- Second Quarter Net Income of $21.5
Million and Net Income per Diluted Share of $0.02, Compared to
Prior Year’s Second Quarter Net Income of $127.8 Million and Net
Income per Diluted Share of $0.13
- Second Quarter Adjusted EBITDA of
$346.8 Million Compared to Adjusted EBITDA of $364.2 Million in
Prior Year’s Second Quarter
- Completes Previously Announced
Acquisition of EnvisionRx
- Rite Aid Updates Outlook for Fiscal
2016
Rite Aid Corporation (NYSE:RAD) today reported operating results
for its fiscal second quarter ended August 29, 2015. The company
reported revenues of $7.7 billion, net income of $21.5 million or
$0.02 per diluted share, and Adjusted EBITDA of $346.8 million, or
4.5 percent of revenues.
“The second quarter was pivotal for Rite Aid as we completed the
acquisition of EnvisionRx and worked as a team to accelerate our
transformation into a retail healthcare company,” said Rite Aid
Chairman and CEO John Standley. “EnvisionRx made positive
contributions to our performance as our Pharmacy Services Segment*
delivered results that were in line with our expectations. We will
continue to focus on key initiatives like wellness+ with Plenti,
flu immunizations and Wellness store remodels to drive performance
in our retail segment as we also leverage EnvisionRx’s suite of
services to create unique and integrated offerings in the
healthcare marketplace.”
Second Quarter Summary
Revenues for the quarter were $7.7 billion versus revenues of
$6.5 billion in the prior year’s second quarter, an increase of
$1.2 billion or 17.5 percent. Retail Pharmacy Segment revenues were
$6.6 billion and increased 1.9 percent primarily as a result of an
increase in same store sales. Pharmacy Services Segment revenues
were $1.1 billion from the date of the acquisition of EnvisionRx,
which was June 24, 2015 through the end of the quarter.
*Pharmacy Services Segment consists of results from
EnvisionRx
Same store drugstore sales for the Retail Pharmacy Segment
increased 2.1 percent over the prior year, consisting of a 0.3
percent increase in front-end sales and a 2.8 percent increase in
pharmacy sales. Pharmacy sales included an approximate 223 basis
point negative impact from new generic introductions. The number of
prescriptions filled in same stores increased 0.2 percent over the
prior year period. Prescription sales accounted for 69.3 percent of
total drugstore sales, and third party prescription revenue was
97.8 percent of pharmacy sales.
Net income was $21.5 million or $0.02 per diluted share compared
to last year’s second quarter net income of $127.8 million or $0.13
per diluted share. The decline in net income resulted primarily
from a $33.2 million loss on debt retirement related to the
redemption of the company’s 8.00% senior secured notes, higher
depreciation and amortization expense related to EnvisionRx and an
increase in capital spending, higher interest and transaction costs
incurred in connection with the company’s acquisition of
EnvisionRx, and the cycling of a prior year benefit of
approximately $40 million related to the Company’s transition to
its new drug purchasing and delivery arrangement with McKesson.
Adjusted EBITDA (which is reconciled to net income on the
attached table) was $346.8 million or 4.5 percent of revenues for
the second quarter compared to $364.2 million or 5.6 percent of
revenues for the like period last year. After taking into effect
the prior year benefit of $40 million related to the Company’s
transition to its new drug purchasing and delivery arrangement,
Adjusted EBITDA increased by $22.6 million. This increase was due
to $33.2 million of Pharmacy Services Segment Adjusted EBITDA,
partially offset by a decline in Retail Pharmacy Segment gross
margin, which was due to lower pharmacy reimbursement, partially
offset by lower drug purchasing costs.
In the second quarter, the company relocated 3 stores and
remodeled 119 stores, bringing the total number of wellness stores
chainwide to 1,859. The company also opened 2 new stores, acquired
2 stores, and closed 9 stores, resulting in a total store count of
4,561 at the end of the second quarter. The Company also opened 5
clinics in the second quarter, bringing the total to 70.
