a percentage of revenues - continuing operations

 

24.47%

 

24.82%

 
Cash interest expense

 

54,068

 

 

52,074

 

Non-cash interest expense

 

3,788

 

 

3,934

 

Total interest expense

 

57,856

 

 

56,008

 

Interest expense - continuing operations

 

57,856

 

 

56,008

 

Interest expense - discontinued operations

 

-

 

 

-

 

 
Adjusted EBITDA - continuing operations

 

108,579

 

 

101,225

 

Adjusted EBITDA as a percentage of revenues - continuing operations

 

2.78%

 

2.55%

 
 
Pharmacy Services Segment
Revenues (a)

$

1,613,109

 

$

1,525,837

 

Cost of revenues (a)

 

1,494,986

 

 

1,423,333

 

Gross profit

 

118,123

 

 

102,504

 

 
Gross profit as a percentage of revenues

 

7.32%

 

6.72%

 
Adjusted EBITDA

 

49,511

 

 

41,566

 

Adjusted EBITDA as a percentage of revenues

 

3.07%

 

2.72%

(a) -Revenues and cost of revenues include $60,757 and $52,496 of inter-segment activity for the thirteen weeks ended November 30, 2019 and December 1, 2018, respectively, that is eliminated in consolidation.
RITE AID CORPORATION AND SUBSIDIARIES
 
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 
 
Thirty-nine weeks ended
November 30, 2019
Thirty-nine weeks ended
December 1, 2018
 
Retail Pharmacy Segment
Revenues from continuing operations (a)

$

11,622,858

$

11,785,996

Cost of revenues from continuing operations (a)

 

8,489,067

 

8,585,318

Gross profit from continuing operations

 

3,133,791

 

3,200,678

LIFO charge from continuing operations

 

7,553

 

19,311

FIFO gross profit from continuing operations

 

3,141,344

 

3,219,989

Adjusted EBITDA gross profit from continuing operations

 

3,151,043

 

3,229,993

 
Gross profit as a percentage of revenues - continuing operations

 

26.96%

 

27.16%

LIFO charge as a percentage of revenues - continuing operations

 

0.06%

 

0.16%

FIFO gross profit as a percentage of revenues - continuing operations

 

27.03%

 

27.32%

Adjusted EBITDA gross profit as a percentage of revenues - continuing operations

 

27.11%

 

27.41%

 
Selling, general and administrative expenses from continuing operations

 

3,160,379

 

3,195,929

Adjusted EBITDA selling, general and administrative expenses from continuing operations

 

2,865,783

 

2,921,021

Selling, general and administrative expenses as a percentage of revenues - continuing operations

 

27.19%

 

27.12%

Adjusted EBITDA selling, general and administrative expenses as a percentage of revenues - continuing operations

 

24.66%

 

24.78%

 
Cash interest expense

 

164,982

 

167,270

Non-cash interest expense

 

11,246

 

12,378

Total interest expense

 

176,228

 

179,648

Interest expense - continuing operations

 

176,228

 

175,033

Interest expense - discontinued operations

 

-

 

4,615

 
Adjusted EBITDA - continuing operations

 

285,260

 

308,972

Adjusted EBITDA as a percentage of revenues - continuing operations

 

2.45%

 

2.62%

 
 
Pharmacy Services Segment
Revenues (a)

$

4,758,470

$

4,630,410

Cost of revenues (a)

 

4,432,124

 

4,319,100

Gross profit

 

326,346

 

311,310

 
Gross profit as a percentage of revenues

 

6.86%

 

6.72%

 
Adjusted EBITDA

 

117,367

 

120,392

Adjusted EBITDA as a percentage of revenues

 

2.47%

 

2.60%

(a) -Revenues and cost of revenues include $180,177 and $156,494 of inter-segment activity for the thirty-nine weeks ended November 30, 2019 and December 1, 2018, respectively, that is eliminated in consolidation.

