Rite Aid Reports Improved Second Quarter Fiscal 2013 Results

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Rite Aid Reports Improved Second Quarter Fiscal 2013 Results

  • Second Quarter Net Loss of $0.05 per Diluted Share, Compared to Prior Second Quarter Net Loss of $0.11 per Diluted Share
  • Second Quarter Adjusted EBITDA of $218.7 Million Compared to Adjusted EBITDA of $184.3 Million in Prior Second Quarter
  • Second Quarter Results Benefited from Continued Front End Sales and Prescription Count Growth
  • Seventh Consecutive Quarter of Adjusted EBITDA Increases
  • Rite Aid Updates Fiscal 2013 Outlook

CAMP HILL, Pa.--(BUSINESS WIRE)-- Rite Aid Corporation (NYS: RAD) today reported improved financial results for its fiscal second quarter ended Sept. 1, 2012.


The company reported revenues of $6.2 billion, a net loss of $38.8 million, or $0.05 per diluted share, and Adjusted EBITDA of $218.7 million, or 3.5 percent of revenues. Results benefited from continued front end sales and prescription count growth as well as an improvement in gross margin.

"We are pleased with our second quarter results as we continue to make significant progress in our turnaround efforts," said Rite Aid Chairman, President and CEO John Standley. "We have now increased Adjusted EBITDA and same store prescription count for seven consecutive quarters, thanks to chainwide efforts to execute key sales initiatives, operate more efficiently and provide a superior customer experience. While the wave of new generic medications is negatively impacting same store sales, it's having a positive impact on pharmacy gross margin."

"We are working to continue this momentum as we focus on communicating the value of our wellness+ loyalty program, converting additional stores to our innovative new Wellness format and promoting the convenience of getting a flu shot at your neighborhood Rite Aid pharmacy," Standley added.

Second Quarter Summary

Revenues for the 13-week quarter were $6.2 billion versus revenues of $6.3 billion in the prior year second quarter. Revenues decreased 0.6 percent primarily as a result of a decrease in pharmacy same store sales and store closings.

Same store sales for the quarter were flat over the prior year 13-week period, consisting of a 1.4 percent increase in front end sales offset by a 0.7 percent decrease in pharmacy sales. Pharmacy sales included an approximate 750 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 4.0 percent over the prior year period, which includes the benefit of additional prescriptions resulting from the Walgreens/Express Scripts dispute. Prescription sales accounted for 67.5 percent of total drugstore sales, and third party prescription revenue was 96.5 percent of pharmacy sales.

Net loss was $38.8 million or $0.05 per diluted share compared to last year's second quarter net loss of $92.3 million or $0.11 per diluted share. The decrease in net loss year over year resulted from an increase in Adjusted EBITDA and decreases in LIFO, store closing and impairment and depreciation and amortization charges.

Adjusted EBITDA (which is reconciled to net loss on the attached table) was $218.7 million or 3.5 percent of revenues for the second quarter compared to $184.3 million or 2.9 percent of revenues for the like period last year. Adjusted EBITDA improved due to increases in front end sales and script count as well as an improvement in pharmacy gross margin resulting from new generic introductions.

In the second quarter, the company relocated four stores, remodeled 147 stores and closed nine stores. Completed wellness remodels at the end of the second quarter totaled 570. Stores in operation at the end of the second quarter totaled 4,643.

Rite Aid Updates Sales, Adjusted EBITDA and Net Loss Guidance for Fiscal 2013

Rite Aid has updated its fiscal 2013 guidance with sales expected to be between $25.1 billion and $25.4 billion and same store sales to range from a decrease of 1.0 percent to an increase of 0.25 percent compared to fiscal 2012. The reduction in the company's sales and same store sales guidance is driven by a projected 650 basis points negative impact of new generic introductions on pharmacy same store sales and continued reimbursement rate pressure. Rite Aid has also raised the lower end of its Adjusted EBITDA (which is reconciled to net loss on the attached table) guidance to be between $965 million and $1.025 billion and its net loss guidance to be between $69 million and $196 million or a loss per diluted share of $0.09 to $0.23. Capital expenditures are expected to be approximately $300 million.

Conference Call Broadcast

Rite Aid will hold an analyst call at 8:30 a.m. EDT today with remarks by Rite Aid's management team. The call will be simulcast via the internet and can be accessed through the websites www.riteaid.com in the conference call section of investor information and www.StreetEvents.com. Slides related to materials discussed on the call will be available on both sites. A playback of the call will be available on both sites starting at 12 p.m. EDT today. A playback of the call will also be available by telephone beginning at 12 p.m. EDT today until 11:59 p.m. EDT on Sept.22, 2012. The playback number is 1-855-859-2056 from within the U.S. and Canada or 1-404-537-3406 from outside the U.S. and Canada with the eight-digit reservation number 25825690.

Rite Aid is one of the nation's leading drugstore chains with 4,643 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.

Statements, including guidance, 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. 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 efforts of private and public third-party payers to reduce prescription drug reimbursements and encourage mail order, our ability to manage expenses and our investments in working capital, outcomes of legal and regulatory matters and changes in legislation or regulations, including healthcare reform. These and other risks, assumptions and uncertainties are 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.

