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Rite Aid Corporation Reports Fiscal 2022 Second Quarter Results and Raises Full Year Adjusted EBITDA Guidance

  • Revenues from Continuing Operations Increased 2.2 Percent to $6.11 Billion Compared to Prior Year Second Quarter Revenues from Continuing Operations of $5.98 Billion
  • Second Quarter Net Loss from Continuing Operations of $100.3 Million or $1.86 Per Share, Compared to the Prior Year Second Quarter Net Loss of $13.2 Million or $0.25 Per Share
  • Second Quarter Adjusted Net Loss from Continuing Operations of $22.0 Million or $0.41 Per Share, Compared to the Prior Year Second Quarter Adjusted Net Income of $13.5 Million or $0.25 Per Share
  • Second Quarter Adjusted EBITDA from Continuing Operations of $106.2 Million, Compared to the Prior Year Second Quarter Adjusted EBITDA of $151.6 Million
  • Company Entered into an Amendment to its Senior Secured Credit Agreement, which Extends the Company’s Debt Maturity Profile and Provides Improved Pricing on its “First-In, Last Out” Senior Secured Term Loan

Rite Aid Corporation (NYSE: RAD) today reported operating results for its second fiscal quarter ended August 28, 2021.

For the second quarter, the company reported net loss from continuing operations of $100.3 million, or $1.86 loss per share, Adjusted net loss from continuing operations of $22.0 million, or $0.41 loss per share, and Adjusted EBITDA from continuing operations of $106.2 million, or 1.7 percent of revenues.

“We are pleased with our second quarter results, which show continued improvement in our underlying business as we delivered another quarter of revenue growth and Adjusted EBITDA that exceeded expectations,” said Heyward Donigan, president and chief executive officer, Rite Aid. “We also amended and extended our revolving credit facility, successfully extending the maturity out to August 2026 as we continue to enhance our financial flexibility to deliver on our RxEvolution strategy.

“Our results were driven by the continued strong execution of our COVID-19 vaccine administration, improved profitability at Elixir and benefits from our work to revitalize our retail and digital experiences. Since launching our strategy last March, our organization is executing a clear plan to build top-line momentum with an intense focus on improving our profitability. We have transformed our business to be more relevant to our target growth consumer and more efficient in how we operate, while making investments necessary to drive the long-term health of our business. The progress on our RxEvolution strategy validates our belief that, as the trusted everyday care connector, Rite Aid will drive lower healthcare costs through better coordination, stronger engagement, and personalized services that help our customers achieve whole health for life.”

Consolidated Second Quarter Summary

(dollars in thousands)

Thirteen Week Period Ended

Twenty-six Week Period Ended

 

 

August 28, 2021

 

August 29, 2020

 

August 28, 2021

 

August 29, 2020

Revenues from continuing operations

$

6,113,000

$

5,981,970

$

12,273,985

$

12,009,346

Net loss from continuing operations

 

(100,301)

 

(13,197)

 

(113,358)

 

(85,899)

Adjusted EBITDA from continuing operations

 

106,160

 

151,603

 

245,037

 

258,995

Revenues from continuing operations for the quarter were $6.11 billion compared to revenues from continuing operations of $5.98 billion in the prior year’s quarter. The 2.2 percent increase in revenues was driven by growth at the Retail Pharmacy Segment, partially offset by a decline at the Pharmacy Services Segment.

Net loss from continuing operations was $100.3 million, or $1.86 per share, compared to last year’s second quarter net loss from continuing operations of $13.2 million, or $0.25 per share. The increase in net loss is due primarily to a decrease in Adjusted EBITDA, higher litigation settlements, a higher loss on sale of assets resulting from the accelerated sale of our CMS receivable in the current year which provided increased liquidity, and a loss on debt modifications and retirements compared to a gain on debt modifications and retirements in the prior year second quarter. These items were partially offset by lower restructuring-related costs.

Retail Pharmacy Segment

(dollars in thousands)

Thirteen Week Period Ended

Twenty-six Week Period Ended

 

 

August 28, 2021

 

August 29, 2020

 

August 28, 2021

 

August 29, 2020

Revenues from continuing operations

$

4,277,218

$

4,017,912

$

8,628,900

$

8,141,183

Adjusted EBITDA from continuing operations

 

69,369

 

122,340

 

164,283

 

185,322

Retail Pharmacy Segment revenues from continuing operations increased 6.5 percent over the prior year quarter, driven by an increase in same store sales and the inclusion of Bartell’s results this quarter. Same store sales from continuing operations for the second quarter increased 2.6 percent over the prior year period, consisting of a 5.0 percent increase in pharmacy sales and a 2.8 percent decrease in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, decreased 2.4 percent. On a 2-year stack basis, front-end same store sales, excluding cigarettes and tobacco products, increased 3.0 percent driven by increases in vitamins, color cosmetics and baby care resulting from the Company’s work to enhance the assortment in these categories. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 7.1 percent over the prior year period. In addition to the benefit from COVID-19 vaccinations, other acute prescriptions increased 1.5 percent and maintenance prescriptions increased 2.4 percent on a same store basis. Prescription sales from continuing operations accounted for 69.2 percent of total drugstore sales. Total store count at the end of the second quarter was 2,501.

