Filed by Rite Aid Corporation

Pursuant to Rule 425 under the Securities Act of 1933

and deemed filed pursuant to Rule 14a-12

under the Exchange Act of 1934

 

Subject Company: Rite Aid Corporation

Commission File No.: 001-05742

 

Rite Aid Corporation (the “Company”) distributed a letter to its supplier partners providing information about the Company’s operating results for its fourth quarter and fiscal year ended March 3, 2018. A copy of that document is below:

 

 

April 12, 2018

 

Dear Rite Aid Supplier Partners,

 

Today, we released our fourth-quarter and full-year results for fiscal 2018*, which reflect how we’re building critical momentum as we continue working together to create the “new” Rite Aid.

 

We made significant progress in many areas during the fourth quarter: our Retail Pharmacy Segment, which includes Rite Aid stores, delivered strong results with an increase in Adjusted EBITDA over the prior year; our Pharmacy Services Segment, which includes EnvisionRxOptions, is off to a strong start in the new commercial selling season; and shortly after the quarter ended, we successfully completed our sale of 1,932 stores to Walgreens, which is delivering significant benefits to our organization.

 

However, our most significant development was that we entered into a definitive merger agreement with Albertsons to create a truly differentiated leader in food, health and wellness. We’re really excited about the merger. It makes sense for us strategically and financially and will transform Rite Aid by increasing geographic presence, adding new levers for growth and solidifying our financial strength. As a result, the merger has the potential to create compelling value for our customers

 



 

and shareholders. Our board and management believe this merger is the best, value-enhancing alternative available for the company and our shareholders.

 

In terms of our results, we have introduced a new metric called pro-forma Adjusted EBITDA from continuing operations. This metric takes our Adjusted EBITDA and adds the Walgreens TSA fees we would have earned if all the stores sold to Walgreens were being supported under the TSA for the entire respective period. It also adjusts for the extra week in fiscal 2017. In the fourth quarter, our pro-forma Adjusted EBITDA from continuing operations was $173.2 million compared to $180.8 million in the prior-year period.

 

In terms of these results, a key highlight was the improvement of our Retail Pharmacy Segment Adjusted EBITDA compared to the prior year, which was due in large part to stronger gross margin and good expense control. While Adjusted EBITDA in the Pharmacy Services Segment decreased during the quarter, we have already secured 200,000 new lives in our commercial and health plan businesses for the new selling season and have enrolled 188,000 new lives for Medicare Part D year-over-year as of January.

 

We encourage you to read the press release included below for additional information about our results.

 

Thanks in part to your continued support, we were able to achieve stronger results during a very busy time. We successfully enhanced wellness+ Rewards by introducing BonusCash rewards, which has resulted in more engagement from our best customers. In addition, we continue to drive positive results in our Wellness stores, which continue to outperform the rest of the chain in terms of same-store front-end sales and prescription count and now represent nearly two-thirds of our chain.

 

With momentum building in critical areas, we have tremendous confidence in our strategy for the “new” Rite Aid. At the same time, we are excited about the potential to accelerate this strategy by combining with Albertsons to create a leading food, health and wellness company.

 

We took an important step toward completing the merger with the recent expiration of the Hart-Scott-Rodino waiting period. The merger remains subject to other customary closing conditions, including the approval of Rite Aid

 



 

shareholders, and we will be setting a date and time for a special shareholder meeting in the coming months.

 

As we look to make the most of this opportunity, our most important priority is to continue providing an outstanding Rite Aid Experience. Fiscal 2018 was a year of significant change for our company, and we truly appreciate all you’ve done in collaborating with us to drive innovation in our stores. Thank you for your continued partnership in working with us to deliver unique and engaging experiences to our customers.

 

We look forward to working together in providing an even higher level of innovation, convenience and value while building even more momentum for the “new” Rite Aid.

 

Sincerely,

 

John Standley

Kermit Crawford

Chairman and CEO

President and COO

 



 


* Press release incorporated by reference

 

 

Press Release
For Further Information Contact:

 

INVESTORS:                                                                           MEDIA:
Byron Purcell                                                                         Susan Henderson
(717) 975-5809                                                                     (717) 730-7766 or investor@riteaid.com

 

FOR IMMEDIATE RELEASE

 

Rite Aid Reports Fiscal 2018 Fourth Quarter and Full Year Results

 

·            Fourth Quarter Net Loss from Continuing Operations of $483.7 Million or $0.46 Per Diluted Share, Compared to the Prior Year Fourth Quarter Net Loss of $25.1 Million or $0.02 Per Diluted Share

 

·                  Fourth Quarter Net Loss includes $325 million of income tax expense relating to the revaluation of the company’s deferred tax assets in connection with the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”) and a goodwill impairment charge of $191 million, net of tax

 



 

·            Fourth Quarter Adjusted Net Loss from Continuing Operations Per Diluted Share of $0.01, Compared to the Prior Year Fourth Quarter Adjusted Net Income Per Diluted Share of $0.02

 

·            Fourth Quarter Adjusted EBITDA from Continuing Operations of $157.4 Million, Compared to the Prior Year Fourth Quarter Adjusted EBITDA of $167.6 Million;

 

·                  Fourth Quarter Pro-forma Adjusted EBITDA from Continuing Operations of $173.2 Million, Compared to Prior Year Fourth Quarter Pro-forma Adjusted EBITDA from Continuing Operations of $180.8 Million

 

·                                          Prior Year Included Benefit of 53rd Week

 

·                                          HSR Waiting Period for Albertsons Companies, Inc. (“Albertsons”) Merger Expired on March 28, 2018

 

·                                          Sale of Stores to Walgreens Boots Alliance, Inc. (“WBA”) Completed on March 27, 2018

 

CAMP HILL, Pa. (Apr. 12, 2018) - Rite Aid Corporation (NYSE: RAD) today reported operating results for its fourth quarter and fiscal year ended March 3, 2018.

 

For the fourth quarter, the company reported net loss from continuing operations of $483.7 million, or $0.46 per diluted share, Adjusted net loss from continuing operations of $10.3 million, or $0.01 per diluted share, Adjusted EBITDA from continuing operations of $157.4 million, or 2.9 percent of revenues and pro-forma Adjusted EBITDA from continuing operations of $173.2 million.

