RAD
$9.99
Rite Aid
$.27
2.78%
Earnings Details
2nd Quarter August 2020
Thursday, September 24, 2020 7:00:00 AM
Tweet Share Watch
Summary

Rite Aid Beats but Guides Lower

Rite Aid (RAD) reported 2nd Quarter August 2020 earnings of $0.25 per share on revenue of $6.0 billion. The consensus earnings estimate was $0.11 per share on revenue of $5.8 billion. The Earnings Whisper number was $0.15 per share. Revenue grew 11.5% on a year-over-year basis.

The company said it expects fiscal 2021 non-GAAP results to range from a loss of $0.67 per share to earnings of $0.09 per share on revenue of $23.5 million to $24.0 million. The company previously withdrew its initial guidance for results to range from a loss of $0.22 per share to earnings of $0.19 per share on revenue of $22.50 billion to $22.90 billion and the current consensus earnings estimate is $0.50 per share on revenue of $23.49 billion for the year ending February 28, 2021.

Rite Aid Corp operates retail drugstore chains in the United States.

Results
Reported Earnings
$0.25
Earnings Whisper
$0.15
Consensus Estimate
$0.11
Reported Revenue
$5.98 Bil
Revenue Estimate
$5.76 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Rite Aid Corporation Reports Fiscal 2021 Second Quarter Results

  • Revenues Increased 11.5 Percent – Driven by Growth in Both Retail Pharmacy and Pharmacy Services Segments
  • Front-End Market Share Increased by 130 Basis Points in Dollars and 150 Basis Points in Unit Sales
  • Net Loss from Continuing Operations Narrowed $65.5 Million to $13.2 Million, or $0.25 Per Share
  • Adjusted EBITDA from Continuing Operations Increased $17.4 Million or 13% to $151.6 Million
  • Company Issues Revised Fiscal 2021 Guidance

CAMP HILL, Pa.--(BUSINESS WIRE)--Rite Aid Corporation (NYSE: RAD) today reported operating results for its second fiscal quarter ended August 29, 2020.

For the second quarter, net loss from continuing operations narrowed $65.5 million to $13.2 million, or $0.25 loss per share. Adjusted net income from continuing operations increased $7.2 million to $13.5 million, or $0.25 earnings per share, and Adjusted EBITDA from continuing operations increased $17.4 million to $151.6 million, or 2.5 percent of revenues.

“We are pleased with our second quarter performance as we delivered another quarter of strong results while making solid progress on our bold, new RxEvolution strategy,” said Heyward Donigan, president and chief executive officer, Rite Aid. “Our retail pharmacists and associates have always been deeply committed to our communities, and they are doing a great job protecting our customers during a global pandemic. Thanks to them, Rite Aid continues to gain retail market share and increase both same store prescription count and front-end sales.”

“And at Elixir, our new leadership team is in place, and we are making progress on modernizing and integrating our many assets. We also officially launched our new Elixir brand and are focused on enhancing our curated solutions, products, clinical and digital capabilities. We grew membership in our Medicare Part D business and benefitted from strong expense control, especially as we continue to integrate Rite Aid and Elixir.”

“I am so proud of our 50,000 associates and how they are working together each and every day to deliver operational excellence and help our customers to not just get healthy, but get thriving. Together, we are building a strong foundation for sustainable growth and setting the stage to engage with consumers in ways never before seen in health care. A whole new Rite Aid is coming to life, and I’m excited to continue our journey to become a dominant mid-market PBM, unlock the value of our pharmacists and revitalize our retail and digital experiences.”

Consolidated Second Quarter Summary

(dollars in thousands)

Thirteen Week Period Ended

Twenty-six Week Period Ended

 

 

August 29, 2020

 

August 31, 2019

 

August 29, 2020

 

August 31, 2019

Revenues from continuing operations

$

5,981,970

 

$

5,366,264

 

$

12,009,346

 

$

10,738,853

 

Net loss from continuing operations

 

(13,197

)

 

(78,705

)

 

(85,899

)

 

(178,044

)

Adjusted EBITDA from continuing
operations

 

 

151,603

 

 

 

 

134,190

 

 

 

 

258,995

 

 

 

 

244,537

 

 

Revenues from continuing operations for the quarter were $5.98 billion compared to revenues from continuing operations of $5.37 billion in the prior year’s quarter. The increase in revenues was driven by growth at both the Retail Pharmacy and Pharmacy Services segments.

Net loss from continuing operations was $13.2 million, or $0.25 per share compared to last year’s second quarter net loss from continuing operations of $78.7 million, or $1.48 per share. The improvement in net loss is due primarily to an increase in Adjusted EBITDA, decreases in income tax and interest expense, a LIFO credit in the current quarter compared to a LIFO charge in the prior year second quarter, and a gain on debt modification in the current quarter. These benefits were partially offset by an increase in lease termination and impairment charges caused by the wind down of our RediClinic business in the current quarter.

Adjusted EBITDA from continuing operations was $151.6 million or 2.5% of revenues, compared to last year’s second quarter Adjusted EBITDA of $134.2 million or 2.5% of revenues. The improvement in Adjusted EBITDA was driven by increased revenues and a reduction in SG&A expenses.

