RAD Rite Aid Corp

• Third Quarter Net Income of $104.8 Million and Net Income per Diluted Share of $0.10, Compared to Prior Year’s Third Quarter Net Income of $71.5 Million and Net Income per Diluted Share of $0.04
• Third Quarter Adjusted EBITDA of $332.8 Million Compared to Adjusted EBITDA of $282.3 Million in Prior Third Quarter
• Rite Aid Raises Fiscal 2015 Outlook

Rite Aid Corporation (NYSE:RAD) today reported operating results for its fiscal third quarter ended November 29, 2014. The company reported revenues of $6.7 billion, net income of $104.8 million or $0.10 per diluted share, and Adjusted EBITDA of $332.8 million, or 5.0 percent of revenues.

"We are pleased with our results for the third quarter, said Rite Aid Chairman and CEO John Standley.” Our focus on expanding our health and wellness offering and delivering a higher level of care to the communities we serve drove our strong same-store sales, prescription count and gross profit. Based upon our strong third-quarter results, we have raised our guidance for the year."

Third Quarter Summary

Revenues for the quarter were $6.7 billion versus revenues of $6.4 billion in the prior year’s third quarter. Revenues increased 5.3 percent primarily as a result of an increase in same store sales.

Same store sales for the quarter increased 5.4 percent over the prior year, consisting of a 1.6 percent increase in front-end sales and a 7.2 percent increase in pharmacy sales. Pharmacy sales included an approximate 228 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 4.5 percent over the prior year period. Prescription sales accounted for 69.8 percent of total drugstore sales, and third party prescription revenue was 97.6 percent of pharmacy sales.

Net income was $104.8 million or $0.10 per diluted share compared to last year’s third quarter net income of $71.5 million or $0.04 per diluted share. The improvement in net income resulted primarily from an increase in Adjusted EBITDA and a lower LIFO charge, partially offset by a higher loss on debt retirement related to the redemption of the company’s 10.25% senior secured notes.

Adjusted EBITDA (which is reconciled to net income on the attached table) was $332.8 million or 5.0 percent of revenues for the third quarter compared to $282.3 million or 4.4 percent of revenues for the like period last year. Adjusted EBITDA improved due to an increase in front-end and pharmacy gross profit, partially offset by an increase in selling, general and administrative expenses related to our higher level of sales. The improved pharmacy gross profit was driven by the increase in pharmacy prescription revenues and a reduction in generic drug costs, driven by the company’s transition to its new drug purchasing and delivery arrangement with McKesson, partially offset by lower reimbursement rates.

In the third quarter, the company relocated 3 stores, remodeled 103 stores and expanded 1 store, bringing the total number of wellness stores chainwide to 1,529. The company also acquired 6 stores and closed 6 stores, resulting in a total store count of 4,572 at the end of the third quarter.

Rite Aid Raises Fiscal 2015 Guidance

Based upon third quarter results, the company is raising its guidance. Adjusted EBITDA (which is reconciled to net income on the attached table) is expected to be between $1.275 billion and $1.305 billion. Net income is expected to be between $315.0 million and $370.0 million and income per diluted share between $0.31 and $0.37. Sales are expected to be between $26.25 billion and $26.4 billion and same store sales to range from an increase of 3.75 percent to an increase of 4.25 percent over Fiscal 2014. Capital expenditures are expected to be approximately $525 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 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. Eastern Time today. A playback of the call will also be available by telephone beginning at 12 p.m. Eastern Time today until 11:59 p.m. Eastern Time on Dec. 20, 2014. 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 38826492.

Rite Aid is one of the nation’s leading drugstore chains with 4,572 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 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 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, the most comparable GAAP financial measure. We define Adjusted EBITDA as net income excluding the impact of income taxes (and any corresponding adjustments to 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, debt retirements and other items (including stock-based compensation expense, sale of assets and investments and revenue deferrals related to our customer loyalty program).

    RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (unaudited)   November 29, 2014 March 1, 2014 ASSETS Current assets: Cash and cash equivalents $ 232,954 $ 146,406 Accounts receivable, net 996,545 949,062 Inventories, net of LIFO reserve of $1,023,213 and $1,018,581 2,997,595 2,993,948 Prepaid expenses and other current assets   132,873     195,709   Total current assets 4,359,967 4,285,125 Property, plant and equipment, net 2,062,376 1,957,329 Goodwill 76,124 - Other intangibles, net 420,415 431,227 Other assets   267,104     271,190   Total assets $ 7,185,986   $ 6,944,871     LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Current maturities of long-term debt and lease financing obligations $ 111,613 $ 49,174 Accounts payable 1,205,887 1,292,419 Accrued salaries, wages and other current liabilities   1,147,174     1,165,859   Total current liabilities 2,464,674 2,507,452 Long-term debt, less current maturities 5,673,591 5,632,798 Lease financing obligations, less current maturities 65,483 75,171 Other noncurrent liabilities   774,896     843,152   Total liabilities 8,978,644 9,058,573   Commitments and contingencies - - Stockholders' deficit: Common stock 981,773 971,331 Additional paid-in capital 4,502,631 4,468,149 Accumulated deficit (7,241,707 ) (7,515,848 ) Accumulated other comprehensive loss   (35,355 )   (37,334 ) Total stockholders' deficit   (1,792,658 )   (2,113,702 ) Total liabilities and stockholders' deficit $ 7,185,986   $ 6,944,871         RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (unaudited)    

