U.S. markets close in 5 hours 9 minutes
  • S&P 500

    4,244.73
    +34.49 (+0.82%)
     
  • Dow 30

    33,594.53
    +285.02 (+0.86%)
     
  • Nasdaq

    12,946.78
    +91.97 (+0.72%)
     
  • Russell 2000

    2,002.88
    +33.64 (+1.71%)
     
  • Crude Oil

    92.44
    +0.51 (+0.55%)
     
  • Gold

    1,807.40
    -6.30 (-0.35%)
     
  • Silver

    20.41
    -0.33 (-1.60%)
     
  • EUR/USD

    1.0333
    +0.0031 (+0.30%)
     
  • 10-Yr Bond

    2.8330
    +0.0470 (+1.69%)
     
  • GBP/USD

    1.2216
    -0.0002 (-0.01%)
     
  • USD/JPY

    132.6660
    -0.2070 (-0.16%)
     
  • BTC-USD

    24,521.98
    +485.98 (+2.02%)
     
  • CMC Crypto 200

    578.20
    +3.46 (+0.60%)
     
  • FTSE 100

    7,472.94
    -34.17 (-0.46%)
     
  • Nikkei 225

    27,819.33
    -180.63 (-0.65%)
     

Rite Aid Corporation Reports Fiscal 2022 Third Quarter Results

  • Oops!
    Something went wrong.
    Please try again later.
·13 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • 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

CAMP HILL, Pa., December 21, 2021--(BUSINESS WIRE)--Rite Aid Corporation (NYSE: RAD) today reported operating results for its third fiscal quarter ended November 27, 2021.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211220005684/en/

(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: