(Source: Business Wire)
Rite Aid Corporation (NYSE: RAD) today reported revenues of $6.3 billion
and a net loss of $116.0 million or $.14 per diluted share for its
fiscal second quarter ended August 29, 2009. Adjusted EBITDA was $216.5
million or 3.4 percent of revenues.
Second Quarter Highlights
Both pharmacy same store sales and the number of prescriptions filled
continued to increase, by 0.8 percent and 1.4 percent respectively. A
274 basis point increase in generic dispensing year over year
negatively impacted sales.
Significant reduction in selling, general and administrative expenses
as a percent of sales continued with SG&A 135 basis points lower than
last year's second quarter.
Significant progress made in reducing inventory continued with FIFO
inventory $351.1 million lower year over year.
Liquidity remained strong with $822.3 million of availability on the
company's credit and accounts receivable facilities at quarter end.
"We again made significant progress on many of our key initiatives,
reducing both SG&A and controlling inventory, and finished the quarter
with strong liquidity. We increased the number of prescriptions filled,
but our pharmacy results were negatively impacted by additional pressure
on pharmacy margins. A more discount-driven customer buying more items
on sale continued to have a negative impact on front end results.
"Because we expect these negative trends and a tough economy to continue
throughout the second half of the year, we have lowered our outlook for
fiscal 2010. We're focusing on growing profitable sales and will
continue to control expenses. We expect liquidity to remain strong," she
said.
Second Quarter Summary
Revenues for the 13-week second quarter were $6.3 billion versus
revenues of $6.5 billion in the prior-year second quarter. Revenues
declined 2.7 percent, primarily as a result of store closings and a
decline in front-end same store sales.
Same store sales for the quarter decreased 1.1 percent over the
prior-year 13-week period, consisting of a 4.9 percent decrease in the
front end and a 0.8 percent increase in pharmacy. The number of
prescriptions filled increased 1.4 percent. Prescription sales accounted
for 68.1 percent of total drugstore sales, and third party prescription
revenue was 96.3 percent of pharmacy sales.
Excluding the acquired Brooks Eckerd stores, same store sales for the
13-week second quarter decreased 0.6 percent over the prior-year period
with front-end decreasing 4.9 percent and pharmacy growing 2.0 percent.
At the former Brooks Eckerd stores, same store sales for the 13-week
second quarter decreased 2.3 percent over the prior-year period with
front end decreasing 4.7 percent and pharmacy decreasing 1.4 percent.
Net loss for the quarter was $116.0 million or $.14 per diluted share
compared to last year's second quarter net loss of $222.0 million and
$.27 per diluted share.
Adjusted EBITDA was $216.5 million or 3.4 percent of revenues for the
second quarter compared to $219.9 million or 3.4 percent of revenues for
the like period last year. Improvement in SG&A offset most of the
decrease in sales and gross margin. As previously disclosed, adjusted
EBITDA for the prior year second quarter reflects a $4.6 million
reclassification of accounts receivable securitization fees as interest
expense to make it comparable to the current period.
In the second quarter the company opened 3 stores, relocated 10 stores,
remodeled 1 store and closed 16 stores. Stores in operation at the end
of the second quarter totaled 4,812.
Company Lowers Fiscal 2010 Outlook
Based on expectations for a continued weak economy with high
unemployment negatively impacting front end sales along with increased
pressure on pharmacy gross margins, Rite Aid has lowered its fiscal 2010
guidance.
Total sales are expected to be between $25.7 billion and $26.2 billion
in fiscal 2010 with same store sales ranging from a decrease of 1.0
percent to an increase of 1.0 percent over fiscal 2009. Adjusted EBITDA
(which is reconciled to net loss on the attached table) is expected to
be between $900 million and $1 billion. Net loss for fiscal 2010 is
expected to be between $390 million and $615 million or a loss per
diluted share of $.48 to $.74. Guidance for capital expenditures remains
at approximately $250 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 for 48 hours beginning at 12 p.m. Eastern Time
today until 11:59 p.m. Eastern Time on September 26. The playback number
is 1-800-642-1687 from within the U.S. and Canada or 1-706-645-9291 from
outside the U.S. and Canada with the eight-digit reservation number
27203163.
Rite Aid Corporation is one of the nation's leading drugstore chains
with more than 4,800 stores in 31 states and the District of Columbia
and fiscal 2009 annual revenues of more than $26.3 billion. Information
about Rite Aid, including corporate background and press releases, is
available through the company's website at www.riteaid.com.