 

For the fourth quarter of fiscal 2018 the company reported net income of $767.1 million, or $0.73 per diluted share. For the full year, the company reported net income of $943.5 million, or $0.90 per diluted share. Net income for the fourth quarter and the full year of fiscal 2018 includes an after-tax gain of approximately $1.2 billion and $1.3 billion, respectively, relating to the 1,554 and 1,651 stores and related assets sold to WBA. As of March 27, 2018, Rite Aid has completed the sale of all 1,932 stores and related assets to WBA. The transfer of the three distribution centers and related inventory is expected to begin after September 1, 2018. As a result of the proceeds received from the store sales, Rite Aid’s debt related to continuing operations, net of cash, was $2.9 billion as of March 3, 2018.

 

“During the fourth quarter, we made significant progress in a number of areas: our Retail Pharmacy Segment delivered strong results with an increase in Adjusted EBITDA over the prior year; our Pharmacy Services Segment is off to a strong start in the new commercial selling season; shortly after the quarter ended, we completed the asset sale of 1,932 stores to WBA; and we entered into a definitive merger agreement with Albertsons Companies to transform Rite Aid into a truly differentiated leader in food, health and wellness,” said Rite Aid Chairman and CEO John Standley.

 

Rite Aid President and Chief Operating Officer Kermit Crawford added: “We are pleased that we’ve been able to drive improved operational performance through a stabilization of reimbursement rates, improvements in drug purchasing costs and a record number of immunizations which helped us deliver a higher pharmacy margin for the quarter. These areas of our business will continue to be key priorities as we begin our new fiscal year and work together to continue building momentum.”

 

Fourth Quarter Summary

 

Revenues from continuing operations for the quarter were $5.4 billion compared to revenues from continuing operations of $5.9 billion in the prior year’s fourth quarter, a decrease of $509.1 million or 8.6

 



 

percent. Retail Pharmacy Segment revenues were $4.0 billion and decreased 10.1 percent compared to the prior year period primarily as a result of the extra week in the prior year’s fourth quarter and a decline in same store sales. Revenues in the Pharmacy Services Segment were $1.4 billion, a decrease of 4.3 percent compared to the prior year period, which was due to a decline in commercial business and changes in its composition of Medicare Part D membership.

 

Same store sales from Retail Pharmacy continuing operations for the quarter decreased 1.7 percent over the prior year, consisting of a 2.3 percent decrease in pharmacy sales and a 0.6 percent decrease in front-end sales. Pharmacy sales included an approximate 138 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, decreased 1.8 percent over the prior year period due in part to exclusion from certain pharmacy networks that Rite Aid participated in the prior year. Prescription sales from continuing operations accounted for 64.9 percent of total drugstore sales.

 

Net loss from continuing operations was $483.7 million or $0.46 per diluted share compared to last year’s fourth quarter net loss from continuing operations of $25.1 million or $0.02 per diluted share. The decline in operating results was due primarily to $325 million of income tax expense relating to the revaluation of the company’s deferred tax assets as a result of the 2017 Tax Act and a charge of $191 million, net of tax, for the impairment of goodwill related to our Pharmacy Services Segment. The effect of the goodwill impairment charge is to adjust the book value of our Pharmacy Services Segment to $2.1 billion, which was our basis in the segment at the date of acquisition. Also impacting results was a decline in Adjusted EBITDA, higher WBA deal related costs, and higher lease termination and impairment charges, partially offset by a higher LIFO credit.

 

Adjusted EBITDA from continuing operations (which is reconciled to net loss from continuing operations in the attached tables) was $157.4 million or 2.9 percent of revenues for the fourth quarter compared to $167.6 million or 2.8 percent of revenues for the same period last year. Current quarter Adjusted EBITDA includes the benefit of $8.2 million in TSA fees while prior year’s fourth quarter Adjusted EBITDA includes the benefit of $10.8 million from the extra week. The decline in Adjusted EBITDA was due to a decrease of $11.3 million in the Pharmacy Services Segment, resulting primarily from the decline in revenues. Adjusted EBITDA in the Retail Pharmacy Segment was favorable to the prior year due to the stabilization of reimbursement rates and improvement in generic purchasing, offset somewhat by lower revenues. Results from continuing operations are fully burdened for corporate administration costs that support both continuing and discontinued operations. Fiscal 2018 and fiscal 2017 quarterly results from continuing operations do not include $15.8 million and $24.0 million of fees, respectively, that would be earned if all of the stores sold to WBA were being supported under the TSA for the entire respective period. After adjusting to reflect those fees as if they had been earned for the full period and adjusting for the extra week in fiscal 2017, Pro-forma Adjusted EBITDA for the fourth quarter of fiscal 2018 and fiscal 2017 was $173.2 million and $180.8 million, respectively.

 

In the fourth quarter, the company relocated 6 stores and remodeled 38 stores, bringing the total number of wellness stores chainwide to 1,805. During the fourth quarter, the company sold 1,554 stores to WBA and closed 19 stores, resulting in a total store count of 2,831 at the end of the fourth quarter. Wellness store count and total store count related to continuing operations was 1,651 and 2,550, respectively.

 

Full Year Results

 

For the fiscal year ended March 3, 2018, revenues from continuing operations were $21.5 billion compared to revenues of $22.9 billion in the prior year, a decrease of $1.4 billion or 6.1 percent. Retail Pharmacy Segment revenues were $15.8 billion and decreased 5.6 percent compared to the prior year

 



 

period primarily as a result of the extra week in the prior year and a decline in same store sales. Revenues in the Pharmacy Services Segment were $5.9 billion, a decrease of  7.8 percent compared to the prior year, which was due a decline in commercial business and to the change in the composition of Medicare Part D membership.

 

Same store sales from continuing operations for the year decreased 2.9 percent, consisting of a 3.9 percent decrease in pharmacy sales and a 0.8 percent decrease in front end sales. Pharmacy sales included an approximate 187 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, decreased 1.8 percent over the prior year due in part to our exclusion from certain pharmacy networks that Rite Aid participated in the prior year. Prescription sales from continuing operations accounted for 65.9 percent of total drugstore sales.

