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): December 19, 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 |
of Incorporation) |
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Identification Number) |
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 December 19, 2018, Rite Aid Corporation (the Company) reported its financial position and results of operations as of and for the thirteen and thirty-nine weeks periods ended December 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 third 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 |
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Press Release, dated December 19, 2018. |
99.2 |
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Third Quarter Fiscal 2019 Supplemental Information. |
EXHIBIT INDEX
Exhibit |
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Description |
99.1 |
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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: December 19, 2018 |
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 |
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For Further Information Contact: |
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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 Third Quarter Results
· Third Quarter Net Loss from Continuing Operations of $17.3 Million or $0.02 Per Share, Compared to the Prior Year Third Quarter Net Loss of $18.2 Million or $0.02 Per Share
· Third Quarter Adjusted Net Income from Continuing Operations of $14.7 million or $0.01 Per Share, Compared to the Prior Year Third Quarter Adjusted Net Income of $8.5 Million or $0.01 Per Share
· Third Quarter Adjusted EBITDA from Continuing Operations of $142.8 Million, Compared to the Prior Year Adjusted EBITDA from Continuing Operations of $142.1 Million
· Retail Same Store Sales Increased 1.6 Percent
· Driven By 2.4 Percent Same Store Prescription Growth
· Rite Aid and McKesson Announce They Will Enter into a 10-Year Drug Purchasing Agreement
· Refinancing of Rite Aids Senior Secured Credit Facility is Substantially Completed
· Rite Aid Narrows Guidance for Fiscal 2019
CAMP HILL, Pa. (Dec. 19, 2018) - 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 were 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.
-MORE-
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 years 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 years 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 years 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 Aids 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 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 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 nations leading drugstore chains with 2,525 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 ability to complete the refinancing of Rite Aids 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 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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December 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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$ |
410,043 |
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$ |
447,334 |
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Accounts receivable, net |
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1,717,830 |
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1,869,100 |
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Inventories, net of LIFO reserve of $600,401 and $581,090 |
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1,894,274 |
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1,799,539 |
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Prepaid expenses and other current assets |
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176,439 |
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181,181 |
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Current assets held for sale |
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131,892 |
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438,137 |
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Total current assets |
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4,330,478 |
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4,735,291 |
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Property, plant and equipment, net |
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1,335,740 |
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1,431,246 |
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Goodwill |
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1,108,135 |
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1,421,120 |
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Other intangibles, net |
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462,362 |
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590,443 |
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Deferred tax assets |
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635,416 |
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594,019 |
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Other assets |
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210,827 |
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217,208 |
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Total assets |
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$ |
8,082,958 |
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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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$ |
16,066 |
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$ |
20,761 |
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Accounts payable |
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1,707,242 |
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1,651,363 |
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Accrued salaries, wages and other current liabilities |
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997,017 |
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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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2,720,325 |
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3,464,065 |
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Long-term debt, less current maturities |
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3,394,466 |
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3,340,099 |
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Lease financing obligations, less current maturities |
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26,200 |
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30,775 |
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Other noncurrent liabilities |
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488,553 |
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553,378 |
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Total liabilities |
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6,629,544 |
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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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1,066,902 |
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1,067,318 |
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Additional paid-in capital |
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4,860,219 |
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4,850,712 |
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Accumulated deficit |
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(4,440,250 |
) |
(4,282,471 |
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Accumulated other comprehensive loss |
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(33,457 |
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(34,549 |
) | ||
Total stockholders equity |
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1,453,414 |
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1,601,010 |
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Total liabilities and stockholders equity |
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$ |
8,082,958 |
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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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$ |
5,450,060 |
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$ |
5,353,170 |
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Costs and expenses: |
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Cost of revenues |
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4,267,972 |
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4,166,447 |
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Selling, general and administrative expenses |
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1,142,555 |
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1,166,514 |
