Rite Aid Reports Fiscal 2019 Fourth Quarter and Full Year Results

Rite Aid Corporation (NYSE: RAD) today reported operating results for its fourth quarter and fiscal year ended March 2, 2019.

For the fourth quarter, the company reported net loss from continuing operations of $255.6 million, or $0.24 per share, Adjusted net loss from continuing operations of $13.3 million, or $0.01 per share, and Adjusted EBITDA from continuing operations of $134.1 million, or 2.5 percent of revenues.

In the fourth quarter, we continued generating critical momentum in key areas of our business while taking important steps to position Rite Aid for future growth said Rite Aid CEO John Standley. Despite a mild flu season, we delivered our third consecutive quarter of same-store pharmacy sales and prescription count growth thanks to a record number of immunizations and other script growth initiatives. We also increased Medicare Part D membership within our EnvisionRxOptions PBM, which helped drive revenue growth and a $4.5 million increase in Pharmacy Services Segment Adjusted EBITDA. As we begin our new fiscal year, well look to build on this momentum as we continue transforming our business to better align with our new operational footprint and deliver greater value in the emerging value-based care marketplace. These efforts will include a strong focus on driving positive patient health outcomes, evolving our front-end business, expanding our omni-channel capabilities and controlling costs to become a more efficient and profitable company.

Fourth Quarter Summary

Revenues from continuing operations for the fourth quarter were $5.38 billion compared to revenues from continuing operations of $5.39 billion in the prior years fourth quarter. Retail Pharmacy Segment revenues were $3.97 billion and were flat compared to the prior year period. Revenues in the Pharmacy Services Segment were $1.46 billion, an increase of 1.2 percent compared to the prior year period, which was due to an increase in Medicare Part D membership.

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Same store sales from Retail Pharmacy continuing operations for the fourth quarter increased 0.7 percent over the prior year, consisting of a 2.1 percent increase in pharmacy sales and a 1.9 percent decrease in front-end sales. Pharmacy sales were negatively impacted by approximately 100 basis points as a result of new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 0.8 percent over the prior year period as the companys initiatives to drive script growth more than offset the benefit of last years strong flu season. Prescription sales from continuing operations accounted for 65.9 percent of total drugstore sales.

Net loss from continuing operations was $255.6 million or $0.24 per share compared to last years fourth quarter net loss from continuing operations of $483.7 million or $0.46 per share. The improvement in operating results was due primarily to a prior year charge of $191.0 million, net of tax, for the impairment of goodwill related to the Pharmacy Services Segment and lower income tax expense. Income tax expense in the current years fourth quarter was impacted by a $197.0 million charge related to an increase in the valuation allowance against the companys deferred tax asset, while income tax expense in the prior years fourth quarter included a charge of $325.0 million relating to the revaluation of the companys deferred tax assets as a result of the 2017 Tax Act. Other items impacting net loss from continuing operations included a LIFO charge in the current year compared to a LIFO credit in the prior year, and a decline in Adjusted EBITDA.

Adjusted EBITDA from continuing operations was $134.1 million or 2.5 percent of revenues for the fourth quarter compared to Adjusted EBITDA from continuing operations of $154.8 million or 2.9 percent of revenues for the same period last year, a decrease of $20.8 million. The Retail Pharmacy Segment Adjusted EBITDA from continuing operations decreased $25.3 million compared to the prior year due primarily to weaker pharmacy gross profit caused by reimbursement rate pressure that the company was not able to fully offset with generic drug purchasing efficiencies and increases in prescriptions filled in comparable stores. Also contributing to the reduction in Adjusted EBITDA was a decline in front end same store sales and increases in distribution costs caused partially by the realignment of stores within Rite Aids distribution network. These negative variances were partially offset by lower salaries and benefits, a reduction in advertising expense and an increase in Transition Services Agreement (TSA) fee income from Walgreens Boots Alliance (WBA). The Pharmacy Services Segment Adjusted EBITDA increased $4.5 million over the prior year due to an increase in Medicare Part D membership.