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(In thousands)

(unaudited)

 
 
 
Thirteen weeks ended
November 30, 2019
Thirteen weeks ended
December 1, 2018
 
 
Reconciliation of net income (loss) to adjusted EBITDA:
Net income (loss) - continuing operations

$

52,286

 

$

(17,250

)

Adjustments:
Interest expense

 

57,856

 

 

56,008

 

Income tax expense (benefit)

 

876

 

 

(1,471

)

Depreciation and amortization

 

82,007

 

 

86,685

 

LIFO (credit) charge

 

(7,440

)

 

5,987

 

Lease termination and impairment charges

 

166

 

 

2,628

 

Gain on debt retirements, net

 

(55,692

)

 

-

 

Merger and Acquisition-related costs

 

-

 

 

4,175

 

Stock-based compensation expense

 

3,506

 

 

1,317

 

Restructuring-related costs

 

25,275

 

 

-

 

Inventory write-downs related to store closings

 

93

 

 

421

 

Gain on sale of assets, net

 

(1,371

)

 

(382

)

Other

 

528

 

 

4,673

 

Adjusted EBITDA - continuing operations

$

158,090

 

$

142,791

 

Percent of revenues - continuing operations

 

2.89%

 

2.62%

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

(In thousands)

(unaudited)

 
 
 
Thirty-nine weeks ended
November 30, 2019
Thirty-nine weeks ended
December 1, 2018
 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss - continuing operations

$

(125,758

)

$

(411,325

)

Adjustments:
Interest expense

 

176,228

 

 

175,033

 

Income tax expense (benefit)

 

35,878

 

 

(117,527

)

Depreciation and amortization

 

248,977

 

 

270,957

 

LIFO charge

 

7,553

 

 

19,311

 

Lease termination and impairment charges

 

2,115

 

 

52,096

 

Goodwill and intangible asset impairment charges

 

-

 

 

375,190

 

(Gain) loss on debt retirements, net

 

(55,692

)

 

554

 

Merger and Acquisition-related costs

 

3,599

 

 

30,394

 

Stock-based compensation expense

 

13,598

 

 

11,563

 

Restructuring-related costs

 

93,770

 

 

-

 

Inventory write-downs related to store closings

 

4,083

 

 

5,554

 

Litigation settlement

 

-

 

 

18,000

 

Gain on sale of assets, net

 

(5,670

)

 

(11,206

)

Other

 

3,946

 

 

10,770

 

Adjusted EBITDA - continuing operations

$

402,627

 

$

429,364

 

Percent of revenues - continuing operations

 

2.49%

 

2.64%

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

ADJUSTED NET INCOME

(Dollars in thousands, except per share amounts)

(unaudited)

 
 
Thirteen weeks ended
November 30, 2019
Thirteen weeks ended
December 1, 2018
 
Net income (loss) from continuing operations

$

52,286

 

$

(17,250

)

Add back - Income tax expense (benefit)

 

876

 

 

(1,471

)

Income (loss) before income taxes - continuing operations

 

53,162

 

 

(18,721

)

 
Adjustments:
Amortization expense

 

24,920

 

 

28,768

 

LIFO (credit) charge

 

(7,440

)

 

5,987

 

Gain on debt retirements, net

 

(55,692

)

 

-

 

Merger and Acquisition-related costs

 

-

 

 

4,175

 

Restructuring-related costs

 

25,275

 

 

-

 

 
Adjusted income before income taxes - continuing operations

 

40,225

 

 

20,209

 

 
Adjusted income tax expense (a)

 

11,090

 

 

5,469

 

Adjusted net income from continuing operations

$

29,135

 

$

14,740

 

 
Adjusted net income per diluted share - continuing operations:
 
Numerator for adjusted net income per diluted share:
Adjusted net income from continuing operations

$

29,135

 

$

14,740

 

 
 
 
Denominator:
Basic weighted average shares

 

53,310

 

 

52,920

 

Outstanding options and restricted shares, net

 

274

 

 

10

 

Diluted weighted average shares

 

53,584

 

 

52,930

 

 
Net income (loss) from continuing operations per diluted share - continuing operations

$

0.98

 

$

(0.33

)

 
 
Adjusted net income per diluted share - continuing operations

$

0.54

 

$

0.28

 

(a)

The fiscal year 2020 and 2019 annual effective tax rates, calculated using a federal rate plus a net state rate that excluded the impact of state NOL's, state credits and valuation allowance, was used for the thirteen weeks ended November 30, 2019 and December 1, 2018, respectively.

