UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): September 27, 2018
Rite Aid Corporation
(Exact name of registrant as specified in its charter)
Delaware |
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1-5742 |
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23-1614034 |
(State or Other Jurisdiction |
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(Commission File Number) |
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(IRS Employer |
30 Hunter Lane, Camp Hill, Pennsylvania 17011
(Address of principal executive offices, including zip code)
(717) 761-2633
(Registrants telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02. Results of Operations and Financial Condition.
On September 27, 2018, Rite Aid Corporation (the Company) reported its financial position and results of operations as of and for the thirteen and twenty-six week periods ended September 1, 2018. The press release includes the non-GAAP financial measures, Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Pro-Forma Adjusted EBITDA. The Company uses these non-GAAP measures in assessing its performance in addition to net income, the most directly comparable GAAP financial measure. Reconciliations of Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Pro-Forma Adjusted EBITDA to net income and net income (loss) per diluted share, the most directly comparable GAAP financial measures, are included in the press release, which is furnished as Exhibit 99.1 hereto.
The Company believes Adjusted EBITDA serves as an appropriate measure in evaluating the performance of its business and helps its investors better compare the Companys operating performance with its competitors. The Company defines Adjusted EBITDA 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, a 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. The Company references this non-GAAP financial measure frequently in its decision-making because it provides supplemental information that facilitates internal comparisons to historical periods and external comparisons to competitors. In addition, incentive compensation is based in part on Adjusted EBITDA and the Company bases certain of its forward-looking estimates and budgets on Adjusted EBITDA.
The Company defines Adjusted Net Income (Loss) as net income (loss) excluding amortization expense, merger and acquisition-related costs, a 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. The Company calculates Adjusted Net Income (Loss) per Diluted Share using the Companys above-referenced definition of Adjusted Net Income (Loss). The Company believes Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share serve as appropriate measures to be used in evaluating the performance of its business and help its investors better compare the Companys operating performance over multiple periods.
In addition, 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 Aids results as if the company was on a FIFO inventory basis.
The Company believes that Pro Forma Adjusted EBITDA is beneficial to investors to reflect what the Companys financial results would have been had it received all of the fees that it would have earned pursuant to the Transition Services Agreement (the TSA) with WBA for the relevant period. The Company 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.
Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Pro Forma Adjusted EBITDA should not be considered in isolation from, and are not intended to represent alternative measures of, operating results or of cash flows from operating activities, as determined in accordance with GAAP. The Companys definitions of Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Pro Forma Adjusted EBITDA may not be comparable to similarly titled measurements reported by other companies or similar terms in the Companys debt facilities.
In addition, a copy of the Companys Earnings Release Supplement for the second quarter of fiscal 2019 is being furnished as Exhibit 99.2 to this Form 8-K.
The information (including Exhibits 99.1 and 99.2) being furnished pursuant to this Item 2.02. Results of Operations and Financial Condition shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities of that section and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Act, or the Exchange Act regardless of any general incorporation language in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1 Press Release, dated September 27, 2018.
99.2 Second Quarter Fiscal 2019 Supplemental Information.
EXHIBIT INDEX
Exhibit |
|
Description |
|
|
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99.1 |
|
|
99.2 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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RITE AID CORPORATION | ||
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Dated: September 27, 2018 |
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By: |
/s/ James J. Comitale | |
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Name: |
James J. Comitale |
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Title: |
Senior Vice President, General Counsel |
Press Release
For Further Information Contact:
INVESTORS: |
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MEDIA: |
Byron Purcell |
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Susan Henderson |
(717) 975-5809 |
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(717) 730-7766 |
or investor@riteaid.com |
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FOR IMMEDIATE RELEASE
Rite Aid Reports Fiscal 2019 Second Quarter Results
· Second Quarter Net Loss from Continuing Operations of $352.3 Million or $0.33 Per Share, Compared to the Prior Year Second Quarter Net Income of $188.4 Million or $0.18 Per Share
· Second Quarter Net Loss includes $282.6 Million of Intangible Asset Impairment Charges, Net of Tax
· Prior Year Second Quarter Net Income Includes Receipt of a $325 Million Merger Termination Fee from Walgreens Boots Alliance
· Second Quarter Adjusted Net Loss from Continuing Operations of $7.9 million or $0.01 Per Share, Compared to the Prior Year Second Quarter Adjusted Net Income of $17.4 Million or $0.02 Per Share
· Second Quarter Adjusted EBITDA from Continuing Operations of $148.6 Million, Compared to the Prior Year Adjusted EBITDA from Continuing Operations of $136.9 Million and Prior Year Pro-forma Adjusted EBITDA from Continuing Operations of $160.9 Million
· Rite Aid Confirms Fiscal 2019 Outlook for Adjusted EBITDA, Revenues and Same Store Sales
· Rite Aid Separately Announces Governance Changes and the Nomination of Three New Independent Directors
CAMP HILL, Pa. (Sept. 27, 2018) - Rite Aid Corporation (NYSE: RAD) today reported operating results for its second fiscal quarter ended September 1, 2018.
For the second quarter, the company reported net loss from continuing operations of $352.3 million, or $0.33 per share, Adjusted net loss from continuing operations of $7.9 million, or $0.01 per share, and Adjusted EBITDA from continuing operations of $148.6 million, or 2.7 percent of revenues.
During the quarter, we have been hard at work accelerating our standalone strategy to capitalize on key opportunities to grow our business, said Rite Aid Chairman and CEO John Standley. These efforts helped us drive significant improvement in front-end and pharmacy comparable stores sales and exceed our plans for script count growth. With our trusted brand of health and wellness, highly popular customer loyalty program, innovative Wellness format and expanding offering of health and wellness services, we have a strong foundation for growth.
While we have important work ahead of us, we also have full confidence in our strategy, our team and our company to succeed in building significant momentum for the future as we continue to work to meet the evolving needs of our customers and create value for our shareholders, Standley added.
-MORE-
Second Quarter Summary
Revenues from continuing operations for the quarter were $5.4 billion compared to revenues from continuing operations of $5.3 billion in the prior years second quarter. Retail Pharmacy Segment revenues were $3.9 billion and increased 0.2 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 $1.6 billion, an increase of 4.6 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 1.0 percent compared to the prior year, consisting of a 1.6 percent increase in pharmacy sales and 0.1 percent decrease in front-end sales. Pharmacy sales included an approximate 107 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 1.1 percent compared to the prior year period. Prescription sales from continuing operations accounted for 66.4 percent of total drugstore sales.
Net loss from continuing operations was $352.3 million or $0.33 per share compared to last years second quarter net income from continuing operations of $188.4 million or $0.18 per share. The companys net loss in the quarter ended September 1, 2018 was due primarily to a charge of $282.6 million, net of tax, for the impairment of intangible assets, including goodwill, related to our Pharmacy Services Segment. The companys net income in the quarter ended September 2, 2017 was positively impacted by the receipt of the $325.0 million merger termination fee from Walgreens Boots Alliance, Inc. (Nasdaq: WBA) for the termination of the merger agreement. Also impacting results was an increase in lease termination and impairment charges, merger and acquisition related costs and a litigation settlement, offset by an increase in Adjusted EBITDA.