Rite Aid Updates Fiscal 2016 Guidance
Rite Aid has updated its fiscal 2016 guidance to reflect more
recent sales trends and additional expected amortization expense
from EnvisionRx. The midpoint of Adjusted EBITDA guidance remains
unchanged. Total revenues are expected to be between $30.8 billion
and $31.1 billion. Retail drugstore sales are expected to be
between $26.7 billion and $27.0 billion and same store sales to
range from an increase of 1.5 percent to an increase of 2.5 percent
over fiscal 2015. Adjusted EBITDA (which is reconciled to net
income on the attached table) guidance is expected to be between
$1.360 billion and $1.440 billion and net income is expected to be
between $125 million and $195 million or income per diluted share
of $0.12 to $0.19. Capital expenditures are expected to be
approximately $665 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 Sept. 19, 2015. 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 34603858.
Rite Aid is one of the nation’s leading drugstore chains with
4,561 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)
August 29, 2015 February 28, 2015 ASSETS Current assets:
Cash and cash equivalents $ 152,647 $ 115,899 Accounts receivable,
net 1,872,976 980,904 Inventories, net of LIFO reserve of
$1,009,501 and $997,528 2,902,749 2,882,980 Deferred tax assets
17,823 17,823 Prepaid expenses and other current assets
140,939 224,152 Total current assets 5,087,134
4,221,758 Property, plant and equipment, net 2,198,674 2,091,369
Goodwill 1,533,827 76,124 Other intangibles, net 1,225,531 421,480
Deferred tax assets 1,617,311 1,766,349 Other assets 316,754
286,172 Total assets $ 11,979,231 $
8,863,252 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Current maturities of long-term debt and lease
financing obligations $ 29,002 $ 100,376 Accounts payable 1,594,411
1,133,520 Accrued salaries, wages and other current liabilities
1,703,545 1,193,419 Deferred tax liabilities 57,622
57,685 Total current liabilities 3,384,580 2,485,000
Long-term debt, less current maturities 7,361,079 5,483,415 Lease
financing obligations, less current maturities 54,232 61,152 Other
noncurrent liabilities 749,637 776,629
Total liabilities 11,549,528 8,806,196 Commitments and
contingencies - - Stockholders' equity: Common stock 1,045,622
988,558 Additional paid-in capital 4,795,106 4,521,023 Accumulated
deficit (5,366,370 ) (5,406,675 ) Accumulated other comprehensive
loss (44,655 ) (45,850 ) Total stockholders' equity
429,703 57,056 Total liabilities and
stockholders' equity $ 11,979,231 $ 8,863,252
RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS (Dollars in thousands, except per share
amounts) (unaudited)
Thirteen weeks endedAugust 29, 2015
Thirteen weeks endedAugust 30, 2014
Revenues $ 7,664,776 $ 6,522,584 Costs and expenses: Cost of goods
sold 5,742,485 4,628,005 Selling, general and administrative
expenses 1,725,826 1,640,524 Lease termination and impairment
charges 9,637 7,111 Interest expense 115,410 100,950 Loss on debt
retirements, net 33,205 - Loss (gain) on sale of assets, net
281 (1,715 ) 7,626,844
6,374,875 Income before income taxes 37,932 147,709
Income tax expense 16,463 19,860 Net
income $ 21,469 $ 127,849 Basic and diluted
earnings per share: Numerator for earnings per share: Net
income $ 21,469 $ 127,849 Add back - Interest on convertible notes
- 1,364 Income attributable to common
stockholders - diluted $ 21,469 $ 129,213
Denominator: Basic weighted average shares 1,029,793 970,664
Outstanding options and restricted shares, net 19,341 26,132
Convertible notes - 24,796
Diluted weighted average shares 1,049,134
1,021,592 Basic and diluted income per share $ 0.02 $
0.13 RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except
