RAD
$0.78
Rite Aid
($.02)
(2.50%)
Earnings Details
3rd Quarter November 2018
Wednesday, December 19, 2018 4:15:00 PM
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Summary

Rite Aid Beats but Guides Lower

Rite Aid (RAD) reported 3rd Quarter November 2018 earnings of $0.01 per share on revenue of $5.5 billion. The consensus estimate was a loss of $0.02 per share on revenue of $5.5 billion. The Earnings Whisper number was for a loss of $0.01 per share. Revenue grew 1.8% on a year-over-year basis.

The company said it expects a fiscal 2019 loss of $0.03 to $0.01 per share on revenue of $21.80 billion to $21.95 billion. The company's previous guidance was for results to range from a loss of $0.03 to earnings of $0.01 per share on revenue of $21.70 billion to $22.10 billion and the current consensus estimate is for breakeven results on revenue of $21.90 billion for the year ending February 28, 2019.

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

Results
Reported Earnings
$0.01
Earnings Whisper
($0.01)
Consensus Estimate
($0.02)
Reported Revenue
$5.45 Bil
Revenue Estimate
$5.48 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Rite Aid Reports Fiscal 2019 Third Quarter Results

  • Third Quarter Net Loss from Continuing Operations of $17.3 Million or $0.02 Per Share, Compared to the Prior Year Third Quarter Net Loss of $18.2 Million or $0.02 Per Share
  • Third Quarter Adjusted Net Income from Continuing Operations of $14.7 million or $0.01 Per Share, Compared to the Prior Year Third Quarter Adjusted Net Income of $8.5 Million or $0.01 Per Share
  • Third Quarter Adjusted EBITDA from Continuing Operations of $142.8 Million, Compared to the Prior Year Adjusted EBITDA from Continuing Operations of $142.1 Million
  • Retail Same Store Sales Increased 1.6 Percent
    • Driven By 2.4 Percent Same Store Prescription Growth
  • Rite Aid and McKesson Announce They Will Enter into a 10-Year Drug Purchasing Agreement
  • Refinancing of Rite Aid’s Senior Secured Credit Facility is Substantially Completed
  • Rite Aid Narrows Guidance for Fiscal 2019

CAMP HILL, Pa.--(BUSINESS WIRE)--Rite Aid Corporation (NYSE: RAD) today reported operating results for its third fiscal quarter ended December 1, 2018.

For the third quarter, the company reported net loss from continuing operations of $17.3 million, or $0.02 per share, Adjusted net income from continuing operations of $14.7 million, or $0.01 per share, and Adjusted EBITDA from continuing operations of $142.8 million, or 2.6 percent of revenues.

“Our third quarter results reflect the progress we’re making in growing our retail and pharmacy benefits management businesses,” said Rite Aid CEO John Standley. “We realized our strongest prescription count performance in over two years and our best comparable store sales in over three years, driven by the success of our immunization business and other clinical pharmacy services that are benefiting our patients. We grew revenue by 5.6 percent at our EnvisionRxOptions PBM, driven by growth in our Medicare Part D membership. We look forward to building on this momentum by further improving clinical services in our pharmacy business, enhancing the customer experience in all channels and investing for further growth in both our retail and pharmacy services businesses.”

“In addition, as we separately announced today, we have agreed to the key terms of an amendment to our drug purchasing agreement with McKesson Corporation, continuing our relationship for an additional 10 years and providing us with competitive drug pricing and operating flexibility that will help drive future growth,” Standley said.

Third Quarter Summary

Revenues from continuing operations for the quarter were $5.5 billion compared to revenues from continuing operations of $5.4 billion in the prior year’s third quarter. Retail Pharmacy Segment revenues were $4.0 billion and increased 0.4 percent compared to the prior year period due to an increase in same store sales, partially offset by a reduction in store count. Revenues in the Pharmacy Services Segment were $1.5 billion, an increase of 5.6 percent compared to the prior year period, which was due to an increase in Medicare Part D membership.

Same store sales from Retail Pharmacy continuing operations for the quarter increased 1.6 percent compared to the prior year, consisting of a 3.1 percent increase in pharmacy sales and 1.5 percent decrease in front-end sales. Pharmacy sales included an approximate 108 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 2.4 percent compared to the prior year period due to strong results from immunizations and other initiatives to drive script growth. Prescription sales from continuing operations accounted for 67.6 percent of total drugstore sales.