This press release contains forward-looking statements, including
guidance, which are subject to certain risks and uncertainties that
could cause actual results to differ materially from those expressed or
implied in the forward-looking statements. Factors that could cause
actual results to differ materially from those expressed or implied in
such forward-looking statements include our high level of indebtedness,
our ability to make interest and principal payments on our debt and
satisfy the other covenants contained in our senior secured credit
facility and other debt agreements; general economic conditions,
inflation and interest rate movements; our ability to improve the
operating performance of our stores in accordance with our long term
strategy, our ability to realize same store sales growth for the
acquired Brooks Eckerd stores; our ability to hire and retain
pharmacists and other store personnel; the efforts of private and public
third-party payors to reduce prescription drug reimbursements and
encourage mail order; competitive pricing pressures, including
aggressive promotional activity from our competitors; decisions to close
additional stores and distribution centers, which could result in
further charges to our operating statement; our ability to manage
expenses; our ability to realize the benefits from actions to further
reduce costs and investment in working capital; continued consolidation
of the drugstore industry; changes in state or federal legislation or
regulations and the outcome of lawsuits and governmental investigations.
Consequently, all of the forward-looking statements made in this press
release, including our guidance, are qualified by these and other
factors, risks and uncertainties. Readers are also directed to consider
other risks and uncertainties discussed in documents filed by the
Company with the Securities and Exchange Commission. Forward-looking
statements can be identified through the use of words such as "may",
"will", "intend", "plan", "project", "expect", "anticipate", "could",
"should", "would", "believe", "estimate", "contemplate", and "possible".
See the attached table for a reconciliation of a non-GAAP financial
measure, Adjusted EBITDA to net income (loss), the most comparable GAAP
financial measure. We define Adjusted EBITDA as net income (loss) from
operations excluding the impact of income taxes, interest expense and
securitization costs, depreciation and amortization, LIFO adjustments,
charges or credits for store closing and impairment, inventory
write-downs related to closed stores, stock-based compensation expense,
debt modifications and retirements, sale of assets and investments, and
other non-recurring items. We reference this non-GAAP financial measure
frequently in our decision-making because it provides supplemental
information that facilitates internal comparisons to the historical
operating performance of prior periods and external comparisons to
competitors' historical operating performance. In addition, incentive
compensation is based on Adjusted EBITDA and we base our forward-looking
estimates on Adjusted EBITDA to facilitate quantification of planned
business activities and enhance subsequent follow-up with comparisons of
actual to planned Adjusted EBITDA.We include this non-GAAP financial
measure in our earnings announcement in order to provide transparency to
our investors and enable investors to better compare our operating
performance with the operating performance of our competitors.
RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
August 29, 2009 February 28, 2009
ASSETS
Current assets:
Cash and cash equivalents $ 121,007 $ 152,035
Accounts receivable, net 621,336 526,742
Inventories, net of LIFO reserve of $776,007 and $746,467 3,423,956 3,509,494
Prepaid expenses and other current assets 98,342 176,661
Total current assets 4,264,641 4,364,932
Property, plant and equipment, net 2,460,790 2,587,356
Other intangibles, net 917,429 1,017,011
Other assets 409,818 357,241
Total assets $ 8,052,678 $ 8,326,540
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt and lease financing obligations $ 50,345 $ 40,683
Accounts payable 1,233,771 1,256,982
Accrued salaries, wages and other current liabilities 1,042,294 1,004,762
Total current liabilities 2,326,410 2,302,427
Long-term debt, less current maturities 5,712,547 5,801,230
Lease financing obligations, less current maturities 151,749 169,796
Other noncurrent liabilities 1,262,501 1,252,739
Total liabilities 9,453,207 9,526,192