 

Net loss from continuing operations for fiscal 2018 was $349.5 million or $0.33 per diluted share compared to last year’s net income from continuing operations of $4.1 million or $0.00 per diluted share. The decline in operating results was due primarily to higher income tax expense relating to the revaluation of the company’s deferred tax assets as a result of the 2017 Tax Act, a goodwill impairment charge in the current year, a decline in Adjusted EBITDA, higher lease termination and impairment charges, and higher WBA deal related costs, partially offset by a $325.0 million merger termination fee from WBA and a higher LIFO credit. Adjusted net loss from continuing operations for fiscal 2018 was $20.2 million or $0.02 per diluted share compared to last year’s Adjusted net income of $84.5 million or $0.08 per diluted share, driven primarily by a decline in Adjusted EBITDA.

 

Adjusted EBITDA from continuing operations was $559.9 million or 2.6 percent of revenues for the year compared to $740.1 million or 3.2 percent of revenues for last year. The decline in Adjusted EBITDA is due to a decrease of $163.5 million in the Retail Pharmacy Segment and $16.7 million in the Pharmacy Services Segment. The decrease in the Retail Pharmacy Segment EBITDA was primarily driven by a decline in pharmacy sales and gross profit. These declines were due to a continued reductions in reimbursement rates which the company was unable to fully offset with generic purchasing efficiencies, as well as lower script counts. The decrease in the Pharmacy Services Segment EBITDA was primarily driven by the decline in revenues. Fiscal 2018 and fiscal 2017 annual results from continuing operations do not include $87.6 million and $96.0 million of fees, respectively, that would be earned if all of the stores sold to WBA were being supported under the TSA. After adjusting to reflect those fees as if they had been earned for the full period and for the extra week in fiscal 2017, Pro-forma Adjusted EBITDA for fiscal 2018 and fiscal 2017 was $647.5 million and  $825.3 million, respectively.

 

For the year, the company relocated 20 stores, remodeled 179 stores, expanded 3 stores, opened 3 stores, sold 1,651 stores to WBA, and closed 57 stores.

 

Outlook for Fiscal 2019

 

Rite Aid is confirming its fiscal 2019 outlook for Adjusted EBITDA and net loss and providing fiscal 2019 outlook for revenues, same store sales, capital expenditures and Adjusted net income. The company’s outlook for fiscal 2019 is based on the anticipated benefits from generic drug purchasing efficiencies, a reimbursement rate environment that is somewhat more stable than fiscal 2018, TSA fees under the agreement with WBA, and other initiatives to grow sales and drive operational efficiencies. The outlook provided herein, does not reflect the impact of the pending transaction with Albertsons.

 

Rite Aid said it expects sales to be between $21.7 billion and $22.1 billion in fiscal 2019 with same store sales expected to range from an increase of 0.0 percent to an increase of 1.0 percent over fiscal 2018.

 



 

Adjusted EBITDA (which is reconciled to net loss in the attached table) is expected to be between $615.0 million and $675.0 million.

 

Net loss is expected to be between $40.0 million and $95.0 million.

 

Adjusted net income per diluted share is expected to be between $0.02 and $0.06.

 

Capital expenditures are expected to be approximately $250 million.

 

Rite Aid is one of the nation’s leading drugstore chains with 2,548 stores in 19 states. Information about Rite Aid, including corporate background and press releases, is available through Rite Aid’s website at www.riteaid.com.

 

Rite Aid Merger with Albertsons

 

As previously announced on February 20, 2018, Rite Aid and Albertsons entered into a definitive agreement under which Albertsons will merge with Rite Aid. The boards of directors of both companies have approved the transaction, and the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired. The merger is expected to close early in the second half of calendar year 2018, subject to the approval of Rite Aid’s shareholders, regulatory approvals, and other customary closing conditions.

 

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 at www.riteaid.com in the conference call section of investor information. A playback of the call will also be available by telephone beginning at 12:00 p.m. Eastern Time today until 11:59 p.m. Eastern Time on April 15, 2018. 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 72531387.

 



 

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 for fiscal 2019, the pending merger (the “Merger”) between Rite Aid and Albertsons; the expected timing  of the closing of the Merger and the subsequent closings of the sale of Rite Aid distribution centers and assets to WBA; the ability of the parties to complete the Merger considering the various closing conditions to the Merger; the ability of the parties to complete the distribution center closing considering the various closing conditions applicable to the distribution centers and related assets being transferred at such distribution center closing; the outcome of legal and regulatory matters in connection with the Merger and the sale of stores and assets of Rite Aid to WBA; the expected benefits of the transactions such as improved operations, growth potential, market profile and financial strength; the competitive ability and position of Rite Aid following completion of the proposed transactions; the ability of Rite Aid to implement new business strategies following the completion of the proposed transactions 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, 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, industry, market, competitive, regulatory and political 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; changes in legislation or regulations, including healthcare reform; our ability to achieve the benefits of our efforts to reduce the costs of our generic and other drugs; risks related to the proposed transactions with WBA, including the possibility that the remaining transactions may not close, or the business of Rite Aid may suffer as a result of uncertainty surrounding the proposed transactions; risks related to the expected timing and likelihood of completion of the Merger, including the risk that the Merger may not close due to one or more closing conditions to the Merger not being satisfied or waived, such as the remaining Ohio Department of Insurance regulatory approval not being obtained, on a timely basis or otherwise, or that a governmental entity prohibited, delayed or refused to grant approval for the consummation of the Merger or required certain conditions, limitations or restrictions in connection with such approvals, or that the required approval of the merger agreement by the stockholders of Rite Aid was not obtained; risks related to the ability to realize the anticipated benefits of the proposed transactions with Albertsons and WBA; risks related to diverting management’s or employees’ attention from ongoing business operations; the risk that any announcements relating to the Merger could have adverse effects on the market price of Rite Aid’s common stock, and the risk that the Merger and its announcement could have an adverse effect on the ability of Rite Aid to retain customers and retain and hire key personnel and maintain relationships with their suppliers and customers and on their operating results and businesses generally; the risk that Rite Aid’s stock price may decline significantly if the Merger or sale of distribution centers and related assets to WBA is not completed; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement (including circumstances requiring Rite Aid to pay Albertsons a termination fee pursuant to the merger agreement); significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the proposed transactions; potential changes to our strategy in the event the remaining proposed transactions do not close, which may include delaying or reducing capital or other expenditures, selling assets or other operations, attempting to restructure or refinance our debt, or seeking additional capital, and other business effects. 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 the registration statement on Form S-4, as it may be amended, that was filed with the SEC by Albertsons on April 6, 2018 in connection with the Merger, and in other documents that we file or furnish with the Securities and Exchange Commission (the “SEC”), 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.