Net loss from continuing operations was $17.3 million or $0.02 per share compared to last year’s third quarter net loss from continuing operations of $18.2 million or $0.02 per share. Adjusted net income from continuing operations was $14.7 million or $0.01 per diluted share compared to last year’s third quarter Adjusted net income from continuing operations of $8.5 million or $0.01 per diluted share.

Adjusted EBITDA from continuing operations was $142.8 million or 2.6 percent of revenues for the third quarter compared to Adjusted EBITDA from continuing operations of $142.1 million or 2.7 percent of revenues for the same period last year, an increase of $0.7 million. Stronger pharmacy gross profit from script count increases was offset by weaker front end gross profit caused by a decline in front end same store sales and by increases in distribution costs caused primarily by the realignment of stores within Rite Aid’s distribution network. Stores were realigned to facilitate the sale of a distribution center to Walgreens Boots Alliance, Inc. (Nasdaq: WBA). Retail SG&A expense benefited from the receipt of $17.9 million of fees under the Transition Services Agreement (the “TSA”) with WBA, offset by increases in employee related costs.

In the third quarter, the company remodeled 21 stores and relocated one store, bringing the total number of wellness stores chainwide to 1,748. During the third quarter, the company closed one store, resulting in a total store count of 2,525 at the end of the third quarter.

Rite Aid Narrows Fiscal 2019 Guidance

Rite Aid has narrowed its fiscal 2019 guidance. Total revenues are expected to be between $21.8 billion and $21.95 billion in fiscal 2019 with same store sales expected to range from an increase of 0.5 percent to 1.0 percent over fiscal 2018. Adjusted net loss is now expected to be between $33 million and $14 million and adjusted net loss per share is expected to be between a loss of $0.03 and $0.01. Adjusted EBITDA is expected to be between $545 million and $570 million. Capital expenditures are expected to be approximately $250 million.

Credit Facility Refinancing

Rite Aid also announced that it has substantially completed a refinancing of its revolving credit facility that will extend its debt maturities and provide additional liquidity. The refinancing is expected to include (i) the replacement of its existing revolving credit facility that was scheduled to mature in 2020 with a new $2.7 billion senior secured asset-based revolving credit facility and (ii) a new $450 million senior secured asset-based term loan facility advanced on a “first-in, last-out” basis. The new senior secured credit facilities are expected to mature in 2023 subject to an earlier maturity on December 31, 2022 if Rite Aid has not repaid or refinanced its existing 6.125% senior notes due 2023 prior to such date. The Company currently expects to complete the refinancing by the end of December, 2018, subject to customary closing conditions.

Conference Call Broadcast

Rite Aid will hold an analyst call at 5:00 p.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 10:00 p.m. Eastern Time today until 11:59 p.m. Eastern Time on Dec. 23, 2018. 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 1397837.

Rite Aid is one of the nation’s leading drugstore chains with 2,525 stores in 19 states. Information about Rite Aid, including corporate background and press releases, is available through Rite Aid’s website at 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 for fiscal 2019; the expected timing and ability to complete the refinancing of Rite Aid’s existing revolving credit facility; the expected timing and the ability to complete the subsequent closings of the sale of the remaining Rite Aid distribution centers and related assets to WBA; Rite Aid’s competitive position and ability to implement new strategies following completion of such transaction with WBA and following the termination of the proposed merger with Albertsons Companies, Inc. (“ACI”); 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 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 centers and related assets to WBA, including the possibility that the transactions may not close, or the business of Rite Aid may suffer as a result of uncertainty surrounding the pending transactions; risks resulting from the termination of the proposed merger with ACI, including the risk that the termination could have an adverse effect on Rite Aid’s ability to retain customers and retain and hire key personnel and maintain relationships with suppliers and customers and on our operating results and businesses generally; the risk of litigation related to the termination of the merger agreement with ACI or the proposed merger; and potential changes to our strategy following the termination of the proposed merger with ACI, which may include delaying or reducing capital or other expenditures, selling assets or other operations, attempting to restructure or refinance our debt, or seeking additional capital, and other business effects. 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 (the “SEC”), 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, Adjusted EBITDA and Pro-Forma 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, Adjusted EBITDA and Pro-Forma 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, loss on debt retirements, LIFO adjustments, goodwill and intangible asset impairment charges 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, loss 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 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.