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Lease termination and impairment charges |
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2,628 |
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3,939 |
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Interest expense |
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56,008 |
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50,308 |
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(Gain) loss on sale of assets, net |
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(382 |
) |
205 |
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5,468,781 |
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5,387,413 |
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Loss from continuing operations before income taxes |
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(18,721 |
) |
(34,243 |
) | ||
Income tax benefit |
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(1,471 |
) |
(16,061 |
) | ||
Net loss from continuing operations |
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(17,250 |
) |
(18,182 |
) | ||
Net income from discontinued operations, net of tax |
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12,740 |
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99,213 |
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Net (loss) income |
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$ |
(4,510 |
) |
$ |
81,031 |
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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 from continuing operations attributable to common stockholders - basic and diluted |
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$ |
(17,250 |
) |
$ |
(18,182 |
) |
Net income from discontinued operations attributable to common stockholders - basic and diluted |
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12,740 |
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99,213 |
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(Loss) income attributable to common stockholders - basic and diluted |
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$ |
(4,510 |
) |
$ |
81,031 |
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Denominator: |
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Basic weighted average shares |
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1,058,395 |
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1,048,502 |
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Outstanding options and restricted shares, net |
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7,367 |
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Diluted weighted average shares |
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1,058,395 |
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1,055,869 |
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Basic and diluted (loss) income per share |
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|
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Continuing operations |
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$ |
(0.02 |
) |
$ |
(0.02 |
) |
Discontinued operations |
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$ |
0.02 |
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$ |
0.10 |
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Net basic and diluted (loss) income per share |
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$ |
(0.00 |
) |
$ |
0.08 |
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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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Thirty-nine weeks ended |
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Thirty-nine weeks ended |
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Revenues |
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$ |
16,259,912 |
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$ |
16,134,704 |
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Costs and expenses: |
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|
|
|
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Cost of revenues |
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12,747,924 |
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12,624,365 |
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Selling, general and administrative expenses |
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3,449,173 |
|
3,469,298 |
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Lease termination and impairment charges |
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52,096 |
|
11,090 |
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Goodwill and intangible asset impairment charges |
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375,190 |
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|
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Interest expense |
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175,033 |
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152,165 |
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Loss on debt retirements, net |
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554 |
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Walgreens Boots Alliance merger termination fee |
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|
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(325,000 |
) | ||
Gain on sale of assets, net |
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(11,206 |
) |
(20,623 |
) | ||
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16,788,764 |
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15,911,295 |
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(Loss) income from continuing operations before income taxes |
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(528,852 |
) |
223,409 |
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Income tax (benefit) expense |
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(117,527 |
) |
89,268 |
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Net (loss) income from continuing operations |
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(411,325 |
) |
134,141 |
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Net income from discontinued operations, net of tax |
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262,091 |
|
42,257 |
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Net (loss) income |
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$ |
(149,234 |
) |
$ |
176,398 |
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Basic and diluted (loss) income per share: |
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|
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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 |
|
$ |
(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 |
|
Thirteen weeks ended |
| ||
|
|
|
|
|
| ||
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 |
|
Thirty-nine weeks ended |
| ||
|
|
|
|
|
| ||
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 |
|
Thirteen weeks ended |
| ||
|
|
|
|
|
| ||
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 |
|
Thirty-nine weeks ended |
| ||
|
|
|
|
|
| ||
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 |
|
Thirteen weeks ended |
| ||
|
|
|
|
|
| ||
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 |
|
Thirty-nine weeks ended |
| ||
|
|
|
|
|
| ||
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 |
|
Thirteen weeks ended |
| ||
|
|
|
|
|
| ||
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 NOLs, 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 |
|
Thirty-nine weeks ended |
| ||
|
|
|
|
|
| ||
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 NOLs, 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 |
) |
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 and guidance 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 SEC. 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, 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 presentation includes a reconciliation of Adjusted EBITDA to net income (loss), 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, 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. Additionally, 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 presentation includes a reconciliation of Adjusted Net Income (Loss) to net income (loss), which is the most directly comparable GAAP financial measure. 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 Gross Profit to Revenue, which is the most directly comparable GAAP financial measure. Adjusted EBITDA SG&A excludes depreciation and amortization (SG&A portion only), stock-based compensation expense, merger and acquisition-related costs, litigation settlement 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
Q3 - FISCAL 2019 SUMMARY 5 ($ in millions, except per share amounts) Note: Data on this slide and throughout the presentation is on a continuing operations basis.