In the fourth quarter, the company remodeled 30 stores, bringing the total number of wellness stores chainwide to 1,765. Additionally, the company closed 56 stores, resulting in a total store count of 2,469 at the end of the fourth quarter.

Full Year Results

For the fiscal year ended March 2, 2019, revenues from continuing operations were $21.6 billion compared to revenues of $21.5 billion in the prior year, an increase of $0.1 billion or 0.5 percent. Retail Pharmacy Segment revenues were $15.8 billion and were flat compared to the prior year period. Revenues in the Pharmacy Services Segment were $6.1 billion, an increase of 3.3 percent compared to the prior year, which was due to an increase in Medicare Part D membership.

Same store sales from continuing operations for the year increased 0.6 percent, consisting of a 1.7 percent increase in pharmacy sales and a 1.4 percent decrease in front end sales. Pharmacy sales were negatively impacted by approximately 112 basis points as a result of new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 0.7 percent over the prior year due to an increase in immunizations and other initiatives to drive prescription growth. Prescription sales from continuing operations accounted for 66.6 percent of total drugstore sales.

Net loss from continuing operations for fiscal 2019 was $667.0 million or $0.63 per share compared to last years net loss from continuing operations of $349.5 million or $0.33 per share. The increase in net loss is due to increased goodwill and intangible asset charges, increased lease termination and impairment charges, increased LIFO expense and a prior year gain caused by the receipt of a merger termination fee from WBA. These items were partially offset by a decrease in income tax expense.

Adjusted EBITDA from continuing operations was $563.4 million or 2.6 percent of revenues for the year compared to $559.9 million or 2.6 percent of revenues for last year. The increase in Adjusted EBITDA is due to an increase of $16.9 million in the Retail Pharmacy Segment, partially offset by a $13.3 million decrease in the Pharmacy Services Segment. The increase in the Retail Pharmacy Segment EBITDA was primarily driven by the receipt of $80.2 million of fees under the TSA and lower salaries and benefits, partially offset by lower front end and pharmacy gross profit and increases in distribution costs caused partially by the realignment of stores within Rite Aids distribution network. The decline in the Pharmacy Services Segment EBITDA was due to compression in the companys commercial business and other operating investments to support current year and future growth.

For the year, the company relocated one store, remodeled 134 stores, opened one store, and closed 82 stores.

Senior Secured Credit Facility Refinancing

As previously announced, Rite Aid completed the refinancing of a new senior secured credit agreement, consisting of a $2.7 billion senior secured asset-based revolving credit facility and a $450 million first in, last out senior secured term loan facility on December 20, 2018. The new $3.15 billion credit facility refinanced Rite Aids existing $2.7 billion senior secured asset-based revolving credit facility that was scheduled to mature in January 2020. As a result of this refinancing, Rite Aid has no debt maturing until 2023 and has increased liquidity by $450 million.

Outlook for Fiscal 2020

The companys outlook for fiscal 2020 assumes a decline in reimbursement rates consistent with the decline experienced in fiscal 2019. 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 companys outlook also assumes a reduction of approximately $40 million in TSA fee income from WBA, which the company expects to offset by the reduction in corporate SG&A costs that was disclosed last month. The Company also has factored into the outlook an increase in rent expense of $11 million as a result of the adoption of the new lease accounting standard.

Rite Aid said it expects sales to be between $21.5 billion and $21.9 billion in fiscal 2020 with same store sales expected to range from an increase of 0.0 percent to an increase of 1.0 percent over fiscal 2019.

Net loss is expected to be between $170.0 million and $220.0 million.

Adjusted EBITDA is expected to be between $500.0 million and $560.0 million.

Adjusted net (loss) income per share is expected to be between a loss of $0.01 and income of $0.04.

Capital expenditures are expected to be approximately $250 million.

Rite Aid Board Approves 1-for-20 Stock Split Ratio

As previously announced on March 21, 2019, Rite Aids stockholders approved a reverse stock split of the companys outstanding shares of common stock, at a reverse stock split ratio of 1-for-10, 1-for-15 or 1-for-20. On April 10, 2019, Rite Aids Board approved the implementation of the Reverse Stock Split at a ratio of 1-for-20. Once effective, the reverse stock split will reduce the number of shares of common stock issued and outstanding from approximately 1.08 billion to approximately 54 million. Rite Aids common stock will begin trading on a split-adjusted basis on the New York Stock Exchange at the market open on April 22, 2019.