Rite Aid believes that Pro Forma Adjusted EBITDA is beneficial to investors to reflect what Rite Aid’s financial results would have been had it received all of the fees that it would have earned pursuant to the TSA with WBA for the relevant period. Rite Aid defines Pro Forma Adjusted EBITDA as Adjusted EBITDA plus the fees that would have been earned under the TSA with WBA for the relevant period, and in order to improve comparability.

RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
 
 
 
December 1, 2018March 3, 2018
ASSETS
Current assets:
Cash and cash equivalents

$

410,043

 

$

447,334

 

Accounts receivable, net

 

1,717,830

 

 

1,869,100

 

Inventories, net of LIFO reserve of $600,401 and $581,090

 

1,894,274

 

 

1,799,539

 

Prepaid expenses and other current assets

 

176,439

 

 

181,181

 

Current assets held for sale

 

131,892

 

 

438,137

 

Total current assets

 

4,330,478

 

 

4,735,291

 

Property, plant and equipment, net

 

1,335,740

 

 

1,431,246

 

Goodwill

 

1,108,135

 

 

1,421,120

 

Other intangibles, net

 

462,362

 

 

590,443

 

Deferred tax assets

 

635,416

 

 

594,019

 

Other assets

 

210,827

 

 

217,208

 

Total assets

$

8,082,958

 

$

8,989,327

 

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

$

16,066

 

$

20,761

 

Accounts payable

 

1,707,242

 

 

1,651,363

 

Accrued salaries, wages and other current liabilities

 

997,017

 

 

1,231,736

 

Current liabilities held for sale-

 

560,205

 

Total current liabilities

 

2,720,325

 

 

3,464,065

 

Long-term debt, less current maturities

 

3,394,466

 

 

3,340,099

 

Lease financing obligations, less current maturities

 

26,200

 

 

30,775

 

Other noncurrent liabilities

 

488,553

 

 

553,378

 

Total liabilities

 

6,629,544

 

 

7,388,317

 

 
Commitments and contingencies--
Stockholders' equity:
Common stock

 

1,066,902

 

 

1,067,318

 

Additional paid-in capital

 

4,860,219

 

 

4,850,712

 

Accumulated deficit

 

(4,440,250

)

 

(4,282,471

)

Accumulated other comprehensive loss

 

(33,457

)

 

(34,549

)

Total stockholders' equity

 

1,453,414

 

 

1,601,010

 

Total liabilities and stockholders' equity

$

8,082,958

 

$

8,989,327

 

 
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
 
Thirteen weeks ended
December 1, 2018
Thirteen weeks ended
December 2, 2017
Revenues

$

5,450,060

 

$

5,353,170

 

Costs and expenses:
Cost of revenues

 

4,267,972

 

 

4,166,447

 

Selling, general and administrative expenses

 

1,142,555

 

 

1,166,514

 

Lease termination and impairment charges

 

2,628

 

 

3,939

 

Interest expense

 

56,008

 

 

50,308

 

(Gain) loss on sale of assets, net

 

(382

)

 

205

 

 

 

5,468,781

 

 

5,387,413

 

 
Loss from continuing operations before income taxes

 

(18,721

)

 

(34,243

)

Income tax benefit

 

(1,471

)

 

(16,061

)

Net loss from continuing operations

 

(17,250

)

 

(18,182

)

Net income from discontinued operations, net of tax

 

12,740

 

 

99,213

 

Net (loss) income

$

(4,510

)

$

81,031

 

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

$

(17,250

)

$

(18,182

)

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

 

12,740

 

 

99,213

 

(Loss) income attributable to common stockholders - basic and diluted

$

(4,510

)

$

81,031

 

 
 
 
Denominator:
Basic weighted average shares

 

1,058,395

 

 

1,048,502

 

Outstanding options and restricted shares, net-

 

7,367

 

Diluted weighted average shares

 

1,058,395

 

 

1,055,869

 

