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Rite Aid Corporation Reports Fiscal 2022 Third Quarter Results

December 21, 2021
  • Revenues from Continuing Operations Increased 1.8 Percent to $6.23 Billion Compared to Prior Year Third Quarter Revenues from Continuing Operations of $6.12 Billion
  • Third Quarter Net Loss from Continuing Operations of $36.1 Million or $0.67 Per Share, Compared to the Prior Year Third Quarter Net Income of $4.3 Million or $0.08 Per Share
  • Third Quarter Adjusted Net Income from Continuing Operations of $8.2 Million or $0.15 Per Share, Compared to the Prior Year Third Quarter Adjusted Net Income of $21.6 Million or $0.40 Per Share
  • Third Quarter Adjusted EBITDA from Continuing Operations Increased 12.7 Percent to $154.8 Million, Compared to the Prior Year Third Quarter Adjusted EBITDA of $137.4 Million
  • Rite Aid Raises Adjusted EBITDA Guidance for Fiscal 2022
  • Company Announces Rebate Aggregation Agreement between Elixir and Prime Therapeutics
  • Company Announces Store Closure Plan to Reduce Costs and Improve Profitability

Rite Aid Corporation (NYSE: RAD) today reported operating results for its third fiscal quarter ended November 27, 2021.

(Photo: Business Wire)

(Photo: Business Wire)

For the third quarter, the company reported net loss from continuing operations of $36.1 million, or $0.67 loss per share, Adjusted net income from continuing operations of $8.2 million, or $0.15 income per share, and Adjusted EBITDA from continuing operations of $154.8 million, or 2.5 percent of revenues.

“We delivered a solid quarter as we grew Adjusted EBITDA by 12.7 percent versus last year,” said Heyward Donigan, president and chief executive officer, Rite Aid. “Despite challenges in the labor market, our pharmacists and store teams were able to meet the unprecedented volumes for COVID and flu immunizations, COVID testing and other clinical services, which clearly demonstrates our Lean work to free up capacity is paying off.”

“We have also taken steps to drive increased value for all of Elixir’s PBM clients by entering into a new rebate aggregation agreement with Prime Therapeutics. In addition to the benefit to clients, this partnership will enable Elixir to be more competitive in the marketplace and improve profit margins.”

“Today, we also announced the first phase of a store closure program to reduce costs, drive improved profitability and ensure that we have a healthy foundation to grow from, with the right stores in the right locations, for the communities we serve and for our business. We have identified an initial 63 stores for closure that is expected to provide an annual EBITDA benefit of approximately $25 million.”

“We are encouraged by our recent momentum and expect to deliver a significant increase in our fourth quarter Adjusted EBITDA results compared to last year. As a result, we are raising our guidance for Adjusted EBITDA for Fiscal 2022.”

“Finally, I want to thank each and every one of our associates for everything they do. It is my greatest privilege to work alongside such a tremendous team, and I am forever grateful for their passion and commitment to our company, our customers and each other.”

Consolidated Third Quarter Summary

(dollars in thousands)

 

Thirteen Week Period Ended

 

Thirty-nine Week Period Ended

 

 

 

November 27, 2021

 

 

November 28, 2020

 

 

November 27, 2021

 

 

November 28, 2020

Revenues from continuing operations

 

$

6,228,880

 

$

6,117,038

 

$

18,502,865

 

$

18,126,384

Net (loss) income from continuing operations

 

 

(36,058)

 

 

4,324

 

 

(149,416)

 

 

(81,575)

Adjusted EBITDA from continuing operations

 

 

154,793

 

 

137,405

 

 

399,830

 

 

396,400

Revenues from continuing operations for the quarter were $6.23 billion compared to revenues from continuing operations of $6.12 billion in the prior year’s quarter. The 1.8 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 $36.1 million, or $0.67 per share, compared to last year’s third quarter net income from continuing operations of $4.3 million, or $0.08 per share. The increase in net loss is due primarily to higher facility exit and impairment charges driven by the Company’s store closure decisions. Other variance drivers include a LIFO charge in the current quarter compared to a LIFO credit in the prior year third quarter and a lower gain on the sale of assets. These items were partially offset by an increase in Adjusted EBITDA and lower depreciation and amortization expense.

Retail Pharmacy Segment

(dollars in thousands)

 

Thirteen Week Period Ended

 

Thirty-nine Week Period Ended

 

 

 

November 27, 2021

 

 

November 28, 2020

 

 

November 27, 2021

 

 

November 28, 2020

Revenues from continuing operations

 

$

4,432,508

 

$

4,109,592

 

$

13,061,408

 

$

12,250,775

Adjusted EBITDA from continuing operations

 

 

125,931

 

 

88,557

 

 

290,214

 

 

273,879

Retail Pharmacy Segment revenues from continuing operations increased 7.9 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 third quarter increased 4.4 percent over the prior year period, consisting of a 5.9 percent increase in pharmacy sales and a 0.4 percent increase in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 1.0 percent. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 7.9 percent over the prior year period. In addition to the benefit from 4 million COVID-19 vaccinations, maintenance prescriptions increased 1.7 percent while other acute prescriptions increased 3.9 percent on a same store basis when excluding COVID-19, flu and all other ancillary vaccinations. Prescription sales from continuing operations accounted for 71.1 percent of total drugstore sales. Total store count at the end of the third quarter was 2,488.

Retail Pharmacy Segment Adjusted EBITDA from continuing operations was $125.9 million, or 2.8 percent of revenues, for the third quarter compared to last year’s third quarter Adjusted EBITDA from continuing operations of $88.6 million, or 2.2 percent of revenues. The increase in Adjusted EBITDA was due to increased gross profit, partially offset by an increase in selling, general and administrative (SG&A) expenses. Gross profit benefited from higher pharmacy same store sales, including immunizations, partially offset by pharmacy reimbursement rate pressures that were not fully offset by generic drug cost reductions and an increase in front-end gross profit resulting from higher front-end same store sales and a reduction in markdowns. SG&A expenses were negatively impacted by incremental payroll costs to support COVID immunizations, increases in bonus expense for store, field and corporate associates, increases in workers compensation costs and cycling the benefit from the prior year change to modernize our associate PTO plans.

Pharmacy Services Segment

(dollars in thousands)

 

Thirteen Week Period Ended

 

Thirty-nine Week Period Ended

 

 

 

November 27, 2021

 

 

November 28, 2020

 

 

November 27, 2021

 

 

November 28, 2020

Revenues from continuing operations

 

$

1,858,830

 

$

2,084,402

 

$

5,629,325

 

$

6,100,026

Adjusted EBITDA from continuing operations

 

 

28,862

 

 

48,848

 

 

109,616

 

 

122,521

Pharmacy Services Segment revenues were $1.9 billion for the quarter, a decrease of 10.8 percent compared to the prior year quarter. The decrease in revenues was primarily the result of a planned decrease in Elixir Insurance membership and a previously announced client loss.

Pharmacy Services Segment Adjusted EBITDA from continuing operations was $28.9 million, or 1.6 percent of revenues, for the third quarter compared to last year’s third quarter Adjusted EBITDA from continuing operations of $48.8 million, or 2.3 percent of revenues. Gross profit dollars were negatively impacted from the decline in revenues, a reduction in rebates and an increase in the Medical Loss Ratio at Elixir Insurance. SG&A expenses improved due to reduced payroll and a reduction in broker commissions.

Retail Store Base Assessment

Rite Aid is conducting a rigorous assessment of its store base and has implemented a store closure program. The program’s primary focus is to reduce costs, drive improved profitability and ensure that Rite Aid has a healthy foundation to grow from, with the right stores in the right locations, for the communities it serves and for its business.

As a result of this ongoing review, Rite Aid identified 63 stores for closure that is expected to provide an annual EBITDA benefit of approximately $25 million. The closures began this past November. Associates impacted by these store closures are being offered the opportunity to transfer to another store. The review work will continue, and the Company anticipates the number of closures to increase as it finalizes the review over the next several months.

Outlook for Fiscal 2022

As a result of the momentum in the third 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 $24.4 billion and $24.7 billion in fiscal 2022. Pharmacy Services Segment revenue is expected to be between $7.1 billion and $7.2 billion (net of any intercompany revenues to the Retail Pharmacy Segment).

Net loss is expected to be between $230 million and $189 million.

Adjusted EBITDA is expected to be between $500 million and $520 million.

Adjusted net loss per share is expected to be between $0.49 and $0.04.

Capital expenditures are expected to be approximately $275 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 Tuesday, Dec. 21, 2021 and ending at 11:59 p.m. Eastern Time on Jan. 21, 2022. To access the replay of the call, telephone (800) 585-8367 or (416) 621-4642 and enter the seven-digit reservation number 1787289. 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 2,400 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; Rite Aid’s store closure program; 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 prolonged impact of the COVID-19 global pandemic and the emerging new variants, including the 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 store closure program 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), 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, federal, state and local governmental policies and initiatives designed to reduce the transmission of COVID-19 and emerging new variants 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, restructuring-related costs, and the loss on Bartell acquisition. 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, gain or loss on sale of assets, and the loss on Bartell acquisition). 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)
 
November 27, 2021 February 27, 2021
ASSETS
Current assets:
Cash and cash equivalents

$

155,289

 

$

160,902

 

Accounts receivable, net

 

1,844,234

 

 

1,462,441

 

Inventories, net of LIFO reserve of $486,759 and $485,859

 

1,949,841

 

 

1,864,890

 

Prepaid expenses and other current assets

 

106,666

 

 

106,941

 

Total current assets

 

4,056,030

 

 

3,595,174

 

Property, plant and equipment, net

 

1,014,662

 

 

1,080,499

 

Operating lease right-of-use assets

 

2,915,748

 

 

3,064,077

 

Goodwill

 

1,108,136

 

 

1,108,136

 

Other intangibles, net

 

307,345

 

 

340,519

 

Deferred tax assets

 

14,964

 

 

14,964

 

Other assets

 

82,239

 

 

132,035

 

Total assets

$

9,499,124

 

$

9,335,404

 

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

$

6,119

 

$

6,409

 

Accounts payable

 

1,547,770

 

 

1,437,421

 

Accrued salaries, wages and other current liabilities

 

873,201

 

 

642,364

 

Current portion of operating lease liabilities

 

522,272

 

 

516,752

 

Total current liabilities

 

2,949,362

 

 

2,602,946

 

Long-term debt, less current maturities

 

3,167,060

 

 

3,063,087

 

Long-term operating lease liabilities

 

2,692,669

 

 

2,829,293

 

Lease financing obligations, less current maturities

 

15,270

 

 

16,711

 

Other noncurrent liabilities

 

202,734

 

 

208,213

 

Total liabilities

 

9,027,095

 

 

8,720,250

 

 
Commitments and contingencies

 

-

 

 

-

 

Stockholders' equity:
Common stock

 

55,761

 

 

55,143

 

Additional paid-in capital

 

5,902,445

 

 

5,897,168

 

Accumulated deficit

 

(5,462,519

)

 

(5,313,103

)

Accumulated other comprehensive loss

 

(23,658

)

 

(24,054

)

Total stockholders' equity

 

472,029

 

 

615,154

 

Total liabilities and stockholders' equity

$

9,499,124

 

$

9,335,404

 

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

Thirteen weeks ended

November 27, 2021

Thirteen weeks ended

November 28, 2020

Revenues

$

6,228,880

 

$

6,117,038

 

Costs and expenses:
Cost of revenues

 

4,894,497

 

 

4,913,939

 

Selling, general and administrative expenses

 

1,276,920

 

 

1,156,355

 

Facility exit and impairment charges

 

47,455

 

 

7,453

 

Interest expense

 

47,794

 

 

50,835

 

Gain on sale of assets, net

 

(5,899

)

 

(16,305

)

Loss on Bartell acquisition

 

5,346

 

 

-

 

 

 

6,266,113

 

 

6,112,277

 

 
(Loss) income from continuing operations before income taxes

 

(37,233

)

 

4,761

 

Income tax (benefit) expense

 

(1,175

)

 

437

 

Net (loss) income from continuing operations

 

(36,058

)

 

4,324

 

Net income from discontinued operations, net of tax

 

-

 

 

-

 

Net (loss) income

$

(36,058

)

$

4,324

 

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

$

(36,058

)

$

4,324

 

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

 

-

 

 

-

 

(Loss) income attributable to common stockholders - basic and diluted

$

(36,058

)

$

4,324

 

 
Denominator:
Basic weighted average shares

 

54,168

 

 

53,744

 

Outstanding options and restricted shares, net

 

-

 

 

335

 

Diluted weighted average shares

 

54,168

 

 

54,079

 

 
Basic and diluted (loss) income per share
Continuing operations

$

(0.67

)

$

0.08

 

Discontinued operations

$

-

 

$

-

 

Net basic and diluted (loss) income per share

$

(0.67

)

$

0.08

 

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

 

 

Thirty-nine weeks ended

November 27, 2021

Thirty-nine weeks ended

November 28, 2020

Revenues

$

18,502,865

 

$

18,126,384

 

Costs and expenses:
Cost of revenues

 

14,637,683

 

 

14,564,621

 

Selling, general and administrative expenses

 

3,790,035

 

 

3,469,644

 

Facility exit and impairment charges

 

67,639

 

 

22,734

 

Intangible asset impairment charges

 

-

 

 

29,852

 

Interest expense

 

145,507

 

 

151,389

 

Loss (gain) on debt modifications and retirements, net

 