Retail Pharmacy Segment

(dollars in thousands)

Thirteen Week Period Ended

Twenty-six Week Period Ended

 

 

August 29, 2020

 

August 31, 2019

 

August 29, 2020

 

August 31, 2019

Revenues from continuing operations

$

4,017,912

$

3,848,104

$

8,141,183

$

7,712,912

Adjusted EBITDA from continuing
operations

 

 

122,340

 

 

92,673

 

 

185,322

 

 

176,681

Retail Pharmacy Segment revenues from continuing operations increased 4.4 percent over the prior year quarter. Same store sales from continuing operations for the second quarter increased 3.5 percent over the prior year period, consisting of a 4.6 percent increase in front-end sales and a 2.3 percent increase in pharmacy sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 6.1 percent, driven by increases across a number of categories. The company increased its front-end market share by 130 basis points in dollars and 150 basis points in unit sales1. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 2.6 percent over the prior year period driven by increases in maintenance prescriptions, supported by personalized Medication Therapy Management interventions and home deliveries, partially offset by a reduction in acute prescriptions of 4.9 percent.

Retail Pharmacy Segment Adjusted EBITDA from continuing operations was $122.3 million or 3.0 percent of revenues for the second quarter compared to last year’s second quarter Adjusted EBITDA from continuing operations of $92.7 million or 2.4 percent of revenues. The increase of $29.6 million is due to a reduction in SG&A expenses and increased gross profit. SG&A expenses were favorably impacted by changes to modernize our associate paid time off (PTO) plans along with strong expense control. These savings were partially offset by incremental costs associated with the COVID-19 pandemic and the absence of Transition Services Agreement income in the current quarter, as services under that agreement have been completed. Gross profit benefited from increased revenue, partially offset by continued pharmacy reimbursement rate pressures that were not fully offset by generic drug cost reductions.

1 – Source: IRI. Excludes tobacco, cigarettes, greeting cards and online sales. For drug store channel during Rite Aid’s second fiscal quarter.

Pharmacy Services Segment

(dollars in thousands)

Thirteen Week Period Ended

Twenty-six Week Period Ended

 

 

August 29, 2020

 

August 31, 2019

 

August 29, 2020

 

August 31, 2019

Revenues from continuing operations

$

2,038,378

$

1,579,069

$

4,015,624

$

3,145,361

Adjusted EBITDA from continuing
operations

 

 

29,263

 

 

41,517

 

 

73,673

 

 

67,856

Pharmacy Services Segment revenues were $2.0 billion, an increase of 29.1 percent compared to the prior year period. The increase in Pharmacy Services Segment revenues was due primarily to a membership increase of 259,000 in Medicare Part D.

Pharmacy Services Segment Adjusted EBITDA from continuing operations was $29.3 million or 1.4 percent of revenues for the second quarter compared to last year’s second quarter Adjusted EBITDA from continuing operations of $41.5 million or 2.6 percent of revenues. The decrease in Adjusted EBITDA of $12.3 million was primarily due to a reduction of $21.0 million in gross profit related to a change in rebate aggregator at our MedTrak subsidiary. The company anticipates that the new rebate aggregator contract will drive improved gross profit for the company and savings for its clients. The unfavorable gross profit reduction was partially offset by increased revenues, improved pharmacy network management and strong expense control.

Outlook for Fiscal 2021

Rite Aid Corporation is issuing revised fiscal 2021 guidance. The company’s guidance assumes strong demand for flu immunizations, continued improvement in pharmacy network management at Elixir and savings from our previously announced cost reduction initiatives, offset by continued reimbursement rate pressure and the impact of a less severe cough, cold and flu season on OTC sales and related prescriptions.

Rite Aid Corporation expects revenues to be between $23.5 billion and $24.0 billion in fiscal 2021 with same store sales expected to range from an increase of 3.0 percent to an increase of 4.0 percent over fiscal 2020.

Net loss is expected to be between $190 million and $140 million.

Adjusted EBITDA is expected to be between $475 million and $525 million.

Adjusted net (loss) income per share is expected to be between $(0.67) and $0.09.

Capital expenditures are expected to be approximately $275 million.

Free cash flow is expected to be between $110 million and $160 million.

Conference Call Broadcast

Rite Aid 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 broadcast via the Internet at https://www.riteaid.com/corporate/investor-relations/presentations. The telephone replay will be available beginning at 12 p.m. Eastern Time today and ending at 11:59 p.m. Eastern Time on, Sept. 26, 2020. To access the replay of the call, telephone (800) 585-8367 or (416) 621-4642 and enter the seven-digit reservation number 6691435. The webcast replay of the call will also be available at https://www.riteaid.com/corporate/investor-relations/presentations starting at 12 p.m. Eastern Time today. The playback will be available until the company’s next conference call.