 
Basic and diluted (loss) income per share
Continuing operations

$

(0.02

)

$

(0.02

)

Discontinued operations

$

0.02

 

$

0.10

 

Net basic and diluted (loss) income per share

$

(0.00

)

$

0.08

 

 
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
 

Thirty-nine weeks ended
December 1, 2018

Thirty-nine weeks ended
December 2, 2017

Revenues

$

16,259,912

 

$

16,134,704

 

Costs and expenses:
Cost of revenues

 

12,747,924

 

 

12,624,365

 

Selling, general and administrative expenses

 

3,449,173

 

 

3,469,298

 

Lease termination and impairment charges

 

52,096

 

 

11,090

 

Goodwill and intangible asset impairment charges

 

375,190

 

-
Interest expense

 

175,033

 

 

152,165

 

Loss on debt retirements, net

 

554

 

-
Walgreens Boots Alliance merger termination fee-

 

(325,000

)

Gain on sale of assets, net

 

(11,206

)

 

(20,623

)

 

 

16,788,764

 

 

15,911,295

 

 
(Loss) income from continuing operations before income taxes

 

(528,852

)

 

223,409

 

Income tax (benefit) expense

 

(117,527

)

 

89,268

 

Net (loss) income from continuing operations

 

(411,325

)

 

134,141

 

Net income from discontinued operations, net of tax

 

262,091

 

 

42,257

 

Net (loss) income

$

(149,234

)

$

176,398

 

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

$

(411,325

)

$

134,141

 

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

 

262,091

 

 

42,257

 

(Loss) income attributable to common stockholders - basic and diluted

$

(149,234

)

$

176,398

 

 
 
 
Denominator:
Basic weighted average shares

 

1,056,488

 

 

1,048,342

 

Outstanding options and restricted shares, net-

 

18,948

 

Diluted weighted average shares

 

1,056,488

 

 

1,067,290

 

 
Basic and diluted (loss) income per share
Continuing operations

$

(0.39

)

$

0.13

 

Discontinued operations

$

0.25

 

$

0.04

 

Net basic and diluted (loss) income per share

$

(0.14

)

$

0.17

 

 
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
 
 
Thirteen weeks ended
December 1, 2018
Thirteen weeks ended
December 2, 2017
 
 

OPERATING ACTIVITIES:

Net (loss) income

$

(4,510

)

$

81,031

 

Net income from discontinued operations, net of tax

 

12,740

 

 

99,213

 

Net loss from continuing operations

$

(17,250

)

$

(18,182

)

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

Depreciation and amortization

 

86,685

 

 

95,764

 

Lease termination and impairment charges

 

2,628

 

 

3,939

 

LIFO charge

 

5,987

 

 

6,784

 

(Gain) loss on sale of assets, net

 

(382

)

 

205

 

Stock-based compensation expense

 

1,317

 

 

7,186

 

Changes in deferred taxes

 

(1,295

)

 

33,747

 

Changes in operating assets and liabilities:

Accounts receivable

 

318,287

 

 

68,883

 

Inventories

 

(46,839

)

 

(57,277

)

Accounts payable

 

(26,446

)

 

59,670

 

Other assets

 

(1,072

)

 

(22,850

)

Other liabilities

 

29,501

 

 

(48,894

)

Net cash provided by operating activities of continuing operations

 

351,121

 

 

128,975

 

INVESTING ACTIVITIES:

Payments for property, plant and equipment

 

(46,653

)

 

(61,700

)

Intangible assets acquired

 

(11,054

)

 

(10,522

)

Proceeds from dispositions of assets and investments

 

72

 

 

1,847

 

Net cash used in investing activities of continuing operations

 

(57,635

)

 

(70,375

)

FINANCING ACTIVITIES:

Net payments to revolver

 

(90,000

)

 

(74,080

)

Principal payments on long-term debt

 

(3,851

)

 

(2,906

)

Change in zero balance cash accounts

 

1,137

 

 

17,405

 

Net proceeds from the issuance of common stock

 

992

 

 

4,201

 

Payments for taxes related to net share settlement of equity awards

 

(175

)

 

(32

)

Net cash used in financing activities of continuing operations

 

(91,897

)

 

(55,412

)

Cash flows from discontinued operations:

Operating activities of discontinued operations

 

14,735

 

 

(64,650

)

Investing activities of discontinued operations

 

61,251

 

 

233,914

 

Financing activities of discontinued operations

-

 

(241,630

)

Net cash provided by (used in) discontinued operations

 

75,986

 

 

(72,366

)

Increase (decrease) in cash and cash equivalents

 

277,575

 

 

(69,178

)

Cash and cash equivalents, beginning of period

 

132,468

 

 

238,978

 

Cash and cash equivalents, end of period

$

410,043

 

$

169,800

 

 
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
 
 
Thirty-nine weeks ended
December 1, 2018
Thirty-nine weeks ended
December 2, 2017
 
 

OPERATING ACTIVITIES:

Net (loss) income

$

(149,234

)

$

176,398

 

Net income from discontinued operations, net of tax

 

262,091

 

 

42,257

 

Net (loss) income from continuing operations

$

(411,325

)

$

134,141

 

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

Depreciation and amortization

 

270,957

 

 

292,448

 

Lease termination and impairment charges

 

52,096

 

 

11,090

 

Goodwill and intangible asset impairment charges

 

375,190

 

-

LIFO charge

 

19,311

 

 

20,393

 

Gain on sale of assets, net

 

(11,206

)

 

(20,623

)

Stock-based compensation expense

 

11,563

 

 

22,550

 

Loss on debt retirements, net

 

554

 

-

Changes in deferred taxes

 

(126,102

)

 

98,597

 

Changes in operating assets and liabilities:

Accounts receivable

 

(5,437

)

 

(19,865

)

Inventories

 

(78,489

)

 

(84,731

)

Accounts payable

 

181,497

 

 

118,941

 

Other assets

 

(12,304

)

 

(30,049

)

Other liabilities

 

(216,086

)

 

(118,442

)

Net cash provided by operating activities of continuing operations

 

50,219

 

 

424,450

 

INVESTING ACTIVITIES:

Payments for property, plant and equipment

 

(139,218

)

 

(140,816

)

Intangible assets acquired

 

(31,573

)

 

(20,201

)

Proceeds from insured loss

-

 

3,627

 

Proceeds from dispositions of assets and investments

 

15,801

 

 

19,254

 

Proceeds from sale-leaseback transactions

 

2,587

 

-

Net cash used in investing activities of continuing operations

 

(152,403

)

 

(138,136

)

FINANCING ACTIVITIES:

Net proceeds from (payments to) revolver

 

1,245,000

 

 

(264,080

)

Principal payments on long-term debt

 

(437,597

)

 

(7,292

)

Change in zero balance cash accounts

 

(15,964

)

 

27,594

 

Net proceeds from the issuance of common stock

 

2,294

 

 

4,416

 

Payments for taxes related to net share settlement of equity awards

 

(2,419

)

 

(4,103

)

Financing fees paid for early debt redemption

 

(13

)

-

Net cash provided by (used in) financing activities of continuing operations

 

791,301

 

 

(243,465

)

Cash flows from discontinued operations:

Operating activities of discontinued operations

 

(47,268

)

 

(62,294

)

Investing activities of discontinued operations

 

664,653

 

 

189,175

 

Financing activities of discontinued operations

 

(1,343,793

)

 

(245,340

)

Net cash used in discontinued operations

 

(726,408

)

 

(118,459

)

Decrease in cash and cash equivalents

 

(37,291

)

 

(75,610

)

Cash and cash equivalents, beginning of period

 

447,334

 

 

245,410

 

Cash and cash equivalents, end of period

$

410,043

 

$

169,800

 

 
RITE AID CORPORATION AND SUBSIDIARIES
 
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 
 
Thirteen weeks ended
December 1, 2018
Thirteen weeks ended
December 2, 2017
 
Retail Pharmacy Segment
Revenues from continuing operations (a)

$

3,976,719

 

$

3,959,002

 

Cost of revenues from continuing operations (a)

 

2,897,135

 

 

2,871,114

 

Gross profit from continuing operations

 

1,079,584

 

 

1,087,888

 

LIFO charge from continuing operations

 

5,987

 

 

6,784

 

FIFO gross profit from continuing operations

 

1,085,571

 

 

1,094,672

 