Adjusted EBITDA from continuing operations was $148.6 million or 2.7 percent of revenues for the second quarter compared to Adjusted EBITDA from continuing operations of $136.9 million or 2.6 percent of revenues for the same period last year, an increase of $11.7 million. Adjusted EBITDA for the second quarter included $23.2 million of fees under the Transition Services Agreement (The TSA) with WBA. Prior year Adjusted EBITDA from continuing operations does not include $24.0 million of fees that would have been earned if all of the stores that were sold to WBA were supported under the TSA for that period. Fiscal 2018 second quarter Pro-forma Adjusted EBITDA from continuing operations would have been $160.9 million after adjusting for these fees. Second quarter Adjusted EBITDA from continuing operations declined $12.3 million compared to the prior year Pro-forma Adjusted EBITDA from continuing operations for the same period. The retail pharmacy segment Adjusted EBITDA from continuing operations decreased $8.0 million compared to the prior year Pro Forma Adjusted EBITDA from continuing operations due to a decline in pharmacy gross profit, which was driven by a decline in reimbursement rates which we were unable to fully offset with generic drug purchasing efficiencies and script growth. The pharmacy services segment Adjusted EBITDA decreased $4.3 million due to margin compression in the companys commercial business and other operating investments to support current year and future growth.
In the second quarter, the company remodeled 33 stores, bringing the total number of wellness stores chainwide to 1,726. During the second quarter, the company closed 8 stores and opened 1 store, resulting in a total store count of 2,526 at the end of the second quarter.
Outlook for Fiscal 2019
Rite Aid is confirming its fiscal 2019 outlook for revenues, same store sales, Adjusted EBITDA and capital expenditures. Rite Aid expects revenues to be between $21.7 billion and $22.1 billion in fiscal 2019 with same store sales expected to range from an increase of 0.0 percent to 1.0 percent over fiscal 2018. Adjusted EBITDA (which is reconciled to net loss in the attached table) is expected to be between $540.0 million and $590.0 million. Capital expenditures are expected to be approximately $250 million.
Net loss is now expected to be between $440 million and $485 million, which is higher than previously announced due primarily to the impairment charges incurred this quarter. Additionally, during the second quarter of fiscal 2019, we modified our definition of adjusted net (loss) income to reflect the add back of all amortization rather than the amortization of EnvisionRx intangible assets only. After giving effect to the change in our definition, adjusted net (loss) income per share is now expected to be between a loss of $0.03 and income of $0.01.
Governance and Board Changes
As announced in a separate press release today, Rite Aid is making changes to its Board composition and governance structure, including the nomination of three new independent directors and the separation of the positions of Chairman and Chief Executive Officer. The changes follow the Boards ongoing engagement with Rite Aids stockholders and strengthen and enhance the Boards governance oversight consistent with the companys commitment to align its interests with those of its stockholders.
As part of the changes, Robert E. Knowling, Jr., Louis P. Miramontes and Arun Nayar will stand for election at the 2018 Annual Meeting of Stockholders, replacing current Rite Aid Directors David Jessick, Myrtle Potter and Frank Savage, who will not stand for re-election. In addition, current director Bruce G. Bodaken will hold the position of Chairman, effective at the Annual Meeting.
Conference Call Broadcast
Rite Aid will hold an analyst call at 8:30 a.m. Eastern Time today with remarks by Rite Aids management team. The call will be simulcast via the internet and can be accessed at www.riteaid.com in the conference call section of investor information. A playback of the call will also be available by telephone beginning at 12:00 p.m. Eastern Time today until 11:59 p.m. Eastern Time on Sept. 30, 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 eight-digit reservation number 4074799.
Rite Aid is one of the nations leading drugstore chains with 2,526 stores in 19 states. Information about Rite Aid, including corporate background and press releases, is available through Rite Aids 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 Aids outlook for fiscal 2019; 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 Aids 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 Aids 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 Aids 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 Aids 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)
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September 1, 2018 |
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March 3, 2018 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
132,468 |
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$ |
447,334 |
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Accounts receivable, net |
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2,039,605 |
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1,869,100 |
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Inventories, net of LIFO reserve of $594,413 and $581,090 |
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1,848,287 |
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1,799,539 |
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Prepaid expenses and other current assets |
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169,313 |
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181,181 |
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Current assets held for sale |
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181,989 |
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438,137 |
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Total current assets |
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4,371,662 |
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4,735,291 |
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Property, plant and equipment, net |
|
1,350,735 |
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1,431,246 |
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Goodwill |
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1,108,135 |
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1,421,120 |
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Other intangibles, net |
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480,520 |
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590,443 |
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Deferred tax assets |
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635,127 |
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594,019 |
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Other assets |
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219,489 |
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217,208 |
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Total assets |
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$ |
8,165,668 |
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$ |
8,989,327 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Current maturities of long-term debt and lease financing obligations |
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$ |
18,668 |
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$ |
20,761 |
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Accounts payable |
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1,733,989 |
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1,651,363 |
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Accrued salaries, wages and other current liabilities |
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938,940 |
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1,231,736 |
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Current liabilities held for sale |
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560,205 |
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Total current liabilities |
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2,691,597 |
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3,464,065 |
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Long-term debt, less current maturities |
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3,481,741 |
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3,340,099 |
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Lease financing obligations, less current maturities |
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26,537 |
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30,775 |