Retail Pharmacy Segment Adjusted EBITDA from continuing operations was $69.4 million, or 1.6 percent of revenues, for the second quarter compared to last year’s second quarter Adjusted EBITDA from continuing operations of $122.3 million, or 3.0 percent of revenues. The decline in Adjusted EBITDA was due to an increase in SG&A expenses, partially offset by increased gross profit. SG&A expenses were negatively impacted by cycling the benefit from the prior year change to modernize our associate PTO plans, incremental costs from recently acquired Bartell stores and incremental payroll and marketing costs incurred to drive COVID-19 vaccines. Gross profit benefited from higher pharmacy same store sales, partially offset by pharmacy reimbursement rate pressures that were not fully offset by generic drug cost reductions and a decline in front end gross profit as we cycled the impact of the prior year’s COVID-19 buying surge.

Pharmacy Services Segment

(dollars in thousands)

Thirteen Week Period Ended

Twenty-six Week Period Ended

 

 

August 28, 2021

 

August 29, 2020

 

August 28, 2021

 

August 29, 2020

Revenues from continuing operations

$

1,898,213

$

2,038,378

$

3,770,495

$

4,015,624

Adjusted EBITDA from continuing operations

 

36,791

 

29,263

 

80,754

 

73,673

Pharmacy Services Segment revenues were $1.9 billion for the quarter, a decrease of 6.9 percent compared to the prior year quarter. The decrease in revenues was primarily the result of a decrease in membership in the PBM business and a decrease in Elixir Insurance membership.

Pharmacy Services Segment Adjusted EBITDA from continuing operations was $36.8 million, or 1.9 percent of revenues, for the second quarter compared to last year’s second quarter Adjusted EBITDA from continuing operations of $29.3 million, or 1.4 percent of revenues. Current year’s performance benefitted from increased gross profit resulting from improvements in the Company’s discount card business and good network management, partially offset by the impact from the loss in lives and cost pressures in the Elixir Insurance business. Prior year’s Adjusted EBITDA was negatively impacted by a reduction in gross profit related to a change in rebate aggregator at our MedTrak subsidiary.

Outlook for Fiscal 2022

As a result of the momentum in the second quarter, and an anticipated increase in demand for COVID-19 vaccines and testing versus prior expectations, Rite Aid Corporation is raising its fiscal 2022 Adjusted EBITDA guidance.

Total revenues are expected to be between $25.1 billion and $25.5 billion in fiscal 2022. Pharmacy Services Segment revenue is expected to be between $7.7 billion and $7.8 billion (net of any intercompany revenues to the Retail Pharmacy Segment).

Net loss is expected to be between $221 million and $197 million.

Adjusted EBITDA is expected to be between $460 million and $500 million.

Adjusted net loss per share is expected to be between $0.90 and $0.53.

Capital expenditures are expected to be approximately $300 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 broadcast via the Internet at https://investors.riteaid.com. The telephone replay will be available beginning at 12:00 p.m. Eastern Time on Thursday, Sept. 23, 2021 and ending at 11:59 p.m. Eastern Time on Oct. 24, 2021. To access the replay of the call, telephone (800) 585-8367 or (416) 621-4642 and enter the seven-digit reservation number 5387890. The webcast replay of the call will also be available at https://investors.riteaid.com starting at 12 p.m. Eastern Time today. The playback will be available until the company’s next conference call.

About Rite Aid Corporation

Rite Aid Corporation is on the front lines of delivering healthcare services and retail products to Americans 365 days a year. Our pharmacists are uniquely positioned to engage with customers and improve their health outcomes. We provide an array of whole being health products and services for the entire family through over 2,500 retail pharmacy locations across 17 states. Through Elixir, we provide pharmacy benefits and services to millions of members nationwide. For more information, www.riteaid.com.

Cautionary Statement Regarding Forward-Looking Statements

Statements 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. Such statements include, but are not limited to, statements regarding Rite Aid's outlook and guidance for fiscal 2022; the continued impact of the global coronavirus (COVID-19) pandemic on Rite Aid’s business; and any assumptions underlying any of the foregoing. 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: risks related to the impact of the COVID-19 global pandemic, such as the scope and duration of the outbreak, and government responses thereto; the impact of COVID-19 on our workforce, operations, stores, expenses, and supply chain, and the operations or behaviors of our customers, suppliers and business partners; our ability to successfully implement our RxEvolution and other strategies; the impact of our high level of indebtedness, the ability to refinance such indebtedness on acceptable terms and our ability to satisfy our obligations and the other covenants contained in our debt agreements; outcome of pending or new litigation, including related to Opioids, “usual and customary” pricing or other matters; our ability to monetize the CMS receivable created in our Part D business; general competitive, economic, industry, market, political (including healthcare reform) and regulatory conditions (including changes to laws or regulations relating to labor or wages), civil unrest (including any resulting store closures, damage, or loss of inventory), as well as other factors that impact the markets in which we operate; 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; our ability to achieve the benefits of our efforts to reduce the costs of our generic and other drugs; our ability to achieve cost savings and other benefits of our restructuring efforts within our anticipated timeframe, if at all; the outcome of our continuing efforts to monitor and comply with applicable laws, regulations, policies and procedures; and our ability to partner and have relationships with health plans and health systems.

These and other risks, assumptions and uncertainties are more fully 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 (the “SEC”), which you are encouraged to read. To the extent that COVID-19 adversely affects our business and financial results, it may also have the effect of heightening many of such risk factors.

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 rely on these forward-looking statements, which speak only as of the date they are made.

The degree to which COVID-19 may adversely affect Rite Aid’s results and operations, including its ability to achieve its outlook for fiscal 2022 guidance, will depend on numerous evolving factors and future developments, which are highly uncertain, including, but not limited to, the duration and spread of the COVID-19 outbreak, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. As a result, the impact on Rite Aid’s financial and operating results cannot be reasonably estimated with specificity at this time, but the impact could be material. Rite Aid expressly disclaims any current intention, and assumes no duty, 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.

All references to “Company” and “Rite Aid” as used throughout this release refer to Rite Aid Corporation and its affiliates.

Reconciliation of Non-GAAP Financial Measures

Rite Aid separately reports financial results on the basis of Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share, Adjusted EBITDA, Adjusted EBITDA Gross Profit and Adjusted EBITDA SG&A, which are non-GAAP financial measures. See the attached tables for a reconciliation of Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Adjusted EBITDA to net income (loss), and net income (loss) per diluted share, which are the most directly comparable GAAP financial measures. Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share exclude amortization expense, merger and acquisition-related costs, non-recurring litigation settlements, gains or losses on debt modifications and retirements, LIFO adjustments, goodwill and intangible asset impairment charges, and restructuring-related costs. Rite Aid 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 its operating performance over multiple periods.

Adjusted EBITDA is defined 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, goodwill and intangible asset impairment charges, inventory write-downs related to store closings, gains or losses on debt modifications and retirements, and other items (including stock-based compensation expense, merger and acquisition-related costs, non-recurring litigation settlements, severance, restructuring-related costs, costs related to facility closures, and gain or loss on sale of assets). The add back of LIFO (credit) charge when calculating Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share removes the entire impact of LIFO (credits) charges, and effectively reflects Rite Aid's results as if the company was on a FIFO inventory basis. Rite Aid believes Adjusted EBITDA serves as an appropriate measure in evaluating the performance of its business and helps its investors better compare its operating performance with its competitors.

Adjusted EBITDA Gross Profit includes LIFO adjustments, depreciation and amortization (COGS portion only) and other items. See the attached tables for a reconciliation of Adjusted EBITDA Gross Profit to Revenue, which is the most directly comparable GAAP financial measure. Adjusted EBITDA SG&A excludes depreciation and amortization (SG&A portion only), stock-based compensation expense, merger and acquisition-related costs, litigation settlements and other items. See the attached tables for a reconciliation of Adjusted EBITDA SG&A to Revenue, which is the most directly comparable GAAP financial measure. The Company believes Adjusted EBITDA Gross Profit and Adjusted EBITDA SG&A serve as appropriate measures in evaluating the performance of its business and helps its investors better compare its operating performance with its competitors.

RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
 
 
 
August 28, 2021 February 27, 2021
ASSETS
Current assets:
Cash and cash equivalents

$

146,564

 

$

160,902

 

Accounts receivable, net

 

1,662,445

 

 

1,462,441

 

Inventories, net of LIFO reserve of $477,873 and $485,859

 

1,891,975

 

 

1,864,890

 

Prepaid expenses and other current assets

 

107,504

 

 

106,941

 

Current assets held for sale

 

24,294

 

 

-

 

Total current assets

 

3,832,782

 

 

3,595,174

 

Property, plant and equipment, net

 

1,024,091

 

 

1,080,499

 

Operating lease right-of-use assets

 

2,974,846

 

 

3,064,077

 

Goodwill

 

1,108,136

 

 

1,108,136

 

Other intangibles, net

 

315,833

 

 

340,519

 

Deferred tax assets

 

14,964

 

 

14,964

 

Other assets

 

92,938

 

 

132,035

 

Total assets

$

9,363,590

 

$

9,335,404

 

 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and lease financing obligations

$

6,726

 

$

6,409

 

Accounts payable

 

1,523,582

 

 

1,437,421

 

Accrued salaries, wages and other current liabilities

 

741,436

 

 

642,364

 

Current portion of operating lease liabilities

 

519,402

 

 

516,752

 

Total current liabilities

 

2,791,146

 

 

2,602,946

 

Long-term debt, less current maturities

 

3,114,351

 

 

3,063,087

 

Long-term operating lease liabilities

 

2,728,390

 

 

2,829,293

 

Lease financing obligations, less current maturities

 

15,723

 

 

16,711

 

Other noncurrent liabilities

 

208,695

 

 

208,213

 

Total liabilities

 

8,858,305

 

 

8,720,250

 

 
Commitments and contingencies

 

-

 

 

-

 

Stockholders' equity:
Common stock

 

55,732

 

 

55,143

 

Additional paid-in capital

 

5,899,795

 

 

5,897,168

 

Accumulated deficit

 

(5,426,461

)

 

(5,313,103

)

Accumulated other comprehensive loss

 

(23,781

)

 

(24,054

)

Total stockholders' equity

 

505,285

 

 

615,154

 

Total liabilities and stockholders' equity

$

9,363,590

 

$

9,335,404

 

RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
 

Thirteen weeks ended

August 28, 2021

Thirteen weeks ended

August 29, 2020

Revenues

$

6,113,000

 

$

5,981,970

 

Costs and expenses:
Cost of revenues

 

4,867,076

 

 

4,821,625

 

Selling, general and administrative expenses

 

1,267,753

 

 

1,116,142

 

Facility exit and impairment charges

 

11,353

 

 

11,528

 

Interest expense

 

48,592

 

 

50,007

 

Loss (gain) on debt modifications and retirements, net

 