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 simulcast via the internet and can be accessed at www.riteaid.com in the conference call section of investor information. A playback of the call will also be available by telephone beginning at 12:00 p.m. Eastern Time today until 11:59 p.m. Eastern Time on April 13, 2019. 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 9067846.

Rite Aid is one of the nations leading drugstore chains with 2,469 stores in 18 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 2020; Rite Aids competitive position and ability to implement new strategies; the timing of the reverse stock split; 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 possibility that the reverse stock split may not have its intended effects and that factors unrelated to the reverse stock split may impact the per share trading price of our common stock; our ability to successfully execute and achieve benefits from our leadership transition plan and organizational restructuring, including our chief executive officer search process, and to manage the transition to a new chief executive officer and other management; the potential for operational disruptions due to, among other things, concerns of management, employees, current and potential customers, other third parties with whom we do business and shareholders; the success of any changes to our business strategy that may be implemented under our new chief executive officer and other management; our ability to achieve cost savings through the organizational restructurings within the anticipated timeframe, if at all; possible changes in the size and components of the expected costs and charges associated with the organizational restructuring plan and the outlook for and future growth of the Company; 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; and 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. 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, 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 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, 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 CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
 
 
 
  March 2, 2019   March 3, 2018
ASSETS
Current assets:
Cash and cash equivalents $ 144,353 $ 447,334
Accounts receivable, net 1,788,712 1,869,100
Inventories, net of LIFO reserve of $604,444 and $581,090 1,871,941 1,799,539
Prepaid expenses and other current assets 179,132 181,181
Current assets held for sale   117,581     438,137  
Total current assets 4,101,719 4,735,291
Property, plant and equipment, net 1,308,514 1,431,246
Goodwill 1,108,136 1,421,120
Other intangibles, net 448,706 590,443
Deferred tax assets 409,084 594,019
Other assets   215,208     217,208  
Total assets $ 7,591,367   $ 8,989,327  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt and lease financing obligations $ 16,111 $ 20,761
Accounts payable 1,618,585 1,651,363
Accrued salaries, wages and other current liabilities 808,439 1,231,736
Current liabilities held for sale       560,205  
Total current liabilities 2,443,135 3,464,065
Long-term debt, less current maturities 3,454,585 3,340,099
Lease financing obligations, less current maturities 24,064 30,775
Other noncurrent liabilities   482,893     553,378  
Total liabilities 6,404,677 7,388,317
 
Commitments and contingencies
Stockholders’ equity:
Common stock 1,080,321 1,067,318
Additional paid-in capital 4,850,672 4,850,712
Accumulated deficit (4,713,244 ) (4,282,471 )
Accumulated other comprehensive loss   (31,059 )   (34,549 )
Total stockholders’ equity   1,186,690     1,601,010  
Total liabilities and stockholders’ equity $ 7,591,367   $ 8,989,327  
 
 
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
 
 

Thirteen weeks ended March 2, 2019

 

Thirteen weeks ended March 3, 2018

Revenues $ 5,379,645 $ 5,394,264
Costs and expenses:
Cost of revenues 4,215,281 4,124,498
Selling, general and administrative expenses 1,143,202 1,181,964
Lease termination and impairment charges 55,898 47,675
Goodwill and intangible asset impairment charges 261,727
Interest expense 52,695 50,603
Gain on sale of assets, net   (26,806 )   (5,249 )
 
  5,440,270     5,661,218  
 
Loss from continuing operations before income taxes (60,625 ) (266,954 )
Income tax expense   195,004     216,719  
Net loss from continuing operations (255,629 ) (483,673 )
Net (loss) income from discontinued operations, net of tax   (17,350 )   1,250,745  
Net (loss) income $ (272,979 ) $ 767,072  
 
 
 
Basic and diluted (loss) income per share:
 
Numerator for (loss) income per share:

Net loss from continuing operations attributable to common stockholders – basic and diluted