 
Gross profit as a percentage of revenues - continuing operations

 

27.15

%

 

27.48

%

LIFO charge as a percentage of revenues - continuing operations

 

0.15

%

 

0.17

%

FIFO gross profit as a percentage of revenues - continuing operations

 

27.30

%

 

27.65

%

 
Selling, general and administrative expenses from continuing operations

 

1,062,598

 

 

1,086,857

 

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

 

26.72

%

 

27.45

%

 
Cash interest expense

 

52,074

 

 

103,946

 

Non-cash interest expense

 

3,934

 

 

5,439

 

Total interest expense

 

56,008

 

 

109,385

 

Interest expense - continuing operations

 

56,008

 

 

49,929

 

Interest expense - discontinued operations-

 

59,456

 

 
Adjusted EBITDA - continuing operations

 

101,225

 

 

101,699

 

Adjusted EBITDA as a percentage of revenues - continuing operations

 

2.55

%

 

2.57

%

 
 
Pharmacy Services Segment
Revenues (a)

$

1,525,837

 

$

1,445,140

 

Cost of revenues (a)

 

1,423,333

 

 

1,346,305

 

Gross profit

 

102,504

 

 

98,835

 

 
Gross profit as a percentage of revenues

 

6.72

%

 

6.84

%

 
Adjusted EBITDA

 

41,566

 

 

40,363

 

Adjusted EBITDA as a percentage of revenues

 

2.72

%

 

2.79

%

(a) -

Revenues and cost of revenues include $52,496 and $50,972 of inter-segment activity for the thirteen weeks ended December 1, 2018 and December 2, 2017, respectively, that is eliminated in consolidation.
RITE AID CORPORATION AND SUBSIDIARIES
 
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 
 
Thirty-nine weeks ended
December 1, 2018
Thirty-nine weeks ended
December 2, 2017
 
Retail Pharmacy Segment
Revenues from continuing operations (a)

$

11,785,996

 

$

11,833,195

 

Cost of revenues from continuing operations (a)

 

8,585,318

 

 

8,629,925

 

Gross profit from continuing operations

 

3,200,678

 

 

3,203,270

 

LIFO charge from continuing operations

 

19,311

 

 

20,393

 

FIFO gross profit from continuing operations

 

3,219,989

 

 

3,223,663

 

 
Gross profit as a percentage of revenues - continuing operations

 

27.16

%

 

27.07

%

LIFO charge as a percentage of revenues - continuing operations

 

0.16

%

 

0.17

%

FIFO gross profit as a percentage of revenues - continuing operations

 

27.32

%

 

27.24

%

 
Selling, general and administrative expenses from continuing operations

 

3,195,929

 

 

3,235,309

 

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

 

27.12

%

 

27.34

%

 
Cash interest expense

 

167,270

 

 

313,576

 

Non-cash interest expense

 

12,378

 

 

16,349

 

Total interest expense

 

179,648

 

 

329,925

 

Interest expense - continuing operations

 

175,033

 

 

151,128

 

Interest expense - discontinued operations

 

4,615

 

 

178,797

 

 
Adjusted EBITDA - continuing operations

 

308,972

 

 

266,777

 

Adjusted EBITDA as a percentage of revenues - continuing operations

 

2.62

%

 

2.25

%

 
 
Pharmacy Services Segment
Revenues (a)

$

4,630,410

 

$

4,451,212

 

Cost of revenues (a)

 

4,319,100

 

 

4,144,143

 

Gross profit

 

311,310

 

 

307,069

 

 
Gross profit as a percentage of revenues

 

6.72

%

 

6.90

%

 
Adjusted EBITDA

 

120,392

 

 

138,237

 

Adjusted EBITDA as a percentage of revenues

 

2.60

%

 

3.11

%

(a) -

Revenues and cost of revenues include $156,494 and $149,703 of inter-segment activity for the thirty-nine weeks ended December 1, 2018 and December 2, 2017, 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
December 1, 2018
Thirteen weeks ended
December 2, 2017
 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss - continuing operations

$

(17,250

)

$

(18,182

)

Adjustments:
Interest expense

 

56,008

 

 

50,308

 

Income tax benefit

 

(1,471

)

 

(16,061

)