2,839

 

 

(5,274

)

Loss on sale of assets, net

 

12,378

 

 

1,092

 

 

 

6,209,991

 

 

5,995,120

 

 
Loss from continuing operations before income taxes

 

(96,991

)

 

(13,150

)

Income tax expense

 

3,310

 

 

47

 

Net loss from continuing operations

 

(100,301

)

 

(13,197

)

Net income from discontinued operations, net of tax

 

-

 

 

-

 

Net loss

$

(100,301

)

$

(13,197

)

 
 
 
Basic and diluted loss per share:
 
Numerator for loss per share:
Net loss from continuing operations attributable to common stockholders - basic and diluted

$

(100,301

)

$

(13,197

)

Net income from discontinued operations attributable to common stockholders - basic and diluted

 

-

 

 

-

 

Loss attributable to common stockholders - basic and diluted

$

(100,301

)

$

(13,197

)

 
 
 
Denominator:
Basic and diluted weighted average shares

 

53,989

 

 

53,573

 

 
Basic and diluted loss per share
Continuing operations

$

(1.86

)

$

(0.25

)

Discontinued operations

$

-

 

$

-

 

Net basic and diluted loss per share

$

(1.86

)

$

(0.25

)

RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
 
Twenty-six weeks ended

August 28, 2021
Twenty-six weeks ended

August 29, 2020
Revenues

$

12,273,985

 

$

12,009,346

 

Costs and expenses:
Cost of revenues

 

9,743,186

 

 

9,650,682

 

Selling, general and administrative expenses

 

2,513,115

 

 

2,313,289

 

Facility exit and impairment charges

 

20,184

 

 

15,281

 

Intangible asset impairment charges

 

-

 

 

29,852

 

Interest expense

 

97,713

 

 

100,554

 

Loss (gain) on debt modifications and retirements, net

 

3,235

 

 

(5,274

)

Loss (gain) on sale of assets, net

 

5,820

 

 

(1,168

)

 

 

12,383,253

 

 

12,103,216

 

 
Loss from continuing operations before income taxes

 

(109,268

)

 

(93,870

)

Income tax expense (benefit)

 

4,090

 

 

(7,971

)

Net loss from continuing operations

 

(113,358

)

 

(85,899

)

Net income from discontinued operations, net of tax

 

-

 

 

9,161

 

Net loss

$

(113,358

)

$

(76,738

)

 
 
 
Basic and diluted loss per share:
 
Numerator for loss per share:
Net loss from continuing operations attributable to common stockholders - basic and diluted

$

(113,358

)

$

(85,899

)

Net income from discontinued operations attributable to common stockholders - basic and diluted

 

-

 

 

9,161

 

Loss attributable to common stockholders - basic and diluted

$

(113,358

)

$

(76,738

)

 
 
 
Denominator:
Basic and diluted weighted average shares

 

53,920

 

 

53,528

 

 
Basic and diluted loss per share
Continuing operations

$

(2.10

)

$

(1.60

)

Discontinued operations

$

-

 

$

0.17

 

Net basic and diluted loss per share

$

(2.10

)

$

(1.43

)

RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
 
 

Thirteen weeks ended

August 28, 2021

Thirteen weeks ended

August 29, 2020

 
 
OPERATING ACTIVITIES:
Net loss

$

(100,301

)

$

(13,197

)

Net income from discontinued operations, net of tax

 

-

 

 

-

 

Net loss from continuing operations

$

(100,301

)

$

(13,197

)

Adjustments to reconcile to net cash provided by (used in) operating activities of continuing operations:
Depreciation and amortization

 

73,859

 

 

87,117

 

Facility exit and impairment charges

 

11,353

 

 

11,528

 

LIFO credit

 

(3,993

)

 

(8,750

)

Loss on sale of assets, net

 

12,378

 

 

1,092

 

Stock-based compensation expense

 

5,792

 

 

3,936

 

Loss (gain) on debt modifications and retirements, net

 

2,839

 

 

(5,274

)

Changes in operating assets and liabilities:
Accounts receivable

 

(63,368

)

 

(327,919

)

Inventories

 

(31,014

)

 

(39,174

)

Accounts payable

 

40,797

 

 

(11,372

)

Operating lease right-of-use assets and operating lease liabilities

 

(6,400

)

 

(11,898

)

Other assets

 

17,207

 

 

(19,664

)

Other liabilities

 

66,574

 

 

(24,747

)

Net cash provided by (used in) operating activities of continuing operations

 

25,723

 

 

(358,322

)

INVESTING ACTIVITIES:
Payments for property, plant and equipment

 

(46,192

)

 

(34,626

)

Intangible assets acquired

 

(9,043

)

 

(11,857

)

Proceeds from insured loss

 

10,436

 

 

12,500

 

Proceeds from dispositions of assets and investments

 

2,228

 

 

3,155

 

Proceeds from sale-leaseback transactions

 

6,729

 

 

8,461

 

Net cash used in investing activities of continuing operations

 

(35,842

)

 

(22,367

)

FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt

 

350,000

 

 

849,918

 

Net proceeds from revolver

 

211,000

 

 

408,000

 

Principal payments on long-term debt

 

(451,047

)

 

(1,054,884

)

Change in zero balance cash accounts

 

(52,801

)

 

(262

)

Financing fees paid for early debt redemption

 

(831

)

 

(2,399

)

Payments for taxes related to net share settlement of equity awards

 