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Other noncurrent liabilities |
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509,843 |
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553,378 |
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Total liabilities |
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6,709,718 |
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7,388,317 |
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Commitments and contingencies |
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Stockholders equity: |
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Common stock |
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1,066,050 |
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1,067,318 |
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Additional paid-in capital |
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4,859,462 |
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4,850,712 |
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Accumulated deficit |
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(4,435,741 |
) |
(4,282,471 |
) | ||
Accumulated other comprehensive loss |
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(33,821 |
) |
(34,549 |
) | ||
Total stockholders equity |
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1,455,950 |
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1,601,010 |
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Total liabilities and stockholders equity |
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$ |
8,165,668 |
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$ |
8,989,327 |
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RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
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Thirteen weeks ended |
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Thirteen weeks ended |
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Revenues |
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$ |
5,421,362 |
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$ |
5,345,011 |
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Costs and expenses: |
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|
|
|
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Cost of revenues |
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4,260,211 |
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4,183,338 |
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Selling, general and administrative expenses |
|
1,153,991 |
|
1,141,844 |
| ||
Lease termination and impairment charges |
|
39,609 |
|
3,113 |
| ||
Goodwill and intangible asset impairment charges |
|
375,190 |
|
|
| ||
Interest expense |
|
56,233 |
|
50,857 |
| ||
Walgreens Boots Alliance merger termination fee |
|
|
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(325,000 |
) | ||
Gain on sale of assets, net |
|
(4,965 |
) |
(14,951 |
) | ||
|
|
|
|
|
| ||
|
|
5,880,269 |
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5,039,201 |
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|
|
|
|
|
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(Loss) income from continuing operations before income taxes |
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(458,907 |
) |
305,810 |
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Income tax (benefit) expense |
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(106,559 |
) |
117,450 |
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Net (loss) income from continuing operations |
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(352,348 |
) |
188,360 |
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Net loss from discontinued operations, net of tax |
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(6,792 |
) |
(17,644 |
) | ||
Net (loss) income |
|
$ |
(359,140 |
) |
$ |
170,716 |
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Basic and diluted (loss) income per share: |
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Numerator for (loss) income per share: |
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|
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Net (loss) income from continuing operations attributable to common stockholders - basic and diluted |
|
$ |
(352,348 |
) |
$ |
188,360 |
|
Net loss from discontinued operations attributable to common stockholders - basic and diluted |
|
(6,792 |
) |
(17,644 |
) | ||
(Loss) income attributable to common stockholders - basic and diluted |
|
$ |
(359,140 |
) |
$ |
170,716 |
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|
|
|
|
|
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Denominator: |
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|
|
|
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Basic weighted average shares |
|
1,056,464 |
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1,048,548 |
| ||
Outstanding options and restricted shares, net |
|
|
|
18,668 |
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Diluted weighted average shares |
|
1,056,464 |
|
1,067,216 |
| ||
|
|
|
|
|
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Basic and diluted (loss) income per share |
|
|
|
|
| ||
Continuing operations |
|
$ |
(0.33 |
) |
$ |
0.18 |
|
Discontinued operations |
|
$ |
(0.01 |
) |
$ |
(0.02 |
) |
Net basic and diluted (loss) income per share |
|
$ |
(0.34 |
) |
$ |
0.16 |
|
RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
|
|
Twenty-six weeks ended |
|
Twenty-six weeks ended |
| ||
Revenues |
|
$ |
10,809,852 |
|
$ |
10,781,534 |
|
Costs and expenses: |
|
|
|
|
| ||
Cost of revenues |
|
8,479,952 |
|
8,457,918 |
| ||
Selling, general and administrative expenses |
|
2,306,618 |
|
2,302,784 |
| ||
Lease termination and impairment charges |
|
49,468 |
|
7,151 |
| ||
Goodwill and intangible asset impairment charges |
|
375,190 |
|
|
| ||
Interest expense |
|
119,025 |
|
101,857 |
| ||
Loss on debt retirements, net |
|
554 |
|
|
| ||
Walgreens Boots Alliance merger termination fee |
|
|
|
(325,000 |
) | ||
Gain on sale of assets, net |
|
(10,824 |
) |
(20,828 |
) | ||
|
|
|
|
|
| ||
|
|
11,319,983 |
|
10,523,882 |
| ||
|
|
|
|
|
| ||
(Loss) income from continuing operations before income taxes |
|
(510,131 |
) |
257,652 |
| ||
Income tax (benefit) expense |
|
(116,056 |
) |
105,329 |
| ||
Net (loss) income from continuing operations |
|
(394,075 |
) |
152,323 |
| ||
Net income (loss) from discontinued operations, net of tax |
|
249,351 |
|
(56,956 |
) | ||
Net (loss) income |
|
$ |
(144,724 |
) |
$ |
95,367 |
|
|
|
|
|
|
| ||
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 |
|
$ |
(394,075 |
) |
$ |
152,323 |
|
Net income (loss) from discontinued operations attributable to common stockholders - basic and diluted |
|
249,351 |
|
(56,956 |
) | ||
(Loss) income attributable to common stockholders - basic and diluted |
|
$ |
(144,724 |
) |
$ |
95,367 |
|
|
|
|
|
|
| ||
Denominator: |
|
|
|
|
| ||
Basic weighted average shares |
|
1,055,424 |
|
1,047,687 |
| ||
Outstanding options and restricted shares, net |
|
|
|
22,597 |
| ||
Diluted weighted average shares |
|
1,055,424 |
|
1,070,284 |
| ||
|
|
|
|
|
| ||
Basic and diluted (loss) income per share |
|
|
|
|
| ||
Continuing operations |
|
$ |
(0.37 |
) |
$ |
0.14 |
|
Discontinued operations |
|
$ |
0.23 |
|
$ |
(0.05 |
) |
Net basic and diluted (loss) income per share |
|
$ |
(0.14 |
) |
$ |
0.09 |
|
RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
|
|
Thirteen weeks ended |
|
Thirteen weeks ended |
| ||
|
|
|
|
|
| ||
OPERATING ACTIVITIES: |
|
|
|
|
| ||
Net (loss) income |
|
$ |
(359,140 |
) |
$ |
170,716 |
|
Net loss from discontinued operations, net of tax |
|
(6,792 |
) |
(17,644 |
) | ||
Net (loss) income from continuing operations |
|
$ |
(352,348 |
) |
$ |
188,360 |
|
Adjustments to reconcile to net cash (used in) provided by operating activities of continuing operations: |
|
|
|
|
| ||
Depreciation and amortization |
|
89,743 |
|
95,655 |
| ||
Lease termination and impairment charges |
|
39,609 |
|
3,113 |
| ||
Goodwill and intangible asset impairment charges |
|
375,190 |
|
|
| ||
LIFO charge |
|
3,358 |
|
3,436 |
| ||
Gain on sale of assets, net |
|
(4,965 |
) |
(14,951 |
) | ||
Stock-based compensation expense |
|
5,215 |
|
6,324 |
| ||
Changes in deferred taxes |
|
(112,452 |
) |
103,010 |
| ||
Changes in operating assets and liabilities: |
|
|
|
|
| ||
Accounts receivable |
|
(129,565 |
) |
(54,137 |
) | ||
Inventories |
|
(62,751 |
) |
(55,522 |
) | ||
Accounts payable |
|
(17 |
) |
93,584 |
| ||
Other assets |
|
(18,334 |
) |
(33,395 |
) | ||
Other liabilities |
|
(117,271 |
) |
(87,773 |
) | ||
Net cash (used in) provided by operating activities of continuing operations |
|
(284,588 |
) |
247,704 |
| ||
INVESTING ACTIVITIES: |
|
|
|
|
| ||
Payments for property, plant and equipment |
|
(44,594 |
) |
(40,791 |
) | ||
Intangible assets acquired |
|
(6,864 |
) |
(4,158 |