Depreciation and amortization

 

86,685

 

 

95,764

 

LIFO charge

 

5,987

 

 

6,784

 

Lease termination and impairment charges

 

2,628

 

 

3,939

 

Merger and Acquisition-related costs

 

4,175

 

 

6,550

 

Stock-based compensation expense

 

1,317

 

 

7,186

 

Inventory write-downs related to store closings

 

421

 

 

2,055

 

(Gain) loss on sale of assets, net

 

(382

)

 

205

 

Other

 

4,673

 

 

3,514

 

Adjusted EBITDA - continuing operations

$

142,791

 

$

142,062

 

Percent of revenues - continuing operations

 

2.62

%

 

2.65

%

 
 
Pro-forma Adjustments:
Adjustment to reflect a full TSA fee-

 

23,800

 

Pro Forma Adjusted EBITDA - continuing operations

$

142,791

 

$

165,862

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED EBITDA
(In thousands)
(unaudited)
 
 
 
Thirty-nine weeks ended
December 1, 2018
Thirty-nine weeks ended
December 2, 2017
 
 
Reconciliation of net (loss) income to adjusted EBITDA:
Net (loss) income - continuing operations

$

(411,325

)

$

134,141

 

Adjustments:
Interest expense

 

175,033

 

 

152,165

 

Income tax (benefit) expense

 

(117,527

)

 

89,268

 

Depreciation and amortization

 

270,957

 

 

292,448

 

LIFO charge

 

19,311

 

 

20,393

 

Lease termination and impairment charges

 

52,096

 

 

11,090

 

Goodwill and intangible asset impairment charges

 

375,190

 

-
Loss on debt retirements, net

 

554

 

-
Merger and Acquisition-related costs

 

30,394

 

 

17,274

 

Stock-based compensation expense

 

11,563

 

 

22,550

 

Inventory write-downs related to store closings

 

5,554

 

 

5,821

 

Litigation settlement

 

18,000

 

-
Gain on sale of assets, net

 

(11,206

)

 

(20,623

)

Walgreens Boots Alliance merger termination fee-

 

(325,000

)

Other

 

10,770

 

 

5,487

 

Adjusted EBITDA - continuing operations

$

429,364

 

$

405,014

 

Percent of revenues - continuing operations

 

2.64

%

 

2.51

%

 
 
Pro-forma Adjustments:
Adjustment to reflect a full TSA fee-

 

71,800

 

Pro Forma Adjusted EBITDA - continuing operations

$

429,364

 

$

476,814

 

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
Thirteen weeks ended
December 1, 2018
Thirteen weeks ended
December 2, 2017
 
Net loss from continuing operations

$

(17,250

)

$

(18,182

)

Add back - Income tax benefit

 

(1,471

)

 

(16,061

)

Loss before income taxes - continuing operations

 

(18,721

)

 

(34,243

)

 
Adjustments:
Amortization expense

 

28,768

 

 

35,489

 

LIFO charge

 

5,987

 

 

6,784

 

Merger and Acquisition-related costs

 

4,175

 

 

6,550

 

 
Adjusted income before income taxes - continuing operations

 

20,209

 

 

14,580

 

 
Adjusted income tax expense (a)

 

5,469

 

 

6,067

 

Adjusted net income from continuing operations

$

14,740

 

$

8,513

 

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

$

14,740

 

$

8,513

 

 
 
 
Denominator:
Basic weighted average shares

 

1,058,395

 

 

1,048,502

 

Outstanding options and restricted shares, net

 

208

 

 

7,367

 

Diluted weighted average shares

 

1,058,603

 

 

1,055,869

 

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

$

(0.02

)

$

(0.02

)

 
 
Adjusted net income per diluted share - continuing operations

$

0.01

 

$

0.01

 

(a)

The fiscal year 2019 and 2018 annual effective tax rates, calculated using a federal rate plus a net state rate that excluded the impact of certain state NOL's, state credits and valuation allowance, was used for the thirteen weeks ended December 1, 2018 and December 2, 2017, respectively. Note also that the federal tax rate for the thirteen weeks ended December 1, 2018 is 21% compared to 35% for the thirteen weeks ended December 2, 2017.
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
Thirty-nine weeks ended
December 1, 2018
Thirty-nine weeks ended
December 2, 2017
 