Thirteen weeks endedNovember 29, 2014

Thirteen weeks endedNovember 30, 2013

Revenues $ 6,692,333 $ 6,357,732 Costs and expenses: Cost of goods sold 4,769,020 4,557,066 Selling, general and administrative expenses 1,692,437 1,632,299 Lease termination and impairment charges 8,702 1,672 Interest expense 97,400 102,819 Loss on debt retirements, net 18,512 271 Gain on sale of assets, net   (455 )   (9,331 )     6,585,616     6,284,796     Income before income taxes 106,717 72,936 Income tax expense   1,871     1,388   Net income $ 104,846   $ 71,548     Basic and diluted earnings per share:   Numerator for earnings per share: Net income $ 104,846 $ 71,548 Accretion of redeemable preferred stock - (26 ) Cumulative preferred stock dividends - (2,814 ) Conversion of Series G and H preferred stock   -     (25,603 ) Income attributable to common stockholders - basic 104,846 43,105 Add back - Interest on convertible notes   1,364     -   Income attributable to common stockholders - diluted $ 106,210   $ 43,105         Denominator: Basic weighted average shares 972,688 938,994 Outstanding options and restricted shares, net 22,793 48,843 Convertible notes   24,796     -     Diluted weighted average shares   1,020,277     987,837     Basic income per share $ 0.11 $ 0.05 Diluted income per share $ 0.10 $ 0.04       RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (unaudited)    

Thirty-nine weeks endedNovember 29, 2014

Thirty-nine weeks endedNovember 30, 2013

Revenues $ 19,680,448 $ 18,928,954 Costs and expenses: Cost of goods sold 14,059,577 13,490,936 Selling, general and administrative expenses 4,977,315 4,844,491 Lease termination and impairment charges 20,661

24,034

Interest expense 299,170 322,599 Loss on debt retirements, net 18,512 62,443 Gain on sale of assets, net   (2,540 )   (16,396 )     19,372,695     18,728,107     Income before income taxes 307,753 200,847 Income tax expense   33,612     6,810   Net income $ 274,141   $ 194,037     Basic and diluted earnings per share:   Numerator for earnings per share: Net income $ 274,141 $ 194,037 Accretion of redeemable preferred stock - (77 ) Cumulative preferred stock dividends - (8,318 ) Conversion of Series G and H preferred stock   -     (25,603 ) Income attributable to common stockholders - basic 274,141 160,039 Add back - Interest on convertible notes   4,092     -   Income attributable to common stockholders - diluted $ 278,233   $ 160,039         Denominator: Basic weighted average shares 968,897 911,608 Outstanding options and restricted shares, net 25,330 41,227 Convertible notes   24,796     -     Diluted weighted average shares   1,019,023     952,835     Basic income per share $ 0.28 $ 0.18 Diluted income per share $ 0.27 $ 0.17       RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (unaudited)    

Thirteen weeks endedNovember 29, 2014

Thirteen weeks endedNovember 30, 2013

Net income $ 104,846 $ 71,548 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

  660   1,263 Total other comprehensive income   660   1,263 Comprehensive income $ 105,506 $ 72,811       RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (unaudited)    

Thirty-nine weeks endedNovember 29, 2014

Thirty-nine weeks endedNovember 30, 2013

Net income $ 274,141 $ 194,037 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   1,979   3,788 Total other comprehensive income   1,979   3,788 Comprehensive income $ 276,120 $ 197,825       RITE AID CORPORATION AND SUBSIDIARIES   SUPPLEMENTAL OPERATING AND CASH FLOW INFORMATION (Dollars in thousands, except per share amounts) (unaudited)    