$ (255,629 ) $ (483,673 )

Net (loss) income from discontinued operations attributable to common stockholders – basic and diluted

  (17,350 )   1,250,745  
(Loss) income attributable to common stockholders – basic and diluted $ (272,979 ) $ 767,072  
 
 
 
Denominator:
Basic and diluted weighted average shares   1,059,308     1,053,491  
 
Basic and diluted (loss) income per share
Continuing operations $ (0.24 ) $ (0.46 )
Discontinued operations $ (0.02 ) $ 1.19  
Net basic and diluted (loss) income per share $ (0.26 ) $ 0.73  
 
 
 
Proforma per-share results after giving effect for the 1-for-20 reverse stock split:
 
Denominator:
Basic and diluted weighted average shares   52,965     52,675  
 
Basic and diluted (loss) income per share
Continuing operations $ (4.83 ) $ (9.18 )
Discontinued operations $ (0.32 ) $ 23.74  
Net basic and diluted (loss) income per share $ (5.15 ) $ 14.56  
 
 
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
 
 

Fifty-two weeks ended March 2, 2019

 

Fifty-two weeks ended March 3, 2018

Revenues $ 21,639,557 $ 21,528,968
Costs and expenses:
Cost of revenues 16,963,205 16,748,863
Selling, general and administrative expenses 4,592,375 4,651,262
Lease termination and impairment charges 107,994 58,765
Goodwill and intangible asset impairment charges 375,190 261,727
Interest expense 227,728 202,768
Loss on debt retirements, net 554
Walgreens Boots Alliance merger termination fee (325,000 )
Gain on sale of assets, net   (38,012 )   (25,872 )
 
  22,229,034     21,572,513  
 
Loss from continuing operations before income taxes (589,477 ) (43,545 )
Income tax expense   77,477     305,987  
Net loss from continuing operations (666,954 ) (349,532 )
Net income from discontinued operations, net of tax   244,741     1,293,002  
Net (loss) income $ (422,213 ) $ 943,470  
 
 
 
Basic and diluted (loss) income per share:
 
Numerator for (loss) income per share:

Net loss from continuing operations attributable to common stockholders – basic and diluted

$ (666,954 ) $ (349,532 )

Net income from discontinued operations attributable to common stockholders – basic and diluted

  244,741     1,293,002  
(Loss) income attributable to common stockholders – basic and diluted $ (422,213 ) $ 943,470  
 
 
 
Denominator:
Basic and diluted weighted average shares   1,057,079     1,049,628  
 
Basic and diluted (loss) income per share
Continuing operations $ (0.63 ) $ (0.33 )
Discontinued operations $ 0.23   $ 1.23  
Net basic and diluted (loss) income per share $ (0.40 ) $ 0.90  
 
 
 
Proforma per-share results after giving effect for the 1-for-20 reverse stock split:
 
Denominator:
Basic and diluted weighted average shares   52,854     52,481  
 
Basic and diluted (loss) income per share
Continuing operations $ (12.62 ) $ (6.66 )
Discontinued operations $ 4.63   $ 24.64  
Net basic and diluted (loss) income per share $ (7.99 ) $ 17.98  
 
 
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
 
 
 

Thirteen weeks ended March 2, 2019

 

Thirteen weeks ended March 3, 2018

 
 