3,235

 

 

(5,274

)

Gain on sale of assets, net

 

(79

)

 

(17,473

)

Loss on Bartell acquisition

 

5,346

 

 

-

 

 

 

18,649,366

 

 

18,215,493

 

 
Loss from continuing operations before income taxes

 

(146,501

)

 

(89,109

)

Income tax expense (benefit)

 

2,915

 

 

(7,534

)

Net loss from continuing operations

 

(149,416

)

 

(81,575

)

Net income from discontinued operations, net of tax

 

-

 

 

9,161

 

Net loss

$

(149,416

)

$

(72,414

)

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

$

(149,416

)

$

(81,575

)

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

 

-

 

 

9,161

 

Loss attributable to common stockholders - basic and diluted

$

(149,416

)

$

(72,414

)

 
Denominator:
Basic and diluted weighted average shares

 

54,004

 

 

53,600

 

 
Basic and diluted loss per share
Continuing operations

$

(2.77

)

$

(1.52

)

Discontinued operations

$

-

 

$

0.17

 

Net basic and diluted loss per share

$

(2.77

)

$

(1.35

)

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

Thirteen weeks ended

November 27, 2021

Thirteen weeks ended

November 28, 2020

 
OPERATING ACTIVITIES:
Net (loss) income

$

(36,058

)

$

4,324

 

Net income from discontinued operations, net of tax

 

-

 

 

-

 

Net (loss) income from continuing operations

$

(36,058

)

$

4,324

 

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

 

72,973

 

 

83,336

 

Facility exit and impairment charges

 

47,455

 

 

7,453

 

LIFO charge (credit)

 

8,886

 

 

(9,487

)

Gain on sale of assets, net

 

(5,899

)

 

(16,305

)

Loss on Bartell acquisition

 

5,346

 

 

-

 

Stock-based compensation expense

 

217

 

 

2,867

 

Changes in deferred taxes

 

(1,602

)

 

-

 

Changes in operating assets and liabilities:
Accounts receivable

 

(185,224

)

 

128,777

 

Inventories

 

(68,054

)

 

(24,005

)

Accounts payable

 

38,112

 

 

(488

)

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

 

(7,208

)

 

(6,826

)

Other assets

 

9,761

 

 

(4,248

)

Other liabilities

 

118,257

 

 

57,351

 

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

 

(3,038

)

 

222,749

 

INVESTING ACTIVITIES:
Payments for property, plant and equipment

 

(39,645

)

 

(64,304

)

Intangible assets acquired

 

(9,810

)

 

(6,131

)

Proceeds from dispositions of assets and investments

 

3,145

 

 

3,176

 

Proceeds from sale-leaseback transactions

 

25,605

 

 

80,551

 

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

 

(20,705

)

 

13,292

 

FINANCING ACTIVITIES:
Net proceeds from (payments to) revolver

 

50,000

 

 

(309,000

)

Principal payments on long-term debt

 

(1,032

)

 

(1,194

)

Change in zero balance cash accounts

 

(14,243

)

 

32,374

 

Payments for taxes related to net share settlement of equity awards

 

(131

)

 

(64

)

Deferred financing costs paid

 

(2,126

)

 

(74

)

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

 

32,468

 

 

(277,958

)

Increase (decrease) in cash and cash equivalents

 

8,725

 

 

(41,917

)

Cash and cash equivalents, beginning of period

 

146,564

 

 

92,730

 

Cash and cash equivalents, end of period

$

155,289

 

$

50,813

 

 
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
Thirty-nine weeks ended
November 27, 2021
Thirty-nine weeks ended
November 28, 2020
 
OPERATING ACTIVITIES:
Net loss

$

(149,416

)

$

(72,414

)

Net income from discontinued operations, net of tax

 

-

 

 

9,161

 

Net loss from continuing operations

$

(149,416

)

$

(81,575

)

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

 

222,691

 

 

249,556

 

Facility exit and impairment charges

 

67,639

 

 

22,734

 

Intangible asset impairment charges

 

-

 

 

29,852

 

LIFO charge (credit)

 

900

 

 

(30,303

)

Gain on sale of assets, net

 

(79

)

 

(17,473

)

Loss on Bartell acquisition

 

5,346

 

 

-

 

Stock-based compensation expense

 

8,820

 

 

8,677

 

Loss (gain) on debt modifications and retirements, net

 

3,235

 

 

(5,274

)

Changes in deferred taxes

 

(1,602

)

 

-

 

Changes in operating assets and liabilities:
Accounts receivable

 

(398,079

)

 

(507,778

)

Inventories

 

