Exhibit 99.1
Press Release
For Further Information Contact:
| INVESTORS: | MEDIA: |
| Matt Schroeder | Susan Henderson |
| (717) 214-8867 | (717) 730-7766 |
or investor@riteaid.com
FOR IMMEDIATE RELEASE
Rite Aid Reports Fiscal 2016 Fourth Quarter and Full Year Results
| · | Revenues of $8.3 Billion for the Fourth Quarter, Up 20.8 Percent Year-Over-Year and $30.7 Billion for the Full Year, Up 15.9 Percent Year-Over-Year |
| · | Fourth Quarter Adjusted Net Income Per Diluted Share of $0.07, Compared to the Prior Year of $0.06; Full Year Adjusted Net Income Per Diluted Share of $0.23, Compared to the Prior Year of $0.27 |
| · | Fourth Quarter Net Income Per Diluted Share of $0.06, Compared to the Prior Year of $1.79; Full Year Net Income Per Diluted Share of $0.16, Compared to the Prior Year of $2.08 |
| § | Prior Year’s Fourth Quarter and Full Year Net Income Benefited from a Deferred Tax Valuation Allowance Adjustment of $1.841 Billion, or Approximately $1.80 Per Diluted Share |
| · | Adjusted EBITDA of $383.0 Million for the Fourth Quarter, Up 11.6 Percent Year-Over-Year and $1,402.3 Million for the Full Year, Up 6.0 Percent Year-Over-Year |
CAMP HILL, Pa. (Apr. 7, 2016) - Rite Aid Corporation (NYSE: RAD) today reported operating results for its fourth quarter and fiscal year ended February 27, 2016.
For the fourth quarter, the company reported revenues of $8.3 billion, net income of $65.6 million, or $0.06 per diluted share, Adjusted net income of $76.1 million, or $0.07 per diluted share and Adjusted EBITDA of $383.0 million, or 4.6 percent of revenues. For the full year, the company reported revenues of $30.7 billion, net income of $165.5 million, or $0.16 per diluted share, Adjusted net income of $241.0 million or $0.23 per diluted share and Adjusted EBITDA of $1,402.3 million, or 4.6 percent of revenues.
“Our positive fourth-quarter results helped us deliver a successful fiscal year that reflects the tremendous progress we’re making to expand our retail healthcare offering,” said Rite Aid Chairman and CEO John Standley. “In the fourth quarter, we generated nearly $40 million of growth in Adjusted EBITDA, including an increase in our Retail Pharmacy Segment and strong results from our new Pharmacy Services Segment. This was one of many key highlights of fiscal 2016, which was a transformational year that saw us acquire EnvisionRx, launch the ground-breaking wellness+ with Plenti program, complete our 2,000th Wellness store and exceed $30 billion in revenues for the first time.”
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Rite Aid FY 2016 Q4 Press Release - page 2
“We look forward to building upon this success and to continue delivering a higher level of care in the communities we serve. We thank our dedicated Rite Aid associates for their hard work in executing our strategy and providing an even better retail healthcare experience for our customers. We’re also excited about our opportunity to join forces with Walgreens Boots Alliance to further expand consumer access to health care as part of the first global, pharmacy-led health and wellbeing enterprise.”
Fourth Quarter Summary
Revenues for the quarter were $8.3 billion compared to revenues of $6.8 billion in the prior year’s fourth quarter, an increase of $1.4 billion or 20.8 percent. Retail Pharmacy Segment revenues were $6.8 billion and decreased 0.3 percent compared to the prior year period primarily as a result of a decrease in same store sales. Pharmacy Services Segment revenues were $1.5 billion.
Same store sales for the quarter decreased 0.6 percent over the prior year, consisting of a 0.8 percent decrease in pharmacy sales and a 0.4 percent decrease in front-end sales. Pharmacy sales included an approximate 241 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 0.1 percent over the prior year period. Prescription sales accounted for 68.1 percent of total drugstore sales, and third party prescription revenue was 97.9 percent of pharmacy sales.