) | ||
Proceeds from insured loss |
|
|
|
1,490 |
| ||
Proceeds from dispositions of assets and investments |
|
5,813 |
|
8,768 |
| ||
Net cash used in investing activities of continuing operations |
|
(45,645 |
) |
(34,691 |
) | ||
FINANCING ACTIVITIES: |
|
|
|
|
| ||
Net proceeds from (payments to) revolver |
|
1,145,000 |
|
(100,000 |
) | ||
Principal payments on long-term debt |
|
(2,640 |
) |
(883 |
) | ||
Change in zero balance cash accounts |
|
(18,184 |
) |
(18,579 |
) | ||
Net proceeds from the issuance of common stock |
|
392 |
|
68 |
| ||
Payments for taxes related to net share settlement of equity awards |
|
(2,244 |
) |
(3,924 |
) | ||
Net cash provided by (used in) financing activities of continuing operations |
|
1,122,324 |
|
(123,318 |
) | ||
Cash flows from discontinued operations: |
|
|
|
|
| ||
Operating activities of discontinued operations |
|
12,047 |
|
(42,607 |
) | ||
Investing activities of discontinued operations |
|
|
|
(19,613 |
) | ||
Financing activities of discontinued operations |
|
(818,762 |
) |
(2,946 |
) | ||
Net cash used in discontinued operations |
|
(806,715 |
) |
(65,166 |
) | ||
(Decrease) increase in cash and cash equivalents |
|
(14,624 |
) |
24,529 |
| ||
Cash and cash equivalents, beginning of period |
|
147,092 |
|
214,449 |
| ||
Cash and cash equivalents, end of period |
|
$ |
132,468 |
|
$ |
238,978 |
|
RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
|
|
Twenty-six weeks ended |
|
Twenty-six weeks ended |
| ||
|
|
|
|
|
| ||
OPERATING ACTIVITIES: |
|
|
|
|
| ||
Net (loss) income |
|
$ |
(144,724 |
) |
$ |
95,367 |
|
Net income (loss) from discontinued operations, net of tax |
|
249,351 |
|
(56,956 |
) | ||
Net (loss) income from continuing operations |
|
$ |
(394,075 |
) |
$ |
152,323 |
|
Adjustments to reconcile to net cash (used in) provided by operating activities of continuing operations: |
|
|
|
|
| ||
Depreciation and amortization |
|
184,272 |
|
196,684 |
| ||
Lease termination and impairment charges |
|
49,468 |
|
7,151 |
| ||
Goodwill and intangible asset impairment charges |
|
375,190 |
|
|
| ||
LIFO charge |
|
13,324 |
|
13,609 |
| ||
Gain on sale of assets, net |
|
(10,824 |
) |
(20,828 |
) | ||
Stock-based compensation expense |
|
10,246 |
|
15,362 |
| ||
Loss on debt retirements, net |
|
554 |
|
|
| ||
Changes in deferred taxes |
|
(124,807 |
) |
64,850 |
| ||
Changes in operating assets and liabilities: |
|
|
|
|
| ||
Accounts receivable |
|
(323,724 |
) |
(88,748 |
) | ||
Inventories |
|
(31,650 |
) |
(27,454 |
) | ||
Accounts payable |
|
207,943 |
|
59,271 |
| ||
Other assets |
|
(11,232 |
) |
(14,262 |
) | ||
Other liabilities |
|
(245,587 |
) |
(62,485 |
) | ||
Net cash (used in) provided by operating activities of continuing operations |
|
(300,902 |
) |
295,473 |
| ||
INVESTING ACTIVITIES: |
|
|
|
|
| ||
Payments for property, plant and equipment |
|
(92,565 |
) |
(79,116 |
) | ||
Intangible assets acquired |
|
(20,519 |
) |
(9,679 |
) | ||
Proceeds from insured loss |
|
|
|
3,627 |
| ||
Proceeds from dispositions of assets and investments |
|
15,729 |
|
17,407 |
| ||
Proceeds from sale-leaseback transactions |
|
2,587 |
|
|
| ||
Net cash used in investing activities of continuing operations |
|
(94,768 |
) |
(67,761 |
) | ||
FINANCING ACTIVITIES: |
|
|
|
|
| ||
Net proceeds from (payments to) revolver |
|
1,335,000 |
|
(190,000 |
) | ||
Principal payments on long-term debt |
|
(433,746 |
) |
(4,386 |
) | ||
Change in zero balance cash accounts |
|
(17,101 |
) |
10,189 |
| ||
Net proceeds from the issuance of common stock |
|
1,302 |
|
215 |
| ||
Payments for taxes related to net share settlement of equity awards |
|
(2,244 |
) |
(4,071 |
) | ||
Financing fees paid for early debt redemption |
|
(13 |
) |
|
| ||
Net cash provided by (used in) financing activities of continuing operations |
|
883,198 |
|
(188,053 |
) | ||
Cash flows from discontinued operations: |
|
|
|
|
| ||
Operating activities of discontinued operations |
|
(62,003 |
) |
2,358 |
| ||
Investing activities of discontinued operations |
|
603,402 |
|
(44,739 |
) | ||
Financing activities of discontinued operations |
|
(1,343,793 |
) |
(3,710 |
) | ||
Net cash used in discontinued operations |
|
(802,394 |
) |
(46,091 |
) | ||
Decrease in cash and cash equivalents |
|
(314,866 |
) |
(6,432 |
) | ||
Cash and cash equivalents, beginning of period |
|
447,334 |
|
245,410 |
| ||
Cash and cash equivalents, end of period |
|
$ |
132,468 |
|
$ |
238,978 |
|
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
|
|
Thirteen weeks ended |
|
Thirteen weeks ended |
| ||
|
|
|
|
|
| ||
Retail Pharmacy Segment |
|
|
|
|
| ||
Revenues from continuing operations (a) |
|
$ |
3,911,512 |
|
$ |
3,901,842 |
|
Cost of revenues from continuing operations (a) |
|
2,859,875 |
|
2,843,431 |
| ||
Gross profit from continuing operations |
|
1,051,637 |
|
1,058,411 |
| ||
LIFO charge from continuing operations |
|
3,358 |
|
3,436 |
| ||
FIFO gross profit from continuing operations |
|
1,054,995 |
|
1,061,847 |
| ||
|
|
|
|
|
| ||
Gross profit as a percentage of revenues - continuing operations |
|
26.89 |
% |
27.13 |
% | ||
LIFO charge as a percentage of revenues - continuing operations |
|
0.09 |
% |
0.09 |
% | ||
FIFO gross profit as a percentage of revenues - continuing operations |
|
26.97 |
% |
27.21 |
% | ||
|
|
|
|
|
| ||
Selling, general and administrative expenses from continuing operations |
|
1,068,944 |
|
1,066,411 |
| ||
Selling, general and administrative expenses as a percentage of revenues - continuing operations |
|
27.33 |
% |
27.33 |
% | ||
|
|
|
|
|
| ||
Cash interest expense |
|
52,295 |
|
105,207 |
| ||
Non-cash interest expense |
|
3,938 |
|
5,434 |
| ||
Total interest expense |
|
56,233 |
|
110,641 |
| ||
Interest expense - continuing operations |
|
56,233 |
|
50,237 |
| ||
Interest expense - discontinued operations |
|
|
|
60,404 |
| ||
|
|
|
|
|
| ||
Adjusted EBITDA - continuing operations |
|
103,618 |
|
87,627 |
| ||
Adjusted EBITDA as a percentage of revenues - continuing operations |
|
2.65 |
% |
2.25 |
% | ||
|
|
|
|
|
| ||
Pharmacy Services Segment |
|
|
|
|
| ||
Revenues (a) |
|
$ |
1,561,811 |
|
$ |
1,492,831 |
|
Cost of revenues (a) |
|
1,452,297 |
|
1,389,569 |
| ||
Gross profit |
|
109,514 |
|
103,262 |
| ||
|
|
|
|
|
| ||
Gross profit as a percentage of revenues |
|
7.01 |
% |
6.92 |
% | ||
|
|
|
|
|
| ||
Adjusted EBITDA |
|
44,963 |
|
49,275 |
| ||
Adjusted EBITDA as a percentage of revenues |
|
2.88 |
% |
3.30 |
% |
(a) - Revenues and cost of revenues include $51,961 and $49,662 of inter-segment activity for the thirteen weeks ended September 1, 2018 and September 2, 2017, respectively, that is eliminated in consolidation.
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
|
|
Twenty-six weeks ended |
|
Twenty-six weeks ended |
| ||
|
|
|
|
|
| ||
Retail Pharmacy Segment |
|
|
|
|
| ||
Revenues from continuing operations (a) |
|
$ |
7,809,277 |
|
$ |
7,874,193 |
|
Cost of revenues from continuing operations (a) |
|
5,688,183 |
|
5,758,811 |
| ||
Gross profit from continuing operations |
|
2,121,094 |
|
2,115,382 |
| ||
LIFO charge from continuing operations |
|
13,324 |
|
13,609 |
| ||
FIFO gross profit from continuing operations |
|
2,134,418 |
|
2,128,991 |
| ||
|
|
|
|
|
| ||
Gross profit as a percentage of revenues - continuing operations |
|
27.16 |
% |
26.86 |
% | ||
LIFO charge as a percentage of revenues - continuing operations |
|
0.17 |
% |
0.17 |
% | ||
FIFO gross profit as a percentage of revenues - continuing operations |
|
27.33 |
% |
27.04 |
% | ||
|
|
|
|
|
| ||
Selling, general and administrative expenses from continuing operations |
|
2,133,331 |
|
2,148,452 |
| ||
Selling, general and administrative expenses as a percentage of revenues - continuing operations |
|
27.32 |
% |
27.28 |
% | ||
|
|
|
|
|
| ||
Cash interest expense |
|
115,196 |
|
209,630 |
| ||
Non-cash interest expense |
|
8,444 |
|
10,910 |
| ||
Total interest expense |
|
123,640 |
|
220,540 |
| ||
Interest expense - continuing operations |
|
119,025 |
|
101,199 |
| ||
Interest expense - discontinued operations |
|
4,615 |
|
119,341 |
| ||
|
|
|
|
|
| ||
Adjusted EBITDA - continuing operations |
|
207,747 |
|
165,078 |
| ||
Adjusted EBITDA as a percentage of revenues - continuing operations |
|
2.66 |
% |
2.10 |
% | ||
|
|
|
|
|
| ||
Pharmacy Services Segment |
|
|
|
|
| ||
Revenues (a) |
|
$ |
3,104,573 |
|
$ |
3,006,072 |
|
Cost of revenues (a) |
|
2,895,767 |
|
2,797,838 |
| ||
Gross profit |
|
208,806 |
|
208,234 |
| ||
|
|
|
|
|
| ||
Gross profit as a percentage of revenues |
|
6.73 |
% |
6.93 |
% | ||
|
|
|
|
|
| ||
Adjusted EBITDA |
|
78,826 |
|
97,874 |
| ||
Adjusted EBITDA as a percentage of revenues |
|
2.54 |
% |
3.26 |
% |
(a) - Revenues and cost of revenues include $103,998 and $98,731 of inter-segment activity for the twenty-six weeks ended September 1, 2018 and September 2, 2017, respectively, that is eliminated in consolidation.