About Rite Aid Corporation

Rite Aid Corporation is on the front lines of delivering healthcare services and retail products to more than 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 Elixir, we provide pharmacy benefits and services to approximately 4 million members nationwide. For more information, 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 2021, the ability to generate positive free cash flows in fiscal 2021; the continued impact of the recent global coronavirus (COVID-19) pandemic on Rite Aid’s business; 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: the impact of COVID-19 on our workforce, operations, stores, expenses, and supply chain, and the operations of our customers, suppliers and business partners; our ability to successfully implement our new business strategy (including any delays and adjustments as a result of COVID-19) and improve the operating performance of our stores; our high level of indebtedness and our ability to satisfy our obligations and the other covenants contained in our debt agreements; general competitive, economic, industry, market, political (including healthcare reform) and regulatory conditions, civil unrest (including any resulting store closures, damage, or loss of inventory), as well as other factors specific to the markets in which we operate; the 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; our ability to achieve the benefits of our efforts to reduce the costs of our generic and other drugs; our ability to achieve cost savings and other benefits of our organizational restructuring within our anticipated timeframe, if at all; outcomes of legal and regulatory matters; and our ability to partner and have relationships with health plans and health systems.

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, in Item 1A (Risk Factors) of our Quarterly Report on Form 10-Q filed on July 2, 2020 and in other documents that we file or furnish with the Securities and Exchange Commission (the “SEC”), which you are encouraged to read. To the extent that COVID-19 adversely affects our business and financial results, it may also have the effect of heightening many of such risk factors.

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.

The degree to which COVID-19 may adversely affect Rite Aid’s results and operations, including its ability to achieve its outlook for fiscal 2021 guidance, will depend on numerous evolving factors and future developments, which are highly uncertain, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact (such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns), including the reinstitution of more stringent regulations, and how quickly and to what extent normal economic and operating conditions can resume. As a result, the impact on Rite Aid’s financial and operating results cannot be reasonably estimated with specificity at this time, but the impact could be material. 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 and modifications, LIFO adjustments, goodwill and intangible asset impairment charges, restructuring-related costs and the WBA merger termination fee.

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 and modifications, 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 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.

RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
 
 
 
August 29, 2020February 29, 2020
ASSETS
Current assets:
Cash and cash equivalents

$

92,730

 

$

218,180

 

Accounts receivable, net

 

1,920,866

 

 

1,286,785

 

Inventories, net of LIFO reserve of $518,824 and $539,640

 

1,937,953

 

 

1,921,604

 

Prepaid expenses and other current assets

 

114,148

 

 

181,794

 

Current assets held for sale

 

-

 

 

92,278

 

Total current assets

 

4,065,697

 

 

3,700,641

 

Property, plant and equipment, net

 

1,140,658

 

 

1,215,838

 

Operating lease right-of-use assets

 

2,860,710

 

 

2,903,256

 

Goodwill

 

1,108,136

 

 

1,108,136

 

Other intangibles, net

 

305,730

 

 

359,491

 

Deferred tax assets

 

16,680

 

 

16,680

 

Other assets

 

122,588

 

 

148,327

 

Total assets

$

9,620,199

 

$

9,452,369

 

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

$

6,902

 

$

8,840

 

Accounts payable

 

1,448,682

 

 

1,484,081

 

Accrued salaries, wages and other current liabilities

 

637,610

 

 

746,318

 

Current portion of operating lease liabilities

 

487,844

 

 

490,161

 

Current liabilities held for sale

 

-

 

 

37,063

 

Total current liabilities

 

2,581,038

 

 

2,766,463

 

Long-term debt, less current maturities

 

3,506,708

 

 

3,077,268

 

Long-term operating lease liabilities

 

2,657,891

 

 

2,710,347

 

Lease financing obligations, less current maturities

 

17,935

 

 

19,326

 

Other noncurrent liabilities

 

253,589

 

 

204,438

 

Total liabilities

 

9,017,161

 

 

8,777,842

 

 
Commitments and contingencies

 

-

 

 

-

 

Stockholders' equity:
Common stock

 

55,224

 

 

54,716

 

Additional paid-in capital

 

5,893,590

 

 

5,890,903

 

Accumulated deficit

 

(5,298,932

)

 

(5,222,194

)

Accumulated other comprehensive loss

 

(46,844

)

 

(48,898

)

Total stockholders' equity

 

603,038

 

 

674,527

 

Total liabilities and stockholders' equity

$

9,620,199

 

$

9,452,369

 

RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
 
Thirteen weeks ended
August 29, 2020
Thirteen weeks ended
August 31, 2019
Revenues

$

5,981,970

 

$

5,366,264

 

Costs and expenses:
Cost of revenues

 

4,821,625

 

 

4,221,825

 

Selling, general and administrative expenses

 

1,116,142

 

 

1,135,530

 

Lease termination and impairment charges

 

11,528

 

 

1,471

 

Interest expense

 

50,007

 

 

60,102

 

Gain on debt modification, net

 

(5,274

)

 

-

 

Loss (gain) on sale of assets, net

 

1,092

 

 

(1,587

)

 

 

5,995,120

 

 

5,417,341

 

 
Loss from continuing operations before income taxes

 

(13,150

)

 