(2,186

)

 

(2,002

)

Deferred financing costs paid

 

(15,932

)

 

(13,268

)

Net cash provided by financing activities of continuing operations

 

38,203

 

 

185,103

 

Cash flows from discontinued operations:
Operating activities of discontinued operations

 

-

 

 

-

 

Investing activities of discontinued operations

 

-

 

 

-

 

Net cash provided by discontinued operations

 

-

 

 

-

 

Increase (decrease) in cash and cash equivalents

 

28,084

 

 

(195,586

)

Cash and cash equivalents, beginning of period

 

118,480

 

 

288,316

 

Cash and cash equivalents, end of period

$

146,564

 

$

92,730

 

RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
 
 
Twenty-six weeks ended

August 28, 2021
Twenty-six weeks ended

August 29, 2020
 
 
OPERATING ACTIVITIES:
Net loss

$

(113,358

)

$

(76,738

)

Net income from discontinued operations, net of tax

 

-

 

 

9,161

 

Net loss from continuing operations

$

(113,358

)

$

(85,899

)

Adjustments to reconcile to net cash provided by (used in) operating activities of continuing operations:
Depreciation and amortization

 

149,718

 

 

166,220

 

Facility exit and impairment charges

 

20,184

 

 

15,281

 

Intangible asset impairment charges

 

-

 

 

29,852

 

LIFO credit

 

(7,986

)

 

(20,816

)

Loss (gain) on sale of assets, net

 

5,820

 

 

(1,168

)

Stock-based compensation expense

 

8,603

 

 

5,810

 

Loss (gain) on debt modifications and retirements, net

 

3,235

 

 

(5,274

)

Changes in operating assets and liabilities:
Accounts receivable

 

(212,855

)

 

(636,555

)

Inventories

 

(19,096

)

 

4,473

 

Accounts payable

 

91,324

 

 

1,948

 

Operating lease right-of-use assets and operating lease liabilities

 

(12,309

)

 

(18,493

)

Other assets

 

25,185

 

 

79,513

 

Other liabilities

 

101,133

 

 

(11,484

)

Net cash provided by (used in) operating activities of continuing operations

 

39,598

 

 

(476,592

)

INVESTING ACTIVITIES:
Payments for property, plant and equipment

 

(105,356

)

 

(63,085

)

Intangible assets acquired

 

(14,479

)

 

(22,572

)

Proceeds from insured loss

 

10,436

 

 

12,500

 

Proceeds from dispositions of assets and investments

 

4,676

 

 

5,910

 

Proceeds from sale-leaseback transactions

 

14,185

 

 

8,461

 

Net cash used in investing activities of continuing operations

 

(90,538

)

 

(58,786

)

FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt

 

350,000

 

 

849,918

 

Net proceeds from revolver

 

250,000

 

 

650,000

 

Principal payments on long-term debt

 

(542,988

)

 

(1,056,182

)

Change in zero balance cash accounts

 

(844

)

 

(26,829

)

Financing fees paid for early debt redemption

 

(833

)

 

(2,399

)

Payments for taxes related to net share settlement of equity awards

 

(2,221

)

 

(2,101

)

Deferred financing costs paid

 

(16,512

)

 

(14,600

)

Net cash provided by financing activities of continuing operations

 

36,602

 

 

397,807

 

Cash flows from discontinued operations:
Operating activities of discontinued operations

 

-

 

 

(82,189

)

Investing activities of discontinued operations

 

-

 

 

94,310

 

Net cash provided by discontinued operations

 

-

 

 

12,121

 

Decrease in cash and cash equivalents

 

(14,338

)

 

(125,450

)

Cash and cash equivalents, beginning of period

 

160,902

 

 

218,180

 

Cash and cash equivalents, end of period

$

146,564

 

$

92,730

 

RITE AID CORPORATION AND SUBSIDIARIES
 
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 
 
Thirteen weeks ended

August 28, 2021
Thirteen weeks ended

August 29, 2020
 
Retail Pharmacy Segment
Revenues from continuing operations (a)

$

4,277,218

 

$

4,017,912

 

Cost of revenues from continuing operations (a)

 

3,136,856

 

 

2,955,999

 

Gross profit from continuing operations

 

1,140,362

 

 

1,061,913

 

LIFO credit from continuing operations

 

(3,993

)

 

(8,750

)

FIFO gross profit from continuing operations

 

1,136,369

 

 

1,053,163

 

Adjusted EBITDA gross profit from continuing operations

 

1,138,913

 

 

1,056,222

 

 
Gross profit as a percentage of revenues - continuing operations

 

26.66

%

 

26.43

%

LIFO credit as a percentage of revenues - continuing operations

 

-0.09

%

 

-0.22

%

FIFO gross profit as a percentage of revenues - continuing operations

 

26.57

%

 

26.21

%

Adjusted EBITDA gross profit as a percentage of revenues - continuing operations

 

26.63

%

 

26.29

%

 
Selling, general and administrative expenses from continuing operations

 

1,163,352

 

 

1,030,075

 

Adjusted EBITDA selling, general and administrative expenses from continuing operations

 

1,069,544

 

 

933,882

 

Selling, general and administrative expenses as a percentage of revenues - continuing operations

 

27.20

%

 

25.64

%

Adjusted EBITDA selling, general and administrative expenses as a percentage of revenues - continuing operations

 

25.01

%

 

23.24

%

 
Cash interest expense

 