OPERATING ACTIVITIES:
Net (loss) income $ (272,979 ) $ 767,072
Net (loss) income from discontinued operations, net of tax   (17,350 )   1,250,745  
Net loss from continuing operations $ (255,629 ) $ (483,673 )
Adjustments to reconcile to net cash (used in) provided by operating activities of continuing operations:
Depreciation and amortization 86,925 93,609
Lease termination and impairment charges 55,898 47,675
Goodwill and intangible asset impairment charges 261,727
LIFO charge (credit) 4,043 (49,220 )
Gain on sale of assets, net (26,806 ) (5,249 )
Stock-based compensation expense 552 3,243
Changes in deferred taxes 221,740 161,814
Changes in operating assets and liabilities:
Accounts receivable (70,407 ) (329,616 )
Inventories 33,844 103,566
Accounts payable (55,572 ) 92,570
Other assets 13,304 19,967
Other liabilities   (223,820 )   170,607  
Net cash (used in) provided by operating activities of continuing operations (215,928 ) 87,020
INVESTING ACTIVITIES:
Payments for property, plant and equipment (57,560 ) (45,063 )
Intangible assets acquired (16,338 ) (8,684 )
Proceeds from insured loss 612
Proceeds from dispositions of assets and investments   27,749     8,332  
Net cash used in investing activities of continuing operations (46,149 ) (44,803 )
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 450,000
Net payments to revolver (370,000 ) (920 )
Principal payments on long-term debt (2,773 ) (2,590 )
Change in zero balance cash accounts (43,517 ) 8,011
Net proceeds from the issuance of common stock 1,380
Financing fees paid for early debt redemption (158 )
Deferred financing costs paid   (21,564 )    
Net cash provided by financing activities of continuing operations   11,988     5,881  
Cash flows from discontinued operations:
Operating activities of discontinued operations (15,688 ) (182,832 )
Investing activities of discontinued operations 87 3,307,047
Financing activities of discontinued operations       (2,894,779 )
Net cash (used in) provided by discontinued operations   (15,601 )   229,436  
(Decrease) increase in cash and cash equivalents (265,690 ) 277,534
Cash and cash equivalents, beginning of period   410,043     169,800  
Cash and cash equivalents, end of period $ 144,353   $ 447,334  
 
 
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
 
 
 

Fifty-two weeks ended March 2, 2019

 

Fifty-two weeks ended March 3, 2018

 
 
OPERATING ACTIVITIES:
Net (loss) income $ (422,213 ) $ 943,470
Net income from discontinued operations, net of tax   244,741     1,293,002  
Net loss from continuing operations $ (666,954 ) $ (349,532 )
Adjustments to reconcile to net cash (used in) provided by operating activities of continuing operations:
Depreciation and amortization 357,882 386,057
Lease termination and impairment charges 107,994 58,765
Goodwill and intangible asset impairment charges 375,190 261,727
LIFO charge (credit) 23,354 (28,827 )
Gain on sale of assets, net (38,012 ) (25,872 )
Stock-based compensation expense 12,115 25,793
Loss on debt retirements, net 554
Changes in deferred taxes 95,638 260,411
Changes in operating assets and liabilities:
Accounts receivable (75,844 ) (349,481 )
Inventories (44,645 ) 18,835
Accounts payable 125,925 211,511
Other assets 1,000 (10,082 )
Other liabilities   (439,906 )   52,165  
Net cash (used in) provided by operating activities of continuing operations (165,709 ) 511,470
INVESTING ACTIVITIES:
Payments for property, plant and equipment (196,778 ) (185,879 )
Intangible assets acquired (47,911 ) (28,885 )
Proceeds from insured loss 4,239
Proceeds from dispositions of assets and investments 43,550 27,586
Proceeds from sale-leaseback transactions   2,587      
Net cash used in investing activities of continuing operations (198,552 ) (182,939 )
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 450,000
Net proceeds from (payments to) revolver 875,000 (265,000 )
Principal payments on long-term debt (440,370 ) (9,882 )
Change in zero balance cash accounts (59,481 ) 35,605
Net proceeds from the issuance of common stock 2,294 5,796
Payments for taxes related to net share settlement of equity awards (2,419 ) (4,103 )
Financing fees paid for early debt redemption (171 )
Deferred financing costs paid   (21,564 )    
Net cash provided by (used in) financing activities of continuing operations   803,289     (237,584 )
Cash flows from discontinued operations:
Operating activities of discontinued operations (62,956 ) (245,126 )
Investing activities of discontinued operations 664,740 3,496,222
Financing activities of discontinued operations   (1,343,793 )   (3,140,119 )
Net cash (used in) provided by discontinued operations   (742,009 )   110,977  
(Decrease) increase in cash and cash equivalents (302,981 ) 201,924
Cash and cash equivalents, beginning of period   447,334     245,410  
Cash and cash equivalents, end of period $ 144,353   $ 447,334  
 