(51,077

)

Income tax expense

 

47

 

 

27,628

 

Net loss from continuing operations

 

(13,197

)

 

(78,705

)

Net loss from discontinued operations, net of tax

 

-

 

 

(574

)

Net loss

$

(13,197

)

$

(79,279

)

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

$

(13,197

)

$

(78,705

)

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

 

-

 

 

(574

)

Loss attributable to common stockholders - basic and diluted

$

(13,197

)

$

(79,279

)

 
 
 
Denominator:
Basic and diluted weighted average shares

 

53,573

 

 

53,041

 

 
Basic and diluted loss per share
Continuing operations

$

(0.25

)

$

(1.48

)

Discontinued operations

$

-

 

$

(0.01

)

Net basic and diluted loss per share

$

(0.25

)

$

(1.49

)

RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
 
Twenty-six weeks ended
August 29, 2020
Twenty-six weeks ended
August 31, 2019
Revenues

$

12,009,346

 

$

10,738,853

 

Costs and expenses:
Cost of revenues

 

9,650,682

 

 

8,467,691

 

Selling, general and administrative expenses

 

2,313,289

 

 

2,298,182

 

Lease termination and impairment charges

 

15,281

 

 

1,949

 

Intangible asset impairment charges

 

29,852

 

 

-

 

Interest expense

 

100,554

 

 

118,372

 

Gain on debt modification, net

 

(5,274

)

 

-

 

Gain on sale of assets, net

 

(1,168

)

 

(4,299

)

 

 

12,103,216

 

 

10,881,895

 

 
Loss from continuing operations before income taxes

 

(93,870

)

 

(143,042

)

Income tax (benefit) expense

 

(7,971

)

 

35,002

 

Net loss from continuing operations

 

(85,899

)

 

(178,044

)

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

 

9,161

 

 

(894

)

Net loss

$

(76,738

)

$

(178,938

)

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

$

(85,899

)

$

(178,044

)

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

 

9,161

 

 

(894

)

Loss attributable to common stockholders - basic and diluted

$

(76,738

)

$

(178,938

)

 
 
 
Denominator:
Basic and diluted weighted average shares

 

53,528

 

 

53,084

 

 
Basic and diluted loss per share
Continuing operations

$

(1.60

)

$

(3.35

)

Discontinued operations

$

0.17

 

$

(0.02

)

Net basic and diluted loss per share

$

(1.43

)

$

(3.37

)

RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
 
 
Thirteen weeks ended
August 29, 2020
Thirteen weeks ended
August 31, 2019
 
 
OPERATING ACTIVITIES:
Net loss

$

(13,197

)

$

(79,279

)

Net loss from discontinued operations, net of tax

 

-

 

 

(574

)

Net loss from continuing operations

$

(13,197

)

$

(78,705

)

Adjustments to reconcile to net cash used in operating activities of continuing operations:
Depreciation and amortization

 

87,117

 

 

83,044

 

Lease termination and impairment charges

 

11,528

 

 

1,471

 

LIFO (credit) charge

 

(8,750

)

 

7,504

 

Loss (gain) on sale of assets, net

 

1,092

 

 

(1,587

)

Stock-based compensation expense

 

3,936

 

 

4,712

 

Gain on debt modification, net

 

(5,274

)

 

-

 

Changes in deferred taxes

 

-

 

 

26,979

 

Changes in operating assets and liabilities:
Accounts receivable

 

(327,919

)

 

(135,704

)

Inventories

 

(39,174

)

 

(100,536

)

Accounts payable

 

(11,372

)

 

(9,730

)

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

 

(11,898

)

 

46,875

 

Other assets

 

(19,664

)

 

(67,187

)

Other liabilities

 

(24,747

)

 

(55,935

)

Net cash used in operating activities of continuing operations

 

(358,322

)

 

(278,799

)

INVESTING ACTIVITIES:
Payments for property, plant and equipment

 

(34,626

)

 

(43,079

)

Intangible assets acquired

 

(11,857

)

 

(7,498

)

Proceeds from insured loss

 

12,500

 

 

-

 

Proceeds from dispositions of assets and investments

 

3,155

 

 

3,765

 

Proceeds from sale-leaseback transactions

 

8,461

 

 

-

 

Net cash used in investing activities of continuing operations

 

(22,367

)

 

(46,812

)

FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt

 

849,918

 

 

-

 

Net proceeds from revolver

 

408,000

 

 

250,000

 

Principal payments on long-term debt

 

(1,054,884

)

 

(1,671

)

Change in zero balance cash accounts

 

(262

)

 

18,325

 

Payments for taxes related to net share settlement of equity awards

 

(2,002

)

 

(791

)

Financing fees paid for early debt redemption

 

(2,399

)

 

-

 

Deferred financing costs paid

 

(13,268

)

 

(129

)

Net cash provided by financing activities of continuing operations

 

185,103

 

 

265,734

 

Cash flows from discontinued operations:
Operating activities of discontinued operations

 

-

 

 

11,605

 

Investing activities of discontinued operations

 

-

 

 

-

 

Net cash provided by discontinued operations

 

-

 

 

11,605

 

Decrease in cash and cash equivalents

 

(195,586

)

 

(48,272

)

Cash and cash equivalents, beginning of period

 

288,316

 

 

190,453

 

Cash and cash equivalents, end of period

$

92,730

 

$

142,181

 

RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
 
 
Twenty-six weeks ended
August 29, 2020
Twenty-six weeks ended
August 31, 2019
 
 
OPERATING ACTIVITIES:
Net loss

$

(76,738

)

$

(178,938

)

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

 

9,161

 

 

(894

)

Net loss from continuing operations

$

(85,899

)

$

(178,044

)

Adjustments to reconcile to net cash used in operating activities of continuing operations:
Depreciation and amortization

 

166,220

 

 

166,970

 

Lease termination and impairment charges

 

15,281

 

 

1,949

 

Intangible asset impairment charges

 

29,852

 

 

-

 

LIFO (credit) charge

 

(20,816

)

 

14,993

 

Gain on sale of assets, net

 

(1,168

)

 

(4,299

)

Stock-based compensation expense

 

5,810

 

 

10,092

 

Gain on debt modification, net

 

(5,274

)

 

-

 

Changes in deferred taxes

 

-

 

 

26,979

 

Changes in operating assets and liabilities:
Accounts receivable

 

(636,555

)

 

(153,269

)

Inventories

 

4,473

 

 

(111,990

)

Accounts payable

 

1,948

 

 

(85,623

)

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

 

(18,493

)

 

34,982

 

Other assets

 

79,513

 

 

(44,674

)

Other liabilities

 

(11,484

)

 

(8,104

)

Net cash used in operating activities of continuing operations

 

(476,592

)

 

(330,038

)

INVESTING ACTIVITIES:
Payments for property, plant and equipment

 

(63,085

)

 

(84,060

)

Intangible assets acquired

 

(22,572

)

 

(15,708

)

Proceeds from insured loss

 

12,500

 

 

-

 

Proceeds from dispositions of assets and investments

 

5,910

 

 

4,423

 

Proceeds from sale-leaseback transactions

 

8,461

 

 

-

 

Net cash used in investing activities of continuing operations

 

(58,786

)

 

(95,345

)

FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt

 

849,918

 

 

-

 

Net proceeds from revolver

 

650,000

 

 

375,000

 

Principal payments on long-term debt

 

(1,056,182

)

 

(3,451

)

Change in zero balance cash accounts

 

(26,829

)

 

54,712

 

Payments for taxes related to net share settlement of equity awards

 

(2,101

)

 

(986

)

Financing fees paid for early debt redemption

 

(2,399

)

 

-

 

Deferred financing costs paid

 

(14,600

)

 

(315

)

Net cash provided by financing activities of continuing operations

 

397,807

 

 

424,960

 

Cash flows from discontinued operations:
Operating activities of discontinued operations

 

(82,189

)

 

(2,272

)

Investing activities of discontinued operations

 

94,310

 

 

523

 

Net cash provided by (used in) discontinued operations

 

12,121

 

 

(1,749

)

Decrease in cash and cash equivalents

 

(125,450

)

 

(2,172

)

Cash and cash equivalents, beginning of period

 

218,180

 

 

144,353

 

Cash and cash equivalents, end of period

$

92,730

 

$

142,181

 

RITE AID CORPORATION AND SUBSIDIARIES
 
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 
 
Thirteen weeks ended
August 29, 2020
Thirteen weeks ended
August 31, 2019
 
Retail Pharmacy Segment
Revenues from continuing operations (a)

$

4,017,912

 

$

3,848,104

 

Cost of revenues from continuing operations (a)

 

2,955,999

 

 

2,815,660

 

Gross profit from continuing operations

 

1,061,913

 

 

1,032,444

 

LIFO (credit) charge from continuing operations

 

(8,750

)

 

7,504

 

FIFO gross profit from continuing operations

 

1,053,163

 

 

1,039,948

 

Adjusted EBITDA gross profit from continuing operations

 

1,056,222

 

 

1,045,257

 

 
Gross profit as a percentage of revenues - continuing operations

 

26.43

%

 

26.83

%

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

 

-0.22

%

 

0.20

%

FIFO gross profit as a percentage of revenues - continuing operations

 

26.21

%

 

27.02

%

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

 

26.29

%

 

27.16

%

 
Selling, general and administrative expenses from continuing operations

 

1,030,075

 

 

1,044,818

 

Adjusted EBITDA selling, general and administrative expenses from continuing operations

 

933,882

 

 

952,584

 

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

 

25.64

%

 

27.15

%

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

 

23.24

%

 

24.75

%

 
Cash interest expense

 

46,767

 

 

56,304

 

Non-cash interest expense

 

3,240

 

 

3,798

 

Total interest expense

 

50,007

 

 

60,102

 

Interest expense - continuing operations

 

50,007

 

 

60,102

 

Interest expense - discontinued operations

 

-

 

 

-

 

 
Adjusted EBITDA - continuing operations

 

122,340

 

 

92,673

 

Adjusted EBITDA as a percentage of revenues - continuing operations

 

3.04

%

 

2.41

%

 
 
Pharmacy Services Segment
Revenues (a)

$

2,038,378

 

$

1,579,069

 

Cost of revenues (a)

 

1,939,946

 

 

1,467,074

 

Gross profit

 

98,432

 

 

111,995

 

 
Gross profit as a percentage of revenues

 

4.83

%

 

7.09

%

 
Adjusted EBITDA

 

29,263

 

 

41,517

 

Adjusted EBITDA as a percentage of revenues

 

1.44

%

 

2.63

%

(a) -

Revenues and cost of revenues include $74,320 and $60,909 of inter-segment activity for the thirteen weeks ended August 29, 2020 and August 31, 2019, respectively, that is eliminated in consolidation.
RITE AID CORPORATION AND SUBSIDIARIES
 
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 
 
Twenty-six weeks ended
August 29, 2020
Twenty-six weeks ended
August 31, 2019
 
Retail Pharmacy Segment
Revenues from continuing operations (a)

$

8,141,183

 

$

7,712,912

 

Cost of revenues from continuing operations (a)

 

5,997,734

 

 

5,649,973

 

Gross profit from continuing operations

 

2,143,449

 

 

2,062,939

 

LIFO (credit) charge from continuing operations

 

(20,816

)

 

14,993

 

FIFO gross profit from continuing operations

 

2,122,633

 

 

2,077,932

 

Adjusted EBITDA gross profit from continuing operations

 

2,154,649

 

 

2,085,520

 

 
Gross profit as a percentage of revenues - continuing operations

 

26.33

%

 

26.75

%

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

 

-0.26

%

 

0.19

%

FIFO gross profit as a percentage of revenues - continuing operations

 

26.07

%

 

26.94

%

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

 

26.47

%

 

27.04

%

 
Selling, general and administrative expenses from continuing operations

 

2,139,051

 

 

2,116,143

 

Adjusted EBITDA selling, general and administrative expenses from continuing operations

 

1,969,327

 

 

1,908,839

 

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

 

26.27

%

 

27.44

%

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

 

24.19

%

 

24.75

%

 
Cash interest expense

 

94,135

 

 

110,914

 

Non-cash interest expense

 

6,419

 

 

7,458

 

Total interest expense

 

100,554

 

 

118,372

 

Interest expense - continuing operations

 

100,554

 

 

118,372

 

Interest expense - discontinued operations

 

-

 

 

-

 

 
Adjusted EBITDA - continuing operations

 

185,322

 

 

176,681

 

Adjusted EBITDA as a percentage of revenues - continuing operations

 

2.28

%

 

2.29

%

 
 
Pharmacy Services Segment
Revenues (a)

$

4,015,624

 

$

3,145,361

 

Cost of revenues (a)

 

3,800,409

 

 

2,937,138

 

Gross profit

 

215,215

 

 

208,223

 

 
Gross profit as a percentage of revenues

 

5.36

%

 

6.62

%

 
Adjusted EBITDA

 

73,673

 

 

67,856

 

Adjusted EBITDA as a percentage of revenues

 

1.83

%

 

2.16

%

(a) -

Revenues and cost of revenues include $147,461 and $119,420 of inter-segment activity for the twenty-six weeks ended August 29, 2020 and August 31, 2019, respectively, that is eliminated in consolidation.
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(In thousands)
(unaudited)
 
 
 
Thirteen weeks ended
August 29, 2020
Thirteen weeks ended
August 31, 2019
 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss - continuing operations

$

(13,197

)

$

(78,705

)

Adjustments:
Interest expense

 

50,007

 

 

60,102

 

Income tax expense

 

47

 

 

27,628

 

Depreciation and amortization

 

87,117

 

 

83,044

 

LIFO (credit) charge

 

(8,750

)

 

7,504

 

Lease termination and impairment charges

 

11,528

 

 

1,471

 

Gain on debt modification, net

 

(5,274

)

 

-

 

Merger and Acquisition-related costs

 

-

 

 

514

 

Stock-based compensation expense

 

3,936

 

 

4,712

 

Restructuring-related costs

 

23,186

 

 

25,145

 

Inventory write-downs related to store closings

 

1,058

 

 

3,149

 

Loss (gain) on sale of assets, net

 

1,092

 

 

(1,587

)

Other

 

853

 

 

1,213

 

Adjusted EBITDA - continuing operations

$

151,603

 

$

134,190

 

Percent of revenues - continuing operations

 

2.53

%

 

2.50

%

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(In thousands)
(unaudited)
 
 
 
Twenty-six weeks ended
August 29, 2020
Twenty-six weeks ended
August 31, 2019
 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss - continuing operations

$

(85,899

)

$

(178,044

)

Adjustments:
Interest expense

 

100,554

 

 

118,372

 

Income tax (benefit) expense

 

(7,971

)

 

35,002

 

Depreciation and amortization

 

166,220

 

 

166,970

 

LIFO (credit) charge

 

(20,816

)

 

14,993

 