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED EBITDA
(In thousands)
(unaudited)
|
|
Thirteen weeks ended |
|
Thirteen weeks ended |
| ||
|
|
|
|
|
| ||
Reconciliation of net (loss) income to adjusted EBITDA: |
|
|
|
|
| ||
Net (loss) income - continuing operations |
|
$ |
(352,348 |
) |
$ |
188,360 |
|
Adjustments: |
|
|
|
|
| ||
Interest expense |
|
56,233 |
|
50,857 |
| ||
Income tax (benefit) expense |
|
(106,559 |
) |
117,450 |
| ||
Depreciation and amortization |
|
89,743 |
|
95,655 |
| ||
LIFO charge |
|
3,358 |
|
3,436 |
| ||
Lease termination and impairment charges |
|
39,609 |
|
3,113 |
| ||
Goodwill and intangible asset impairment charges |
|
375,190 |
|
|
| ||
Merger and Acquisition-related costs |
|
19,031 |
|
9,632 |
| ||
Stock based compensation expense |
|
5,215 |
|
6,324 |
| ||
Inventory write-downs related to store closings |
|
1,300 |
|
1,348 |
| ||
Litigation settlement |
|
18,000 |
|
|
| ||
Gain on sale of assets, net |
|
(4,965 |
) |
(14,951 |
) | ||
Walgreens Boots Alliance merger termination fee |
|
|
|
(325,000 |
) | ||
Other |
|
4,774 |
|
678 |
| ||
Adjusted EBITDA - continuing operations |
|
$ |
148,581 |
|
$ |
136,902 |
|
Percent of revenues - continuing operations |
|
2.74 |
% |
2.56 |
% | ||
|
|
|
|
|
| ||
Pro-forma Adjustments: |
|
|
|
|
| ||
Adjustment to reflect a full TSA fee |
|
|
|
24,000 |
| ||
Pro Forma Adjusted EBITDA - continuing operations |
|
$ |
148,581 |
|
$ |
160,902 |
|
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED EBITDA
(In thousands)
(unaudited)
|
|
Twenty-six weeks ended |
|
Twenty-six weeks ended |
| ||
|
|
|
|
|
| ||
Reconciliation of net (loss) income to adjusted EBITDA: |
|
|
|
|
| ||
Net (loss) income - continuing operations |
|
$ |
(394,075 |
) |
$ |
152,323 |
|
Adjustments: |
|
|
|
|
| ||
Interest expense |
|
119,025 |
|
101,857 |
| ||
Income tax (benefit) expense |
|
(116,056 |
) |
105,329 |
| ||
Depreciation and amortization |
|
184,272 |
|
196,684 |
| ||
LIFO charge |
|
13,324 |
|
13,609 |
| ||
Lease termination and impairment charges |
|
49,468 |
|
7,151 |
| ||
Goodwill and intangible asset impairment charges |
|
375,190 |
|
|
| ||
Loss on debt retirements, net |
|
554 |
|
|
| ||
Merger and Acquisition-related costs |
|
26,219 |
|
10,848 |
| ||
Stock based compensation expense |
|
10,246 |
|
15,362 |
| ||
Inventory write-downs related to store closings |
|
5,133 |
|
3,766 |
| ||
Litigation settlement |
|
18,000 |
|
|
| ||
Gain on sale of assets, net |
|
(10,824 |
) |
(20,828 |
) | ||
Walgreens Boots Alliance merger termination fee |
|
|
|
(325,000 |
) | ||
Other |
|
6,097 |
|
1,851 |
| ||
Adjusted EBITDA - continuing operations |
|
$ |
286,573 |
|
$ |
262,952 |
|
Percent of revenues - continuing operations |
|
2.65 |
% |
2.44 |
% | ||
|
|
|
|
|
| ||
|
|
|
|
|
| ||
Pro-forma Adjustments: |
|
|
|
|
| ||
Adjustment to reflect a full TSA fee |
|
|
|
48,000 |
| ||
Pro Forma Adjusted EBITDA - continuing operations |
|
$ |
286,573 |
|
$ |
310,952 |
|
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET (LOSS) INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
|
|
Thirteen weeks ended |
|
Thirteen weeks ended |
| |||
|
|
|
|
|
| |||
Net (loss) income from continuing operations |
|
$ |
(352,348 |
) |
$ |
188,360 |
| |
Add back - Income tax (benefit) expense |
|
(106,559 |
) |
117,450 |
| |||
(Loss) income before income taxes - continuing operations |
|
(458,907 |
) |
305,810 |
| |||
|
|
|
|
|
|
| ||
Adjustments: |
|
|
|
|
| |||
Amortization expense |
|
32,500 |
|
36,321 |
| |||
LIFO charge |
|
3,358 |
|
3,436 |
| |||
Goodwill and intangible asset impairment charges |
|
375,190 |
|
|
| |||
Merger and Acquisition-related costs |
|
19,031 |
|
9,632 |
| |||
Litigation settlement |
|
18,000 |
|
|
| |||
Walgreens Boots Alliance merger termination fee |
|
|
|
(325,000 |
) | |||
|
|
|
|
|
|
| ||
Adjusted (loss) income before income taxes - continuing operations |
|
(10,828 |
) |
30,199 |
| |||
|
|
|
|
|
| |||
Adjusted income tax (benefit) expense (a) |
|
(2,951 |
) |
12,838 |
| |||
Adjusted net (loss) income from continuing operations |
|
$ |
(7,877 |
) |
$ |
17,361 |
| |
|
|
|
|
|
|
| ||
Adjusted net (loss) income per diluted share - continuing operations: |
|
|
|
|
| |||
|
|
|
|
|
| |||
Numerator for adjusted net (loss) income per diluted share: |
|
|
|
|
| |||
Adjusted net (loss) income from continuing operations |
|
$ |
(7,877 |
) |
$ |
17,361 |
| |
|
|
|
|
|
| |||
|
|
|
|
|
| |||
|
|
|
|
|
| |||
Denominator: |
|
|
|
|
| |||
Basic weighted average shares |
|
1,056,464 |
|
1,048,548 |
| |||
Outstanding options and restricted shares, net |
|
|
|
18,668 |
| |||
Diluted weighted average shares |
|
1,056,464 |
|
1,067,216 |
| |||
|
|
|
|
|
| |||
Net (loss) income from continuing operations per diluted share - continuing operations |
|
$ |
(0.33 |
) |
$ |
0.18 |
| |
|
|
|
|
|
| |||
|
|
|
|
|
| |||
Adjusted net (loss) income per diluted share - continuing operations |
|
$ |
(0.01 |
) |
$ |
0.02 |
|
(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 NOLs, state credits and valuation allowance, was used for the thirteen weeks ended September 1, 2018 and September 2, 2017, respectively. Note also that the federal tax rate for the thirteen weeks ended September 1, 2018 is 21% compared to 35% for the thirteen weeks ended September 2, 2017.