Q3 - FISCAL 2019 RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA 6 ($ in thousands) 13 Weeks Ended Dec. 1, 2018 13 Weeks Ended Dec. 2, 2017 Net Loss (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 142,791 142,062 Percent of revenues 2.62% 2.65% Pro Forma Adjustments: Adjustment to reflect a full TSA fee - 23,800 Pro Forma Adjusted EBITDA 142,791 $ 165,862 $
Q3 - FISCAL 2019 RECONCILIATION OF NET LOSS TO ADJUSTED NET INCOME 7 ($ in thousands, except per share amounts) ($ in thousands) 13 Weeks Ended Dec. 1, 2018 13 Weeks Ended Dec. 2, 2017 Net Loss $ (17,250) $ (18,182) Add back - Income tax benefit (1,471) (16,061) Loss before income taxes $ (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 $ 20,209 $ 14,580 Adjusted income tax expense 5,469 6,067 Adjusted net income $ 14,740 $ 8,513 Net loss per diluted share $ (0.02) $ (0.02) Adjusted net income per diluted share $ 0.01 $ 0.01
Q3 - FISCAL 2019 SUMMARY - RETAIL PHARMACY SEGMENT 8 ($ in millions) (1) Refer to slides 10 and 11 for the reconciliations of these non-GAAP measures to their applicable GAAP measures. Q2 - Fiscal 2017 Summary RETAIL PHARMACY SEGMENT ($ in millions) 13 Weeks Ended Dec. 1, 2018 13 Weeks Ended Dec. 2, 2017 Revenue $ 3,976.7 $ 3,959.0 Adjusted EBITDA Gross Profit (1) $ 1,088.2 27.36% $ 1,098.9 27.76% Adjusted EBITDA SG&A(1) $ 987.0 24.82% $ 997.2 25.19% Adjusted EBITDA $ 101.2 2.55% $ 101.7 2.57%
Retail Pharmacy Segment revenue increased $17.7 million. Same store sales increased 1.6%, driven primarily by a 2.4% increase in same store script count. Adjusted EBITDA Gross Profit decreased $10.7 million and Adjusted EBITDA Gross Margin decreased by 40 bps. Pharmacy gross profit increased due to the increase in same store script count. This increase was more than offset by a decrease in front end gross profit, driven by our front end sales decline, and increases in distribution costs driven by the realignment of stores in our distribution network resulting from the sale of a distribution center to Walgreens Boots Alliance. Adjusted EBITDA SG&A was $10.2 million better than the prior year. TSA fees of $17.9 million received from WBA were partially offset by an increase in employee expenses. Q3 - FISCAL 2019 SUMMARY RETAIL PHARMACY SEGMENT 9
RECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT - RETAIL PHARMACY SEGMENT 10 ($ in thousands)
RECONCILIATION OF ADJUSTED EBITDA SG&A - RETAIL PHARMACY SEGMENT 11 ($ in thousands) Reconciliation of Adjusted EBITDA SG&A Retail Pharmacy Segment ($ in thousands) 13 Weeks Ended Dec. 1, 2018 13 Weeks Ended Dec. 2, 2017 Total Revenues $ 3,976,719 $ 3,959,002 Selling, general and administrative expenses 1,062,598 1,086,857 Less: Depreciation and amortization (SG&A portion only) 67,905 72,128 Stock based compensation expense 1,317 7,186 Merger and Acquisition-related costs 4,175 6,550 Other 2,213 3,795 Adjusted EBITDA SG&A $ 986,988 $ 997,198 Adjusted EBITDA SG&A as a percent of revenue 24.82% 25.19%
PHARMACY SERVICES SEGMENT RESULTS 12 ($ in millions) Pharmacy Services Segment Results ($ in millions) 13 Weeks Ended Dec. 1, 2018 13 Weeks Ended Dec. 2, 2017 Revenues $ 1,525.8 $ 1,445.1 Cost of Revenues 1,423.3 1,346.3 Gross Profit 102.5 98.8 Selling, General and Administrative Expense (80.0) (79.7) Addback: Depreciation and Amortization 16.5 21.3 Other 2.6 - Adjusted EBITDA - Pharmacy Services Segment $ 41.6 $ 40.4
Revenues increased $80.7 million, primarily due to an increase in our Medicare Part D membership Adjusted EBITDA increased $1.2 million, primarily due to our increased Medicare Part D membership, partially offset by margin compression in our commercial business and SG&A investments we have made to support our current year and future growth Q3 - FY 2019 SUMMARY PHARMACY SERVICES SEGMENT 13
