Rite Aid Reports Net Income and Record Adjusted EBITDA in Third Quarter Fiscal 2013

Rite Aid Reports Net Income and Record Adjusted EBITDA in Third Quarter Fiscal 2013

  • Third Quarter Net Income of $0.07 per Diluted Share, Compared to Prior Third Quarter Net Loss of $0.06 per Diluted Share

  • Third Quarter Adjusted EBITDA of $295.3 Million Compared to Adjusted EBITDA of $221.5 Million in Prior Third Quarter

  • Third Quarter Results Benefited from Continued Front End Sales and Prescription Count Growth

  • Eighth Consecutive Quarter of Adjusted EBITDA Increases

  • Rite Aid Raises Earnings Guidance

CAMP HILL, Pa.--(BUSINESS WIRE)-- Rite Aid Corporation (NYS: RAD) today reported improved financial results for its fiscal third quarter ended Dec. 1, 2012. The company reported revenues of $6.2 billion, net income of $61.9 million, or $0.07 per diluted share, and Adjusted EBITDA of $295.3 million, or 4.7 percent of revenues.

"We have reached a significant milestone in our turnaround efforts by returning to profitability," said Rite Aid Chairman, President and CEO John Standley. "We have now increased Adjusted EBITDA and same store prescription counts for eight consecutive quarters. Our third quarter performance is the result of our entire team's continued efforts to fundamentally improve our business."


"Our record Adjusted EBITDA was driven by strong prescription count growth, an increase in front-end same store sales and higher pharmacy gross margin resulting from the introduction of new generic medications. While we are pleased with our third quarter results, we remain focused on sustaining our positive momentum and achieving long-term success," Standley added.

Third Quarter Summary

Revenues for the 13-week quarter were $6.2 billion versus revenues of $6.3 billion in the prior year third quarter. Revenues decreased 1.2 percent primarily due to the impact of the introduction of lower cost generics on pharmacy same store sales as well as store closings.

Same store sales for the quarter decreased 1.5 percent over the prior year 13-week period, consisting of a 1.1 percent increase in front end sales offset by a 2.7 percent decrease in pharmacy sales. Pharmacy sales included an approximate 924 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 3.6 percent over the prior year period, which includes the benefit of additional prescriptions resulting from the Walgreens/Express Scripts dispute. Prescription sales accounted for 67.8 percent of total drugstore sales, and third party prescription revenue was 96.5 percent of pharmacy sales.

Net income was $61.9 million or $0.07 per diluted share compared to last year's third quarter net loss of $52.0 million or $0.06 per diluted share. The improvement in net income resulted primarily from an increase in Adjusted EBITDA as well as a lower LIFO charge.

Adjusted EBITDA (which is reconciled to net income on the attached table) was $295.3 million or 4.7 percent of revenues for the third quarter compared to $221.5 million or 3.5 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. Also included in Adjusted EBITDA in the current quarter was an $18.1 million benefit related to the settlement of interchange fee litigation which was not included in the company's guidance.

In the third quarter, the company relocated three stores, remodeled 114 stores and closed ten stores. Completed wellness stores at the end of the third quarter totaled 687. Stores in operation at the end of the third quarter totaled 4,633.

Rite Aid Raises Earnings Guidance

Rite Aid has updated its fiscal 2013 guidance with sales expected to be between $25.150 billion and $25.300 billion and same store sales to range from a decrease of 0.90 percent to a decrease of 0.30 percent compared to fiscal 2012. Rite Aid has raised its Adjusted EBITDA (which is reconciled to net loss/income on the attached table) guidance to be between $1.050 billion and $1.075 billion and its net loss/income guidance to be between a net loss of $38 million or $0.05 per diluted share and net income of $33 million or $0.03 per diluted share. Capital expenditure guidance has been raised to $360 million.

Conference Call Broadcast

Rite Aid will hold an analyst call at 8:30 a.m. EST 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. EST today. A playback of the call will also be available by telephone beginning at 12 p.m. EST today until 11:59 p.m. EST on Dec.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 75462616.

