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Rite Aid Corporation Reports Fiscal 2021 Fourth Quarter and Full Year Results

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  • Fourth Quarter Net Loss from Continuing Operations of $18.5 Million or $0.34 Per Share, Compared to the Prior Year Fourth Quarter Net Loss of $343.5 Million or $6.43 Per Share

  • Fourth Quarter Adjusted EBITDA from Continuing Operations of $41.3 Million, Compared to the Prior Year Adjusted EBITDA of $135.6 Million

  • Completed Acquisition of Bartell Drugs

  • Company Provides First Quarter Fiscal 2022 Outlook

  • Over 2 Million COVID-19 Vaccines Administered in March and April to Date

Rite Aid Corporation (NYSE: RAD) today reported operating results for its fourth quarter and fiscal year ended February 27, 2021.

For the fourth quarter, the company reported net loss from continuing operations of $18.5 million, or $0.34 loss per share, Adjusted net loss from continuing operations of $41.8 million, or $0.78 loss per share, and Adjusted EBITDA from continuing operations of $41.3 million, or 0.7 percent of revenues.

"We remain very optimistic about the direction of Rite Aid, despite a fourth quarter that was impacted by a historically soft cough, cold and flu season, the deferral of elective procedures and related acute prescription volume and the impact of COVID-19 on selling, general and administrative expenses," said Heyward Donigan, president and chief executive officer, Rite Aid. "This past year, we made significant progress in bringing our RxEvolution strategy to life. We redefined the role of the pharmacist, rebranded both our retail pharmacy business and Elixir, completed the strategic acquisition of Bartell’s and moved quickly to deliver solutions to meet customer needs for COVID-19 testing and vaccine administration."

"As we look ahead, our teams are continuing their heroic efforts to serve our communities and customers during this critical time. I am pleased to announce that we have administered over 2 million COVID-19 vaccines so far in the first quarter. We are also seeing prescription count trends, both acute and maintenance, return to positive levels. At Elixir, we are experiencing growth in our sales pipeline, and have recently been awarded over 200,000 new lives and over 6 million annualized scripts, with additional decisions pending in the current sales cycle. I am so proud of our 50,000 associates and the strategic progress we’re making in our journey to revitalize our brand and elevate the crucial role that pharmacy plays in the health of our customers."

Consolidated Fourth Quarter and Full Year Summary

(dollars in thousands)

Thirteen Week Period Ended

Fifty-two Week Period Ended

February 27,
2021

February 29,
2020

February 27,
2021

February 29,
2020

Revenues from continuing operations

$

5,916,856

$

5,727,242

$

24,043,240

$

21,928,393

Net loss from continuing operations

(18,495)

(343,461)

(100,070)

(469,219)

Adjusted EBITDA from continuing operations

41,265

135,584

437,665

538,211

Revenues from continuing operations increased 3.3 percent and 9.6 percent for the thirteen and fifty-two week periods ended February 27, 2021, respectively, compared to the prior year driven by growth at both the Retail Pharmacy and Pharmacy Services segments.

Fourth quarter net loss from continuing operations was $18.5 million, or $0.34 loss per share, compared to last year’s fourth quarter net loss from continuing operations of $343.5 million, or $6.43 loss per share. Income tax expense in the prior year’s fourth quarter was impacted by a $320.6 million charge to increase the valuation allowance against the company’s deferred tax asset. Other items impacting net loss from continuing operations in the current year’s fourth quarter included a decrease in Adjusted EBITDA and a lower LIFO credit, partially offset by a gain on the acquisition of Bartell Drugs and a gain on sale of assets resulting from the sale leasebacks of the company’s Lancaster, CA and Woodland, CA distribution centers.

Net loss from continuing operations for the fiscal year ended February 27, 2021 was $100.1 million, or $1.87 loss per share, compared to last year’s net loss of $469.2 million, or $8.82 loss per share. The reduction in net loss is due to lower income tax expense, a gain on sale of assets compared to a loss on sale of assets in the prior year, and a gain on the acquisition of Bartell Drugs. These items were partially offset by a decrease in Adjusted EBITDA, a lower gain on debt modifications and retirements, higher intangible asset impairment charges, and a lower LIFO credit.