 

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

ADJUSTED NET INCOME

(Dollars in thousands, except per share amounts)

(unaudited)

 
 
Thirty-nine weeks ended
November 30, 2019
Thirty-nine weeks ended
December 1, 2018
 
Net loss from continuing operations

$

(125,758

)

$

(411,325

)

Add back - Income tax expense (benefit)

 

35,878

 

 

(117,527

)

Loss before income taxes - continuing operations

 

(89,880

)

 

(528,852

)

 
Adjustments:
Amortization expense

 

79,176

 

 

96,668

 

LIFO charge

 

7,553

 

 

19,311

 

Goodwill and intangible asset impairment charges

 

-

 

 

375,190

 

(Gain) loss on debt retirements, net

 

(55,692

)

 

554

 

Merger and Acquisition-related costs

 

3,599

 

 

30,394

 

Restructuring-related costs

 

93,770

 

 

-

 

Litigation settlement

 

-

 

 

18,000

 

 
Adjusted income before income taxes - continuing operations

 

38,526

 

 

11,265

 

 
Adjusted income tax expense (a)

 

10,622

 

 

3,049

 

Adjusted net income from continuing operations

$

27,904

 

$

8,216

 

 
Adjusted net income per diluted share - continuing operations:
 
Numerator for adjusted net income per diluted share:
Adjusted net income from continuing operations

$

27,904

 

$

8,216

 

 
 
 
Denominator:
Basic weighted average shares

 

53,159

 

 

52,824

 

Outstanding options and restricted shares, net

 

775

 

 

124

 

Diluted weighted average shares

 

53,934

 

 

52,948

 

 
Net loss from continuing operations per diluted share - continuing operations

$

(2.37

)

$

(7.79

)

 
Adjusted net income diluted share - continuing operations

$

0.52

 

$

0.16

 

(a)The fiscal year 2020 and 2019 annual effective tax rates, calculated using a federal rate plus a net state rate that excluded the impact of state NOL's, state credits and valuation allowance, was used for the thirty-nine weeks ended November 30, 2019 and December 1, 2018, respectively.

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND RECONCILIATION OF ADJUSTED EBITDA SELLING,

GENERAL AND ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT

(In thousands)

(unaudited)

 
 
 
Thirteen weeks ended
November 30, 2019
Thirteen weeks ended
December 1, 2018
 
 
Reconciliation of adjusted EBITDA gross profit:
Revenues

$

3,909,946

 

$

3,976,719

 

Gross Profit

 

1,070,852

 

 

1,079,584

 

Addback:
LIFO (credit) charge

 

(7,440

)

 

5,987

 

Depreciation and amortization (cost of goods sold portion only)

 

2,070

 

 

2,308

 

Other

 

41

 

 

334

 

Adjusted EBITDA gross profit - continuing operations

$

1,065,523

 

$

1,088,213

 

Percent of revenues - continuing operations

 

27.25%

 

27.36%

 
 
 
Reconciliation of adjusted EBITDA selling, general and administrative expenses:
Revenues

$

3,909,946

 

$

3,976,719

 

Selling, general and administrative expenses

 

1,044,236

 

 

1,062,598

 

Less:
Depreciation and amortization (SG&A portion only)

 

65,267

 

 

67,905

 

Stock-based compensation expense

 

2,976

 

 

1,317

 

Merger and Acquisition-related costs

 

-

 

 

4,175

 

Restructuring-related costs

 

18,415

 

 

-

 

Other

 

634

 

 

2,213

 

Adjusted EBITDA selling, general and administrative expenses - continuing operations

$

956,944

 

$

986,988

 

Percent of revenues - continuing operations

 

24.47%

 

24.82%

 
 
 
Adjusted EBITDA - continuing operations

$

108,579

 

$

101,225

 

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND RECONCILIATION OF ADJUSTED EBITDA SELLING,

GENERAL AND ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT

(In thousands)

(unaudited)

 
 
 
Thirty-nine weeks ended
November 30, 2019
Thirty-nine weeks ended
December 1, 2018
 