See the attached table for a reconciliation of a non-GAAP financial measure, Adjusted EBITDA to net income (loss), the most comparable GAAP financial measure. We define Adjusted EBITDA as net income (loss) excluding the impact of income taxes (and any corresponding reduction of 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, stock-based compensation expense, debt modifications and retirements, sale of assets and investments, revenue deferrals related to our customer loyalty program and other items.

  
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
 
September 1, 2012March 3, 2012
ASSETS
Current assets:
Cash and cash equivalents$94,325$162,285
Accounts receivable, net926,4281,013,233
Inventories, net of LIFO reserve of $1,090,625 and $1,063,1233,022,7073,138,455
Prepaid expenses and other current assets 197,467  190,613 
Total current assets4,240,9274,504,586
Property, plant and equipment, net1,899,8661,902,021
Other intangibles, net482,453528,775
Other assets 327,332  428,909 
Total assets$6,950,578 $7,364,291 
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt and lease financing obligations$228,134$79,421
Accounts payable1,258,4601,426,391
Accrued salaries, wages and other current liabilities 1,138,588  1,064,507 
Total current liabilities2,625,1822,570,319
Long-term debt, less current maturities5,829,5826,141,773
Lease financing obligations, less current maturities101,195107,007
Other noncurrent liabilities 1,037,942  1,131,948 
Total liabilities9,593,9019,951,047
 
Commitments and contingencies--
Stockholders' deficit:
Preferred stock - Series G11
Preferred stock - Series H176,755171,569
Common stock903,786898,687
Additional paid-in capital4,276,9504,278,988
Accumulated deficit(7,950,220)(7,883,367)
Accumulated other comprehensive loss (50,595) (52,634)
Total stockholders' deficit (2,643,323) (2,586,756)
Total liabilities and stockholders' deficit$6,950,578 $7,364,291 
  
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
Thirteen weeks endedThirteen weeks ended
September 1, 2012August 27, 2011
Revenues$6,230,884$6,271,091
Costs and expenses:
Cost of goods sold4,520,4634,622,130
Selling, general and administrative expenses1,618,1691,603,752
Lease termination and impairment charges7,78315,118
Interest expense129,054130,829
Gain on debt modifications and retirements, net-(4,924)
Gain on sale of assets, net (2,954) (848)
 
 6,272,515  6,366,057 
 
Loss before income taxes(41,631)(94,966)
Income tax benefit (2,866) (2,712)
Net loss$(38,765)$(92,254)
 
Basic and diluted loss per share:
 
Numerator for loss per share:
Net loss$(38,765)$(92,254)
Accretion of redeemable preferred stock(26)(26)
Cumulative preferred stock dividends (2,612) (2,461)
Loss attributable to common stockholders - basic and diluted$(41,403)$(94,741)
 
 
 
Basic and diluted weighted average shares 889,645  885,621 
 
Basic and diluted loss per share$(0.05)$(0.11)
  
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
Twenty-six weeks endedTwenty-six weeks ended
September 1, 2012August 27, 2011
Revenues$12,699,171$12,661,884
Costs and expenses:
Cost of goods sold9,239,9799,322,004
Selling, general and administrative expenses3,306,2353,189,988
Lease termination and impairment charges19,92632,208
Interest expense259,642261,589
Loss on debt modifications and retirements, net17,84217,510
Gain on sale of assets, net (13,005) (5,640)
 
 12,830,619  12,817,659 
 
Loss before income taxes(131,448)(155,775)
Income tax benefit (64,595) (439)
Net loss$(66,853)$(155,336)
 
Basic and diluted loss per share:
 
Numerator for loss per share:
Net loss$(66,853)$(155,336)
Accretion of redeemable preferred stock(51)(51)
Cumulative preferred stock dividends (5,186) (4,886)
Loss attributable to common stockholders - basic and diluted$(72,090)$(160,273)
 
 
 
Basic and diluted weighted average shares 888,573  884,768 
 
Basic and diluted loss per share$(0.08)$(0.18)
  
RITE AID CORPORATION AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(unaudited)
 
 
Thirteen weeks endedThirteen weeks ended
September 1, 2012August 27, 2011
Net loss$(38,765)$(92,254)
Other comprehensive income:
Defined benefit pension plans:
Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost 1,019  591 
Total other comprehensive income$1,019 $591 
Comprehensive loss$(37,746)$(91,663)
 
RITE AID CORPORATION AND SUBSIDIARIES
  
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(unaudited)
 
 
Twenty-six weeks endedTwenty-six weeks ended
September 1, 2012August 27, 2011
Net loss$(66,853)$(155,336)
Other comprehensive income:
Defined benefit pension plans:
Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost 2,039  1,181 
Total other comprehensive income$2,039 $1,181 
Comprehensive loss$(64,814)$(154,155)
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RITE AID CORPORATION AND SUBSIDIARIES
 
SUPPLEMENTAL OPERATING AND CASH FLOW INFORMATION
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
Thirteen weeks endedThirteen weeks ended
September 1, 2012August 27, 2011