(87,150

)

 

(19,532

)

Accounts payable

 

129,436

 

 

1,460

 

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

 

(19,517

)

 

(25,319

)

Other assets

 

34,946

 

 

75,265

 

Other liabilities

 

219,390

 

 

45,867

 

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

 

36,560

 

 

(253,843

)

INVESTING ACTIVITIES:
Payments for property, plant and equipment

 

(145,001

)

 

(127,389

)

Intangible assets acquired

 

(24,289

)

 

(28,703

)

Proceeds from insured loss

 

10,436

 

 

12,500

 

Proceeds from dispositions of assets and investments

 

7,821

 

 

9,086

 

Proceeds from sale-leaseback transactions

 

39,790

 

 

89,012

 

Net cash used in investing activities of continuing operations

 

(111,243

)

 

(45,494

)

FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt

 

350,000

 

 

849,918

 

Net proceeds from revolver

 

300,000

 

 

341,000

 

Principal payments on long-term debt

 

(544,020

)

 

(1,057,376

)

Change in zero balance cash accounts

 

(15,087

)

 

5,545

 

Financing fees paid for early debt redemption

 

(833

)

 

(2,399

)

Payments for taxes related to net share settlement of equity awards

 

(2,352

)

 

(2,165

)

Deferred financing costs paid

 

(18,638

)

 

(14,674

)

Net cash provided by financing activities of continuing operations

 

69,070

 

 

119,849

 

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

 

(5,613

)

 

(167,367

)

Cash and cash equivalents, beginning of period

 

160,902

 

 

218,180

 

Cash and cash equivalents, end of period

$

155,289

 

$

50,813

 

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

Thirteen weeks ended

November 27, 2021

Thirteen weeks ended

November 28, 2020

 
Retail Pharmacy Segment
Revenues from continuing operations (a)

$

4,432,508

 

$

4,109,592

 

Cost of revenues from continuing operations (a)

 

3,199,271

 

 

3,029,884

 

Gross profit from continuing operations

 

1,233,237

 

 

1,079,708

 

LIFO charge (credit) from continuing operations

 

8,886

 

 

(9,487

)

FIFO gross profit from continuing operations

 

1,242,123

 

 

1,070,221

 

Adjusted EBITDA gross profit from continuing operations

 

1,244,637

 

 

1,072,547

 

 
Gross profit as a percentage of revenues - continuing operations

 

27.82

%

 

26.27

%

LIFO charge (credit) as a percentage of revenues - continuing operations

 

0.20

%

 

-0.23

%

FIFO gross profit as a percentage of revenues - continuing operations

 

28.02

%

 

26.04

%

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

 

28.08

%

 

26.10

%

 
Selling, general and administrative expenses from continuing operations

 

1,185,974

 

 

1,067,027

 

Adjusted EBITDA selling, general and administrative expenses from continuing operations

 

1,118,706

 

 

983,990

 

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

 

26.76

%

 

25.96

%

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

 

25.24

%

 

23.94

%

 
Cash interest expense

 

44,853

 

 

47,500

 

Non-cash interest expense

 

2,941

 

 

3,335

 

Total interest expense

 

47,794

 

 

50,835

 

Interest expense - continuing operations

 

47,794

 

 

50,835

 

Interest expense - discontinued operations

 

-

 

 

-

 

 
Adjusted EBITDA - continuing operations

 

125,931

 

 

88,557

 

Adjusted EBITDA as a percentage of revenues - continuing operations

 

2.84

%

 

2.15

%

 
Pharmacy Services Segment
Revenues (a)

$

1,858,830

 

$

2,084,402

 

Cost of revenues (a)

 

1,757,684

 

 

1,961,011

 

Gross profit

 

101,146

 

 

123,391

 

 
Gross profit as a percentage of revenues

 

5.44

%

 

5.92

%

 
Adjusted EBITDA

 

28,862

 

 

48,848

 

Adjusted EBITDA as a percentage of revenues

 

1.55

%

 

2.34

%

(a) -

Revenues and cost of revenues include $62,458 and $76,956 of inter-segment activity for the thirteen weeks ended November 27, 2021 and November 28, 2020, respectively, that is eliminated in consolidation.
 
