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Share Name | Share Symbol | Market | Type |
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Rite Aid Corp | NYSE:RAD | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0.6483 | 0 | 01:00:00 |
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
View source 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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