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET (LOSS) INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
|
|
Twenty-six weeks ended |
|
Twenty-six weeks ended |
| ||
|
|
|
|
|
| ||
Net (loss) income from continuing operations |
|
$ |
(394,075 |
) |
$ |
152,323 |
|
Add back - Income tax (benefit) expense |
|
(116,056 |
) |
105,329 |
| ||
(Loss) income before income taxes - continuing operations |
|
(510,131 |
) |
257,652 |
| ||
|
|
|
|
|
| ||
Adjustments: |
|
|
|
|
| ||
Amortization expense |
|
67,900 |
|
77,283 |
| ||
LIFO charge |
|
13,324 |
|
13,609 |
| ||
Goodwill and intangible asset impairment charges |
|
375,190 |
|
|
| ||
Loss on debt retirements, net |
|
554 |
|
|
| ||
Merger and Acquisition-related costs |
|
26,219 |
|
10,848 |
| ||
Litigation settlement |
|
18,000 |
|
|
| ||
Walgreens Boots Alliance merger termination fee |
|
|
|
(325,000 |
) | ||
|
|
|
|
|
| ||
Adjusted (loss) income before income taxes - continuing operations |
|
(8,944 |
) |
34,392 |
| ||
|
|
|
|
|
| ||
Adjusted income tax (benefit) expense (a) |
|
(2,437 |
) |
14,621 |
| ||
Adjusted net (loss) income from continuing operations |
|
$ |
(6,507 |
) |
$ |
19,771 |
|
|
|
|
|
|
| ||
Adjusted net (loss) income per diluted share - continuing operations: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Numerator for adjusted net (loss) income per diluted share: |
|
|
|
|
| ||
Adjusted net (loss) income from continuing operations |
|
$ |
(6,507 |
) |
$ |
19,771 |
|
|
|
|
|
|
| ||
Denominator: |
|
|
|
|
| ||
Basic weighted average shares |
|
1,055,424 |
|
1,047,687 |
| ||
Outstanding options and restricted shares, net |
|
|
|
22,597 |
| ||
Diluted weighted average shares |
|
1,055,424 |
|
1,070,284 |
| ||
|
|
|
|
|
| ||
Net (loss) income from continuing operations per diluted share - continuing operations |
|
$ |
(0.37 |
) |
$ |
0.14 |
|
|
|
|
|
|
| ||
Adjusted net (loss) income per diluted share - continuing operations |
|
$ |
(0.01 |
) |
$ |
0.02 |
|
(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 NOLs, state credits and valuation allowance, was used for the twenty-six weeks ended September 1, 2018 and September 2, 2017, respectively. Note also that the federal tax rate for the twenty-six weeks ended September 1, 2018 is 21% compared to 35% for the twenty six weeks ended September 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 |
|
$ |
21,700,000 |
|
$ |
22,100,000 |
|
|
|
|
|
|
| ||
Same store sales |
|
0.00 |
% |
1.00 |
% | ||
|
|
|
|
|
| ||
Gross Capital Expenditures |
|
$ |
250,000 |
|
$ |
250,000 |
|
|
|
|
|
|
| ||
Reconciliation of net loss to adjusted EBITDA: |
|
|
|
|
| ||
Net loss |
|
$ |
(485,000 |
) |
$ |
(440,000 |
) |
Adjustments: |
|
|
|
|
| ||
Interest expense |
|
215,000 |
|
215,000 |
| ||
Income tax benefit |
|
(130,000 |
) |
(125,000 |
) | ||
Depreciation and amortization |
|
375,000 |
|
375,000 |
| ||
LIFO charge |
|
35,000 |
|
35,000 |
| ||
Lease termination and impairment charges |
|
60,000 |
|
60,000 |
| ||
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 |
|
$ |
540,000 |
|
$ |
590,000 |
|
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET (LOSS) INCOME GUIDANCE
YEAR ENDING MARCH 2, 2019
(In thousands)
(unaudited)
|
|
Guidance Range |
| ||||
|
|
Low |
|
High |
| ||
|
|
|
|
|
| ||
Net loss |
|
$ |
(485,000 |
) |
$ |
(440,000 |
) |
Add back - income tax benefit |
|
(130,000 |
) |
(125,000 |
) | ||
Loss before income taxes |
|
(615,000 |
) |
(565,000 |
) | ||
|
|
|
|
|
| ||
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) income before adjusted income taxes |
|
(33,000 |
) |
17,000 |
| ||
|
|
|
|
|
| ||
Adjusted income tax (benefit) expense |
|
(8,000 |
) |
4,000 |
| ||
Adjusted net (loss) income |
|
$ |
(25,000 |
) |
$ |
13,000 |
|
|
|
|
|
|
| ||
Diluted adjusted net (loss) income per share |
|
$ |
(0.03 |
) |
$ |
0.01 |
|
Cautionary Statement Regarding Forward Looking Statements Statements in this presentation 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 Aids outlook for fiscal 2019; 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 Walgreens Boots Alliance, Inc. ("WBA"); Rite Aids 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 Aids 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 presentation, whether as a result of new information, future events, changes in assumptions or otherwise. SAFE HARBOR STATEMENT 2
Cautionary Note Regarding Pro Forma Information The following presentation provides certain pro forma information regarding the impact of Rite Aids pending sale of distribution centers and assets to WBA on Rite Aids results of operations and capital structure. The pro forma information is for illustrative purposes only, was prepared by management in response to investor inquiries and is based upon a number of assumptions. The pro forma information assumes the completion of all the asset sales when they will actually take place over an extended period of time. Additional items that may require adjustments to the pro forma information may be identified and could result in material changes to the information contained herein. The information in this presentation is not necessarily indicative of what actual financial results of Rite Aid would have been had the sale occurred on the dates or for the periods indicated, nor does it purport to project the financial results of Rite Aid for any future periods or as of any date. Such pro forma information has not been prepared in conformity with Regulation S-X. Rite Aids independent auditors have not audited, reviewed, compiled or performed any procedures with respect to this preliminary financial information. Accordingly, they do not express an opinion or provide any form of assurance with respect thereto. The information in this presentation should not be viewed in replacement of results prepared in compliance with Generally Accepted Accounting Principles or any pro forma financial statements subsequently required by the rules and regulations of the Securities and Exchange Commission. SAFE HARBOR STATEMENT 3
NON-GAAP FINANCIAL MEASURES The following presentation includes the non-GAAP financial measures, Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share, Pro Forma Adjusted EBITDA, Adjusted EBITDA Gross Profit and Adjusted EBITDA SG&A. Rite Aid defines Adjusted EBITDA as net income (loss) excluding the impact of income taxes, interest expense, depreciation and amortization, LIFO adjustments (which removes the entire impact of LIFO, and effectively reflects the companys results as if the company was on a FIFO inventory basis), charges or credits for facility closing and impairment, goodwill and intangible asset impairment, inventory write-downs related to store closings, loss on debt retirements, the WBA merger termination fee, merger and acquisition-related costs and other items (including stock-based compensation expense, severance and costs related to facility closures, non-recurring litigation settlement and gain or loss on sale of assets). The presentation includes a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP financial measure. Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share exclude amortization expense, merger and acquisition-related costs, loss on debt retirements, LIFO adjustments (which removes the entire impact of LIFO, and effectively reflects the companys results as if the company was on a FIFO inventory basis), goodwill and intangible asset impairment, non-recurring litigation settlement and the WBA merger termination fee. Rite Aid defines Pro Forma Adjusted EBITDA as Adjusted EBITDA plus the fees that would have been earned under the Transition Services Agreement (the TSA) with WBA for the relevant period, and in order to improve comparability. Adjusted EBITDA Gross Profit includes LIFO adjustments, depreciation and amortization (COGS portion only) and other items. The presentation includes a reconciliation of Adjusted EBITDA SG&A to Revenue, which is the most directly comparable GAAP financial measure. 4