Adjusted net income (which is reconciled to net income in the attached tables) was $76.1 million or $0.07 per diluted share compared to last year’s fourth quarter adjusted net income of $65.2 million or $0.06 per diluted share.
Adjusted EBITDA (which is reconciled to net income in the attached tables) was $383.0 million or 4.6 percent of revenues for the fourth quarter compared to $343.3 million or 5.0 percent of revenues for the same period last year. Adjusted EBITDA improved due to $34.2 million of Pharmacy Services Segment Adjusted EBITDA and an increase of $5.5 million in Retail Pharmacy Segment Adjusted EBITDA. The increase in Retail Pharmacy Segment Adjusted EBITDA was driven by an increase in front-end gross profit, partially offset by a decrease in pharmacy gross profit and an increase in selling, general and administrative expenses.
In the fourth quarter, the company opened 3 stores, relocated 10 stores, remodeled 89 stores and expanded 1 store, bringing the total number of wellness stores chainwide to 2,042. The company also acquired 2 stores and closed 4 stores, resulting in a total store count of 4,561 at the end of the fourth quarter. The company also opened 3 clinics in the fourth quarter, bringing the total to 78.
Full Year Results
For the fiscal year ended February 27, 2016, Rite Aid had revenues of $30.7 billion compared to revenues of $26.5 billion in the prior year, an increase of $4.2 billion or 15.9 percent. Retail Pharmacy Segment revenues were $26.9 billion and increased 1.3 percent compared to the prior year primarily as a result of an increase in same store sales. Pharmacy Services Segment revenues were $4.1 billion from the date of the acquisition of EnvisionRx, which was June 24, 2015, through the end of the fiscal year.
Same store sales for the year increased 1.3 percent consisting of a 1.8 percent increase in pharmacy sales and a 0.2 percent increase in front end sales. Pharmacy sales included an approximate 221 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 0.5 percent over the prior year period. Prescription sales accounted for 69.1 percent of total drugstore sales, and third party prescription revenue was 97.8 percent of pharmacy sales.
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Rite Aid FY 2016 Q4 Press Release - page 3
Adjusted net income for fiscal 2016 was $241.0 million or $0.23 per diluted share compared to last year’s adjusted net income of $273.0 million or $0.27 per diluted share. The decline in adjusted net income resulted primarily from increased interest expense incurred in connection with the company’s acquisition of EnvisionRx and higher depreciation expense related to an increase in capital spending, partially offset by an increase in Adjusted EBITDA.
Adjusted EBITDA was $1,402.3 million or 4.6 percent of revenues for the year compared to $1,322.8 million or 5.0 percent of revenues for last year. Adjusted EBITDA improved due to $101.4 million of Pharmacy Services Segment Adjusted EBITDA, partially offset by a decrease of $21.9 million in Retail Pharmacy Segment Adjusted EBITDA. The decrease in Retail Pharmacy Segment Adjusted EBITDA was due to an increase in selling, general and administrative expenses related to our higher level of sales and a decrease in pharmacy gross profit, partially offset by an increase in front-end gross profit.
Operating cash flow for fiscal 2016 was approximately $1.0 billion, due to strong Adjusted EBITDA results and contributions from working capital management. Working capital primarily benefited from a reduction in store level pharmacy inventory. The company used this operating cash flow to fund capital expenditures and to reduce borrowings following the acquisition of EnvisionRx.
For the year, the company relocated 20 stores, acquired 6 stores, remodeled 412 stores, expanded 2 stores, opened 5 stores, and closed 20 stores. The company also opened 23 clinics during the fiscal year.
As previously announced on October 27, 2015, Rite Aid and Walgreens Boots Alliance, Inc. (“WBA”) entered into a definitive agreement under which WBA will acquire all outstanding shares of Rite Aid for $9.00 per share in cash, for a total enterprise value of approximately $17.2 billion, including acquired net debt. The board of directors of both companies and Rite Aid’s shareholders have approved the transaction, which is subject to certain conditions, including, among others, the receipt of approval under applicable antitrust laws and other customary closing conditions. The transaction is expected to close in the second half of calendar 2016.