 

Additional Information and Where to Find It

 

In connection with the proposed merger involving Rite Aid and Albertsons, Rite Aid and Albertsons have prepared and Albertsons has filed with the SEC on April 6, 2018 a registration statement on Form S-4 that includes a proxy statement of Rite Aid that also constitutes a prospectus of Albertsons. The registration statement is not yet final and will be amended. Rite Aid will mail the proxy statement/prospectus and a proxy card to each stockholder entitled to vote at the special meeting relating

 



 

to the proposed merger. Rite Aid and Albertsons also plan to file other relevant documents with the SEC regarding the proposed merger. INVESTORS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE, AS WELL AS OTHER DOCUMENTS FILED WITH THE SEC, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. RITE AID’S EXISTING PUBLIC FILINGS WITH THE SEC SHOULD ALSO BE READ, INCLUDING THE RISK FACTORS CONTAINED THEREIN.

 

Investors and security holders may obtain copies of the Form S-4, including the proxy statement/prospectus, as well as other filings containing information about Rite Aid, free of charge, from the SEC’s Web site (www.sec.gov). Investors and security holders may also obtain Rite Aid’s SEC filings in connection with the transaction, free of charge, from Rite Aid’s Web site (www.RiteAid.com) under the link “Investor Relations” and then under the tab “SEC Filings,” or by directing a request to Rite Aid, Byron Purcell, Attention: Senior Director, Treasury Services & Investor Relations. Copies of documents filed with the SEC by Albertsons will be made available, free of charge, on Albertsons’ website at www.albertsonscompanies.com.

 

Participants in Solicitation

 

Rite Aid, Albertsons and their respective directors, executive officers and employees and other persons may be deemed to be participants in the solicitation of proxies from the holders of Rite Aid common stock in respect of the proposed transaction. Information regarding Rite Aid’s directors and executive officers is available in its definitive proxy statement for Rite Aid’s 2017 annual meeting of stockholders filed with the SEC on June 7, 2017, as modified or supplemented by any Form 3 or Form 4 filed with the SEC since the date of such definitive proxy statement. Information about the directors and executive officers of Albertsons is set forth in the registration statement on Form S-4, including the proxy statement/prospectus, as it may be amended, that has been filed with the SEC on April 6, 2018. Other information regarding the interests of the participants in the proxy solicitation may be included in the definitive proxy statement/prospectus when it becomes available. These documents can be obtained free of charge from the sources indicated above.

 

Non-Solicitation

 

This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

 

Reconciliation of Non-GAAP Financial Measures

 

The company separately reports financial results on the basis of Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share, Adjusted EBITDA and Pro-Forma Adjusted EBITDA 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, Adjusted EBITDA and Pro-Forma 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 of EnvisionRx intangible assets, merger and acquisition-related costs, loss on debt retirements, LIFO adjustments, goodwill impairment and the Walgreens Boots Alliance, Inc. termination fee. 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 impairment, inventory write-downs related to store closings, debt retirements, the Walgreens Boots Alliance, Inc. termination fee, and other items (including stock-based compensation expense, merger and acquisition-related costs, severance and costs related to distribution center closures, gain or loss on sale of assets and revenue deferrals related to our customer loyalty program).

 

The company’s management team routinely evaluates how it measures the company’s financial performance.  In connection with such review, the company determined that it would be beneficial to investors to reflect what the company’s financial results would have been had it received all of the fees that it would have earned pursuant to the TSA Agreement with WBA for the relevant period.  As a result, the company hereby introduces the non-GAAP financial measure Pro Forma Adjusted EBITDA which is defined as Adjusted EBITDA plus the fees that would have been earned under the TSA, and in order to improve comparability, Pro Forma Adjusted EBITDA further adjusts results so that periods contain the same number of weeks.

 

###

 



 

RITE AID CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

(unaudited)

 

 

 

March 3, 2018

 

March 4, 2017

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

447,334

 

$

245,410

 

Accounts receivable, net

 

1,869,100

 

1,771,126

 

Inventories, net of LIFO reserve of $581,090 and $607,326

 

1,799,539

 

1,789,541

 

Prepaid expenses and other current assets

 

181,181

 

211,541

 

Current assets held for sale

 

438,137

 

1,047,670

 

Total current assets

 

4,735,291

 

5,065,288

 

Property, plant and equipment, net

 

1,431,246

 

1,526,462

 

Goodwill

 

1,421,120

 

1,682,847

 

Other intangibles, net

 

590,443

 

715,406

 

Deferred tax assets

 

594,019

 

1,505,564

 

Other assets

 

217,208

 

215,917

 

Noncurrent assets held for sale

 

 

882,268

 

Total assets

 

$

8,989,327

 

$

11,593,752

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current maturities of long-term debt and lease financing obligations

 

$

20,761

 

$

17,709

 

Accounts payable

 

1,651,363

 

1,613,909

 

Accrued salaries, wages and other current liabilities

 

1,231,736

 

1,340,947

 

Current liabilities held for sale

 

560,205

 

32,683

 

Total current liabilities

 

3,464,065

 

3,005,248

 

Long-term debt, less current maturities

 

3,340,099

 

3,235,888

 

Lease financing obligations, less current maturities

 

30,775

 

37,204

 

Other noncurrent liabilities

 

553,378

 

643,950

 

Noncurrent liabilities held for sale

 

 

4,057,392

 

Total liabilities

 

7,388,317

 