Quarter Ended September 1, 2018 STRATEGY UPDATE
BUILDING A LEADER IN HEALTH AND WELLNESS 6 EXPANDING OUR OMNICHANNEL CAPABILITIES Grow Front End through convenient shopping & tailored offering Leverage our valuable wellness brand Refine merchandising across Own Brand, assortment and layout while tailoring to key markets Relaunch wellness+ to drive growth of new and retention of existing customers Serve as the Trusted Advisor for our Pharmacy Customers Improve productivity to serve customer wellness needs profitably Enhance our pharmacy clinical capabilities to improve outcomes Expand EnvisionRx Options Med D business Build a winning value proposition for payors and providers Expand access to preferred and limited pharmacy networks Improve payor relations to stabilize reimbursement rate pressures Obtain efficient generic drug pricing GROWTH AS LEADERS AT ALL LEVELS COST EFFICIENT APPROACH To improve the health and wellness of our communities through engaging experiences that provide our customers with the best products, services and advice to meet their unique needs. OUR MISSION:
Medicare Part D In all OPEN networks In two national and two regional preferred Medicare Part D plans Continued discussions with payors for 2020 preferred access Commercial Networks Multi-year agreements in place with top payors Continued dialogue with payors to identify performance-based network opportunities Performance-based contracts supported through targeted adherence programs and contract-specific collaboration utilizing Health Dialog capabilities NETWORK ACCESS 7
CLINICAL INITIATIVES TO DRIVE SCRIPT GROWTH Drive Adherence Capitalize on launch of Shingrix and ancillary immunizations Centralize MTM activities to improve output Improve Rite Care through development Improve customer experience through technology Enhance Delivery Model A I M ADHERENCE IMMUNIZATION MEDICAL THERAPY 8
Immunizations by fiscal year (in thousands) 9
Comp results for Wellness stores continue to exceed the chain average(1) Front-end sales growth outperformance of 93 bps in Q2 Fiscal 2019 Script count growth outperformance of 113 bps in Q2 of Fiscal 2019 Remodeled Stores Since 2012 WELLNESS STORE RENOVATIONS Calculation compares the comp results of Wellness stores remodeled in the last 24 months to the remainder of the chain. As of the Quarter ended September 1, 2018. (2) 10 215 522 797 1,043 1,288 1,458 1,559 1,726 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Q2
Wellness+ rewards program Program changes in January 2018 have been successful Customer/member engagement has grown significantly with introduction of Bonus Cash Integration of industry leading loyalty management platforms (Symphony Retail, Amplify and Redpoint) is currently being integrated to drive enhanced personalization Integrated marketing campaign to drive share of wallet and new customer acquisition 11
1 in 5 transactions today includes Bonus Cash Nearly double the impact of Plenti last year BONUS CASH HAS SIGNIFICANTLY INCREASED CUSTOMER ENGAGEMENT 12
Being relevant and local will be a key differentiator for the new Rite Aid Appropriate ethnic assortment to match core demographic Consumables, beauty, and seasonal Product assortment that resonates with local community Consumables and apparel Expanded DME in select communities Localized Instore Marketing and Team Relevant ISM elements/graphics, especially in beauty categories Second language navigation, signing, etc. LOCALIZED PRODUCT ASSORTMENT 13
Six key brands with over 4,200 items throughout the store and sales over $800mm A strategic point of difference for Rite Aid, offering many exclusive items and great value for our customers Commitment to quality with all products to meet or exceed National Brand standards RITE AID OWN BRANDS 14
BUILDING STRONG RELATIONSHIPS WITH OUR CUSTOMERS THROUGH OMNICHANNEL OFFERINGS Pharmacy Drive-Through Pharmacy Delivery Pharmacy B-to-B Flu Clinics EnvisionRx Retail Stores RediClinic Mobile App RiteAid.com E-Commerce 15
RAPIDLY GROWING MEDICARE PART D BUSINESS (in thousands) Lives covered by EnvisionRx (1) Represents estimated enrollment at the end of calendar 2018. (1) 16
Rate stabilization expected to continue in Fiscal 2020 Reimbursement rate trends have improved over the last year Generic Effective Rate contracts for 80% of our business provide increased predictability on reimbursements and access for the coming year PHARMACY BUSINESS STABILIZATION 17
WBAD generic purchasing option Option expires May 2019 Requires brands to be sourced through ABC Benefit being verified in clean room process RFP process to achieve lowest possible drug cost prior to exercising option WBAD option, possible bids from McKesson and Cardinal Timing Evaluation process to be completed in the fall of calendar 2018 McKesson contract expires March 31, 2019 OPTIMIZE PHARMACY PURCHASING 18
Reduce near-term operating costs Store and field labor efficiency Advertising optimize circular costs with better balance of digital Indirect procurement goods not for resale Targeted long-term reduction of $96 million of administrative costs Process reengineering at corporate office Reduction of workload due to store count reduction Continue to evaluate underperforming stores Increased operational focus to improve results at actionable stores Target negative cash flow stores with short leases for closure or real estate solutions Optimize store footprint evaluating options, including closure of up to 100 under-performing watch list stores CONTINUE TO IMPLEMENT COST CONTROL & SAVINGS INITIATIVES 19
Quarter Ended September 1, 2018 FINANCIAL UPDATE
Q2 - FISCAL 2019 SUMMARY 21 ($ in millions, except per share amounts) Note: Data on this slide and throughout the presentation is on a continuing operations basis. 13 Weeks Ended Sept. 1, 2018 13 Weeks Ended Sept 2, 2017 Revenue $ 5,421.4 $ 5,345.0 Net (Loss) $ (352.3) $ 188.4 Net (Loss) Income per Diluted Share $ (0.33) $ 0.18 Adjusted Net (Loss) Income per Diluted Share $ (0.01) $ 0.02 Adjusted EBITDA $ 148.6 2.74% $ 136.9 2.56% Pro Forma Adjusted EBITDA $ 148.6 $ 160.9
Q2 - FISCAL 2019 RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED EBITDA 22 ($ in thousands) ($ in thousands) 13 Weeks Ended Sept. 1, 2018 13 Weeks Ended Sept. 2, 2017 Net (Loss) Income - Continuing Operations $ (352,348) $ 188,360 Adjustments: Interest expense 56,233 50,857 Income tax (benefit) expense (106,559) 117,450 Depreciation and amortization 89,743 95,655 LIFO charge 3,358 3,436 Lease termination and impairment charges 39,609 3,113 Goodwill and intangible asset impairment charges 375,190 - Merger and Acquisition-related costs 19,031 9,632 Stock-based compensation expense 5,215 6,324 Inventory write-downs related to store closings 1,300 1,348 Litigation settlement 18,000 - Gain on sale of assets, net (4,965) (14,951) Walgreens Boots Alliance merger termination fee - (325,000) Other 4,774 678 Adjusted EBITDA 148,581 136,902 Percent of revenues 2.74% 2.56% Pro Forma Adjustments: Adjustment to reflect a full TSA fee - 24,000 Pro Forma Adjusted EBITDA $ 148,581 $ 160,902
