Provides Update on Impact of COVID-19 on the
Business
- Fourth Quarter Net Loss from Continuing Operations of $343.5
Million, or $6.43 Per Share, Compared to the Prior Year Fourth
Quarter Net Loss of $255.6 Million, or $4.83 Per Share
- Fourth Quarter Net Loss from Continuing Operations Includes
$320.6 Million, or $6.00 Per Share of Non-Cash Income Tax
Expense
- Fourth Quarter Adjusted Net Loss from Continuing Operations
of $19.9 Million, or $0.37 Per Share, Compared to the Prior Year
Fourth Quarter Adjusted Net Loss of $13.3 Million, or $0.25 Per
Share
- Fourth Quarter Adjusted EBITDA from Continuing Operations of
$135.6 Million, Compared to the Prior Year Fourth Quarter Adjusted
EBITDA of $134.1 Million
- Strong Growth in Pharmacy Services Segment Revenues and Same
Store Prescription Volume
- Substantially Improved Pro-Forma Leverage Ratio to 5.3x
Adjusted EBITDA
- Fiscal 2021 Outlook as Previously Announced on March 16,
2020 Unchanged – Ultimate Impact of COVID-19 on Fiscal 2021 Outlook
Uncertain
Rite Aid Corporation (NYSE: RAD) today reported operating
results for its fourth quarter and fiscal year ended February 29,
2020.
For the fourth quarter, the company reported net loss from
continuing operations of $343.5 million, or $6.43 per share,
Adjusted net loss from continuing operations of $19.9 million, or
$0.37 per share, and Adjusted EBITDA from continuing operations of
$135.6 million, or 2.4 percent of revenues.
“I’d like to thank our Rite Aid team for working together to
deliver a solid finish to the fiscal year,” said Heyward Donigan,
president and chief executive officer, Rite Aid. “Strong execution
by our team drove growth in both Pharmacy Services Segment revenues
and Retail Pharmacy Segment prescription count, and helped deliver
our second consecutive quarter-over-quarter improvement in Adjusted
EBITDA. These results provide important momentum as we redefine our
industry by deploying our bold, new RxEvolution strategy.”
“As we begin the new fiscal year, Rite Aid’s top priority is to
continue providing the essential care, services and products that
our communities need during the COVID-19 crisis,” Donigan
continued. “I couldn’t be more proud of our team for working
together to support our fellow associates and serve our customers
and clients during this global health emergency. There has never
been a more important time to be a pharmacy company, and we remain
committed to serving as a trusted and essential resource for
medications, supplies and services in our communities.”
Fourth Quarter Summary
Revenues from continuing operations for the quarter were $5.73
billion compared to revenues from continuing operations of $5.38
billion in the prior year’s quarter. Retail Pharmacy Segment
revenues were $3.99 billion and increased 0.6 percent compared to
the prior year period due to an increase in same store sales.
Revenues in the Pharmacy Services Segment were $1.8 billion, an
increase of 23.1 percent compared to the prior year period, which
was due to an increase in Medicare Part D membership of
approximately 244,000 compared to the prior year period.
Retail Pharmacy Segment same store sales from continuing
operations for the fourth quarter increased 1.6 percent over the
prior year period, consisting of a 1.6 percent increase in pharmacy
sales and a 0.1 percent increase in front-end sales. Front-end same
store sales, excluding cigarettes and tobacco products, increased
1.5 percent. Pharmacy sales were negatively impacted by
approximately 330 basis points as a result of new generic
introductions. The number of prescriptions filled in same stores,
adjusted to 30-day equivalents, increased 5.0 percent over the
prior year period driven by strong execution, notably in growing
immunizations and medication adherence through personalized
interventions, as well as prescription file buys and gaining access
to new networks in markets where we have strong market presence.
Prescription sales from continuing operations accounted for 65.9
percent of total drugstore sales.
Net loss from continuing operations was $343.5 million, or $6.43
per share compared to last year’s fourth quarter net loss from
continuing operations of $255.6 million, or $4.83 per share. Income
tax expense in the current year’s fourth quarter was impacted by a
$320.6 million charge related to an increase in the valuation
allowance against the company’s deferred tax asset. Other items
impacting net loss from continuing operations included a loss on
sale of assets in the current year compared to a gain on sale of
assets in the prior year, partially offset by a LIFO credit in the
current year compared to a LIFO charge in the prior year.
Adjusted EBITDA from continuing operations was $135.6 million or
2.4 percent of revenues for the fourth quarter compared to last
year’s fourth quarter Adjusted EBITDA from continuing operations of
$134.1 million or 2.5 percent of revenues. Retail Pharmacy Segment
Adjusted EBITDA from continuing operations decreased $11.1 million
due primarily to a reduction in the Transition Services Agreement
(the TSA) fee income from Walgreens Boots Alliance, Inc. (WBA).
Pharmacy Services Segment Adjusted EBITDA increased $12.6 million
over the prior year due to increased revenues and improvements in
pharmacy network management.
Full Year Results
For the fiscal year ended February 29, 2020, revenues from
continuing operations were $21.9 billion compared to revenues of
$21.6 billion in the prior year, an increase of $0.3 billion or 1.3
percent. Retail Pharmacy Segment revenues were $15.6 billion, a
decrease of 0.9 percent compared to the prior year. Revenues in the
Pharmacy Services Segment were $6.6 billion, an increase of 7.6
percent compared to the prior year, which was due to an increase in
Medicare Part D membership.