Fourth quarter Adjusted EBITDA from continuing operations was $41.3 million, or 0.7 percent of revenues, compared to last year’s fourth quarter Adjusted EBITDA of $135.6 million, or 2.4 percent of revenues. The decline in Adjusted EBITDA is due to a decrease in gross profit resulting from lower front-end same store sales, weather disruptions that impacted the supply chain and reimbursement rate pressure and an increase in selling, general and administrative (SG&A) expenses due to incremental costs associated with the COVID-19 pandemic.

Adjusted EBITDA from continuing operations for the fiscal year ended February 27, 2021 was $437.7 million, or 1.8 percent of revenues, compared to last year’s Adjusted EBITDA of $538.2 million, or 2.5 percent of revenues. The decline in Adjusted EBITDA is due to a decrease in gross profit resulting from declines in acute scripts related to the pandemic, reimbursement rate pressure and an increase in SG&A expenses due to the impact of the COVID-19 pandemic and the completion of services provided under the Transition Services Agreement with Walgreens.

Retail Pharmacy Segment

(dollars in thousands)

Thirteen Week Period Ended

Fifty-two Week Period Ended

February 27,
2021

February 29,
2020

February 27,
2021

February 29,
2020

Revenues from continuing operations

$

4,114,485

$

3,993,328

$

16,365,260

$

15,616,186

Adjusted EBITDA from continuing operations

6,017

85,175

279,896

370,435

Retail Pharmacy Segment revenues from continuing operations increased 3.0 percent over the prior year quarter due primarily to the acquisition of Bartell Drugs. Same store sales from continuing operations for the fourth quarter decreased 0.3 percent over the prior year period, consisting of a 5.6 percent decrease in front-end sales and a 2.0 percent increase in pharmacy sales. Front-end same store sales, excluding cigarettes and tobacco products, decreased 5.0 percent. The decline in front-end same store sales was driven by a decline of nearly 37 percent in cough, cold and flu related categories. Difficult weather conditions also had a negative impact on same store sales for the quarter. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, decreased 0.9 percent over the prior year period driven by an over 14 percent decline in acute prescriptions, partially offset by increases in maintenance prescriptions, as well as the administration of the company’s first allocations of the COVID-19 vaccine. The company increased its front-end market share in both dollars and in unit sales1.

For the fiscal year ended February 27, 2021, Retail Pharmacy Segment revenues from continuing operations increased 4.8 percent over the prior year. Same store sales from continuing operations for the year increased 3.5 percent over the prior year, consisting of a 3.2 percent increase in pharmacy sales and a 3.1 percent increase in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 4.2 percent. Front-end sales benefited from increases in immunity, first aid and paper products, offset by decreases in over-the-counter products related to cough, cold and flu. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 1.3 percent over the prior year driven by increases in maintenance prescriptions, supported by personalized Medication Therapy Management interventions and home deliveries, partially offset by a pandemic influenced reduction in acute prescriptions of 9.0 percent. Prescription sales from continuing operations accounted for 66.7 percent of total drugstore sales.

Retail Pharmacy Segment Adjusted EBITDA from continuing operations was $6.0 million, or 0.2 percent of revenues, for the fourth quarter compared to last year’s fourth quarter Adjusted EBITDA from continuing operations of $85.2 million, or 2.1 percent of revenues. The decline in Adjusted EBITDA is largely due to a soft cough, cold and flu season, ongoing impacts related to COVID-19 and challenging weather conditions. The Company estimates the following impacts on fourth quarter adjusted EBITDA:

  • $20 million to $24 million from lower incidence in cough, cold and flu related illnesses;

  • $20 million to $24 million due to difficult weather conditions; and

  • $10 million to $12 million related to continued effects of COVID-19.

The total unanticipated impact on the quarter results was approximately $50 million to $60 million.