Commitments and contingencies - -
Stockholders' deficit:
Preferred stock - Series G 1 1
Preferred stock - Series H 147,836 143,498
Common stock 887,951 886,113
Additional paid-in capital 4,270,496 4,265,211
Accumulated deficit (6,667,143 ) (6,452,696 )
Accumulated other comprehensive loss (39,670 ) (41,779 )
Total stockholders' deficit (1,400,529 ) (1,199,652 )
Total liabilities and stockholders' deficit $ 8,052,678 $ 8,326,540
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RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
Thirteen weeks Thirteen weeks
ended August 29, ended August 30,
2009 2008
Revenues $ 6,321,870 $ 6,500,244
Costs and expenses:
Cost of goods sold 4,633,595 4,722,070
Selling, general and administrative expenses 1,645,913 1,780,631
Lease termination and impairment charges 28,752 51,825
Interest expense 128,828 118,565
Loss on debt modifications and retirements, net 993 36,197
(Gain) loss on sale of assets, net (4,188 ) 7,607
6,433,893 6,716,895
Loss before income taxes (112,023 ) (216,651 )
Income tax expense 3,989 5,346
Net loss $ (116,012 ) $ (221,997 )
Basic and diluted loss per share:
Numerator for loss per share:
Net loss $ (116,012 ) $ (221,997 )
Accretion of redeemable preferred stock (26 ) (26 )
Cumulative preferred stock dividends (4,338 ) (5,368 )
Loss attributable to common stockholders - basic and diluted $ (120,376 ) $ (227,391 )
Basic and diluted weighted average shares 880,683 837,913
Basic and diluted loss per share $ (0.14 ) $ (0.27 )
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RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
Twenty-six weeks Twenty-six weeks
ended August 29, ended August 30,
2009 2008
Revenues $ 12,853,048 $ 13,113,100
Costs and expenses:
Cost of goods sold 9,390,707 9,526,680
Selling, general and administrative expenses 3,356,585 3,573,605
Lease termination and impairment charges 95,738 88,087
Interest expense 238,306 236,805
Loss on debt modifications and retirements, net 993 39,905
(Gain) loss on sale of assets, net (24,139 ) 12,947
13,058,190 13,478,029
Loss from continuing operations before income taxes (205,142 ) (364,929 )
Income tax expense 9,316 10,339
Net loss from continuing operations (214,458 ) (375,268 )
Loss from discontinued operations - (3,369 )
Net loss $ (214,458 ) $ (378,637 )
Basic and diluted loss per share:
Numerator for loss per share:
Net loss $ (214,458 ) $ (378,637 )
Accretion of redeemable preferred stock (51 ) (51 )
Cumulative preferred stock dividends (4,338 ) (11,490 )
Loss attributable to common stockholders - basic and diluted $ (218,847 ) $ (390,178 )
Basic and diluted weighted average shares 880,179 830,499
Basic and diluted loss per share $ (0.25 ) $ (0.47 )
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RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OPERATING AND CASH FLOW INFORMATION
(Dollars in thousands, except per share amounts)
(unaudited)
Thirteen weeks ended Thirteen weeks ended
August 29, 2009 August 30, 2008
SUPPLEMENTAL OPERATING INFORMATION
Revenues $ 6,321,870 $ 6,500,244
Cost of goods sold 4,633,595 4,722,070
Gross profit 1,688,275 1,778,174
LIFO charge 14,770 15,094
FIFO gross profit 1,703,045 1,793,268
Gross profit as a percentage of revenues 26.71 % 27.36 %
LIFO charge as a percentage of revenues 0.23 % 0.23 %
FIFO gross profit as a percentage of revenues 26.94 % 27.59 %
Selling, general and administrative expenses 1,645,913 1,780,631
Selling, general and administrative expenses as a percentage of revenues 26.04 % 27.39 %
Cash interest expense 118,761 112,915
Non-cash interest expense 10,067 5,650
Total interest expense 128,828 118,565
Securitization costs (included in SG&A) 14,055 4,646
Total interest expense and securitization costs 142,883 123,211
Adjusted EBITDA 216,535 219,897
Adjusted EBITDA as a percentage of revenues 3.43 % 3.38 %
Net loss (116,012 ) (221,997 )
Net loss as a percentage of revenues -1.84 % -3.42 %
Total debt 5,914,641 6,216,637
Accounts receivable securitization facility 395,520 500,000
Total debt including accounts receivable facility 6,310,161 6,716,637
SUPPLEMENTAL CASH FLOW INFORMATION
Payments for property, plant and equipment 38,895 153,079
Intangible assets acquired 1,482 25,342
Total cash capital expenditures 40,377 178,421
Equipment received for noncash consideration 7,019 20,231
Equipment financed under capital leases 33 3,105
Gross capital expenditures $ 47,429 $ 201,757
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RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OPERATING AND CASH FLOW INFORMATION