Given the agreement with WBA described above, and as is customary for transactions of this type, Rite Aid does not intend to provide earnings guidance for fiscal 2017.
Rite Aid is one of the nation’s leading drugstore chains with 4,561 stores in 31 states and the District of Columbia. Information about Rite Aid, including corporate background and press releases, is available through Rite Aid’s website at www.riteaid.com.
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Rite Aid FY 2016 Q4 Press Release - page 4
Cautionary Statement Regarding Forward Looking Statements
Statements in this release that are not historical and statements regarding the expected timing of the closing of the proposed merger and the ability of the parties to complete such transaction considering the various closing conditions and any assumptions underlying any of the foregoing, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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, market and competitive 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, and risks related to the proposed merger. These and other risks, assumptions and uncertainties are more fully described in Item 1A (Risk Factors) of our most recent Annual Report on Form 10-K, in the definitive proxy statement that we filed with the Securities and Exchange Commission on December 21, 2015 in connection with the proposed merger, and in other documents that we file or furnish with the Securities and Exchange Commission, 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. Additionally, there can be no assurance that the proposed merger will be completed, or if it is completed, that it will close within the anticipated time period or that the expected benefits of the proposed merger will be realized. 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
The company separately reports financial results on the basis of Adjusted Net Income, Adjusted Net Income per diluted share, and Adjusted EBITDA, which are non-GAAP financial measures. See the attached tables for a reconciliation of Adjusted Net Income, Adjusted Net Income per diluted share and Adjusted EBITDA to net income, which is a comparable GAAP financial measure. Adjusted Net Income and Adjusted Net Income per diluted share excludes amortization of EnvisionRx intangible assets, acquisition-related costs, loss on debt retirements and LIFO adjustments. Adjusted EBITDA is defined as net income excluding the impact of income taxes (and any corresponding adjustments to tax indemnification asset), interest expense, depreciation and amortization, LIFO adjustments, charges or credits for facility closing and impairment, inventory write-downs related to store closings, debt retirements and other items (including stock-based compensation expense, sale of assets and investments and revenue deferrals related to our customer loyalty program).
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RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
| February 27, 2016 | February 28, 2015 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 124,471 | $ | 115,899 | ||||
| Accounts receivable, net | 1,601,008 | 980,904 | ||||||
| Inventories, net of LIFO reserve of $1,006,396 and $997,528 | 2,697,104 | 2,882,980 | ||||||
| Deferred tax assets | - | 17,823 | ||||||
| Prepaid expenses and other current assets | 128,144 | 224,152 | ||||||
| Total current assets | 4,550,727 | 4,221,758 | ||||||
| Property, plant and equipment, net | 2,255,398 | 2,091,369 | ||||||
| Goodwill | 1,713,475 | 76,124 | ||||||
| Other intangibles, net | 1,004,379 | 421,480 | ||||||
| Deferred tax assets | 1,539,141 | 1,766,349 | ||||||