For the fiscal year ended February 27, 2021, Retail Pharmacy Segment Adjusted EBITDA from continuing operations was $279.9 million, or 1.7 percent of revenues, compared to $370.4 million, or 2.4 percent of revenues, for the prior year. The decline in Adjusted EBITDA is due to a decrease in gross profit resulting from declines in acute scripts resulting from the pandemic and reimbursement rate pressure and an increase in SG&A expenses due to the impact of the COVID-19 pandemic and the completion of services provided under the Transition Services Agreement with Walgreens.

Pharmacy Services Segment

(dollars in thousands)

Thirteen Week Period Ended

Fifty-two Week Period Ended

February 27,
2021

February 29,
2020

February 27,
2021

February 29,
2020

Revenues from continuing operations

$

1,870,111

$

1,801,090

$

7,970,137

$

6,559,560

Adjusted EBITDA from continuing operations

35,248

50,409

157,769

167,776

Pharmacy Services Segment revenues were $1.9 billion for the quarter, an increase of 3.8 percent compared to the prior year quarter. The increase in revenues was primarily the result of higher claims revenue due to changes in member mix and benefit packages and Medicare Part D revenue with the new calendar year.

For the fiscal year ended February 27, 2021, Pharmacy Services Segment revenues were $8.0 billion, an increase of 21.5 percent compared to the prior year. The increase in revenues was primarily the result of an increase in Medicare Part D membership.

1 – Source: IRI. Excludes tobacco, cigarettes, greeting cards and online sales. For drug store channel during Rite Aid’s fourth fiscal quarter.

Pharmacy Services Segment Adjusted EBITDA from continuing operations was $35.2 million, or 1.9 percent of revenues, for the fourth quarter compared to last year’s fourth quarter Adjusted EBITDA from continuing operations of $50.4 million, or 2.8 percent of revenues. The decline in Adjusted EBITDA is due to a decrease in gross profit associated with contract renewals on our small group business. Going forward, the company expects margins to stabilize across the book of business along with membership growth in target segments.

For the fiscal year ended February 27, 2021, Pharmacy Services Segment Adjusted EBITDA from continuing operations was $157.8 million, or 2.0 percent of revenues, compared to $167.8 million, or 2.6 percent of revenues, for the prior year. The decline in Adjusted EBITDA is due to increased drug costs within Medicare Part D, a decrease in gross profit within the segment’s small group business and SG&A spend related to an increase in Medicare Part D members.

Outlook for First Quarter 2022

The pandemic will continue to have an impact on several factors in Fiscal 2022. Those factors include the number of individuals that receive a COVID-19 vaccine, demand for COVID-19 testing, the timing and extent to which elective procedures increase to pre-pandemic levels, the demand for flu and other immunizations and the length and severity of this year’s cough cold and flu season. As a result, the company is currently only providing guidance for its first quarter of fiscal 2022.

The company’s results for the first quarter of fiscal 2022 will be significantly impacted by the number of COVID-19 vaccinations administered during the quarter, and the related benefit to revenues and gross profit, partially offset by incremental costs to administer these vaccines. Also included in our guidance assumptions are a meaningful reduction in front-end sales compared to last year’s pandemic driven surge and continued deferral of elective procedures and the related impact on acute scripts. The company also expects continued reimbursement rate pressure at retail, and a return of Elixir EBITDA to recent run rate levels due to good network management and expense control initiatives.

Total revenues are projected to be between $6.1 billion and $6.3 billion in the first quarter with Retail Pharmacy Segment same store sales expected to range from a decrease of 9.0 percent to a decrease of 7.0 percent compared to fiscal 2021.

Net income/loss is projected to be between a loss of $10 million and income of $10 million.