Q2 - FISCAL 2019 RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED NET LOSS 23 ($ in thousands, except per share amounts) ($ in thousands) 13 Weeks Ended Sept. 1, 2018 13 Weeks Ended Sept. 2, 2017 Net (Loss) Income $ (352,348) $ 188,360 Add back - Income tax (benefit) expense (106,559) 117,450 (Loss) Income before income taxes $ (458,907) $ 305,810 Adjustments: Amortization expense 32,500 36,321 LIFO charge 3,358 3,436 Goodwill and intangible asset impairment charges 375,190 - Merger and Acquisition-related costs 19,031 9,632 Litigation settlement 18,000 - Walgreens Boots Alliance merger termination fee - (325,000) Adjusted (loss) income before income taxes $ (10,828) $ 30,199 Adjusted income tax (benefit) expense (2,951) 12,838 Adjusted net (loss) income $ (7,877) $ 17,361 Net (loss) income per diluted share $ (0.33) $ 0.18 Adjusted net (loss) income per diluted share $ (0.01) $ 0.02
Q2 - FISCAL 2019 SUMMARY - RETAIL PHARMACY SEGMENT 24 ($ in millions) (1) Refer to slides 27 and 28 for the reconciliations of these non-GAAP measures to their applicable GAAP measures. 13 Weeks Ended Sept. 1, 2018 13 Weeks Ended Sept. 2, 2017 Revenue $ 3,911.5 $ 3,901.8 Adjusted EBITDA Gross Profit (1) $ 1,057.7 27.04% $ 1,065.3 27.30% Adjusted EBITDA SG&A(1) $ 954.1 24.39% $ 977.7 25.06% Adjusted EBITDA $ 103.6 2.65% $ 87.6 2.25%
Retail Pharmacy Segment revenue increased $9.7 million. Same store sales increased 1.0%, driven primarily by a 1.1% increase in same store script growth. Adjusted EBITDA Gross Profit decreased $7.6 million and Adjusted EBITDA Gross Margin decreased by 26 bps. The Gross Margin decrease was driven by a decline in reimbursement rates that we could not fully offset with generic purchasing efficiencies. Adjusted EBITDA SG&A was $23.6 million better than the prior year due primarily to TSA fees received in the current year. Q2 - FISCAL 2019 SUMMARY RETAIL PHARMACY SEGMENT 25
RECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT - RETAIL PHARMACY SEGMENT 26 ($ in thousands) Reconciliation of Adjusted EBITDA Gross Profit Retail Pharmacy Segment ($ in thousands) 13 Weeks Ended Sept. 1, 2018 13 Weeks Ended Sept. 2, 2017 Revenues $ 3,911,512 $ 3,901,842 Gross Profit 1,051,637 1,058,411 Addback: LIFO charge 3,358 3,436 Depreciation and amortization (COGS portion only) 2,254 2,429 Other 494 1,031 Adjusted EBITDA Gross Profit $ 1,057,743 $ 1,065,307 Adjusted EBITDA Gross Profit as a percent of revenue 27.04% 27.30%
RECONCILIATION OF ADJUSTED EBITDA SG&A - RETAIL PHARMACY SEGMENT 27 ($ in thousands) Reconciliation of Adjusted EBITDA SG&A Retail Pharmacy Segment ($ in thousands) 13 Weeks Ended Sept. 1, 2018 13 Weeks Ended Sept. 2, 2017 Total Revenues $ 3,911,512 $ 3,901,842 Selling, general and administrative expenses 1,068,944 1,066,411 Less: Depreciation and amortization (SG&A portion only) 68,401 71,780 Stock based compensation expense 5,215 6,324 Merger and Acquisition-related costs 19,031 9,632 Litigation settlement 18,000 - Other 4,172 1,004 Adjusted EBITDA SG&A $ 954,125 $ 977,671 Adjusted EBITDA SG&A as a percent of revenue 24.39% 25.06%
PHARMACY SERVICES SEGMENT RESULTS 28 ($ in millions) 13 Weeks Ended Sept. 1, 2018 13 Weeks Ended Sept. 2, 2017 Revenues $ 1,561.8 $ 1,492.8 Cost of Revenues 1,452.3 1,389.6 Gross Profit 109.5 103.2 Selling, General and Administrative Expense (85.0) (75.4) Addback: Depreciation and Amortization 20.5 20.0 Other - 1.5 Adjusted EBITDA - Pharmacy Services Segment $ 45.0 $ 49.3
Revenues increased $69.0 million, primarily due to an increase in our Medicare Part D membership Adjusted EBITDA decreased $4.3 million, primarily due to margin compression in our commercial business and SG&A investments we have made to support our current year and future growth Q2 - FY 2019 SUMMARY PHARMACY SERVICES SEGMENT 29
FY 2018 FY 2016 FY 2017 Front End Sales Rx Sales COMPARABLE STORE SALES GROWTH 30 Script Count (1) (1) Script count growth shown on a 30-day equivalent basis. FY 2019 5.0% 3.3% 1.8% 0.5% 0.4% - 3.4% - 4.0% - 4.7% - 5.5% - 4.9% - 3.5% - 2.3% - 0.1% 1.6% 0.9% 0.8% 0.7% 0.1% 1.5% 0.5% 0.1% 0.1% - 1.1% - 0.8% - 0.5% - 0.6% - 1.8% - 0.1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 3.6% 2.0% 2.0% 2.5% 2.8% 0.2% - 0.4% - 0.1% - 1.1% - 2.0% - 2.4% - 1.8% - 1.5% 1.1%
CAPITALIZATION TABLE 31 ($ in thousands) Note: Debt in the capitalization table is shown net of unamortized debt issuance costs. Capitalization Table & Leverage ($ in thousands) ############### March 3, 2018 Secured Debt: Senior secured revolving credit facility due January 2020 $ 1,326,367 $ (13,076) Other 90 90 1,326,457 (12,986) Unsecured Guaranteed Debt: 9.25% senior notes due March 2020 - 898,476 6.75% senior notes due June 2021 - 805,123 6.125% senior secured notes due April 2023 1,734,426 1,778,292 1,734,426 3,481,891 Unsecured Unguaranteed Debt: 7.7% notes due February 2027 293,623 293,540 6.875% fixed-rate senior notes due December 2028 127,325 127,293 420,948 420,833 Lease financing obligations 45,115 52,554 Total Debt: 3,526,946 3,942,292 Current maturities of long-term debt and lease financing obligations (18,668) (21,031) Long-term debt & lease financing obligations, less current maturities $ 3,508,278 $ 3,921,261 Total Debt Gross 3,556,695 3,987,644 Less: Unamortized debt issue costs 29,749 45,352 Total Debt per balance sheet $ 3,526,946 $ 3,942,292
PRO FORMA LEVERAGE RATIO 32 ($ in thousands) Sept. 1, 2018 Total Debt: $ 3,526,946 Less: cash and cash equivalents 132,468 Less: distribution center sale proceeds 218,314 Pro Forma Net Debt $ 3,176,164 Pro Forma Adjusted EBITDA: Retail Pharmacy Segment 430,989 Pro Forma adjustment for TSA Fees 39,600 Pharmacy Services Segment 152,486 Pro Forma Adjusted EBITDA $ 623,075 Pro Forma Leverage Ratio 5.10
FY 2019 GUIDANCE 33 ($ in thousands) RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE YEAR ENDING MARCH 2, 2019 (In thousands, except per share amounts) (unaudited) Guidance Range Low High Total Revenues $ 21,700,000 $ 22,100,000 Same store sales 0.00% 1.00% Gross Capital Expenditures $ 250,000 $ 250,000 Reconciliation of net loss to adjusted EBITDA: Net loss $ (485,000) $ (440,000) Adjustments: Interest expense 215,000 215,000 Income tax benefit (130,000) (125,000) Depreciation and amortization 375,000 375,000 LIFO charge 35,000 35,000 Lease termination and impairment charges 60,000 60,000 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 $ 540,000 $ 590,000
FY 2019 GUIDANCE (cont.) 34 ($ in thousands, except per share amounts) RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET INCOME GUIDANCE YEAR ENDING MARCH 2, 2019 (In thousands, except per share amounts) (unaudited) Guidance Range Low High Net loss $ (485,000) $ (440,000) Add back - Income tax benefit (130,000) (125,000) Loss before income taxes (615,000) (565,000) 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) income before adjusted income taxes (33,000) 17,000 Adjusted income tax (benefit) expense (8,000) 4,000 Adjusted net (loss) income $ (25,000) $ 13,000 Diluted adjusted net (loss) income per share $ (0.03) $ 0.01
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