 
RITE AID CORPORATION AND SUBSIDIARIES
 
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 
 
 
 

Thirteen weeks ended March 2, 2019

 

Thirteen weeks ended March 3, 2018

 
Retail Pharmacy Segment
Revenues from continuing operations (a) $ 3,971,156 $ 3,999,430
Cost of revenues from continuing operations (a)   2,913,118     2,830,327  
Gross profit from continuing operations 1,058,038 1,169,103
LIFO charge (credit) from continuing operations   4,043     (49,220 )
FIFO gross profit from continuing operations 1,062,081 1,119,883
 
Gross profit as a percentage of revenues – continuing operations 26.64 % 29.23 %
LIFO charge (credit) as a percentage of revenues – continuing operations 0.10 % -1.23 %
FIFO gross profit as a percentage of revenues – continuing operations 26.74 % 28.00 %
 
Selling, general and administrative expenses from continuing operations 1,055,449 1,093,258

Selling, general and administrative expenses as a percentage of revenues – continuing operations

26.58 % 27.34 %
 
Cash interest expense 49,325 90,915
Non-cash interest expense   3,371     5,217  
Total interest expense 52,696 96,132
Interest expense – continuing operations   52,695     50,628  
Interest expense – discontinued operations 1 45,504
 
Adjusted EBITDA – continuing operations 96,234 121,543
Adjusted EBITDA as a percentage of revenues – continuing operations 2.42 % 3.04 %
 
 
Pharmacy Services Segment
Revenues (a) $ 1,463,278 $ 1,445,457
Cost of revenues (a)   1,356,952     1,344,794  
Gross profit 106,326 100,663
 
Gross profit as a percentage of revenues 7.27 % 6.96 %
 
Adjusted EBITDA 37,846 33,297
Adjusted EBITDA as a percentage of revenues 2.59 % 2.30 %
 
(a) –   Revenues and cost of revenues include $54,789 and $50,623 of inter-segment activity for the thirteen weeks ended March 2, 2019 and March 3, 2018, respectively, that is eliminated in consolidation.
 
 
RITE AID CORPORATION AND SUBSIDIARIES
 
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 
 
 
 

Fifty-two weeks ended March 2, 2019

 

Fifty-two weeks ended March 3, 2018

 
Retail Pharmacy Segment
Revenues from continuing operations (a) $ 15,757,152 $ 15,832,625
Cost of revenues from continuing operations (a)   11,498,436     11,460,252  
Gross profit from continuing operations 4,258,716 4,372,373
LIFO charge (credit) from continuing operations   23,354     (28,827 )
FIFO gross profit from continuing operations 4,282,070 4,343,546
 
Gross profit as a percentage of revenues – continuing operations 27.03 % 27.62 %
LIFO charge (credit) as a percentage of revenues – continuing operations 0.15 % -0.18 %
FIFO gross profit as a percentage of revenues – continuing operations 27.18 % 27.43 %
 
Selling, general and administrative expenses from continuing operations 4,251,378 4,328,567

Selling, general and administrative expenses as a percentage of revenues – continuing operations

26.98 % 27.34 %
 
Cash interest expense 216,595 404,491
Non-cash interest expense   15,749     21,566  
Total interest expense 232,344 426,057
Interest expense – continuing operations   227,728     201,756  
Interest expense – discontinued operations 4,616 224,301
 
Adjusted EBITDA – continuing operations 405,206 388,320
Adjusted EBITDA as a percentage of revenues – continuing operations 2.57 % 2.45 %
 
 
Pharmacy Services Segment
Revenues (a) $ 6,093,688 $ 5,896,669
Cost of revenues (a)   5,676,052     5,488,937  
Gross profit 417,636 407,732
 
Gross profit as a percentage of revenues 6.85 % 6.91 %
 
Adjusted EBITDA 158,238 171,534
Adjusted EBITDA as a percentage of revenues 2.60 % 2.91 %
 

(a) –

 

Revenues and cost of revenues include $211,283 and $200,326 of inter-segment activity for the fifty-two weeks ended March 2, 2019 and March 3, 2018, 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 March 2, 2019

 