10,979,682

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

1,067,318

 

1,053,690

 

Additional paid-in capital

 

4,850,712

 

4,839,854

 

Accumulated deficit

 

(4,282,471

)

(5,237,157

)

Accumulated other comprehensive loss

 

(34,549

)

(42,317

)

Total stockholders’ equity

 

1,601,010

 

614,070

 

Total liabilities and stockholders’ equity

 

$

8,989,327

 

$

11,593,752

 

 

Chart 1



 

RITE AID CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)

 

 

 

Thirteen weeks ended
March 3, 2018

 

Fourteen weeks ended
 March 4, 2017

 

Revenues

 

$

5,394,264

 

$

5,903,385

 

Costs and expenses:

 

 

 

 

 

Cost of revenues

 

4,124,498

 

4,554,328

 

Selling, general and administrative expenses

 

1,181,964

 

1,253,144

 

Lease termination and impairment charges

 

47,675

 

25,575

 

Goodwill impairment

 

261,727

 

 

Interest expense

 

50,603

 

53,391

 

Gain on sale of assets, net

 

(5,249

)

(6,261

)

 

 

5,661,218

 

5,880,177

 

(Loss) income from continuing operations before income taxes

 

(266,954

)

23,208

 

Income tax expense

 

216,719

 

48,262

 

Net loss from continuing operations

 

(483,673

)

(25,054

)

Net income from discontinued operations, net of tax

 

1,250,745

 

3,912

 

Net income (loss)

 

$

767,072

 

$

(21,142

)

 

 

 

 

 

 

Basic and diluted income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

Numerator for income (loss) per share:

 

 

 

 

 

Net loss from continuing operations attributable to common stockholders - basic and diluted

 

$

(483,673

)

$

(25,054

)

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

 

1,250,745

 

3,912

 

Income (loss) attributable to common stockholders - basic and diluted

 

$

767,072

 

$

(21,142

)

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Basic and diluted weighted average shares

 

1,053,491

 

1,045,929

 

 

 

 

 

 

 

Basic and diluted (loss) income per share

 

 

 

 

 

Continuing operations

 

$

(0.46

)

$

(0.02

)

Discontinued operations

 

$

1.19

 

$

0.00

 

Net basic and diluted income per share

 

$

0.73

 

$

(0.02

)

 

Chart 2



 

RITE AID CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)

 

 

 

Fifty-two weeks ended
March 3, 2018

 

Fifty-three weeks ended
March 4, 2017

 

Revenues

 

$

21,528,968

 

$

22,927,540

 

Costs and expenses:

 

 

 

 

 

Cost of revenues

 

16,748,863

 

17,862,833

 

Selling, general and administrative expenses

 

4,651,262

 

4,776,995

 

Lease termination and impairment charges

 

58,765

 

45,778

 

Goodwill impairment

 

261,727

 

 

Interest expense

 

202,768

 

200,065

 

Walgreens Boots Alliance merger termination fee

 

(325,000

)

 

Gain on sale of assets, net

 

(25,872

)

(6,649

)

 

 

21,572,513

 

22,879,022

 

(Loss) income from continuing operations before income taxes

 

(43,545

)

48,518

 

Income tax expense

 

305,987

 

44,438

 

Net (loss) income from continuing operations

 

(349,532

)

4,080

 

Net income (loss) from discontinued operations, net of tax

 

1,293,002

 

(27

)

Net income

 

$

943,470

 

$

4,053

 

 

 

 

 

 

 

Basic and diluted (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

Numerator for income per share:

 

 

 

 

 

Net (loss) income from continuing operations attributable to common stockholders - basic and diluted

 

$

(349,532

)

$

4,080

 

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

 

1,293,002

 

(27

)

Income attributable to common stockholders - basic and diluted

 

$

943,470

 

$

4,053

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Basic weighted average shares

 

1,049,628

 

1,044,427

 

Outstanding options and restricted shares, net

 

 

16,399

 

Diluted weighted average shares

 

1,049,628

 

1,060,826

 

 

 

 

 

 

 

Basic income (loss) per share

 

 

 

 

 

Continuing operations

 

$

(0.33

)

$

0.00

 

Discontinued operations

 

$

1.23

 

$

(0.00

)

Net basic income per share

 

$

0.90

 

$

0.00

 

 

 

 

 

 

 

Diluted income (loss) per share

 

 

 

 

 

Continuing operations

 

$

(0.33

)

$

0.00

 

Discontinued operations

 

$

1.23

 

$

(0.00

)

Net diluted income per share

 

$

0.90

 

$

0.00

 

 

Chart 3



 

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(unaudited)

 

 

 

Thirteen weeks ended
March 3, 2018

 

Fourteen weeks ended
March 4, 2017

 

Net income (loss)

 

$

767,072

 

$

(21,142

)

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 $3,816 and $2,247 tax expense

 

5,712

 

3,421

 

Adjustment for implementation of ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

 

513

 

 

Total other comprehensive income

 

6,225

 

3,421

 

Comprehensive income (loss)

 

$

773,297

 

$

(17,721

)

 

Chart 4



 

RITE AID CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(unaudited)

 

 

 

Fifty-two weeks ended
March 3, 2018

 

Fifty-three weeks ended
March 4, 2017

 

Net income

 

$

943,470

 

$

4,053

 

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 $4,842 and $3,600 tax expense

 

7,255

 

5,464

 

Adjustment for implementation of ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

 

513

 

 

Total other comprehensive income

 

7,768

 

5,464

 

Comprehensive income

 

$

951,238

 

$

9,517

 

 

Chart 5



 

RITE AID CORPORATION AND SUBSIDIARIES

 

SUPPLEMENTAL SEGMENT OPERATING INFORMATION

(Dollars in thousands)

(unaudited)

 

 

 

Thirteen weeks ended
March 3, 2018

 

Fourteen weeks ended
March 4, 2017

 

 

 

 

 

 

 

Retail Pharmacy Segment

 

 

 

 

 

Revenues from continuing operations (a)

 

$

3,999,430

 

$

4,447,175

 

Cost of revenues from continuing operations (a)

 

2,830,327

 

3,201,466

 