Net (loss) income from continuing operations

$

(411,325

)

$

134,141

 

Add back - Income tax (benefit) expense

 

(117,527

)

 

89,268

 

(Loss) income before income taxes - continuing operations

 

(528,852

)

 

223,409

 

 
Adjustments:
Amortization expense

 

96,668

 

 

112,772

 

LIFO charge

 

19,311

 

 

20,393

 

Goodwill and intangible asset impairment charges

 

375,190

 

-
Loss on debt retirements, net

 

554

 

-
Merger and Acquisition-related costs

 

30,394

 

 

17,274

 

Litigation settlement

 

18,000

 

-
Walgreens Boots Alliance merger termination fee-

 

(325,000

)

 
Adjusted income before income taxes - continuing operations

 

11,265

 

 

48,848

 

 
Adjusted income tax expense (a)

 

3,049

 

 

20,327

 

Adjusted net income from continuing operations

$

8,216

 

$

28,521

 

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

$

8,216

 

$

28,521

 

 
 
 
Denominator:
Basic weighted average shares

 

1,056,488

 

 

1,048,342

 

Outstanding options and restricted shares, net

 

2,484

 

 

18,948

 

Diluted weighted average shares

 

1,058,972

 

 

1,067,290

 

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

$

(0.39

)

$

0.13

 

 
Adjusted net income per diluted share - continuing operations

$

0.01

 

$

0.03

 

(a)

The fiscal year 2019 and 2018 annual effective tax rates, calculated using a federal rate plus a net state rate that excluded the impact of certain state NOL's, state credits and valuation allowance, was used for the thirty-nine weeks ended December 1, 2018 and December 2, 2017, respectively. Note also that the federal tax rate for the thirty-nine weeks ended December 1, 2018 is 21% compared to 35% for the thirty-nine weeks ended December 2, 2017.
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE
YEAR ENDING MARCH 2, 2019
(In thousands)
(unaudited)
 
 
Guidance Range
LowHigh
 
Total Revenues

$

21,800,000

 

$

21,950,000

 

 
Same store sales

 

0.50

%

 

1.00

%

 
Gross Capital Expenditures

$

250,000

 

$

250,000

 

 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss

$

(485,000

)

$

(465,000

)

Adjustments:
Interest expense

 

220,000

 

 

220,000

 

Income tax benefit

 

(140,000

)

 

(135,000

)

Depreciation and amortization

 

360,000

 

 

360,000

 

LIFO charge

 

35,000

 

 

35,000

 

Lease termination and impairment charges

 

85,000

 

 

85,000

 

Goodwill and intangible asset impairment charges

 

375,000

 

 

375,000

 

Merger and Acquisition-related costs

 

34,000

 

 

34,000

 

Litigation settlement

 

18,000

 

 

18,000

 

Other

 

43,000

 

 

43,000

 

Adjusted EBITDA

$

545,000

 

$

570,000

 

 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET LOSS GUIDANCE
YEAR ENDING MARCH 2, 2019
(In thousands)
(unaudited)
 
 
 
Guidance Range
LowHigh
 
Net loss

$

(485,000

)

$

(465,000

)

Add back - income tax benefit

 

(140,000

)

 

(135,000

)

Loss before income taxes

 

(625,000

)

 

(600,000

)

 
Adjustments:
Amortization expense

 

120,000

 

 

120,000

 

LIFO charge

 

35,000

 

 

35,000

 

Goodwill and intangible asset impairment charges

 

375,000

 

 

375,000

 

Merger and Acquisition-related costs

 

34,000

 

 

34,000

 

Litigation settlement

 

18,000

 

 

18,000

 

 
Adjusted loss before adjusted income taxes

 

(43,000

)

 

(18,000

)

 
Adjusted income tax benefit

 

(10,000

)

 

(4,000

)

Adjusted net loss

$

(33,000

)

$

(14,000

)

 
 
Diluted adjusted net loss per share

$

(0.03

)

$

(0.01

)

 

INVESTORS:
Byron Purcell
(717) 975-5809
or investor@riteaid.com

MEDIA:
Susan Henderson
(717) 730-7766

Source: Rite Aid Corporation