RITE AID CORPORATION AND SUBSIDIARIES
 
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 

Thirty-nine weeks ended

November 27, 2021

Thirty-nine weeks ended

November 28, 2020

 
Retail Pharmacy Segment
Revenues from continuing operations (a)

$

13,061,408

 

$

12,250,775

 

Cost of revenues from continuing operations (a)

 

9,517,875

 

 

9,027,618

 

Gross profit from continuing operations

 

3,543,533

 

 

3,223,157

 

LIFO charge (credit) from continuing operations

 

900

 

 

(30,303

)

FIFO gross profit from continuing operations

 

3,544,433

 

 

3,192,854

 

Adjusted EBITDA gross profit from continuing operations

 

3,551,888

 

 

3,227,196

 

 
Gross profit as a percentage of revenues - continuing operations

 

27.13

%

 

26.31

%

LIFO charge (credit) as a percentage of revenues - continuing operations

 

0.01

%

 

-0.25

%

FIFO gross profit as a percentage of revenues - continuing operations

 

27.14

%

 

26.06

%

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

 

27.19

%

 

26.34

%

 
Selling, general and administrative expenses from continuing operations

 

3,505,365

 

 

3,206,078

 

Adjusted EBITDA selling, general and administrative expenses from continuing operations

 

3,261,674

 

 

2,953,317

 

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

 

26.84

%

 

26.17

%

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

 

24.97

%

 

24.11

%

 
Cash interest expense

 

136,476

 

 

141,635

 

Non-cash interest expense

 

9,031

 

 

9,754

 

Total interest expense

 

145,507

 

 

151,389

 

Interest expense - continuing operations

 

145,507

 

 

151,389

 

Interest expense - discontinued operations

 

-

 

 

-

 

 
Adjusted EBITDA - continuing operations

 

290,214

 

 

273,879

 

Adjusted EBITDA as a percentage of revenues - continuing operations

 

2.22

%

 

2.24

%

 
Pharmacy Services Segment
Revenues (a)

$

5,629,325

 

$

6,100,026

 

Cost of revenues (a)

 

5,307,676

 

 

5,761,420

 

Gross profit

 

321,649

 

 

338,606

 

 
Gross profit as a percentage of revenues

 

5.71

%

 

5.55

%

 
Adjusted EBITDA

 

109,616

 

 

122,521

 

Adjusted EBITDA as a percentage of revenues

 

1.95

%

 

2.01

%

(a) -

Revenues and cost of revenues include $187,868 and $224,417 of inter-segment activity for the thirty-nine weeks ended November 27, 2021 and November 28, 2020, respectively, that is eliminated in consolidation.
 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED EBITDA
(In thousands)
(unaudited)
 

Thirteen weeks ended

November 27, 2021

Thirteen weeks ended

November 28, 2020

 
Reconciliation of net (loss) income to adjusted EBITDA:
Net (loss) income - continuing operations

$

(36,058

)

$

4,324

 

Adjustments:
Interest expense

 

47,794

 

 

50,835

 

Income tax (benefit) expense

 

(1,175

)

 

437

 

Depreciation and amortization

 

72,973

 

 

83,336

 

LIFO charge (credit)

 

8,886

 

 

(9,487

)

Facility exit and impairment charges

 

47,455

 

 

7,453

 

Merger and Acquisition-related costs

 

3,642

 

 

1,136

 

Stock-based compensation expense

 

217

 

 

2,867

 

Restructuring-related costs

 

9,657

 

 

12,175

 

Inventory write-downs related to store closings

 

86

 

 

704

 

Litigation settlements

 

2,000

 

 

-

 

Gain on sale of assets, net

 

(5,899

)

 

(16,305

)

Loss on Bartell acquisition

 

5,346

 

 

-

 

Other

 

(131

)

 

(70

)

Adjusted EBITDA - continuing operations

$

154,793

 

$

137,405

 

Percent of revenues - continuing operations

 

2.49

%

 

2.25

%

 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(In thousands)
(unaudited)
 

Thirty-nine weeks ended

November 27, 2021

Thirty-nine weeks ended

November 28, 2020

 
Reconciliation of net loss to adjusted EBITDA:
Net loss - continuing operations

$

(149,416

)

$

(81,575

)

Adjustments:
Interest expense

 

145,507

 

 

151,389

 

Income tax expense (benefit)

 

2,915

 

 

(7,534

)

Depreciation and amortization

 

222,691

 

 

249,556

 

LIFO charge (credit)

 

900

 

 

(30,303

)

Facility exit and impairment charges

 

67,639

 

 

22,734

 

Intangible asset impairment charges

 

-

 

 

29,852

 

Loss (gain) on debt modifications and retirements, net

 

3,235

 

 

(5,274

)

Merger and Acquisition-related costs

 

12,119

 

 

1,136

 

Stock-based compensation expense

 

8,820

 

 

8,677

 

Restructuring-related costs

 

25,173

 

 

71,096

 

Inventory write-downs related to store closings

 