Gross profit from continuing operations

 

1,169,103

 

1,245,709

 

LIFO credit from continuing operations

 

(49,220

)

(28,987

)

FIFO gross profit from continuing operations

 

1,119,883

 

1,216,722

 

 

 

 

 

 

 

Gross profit as a percentage of revenues - continuing operations

 

29.23

%

28.01

%

LIFO credit as a percentage of revenues - continuing operations

 

-1.23

%

-0.65

%

FIFO gross profit as a percentage of revenues - continuing operations

 

28.00

%

27.36

%

 

 

 

 

 

 

Selling, general and administrative expenses from continuing operations

 

1,093,258

 

1,171,840

 

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

 

27.34

%

26.35

%

 

 

 

 

 

 

Cash interest expense

 

90,915

 

109,584

 

Non-cash interest expense

 

5,217

 

5,639

 

Total interest expense

 

96,132

 

115,223

 

Interest expense - continuing operations

 

50,628

 

53,433

 

Interest expense - discontinued operations

 

45,504

 

61,790

 

 

 

 

 

 

 

Adjusted EBITDA - continuing operations

 

124,107

 

122,951

 

Adjusted EBITDA as a percentage of revenues - continuing operations

 

3.10

%

2.76

%

 

 

 

 

 

 

Pharmacy Services Segment

 

 

 

 

 

Revenues (a)

 

$

1,445,457

 

$

1,510,814

 

Cost of revenues (a)

 

1,344,794

 

1,407,466

 

Gross profit

 

100,663

 

103,348

 

 

 

 

 

 

 

Gross profit as a percentage of revenues

 

6.96

%

6.84

%

 

 

 

 

 

 

Adjusted EBITDA

 

33,297

 

44,619

 

Adjusted EBITDA as a percentage of revenues

 

2.30

%

2.95

%

 


(a) - Revenues and cost of revenues include $50,623 and $54,604 of inter-segment activity for the thirteen weeks ended March 3, 2018 and the fourteen weeks ended March 4, 2017, respectively, that is eliminated in consolidation.

 

Chart 6



 

RITE AID CORPORATION AND SUBSIDIARIES

 

SUPPLEMENTAL SEGMENT OPERATING INFORMATION

(Dollars in thousands)

(unaudited)

 

 

 

Fifty-two weeks ended 
March 3, 2018

 

Fifty-three weeks ended 
March 4, 2017

 

Retail Pharmacy Segment

 

 

 

 

 

Revenues from continuing operations (a)

 

$

15,832,625

 

$

16,766,620

 

Cost of revenues from continuing operations (a)

 

11,460,252

 

12,094,645

 

Gross profit from continuing operations

 

4,372,373

 

4,671,975

 

LIFO credit from continuing operations

 

(28,827

)

(3,721

)

FIFO gross profit from continuing operations

 

4,343,546

 

4,668,254

 

 

 

 

 

 

 

Gross profit as a percentage of revenues - continuing operations

 

27.62

%

27.86

%

LIFO credit as a percentage of revenues - continuing operations

 

-0.18

%

-0.02

%

FIFO gross profit as a percentage of revenues - continuing operations

 

27.43

%

27.84

%

 

 

 

 

 

 

Selling, general and administrative expenses from continuing operations

 

4,328,567

 

4,483,496

 

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

 

27.34

%

26.74

%

 

 

 

 

 

 

Cash interest expense

 

404,491

 

410,386

 

Non-cash interest expense

 

21,566

 

21,612

 

Total interest expense

 

426,057

 

431,998

 

Interest expense - continuing operations

 

201,756

 

200,072

 

Interest expense - discontinued operations

 

224,301

 

231,926

 

 

 

 

 

 

 

Adjusted EBITDA - continuing operations

 

388,360

 

551,816

 

Adjusted EBITDA as a percentage of revenues - continuing operations

 

2.45

%

3.29

%

Pharmacy Services Segment

 

 

 

 

 

Revenues (a)

 

$

5,896,669

 

$

6,393,884

 

Cost of revenues (a)

 

5,488,937

 

6,001,152

 

Gross profit

 

407,732

 

392,732

 

 

 

 

 

 

 

Gross profit as a percentage of revenues

 

6.91

%

6.14

%

 

 

 

 

 

 

Adjusted EBITDA

 

171,534

 

188,235

 

Adjusted EBITDA as a percentage of revenues

 

2.91

%

2.94

%

 


(a) - Revenues and cost of revenues include $200,326 and $232,964 of inter-segment activity for the fifty-two weeks ended March 3, 2018 and the fifty-three weeks ended March 4, 2017, respectively, that is eliminated in consolidation.

 

Chart 7



 

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

 

 

 

Thirteen weeks ended
March 3, 2018

 

Fourteen weeks ended
March 4, 2017

 

 

 

 

 

 

 

Reconciliation of net loss to adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

Net loss - continuing operations

 

$

(483,673

)

$

(25,054

)

Adjustments:

 

 

 

 

 

Interest expense

 

50,603

 

53,391

 

Income tax expense

 

216,719

 

48,262

 

Depreciation and amortization

 

93,609

 

102,906

 

LIFO credit

 

(49,220

)

(28,987

)

Lease termination and impairment charges

 

47,675

 

25,575

 

Goodwill impairment

 

261,727

 

 

Other

 

19,964

 

(8,523

)

Adjusted EBITDA - continuing operations

 

$

157,404

 

$

167,570

 

Percent of revenues - continuing operations

 

2.92

%

2.84

%

Pro-forma Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Adjustment for additional week

 

$

 

$

(10,800

)

Adjustment to reflect a full TSA fee

 

15,800

 

24,000

 

Pro Forma Adjusted EBITDA - continuing operations

 

$

173,204

 

$

180,770

 

 

Chart 8



 

RITE AID CORPORATION AND SUBSIDIARIES

 

SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED EBITDA
(In thousands)
(unaudited)

 

 

 

Fifty-two weeks ended
March 3, 2018

 

Fifty-three weeks ended
March 4, 2017

 

Reconciliation of net (loss) income to adjusted EBITDA

 

 

 

 

 

Net (loss) income - continuing operations

 