 
Reconciliation of adjusted EBITDA gross profit:
Revenues

$

11,622,858

 

$

11,785,996

 

Gross Profit

 

3,133,791

 

 

3,200,678

 

Addback:
LIFO charge

 

7,553

 

 

19,311

 

Depreciation and amortization (cost of goods sold portion only)

 

6,538

 

 

6,929

 

Other

 

3,161

 

 

3,075

 

Adjusted EBITDA gross profit - continuing operations

$

3,151,043

 

$

3,229,993

 

Percent of revenues - continuing operations

 

27.11%

 

27.41%

 
 
 
Reconciliation of adjusted EBITDA selling, general and administrative expenses:
Revenues

$

11,622,858

 

$

11,785,996

 

Selling, general and administrative expenses

 

3,160,379

 

 

3,195,929

 

Less:
Depreciation and amortization (SG&A portion only)

 

195,281

 

 

205,972

 

Stock-based compensation expense

 

12,673

 

 

11,563

 

Merger and Acquisition-related costs

 

2,828

 

 

30,394

 

Restructuring-related costs

 

78,851

 

 

-

 

Litigation settlement

 

-

 

 

18,000

 

Other

 

4,963

 

 

8,979

 

Adjusted EBITDA selling, general and administrative expenses - continuing operations

$

2,865,783

 

$

2,921,021

 

Percent of revenues - continuing operations

 

24.66%

 

24.78%

 
 
 
Adjusted EBITDA - continuing operations

$

285,260

 

$

308,972

 

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE

YEAR ENDING FEBRUARY 29, 2020

(In thousands)

(unaudited)

 
 
Guidance Range
LowHigh
 
Total Revenues

$

21,500,000

 

$

21,900,000

 

 
Same store sales

 

0.00%

 

1.00%

 
Gross Capital Expenditures

$

230,000

 

$

230,000

 

 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss

$

(204,000

)

$

(174,000

)

Adjustments:
Interest expense

 

235,000

 

 

235,000

 

Income tax expense

 

40,000

 

 

40,000

 

Depreciation and amortization

 

330,000

 

 

330,000

 

LIFO charge

 

10,000

 

 

10,000

 

Lease termination and impairment charges

 

35,000

 

 

35,000

 

Gain on debt retirements, net

 

(56,000

)

 

(56,000

)

Restructuring-related costs

 

100,000

 

 

100,000

 

Other

 

25,000

 

 

25,000

 

Adjusted EBITDA

$

515,000

 

$

545,000

 

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET INCOME GUIDANCE

YEAR ENDING FEBRUARY 29, 2020

(In thousands)

(unaudited)

 
 
 
Guidance Range
LowHigh
 
Net loss

$

(204,000

)

$

(174,000

)

Add back - income tax expense

 

40,000

 

 

40,000

 

Loss before income taxes

 

(164,000

)

 

(134,000

)

 
Adjustments:
Amortization expense

 

120,000

 

 

120,000

 

LIFO charge

 

10,000

 

 

10,000

 

Gain on debt retirements, net

 

(56,000

)

 

(56,000

)

Restructuring-related costs

 

100,000

 

 

100,000

 

 
Adjusted income before adjusted income taxes

 

10,000

 

 

40,000

 

 
Adjusted income tax expense

 

3,000

 

 

11,000

 

Adjusted net income

$

7,000

 

$

29,000

 

 
 
Diluted adjusted net income per share

$

0.13

 

$

0.55

 

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191219005149/en/

CONTACT: INVESTORS:

Byron Purcell

(717) 975-5809

Orinvestor@riteaid.comMEDIA:

Christopher Savarese

(717) 975-5718

KEYWORD: PENNSYLVANIA UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: MEDICAL SUPPLIES RETAIL HEALTH CONVENIENCE STORE DISCOUNT/VARIETY GENERAL HEALTH PHARMACEUTICAL

SOURCE: Rite Aid Corporation

Copyright Business Wire 2019.

PUB: 12/19/2019 07:00 AM/DISC: 12/19/2019 07:01 AM

http://www.businesswire.com/news/home/20191219005149/en