1,356

 

 

2,596

 

Litigation settlements

 

50,212

 

 

-

 

Gain on sale of assets, net

 

(79

)

 

(17,473

)

Loss on Bartell acquisition

 

5,346

 

 

-

 

Other

 

3,412

 

 

1,523

 

Adjusted EBITDA - continuing operations

$

399,830

 

$

396,400

 

Percent of revenues - continuing operations

 

2.16

%

 

2.19

%

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

Thirteen weeks ended

November 27, 2021

Thirteen weeks ended

November 28, 2020

 
Net (loss) income from continuing operations

$

(36,058

)

$

4,324

 

Add back - Income tax (benefit) expense

 

(1,175

)

 

437

 

(Loss) income before income taxes - continuing operations

 

(37,233

)

 

4,761

 

 
Adjustments:
Amortization expense

 

18,780

 

 

21,236

 

LIFO charge (credit)

 

8,886

 

 

(9,487

)

Merger and Acquisition-related costs

 

3,642

 

 

1,136

 

Restructuring-related costs

 

9,657

 

 

12,175

 

Loss on Bartell acquisition

 

5,346

 

 

-

 

Litigation settlements

 

2,000

 

 

-

 

 
Adjusted income before income taxes - continuing operations

 

11,078

 

 

29,821

 

 
Adjusted income tax expense (a)

 

2,914

 

 

8,243

 

Adjusted net income from continuing operations

$

8,164

 

$

21,578

 

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

$

8,164

 

$

21,578

 

 
 
Denominator:
Basic weighted average shares

 

54,168

 

 

53,744

 

Outstanding options and restricted shares, net

 

541

 

 

335

 

Diluted weighted average shares

 

54,709

 

 

54,079

 

 
Net (loss) income from continuing operations per diluted
share - continuing operations

$

(0.67

)

$

0.08

 

 
Adjusted net income per diluted share - continuing operations

$

0.15

 

$

0.40

 

(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 November 27, 2021 and November 28, 2020, respectively.
 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
 

Thirty-nine weeks ended

November 27, 2021

Thirty-nine weeks ended

November 28, 2020

 
Net loss from continuing operations

$

(149,416

)

$

(81,575

)

Add back - Income tax expense (benefit)

 

2,915

 

 

(7,534

)

Loss before income taxes - continuing operations

 

(146,501

)

 

(89,109

)

 
Adjustments:
Amortization expense

 

59,193

 

 

68,351

 

LIFO charge (credit)

 

900

 

 

(30,303

)

Intangible asset impairment charges

 

-

 

 

29,852

 

Loss (gain) on debt modifications and retirements, net

 

3,235

 

 

(5,274

)

Merger and Acquisition-related costs

 

12,119

 

 

1,136

 

Restructuring-related costs

 

25,173

 

 

71,096

 

Loss on Bartell acquisition

 

5,346

 

 

-

 

Litigation settlements

 

50,212

 

 

-

 

 
Adjusted income before income taxes - continuing operations

 

9,677

 

 

45,749

 

 
Adjusted income tax expense (a)

 

2,545

 

 

12,645

 

Adjusted net income from continuing operations

$

7,132

 

$

33,104

 

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

$

7,132

 

$

33,104

 

 
 
Denominator:
Basic weighted average shares

 

54,004

 

 

53,600

 

Outstanding options and restricted shares, net

 

998

 

 

754

 

Diluted weighted average shares

 

55,002

 

 

54,354

 

 
Net loss from continuing operations per diluted
share - continuing operations

$

(2.77

)

$

(1.52

)

 
Adjusted net income per diluted share - continuing operations

$

0.13

 

$

0.61

 

(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 thirty-nine weeks ended November 27, 2021 and November 28, 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

November 27, 2021

Thirteen weeks ended

November 28, 2020

 
Reconciliation of adjusted EBITDA gross profit:
Revenues

$

4,432,508

 

$

4,109,592

 

Gross Profit

 

1,233,237

 

 

1,079,708

 

Addback:
LIFO charge (credit)

 

8,886

 

 

(9,487

)

Depreciation and amortization (cost of goods sold portion only)

 

2,489

 

 

1,945

 

Other

 

25

 

 

381

 

Adjusted EBITDA gross profit - continuing operations

$

1,244,637

 

$

1,072,547

 

Percent of revenues - continuing operations

 

28.08

%

 

26.10

%

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

$

4,432,508

 

$

4,109,592

 

Selling, general and administrative expenses

 

1,185,974

 

 

1,067,027

 

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

 

58,087

 

 

67,641

 

Stock-based compensation expense

 