(Dollars in thousands, except per share amounts)
(unaudited)
Twenty-six weeks Twenty-six weeks
ended August 29, ended August 30,
2009 2008
SUPPLEMENTAL OPERATING INFORMATION
Revenues $ 12,853,048 $ 13,113,100
Cost of goods sold 9,390,707 9,526,680
Gross profit 3,462,341 3,586,420
LIFO charge 29,540 30,188
FIFO gross profit 3,491,881 3,616,608
Gross profit as a percentage of revenues 26.94 % 27.35 %
LIFO charge as a percentage of revenues 0.23 % 0.23 %
FIFO gross profit as a percentage of revenues 27.17 % 27.58 %
Selling, general and administrative expenses 3,356,585 3,573,605
Selling, general and administrative expenses as a percentage of revenues 26.12 % 27.25 %
Cash interest expense 220,584 225,813
Non-cash interest expense 17,722 10,992
Total interest expense 238,306 236,805
Securitization costs (included in SG&A) 28,500 9,309
Total interest expense and securitization costs 266,806 246,114
Adjusted EBITDA 465,731 460,989
Adjusted EBITDA as a percentage of revenues 3.62 % 3.52 %
Net loss (214,458 ) (378,637 )
Net loss as a percentage of revenues -1.67 % -2.89 %
Total debt 5,914,641 6,216,637
Accounts receivable securitization facility 395,520 500,000
Total debt including accounts receivable facility 6,310,161 6,716,637
SUPPLEMENTAL CASH FLOW INFORMATION
Payments for property, plant and equipment 81,199 302,955
Intangible assets acquired 3,447 61,464
Total cash capital expenditures 84,646 364,419
Equipment received for noncash consideration 7,838 22,232
Equipment financed under capital leases 185 4,336
Gross capital expenditures $ 92,669 $ 390,987
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RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(In thousands)
Thirteen weeks Thirteen weeks
ended August 29, ended August 30,
2009 2008
Reconciliation of net loss to Adjusted EBITDA:
Net loss $ (116,012 ) $ (221,997 )
Adjustments:
Interest expense and securitization costs (a) 142,883 123,211
Income tax expense 3,989 5,346
Depreciation and amortization 133,522 150,901
LIFO charges (b) 14,770 15,094
Lease termination and impairment charges 28,752 51,825
Stock-based compensation expense 6,092 7,524
(Gain) loss on sale of assets, net (4,188 ) 7,607
Loss on debt modifications and retirements, net 993 36,197
Incremental acquisition costs (c) - 32,385
Closed store liquidation expense (d) 1,890 5,675
Severance costs 2,053 -
Other 1,791 6,129
Adjusted EBITDA (a) $ 216,535 $ 219,897
Percent of revenues 3.43 % 3.38 %
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Notes:
(a) Securitization costs of $4,646 for the thirteen weeks ended August 30, 2008 have been excluded from Adjusted EBITDA.
(b) Represents non-cash charges to value our inventories under the last-in first-out ("LIFO") method.
(c) Represents incremental costs related to the acquisition of Jean Coutu, USA.
(d) Represents costs to liquidate inventory at stores that are in the process of closing.
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RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(In thousands)
Twenty-six weeksended August 29,2009 Twenty-six weeksended August 30,2008
Reconciliation of net loss to Adjusted EBITDA:
Net loss $ (214,458 ) $ (378,637 )
Adjustments:
Interest expense and securitization costs (a) 266,806 246,114
Income tax expense 9,316 10,339
Depreciation and amortization 271,760 295,942
LIFO charges (b) 29,540 30,188
Lease termination and impairment charges 95,738 88,087
Stock-based compensation expense 12,509 16,203
(Gain) loss on sale of assets, net (24,139 ) 12,995
Loss on debt modifications and retirements, net 993 39,905
Incremental acquisition costs (c) - 76,876
Closed store liquidation expense (d) 7,869 10,535
Severance costs 6,049 -
Other 3,748 12,442
Adjusted EBITDA (a) $ 465,731 $ 460,989
Percent of revenues 3.62 % 3.52 %
Results of discontinued operations (e) - 1,882
Adjusted EBITDA from continuing operations $ 465,731 $ 462,871
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Notes:
(a) Securitization costs of $9,309 for the twenty-six weeks ended August 30, 2008 have been excluded from Adjusted EBITDA.
(b) Represents non-cash charges to value our inventories under the last-in first-out ("LIFO") method.
(c) Represents incremental costs related to the acquisition of Jean Coutu, USA.
(d) Represents costs to liquidate inventory at stores that are in the process of closing.
(e) Represents losses from our disposed Las Vegas market that are included in prior year's Adjusted EBITDA.