Rite Aid is one of the nation's leading drugstore chains with 4,633 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)

December 1, 2012

March 3, 2012

ASSETS

Current assets:

Cash and cash equivalents

$

263,641

$

162,285

Accounts receivable, net

917,033

1,013,233

Inventories, net of LIFO reserve of $1,090,625 and $1,063,123

3,096,988

3,138,455

Prepaid expenses and other current assets

194,930

190,613

Total current assets

4,472,592

4,504,586

Property, plant and equipment, net

1,901,542

1,902,021

Other intangibles, net

476,413

528,775

Other assets

335,595

428,909

Total assets

$

7,186,142

$

7,364,291

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

Current maturities of long-term debt and lease financing obligations

$

229,041

$

79,421

Accounts payable

1,437,728

1,426,391

Accrued salaries, wages and other current liabilities

1,176,903

1,064,507

Total current liabilities

2,843,672

2,570,319

Long-term debt, less current maturities

5,827,936

6,141,773

Lease financing obligations, less current maturities

95,434

107,007

Other noncurrent liabilities

995,214

1,131,948

Total liabilities

9,762,256

9,951,047

Commitments and contingencies

-

-

Stockholders' deficit:

Preferred stock - Series G

1

1

Preferred stock - Series H

179,406

171,569

Common stock

903,827

898,687

Additional paid-in capital

4,278,576

4,278,988

Accumulated deficit

(7,888,349

)

(7,883,367

)

Accumulated other comprehensive loss

(49,575

)

(52,634

)

Total stockholders' deficit

(2,576,114

)

(2,586,756

)

Total liabilities and stockholders' deficit

$

7,186,142

$

7,364,291

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)

Thirteen weeks ended

Thirteen weeks ended

December 1, 2012

November 26, 2011

Revenues

$

6,237,847

$

6,312,584

Costs and expenses:

Cost of goods sold

4,426,526

4,641,204

Selling, general and administrative expenses

1,612,198

1,583,098

Lease termination and impairment charges

14,366

11,540

Interest expense

128,371

129,927

Gain on sale of assets, net

(6,262

)

(2,172

)

6,175,199

6,363,597

Income (loss) before income taxes

62,648

(51,013

)

Income tax expense

777

972

Net income (loss)

$

61,871

$

(51,985

)

Basic and diluted earnings (loss) per share:

Numerator for earnings (loss) per share:

Net income (loss)

$

61,871

$

(51,985

)

Accretion of redeemable preferred stock

(26

)

(26

)

Cumulative preferred stock dividends

(2,651

)

(2,498

)

Income (loss) attributable to common stockholders - basic

59,194

(54,509

)

Add back - Interest on convertible notes

1,334

-

Income (loss) attributable to common stockholders - diluted

$

60,528

$

(54,509

)

Denominator:

Basic weighted average shares

891,031

886,629

Outstanding options

1,977

-

Convertible notes

24,800

-

Diluted weighted average shares

917,808

886,629

Basic and diluted income (loss) per share

$

0.07

$

(0.06

)

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)

Thirty-nine weeks ended

Thirty-nine weeks ended

December 1, 2012

November 26, 2011

Revenues

$

18,937,018

$

18,974,468

Costs and expenses:

Cost of goods sold

13,666,505

13,963,208

Selling, general and administrative expenses

4,918,433

4,773,086

Lease termination and impairment charges

34,292

43,748

Interest expense

388,013

391,516

Loss on debt modifications and retirements, net

17,842

17,510

Gain on sale of assets, net

(19,267

)

(7,812

)

19,005,818

19,181,256

Loss before income taxes

(68,800

)

(206,788

)

Income tax (benefit) expense

(63,818

)

533

Net loss

$

(4,982

)

$

(207,321

)

Basic and diluted loss per share:

Numerator for loss per share:

Net loss

$

(4,982

)

$

(207,321

)

Accretion of redeemable preferred stock

(77

)

(77

)

Cumulative preferred stock dividends

(7,837

)

(7,384

)

Loss attributable to common stockholders - basic and diluted

$

(12,896

)

$

(214,782

)

Denominator:

Basic and diluted weighted average shares

889,187

885,388

Basic and diluted loss per share

$

(0.01

)

$

(0.24

)

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(unaudited)

Thirteen weeks ended

Thirteen weeks ended

December 1, 2012

November 26, 2011

Net income (loss)

$

61,871

$

(51,985

)

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

1,020

590

Total other comprehensive income

1,020

590

Comprehensive income (loss)

$

62,891

$

(51,395

)

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(unaudited)

Thirty-nine weeks ended

Thirty-nine weeks ended

December 1, 2012

November 26, 2011

Net loss

$

(4,982

)

$

(207,321

)

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

3,059

1,771

Total other comprehensive income

3,059

1,771

Comprehensive loss

$

(1,923

)

$

(205,550

)