$

(349,532

)

$

4,080

 

Adjustments:

 

 

 

 

 

Interest expense

 

202,768

 

200,065

 

Income tax expense

 

305,987

 

44,438

 

Depreciation and amortization

 

386,057

 

407,366

 

LIFO credit

 

(28,827

)

(3,721

)

Lease termination and impairment charges

 

58,765

 

45,778

 

Goodwill impairment

 

261,727

 

 

Walgreens Boots Alliance merger termination fee

 

(325,000

)

 

Other

 

47,949

 

42,045

 

Adjusted EBITDA - continuing operations

 

$

559,894

 

$

740,051

 

Percent of revenues - continuing operations

 

2.60

%

3.23

%

 

 

 

 

 

 

Pro-forma Adjustments:

 

 

 

 

 

Adjustment for additional week

 

$

 

$

(10,800

)

Adjustment to reflect a full TSA fee

 

87,600

 

96,000

 

Pro Forma Adjusted EBITDA - continuing operations

 

$

647,494

 

$

825,251

 

 

Chart 9



 

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

ADJUSTED NET (LOSS) INCOME

(Dollars in thousands, except per share amounts)

(unaudited)

 

 

 

Thirteen weeks ended
March 3, 2018

 

Fourteen weeks ended
March 4, 2017

 

Net loss from continuing operations

 

$

(483,673

)

$

(25,054

)

Add back - Income tax expense

 

216,719

 

48,262

 

(Loss) income before income taxes - continuing operations

 

(266,954

)

23,208

 

Adjustments:

 

 

 

 

 

Amortization of EnvisionRx intangible assets

 

19,139

 

20,805

 

LIFO credits

 

(49,220

)

(28,987

)

Goodwill Impairment

 

261,727

 

 

Merger and Acquisition-related costs

 

6,885

 

7,944

 

Adjusted (loss) income before income taxes - continuing operations

 

(28,423

)

22,970

 

Adjusted income tax (benefit) expense (a)

 

(18,143

)

3,160

 

Adjusted net (loss) income from continuing operations

 

$

(10,280

)

19,810

 

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

 

 

 

 

 

Numerator for adjusted net (loss) income per diluted share:

 

 

 

 

 

Adjusted net (loss) income from continuing operations

 

$

(10,280

)

$

19,810

 

Denominator:

 

 

 

 

 

Basic and diluted weighted average shares

 

1,053,491

 

1,045,929

 

Net loss from continuing operations per diluted share - continuing operations

 

$

(0.46

)

$

(0.02

)

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

 

$

(0.01

)

$

0.02

 

 


(a) The fiscal year 2018 and 2017 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 March 3, 2018 and the fourteen weeks ended March 4, 2017, respectively.

 

Chart 10



 

RITE AID CORPORATION AND SUBSIDIARIES

 

SUPPLEMENTAL INFORMATION

ADJUSTED NET (LOSS) INCOME

(Dollars in thousands, except per share amounts)

(unaudited)

 

 

 

Fifty-two weeks ended
March 3, 2018

 

Fifty-three weeks ended
March 4, 2017

 

Net (loss) income from continuing operations

 

$

(349,532

)

$

4,080

 

Add back - Income tax expense

 

305,987

 

44,438

 

Income before income taxes - continuing operations

 

(43,545

)

48,518

 

Adjustments:

 

 

 

 

 

Amortization of EnvisionRx intangible assets

 

78,554

 

83,022

 

LIFO credits

 

(28,827

)

(3,721

)

Goodwill Impairment

 

261,727

 

 

Merger and Acquisition-related costs

 

24,283

 

14,066

 

Walgreens Boots Alliance merger termination fee

 

(325,000

)

 

Adjusted (loss) income before income taxes - continuing operations

 

(32,808

)

141,885

 

Adjusted income tax (benefit) expense (a)

 

(12,570

)

57,344

 

Adjusted net (loss) income from continuing operations

 

$

(20,238

)

$

84,541

 

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

 

 

 

 

 

Numerator for adjusted net (loss) income per diluted share:

 

 

 

 

 

Adjusted net (loss) income from continuing operations

 

$

(20,238

)

$

84,541

 

Denominator:

 

 

 

 

 

Basic weighted average shares

 

1,049,628

 

1,044,427

 

Outstanding options and restricted shares, net

 

 

16,399

 

Diluted weighted average shares

 

1,049,628

 

1,060,826

 

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

 

$

(0.33

)

$

0.00

 

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

 

$

(0.02

)

$

0.08

 

 


(a) The fiscal year 2018 and 2017 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 fifty-two weeks ended March 3, 2018 and the fifty-three weeks ended March 4, 2017, respectively.

 

Chart 11



 

RITE AID CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

 

 

 

Thirteen weeks ended
March 3, 2018

 

Fourteen weeks ended
March 4, 2017

 

 

 

 

 

 

 

OPERATING ACTIVITIES:

 

 

 

 

 

Net income (loss)

 

$

767,072

 

$

(21,142

)

Net income from discontinued operations, net of tax

 

1,250,745

 

3,912

 

Net loss from continuing operations

 

$

(483,673

)

$

(25,054

)

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

 

 

 

 

 

Depreciation and amortization

 

93,609

 

102,906

 

Lease termination and impairment charges

 

47,675

 

25,575

 

Goodwill impairment

 

261,727

 

 

LIFO credits

 

(49,220

)

(28,987

)

Gain on sale of assets, net

 

(5,249

)

(6,261

)

Stock-based compensation expense

 

3,243

 

(13,284

)

Changes in deferred taxes

 

161,814

 

28,873

 

Excess tax benefit on stock options and restricted stock

 

 

3,266

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(329,616

)

(78,070

)

Inventories

 

103,566

 

77,878

 

Accounts payable

 

92,570

 

(138,724

)

Other assets and liabilities, net

 

190,574

 

37,967

 

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

 

87,020

 

(13,915

)

INVESTING ACTIVITIES:

 

 

 

 

 

Payments for property, plant and equipment

 

(45,063

)

(56,426

)

Intangible assets acquired

 

(8,684

)

(3,662

)

Proceeds from insured loss

 