(174

)

 

2,429

 

Merger and Acquisition-related costs

 

3,642

 

 

1,136

 

Restructuring-related costs

 

3,746

 

 

11,605

 

Litigation settlements

 

2,000

 

 

-

 

Other

 

(33

)

 

226

 

Adjusted EBITDA selling, general and administrative
expenses - continuing operations

$

1,118,706

 

$

983,990

 

Percent of revenues - continuing operations

 

25.24

%

 

23.94

%

 
Adjusted EBITDA - continuing operations

$

125,931

 

$

88,557

 

 
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)
 

Thirty-nine weeks ended

November 27, 2021

Thirty-nine weeks ended

November 28, 2020

 
Reconciliation of adjusted EBITDA gross profit:
Revenues

$

13,061,408

 

$

12,250,775

 

Gross Profit

 

3,543,533

 

 

3,223,157

 

Addback:
LIFO charge (credit)

 

900

 

 

(30,303

)

Depreciation and amortization (cost of goods sold portion only)

 

6,536

 

 

6,775

 

Restructuring-related costs - SKU optimization charges

 

-

 

 

25,763

 

Other

 

919

 

 

1,804

 

Adjusted EBITDA gross profit - continuing operations

$

3,551,888

 

$

3,227,196

 

Percent of revenues - continuing operations

 

27.19

%

 

26.34

%

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

$

13,061,408

 

$

12,250,775

 

Selling, general and administrative expenses

 

3,505,365

 

 

3,206,078

 

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

 

176,936

 

 

199,434

 

Stock-based compensation expense

 

8,292

 

 

7,785

 

Merger and Acquisition-related costs

 

12,119

 

 

1,136

 

Restructuring-related costs

 

7,951

 

 

41,992

 

Litigation settlements

 

34,448

 

 

-

 

Other

 

3,945

 

 

2,414

 

Adjusted EBITDA selling, general and administrative
expenses - continuing operations

$

3,261,674

 

$

2,953,317

 

Percent of revenues - continuing operations

 

24.97

%

 

24.11

%

 
Adjusted EBITDA - continuing operations

$

290,214

 

$

273,879

 

 
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

$

24,400,000

 

$

24,700,000

 

 
Pharmacy Services Segment Revenues

$

7,100,000

 

$

7,200,000

 

 
Gross Capital Expenditures

$

275,000

 

$

275,000

 

 
Reconciliation of net loss to adjusted EBITDA:
Net loss

$

(229,500

)

$

(188,500

)

Adjustments:
Interest expense

 

195,000

 

 

195,000

 

Income tax expense

 

3,000

 

 

-

 

Depreciation and amortization

 

302,000

 

 

302,000

 

LIFO charge

 

5,000

 

 

-

 

Facility exit and impairment charges

 

105,000

 

 

95,000

 

Loss on debt modifications and retirements, net

 

3,200

 

 

3,200

 

Merger and Acquisition-related costs

 

13,000

 

 

13,000

 

Restructuring-related costs

 

35,000

 

 

35,000

 

Litigation settlements

 

50,000

 

 

50,000

 

Gain on sale of assets, net

 

(7,000

)

 

(10,000

)

Loss on Bartell acquisition

 

5,300

 

 

5,300

 

Other

 

20,000

 

 

20,000

 

Adjusted EBITDA

$

500,000

 

$

520,000

 

 
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

$

(229,500

)

$

(188,500

)

Add back - income tax expense

 

3,000

 

 

-

 

Loss before income taxes

 

(226,500

)

 

(188,500

)

 
Adjustments:
Amortization expense

 

79,000

 

 

79,000

 

LIFO charge

 

5,000

 

 

-

 

Loss on debt modifications and retirements, net

 

3,200

 

 

3,200

 

Merger and Acquisition-related costs

 

13,000

 

 

13,000

 

Restructuring-related costs

 

35,000

 

 

35,000

 

Loss on Bartell acquisition

 

5,300

 

 

5,300

 

Litigation settlements

 

50,000

 

 

50,000

 

 
Adjusted loss before adjusted income taxes

 

(36,000

)

 

(3,000

)

 
Adjusted income tax benefit

 

(9,500

)

 

(800

)

Adjusted net loss

$

(26,500

)

$

(2,200

)

 
Diluted adjusted net loss per share

$

(0.49

)

$

(0.04

)

 

INVESTORS:
Trent Kruse
(717) 975-3710
investor@riteaid.com

MEDIA:
Jeffery Olson
(717) 975-5718
Jeffery.Olson@riteaid.com

Source: Rite Aid Corporation

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