Lease termination and impairment charges

 

15,281

 

 

1,949

 

Intangible asset impairment charges

 

29,852

 

 

-

 

Gain on debt modification, net

 

(5,274

)

 

-

 

Merger and Acquisition-related costs

 

-

 

 

3,599

 

Stock-based compensation expense

 

5,810

 

 

10,092

 

Restructuring-related costs

 

58,921

 

 

68,495

 

Inventory write-downs related to store closings

 

1,892

 

 

3,990

 

Gain on sale of assets, net

 

(1,168

)

 

(4,299

)

Other

 

1,593

 

 

3,418

 

Adjusted EBITDA - continuing operations

$

258,995

 

$

244,537

 

Percent of revenues - continuing operations

 

2.16

%

 

2.28

%

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
Thirteen weeks ended
August 29, 2020
Thirteen weeks ended
August 31, 2019
 
Net loss from continuing operations

$

(13,197

)

$

(78,705

)

Add back - Income tax expense

 

47

 

 

27,628

 

Loss before income taxes - continuing operations

 

(13,150

)

 

(51,077

)

 
Adjustments:
Amortization expense

 

22,695

 

 

26,596

 

LIFO (credit) charge

 

(8,750

)

 

7,504

 

Gain on debt modification, net

 

(5,274

)

 

-

 

Merger and Acquisition-related costs

 

-

 

 

514

 

Restructuring-related costs

 

23,186

 

 

25,145

 

 
Adjusted income before income taxes - continuing operations

 

18,707

 

 

8,682

 

 
Adjusted income tax expense (a)

 

5,171

 

 

2,394

 

Adjusted net income from continuing operations

$

13,536

 

$

6,288

 

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

$

13,536

 

$

6,288

 

 
 
 
Denominator:
Basic weighted average shares

 

53,573

 

 

53,041

 

Outstanding options and restricted shares, net

 

842

 

 

651

 

Diluted weighted average shares

 

54,415

 

 

53,692

 

 
Net loss from continuing operations per diluted
share - continuing operations

$

(0.25

)

$

(1.48

)

 
 
Adjusted net income per diluted share - continuing operations

$

0.25

 

$

0.12

 

(a)

The fiscal year 2021 and 2020 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 August 29, 2020 and August 31, 2019, respectively.
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET INCOME (LOSS)
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
Twenty-six weeks ended
August 29, 2020
Twenty-six weeks ended
August 31, 2019
 
Net loss from continuing operations

$

(85,899

)

$

(178,044

)

Add back - Income tax (benefit) expense

 

(7,971

)

 

35,002

 

Loss before income taxes - continuing operations

 

(93,870

)

 

(143,042

)

 
Adjustments:
Amortization expense

 

47,115

 

 

54,256

 

LIFO (credit) charge

 

(20,816

)

 

14,993

 

Intangible asset impairment charges

 

29,852

 

 

-

 

Gain on debt modification, net

 

(5,274

)

 

-

 

Merger and Acquisition-related costs

 

-

 

 

3,599

 

Restructuring-related costs

 

58,921

 

 

68,495

 

 
Adjusted income (loss) before income taxes - continuing operations

 

15,928

 

 

(1,699

)

 
Adjusted income tax expense (benefit) (a)

 

4,402

 

 

(468

)

Adjusted net income (loss) from continuing operations

$

11,526

 

$

(1,231

)

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

$

11,526

 

$

(1,231

)

 
 
 
Denominator:
Basic weighted average shares

 

53,528

 

 

53,084

 

Outstanding options and restricted shares, net

 

775

 

 

-

 

Diluted weighted average shares

 

54,303

 

 

53,084

 

 
Net loss from continuing operations per diluted
share - continuing operations

$

(1.60

)

$

(3.35

)

 
 
Adjusted net income (loss) per diluted share - continuing operations

$

0.21

 

$

(0.02

)

(a)

The fiscal year 2021 and 2020 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 twenty-six weeks ended August 29, 2020 and August 31, 2019, 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
August 29, 2020
Thirteen weeks ended
August 31, 2019
 
 
Reconciliation of adjusted EBITDA gross profit:
Revenues

$

4,017,912

 

$

3,848,104

 

Gross Profit

 

1,061,913

 

 

1,032,444

 

Addback:
LIFO (credit) charge

 

(8,750

)

 

7,504

 

Depreciation and amortization (cost of goods sold portion only)

 

2,167

 

 

2,205

 

Other

 

892

 

 

3,104

 

Adjusted EBITDA gross profit - continuing operations

$

1,056,222

 

$

1,045,257

 

Percent of revenues - continuing operations

 

26.29

%

 

27.16

%

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

$

4,017,912

 

$

3,848,104

 

Selling, general and administrative expenses

 

1,030,075

 

 

1,044,818

 

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

 

70,884

 

 

64,975

 

Stock-based compensation expense

 

3,631

 

 

4,432

 

Merger and Acquisition-related costs

 

-

 

 

514

 

Restructuring-related costs

 

20,441

 

 

21,055

 

Other

 

1,237

 

 