Thirteen weeks ended March 3, 2018

 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss – continuing operations $ (255,629 ) $ (483,673 )
Adjustments:
Interest expense 52,695 50,603
Income tax expense 195,004 216,719
Depreciation and amortization 86,925 93,609
LIFO charge (credit) 4,043 (49,220 )
Lease termination and impairment charges 55,898 47,675
Goodwill and intangible asset impairment charges 261,727
Merger and Acquisition-related costs 4,602 6,885
Stock-based compensation expense 552 3,243
Restructuring-related costs 4,704
Inventory write-downs related to store closings 7,933 1,765
Gain on sale of assets, net (26,806 ) (5,249 )
Other   4,159     10,756  
Adjusted EBITDA – continuing operations $ 134,080 $ 154,840
Percent of revenues – continuing operations 2.49 % 2.87 %
 
 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(In thousands)
(unaudited)
 
 
 
 

Fifty-two weeks ended March 2, 2019

 

Fifty-two weeks ended March 3, 2018

 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss – continuing operations $ (666,954 ) $ (349,532 )
Adjustments:
Interest expense 227,728 202,768
Income tax expense 77,477 305,987
Depreciation and amortization 357,882 386,057
LIFO charge (credit) 23,354 (28,827 )
Lease termination and impairment charges 107,994 58,765
Goodwill and intangible asset impairment charges 375,190 261,727
Loss on debt retirements, net 554
Merger and Acquisition-related costs 37,821 24,283
Stock-based compensation expense 12,115 25,793
Restructuring-related costs 4,704
Inventory write-downs related to store closings 13,487 7,586
Litigation settlement 18,000
Gain on sale of assets, net (38,012 ) (25,872 )
Walgreens Boots Alliance merger termination fee (325,000 )
Other   12,104     16,119  
Adjusted EBITDA – continuing operations $ 563,444 $ 559,854
Percent of revenues – continuing operations 2.60 % 2.60 %
 
 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET LOSS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
 
 

Thirteen weeks ended March 2, 2019

 

Thirteen weeks ended March 3, 2018

 
Net loss from continuing operations $ (255,629 ) $ (483,673 )
Add back – Income tax expense   195,004     216,719  
Loss before income taxes – continuing operations (60,625 ) (266,954 )
 
Adjustments:
Amortization expense 28,972 34,967
LIFO charge (credit) 4,043 (49,220 )
Goodwill and intangible asset impairment charges 261,727
Merger and Acquisition-related costs 4,602 6,885
Restructuring-related costs   4,704      
 
Adjusted loss before income taxes – continuing operations (18,304 ) (12,595 )
 
Adjusted income tax benefit (a)   (5,052 )   (4,826 )
Adjusted net loss from continuing operations $ (13,252 ) $ (7,769 )
 
Adjusted net loss per diluted share – continuing operations:
 
Numerator for adjusted net loss per diluted share:
Adjusted net loss from continuing operations $ (13,252 ) $ (7,769 )
 
 
 
Denominator:
Basic and diluted weighted average shares   1,059,308     1,053,491  
 

Net loss from continuing operations per diluted share – continuing operations

$ (0.24 ) $ (0.46 )
 
 
Adjusted net loss per diluted share – continuing operations $ (0.01 ) $ (0.01 )
 
 
 
Proforma per-share results after giving effect for the 1-for-20 reverse stock split:
 
Denominator:
Basic and diluted weighted average shares   52,965     52,675  
 

Net loss from continuing operations per diluted share – continuing operations

$ (4.83 ) $ (9.18 )
 
 
Adjusted net loss per diluted share – continuing operations $ (0.25 ) $ (0.15 )
 
     

(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 state NOL’s, state credits and valuation allowance, was used for the thirteen weeks ended March 2, 2019 and March 3, 2018, respectively. Note also that the federal tax rate for the thirteen weeks ended March 2, 2019 is 21% compared to 33% for the thirteen weeks ended March 3, 2018.

