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Item 7.01
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Regulation FD Disclosure.
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As previously disclosed, on September 18,
2017, Rite Aid Corporation (“the Company”) entered into an Amended and Restated Asset Purchase Agreement (the “Asset
Purchase Agreement”) with Walgreens Boots Alliance, Inc., a Delaware corporation (“WBA”), and Walgreen Co.,
an Illinois corporation and wholly owned direct subsidiary of WBA (“Buyer”). Pursuant to the terms and subject to
the conditions set forth in the Asset Purchase Agreement, Buyer will purchase from the Company 1,932 stores and certain distribution
and other specified assets related thereto for a purchase price of approximately $4.375 billion, on a cash-free, debt-free basis,
plus Buyer’s assumption of certain liabilities of the Company and its affiliates (the “Sale”).
Members of senior management of the
Company made a presentation during the J.P. Morgan Healthcare Conference on Wednesday, January 10, 2018 (the “Investor
Conference”) to provide an illustration of the impact of the Sale. A copy of the presentation is available online on
the Company’s website at www.riteaid.com under the “Investor Calls & Presentations” section.
The presentation includes the non-GAAP financial
measures, “Adjusted EBITDA,” “Adjusted Net Income (Loss)” and “Adjusted Net Income (Loss) per Diluted
Share.” The Company uses these non-GAAP measures in assessing its performance in addition to net income, the most directly
comparable GAAP financial measure. A reconciliation of Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income (Loss)
per Diluted Share to net income is included in the appendix to the presentation, which is furnished as Exhibit 99.1 to this Form
8-K.
The Company believes Adjusted EBITDA serves
as an appropriate measure in evaluating the performance of its business and helps its investors better compare the Company’s
operating performance with its competitors. The Company defines Adjusted EBITDA 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,
inventory write-downs related to store closings, debt retirements, the previously received WBA merger termination fee, and other
items (including stock-based compensation expense, merger and acquisition-related costs, severance and costs related to distribution
center closures, gain or loss on sale of assets and revenue deferrals related to the Company’s customer loyalty program).
The Company references this non-GAAP financial measure frequently in its decision-making because it provides supplemental information
that facilitates internal comparisons to historical periods and external comparisons to competitors. In addition, incentive compensation
is based in part on Adjusted EBITDA and the Company bases certain of its forward-looking estimates and budgets on Adjusted EBITDA.
The Company defines Adjusted Net Income
(Loss) as net income (loss) excluding the impact of amortization of EnvisionRx intangible assets, merger and acquisition-related
costs, loss on debt retirements, LIFO adjustments, and the previously received WBA merger termination fee. The Company calculates
Adjusted Net Income (Loss) per Diluted Share using the Company’s above-referenced definition of Adjusted Net Income (Loss).
The Company believes Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share serve as appropriate measures
to be used in evaluating the performance of its business and help its investors better compare the Company’s operating performance
over multiple periods.
Adjusted EBITDA, Adjusted Net Income (Loss)
and Adjusted Net Income (Loss) per Diluted Share should not be considered in isolation from, and are not intended to represent
alternative measures of, operating results or of cash flows from operating activities, as determined in accordance with GAAP.
The Company’s definitions of Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share
may not be comparable to similarly titled measurements reported by other companies or similar terms in the Company’s debt
facilities.
The presentation is subject to a number
of assumptions as more fully set forth in the presentation and actual results could differ from those included in the presentation,
and such differences may be material. The presentation is for illustrative purposes only and 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 Securities and Exchange Commission.
The information (including Exhibit 99.1) being
furnished pursuant to this “Item 7.01 Regulation FD Disclosure” shall not be deemed to be “filed” for
the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the
liabilities of that section and shall not be deemed to be incorporated by reference into any filing under the Securities Act of
1933, as amended, or the Securities Act, or the Exchange Act regardless of any general incorporation language in such filing.