Thirteen weeks endedNovember 29, 2014

Thirteen weeks endedNovember 30, 2013

  SUPPLEMENTAL OPERATING INFORMATION   Revenues $ 6,692,333 $ 6,357,732 Cost of goods sold   4,769,020   4,557,066 Gross profit 1,923,313 1,800,666 LIFO charge   1,543   25,000 FIFO gross profit 1,924,856 1,825,666   Gross profit as a percentage of revenues 28.74% 28.32% LIFO charge as a percentage of revenues 0.02% 0.39% FIFO gross profit as a percentage of revenues 28.76% 28.72%   Selling, general and administrative expenses 1,692,437 1,632,299 Selling, general and administrative expenses as a percentage of revenues 25.29% 25.67%   Cash interest expense 93,142 98,838 Non-cash interest expense   4,258   3,981 Total interest expense 97,400 102,819     Adjusted EBITDA 332,769 282,262 Adjusted EBITDA as a percentage of revenues 4.97% 4.44%   Net income 104,846 71,548 Net income as a percentage of revenues 1.57% 1.13%   Total debt 5,850,687 5,952,426 Invested cash   862   11,323 Total debt net of invested cash 5,849,825 5,941,103     SUPPLEMENTAL CASH FLOW INFORMATION   Payments for property, plant and equipment 131,305 84,419 Intangible assets acquired   39,586   28,954 Total cash capital expenditures 170,891 113,373 Equipment received for noncash consideration 263 1,588 Equipment financed under capital leases   824   1,906 Gross capital expenditures $ 171,978 $ 116,867       RITE AID CORPORATION AND SUBSIDIARIES   SUPPLEMENTAL OPERATING AND CASH FLOW INFORMATION (Dollars in thousands, except per share amounts) (unaudited)    

Thirty-nine weeks endedNovember 29, 2014

Thirty-nine weeks endedNovember 30, 2013

  SUPPLEMENTAL OPERATING INFORMATION   Revenues $ 19,680,448 $ 18,928,954 Cost of goods sold   14,059,577   13,490,936 Gross profit 5,620,871 5,438,018 LIFO charge   4,632   60,000 FIFO gross profit 5,625,503 5,498,018   Gross profit as a percentage of revenues 28.56% 28.73% LIFO charge as a percentage of revenues 0.02% 0.32% FIFO gross profit as a percentage of revenues 28.58% 29.05%   Selling, general and administrative expenses 4,977,315 4,844,491 Selling, general and administrative expenses as a percentage of revenues 25.29% 25.59%   Cash interest expense 286,135 309,942 Non-cash interest expense   13,035   12,657 Total interest expense 299,170 322,599     Adjusted EBITDA 979,548 968,629 Adjusted EBITDA as a percentage of revenues 4.98% 5.12%   Net income 274,141 194,037 Net income as a percentage of revenues 1.39% 1.03%   Total debt 5,850,687 5,952,426 Invested cash   862   11,323 Total debt net of invested cash 5,849,825 5,941,103     SUPPLEMENTAL CASH FLOW INFORMATION   Payments for property, plant and equipment 324,938 255,269 Intangible assets acquired   79,609   64,605 Total cash capital expenditures 404,547 319,874 Equipment received for noncash consideration 1,600 1,588 Equipment financed under capital leases   4,749   15,023 Gross capital expenditures $ 410,896 $ 336,485     RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (In thousands)      

Thirteen weeks endedNovember 29, 2014

Thirteen weeks endedNovember 30, 2013

    Reconciliation of net income to adjusted EBITDA: Net income $ 104,846 $ 71,548 Adjustments: Interest expense 97,400 102,819 Income tax expense 1,871 1,388 Depreciation and amortization 104,614 101,188 LIFO charge 1,543 25,000 Lease termination and impairment charges 8,702 1,672 Other   13,793     (21,353 ) Adjusted EBITDA $ 332,769   $ 282,262   Percent of revenues 4.97 % 4.44 %     RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (In thousands)      

Thirty-nine weeks endedNovember 29, 2014

Thirty-nine weeks endedNovember 30, 2013

    Reconciliation of net income to adjusted EBITDA: Net income $ 274,141 $ 194,037 Adjustments: Interest expense 299,170 322,599 Income tax expense 33,612 6,810 Depreciation and amortization 309,203 301,681 LIFO charge 4,632 60,000 Lease termination and impairment charges 20,661 24,034 Other   38,129     59,468   Adjusted EBITDA $ 979,548   $ 968,629   Percent of revenues 4.98 % 5.12 %       RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited)      