| Other assets | 213,890 | 200,345 | ||||||
| Total assets | $ | 11,277,010 | $ | 8,777,425 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current maturities of long-term debt and lease financing obligations | $ | 26,848 | $ | 100,376 | ||||
| Accounts payable | 1,542,797 | 1,133,520 | ||||||
| Accrued salaries, wages and other current liabilities | 1,427,250 | 1,193,419 | ||||||
| Deferred tax liabilities | - | 57,685 | ||||||
| Total current liabilities | 2,996,895 | 2,485,000 | ||||||
| Long-term debt, less current maturities | 6,914,393 | 5,397,588 | ||||||
| Lease financing obligations, less current maturities | 52,895 | 61,152 | ||||||
| Other noncurrent liabilities | 731,399 | 776,629 | ||||||
| Total liabilities | 10,695,582 | 8,720,369 | ||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders' equity: | ||||||||
| Common stock | 1,047,754 | 988,558 | ||||||
| Additional paid-in capital | 4,822,665 | 4,521,023 | ||||||
| Accumulated deficit | (5,241,210 | ) | (5,406,675 | ) | ||||
| Accumulated other comprehensive loss | (47,781 | ) | (45,850 | ) | ||||
| Total stockholders' equity | 581,428 | 57,056 | ||||||
| Total liabilities and stockholders' equity | $ | 11,277,010 | $ | 8,777,425 | ||||
| RITE AID CORPORATION AND SUBSIDIARIES | |||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
| (Dollars in thousands, except per share amounts) | |||||
| (unaudited) | |||||
| Thirteen weeks ended February 27, 2016 | Thirteen weeks ended February 28, 2015 | |||||||
| Revenues | $ | 8,270,136 | $ | 6,847,929 | ||||
| Costs and expenses: | ||||||||
| Cost of revenues | 6,228,581 | 4,892,068 | ||||||
| Selling, general and administrative expenses | 1,810,288 | 1,718,327 | ||||||
| Lease termination and impairment charges | 26,753 | 21,284 | ||||||
| Interest expense | 103,678 | 98,442 | ||||||
| Gain on sale of assets, net | (348 | ) | (1,259 | ) | ||||
| 8,168,952 | 6,728,862 | |||||||
| Income before income taxes | 101,184 | 119,067 | ||||||
| Income tax expense (benefit) | 35,567 | (1,715,965 | ) | |||||
| Net income | $ | 65,617 | $ | 1,835,032 | ||||
| Basic and diluted earnings per share: | ||||||||
| Numerator for earnings per share: | ||||||||
| Net income | $ | 65,617 | $ | 1,835,032 | ||||
| Add back - Interest on convertible notes | - | 1,364 | ||||||
| Income attributable to common stockholders - diluted | $ | 65,617 | $ | 1,836,396 | ||||
| Denominator: | ||||||||
| Basic weighted average shares | 1,041,157 | 977,716 | ||||||
| Outstanding options and restricted shares, net | 17,357 | 22,097 | ||||||
| Convertible notes | - | 24,792 | ||||||
| Diluted weighted average shares | 1,058,514 | 1,024,605 | ||||||
| Basic income per share | $ | 0.06 | $ | 1.88 | ||||
| Diluted income per share | $ | 0.06 | $ | 1.79 | ||||
| RITE AID CORPORATION AND SUBSIDIARIES | |||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
| (Dollars in thousands, except per share amounts) | |||||
| (unaudited) | |||||
| Fifty-two weeks ended February 27, 2016 | Fifty-two weeks ended February 28, 2015 | |||||||
| Revenues | $ | 30,736,657 | $ | 26,528,377 | ||||
| Costs and expenses: | ||||||||
| Cost of revenues | 22,910,402 | 18,951,645 | ||||||
| Selling, general and administrative expenses | 7,013,346 | 6,695,642 | ||||||
| Lease termination and impairment charges | 48,423 | 41,945 | ||||||
| Interest expense | 449,574 | 397,612 | ||||||
| Loss on debt retirements, net | 33,205 | 18,512 | ||||||
| Loss (gain) on sale of assets, net | 3,303 | (3,799 | ) | |||||
| 30,458,253 | 26,101,557 | |||||||
| Income before income taxes | 278,404 | 426,820 | ||||||
| Income tax expense (benefit) | 112,939 | (1,682,353 | ) | |||||