Retail Pharmacy Segment same store sales from continuing
operations for the year increased 1.1 percent, consisting of a 1.4
percent increase in pharmacy sales and a 0.6 percent decrease in
front end sales. Front-end same store sales, excluding cigarettes
and tobacco products, increased 0.6 percent for the year. Pharmacy
sales were negatively impacted by approximately 286 basis points as
a result of new generic introductions. The number of prescriptions
filled in same stores, adjusted to 30-day equivalents, increased
3.5 percent over the prior year resulting primarily from strong
execution, notably in growing immunizations and medication
adherence through personalized interventions, as well as
prescription file buys and gaining access to new networks in
markets where we have strong market presence. Prescription sales
from continuing operations accounted for 67.0 percent of total
drugstore sales.
Net loss from continuing operations for fiscal 2020 was $469.2
million, or $8.82 per share compared to last year’s net loss from
continuing operations of $667.0 million, or $12.62 per share. The
reduction in net loss is due to lower goodwill and intangible asset
impairment charges, lower LIFO expense, lower lease termination and
impairment charges, and a gain on debt retirements in the current
year compared to a loss on debt retirements in the prior year.
These items were partially offset by higher income tax expense and
higher restructuring-related costs.
Adjusted EBITDA from continuing operations was $538.2 million or
2.5 percent of revenues for the year compared to $563.4 million or
2.6 percent of revenues for last year. The decrease in Adjusted
EBITDA is due to a decrease of $34.8 million in the Retail Pharmacy
Segment, partially offset by a $9.5 million increase in the
Pharmacy Services Segment. The decrease in the Retail Pharmacy
Segment Adjusted EBITDA was driven by a $42.4 million reduction in
TSA fee income from WBA. Also contributing to the reduction in
Adjusted EBITDA was a decrease in Adjusted EBITDA gross profit
resulting from reimbursement rate pressures that were not fully
offset by generic drug purchasing efficiencies, a reduction in
vendor promotional funds and a decline in front-end same store
sales. These negative variances were partially offset by same-store
prescription count growth and lower selling, general and
administrative expenses due to strong labor and benefits expense
control. The improvement in the Pharmacy Services Segment EBITDA
was due to increased revenue and improvements in pharmacy network
management.
For the year, the company relocated five stores, finished the
last 75 stores with the wellness remodel format, opened two stores,
and closed 10 stores.
Rite Aid on the Front Lines of the COVID-19 Crisis
Rite Aid is on the front lines of providing communities with
essential care, services and products during the COVID-19 pandemic.
The company has taken numerous steps to ensure that Rite Aid can
continue providing these vital services during this time of great
need, including:
- Working with the U.S. Department of Health and Human Services
to pilot new testing models.
- Announcing plans to hire an additional 5,000 full and part-time
associates to support store and distribution center teams.
- Implementing Hero Pay and Hero Bonus programs, along with
increasing our associate discount to 35%, to show appreciation for
the exceptional commitment of Rite Aid associates on the front
lines.
- Instituting a “Pandemic Pay” policy that ensures associates are
compensated if diagnosed with the virus or quarantined because of
exposure.
- Implementing specific internal protocols to keep associates
safe and ready to serve customers, including the installation of
Plexiglas shields at pharmacy and front-end counters to provide
additional protection.
- Ensuring contact-less capabilities at our stores for
prescription pickup and payment.
- Launching a new telehealth service RediClinic@Home to better
serve patient needs.
- Designating 9 a.m. to 10 a.m. as a senior shopping hour to
limit exposure for customers 60 and older and offering a 30%
discount to wellness+ rewards members every Wednesday in
April.
- Establishing social distancing procedures that include marking
floor areas in front of the pharmacy and front-end counters with
tape to ensure 6-foot separation.
- Waiving delivery-service fees for eligible prescriptions.
- Following enhanced cleaning and sanitization protocols designed
specifically to prevent the spread of a wide spectrum of viruses,
including COVID-19 and influenza.
In response to the COVID-19 pandemic, the company implemented
its business continuity plans in an effort to continue normal
operations based on the work from home and social distancing
requirements of various governmental entities. During the month of
March, the company saw increases in comparable front-end sales of
33 percent, due to demand for personal care, paper products and OTC
medications, and increases in 30-day comparable adjusted
prescription count of 8.3 percent due to increased fills of
maintenance medications.
The company expects these initial favorable results to be
tempered by a decline in front-end sales during the remainder of
the first quarter of fiscal 2021 due to social distancing measures
that are in effect in our markets, and a moderation in prescription
count due to the timing of maintenance medication fills and a
potential prolonged acute prescription decline. Also the company
incurred incremental costs related to the Hero Pay and Bonus
programs for front-line associates, as well as incremental expenses
(e.g. Plexiglas protective barriers, cleaning crews and additional
staffing) to ensure our stores stay open and to minimize the risk
to our associates and customers.
The company currently has liquidity of $1.9 billion, which
consists of availability to borrow under our secured revolving
credit facility of $1.7 billion and cash on hand of $180 million.
The company will continue to assess developments related to
COVID-19 as the quarter progresses to determine if any material
negative impacts are identified and will work to minimize the risk
to the company’s financial position if material negative
developments occur.