Thirteen weeks endedNovember 29, 2014

Thirteen weeks endedNovember 30, 2013

    OPERATING ACTIVITIES: Net income $ 104,846 $ 71,548 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 104,614 101,188 Lease termination and impairment charges 8,702 1,672 Gain from lease termination - (8,750 ) LIFO charge 1,543 25,000 Gain on sale of assets, net (455 ) (9,331 ) Stock-based compensation expense 7,040 4,117 Loss on debt retirements, net 18,512 271 Excess tax benefit on stock options (589 ) - Changes in operating assets and liabilities: Accounts receivable (41,934 ) 76,532 Inventories (76,955 ) (110,482 ) Accounts payable (18,297 ) (11,040 ) Other assets and liabilities, net   4,701     106,661   Net cash provided by operating activities 111,728 247,386 INVESTING ACTIVITIES: Payments for property, plant and equipment (131,305 ) (84,419 ) Intangible assets acquired (39,586 ) (28,954 ) Proceeds from dispositions of assets and investments 4,457 4,459 Proceeds from lease termination - 8,750 Proceeds from insured loss   -     2,758   Net cash used in investing activities (166,434 ) (97,406 ) FINANCING ACTIVITIES: Net proceeds from (payments to) revolver 375,000 (87,000 ) Principal payments on long-term debt (278,189 ) (10,557 ) Change in zero balance cash accounts 17,611 (4,842 ) Net proceeds from the issuance of common stock 732 12,618 Payments for the repurchase of preferred stock - (21,034 ) Financing fees paid for early debt redemption (13,841 ) - Excess tax benefit on stock options 589 - Deferred financing costs paid   -     (120 ) Net cash provided by (used in) financing activities   101,902     (110,935 ) Increase in cash and cash equivalents 47,196 39,045 Cash and cash equivalents, beginning of period   185,758     144,167   Cash and cash equivalents, end of period $ 232,954   $ 183,212         RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited)      

Thirty-nine weeks endedNovember 29, 2014

Thirty-nine weeks endedNovember 30, 2013

    OPERATING ACTIVITIES: Net income $ 274,141 $ 194,037 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 309,203 301,681 Lease termination and impairment charges 20,661 24,034 Gain from lease termination - (8,750 ) LIFO charge 4,632 60,000 Gain on sale of assets, net (2,540 ) (16,396 ) Stock-based compensation expense 16,932 12,194 Loss on debt retirements, net 18,512 62,443 Excess tax benefit on stock options (27,647 ) - Changes in operating assets and liabilities: Accounts receivable (41,493 ) 79,895 Inventories (8,038 ) (206,408 ) Accounts payable (45,047 ) 25,160 Other assets and liabilities, net   (45,357 )   (19,972 ) Net cash provided by operating activities 473,959 507,918 INVESTING ACTIVITIES: Payments for property, plant and equipment (324,938 ) (255,269 ) Intangible assets acquired (79,609 ) (64,605 ) Acquisition of Health Dialog and RediClinic, net of cash acquired (69,793 ) - Proceeds from sale-leaseback transactions - 3,989 Proceeds from dispositions of assets and investments 10,559 14,157 Proceeds from lease termination - 8,750 Proceeds from insured loss   -     6,138   Net cash used in investing activities (463,781 ) (286,840 ) FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 1,152,293 1,310,000 Net proceeds from (payments to) revolver 380,000 (75,000 ) Principal payments on long-term debt (1,443,812 ) (1,332,528 ) Change in zero balance cash accounts (39,934 ) (10,161 ) Net proceeds from the issuance of common stock 15,523 24,881 Payments for the repurchase of preferred stock - (21,034 ) Financing fees paid for early debt redemption (13,841 ) (45,636 ) Excess tax benefit on stock options 27,647 - Deferred financing costs paid   (1,506 )   (17,840 ) Net cash provided by (used in) financing activities   76,370     (167,318 ) Increase in cash and cash equivalents 86,548 53,760 Cash and cash equivalents, beginning of period   146,406     129,452   Cash and cash equivalents, end of period $ 232,954   $ 183,212         RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF NET INCOME GUIDANCE TO ADJUSTED EBITDA GUIDANCE YEAR ENDING FEBRUARY 28, 2015 (In thousands, except per share amounts)     Guidance Range Low High   Sales $ 26,250,000 $ 26,400,000   Same store sales 3.75% 4.25%   Gross capital expenditures $ 525,000 $ 525,000   Reconciliation of net income to adjusted EBITDA: Net income $ 315,000 $ 370,000 Adjustments: Interest expense 393,000 393,000 Income tax expense 35,000 35,000 Depreciation and amortization 418,000 416,000 LIFO charge 15,000 - Store closing and impairment charges 50,000 46,000 Loss on debt retirement 18,000 18,000 Other   31,000   27,000 Adjusted EBITDA $ 1,275,000 $ 1,305,000     Diluted income per share $ 0.31 $ 0.37  

Rite Aid CorporationInvestors:Matt Schroeder, 717-214-8867investor@riteaid.comorMedia:Susan Henderson, 717-730-7766