| Net income | $ | 165,465 | $ | 2,109,173 | ||||
| Basic and diluted earnings per share: | ||||||||
| Numerator for earnings per share: | ||||||||
| Net income | $ | 165,465 | $ | 2,109,173 | ||||
| Add back - Interest on convertible notes | - | 5,456 | ||||||
| Income attributable to common stockholders - diluted | $ | 165,465 | $ | 2,114,629 | ||||
| Denominator: | ||||||||
| Basic weighted average shares | 1,024,377 | 971,102 | ||||||
| Outstanding options and restricted shares, net | 17,985 | 21,967 | ||||||
| Convertible notes | - | 24,792 | ||||||
| Diluted weighted average shares | 1,042,362 | 1,017,861 | ||||||
| Basic income per share | $ | 0.16 | $ | 2.17 | ||||
| Diluted income per share | $ | 0.16 | $ | 2.08 | ||||
| RITE AID CORPORATION AND SUBSIDIARIES | |||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||
| (In thousands) | |||||
| (unaudited) | |||||
| Thirteen weeks ended February 27, 2016 | Thirteen weeks ended February 28, 2015 | |||||||
| Net income | $ | 65,617 | $ | 1,835,032 | ||||
| Other comprehensive loss: | ||||||||
| Defined benefit pension plans: | ||||||||
| Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost, net of $2,875 and $6,042 tax benefit | (3,723 | ) | (10,495 | ) | ||||
| Total other comprehensive loss | (3,723 | ) | (10,495 | ) | ||||
| Comprehensive income | $ | 61,894 | $ | 1,824,537 | ||||
| RITE AID CORPORATION AND SUBSIDIARIES | |||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||
| (In thousands) | |||||
| (unaudited) | |||||
| Fifty-two weeks ended February 27, 2016 | Fifty-two weeks ended February 28, 2015 | |||||||
| Net income | $ | 165,465 | $ | 2,109,173 | ||||
| Other comprehensive loss: | ||||||||
| Defined benefit pension plans: | ||||||||
| Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost, net of $1,681 and $6,042 tax benefit | (1,931 | ) | (8,516 | ) | ||||
| Total other comprehensive loss | (1,931 | ) | (8,516 | ) | ||||
| Comprehensive income | $ | 163,534 | $ | 2,100,657 | ||||
| RITE AID CORPORATION AND SUBSIDIARIES | ||||||
| SUPPLEMENTAL SEGMENT OPERATING INFORMATION | ||||||
| (Dollars in thousands) | ||||||
| (unaudited) | ||||||
| Thirteen weeks ended February 27, 2016 | Thirteen weeks ended February 28, 2015 | |||||||
| Retail Pharmacy Segment | ||||||||
| Revenues (a) | $ | 6,826,984 | $ | 6,847,929 | ||||
| Cost of revenues (a) | 4,873,484 | 4,892,068 | ||||||
| Gross profit | 1,953,500 | 1,955,861 | ||||||
| LIFO credit | (6,796 | ) | (23,489 | ) | ||||
| FIFO gross profit | 1,946,704 | 1,932,372 | ||||||
| Gross profit as a percentage of revenues | 28.61 | % | 28.56 | % | ||||
| LIFO credit as a percentage of revenues | -0.10 | % | -0.34 | % | ||||
| FIFO gross profit as a percentage of revenues | 28.51 | % | 28.22 | % | ||||
| Selling, general and administrative expenses | 1,737,759 | 1,718,327 | ||||||
| Selling, general and administrative expenses as a percentage of revenues | 25.45 | % | 25.09 | % | ||||
| Cash interest expense | 98,081 | 86,774 | ||||||
| Non-cash interest expense | 5,342 | 11,668 | ||||||
| Total interest expense | 103,423 | 98,442 | ||||||
| Adjusted EBITDA | 348,785 | 343,295 | ||||||
| Adjusted EBITDA as a percentage of revenues | 5.11 | % | 5.01 | % | ||||
| Pharmacy Services Segment | ||||||||
| Revenues (a) | $ | 1,530,729 | ||||||
| Cost of revenues (a) | 1,442,674 | |||||||
| Gross profit | 88,055 | |||||||
| Gross profit as a percentage of revenues | 5.75 | % | ||||||
| Adjusted EBITDA | 34,224 | |||||||
| Adjusted EBITDA as a percentage of revenues | 2.24 | % | ||||||
(a) - Revenues and cost of revenues include $87,577 of inter-segment activity that is eliminated in consolidation.