Outlook for Fiscal 2021
The company’s outlook for fiscal 2021, as previously announced
on March 16, 2020, assumes a decline in reimbursement rates
consistent with the decline experienced in fiscal 2020. However,
based upon conditions in the generic drug market, the company does
not expect to be able to as effectively offset these declines with
generic drug purchasing savings as in the prior year. The company
does expect benefits from revenue growth and initiatives to control
costs to partially offset these reimbursement rate pressures. The
company’s outlook also assumes restructuring charges of
approximately $60.0 million, which will not be included in Adjusted
EBITDA. These charges include costs to relaunch the brand and to
transition certain merchandise lines.
At this time, the impact of COVID-19 on fiscal 2021 Adjusted
EBITDA has not been material, as increased sales volumes in March
are expected to be offset by declines in sales during the remainder
of the first quarter of fiscal 2021 and the cost investments
described above. At this time, the company does not have enough
information about the ultimate impact of COVID-19 on fiscal 2021
results to justify changing guidance. It is important to note that
the impacts of COVID-19 on our business are fluid and difficult to
predict and these estimates could materially change. Factors that
could cause our estimates for fiscal 2021 to materially change
include a deterioration in front-end sales and prescriptions due to
prolonged social distancing measures, a reduction in members at our
Pharmacy Services Segment commercial clients and disruptions to our
front-end or pharmaceutical supply chain.
Revenues are expected to be between $22.5 billion and $22.9
billion in fiscal 2021 with Retail Pharmacy Segment same store
sales expected to range from an increase of 1.5 percent to an
increase of 2.5 percent over fiscal 2020. Pharmacy Services Segment
revenue is expected to be between $6.75 billion and $6.85 billion
(net of any intercompany revenues to Rite Aid retail).
Net loss is expected to be between $91.0 million and $119.0
million.
Adjusted EBITDA is expected to be between $500.0 million and
$540.0 million.
Adjusted net (loss) income per share is expected to be between a
loss of $0.22 and income of $0.19.
Cash flow from operations is expected to be between $400.0
million and $450.0 million.
Capital expenditures are expected to be approximately $350.0
million.
Conference Call Broadcast
Rite Aid will hold an analyst call at 8:30 a.m. Eastern Time
today with remarks by Rite Aid's management team.
The call will be broadcast via the Internet at
https://www.riteaid.com/corporate/investor-relations/presentations.
The telephone replay will be available beginning at 12 p.m. Eastern
Time today and ending at 11:59 p.m. Eastern Time on, April 18,
2020. To access the replay of the call, telephone (855) 859-2056
from within the U.S. and Canada or (404) 537-3406 from outside the
U.S. and Canada and enter the seven-digit reservation number
5497617. The webcast replay of the call will also be available at
https://www.riteaid.com/corporate/investor-relations/presentations
starting at 12 p.m. Eastern Time today. The playback will be
available until the company’s next conference call.
About Rite Aid Corporation
Rite Aid Corporation is on the front lines of delivering health
care services and retail products to over 1.6 million Americans
daily. Our pharmacists are uniquely positioned to engage with
customers and improve their health outcomes. We provide an array of
whole being health products and services for the entire family
through over 2,400 retail pharmacy locations across 18 states.
Through EnvisionRxOptions, soon to be renamed Elixir, we provide
pharmacy benefits and services to approximately 4 million members
nationwide. For more information, www.riteaid.com.
Cautionary Statement Regarding Forward-Looking
Statements
Statements in this release that are not historical, are
forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Such statements include, but are not limited to, statements
regarding Rite Aid's outlook and guidance for fiscal 2021,
including the impact of coronavirus pandemic (COVID-19) on the
company’s business; Rite Aid’s plan to hire additional associates;
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: the impact of COVID-19 on our
workforce, operations, stores, and supply chain, and the operations
of our customers, suppliers and business partners; our ability to
successfully implement our new business strategy (including any
delays as a result of COVID-19) and improve the operating
performance of our stores; our high level of indebtedness and our
ability to satisfy our obligations and the other covenants
contained in our debt agreements; general competitive, economic,
industry, market, political (including healthcare reform), and
regulatory conditions, as well as factors specific to the markets
in which we operate; 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; our ability to achieve the
benefits of our efforts to reduce the costs of our generic and
other drugs; outcomes of legal and regulatory matters; our ability
to partner and have relationships with health plans and health
systems; risks related to the pending sale of the remaining Rite
Aid distribution center and related assets to WBA, including the
possibility that the transaction may not close; and the continued
integration of our new senior management team and our ability to
realize the benefits from our organizational restructuring.
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. To the extent that COVID-19 adversely
affects our business and financial results, it may also have the
effect of heightening many of such risk factors.
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. The degree to which
COVID-19 may affect Rite Aid’s results and operations, including
its ability to achieve its outlook for fiscal 2021, will depend on
future developments, which are highly uncertain, including, but not
limited to, the duration and spread of the outbreak, its severity,
the actions to contain the virus or treat its impact (including
travel bans and restrictions, quarantines, shelter-in-place orders
and shutdowns), and how quickly and to what extent normal economic
and operating conditions can resume. As a result, the impact on
Rite Aid’s financial and operating results cannot be reasonably
estimated with specificity at this time, but the impact could be
material. 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 and 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 and 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,
gains and losses on debt retirements, LIFO adjustments, goodwill
and intangible asset impairment charges, restructuring-related
costs 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, gains or
losses 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, restructuring-related costs and costs related to
facility closures and gain or loss on sale of assets). The current
calculation of Adjusted EBITDA reflects a modification made in the
second quarter of fiscal 2019 to eliminate the add back of revenue
deferrals related to our customer loyalty program and to present
amounts previously included within other as separate reconciling
items. We further note that the add back of LIFO (credit) charge
when calculating Adjusted EBITDA, Adjusted Net Income (Loss) and
Adjusted Net Income (Loss) per Diluted Share removes the entire
impact of LIFO (credits) charges, and effectively reflects Rite
Aid's results as if the company was on a FIFO inventory basis.