612

 

 

Proceeds from dispositions of assets and investments

 

8,332

 

6,635

 

Net cash used in investing activities of continuing operations

 

(44,803

)

(53,453

)

FINANCING ACTIVITIES:

 

 

 

 

 

Net (payments to) proceeds from revolver

 

(920

)

50,000

 

Principal payments on long-term debt

 

(2,590

)

(3,860

)

Change in zero balance cash accounts

 

8,011

 

12,395

 

Net proceeds from the issuance of common stock

 

1,380

 

2,539

 

Excess tax benefit on stock options and restricted stock

 

 

(3,266

)

Net cash provided by financing activities of continuing operations

 

5,881

 

57,808

 

Cash flows from discontinued operations:

 

 

 

 

 

Operating activities of discontinued operations

 

(182,832

)

74,325

 

Investing activities of discontinued operations

 

3,307,047

 

(38,430

)

Financing activities of discontinued operations

 

(2,894,779

)

(953

)

Net cash provided by discontinued operations

 

229,436

 

34,942

 

Increase in cash and cash equivalents

 

277,534

 

25,382

 

Cash and cash equivalents, beginning of period

 

169,800

 

220,028

 

Cash and cash equivalents, end of period

 

$

447,334

 

$

245,410

 

 

Chart 12



 

RITE AID CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

 

 

 

Fifty-two weeks ended
March 3, 2018

 

Fifty-three weeks ended
March 4, 2017

 

OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

943,470

 

$

4,053

 

Net income (loss) from discontinued operations, net of tax

 

1,293,002

 

(27

)

Net (loss) income from continuing operations

 

$

(349,532

)

$

4,080

 

Adjustments to reconcile to net cash provided by operating activities of continuing operations:

 

 

 

 

 

Depreciation and amortization

 

386,057

 

407,366

 

Lease termination and impairment charges

 

58,765

 

45,778

 

Goodwill impairment

 

261,727

 

 

LIFO credits

 

(28,827

)

(3,721

)

Gain on sale of assets, net

 

(25,872

)

(6,649

)

Stock-based compensation expense

 

25,793

 

23,482

 

Changes in deferred taxes

 

260,411

 

35,038

 

Excess tax benefit on stock options and restricted stock

 

 

(543

)

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(349,481

)

(159,590

)

Inventories

 

18,835

 

(49,381

)

Accounts payable

 

211,511

 

39,542

 

Other assets and liabilities, net

 

42,083

 

(152,375

)

Net cash provided by operating activities of continuing operations

 

511,470

 

183,027

 

INVESTING ACTIVITIES:

 

 

 

 

 

Payments for property, plant and equipment

 

(185,879

)

(254,149

)

Intangible assets acquired

 

(28,885

)

(39,648

)

Proceeds from insured loss

 

4,239

 

 

Proceeds from dispositions of assets and investments

 

27,586

 

16,852

 

Net cash used in investing activities of continuing operations

 

(182,939

)

(276,945

)

FINANCING ACTIVITIES:

 

 

 

 

 

Net (payments to) proceeds from revolver

 

(265,000

)

330,000

 

Principal payments on long-term debt

 

(9,882

)

(16,588

)

Change in zero balance cash accounts

 

35,605

 

43,080

 

Net proceeds from the issuance of common stock

 

5,796

 

6,951

 

Excess tax benefit on stock options and restricted stock

 

 

543

 

Payments for taxes related to net share settlement of equity awards

 

(4,103

)

(6,254

)

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

 

(237,584

)

357,732

 

Cash flows from discontinued operations:

 

 

 

 

 

Operating activities of discontinued operations

 

(245,126

)

49,090

 

Investing activities of discontinued operations

 

3,496,222

 

(187,314

)

Financing activities of discontinued operations

 

(3,140,119

)

(4,651

)

Net cash provided by (used in) discontinued operations

 

110,977

 

(142,875

)

Increase in cash and cash equivalents

 

201,924

 

120,939

 

Cash and cash equivalents, beginning of period

 

245,410

 

124,471

 

Cash and cash equivalents, end of period

 

$

447,334

 

$

245,410

 

 

Chart 13



 

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE

YEAR ENDING MARCH 2, 2019

(In thousands)

(unaudited)

 

 

 

Guidance Range

 

 

 

Low

 

High

 

Total Revenues

 

$

21,700,000

 

$

22,100,000

 

Same store sales

 

0.00

%

1.00

%

Gross Capital Expenditures

 

$

250,000

 

$

250,000

 

 

 

 

 

 

 

Reconciliation of net loss to adjusted EBITDA:

 

 

 

 

 

Net loss

 

$

(95,000

)

$

(40,000

)

Adjustments:

 

 

 

 

 

Interest expense

 

210,000

 

210,000

 

Income tax benefit

 

(15,000

)

(10,000

)

Depreciation and amortization

 

380,000

 

380,000

 

LIFO charge

 

35,000

 

35,000

 

Loss on debt retirement

 

15,000

 

15,000

 

Store closing and impairment charges

 

40,000

 

40,000

 

Other

 

45,000

 

45,000

 

Adjusted EBITDA

 

$

615,000

 

$

675,000

 

 

Chart 14



 

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET INCOME GUIDANCE

YEAR ENDING MARCH 2, 2019

(In thousands)

(unaudited)

 

 

 

Guidance Range

 

 

 

Low

 

High

 

Net loss

 

$

(95,000

)

$

(40,000

)

Add back - Income tax benefit

 

(15,000

)

(10,000

)

Loss before income taxes

 

(110,000

)

(50,000

)

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

Amortization of EnvisionRx intangible assets

 

85,000

 

85,000

 

LIFO charge

 

35,000

 

35,000

 

Loss on debt retirements

 

15,000

 

15,000

 

 

 

 

 

 

 

Adjusted income before adjusted income taxes

 

25,000

 

85,000

 

 

 

 

 

 

 

Adjusted income tax expense

 

7,000

 

24,000

 

Adjusted net income

 

$

18,000

 

$

61,000

 

 

 

 

 

 

 

Diluted adjusted net income per share

 

$

0.02

 

$

0.06

 

 

Chart 15