45,599

 

 

46,767

 

Non-cash interest expense

 

2,993

 

 

3,240

 

Total interest expense

 

48,592

 

 

50,007

 

Interest expense - continuing operations

 

48,592

 

 

50,007

 

Interest expense - discontinued operations

 

-

 

 

-

 

 
Adjusted EBITDA - continuing operations

 

69,369

 

 

122,340

 

Adjusted EBITDA as a percentage of revenues - continuing operations

 

1.62

%

 

3.04

%

 
 
Pharmacy Services Segment
Revenues (a)

$

1,898,213

 

$

2,038,378

 

Cost of revenues (a)

 

1,792,651

 

 

1,939,946

 

Gross profit

 

105,562

 

 

98,432

 

 
Gross profit as a percentage of revenues

 

5.56

%

 

4.83

%

 
Adjusted EBITDA

 

36,791

 

 

29,263

 

Adjusted EBITDA as a percentage of revenues

 

1.94

%

 

1.44

%

(a) - Revenues and cost of revenues include $62,431 and $74,320 of inter-segment activity for the thirteen weeks ended August 28, 2021 and August 29, 2020, respectively, that is eliminated in consolidation.
RITE AID CORPORATION AND SUBSIDIARIES
 
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 
 
Twenty-six weeks ended

August 28, 2021
Twenty-six weeks ended

August 29, 2020
 
Retail Pharmacy Segment
Revenues from continuing operations (a)

$

8,628,900

 

$

8,141,183

 

Cost of revenues from continuing operations (a)

 

6,318,604

 

 

5,997,734

 

Gross profit from continuing operations

 

2,310,296

 

 

2,143,449

 

LIFO credit from continuing operations

 

(7,986

)

 

(20,816

)

FIFO gross profit from continuing operations

 

2,302,310

 

 

2,122,633

 

Adjusted EBITDA gross profit from continuing operations

 

2,307,251

 

 

2,154,649

 

 
Gross profit as a percentage of revenues - continuing operations

 

26.77

%

 

26.33

%

LIFO credit as a percentage of revenues - continuing operations

 

-0.09

%

 

-0.26

%

FIFO gross profit as a percentage of revenues - continuing operations

 

26.68

%

 

26.07

%

Adjusted EBITDA gross profit as a percentage of revenues - continuing operations

 

26.74

%

 

26.47

%

 
Selling, general and administrative expenses from continuing operations

 

2,319,391

 

 

2,139,051

 

Adjusted EBITDA selling, general and administrative expenses from continuing operations

 

2,142,968

 

 

1,969,327

 

Selling, general and administrative expenses as a percentage of revenues - continuing operations

 

26.88

%

 

26.27

%

Adjusted EBITDA selling, general and administrative expenses as a percentage of revenues - continuing operations

 

24.83

%

 

24.19

%

 
Cash interest expense

 

91,623

 

 

94,135

 

Non-cash interest expense

 

6,090

 

 

6,419

 

Total interest expense

 

97,713

 

 

100,554

 

Interest expense - continuing operations

 

97,713

 

 

100,554

 

Interest expense - discontinued operations

 

-

 

 

-

 

 
Adjusted EBITDA - continuing operations

 

164,283

 

 

185,322

 

Adjusted EBITDA as a percentage of revenues - continuing operations

 

1.90

%

 

2.28

%

 
 
Pharmacy Services Segment
Revenues (a)

$

3,770,495

 

$

4,015,624

 

Cost of revenues (a)

 

3,549,992

 

 

3,800,409

 

Gross profit

 

220,503

 

 

215,215

 

 
Gross profit as a percentage of revenues

 

5.85

%

 

5.36

%

 
Adjusted EBITDA

 

80,754

 

 

73,673

 

Adjusted EBITDA as a percentage of revenues

 

2.14

%

 

1.83

%

(a) - Revenues and cost of revenues include $125,410 and $147,461 of inter-segment activity for the twenty-six weeks ended August 28, 2021 and August 29, 2020, respectively, that is eliminated in consolidation.
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(In thousands)
(unaudited)
 
 
 
Thirteen weeks ended

August 28, 2021
Thirteen weeks ended

August 29, 2020
 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss - continuing operations

$

(100,301

)

$

(13,197

)

Adjustments:
Interest expense

 

48,592

 

 

50,007

 

Income tax expense

 

3,310

 

 

47

 

Depreciation and amortization

 

73,859

 

 

87,117

 

LIFO credit

 

(3,993

)

 

(8,750

)

Facility exit and impairment charges

 

11,353

 

 

11,528

 

Loss (gain) on debt modifications and retirements, net

 

2,839

 

 

(5,274

)

Merger and Acquisition-related costs

 

4,591

 

 

-

 

Stock-based compensation expense

 

5,792

 

 

3,936

 

Restructuring-related costs

 

9,584

 

 

23,186

 

Inventory write-downs related to store closings

 

798

 

 

1,058

 

Litigation settlements

 

34,212

 

 

-

 

Loss on sale of assets, net

 

12,378

 

 

1,092

 

Other

 

3,146

 

 

853

 

Adjusted EBITDA - continuing operations

$

106,160

 

$

151,603

 

Percent of revenues - continuing operations

 

1.74

%

 

2.53

%

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(In thousands)
(unaudited)
 
 
 
Twenty-six weeks ended

August 28, 2021
Twenty-six weeks ended

August 29, 2020
 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss - continuing operations