Cautionary Note Regarding Pro Forma Information
This release provides certain pro forma information regarding
the impact of Rite Aid’s pending sale of a distribution center and
assets to WBA on Rite Aid’s 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
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 release 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 Aid’s 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 release 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.
###
RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS (Dollars in thousands) (unaudited)
February 29, 2020 March 2, 2019 ASSETS Current assets: Cash and
cash equivalents
$
218,180
$
144,353
Accounts receivable, net
1,286,785
1,788,712
Inventories, net of LIFO reserve of $539,640 and $604,444
1,921,604
1,871,941
Prepaid expenses and other current assets
181,794
179,132
Current assets held for sale
92,278
117,581
Total current assets
3,700,641
4,101,719
Property, plant and equipment, net
1,215,838
1,308,514
Operating lease right-of-use assets
2,903,256
-
Goodwill
1,108,136
1,108,136
Other intangibles, net
359,491
448,706
Deferred tax assets
16,680
409,084
Other assets
148,327
215,208
Total assets
$
9,452,369
$
7,591,367
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Current maturities of long-term debt and lease financing
obligations
$
8,840
$
16,111
Accounts payable
1,484,081
1,618,585
Accrued salaries, wages and other current liabilities
746,318
808,439
Current portion of operating lease liabilities
490,161
-
Current liabilities held for sale
37,063
-
Total current liabilities
2,766,463
2,443,135
Long-term debt, less current maturities
3,077,268
3,454,585
Long-term operating lease liabilities
2,710,347
-
Lease financing obligations, less current maturities
19,326
24,064
Other noncurrent liabilities
204,438
482,893
Total liabilities
8,777,842
6,404,677
Commitments and contingencies
-
-
Stockholders' equity: Common stock
54,716
54,016
Additional paid-in capital
5,890,903
5,876,977
Accumulated deficit
(5,222,194
)
(4,713,244
)
Accumulated other comprehensive loss
(48,898
)
(31,059
)
Total stockholders' equity
674,527
1,186,690
Total liabilities and stockholders' equity
$
9,452,369
$
7,591,367
RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS (Dollars in thousands, except per share
amounts) (unaudited) Thirteen weeks
endedFebruary 29, 2020 Thirteen weeks endedMarch 2, 2019 Revenues
$
5,727,242
$
5,379,645
Costs and expenses: Cost of revenues
4,460,621
4,215,281
Selling, general and administrative expenses
1,154,300
1,143,202
Lease termination and impairment charges
40,728
55,898
Interest expense
53,429
52,695
Loss (gain) on sale of assets, net
9,896
(26,806
)
5,718,974
5,440,270
Income (loss) from continuing operations before income taxes
8,268
(60,625
)
Income tax expense
351,729
195,004
Net loss from continuing operations
(343,461
)
(255,629
)
Net income (loss) from discontinued operations, net of tax
18,740
(17,350
)
Net loss
$
(324,721
)
$
(272,979
)
Basic and diluted loss per share:
Numerator for loss per share: Net loss from continuing operations
attributable to common stockholders - basic and diluted
$
(343,461
)
$
(255,629
)
Net income (loss) from discontinued operations attributable to
common stockholders - basic and diluted
18,740
(17,350
)
Loss attributable to common stockholders - basic and diluted
$
(324,721
)
$
(272,979
)
Denominator: Basic and diluted weighted
average shares
53,434
52,965
Basic and diluted loss per share Continuing operations
$
(6.43
)
$
(4.83
)
Discontinued operations
$
0.35
$
(0.32
)
Net basic and diluted loss per share
$
(6.08
)
$
(5.15
)
RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS (Dollars in thousands, except per share
amounts) (unaudited) Fifty-two weeks
endedFebruary 29, 2020 Fifty-two weeks endedMarch 2, 2019 Revenues
$
21,928,393
$
21,639,557
Costs and expenses: Cost of revenues
17,201,635
16,963,205
Selling, general and administrative expenses
4,587,336
4,592,375
Lease termination and impairment charges
42,843
107,994
Goodwill and intangible asset impairment charges
-
375,190
Interest expense
229,657
227,728
(Gain) loss on debt retirements, net
(55,692
)
554
Loss (gain) on sale of assets, net
4,226
(38,012
)
22,010,005
22,229,034
Loss from continuing operations before income taxes
(81,612
)
(589,477
)
Income tax expense
387,607
77,477
Net loss from continuing operations
(469,219
)
(666,954
)
Net income from discontinued operations, net of tax
17,045
244,741
Net loss
$
(452,174
)
$
(422,213
)
Basic and diluted loss per share:
Numerator for loss per share: Net loss from continuing operations
attributable to common stockholders - basic and diluted
$
(469,219
)
$
(666,954
)
Net income from discontinued operations attributable to common
stockholders - basic and diluted
17,045
244,741
Loss attributable to common stockholders - basic and diluted
$
(452,174
)
$
(422,213
)
Denominator: Basic and diluted weighted