 
 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET (LOSS) INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
 
 

Fifty-two weeks ended March 2, 2019

 

Fifty-two weeks ended March 3, 2018

 
Net loss from continuing operations $ (666,954 ) $ (349,532 )
Add back – Income tax expense   77,477     305,987  
Loss before income taxes – continuing operations (589,477 ) (43,545 )
 
Adjustments:
Amortization expense 125,640 147,739
LIFO charge (credit) 23,354 (28,827 )
Goodwill and intangible asset impairment charges 375,190 261,727
Loss on debt retirements, net 554
Merger and Acquisition-related costs 37,821 24,283
Restructuring-related costs 4,704
Litigation settlement 18,000
Walgreens Boots Alliance merger termination fee       (325,000 )
 
Adjusted (loss) income before income taxes – continuing operations (4,214 ) 36,377
 
Adjusted income tax (benefit) expense (a)   (1,163 )   13,937  
Adjusted net (loss) income from continuing operations $ (3,051 ) $ 22,440  
 
Adjusted net (loss) income per diluted share – continuing operations:
 
Numerator for adjusted net (loss) income per diluted share:
Adjusted net (loss) income from continuing operations $ (3,051 ) $ 22,440  
 
 
 
Denominator:
Basic weighted average shares 1,057,079 1,049,628
Outstanding options and restricted shares, net       16,397  
Diluted weighted average shares   1,057,079     1,066,025  
 

Net loss from continuing operations per diluted share – continuing operations

$ (0.63 ) $ (0.33 )
 
Adjusted net (loss) income per diluted share – continuing operations $ (0.00 ) $ 0.02
 
 
 
Proforma per-share results after giving effect for the 1-for-20 reverse stock split:
 
Denominator:
Basic weighted average shares 52,854 52,481
Outstanding options and restricted shares, net       820  
Basic and diluted weighted average shares   52,854     53,301  
 

Net loss from continuing operations per diluted share – continuing operations

$ (12.62 ) $ (6.66 )
 
 
Adjusted net (loss) income per diluted share – continuing operations $ (0.06 ) $ 0.42
 
     

(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 state NOL’s, state credits and valuation allowance, was used for the fifty-two weeks ended March 2, 2019 and March 3, 2018, respectively. Note also that the federal tax rate for the fifty-two weeks ended March 2, 2019 is 21% compared to 33% for the fifty-two weeks ended March 3, 2018.

 
 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE
YEAR ENDING FEBRUARY 29, 2020
(In thousands)
(unaudited)
 
 
 
  Guidance Range
Low   High
 
Total Revenues $ 21,500,000 $ 21,900,000
 
Same store sales 0.00 % 1.00 %
 
Gross Capital Expenditures $ 250,000 $ 250,000
 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss $ (220,000 ) $ (170,000 )
Adjustments:
Interest expense 240,000 240,000
Income tax expense 5,000 15,000
Depreciation and amortization 340,000 340,000
LIFO charge 30,000 30,000
Lease termination and impairment charges 25,000 25,000
Restructuring-related costs 55,000 55,000
Other   25,000     25,000  

Adjusted EBITDA

$ 500,000   $ 560,000  
 
 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET (LOSS) INCOME GUIDANCE
YEAR ENDING FEBRUARY 29, 2020
(In thousands)
(unaudited)
 
 
 
  Guidance Range
Low   High
 
Net loss $ (220,000 ) $ (170,000 )
Add back – income tax expense   5,000     15,000  
Loss before income taxes (215,000 ) (155,000 )
 
Adjustments:
Amortization expense 120,000 120,000
LIFO charge 30,000 30,000
Restructuring-related costs   55,000     55,000  
 
Adjusted (loss) income before adjusted income taxes (10,000 ) 50,000
 
Adjusted income tax (benefit) expense   (3,000 )   14,000  
Adjusted net (loss) income $ (7,000 ) $ 36,000  
 
 
Diluted adjusted net (loss) income per share $ (0.01 ) $ 0.04
 
 
 
Proforma per-share results after giving effect for the 1-for-20 reverse stock split:
 
Diluted adjusted net (loss) income per share $ (0.14 ) $ 0.72
 

INVESTORS:
Byron Purcell
(717) 975-5809
or [email protected]

MEDIA:
Susan
Henderson
(717) 730-7766