$

(113,358

)

$

(85,899

)

Adjustments:
Interest expense

 

97,713

 

 

100,554

 

Income tax expense (benefit)

 

4,090

 

 

(7,971

)

Depreciation and amortization

 

149,718

 

 

166,220

 

LIFO credit

 

(7,986

)

 

(20,816

)

Facility exit and impairment charges

 

20,184

 

 

15,281

 

Intangible asset impairment charges

 

-

 

 

29,852

 

Loss (gain) on debt modifications and retirements, net

 

3,235

 

 

(5,274

)

Merger and Acquisition-related costs

 

8,477

 

 

-

 

Stock-based compensation expense

 

8,603

 

 

5,810

 

Restructuring-related costs

 

15,516

 

 

58,921

 

Inventory write-downs related to store closings

 

1,270

 

 

1,892

 

Litigation settlements

 

48,212

 

 

-

 

Loss (gain) on sale of assets, net

 

5,820

 

 

(1,168

)

Other

 

3,543

 

 

1,593

 

Adjusted EBITDA - continuing operations

$

245,037

 

$

258,995

 

Percent of revenues - continuing operations

 

2.00

%

 

2.16

%

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET (LOSS) INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
Thirteen weeks ended

August 28, 2021
Thirteen weeks ended

August 29, 2020
 
Net loss from continuing operations

$

(100,301

)

$

(13,197

)

Add back - Income tax expense

 

3,310

 

 

47

 

Loss before income taxes - continuing operations

 

(96,991

)

 

(13,150

)

 
Adjustments:
Amortization expense

 

19,953

 

 

22,695

 

LIFO credit

 

(3,993

)

 

(8,750

)

Loss (gain) on debt modifications and retirements, net

 

2,839

 

 

(5,274

)

Merger and Acquisition-related costs

 

4,591

 

 

-

 

Restructuring-related costs

 

9,584

 

 

23,186

 

Litigation settlements

 

34,212

 

 

-

 

 
Adjusted (loss) income before income taxes - continuing operations

 

(29,805

)

 

18,707

 

 
Adjusted income tax (benefit) expense (a)

 

(7,839

)

 

5,171

 

Adjusted net (loss) income from continuing operations

$

(21,966

)

$

13,536

 

 
Adjusted net (loss) income per diluted share - continuing operations:
 
Numerator for adjusted net (loss) income per diluted share:
Adjusted net (loss) income from continuing operations

$

(21,966

)

$

13,536

 

 
 
 
Denominator:
Basic weighted average shares

 

53,989

 

 

53,573

 

Outstanding options and restricted shares, net

 

-

 

 

842

 

Diluted weighted average shares

 

53,989

 

 

54,415

 

 
Net loss from continuing operations per diluted share - continuing operations

$

(1.86

)

$

(0.25

)

 
 
Adjusted net (loss) income per diluted share - continuing operations

$

(0.41

)

$

0.25

 

(a) The fiscal year 2022 and 2021 annual effective tax rates, calculated using a federal rate plus a net state rate that excluded the impact of state NOL's, state credits and valuation allowance, was used for the thirteen weeks ended August 28, 2021 and August 29, 2020, respectively.
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET (LOSS) INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
Twenty-six weeks ended

August 28, 2021
Twenty-six weeks ended

August 29, 2020
 
Net loss from continuing operations

$

(113,358

)

$

(85,899

)

Add back - Income tax expense (benefit)

 

4,090

 

 

(7,971

)

Loss before income taxes - continuing operations

 

(109,268

)

 

(93,870

)

 
Adjustments:
Amortization expense

 

40,413

 

 

47,115

 

LIFO credit

 

(7,986

)

 

(20,816

)

Intangible asset impairment charges

 

-

 

 

29,852

 

Loss (gain) on debt modifications and retirements, net

 

3,235

 

 

(5,274

)

Merger and Acquisition-related costs

 

8,477

 

 

-

 

Restructuring-related costs

 

15,516

 

 

58,921

 

Litigation settlements

 

48,212

 

 

-

 

 
Adjusted (loss) income before income taxes - continuing operations

 

(1,401

)

 

15,928

 

 
Adjusted income tax (benefit) expense (a)

 

(368

)

 

4,402

 

Adjusted net (loss) income from continuing operations

$

(1,033

)

$

11,526

 

 
Adjusted net (loss) income per diluted share - continuing operations:
 
Numerator for adjusted net (loss) income per diluted share:
Adjusted net (loss) income from continuing operations

$

(1,033

)

$

11,526

 

 
 
 
Denominator:
Basic weighted average shares

 

53,920

 

 

53,528

 

Outstanding options and restricted shares, net

 

-

 

 

775

 

Diluted weighted average shares

 

53,920

 

 

54,303

 

 
Net loss from continuing operations per diluted share - continuing operations

$

(2.10

)

$

(1.60

)

 
 
Adjusted net (loss) income per diluted share - continuing operations

$

(0.02

)

$

0.21

 

(a) The fiscal year 2022 and 2021 annual effective tax rates, calculated using a federal rate plus a net state rate that excluded the impact of state NOL's, state credits and valuation allowance, was used for the twenty-six weeks ended August 28, 2021 and August 29, 2020, respectively.
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND RECONCILIATION OF ADJUSTED EBITDA SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT
(In thousands)
(unaudited)
 
 
 