average shares
53,228
52,854
Basic and diluted loss per share Continuing operations
$
(8.82
)
$
(12.62
)
Discontinued operations
$
0.32
$
4.63
Net basic and diluted loss per share
$
(8.50
)
$
(7.99
)
RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited)
Thirteen weeks endedFebruary 29, 2020 Thirteen weeks
endedMarch 2, 2019 OPERATING ACTIVITIES: Net loss
$
(324,721
)
$
(272,979
)
Net income (loss) from discontinued operations, net of tax
18,740
(17,350
)
Net loss from continuing operations
$
(343,461
)
$
(255,629
)
Adjustments to reconcile to net cash provided by (used in)
operating activities of continuing operations: Depreciation and
amortization
79,300
86,925
Lease termination and impairment charges
40,728
55,898
LIFO (credit) charge
(72,357
)
4,043
Loss (gain) on sale of assets, net
9,896
(26,806
)
Stock-based compensation expense
2,489
552
Changes in deferred taxes
358,925
221,740
Changes in operating assets and liabilities: Accounts receivable
387,065
(70,407
)
Inventories
107,798
33,844
Accounts payable
(53,817
)
(55,572
)
Operating lease right-of-use assets and operating lease liabilities
(8,691
)
-
Other assets
4,364
13,304
Other liabilities
(95,057
)
(223,820
)
Net cash provided by (used in) operating activities of continuing
operations
417,182
(215,928
)
INVESTING ACTIVITIES: Payments for property, plant and equipment
(42,570
)
(57,560
)
Intangible assets acquired
(9,246
)
(16,338
)
Proceeds from dispositions of assets and investments
3,687
27,749
Proceeds from sale-leaseback transactions
4,879
-
Net cash used in investing activities of continuing operations
(43,250
)
(46,149
)
FINANCING ACTIVITIES: Proceeds from issuance of long-term debt
600,000
450,000
Net payments to revolver
(485,000
)
(370,000
)
Principal payments on long-term debt
(601,401
)
(2,773
)
Change in zero balance cash accounts
24,420
(43,517
)
Payments for taxes related to net share settlement of equity awards
(348
)
-
Financing fees paid for early debt redemption
-
(158
)
Deferred financing costs paid
(5,466
)
(21,564
)
Net cash (used in) provided by financing activities of continuing
operations
(467,795
)
11,988
Cash flows from discontinued operations: Operating activities of
discontinued operations
(16,688
)
(15,688
)
Investing activities of discontinued operations
39,233
87
Net cash provided by (used in) discontinued operations
22,545
(15,601
)
Decrease in cash and cash equivalents
(71,318
)
(265,690
)
Cash and cash equivalents, beginning of period
289,498
410,043
Cash and cash equivalents, end of period
$
218,180
$
144,353
RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited)
Fifty-two weeks endedFebruary 29, 2020 Fifty-two
weeks endedMarch 2, 2019 OPERATING ACTIVITIES: Net
loss
$
(452,174
)
$
(422,213
)
Net income from discontinued operations, net of tax
17,045
244,741
Net loss from continuing operations
$
(469,219
)
$
(666,954
)
Adjustments to reconcile to net cash provided by (used in)
operating activities of continuing operations: Depreciation and
amortization
328,277
357,882
Lease termination and impairment charges
42,843
107,994
Goodwill and intangible asset impairment charges
-
375,190
LIFO (credit) charge
(64,804
)
23,354
Loss (gain) on sale of assets, net
4,226
(38,012
)
Stock-based compensation expense
16,087
12,115
(Gain) loss on debt retirements, net
(55,692
)
554
Changes in deferred taxes
385,904
95,638
Changes in operating assets and liabilities: Accounts receivable
486,563
(75,844
)
Inventories
15,141
(44,645
)
Accounts payable
(92,062
)
125,925
Operating lease right-of-use assets and operating lease liabilities
14,112
-
Other assets
(38,351
)
1,000
Other liabilities
(62,168
)
(439,906
)
Net cash provided by (used in) operating activities of continuing
operations
510,857
(165,709
)
INVESTING ACTIVITIES: Payments for property, plant and equipment
(171,705
)
(196,778
)
Intangible assets acquired
(42,681
)
(47,911
)
Proceeds from dispositions of assets and investments
59,658
43,550
Proceeds from sale-leaseback transactions
4,879
2,587
Net cash used in investing activities of continuing operations
(149,849
)
(198,552
)
FINANCING ACTIVITIES: Proceeds from issuance of long-term debt
600,000
450,000
Net (payments to) proceeds from revolver
(225,000
)
875,000
Principal payments on long-term debt
(706,103
)
(440,370
)
Change in zero balance cash accounts
12,671
(59,481
)
Net proceeds from the issuance of common stock
-
2,294
Payments for taxes related to net share settlement of equity awards
(1,921
)
(2,419
)
Financing fees paid for early debt redemption
(518
)
(171
)
Deferred financing costs paid
(5,781
)
(21,564
)
Net cash (used in) provided by financing activities of continuing
operations
(326,652
)
803,289
Cash flows from discontinued operations: Operating activities of
discontinued operations
(23,836
)
(62,956
)
Investing activities of discontinued operations
63,307
664,740
Financing activities of discontinued operations
