U.S. Markets closed

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

  • Oops!
    Something went wrong.
    Please try again later.
·12 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Revenues from Continuing Operations Increased 2.2 Percent to $6.11 Billion Compared to Prior Year Second Quarter Revenues from Continuing Operations of $5.98 Billion

  • Second Quarter Net Loss from Continuing Operations of $100.3 Million or $1.86 Per Share, Compared to the Prior Year Second Quarter Net Loss of $13.2 Million or $0.25 Per Share

  • Second Quarter Adjusted Net Loss from Continuing Operations of $22.0 Million or $0.41 Per Share, Compared to the Prior Year Second Quarter Adjusted Net Income of $13.5 Million or $0.25 Per Share

  • Second Quarter Adjusted EBITDA from Continuing Operations of $106.2 Million, Compared to the Prior Year Second Quarter Adjusted EBITDA of $151.6 Million

  • Company Entered into an Amendment to its Senior Secured Credit Agreement, which Extends the Company’s Debt Maturity Profile and Provides Improved Pricing on its "First-In, Last Out" Senior Secured Term Loan

CAMP HILL, Pa., September 23, 2021--(BUSINESS WIRE)--Rite Aid Corporation (NYSE: RAD) today reported operating results for its second fiscal quarter ended August 28, 2021.

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

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

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

Consolidated Second Quarter Summary

(dollars in thousands)

Thirteen Week Period Ended

Twenty-six Week Period Ended

August 28, 2021

August 29, 2020

August 28, 2021

August 29, 2020

Revenues from continuing operations

$

6,113,000

$

5,981,970

$

12,273,985

$

12,009,346

Net loss from continuing operations

(100,301)

(13,197)

(113,358)

(85,899)

Adjusted EBITDA from continuing operations

106,160

151,603

245,037

258,995

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

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

Retail Pharmacy Segment

(dollars in thousands)

Thirteen Week Period Ended

Twenty-six Week Period Ended

August 28, 2021

August 29, 2020

August 28, 2021

August 29, 2020

Revenues from continuing operations

$

4,277,218

$

4,017,912

$

8,628,900

$

8,141,183

Adjusted EBITDA from continuing operations

69,369

122,340

164,283

185,322

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

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

Pharmacy Services Segment

(dollars in thousands)

Thirteen Week Period Ended

Twenty-six Week Period Ended

August 28, 2021

August 29, 2020

August 28, 2021

August 29, 2020

Revenues from continuing operations

$

1,898,213

$

2,038,378

$

3,770,495

$

4,015,624

Adjusted EBITDA from continuing operations

36,791

29,263

80,754

73,673

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

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

Outlook for Fiscal 2022

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

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

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

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

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

Capital expenditures are expected to be approximately $300 million.

Conference Call Broadcast

Rite Aid will hold an analyst call at 8:30 a.m. Eastern Time today with remarks by Rite Aid's management team. The call will be broadcast via the Internet at https://investors.riteaid.com. The telephone replay will be available beginning at 12:00 p.m. Eastern Time on Thursday, Sept. 23, 2021 and ending at 11:59 p.m. Eastern Time on Oct. 24, 2021. To access the replay of the call, telephone (800) 585-8367 or (416) 621-4642 and enter the seven-digit reservation number 5387890. The webcast replay of the call will also be available at https://investors.riteaid.com starting at 12 p.m. Eastern Time today. The playback will be available until the company’s next conference call.

About Rite Aid Corporation

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

Cautionary Statement Regarding Forward-Looking Statements

Statements in this release that are not historical, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements regarding Rite Aid's outlook and guidance for fiscal 2022; the continued impact of the global coronavirus (COVID-19) pandemic on Rite Aid’s business; and any assumptions underlying any of the foregoing. Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," and "will" and variations of such words and similar expressions are intended to identify such forward-looking statements.

These forward-looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including, but not limited to: risks related to the impact of the COVID-19 global pandemic, such as the scope and duration of the outbreak, and government responses thereto; the impact of COVID-19 on our workforce, operations, stores, expenses, and supply chain, and the operations or behaviors of our customers, suppliers and business partners; our ability to successfully implement our RxEvolution and other strategies; the impact of our high level of indebtedness, the ability to refinance such indebtedness on acceptable terms and our ability to satisfy our obligations and the other covenants contained in our debt agreements; outcome of pending or new litigation, including related to Opioids, "usual and customary" pricing or other matters; our ability to monetize the CMS receivable created in our Part D business; general competitive, economic, industry, market, political (including healthcare reform) and regulatory conditions (including changes to laws or regulations relating to labor or wages), civil unrest (including any resulting store closures, damage, or loss of inventory), as well as other factors that impact the markets in which we operate; the impact of private and public third-party payers continued reduction in prescription drug reimbursements and efforts to encourage mail order; our ability to manage expenses and our investments in working capital; our ability to achieve the benefits of our efforts to reduce the costs of our generic and other drugs; our ability to achieve cost savings and other benefits of our restructuring efforts within our anticipated timeframe, if at all; the outcome of our continuing efforts to monitor and comply with applicable laws, regulations, policies and procedures; and our ability to partner and have relationships with health plans and health systems.

