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, 2018 | March 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
|
Thirty-nine weeks ended
|
||||||
| 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 | |||||||
| Low | High | ||||||
| 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 | |||||||
| Low | High | ||||||
| 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 |
) |
|