-
(1,343,793
)
Net cash provided by (used in) discontinued operations
39,471
(742,009
)
Increase (decrease) in cash and cash equivalents
73,827
(302,981
)
Cash and cash equivalents, beginning of period
144,353
447,334
Cash and cash equivalents, end of period
$
218,180
$
144,353
RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL
SEGMENT OPERATING INFORMATION (Dollars in thousands) (unaudited)
Thirteen weeks endedFebruary 29, 2020 Thirteen weeks
endedMarch 2, 2019
Retail Pharmacy Segment Revenues
from continuing operations (a)
$
3,993,328
$
3,971,156
Cost of revenues from continuing operations (a)
2,852,283
2,913,118
Gross profit from continuing operations
1,141,045
1,058,038
LIFO (credit) charge from continuing operations
(72,357
)
4,043
FIFO gross profit from continuing operations
1,068,688
1,062,081
Adjusted EBITDA gross profit from continuing operations
1,070,890
1,069,396
Gross profit as a percentage of revenues - continuing
operations
28.57
%
26.64
%
LIFO (credit) charge as a percentage of revenues - continuing
operations
-1.81
%
0.10
%
FIFO gross profit as a percentage of revenues - continuing
operations
26.76
%
26.74
%
Adjusted EBITDA gross profit as a percentage of revenues -
continuing operations
26.82
%
26.93
%
Selling, general and administrative expenses from continuing
operations
1,060,472
1,055,449
Adjusted EBITDA selling, general and administrative expenses from
continuing operations
985,715
973,162
Selling, general and administrative expenses as a percentage of
revenues - continuing operations
26.56
%
26.58
%
Adjusted EBITDA selling, general and administrative expenses as a
percentage of revenues - continuing operations
24.68
%
24.51
%
Cash interest expense
49,607
49,325
Non-cash interest expense
3,822
3,371
Total interest expense
53,429
52,696
Interest expense - continuing operations
53,429
52,695
Interest expense - discontinued operations
-
1
Adjusted EBITDA - continuing operations
85,175
96,234
Adjusted EBITDA as a percentage of revenues - continuing operations
2.13
%
2.42
%
Pharmacy Services Segment Revenues (a)
$
1,801,090
$
1,463,278
Cost of revenues (a)
1,675,514
1,356,952
Gross profit
125,576
106,326
Gross profit as a percentage of revenues
6.97
%
7.27
%
Adjusted EBITDA
50,409
37,846
Adjusted EBITDA as a percentage of revenues
2.80
%
2.59
%
(a) -
Revenues and cost of revenues include $67,176 and $54,789 of
inter-segment activity for the thirteen weeks ended February 29,
2020 and March 2, 2019, respectively, that is eliminated in
consolidation. RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL SEGMENT OPERATING INFORMATION (Dollars in thousands)
(unaudited) Fifty-two weeks endedFebruary 29, 2020
Fifty-two weeks endedMarch 2, 2019
Retail Pharmacy
Segment Revenues from continuing operations (a)
$
15,616,186
$
15,757,152
Cost of revenues from continuing operations (a)
11,341,350
11,498,436
Gross profit from continuing operations
4,274,836
4,258,716
LIFO (credit) charge from continuing operations
(64,804
)
23,354
FIFO gross profit from continuing operations
4,210,032
4,282,070
Adjusted EBITDA gross profit from continuing operations
4,221,933
4,299,389
Gross profit as a percentage of revenues - continuing
operations
27.37
%
27.03
%
LIFO (credit) charge as a percentage of revenues - continuing
operations
-0.41
%
0.15
%
FIFO gross profit as a percentage of revenues - continuing
operations
26.96
%
27.18
%
Adjusted EBITDA gross profit as a percentage of revenues -
continuing operations
27.04
%
27.29
%
Selling, general and administrative expenses from continuing
operations
4,220,851
4,251,378
Adjusted EBITDA selling, general and administrative expenses from
continuing operations
3,851,498
3,894,183
Selling, general and administrative expenses as a percentage of
revenues - continuing operations
27.03
%
26.98
%
Adjusted EBITDA selling, general and administrative expenses as a
percentage of revenues - continuing operations
24.66
%
24.71
%
Cash interest expense
214,589
216,595
Non-cash interest expense
15,068
15,749
Total interest expense
229,657
232,344
Interest expense - continuing operations
229,657
227,728
Interest expense - discontinued operations
-
4,616
Adjusted EBITDA - continuing operations
370,435
405,206
Adjusted EBITDA as a percentage of revenues - continuing operations
2.37
%
2.57
%
Pharmacy Services Segment Revenues (a)
$
6,559,560
$
6,093,688
Cost of revenues (a)
6,107,638
5,676,052
Gross profit
451,922
417,636
Gross profit as a percentage of revenues
6.89
%
6.85
%
Adjusted EBITDA
167,776
158,238
Adjusted EBITDA as a percentage of revenues
2.56
%
2.60
%
(a) -
Revenues and cost of revenues include $247,353 and $211,283 of
inter-segment activity for the fifty-two weeks ended February 29,
2020 and March 2, 2019, 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
endedFebruary 29, 2020 Thirteen weeks endedMarch 2, 2019
Reconciliation of net loss to adjusted EBITDA: Net loss -
continuing operations
$
(343,461