| RITE AID CORPORATION AND SUBSIDIARIES | ||||||
| SUPPLEMENTAL SEGMENT OPERATING INFORMATION | ||||||
| (Dollars in thousands) | ||||||
| (unaudited) | ||||||
| Fifty-two weeks ended February 27, 2016 | Fifty-two weeks ended February 28, 2015 | |||||||
| Retail Pharmacy Segment | ||||||||
| Revenues (a) | $ | 26,865,931 | $ | 26,528,377 | ||||
| Cost of revenues (a) | 19,270,502 | 18,951,645 | ||||||
| Gross profit | 7,595,429 | 7,576,732 | ||||||
| LIFO charge (credit) | 11,163 | (18,857 | ) | |||||
| FIFO gross profit | 7,606,592 | 7,557,875 | ||||||
| Gross profit as a percentage of revenues | 28.27 | % | 28.56 | % | ||||
| LIFO charge (credit) as a percentage of revenues | 0.04 | % | -0.07 | % | ||||
| FIFO gross profit as a percentage of revenues | 28.31 | % | 28.49 | % | ||||
| Selling, general and administrative expenses | 6,824,698 | 6,695,642 | ||||||
| Selling, general and administrative expenses as a percentage of revenues | 25.40 | % | 25.24 | % | ||||
| Cash interest expense | 412,133 | 372,909 | ||||||
| Non-cash interest expense | 37,170 | 24,703 | ||||||
| Total interest expense | 449,303 | 397,612 | ||||||
| Adjusted EBITDA | 1,300,905 | 1,322,843 | ||||||
| Adjusted EBITDA as a percentage of revenues | 4.84 | % | 4.99 | % | ||||
| Pharmacy Services Segment | ||||||||
| Revenues (a) | $ | 4,103,513 | ||||||
| Cost of revenues (a) | 3,872,687 | |||||||
| Gross profit | 230,826 | |||||||
| Gross profit as a percentage of revenues | 5.63 | % | ||||||
| Adjusted EBITDA | 101,357 | |||||||
| Adjusted EBITDA as a percentage of revenues | 2.47 | % | ||||||
(a) - Revenues and cost of revenues include $232,787 of inter-segment activity that is eliminated in consolidation.
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(In thousands)
(unaudited)
| Thirteen weeks ended February 27, 2016 | Thirteen weeks ended February 28, 2015 | |||||||
| Reconciliation of net income to adjusted EBITDA: | ||||||||
| Net income | $ | 65,617 | $ | 1,835,032 | ||||
| Adjustments: | ||||||||
| Interest expense | 103,678 | 98,442 | ||||||
| Income tax expense | 61,925 | 125,339 | ||||||
| Income tax valuation allowance reduction | (26,358 | ) | (1,841,304 | ) | ||||
| Depreciation and amortization | 135,430 | 107,425 | ||||||
| LIFO credit | (6,796 | ) | (23,489 | ) | ||||
| Lease termination and impairment charges | 26,753 | 21,284 | ||||||
| Other | 22,760 | 20,566 | ||||||
| Adjusted EBITDA | $ | 383,009 | $ | 343,295 | ||||
| Percent of revenues | 4.63 | % | 5.01 | % | ||||
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(In thousands)
(unaudited)
| Fifty-two weeks ended February 27, 2016 | Fifty-two weeks ended February 28, 2015 | |||||||
| Reconciliation of net income to adjusted EBITDA: | ||||||||
| Net income | $ | 165,465 | $ | 2,109,173 | ||||
| Adjustments: | ||||||||
| Interest expense | 449,574 | 397,612 | ||||||
| Income tax expense | 139,297 | 158,951 | ||||||
| Income tax valuation allowance reduction | (26,358 | ) | (1,841,304 | ) | ||||
| Depreciation and amortization | 509,212 | 416,628 | ||||||
| LIFO charge (credit) | 11,163 | (18,857 | ) | |||||
| Lease termination and impairment charges | 48,423 | 41,945 | ||||||
| Loss on debt retirements, net | 33,205 | 18,512 | ||||||
| Other | 72,281 | 40,183 | ||||||
| Adjusted EBITDA | $ | 1,402,262 | $ | 1,322,843 | ||||
| Percent of revenues | 4.56 | % | 4.99 | % | ||||
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
| Thirteen weeks ended February 27, 2016 | Thirteen weeks ended February 28, 2015 | |||||||
| Net income | $ | 65,617 | $ | 1,835,032 | ||||
| Add back - Income tax expense (benefit) | 35,567 | (1,715,965 | ) | |||||
| Income before income taxes | 101,184 | 119,067 | ||||||