FY 2018 FY 2016 FY 2017 Front End Sales Rx Sales COMPARABLE STORE SALES GROWTH 14 Script Count (1) (1) Script count growth shown on a 30-day equivalent basis. FY 2019 5.0% 3.3% 1.8% 0.5% 0.4% - 3.4% - 4.0% - 4.7% - 5.5% - 4.9% - 3.5% - 2.3% - 0.1% 1.6% 3.1% 0.9% 0.8% 0.7% 0.1% 1.5% 0.5% 0.1% 0.1% - 1.1% - 0.8% - 0.5% - 0.6% - 1.8% - 0.1% - 1.5% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 3.6% 2.0% 2.0% 2.5% 2.8% 0.2% - 0.4% - 0.1% - 1.1% - 2.0% - 2.4% - 1.8% - 1.5% 1.1% 2.4%
CAPITALIZATION TABLE 15 ($ in thousands) Note: Debt in the capitalization table is shown net of unamortized debt issuance costs. Capitalization Table & Leverage ($ in thousands) December 1, 2018 March 3, 2018 Secured Debt: Senior secured revolving credit facility due January 2020 $ 1,237,993 $ (13,076) Other 90 90 1,238,083 (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 1,735,467 1,778,292 1,735,467 3,481,891 Unsecured Unguaranteed Debt: 7.7% notes due February 2027 293,664 293,540 6.875% fixed-rate senior notes due December 2028 127,341 127,293 421,005 420,833 Lease financing obligations 42,177 52,554 Total Debt: 3,436,732 3,942,292 Current maturities of long-term debt and lease financing obligations (16,066) (21,031) Long-term debt & lease financing obligations, less current maturities $ 3,420,666 $ 3,921,261 Total Debt Gross 3,463,757 3,439,787 Less: Unamortized debt issue costs (27,025) (46,752) Plus: Unamortized premium on the 9.25% notes - 1,400 Total Debt per balance sheet $ 3,436,732 $ 3,391,635
PRO FORMA LEVERAGE RATIO 16 ($ in thousands) FY 2018 Debt Table (Dollars in thousands) December 2, 2017 Secured Debt: Senior secured revolving credit facility due January 2020 ($1,925,000 and $2,430,000 face value less unamortized debt issuance costs of $18,308 and $24,918) $ 1,906,692 Tranche 1 Term Loan (second lien) due August 2020 ($470,000 face value less unamortized debt issuance costs of $3,249 and $4,167) 466,751 Tranche 2 Term Loan (second lien) due June 2021 ($500,000 face value less unamortized debt issuance costs of $2,008 and $2,431) 497,992 Other secured 90 2,871,525 Unsecured Guaranteed Debt: 9.25% senior notes due March 2020 ($902,000 face value plus unamortized premium of $1,568 and $2,071 and less unamortized debt issuance costs of $5,575 and $7,527) 897,993 6.75% senior notes due June 2021 ($810,000 face value less unamortized debt issuance costs of $5,247 and $6,360) 804,753 6.125% senior secured notes due April 2023 ($1,800,000 face value less unamortized debt issuance costs of $22,777 and $25,984) 1,777,223 3,479,969 Unsecured Unguaranteed Debt: 7.7% notes due February 2027 ($295,000 face value less unamortized debt issuance costs of $1,501 and $1,625) 293,499 6.875% fixed-rate senior notes due December 2028 ($128,000 face value less unamortized debt issuance costs of $723 and $771) 127,277 420,776 Lease financing obligations 57,990 Total Debt: 6,830,260 Current maturities of long-term debt and lease financing obligations (22,262) Long-term debt and lease financing obligations, less current maturities $ 6,807,998 Total Debt, gross: $ 6,889,647 Less: Unamortized debt issue costs 59,387 Total Debt per balance sheet: $ 6,830,260 Leverage Ratio New Slide: Dec. 1, 2018 Total Debt: $ 3,436,732 Less: Cash and cash equivalents (410,034) Add: Amount due to reinsurance carrier related to CMS 182,400 Less: Distribution center sale proceeds (157,063) Pro Forma Net Debt $ 3,052,035 Pro Forma LTM Adjusted EBITDA: Retail Pharmacy Segment 430,515 Pro Forma adjustment for TSA Fees 15,800 Pharmacy Services Segment 153,689 Pro Forma LTM Adjusted EBITDA $ 600,004 Pro Forma Leverage Ratio 5.09
FY 2019 GUIDANCE 17 ($ 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 $ 21,800,000 $ 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
FY 2019 GUIDANCE (cont.) 18 ($ 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) $ (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 loss per share $ (0.03) $ (0.01)
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