per share amounts) (unaudited)
Twenty-six weeks endedAugust 29, 2015
Twenty-six weeks endedAugust 30, 2014
Revenues $ 14,312,337 $ 12,988,115 Costs and expenses: Cost of
goods sold 10,530,516 9,290,557 Selling, general and administrative
expenses 3,425,411 3,284,878 Lease termination and impairment
charges 14,659 11,959 Interest expense 239,017 201,770 Loss on debt
retirements, net 33,205 - Loss (gain) on sale of assets, net
320 (2,085 ) 14,243,128
12,787,079 Income before income taxes 69,209 201,036
Income tax expense 28,904 31,741 Net
income $ 40,305 $ 169,295 Basic and diluted
earnings per share: Numerator for earnings per share: Net
income $ 40,305 $ 169,295 Add back - Interest on convertible notes
- 2,728 Income attributable to common
stockholders - diluted $ 40,305 $ 172,023
Denominator: Basic weighted average shares 1,008,242 966,997
Outstanding options and restricted shares, net 18,959 26,141
Convertible notes - 24,796
Diluted weighted average shares 1,027,201
1,017,934 Basic income per share $ 0.04 $ 0.18
Diluted income per share $ 0.04 $ 0.17 RITE AID CORPORATION
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (In thousands) (unaudited)
Thirteen weeks endedAugust 29, 2015
Thirteen weeks endedAugust 30, 2014
Net income $ 21,469 $ 127,849 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, net of $398 and $0 tax expense 598
660 Total other comprehensive income 598 660
Comprehensive income $ 22,067 $ 128,509 RITE AID CORPORATION
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (In thousands) (unaudited)
Twenty-six weeks endedAugust 29, 2015
Twenty-six weeks endedAugust 30, 2014
Net income $ 40,305 $ 169,295 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, net of $796 and $0 tax expense 1,195
1,319 Total other comprehensive income 1,195
1,319 Comprehensive income $ 41,500 $ 170,614 RITE AID
CORPORATION AND SUBSIDIARIES SUPPLEMENTAL SEGMENT
OPERATING INFORMATION (Dollars in thousands) (unaudited)
Thirteen weeks endedAugust 29, 2015
Thirteen weeks endedAugust 30, 2014
Retail Pharmacy Segment Revenues (a) $ 6,647,243 $
6,522,584 Cost of goods sold (a) 4,786,730
4,628,005 Gross profit 1,860,513 1,894,579 LIFO charge
5,986 1,544 FIFO gross profit 1,866,499
1,896,123 Gross profit as a percentage of revenues 27.99 %
29.05 % LIFO charge as a percentage of revenues 0.09 % 0.02 % FIFO
gross profit as a percentage of revenues 28.08 % 29.07 %
Selling, general and administrative expenses 1,678,909 1,640,524
Selling, general and administrative expenses as a percentage of
revenues 25.26 % 25.15 % Cash interest expense 109,796
96,558 Non-cash interest expense 5,608 4,392
Total interest expense 115,404 100,950 Adjusted
EBITDA 313,602 364,166 Adjusted EBITDA as a percentage of revenues
4.72 % 5.58 %
Pharmacy Services Segment
Revenues (a) $ 1,071,889 Cost of goods sold (a) 1,010,111
Gross profit 61,778 Gross profit as a percentage of
revenues 5.76 % Adjusted EBITDA 33,222 Adjusted EBITDA as a
percentage of revenues 3.10 % (a) - Revenues and cost of
goods sold include $54,356 of inter-segment activity that is
eliminated in consolidation. RITE AID CORPORATION AND
SUBSIDIARIES SUPPLEMENTAL SEGMENT OPERATING
INFORMATION (Dollars in thousands) (unaudited)
Twenty-six weeks endedAugust 29, 2015
Twenty-six weeks endedAugust 30, 2014
Retail Pharmacy Segment Revenues (a) $ 13,294,804 $
12,988,115 Cost of goods sold (a) 9,574,761
9,290,557 Gross profit 3,720,043 3,697,558 LIFO charge
11,973 3,089 FIFO gross profit
3,732,016 3,700,647 Gross profit as a percentage of revenues
27.98 % 28.47 % LIFO charge as a percentage of revenues 0.09 % 0.02
% FIFO gross profit as a percentage of revenues 28.07 % 28.49 %
Selling, general and administrative expenses 3,378,494