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RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
Thirteen weeksended August29, 2009 Thirteen weeksended August30, 2008
OPERATING ACTIVITIES:
Net loss $ (116,012 ) $ (221,997 )
Adjustments to reconcile to net cash (used in) provided by operating activities:
Depreciation and amortization 133,522 150,901
Lease termination and impairment charges 28,752 51,825
LIFO charges 14,770 15,094
(Gain) loss on sale of assets, net (4,188 ) 7,607
Stock-based compensation expense 6,092 7,524
Loss on debt modifications and retirements, net 993 36,197
Proceeds from insured loss 63 -
Changes in operating assets and liabilities:
Net repayments to accounts receivable securitization (125,000 ) (5,000 )
Accounts receivable 111,168 56,587
Inventories (82,936 ) (44,091 )
Accounts payable (16,163 ) 133,900
Other assets and liabilities, net (97,917 ) (92,428 )
Net cash (used in) provided by operating activities (146,856 ) 96,119
INVESTING ACTIVITIES:
Payments for property, plant and equipment (38,895 ) (153,079 )
Intangible assets acquired (1,482 ) (25,342 )
Proceeds from sale-leaseback transactions 6,532 73,933
Proceeds from dispositions of assets and investments 6,878 13,953
Net cash used in investing activities (26,967 ) (90,535 )
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 906,604 740,764
Net payments to revolver (535,000 ) (22,000 )
Principal payments on long-term debt (152,398 ) (700,225 )
Proceeds from financing secured by owned property - 20,134
Change in zero balance cash accounts (15,690 ) 14,518
Payments for preferred stock dividends - (831 )
Financing costs paid (45,145 ) (39,873 )
Net cash provided by financing activities 158,371 12,487
(Decrease) increase in cash and cash equivalents (15,452 ) 18,071
Cash and cash equivalents, beginning of period 136,459 152,189
Cash and cash equivalents, end of period $ 121,007 $ 170,260
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RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
Twenty-sixweeks endedAugust 29, 2009 Twenty-sixweeks endedAugust 30, 2008
OPERATING ACTIVITIES:
Net loss $ (214,458 ) $ (378,637 )
Adjustments to reconcile to net cash provided by (used in) operating activities:
Depreciation and amortization 271,760 295,942
Lease termination and impairment charges 95,738 88,087
LIFO charges 29,540 30,188
(Gain) loss on sale of assets, net (24,139 ) 12,995
Stock-based compensation expense 12,509 16,203
Loss on debt modifications and retirements, net 993 39,905
Proceeds from insured loss 1,380 -
Changes in operating assets and liabilities:
Net (repayments to) proceeds from accounts receivable securitization (155,000 ) 65,000
Accounts receivable 56,886 7,745
Inventories 55,039 (95,194 )
Accounts payable 37,003 16,971
Other assets and liabilities, net 43,491 (108,414 )
Net cash provided by (used in) operating activities 210,742 (9,209 )
INVESTING ACTIVITIES:
Payments for property, plant and equipment (81,199 ) (302,955 )
Intangible assets acquired (3,447 ) (61,464 )
Expenditures for business acquisition - (112 )
Proceeds from sale-leaseback transactions 6,532 161,553
Proceeds from dispositions of assets and investments 35,698 18,629
Net cash used in investing activities (42,416 ) (184,349 )
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 906,604 898,764
Net (payments to) proceeds from revolver (838,000 ) 164,000
Principal payments on long-term debt (159,890 ) (855,190 )
Proceeds from financing secured by owned property - 31,266
Change in zero balance cash accounts (62,923 ) 20,060
Net proceeds from the issuance of common stock - 1,117
Payments for preferred stock dividends - (2,488 )
Financing costs paid (45,145 ) (49,473 )
Net cash (used in) provided by financing activities (199,354 ) 208,056
(Decrease) increase in cash and cash equivalents (31,028 ) 14,498
Cash and cash equivalents, beginning of period 152,035 155,762
Cash and cash equivalents, end of period $ 121,007 $ 170,260
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RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE
YEAR ENDING FEBRUARY 27, 2010
(In thousands, except per share amounts)
Guidance Range
Low High
Sales $ 25,700,000 $ 26,200,000
Same store sales -1.00 % 1.00 %
Gross capital expenditures $ 250,000 $ 250,000
Reconciliation of net loss to Adjusted EBITDA:
Net loss $ (615,000 ) $ (390,000 )
Adjustments:
Interest expense and securitization costs 585,000 570,000
Income tax expense 17,000 16,000
Depreciation and amortization 565,000 545,000
LIFO charge 70,000 50,000
Store closing, liquidation, and impairment charges 242,000 204,000
Stock-based compensation expense 25,000 20,000
Other 11,000 (15,000 )
Adjusted EBITDA $ 900,000 $ 1,000,000
Diluted loss per share $ (0.74 ) $ (0.48 )
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