| Adjustments: | ||||||||
| Amortization of EnvisionRx intangible assets | 17,310 | - | ||||||
| LIFO credit | (6,796 | ) | (23,489 | ) | ||||
| Acquisition-related costs | 5,686 | 8,309 | ||||||
| Adjusted income before income taxes | 117,384 | 103,887 | ||||||
| Adjusted income tax expense (a) | 41,319 | 38,646 | ||||||
| Adjusted net income | $ | 76,065 | $ | 65,241 | ||||
| Adjusted net income per diluted share | $ | 0.07 | $ | 0.06 | ||||
| (a) | The fiscal year 2015 annual effective tax rate, adjusted for the income tax valuation reduction of $1.841 billion, is used for the thirteen weeks ended February 28, 2015. |
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
| Fifty-two weeks ended February 27, 2016 | Fifty-two weeks ended February 28, 2015 | |||||||
| Net income | $ | 165,465 | $ | 2,109,173 | ||||
| Add back - Income tax expense (benefit) | 112,939 | (1,682,353 | ) | |||||
| Income before income taxes | 278,404 | 426,820 | ||||||
| Adjustments: | ||||||||
| Amortization of EnvisionRx intangible assets | 55,527 | - | ||||||
| LIFO charge (credit) | 11,163 | (18,857 | ) | |||||
| Loss on debt retirements, net | 33,205 | 18,512 | ||||||
| Acquisition-related costs | 27,482 | 8,309 | ||||||
| Adjusted income before income taxes | 405,781 | 434,784 | ||||||
| Adjusted income tax expense (a) | 164,747 | 161,740 | ||||||
| Adjusted net income | $ | 241,034 | $ | 273,044 | ||||
| Adjusted net income per diluted share | $ | 0.23 | $ | 0.27 | ||||
| (a) | The estimated annualized effective tax rate used for the fifty-two weeks ended February 28, 2015 is adjusted for the income tax valuation allowance reduction of $1.841 billion. |
RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
| Thirteen weeks ended February 27, 2016 | Thirteen weeks ended February 28, 2015 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 65,617 | $ | 1,835,032 | ||||
| Adjustments to reconcile to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 135,430 | 107,425 | ||||||
| Lease termination and impairment charges | 26,753 | 21,284 | ||||||
| LIFO credit | (6,796 | ) | (23,489 | ) | ||||
| Gain on sale of assets, net | (348 | ) | (1,259 | ) | ||||
| Stock-based compensation expense | 11,419 | 6,458 | ||||||
| Changes in deferred taxes | 28,793 | (1,726,487 | ) | |||||
| Excess tax benefit on stock options and restricted stock | (1,448 | ) | (13,916 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (24,239 | ) | 15,591 | |||||
| Inventories | 181,619 | 138,023 | ||||||
| Accounts payable | (110,817 | ) | (124,905 | ) | ||||
| Other assets and liabilities, net | 21,882 | (58,757 | ) | |||||
| Net cash provided by operating activities | 327,865 | 175,000 | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Payments for property, plant and equipment | (127,009 | ) | (101,890 | ) | ||||
| Intangible assets acquired | (31,036 | ) | (32,949 | ) | ||||
| Proceeds from sale-leaseback transactions | 36,732 | - | ||||||
| Proceeds from dispositions of assets and investments | 1,085 | 4,935 | ||||||
| Net cash used in investing activities | (120,228 | ) | (129,904 | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Net (payments to) proceeds from revolver | (280,000 | ) | 945,000 | |||||
| Principal payments on long-term debt | (5,750 | ) | (1,151,897 | ) | ||||
| Change in zero balance cash accounts | (27,867 | ) | 41,015 | |||||
| Net proceeds from the issuance of common stock | 2,751 | 8,594 | ||||||
| Excess tax benefit on stock options and restricted stock | 1,448 | 13,916 | ||||||
| Deferred financing costs paid | - | (18,779 | ) | |||||
| Net cash used in financing activities | (309,418 | ) | (162,151 | ) | ||||