3,284,878 Selling, general and administrative expenses as a
percentage of revenues 25.41 % 25.29 % Cash interest expense
212,558 192,993 Non-cash interest expense 26,453
8,777 Total interest expense 239,011 201,770
Adjusted EBITDA 612,865 646,779 Adjusted EBITDA as a percentage of
revenues 4.61 % 4.98 %
Pharmacy Services
Segment Revenues (a) $ 1,071,889 Cost of goods sold (a)
1,010,111 Gross profit 61,778 Gross profit as a
percentage of revenues 5.76 % Adjusted EBITDA 33,222
Adjusted EBITDA as a percentage of revenues 3.10 % (a) -
Revenues and cost of goods sold include $54,356 of inter-segment
activity that is eliminated in consolidation. RITE AID
CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (In thousands)
(unaudited)
Thirteen weeks endedAugust 29, 2015
Thirteen weeks endedAugust 30, 2014
Reconciliation of net income to adjusted EBITDA: Net
income $ 21,469 $ 127,849 Adjustments: Interest expense 115,410
100,950 Income tax expense 16,463 19,860 Depreciation and
amortization 127,699 101,484 LIFO charge 5,986 1,544 Lease
termination and impairment charges 9,637 7,111 Loss on debt
retirements, net 33,205 - Other 16,955 5,368
Adjusted EBITDA $ 346,824 $ 364,166 Percent of
revenues 4.52 % 5.58 % RITE AID CORPORATION AND
SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF NET INCOME
TO ADJUSTED EBITDA (In thousands) (unaudited)
Twenty-six weeks endedAugust 29, 2015
Twenty-six weeks endedAugust 30, 2014
Reconciliation of net income to adjusted EBITDA: Net
income $ 40,305 $ 169,295 Adjustments: Interest expense 239,017
201,770 Income tax expense 28,904 31,741 Depreciation and
amortization 237,348 204,589 LIFO charge 11,973 3,089 Lease
termination and impairment charges 14,659 11,959 Loss on debt
retirements, net 33,205 - Other 40,676 24,336
Adjusted EBITDA $ 646,087 $ 646,779 Percent of
revenues 4.51 % 4.98 % RITE AID CORPORATION AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) (unaudited)
Thirteen weeks endedAugust 29, 2015
Thirteen weeks endedAugust 30, 2014
OPERATING ACTIVITIES: Net income $ 21,469 $ 127,849
Adjustments to reconcile to net cash (used in) provided by
operating activities: Depreciation and amortization 127,699 101,484
Lease termination and impairment charges 9,637 7,111 LIFO charge
5,986 1,544 Loss (gain) on sale of assets, net 281 (1,715 )
Stock-based compensation expense 8,831 5,736 Loss on debt
retirements, net 33,205 - Changes in deferred taxes (7,966 ) -
Excess tax benefit on stock options and restricted stock (18,049 )
(16,536 ) Changes in operating assets and liabilities: Accounts
receivable (2,908 ) (40,906 ) Inventories (80,673 ) 9,542 Accounts
payable (47,806 ) (113,074 ) Other assets and liabilities, net
(75,969 ) 41,448 Net cash (used in) provided
by operating activities (26,263 ) 122,483 INVESTING ACTIVITIES:
Payments for property, plant and equipment (130,646 ) (99,291 )
Intangible assets acquired (29,169 ) (20,437 ) Acquisition of
businesses, net of cash acquired (1,779,571 ) (4,487 ) Proceeds
from dispositions of assets and investments 3,243
4,229 Net cash used in investing activities
(1,936,143 ) (119,986 ) FINANCING ACTIVITIES: Net proceeds from
revolver 869,000 54,000 Principal payments on long-term debt
(655,640 ) (8,180 ) Change in zero balance cash accounts (17,034 )
(48,967 ) Net proceeds from the issuance of common stock 4,727
3,887 Financing fees paid for early debt redemption (26,003 ) -
Excess tax benefit on stock options and restricted stock 18,049
16,536 Deferred financing costs paid (175 ) (18 ) Net
cash provided by financing activities 192,924
17,258 (Decrease) increase in cash and cash equivalents
(1,769,482 ) 19,755 Cash and cash equivalents, beginning of period
1,922,129 166,003 Cash and cash
equivalents, end of period $ 152,647 $ 185,758