Thirteen weeks ended

August 28, 2021
Thirteen weeks ended

August 29, 2020
 
 
Reconciliation of adjusted EBITDA gross profit:
Revenues

$

4,277,218

 

$

4,017,912

 

Gross Profit

 

1,140,362

 

 

1,061,913

 

Addback:
LIFO credit

 

(3,993

)

 

(8,750

)

Depreciation and amortization (cost of goods sold portion only)

 

1,950

 

 

2,167

 

Other

 

594

 

 

892

 

Adjusted EBITDA gross profit - continuing operations

$

1,138,913

 

$

1,056,222

 

Percent of revenues - continuing operations

 

26.63

%

 

26.29

%

 
 
 
Reconciliation of adjusted EBITDA selling, general and administrative expenses:
Revenues

$

4,277,218

 

$

4,017,912

 

Selling, general and administrative expenses

 

1,163,352

 

 

1,030,075

 

Less:
Depreciation and amortization (SG&A portion only)

 

59,081

 

 

70,884

 

Stock-based compensation expense

 

5,695

 

 

3,631

 

Merger and Acquisition-related costs

 

4,591

 

 

-

 

Restructuring-related costs

 

2,584

 

 

20,441

 

Litigation settlements

 

18,448

 

 

-

 

Other

 

3,409

 

 

1,237

 

Adjusted EBITDA selling, general and administrative expenses - continuing operations

$

1,069,544

 

$

933,882

 

Percent of revenues - continuing operations

 

25.01

%

 

23.24

%

 
 
 
Adjusted EBITDA - continuing operations

$

69,369

 

$

122,340

 

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND RECONCILIATION OF ADJUSTED EBITDA SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT
(In thousands)
(unaudited)
 
 
 
Twenty-six weeks ended

August 28, 2021
Twenty-six weeks ended

August 29, 2020
 
 
Reconciliation of adjusted EBITDA gross profit:
Revenues

$ 8,628,900

$ 8,141,183

Gross Profit

2,310,296

2,143,449

Addback:
LIFO credit

(7,986)

(20,816)

Depreciation and amortization (cost of goods sold portion only)

4,047

4,830

Restructuring-related costs - SKU optimization charges

-

25,763

Other

894

1,423

Adjusted EBITDA gross profit - continuing operations

$ 2,307,251

$ 2,154,649

Percent of revenues - continuing operations

26.74%

26.47%

 
 
 
Reconciliation of adjusted EBITDA selling, general and administrative expenses:
Revenues

$ 8,628,900

$ 8,141,183

Selling, general and administrative expenses

2,319,391

2,139,051

Less:
Depreciation and amortization (SG&A portion only)

118,849

131,793

Stock-based compensation expense

8,466

5,356

Merger and Acquisition-related costs

8,477

-

Restructuring-related costs

4,205

30,387

Litigation settlements

32,448

-

Other

3,978

2,188

Adjusted EBITDA selling, general and administrative expenses - continuing operations

$ 2,142,968

$ 1,969,327

Percent of revenues - continuing operations

24.83%

24.19%

 
 
 
Adjusted EBITDA - continuing operations

$ 164,283

$ 185,322

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE
YEAR ENDING FEBRUARY 26, 2022
(In thousands)
(unaudited)
 
 
Guidance Range
Low High
 
Total Revenues

$

25,100,000

 

$

25,500,000

 

 
PBM Revenues

$

7,700,000

 

$

7,800,000

 

 
Gross Capital Expenditures

$

300,000

 

$

300,000

 

 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss

$

(221,000

)

$

(197,000

)

Adjustments:
Interest expense

 

198,000

 

 

198,000

 

Income tax expense

 

-

 

 

3,000

 

Depreciation and amortization

 

300,000

 

 

300,000

 

LIFO credit

 

(16,000

)

 

(16,000

)

Facility exit and impairment charges

 

87,700

 

 

97,700

 

Loss on debt modifications and retirements, net

 

3,200

 

 

3,200

 

Merger and Acquisition-related costs

 

11,000

 

 

11,000

 

Restructuring-related costs

 

30,000

 

 

30,000

 

Litigation settlements

 

48,200

 

 

48,200

 

Gain on sale of assets, net

 

(6,100

)

 

(3,100

)

Other

 

25,000

 

 

25,000

 

Adjusted EBITDA

$

460,000

 

$

500,000

 

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET LOSS GUIDANCE
YEAR ENDING FEBRUARY 26, 2022
(In thousands)
(unaudited)
 
 
 
Guidance Range
Low High
 
Net loss

$

(221,000

)

$

(197,000

)

Add back - income tax expense

 

-

 

 

3,000

 

Loss before income taxes

 

(221,000

)

 

(194,000

)

 
Adjustments:
Amortization expense

 

79,000

 

 

79,000

 

LIFO credit

 

(16,000

)

 

(16,000

)

Loss on debt modifications and retirements, net

 

3,200

 

 

3,200

 

Merger and Acquisition-related costs

 

11,000

 

 

11,000

 

Restructuring-related costs

 

30,000

 

 

30,000

 

Litigation settlements

 

48,200

 

 

48,200

 

 
Adjusted loss before adjusted income taxes

 

(65,600

)

 

(38,600

)

 
Adjusted income tax benefit

 

(17,000

)

 

(10,000

)

Adjusted net loss

$

(48,600

)

$

(28,600

)

 
 
Diluted adjusted net loss per share

$

(0.90

)

$

(0.53

)

 

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