These and other risks, assumptions and uncertainties are more fully described in Item 1A (Risk Factors) of our most recent Annual Report on Form 10-K and in other documents that we file or furnish with the Securities and Exchange Commission (the "SEC"), which you are encouraged to read. To the extent that COVID-19 adversely affects our business and financial results, it may also have the effect of heightening many of such risk factors.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to rely on these forward-looking statements, which speak only as of the date they are made.

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

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

Reconciliation of Non-GAAP Financial Measures

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

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

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

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)

August 28, 2021

February 27, 2021

ASSETS

Current assets:

Cash and cash equivalents

$

146,564

$

160,902

Accounts receivable, net

1,662,445

1,462,441

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

1,891,975

1,864,890

Prepaid expenses and other current assets

107,504

106,941

Current assets held for sale

24,294

-

Total current assets

3,832,782

3,595,174

Property, plant and equipment, net

1,024,091

1,080,499

Operating lease right-of-use assets

2,974,846

3,064,077

Goodwill

1,108,136

1,108,136

Other intangibles, net

315,833

340,519

Deferred tax assets

14,964

14,964

Other assets

92,938

132,035

Total assets

$

9,363,590

$

9,335,404

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current maturities of long-term debt and lease financing obligations

$

6,726

$

6,409

Accounts payable

1,523,582

1,437,421

Accrued salaries, wages and other current liabilities

741,436

642,364

Current portion of operating lease liabilities

519,402

516,752

Total current liabilities

2,791,146

2,602,946

Long-term debt, less current maturities

3,114,351

3,063,087

Long-term operating lease liabilities

2,728,390

2,829,293

Lease financing obligations, less current maturities

15,723

16,711

Other noncurrent liabilities

208,695

208,213

Total liabilities

8,858,305

8,720,250

Commitments and contingencies

-

-

Stockholders' equity:

Common stock

55,732

55,143

Additional paid-in capital

5,899,795

5,897,168

Accumulated deficit

(5,426,461

)

(5,313,103

)

Accumulated other comprehensive loss

(23,781

)

(24,054

)

Total stockholders' equity

505,285

615,154

Total liabilities and stockholders' equity

$

9,363,590

$

9,335,404

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)

Thirteen weeks ended

August 28, 2021

Thirteen weeks ended

August 29, 2020

Revenues

$

6,113,000

$

5,981,970

Costs and expenses:

Cost of revenues

4,867,076

4,821,625

Selling, general and administrative expenses

1,267,753

1,116,142

Facility exit and impairment charges

11,353

11,528

Interest expense

48,592

50,007

Loss (gain) on debt modifications and retirements, net

2,839

(5,274

)

Loss on sale of assets, net

12,378

1,092

6,209,991

5,995,120

Loss from continuing operations before income taxes

(96,991

)

(13,150

)

Income tax expense

3,310

47

Net loss from continuing operations

(100,301

)

(13,197

)

Net income from discontinued operations, net of tax

-

-

Net loss

$

(100,301

)

$

(13,197

)

Basic and diluted loss per share:

Numerator for loss per share:

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

$

(100,301

)

$

(13,197

)

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

-

-

Loss attributable to common stockholders - basic and diluted

$

(100,301

)

$

(13,197

)

Denominator:

Basic and diluted weighted average shares

53,989

53,573

Basic and diluted loss per share

Continuing operations

$

(1.86

)

$

(0.25

)

Discontinued operations

$

-

$

-

Net basic and diluted loss per share

$

(1.86

)

$

(0.25

)

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)

Twenty-six weeks ended
August 28, 2021

Twenty-six weeks ended
August 29, 2020

Revenues

$

12,273,985

$

12,009,346

Costs and expenses:

Cost of revenues

9,743,186

9,650,682

Selling, general and administrative expenses

2,513,115

2,313,289

Facility exit and impairment charges

20,184

15,281

Intangible asset impairment charges

-

29,852

Interest expense

97,713

100,554

Loss (gain) on debt modifications and retirements, net

3,235

(5,274

)

Loss (gain) on sale of assets, net

5,820

(1,168

)

12,383,253

12,103,216

Loss from continuing operations before income taxes

(109,268

)

(93,870

)

Income tax expense (benefit)

4,090

(7,971

)

Net loss from continuing operations

(113,358

)

(85,899

)

Net income from discontinued operations, net of tax

-

9,161

Net loss

$

(113,358

)

$

(76,738

)

Basic and diluted loss per share:

Numerator for loss per share:

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

$

(113,358

)

$

(85,899

)

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

-

9,161

Loss attributable to common stockholders - basic and diluted

$

(113,358

)

$

(76,738

)

Denominator:

Basic and diluted weighted average shares

53,920

53,528

Basic and diluted loss per share

Continuing operations

$

(2.10

)

$

(1.60

)

Discontinued operations

$

-

$

0.17

Net basic and diluted loss per share

$

(2.10

)

$

(1.43

)

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

Thirteen weeks ended
August 28, 2021

Thirteen weeks ended
August 29, 2020

OPERATING ACTIVITIES:

Net loss

$

(100,301

)

$

(13,197

Net income from discontinued operations, net of tax

-

-

Net loss from continuing operations

$

(100,301

)

$

(13,197

)

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

Depreciation and amortization