)
$
(255,629
)
Adjustments: Interest expense
53,429
52,695
Income tax expense
351,729
195,004
Depreciation and amortization
79,300
86,925
LIFO (credit) charge
(72,357
)
4,043
Lease termination and impairment charges
40,728
55,898
Merger and Acquisition-related costs
-
4,602
Stock-based compensation expense
2,489
552
Restructuring-related costs
11,872
4,704
Inventory write-downs related to store closings
569
7,933
Loss (gain) on sale of assets, net
9,896
(26,806
)
Other
1,390
4,159
Adjusted EBITDA - continuing operations
$
135,584
$
134,080
Percent of revenues - continuing operations
2.37
%
2.49
%
RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL
INFORMATION RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (In
thousands) (unaudited) Fifty-two weeks
endedFebruary 29, 2020 Fifty-two weeks endedMarch 2, 2019
Reconciliation of net loss to adjusted EBITDA: Net loss -
continuing operations
$
(469,219
)
$
(666,954
)
Adjustments: Interest expense
229,657
227,728
Income tax expense
387,607
77,477
Depreciation and amortization
328,277
357,882
LIFO (credit) charge
(64,804
)
23,354
Lease termination and impairment charges
42,843
107,994
Goodwill and intangible asset impairment charges
-
375,190
(Gain) loss on debt retirements, net
(55,692
)
554
Merger and Acquisition-related costs
3,599
37,821
Stock-based compensation expense
16,087
12,115
Restructuring-related costs
105,642
4,704
Inventory write-downs related to store closings
4,652
13,487
Litigation settlement
-
18,000
Loss (gain) on sale of assets, net
4,226
(38,012
)
Other
5,336
12,104
Adjusted EBITDA - continuing operations
$
538,211
$
563,444
Percent of revenues - continuing operations
2.45
%
2.60
%
RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION
ADJUSTED NET LOSS (Dollars in thousands, except per share amounts)
(unaudited) Thirteen weeks endedFebruary 29, 2020
Thirteen weeks endedMarch 2, 2019
Net loss from continuing
operations
$
(343,461
)
$
(255,629
)
Add back - Income tax expense
351,729
195,004
Income (loss) before income taxes - continuing operations
8,268
(60,625
)
Adjustments: Amortization expense
24,765
28,972
LIFO (credit) charge
(72,357
)
4,043
Merger and Acquisition-related costs
-
4,602
Restructuring-related costs
11,872
4,704
Adjusted loss before income taxes - continuing operations
(27,452
)
(18,304
)
Adjusted income tax benefit (a)
(7,588
)
(5,052
)
Adjusted net loss from continuing operations
$
(19,864
)
$
(13,252
)
Adjusted net loss per diluted share - continuing operations:
Numerator for adjusted net loss per diluted share: Adjusted
net loss from continuing operations
$
(19,864
)
$
(13,252
)
Denominator: Basic and diluted weighted
average shares
53,434
52,965
Net loss from continuing operations per diluted share -
continuing operations
$
(6.43
)
$
(4.83
)
Adjusted net loss per diluted share - continuing
operations
$
(0.37
)
$
(0.25
)
(a)
The fiscal year 2020 and 2019 annual effective tax rates,
calculated using a federal rate plus a net state rate that excluded
the impact of state NOL's, state credits and valuation allowance,
was used for the thirteen weeks ended February 29, 2020 and March
2, 2019, respectively.
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION ADJUSTED NET INCOME (LOSS) (Dollars in
thousands, except per share amounts) (unaudited)
Fifty-two weeks endedFebruary 29, 2020 Fifty-two weeks endedMarch
2, 2019 Net loss from continuing operations
$
(469,219
)
$
(666,954
)
Add back - Income tax expense
387,607
77,477
Loss before income taxes - continuing operations
(81,612
)
(589,477
)
Adjustments: Amortization expense
103,941
125,640
LIFO (credit) charge
(64,804
)
23,354
Goodwill and intangible asset impairment charges
-
375,190
(Gain) loss on debt retirements, net
(55,692
)
554
Merger and Acquisition-related costs
3,599
37,821
Restructuring-related costs
105,642
4,704
Litigation settlement
-
18,000
Adjusted income (loss) before income taxes - continuing
operations
11,074
(4,214
)
Adjusted income tax expense (benefit) (a)
3,061
(1,163
)
Adjusted net income (loss) from continuing operations
$
8,013
$
(3,051
)
Adjusted net income (loss) per diluted share - continuing
operations: Numerator for adjusted net income (loss) per
diluted share: Adjusted net income (loss) from continuing
operations
$
8,013
$
(3,051
)
Denominator: Basic weighted average shares
53,228
52,854
Outstanding options and restricted shares, net
778
-
Diluted weighted average shares
54,006
52,854
Net loss from continuing operations per diluted share -
continuing operations
$
(8.82
)
$
(12.62
)
Adjusted net income (loss) per diluted share - continuing
operations
$
0.15
$
(0.06
)
(a)
The fiscal year 2020 and 2019 annual effective tax rates,
calculated using a federal rate plus a net state rate that excluded
the impact of state NOL's, state credits and valuation allowance,
was used for the fifty-two weeks ended February 29, 2020 and March