SUPPLEMENTAL CASH FLOW INFORMATION Payments
for property, plant and equipment $ 130,646 $ 99,291 Intangible
assets acquired 29,169 20,437 Total
cash capital expenditures 159,815 119,728 Equipment received for
noncash consideration 1,466 1,337 Equipment financed under capital
leases 471 2,242 Gross capital
expenditures $ 161,752 $ 123,307 RITE
AID CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited)
Twenty-six weeks endedAugust 29, 2015
Twenty-six weeks endedAugust 30, 2014
OPERATING ACTIVITIES: Net income $ 40,305 $ 169,295
Adjustments to reconcile to net cash provided by operating
activities: Depreciation and amortization 237,348 204,589 Lease
termination and impairment charges 14,659 11,959 LIFO charge 11,973
3,089 Loss (gain) on sale of assets, net 320 (2,085 ) Stock-based
compensation expense 16,201 9,892 Loss on debt retirements, net
33,205 - Changes in deferred taxes 1,574 - Excess tax benefit on
stock options and restricted stock (20,869 ) (27,058 ) Changes in
operating assets and liabilities: Accounts receivable 8,119 441
Inventories (24,469 ) 68,917 Accounts payable 31,909 (26,750 )
Other assets and liabilities, net (8,703 ) (50,058 )
Net cash provided by operating activities 341,572 362,231 INVESTING
ACTIVITIES: Payments for property, plant and equipment (271,683 )
(193,633 ) Intangible assets acquired (43,462 ) (40,023 )
Acquisition of businesses, net of cash acquired (1,779,571 )
(69,793 ) Proceeds from dispositions of assets and investments
6,081 6,102 Net cash used in investing
activities (2,088,635 ) (297,347 ) FINANCING ACTIVITIES: Proceeds
from issuance of long-term debt 1,800,000 1,152,293 Net proceeds
from revolver 728,000 5,000 Principal payments on long-term debt
(661,217 ) (1,165,623 ) Change in zero balance cash accounts
(51,309 ) (57,545 ) Net proceeds from the issuance of common stock
8,105 14,791 Financing fees paid for early debt redemption (26,003
) - Excess tax benefit on stock options and restricted stock 20,869
27,058 Deferred financing costs paid (34,634 ) (1,506
) Net cash provided by (used in) financing activities
1,783,811 (25,532 ) Increase in cash and cash
equivalents 36,748 39,352 Cash and cash equivalents, beginning of
period 115,899 146,406 Cash and cash
equivalents, end of period $ 152,647 $ 185,758
SUPPLEMENTAL CASH FLOW INFORMATION Payments
for property, plant and equipment $ 271,683 $ 193,633 Intangible
assets acquired 43,462 40,023 Total
cash capital expenditures 315,145 233,656 Equipment received for
noncash consideration 2,011 1,337 Equipment financed under capital
leases 1,271 3,925 Gross capital
expenditures $ 318,427 $ 238,918 RITE
AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET INCOME GUIDANCE TO ADJUSTED EBITDA GUIDANCE
YEAR ENDING FEBRUARY 27, 2016 (In thousands, except per share
amounts) (unaudited)
Guidance Range
Low High Total revenues $ 30,800,000 $
31,100,000 Drugstore sales $ 26,700,000 $ 27,000,000
Same store sales 1.50 % 2.50 % Gross capital expenditures $
665,000 $ 665,000 Reconciliation of net income to adjusted
EBITDA: Net income $ 125,000 $ 195,000 Adjustments: Interest
expense 455,000 455,000 Income tax expense 90,000 135,000
Depreciation and amortization 507,000 502,000 LIFO charge 30,000
10,000 Loss on debt retirement 33,000 33,000 Store closing and
impairment charges 55,000 45,000 Other 65,000
65,000 Adjusted EBITDA $ 1,360,000 $ 1,440,000
Diluted income per share $ 0.12 $ 0.19
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version on businesswire.com: http://www.businesswire.com/news/home/20150917005555/en/
Rite Aid CorporationInvestors:Matt Schroeder,
717-214-8867investor@riteaid.comorMedia:Susan Henderson,
717-730-7766
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