1,258

 

Adjusted EBITDA selling, general and administrative
expenses - continuing operations

$

933,882

 

$

952,584

 

Percent of revenues - continuing operations

 

23.24

%

 

24.75

%

 
 
 
Adjusted EBITDA - continuing operations

$

122,340

 

$

92,673

 

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)
 
 
 
Twenty-six weeks ended
August 29, 2020
Twenty-six weeks ended
August 31, 2019
 
 
Reconciliation of adjusted EBITDA gross profit:
Revenues

$

8,141,183

 

$

7,712,912

 

Gross Profit

 

2,143,449

 

 

2,062,939

 

Addback:
LIFO (credit) charge

 

(20,816

)

 

14,993

 

Depreciation and amortization (cost of goods sold portion only)

 

4,830

 

 

4,468

 

Restructuring-related costs - SKU optimization charges

 

25,763

 

 

-

 

Other

 

1,423

 

 

3,120

 

Adjusted EBITDA gross profit - continuing operations

$

2,154,649

 

$

2,085,520

 

Percent of revenues - continuing operations

 

26.47

%

 

27.04

%

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

$

8,141,183

 

$

7,712,912

 

Selling, general and administrative expenses

 

2,139,051

 

 

2,116,143

 

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

 

131,793

 

 

130,014

 

Stock-based compensation expense

 

5,356

 

 

9,697

 

Merger and Acquisition-related costs

 

-

 

 

2,828

 

Restructuring-related costs

 

30,387

 

 

60,436

 

Other

 

2,188

 

 

4,329

 

Adjusted EBITDA selling, general and administrative
expenses - continuing operations

$

1,969,327

 

$

1,908,839

 

Percent of revenues - continuing operations

 

24.19

%

 

24.75

%

 
 
 
Adjusted EBITDA - continuing operations

$

185,322

 

$

176,681

 

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE
YEAR ENDING FEBRUARY 27, 2021
(In thousands)
(unaudited)
 
 
Guidance Range
LowHigh
 
Total Revenues

$

23,500,000

 

$

24,000,000

 

 
PBM Revenues

$

7,550,000

 

$

7,650,000

 

 
Same store sales

 

3.00

%

 

4.00

%

 
Gross Capital Expenditures

$

275,000

 

$

275,000

 

 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss

$

(190,000

)

$

(140,000

)

Adjustments:
Interest expense

 

202,000

 

 

202,000

 

Income tax benefit

 

(12,000

)

 

(7,000

)

Depreciation and amortization

 

338,000

 

 

338,000

 

LIFO credit

 

(38,000

)

 

(38,000

)

Lease termination and impairment charges

 

53,000

 

 

53,000

 

Intangible asset impairment charges

 

30,000

 

 

30,000

 

Gain on debt modification, net

 

(5,300

)

 

(5,300

)

Restructuring-related costs

 

75,000

 

 

75,000

 

Other

 

22,300

 

 

17,300

 

Adjusted EBITDA

$

475,000

 

$

525,000

 

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET (LOSS) INCOME GUIDANCE
YEAR ENDING FEBRUARY 27, 2021
(In thousands)
(unaudited)
 
 
 
Guidance Range
LowHigh
 
Net loss

$

(190,000

)

$

(140,000

)

Add back - income tax benefit

 

(12,000

)

 

(7,000

)

Loss before income taxes

 

(202,000

)

 

(147,000

)

 
Adjustments:
Amortization expense

 

92,000

 

 

92,000

 

LIFO credit

 

(38,000

)

 

(38,000

)

Intangible asset impairment charges

 

30,000

 

 

30,000

 

Gain on debt modification, net

 

(5,300

)

 

(5,300

)

Restructuring-related costs

 

75,000

 

 

75,000

 

 
Adjusted (loss) income before adjusted income taxes

 

(48,300

)

 

6,700

 

 
Adjusted income tax (benefit) expense

 

(12,000

)

 

2,000

 

Adjusted net (loss) income

$

(36,300

)

$

4,700

 

 
 
Diluted adjusted net (loss) income per share

$

(0.67

)

$

0.09

 

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF ADJUSTED EBITDA GUIDANCE TO FREE CASH FLOW
GUIDANCE
YEAR ENDING FEBRUARY 27, 2021
(In thousands)
(unaudited)
 
 
 
Guidance Range
LowHigh
 
Adjusted EBITDA

$

475,000

 

$

525,000

 

Cash interest expense

 

(189,000

)

 

(189,000

)

Restructuring-related costs

 

(75,000

)

 

(75,000

)

Closed store rent

 

(26,000

)

 

(26,000

)

Working capital benefit

 

200,000

 

 

200,000

 

Cash flow from operations

 

385,000

 

 

435,000

 

Gross capital expenditures

 

(275,000

)

 

(275,000

)

Free cash flow

$

110,000

 

$

160,000

 

 

INVESTORS:
Trent Kruse
(717) 975-3710
investor@riteaid.com

MEDIA:
Christopher Savarese
(717) 975-5718
Christopher.Savarese@riteaid.com

Source: Rite Aid