2, 2019, respectively. RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION RECONCILIATION OF ADJUSTED EBITDA GROSS
PROFIT AND RECONCILIATION OF ADJUSTED EBITDA SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT (In thousands)
(unaudited) Thirteen weeks endedFebruary 29,
2020 Thirteen weeks endedMarch 2, 2019 Reconciliation
of adjusted EBITDA gross profit: Revenues
$
3,993,328
$
3,971,156
Gross Profit
1,141,045
1,058,038
Addback: LIFO (credit) charge
(72,357
)
4,043
Depreciation and amortization (cost of goods sold portion only)
1,758
2,277
Other
444
5,038
Adjusted EBITDA gross profit - continuing operations
$
1,070,890
$
1,069,396
Percent of revenues - continuing operations
26.82
%
26.93
%
Reconciliation of adjusted EBITDA selling,
general and administrative expenses: Revenues
$
3,993,328
$
3,971,156
Selling, general and administrative expenses
1,060,472
1,055,449
Less: Depreciation and amortization (SG&A portion only)
62,109
68,150
Stock-based compensation expense
2,191
475
Merger and Acquisition-related costs
-
3,466
Restructuring-related costs
8,887
3,224
Other
1,570
6,972
Adjusted EBITDA selling, general and administrative expenses -
continuing operations
$
985,715
$
973,162
Percent of revenues - continuing operations
24.68
%
24.51
%
Adjusted EBITDA - continuing operations
$
85,175
$
96,234
RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL
INFORMATION RECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND
RECONCILIATION OF ADJUSTED EBITDA SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT (In thousands)
(unaudited) Fifty-two weeks endedFebruary 29,
2020 Fifty-two weeks endedMarch 2, 2019
Reconciliation of adjusted EBITDA gross profit: Revenues
$
15,616,186
$
15,757,152
Gross Profit
4,274,836
4,258,716
Addback: LIFO (credit) charge
(64,804
)
23,354
Depreciation and amortization (cost of goods sold portion only)
8,296
9,206
Other
3,605
8,113
Adjusted EBITDA gross profit - continuing operations
$
4,221,933
$
4,299,389
Percent of revenues - continuing operations
27.04
%
27.29
%
Reconciliation of adjusted EBITDA selling,
general and administrative expenses: Revenues
$
15,616,186
$
15,757,152
Selling, general and administrative expenses
4,220,851
4,251,378
Less: Depreciation and amortization (SG&A portion only)
257,390
274,122
Stock-based compensation expense
14,864
12,038
Merger and Acquisition-related costs
2,828
33,860
Restructuring-related costs
87,738
3,224
Litigation settlement
-
18,000
Other
6,533
15,951
Adjusted EBITDA selling, general and administrative expenses -
continuing operations
$
3,851,498
$
3,894,183
Percent of revenues - continuing operations
24.66
%
24.71
%
Adjusted EBITDA - continuing operations
$
370,435
$
405,206
RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL
INFORMATION RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA
GUIDANCE YEAR ENDING FEBRUARY 27, 2021 (In thousands) (unaudited)
Guidance Range Low High
Total Revenues
$
22,500,000
$
22,900,000
PBM Revenues
$
6,750,000
$
6,850,000
Same store sales
1.50
%
2.50
%
Gross Capital Expenditures
$
350,000
$
350,000
Reconciliation of net loss to adjusted EBITDA: Net
loss
$
(119,000
)
$
(91,000
)
Adjustments: Interest expense
215,000
215,000
Income tax expense
3,000
15,000
Depreciation and amortization
317,000
317,000
LIFO credit
(35,000
)
(35,000
)
Lease termination and impairment charges
41,000
41,000
Restructuring-related costs
60,000
60,000
Other
18,000
18,000
Adjusted EBITDA
$
500,000
$
540,000
RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL
INFORMATION RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET
(LOSS) INCOME GUIDANCE YEAR ENDING FEBRUARY 27, 2021 (In thousands)
(unaudited)
Guidance Range Low
High Net loss
$
(119,000
)
$
(91,000
)
Add back - income tax expense
3,000
15,000
Loss before income taxes
(116,000
)
(76,000
)
Adjustments: Amortization expense
64,000
64,000
LIFO credit
(35,000
)
(35,000
)
Restructuring-related costs
60,000
60,000
Adjusted (loss) income before adjusted income taxes
(27,000
)
13,000
Adjusted income tax (benefit) expense
(15,000
)
3,000
Adjusted net (loss) income
$
(12,000
)
$
10,000
Diluted adjusted net (loss) income per share
$
(0.22
)
$
0.19
RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL
INFORMATION RECONCILIATION OF ADJUSTED EBITDA GUIDANCE TO FREE CASH
FLOW GUIDANCE YEAR ENDING FEBRUARY 27, 2021 (In thousands)
(unaudited)
Guidance Range Low
High Adjusted EBITDA
$
500,000
$
540,000
Cash interest expense
(210,000)
(210,000)
Restructuring-related costs
(60,000)
(60,000)
Closed store rent
(30,000)
(30,000)
Working capital benefit
200,000
210,000
Cash flow from operations
400,000
450,000
Gross capital expenditures
(350,000)
(350,000)
Free cash flow
$
50,000
$
100,000
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200416005368/en/
INVESTORS: Byron Purcell (717) 975-5809 investor@riteaid.com
MEDIA: Christopher Savarese (717) 975-5718
Christopher.Savarese@riteaid.com
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