| Decrease in cash and cash equivalents | (101,781 | ) | (117,055 | ) | ||||
| Cash and cash equivalents, beginning of period | 226,252 | 232,954 | ||||||
| Cash and cash equivalents, end of period | $ | 124,471 | $ | 115,899 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Payments for property, plant and equipment | $ | 127,009 | $ | 101,890 | ||||
| Intangible assets acquired | 31,036 | 32,949 | ||||||
| Total cash capital expenditures | 158,045 | 134,839 | ||||||
| Equipment received for noncash consideration | 1,000 | - | ||||||
| Equipment financed under capital leases | 6,115 | 1,408 | ||||||
| Gross capital expenditures | $ | 165,160 | $ | 136,247 | ||||
RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
| Fifty-two weeks ended February 27, 2016 | Fifty-two weeks ended February 28, 2015 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 165,465 | $ | 2,109,173 | ||||
| Adjustments to reconcile to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 509,212 | 416,628 | ||||||
| Lease termination and impairment charges | 48,423 | 41,945 | ||||||
| LIFO charge (credit) | 11,163 | (18,857 | ) | |||||
| Loss (gain) on sale of assets, net | 3,303 | (3,799 | ) | |||||
| Stock-based compensation expense | 37,948 | 23,390 | ||||||
| Loss on debt retirements, net | 33,205 | 18,512 | ||||||
| Changes in deferred taxes | 79,488 | (1,726,487 | ) | |||||
| Excess tax benefit on stock options and restricted stock | (22,884 | ) | (41,563 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 291,659 | (25,902 | ) | |||||
| Inventories | 181,958 | 129,985 | ||||||
| Accounts payable | (21,187 | ) | (169,952 | ) | ||||
| Other assets and liabilities, net | (320,351 | ) | (104,114 | ) | ||||
| Net cash provided by operating activities | 997,402 | 648,959 | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Payments for property, plant and equipment | (541,347 | ) | (426,828 | ) | ||||
| Intangible assets acquired | (128,648 | ) | (112,558 | ) | ||||
| Acquisition of businesses, net of cash acquired | (1,778,377 | ) | (69,793 | ) | ||||
| Proceeds from sale-leaseback transactions | 36,732 | - | ||||||
| Proceeds from dispositions of assets and investments | 9,782 | 15,494 | ||||||
| Net cash used in investing activities | (2,401,858 | ) | (593,685 | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of long-term debt | 1,800,000 | 1,152,293 | ||||||
| Net proceeds from revolver | 375,000 | 1,325,000 | ||||||
| Principal payments on long-term debt | (672,717 | ) | (2,595,709 | ) | ||||
| Change in zero balance cash accounts | (62,878 | ) | 1,081 | |||||
| Net proceeds from the issuance of common stock | 11,376 | 24,117 | ||||||
| Financing fees paid for early debt redemption | (26,003 | ) | (13,841 | ) | ||||
| Excess tax benefit on stock options and restricted stock | 22,884 | 41,563 | ||||||
| Deferred financing costs paid | (34,634 | ) | (20,285 | ) | ||||
| Net cash provided by (used in) financing activities | 1,413,028 | (85,781 | ) | |||||
| Increase (decrease) in cash and cash equivalents | 8,572 | (30,507 | ) | |||||
| Cash and cash equivalents, beginning of period | 115,899 | 146,406 | ||||||
| Cash and cash equivalents, end of period | $ | 124,471 | $ | 115,899 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Payments for property, plant and equipment | $ | 541,347 | $ | 426,828 | ||||
| Intangible assets acquired | 128,648 | 112,558 | ||||||
| Total cash capital expenditures | 669,995 | 539,386 | ||||||
| Equipment received for noncash consideration | 3,011 | 1,600 | ||||||
| Equipment financed under capital leases | 9,614 | 6,157 | ||||||
| Gross capital expenditures | $ | 682,620 | $ | 547,143 | ||||