Adjusted EBITDA is projected to be between $115 million and $140 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://www.riteaid.com//investor-relations/presentations. The telephone replay will be available beginning at 12:30 p.m. Eastern Time on Thursday, April 15, 2021 and ending at 11:59 p.m. Eastern Time on May 5, 2021. To access the replay of the call, telephone (800) 585-8367 or (416) 621-4642 and enter the seven-digit reservation number 2368577. The webcast replay of the call will also be available at https://www.riteaid.com/corporate/investor-relations/presentations 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 including under the heading "Outlook for First Quarter 2022", the ability to generate positive free cash flows in fiscal 2022; the impact of the global coronavirus (COVID-19) pandemic on Rite Aid’s business; the ability to accelerate key initiatives and improve the operating performance of our stores; 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, government actions and restrictive measures implemented in response, and other impacts to the business, or on the Company’s ability to execute business continuity plans, as a result of the COVID-19 pandemic; 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 organizational restructuring 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, in Item 1A (Risk Factors) of our Quarterly Report on Form 10-Q filed on July 2, 2020 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 the first fiscal quarter of 2022 or 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, its severity, the actions to contain the virus or treat its impact (such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns), including the reinstitution of more stringent regulations (including mandatory stay at home orders, the availability and rollout of vaccines to treat the virus), 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 and 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 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 settlement, gains or losses on debt modifications and retirements, LIFO adjustments, goodwill and intangible asset impairment charges, restructuring-related costs, gain on Bartell acquisition, and the WBA merger 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 and intangible asset impairment charges, inventory write-downs related to store closings, gains or losses on debt modifications and retirements, the WBA merger termination fee, and other items (including stock-based compensation expense, merger and acquisition-related costs, non-recurring litigation settlement, severance, restructuring-related costs and costs related to facility closures, gain or loss on sale of assets, and gain 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 CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)

February 27, 2021

February 29, 2020

ASSETS

Current assets:

Cash and cash equivalents

$

160,902

$

218,180

Accounts receivable, net

1,462,441

1,286,785

Inventories, net of LIFO reserve of $485,859 and $539,640

1,864,890

1,921,604

Prepaid expenses and other current assets

106,941

181,794

Current assets held for sale

-

92,278

Total current assets

3,595,174

3,700,641

Property, plant and equipment, net

1,080,499

1,215,838

Operating lease right-of-use assets

3,064,077

2,903,256

Goodwill

1,108,136

1,108,136

Other intangibles, net

340,519

359,491

Deferred tax assets

14,964

16,680

Other assets

132,035

148,327

Total assets

$

9,335,404

$

9,452,369

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current maturities of long-term debt and lease financing obligations

$

6,409

$

8,840

Accounts payable

1,437,421

1,484,081

Accrued salaries, wages and other current liabilities

642,364

746,318

Current portion of operating lease liabilities

516,752

490,161

Current liabilities held for sale

-

37,063

Total current liabilities

2,602,946

2,766,463

Long-term debt, less current maturities

3,063,087

3,077,268

Long-term operating lease liabilities

2,829,293

2,710,347

Lease financing obligations, less current maturities

16,711

19,326

Other noncurrent liabilities

208,213

204,438

Total liabilities

8,720,250

8,777,842

Commitments and contingencies

-

-

Stockholders' equity:

Common stock

55,143

54,716

Additional paid-in capital

5,897,168

5,890,903

Accumulated deficit

(5,313,103

)

(5,222,194

)

Accumulated other comprehensive loss

(24,054

)

(48,898

)

Total stockholders' equity

615,154

674,527

Total liabilities and stockholders' equity

$

9,335,404

$

9,452,369

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)

Thirteen weeks ended
February 27, 2021

Thirteen weeks ended
February 29, 2020

Revenues

$

5,916,856

$

5,727,242

Costs and expenses:

Cost of revenues

4,774,297

4,460,621

Selling, general and administrative expenses

1,187,541

1,154,300

Lease termination and impairment charges

35,669

40,728

Interest expense

49,999

53,429

(Gain) loss on sale of assets, net

(51,827

)

9,896

Gain on Bartell acquisition

(47,705

)

-

5,947,974

5,718,974

(Loss) income from continuing operations before income taxes

(31,118

)

8,268

Income tax (benefit) expense

(12,623

)

351,729

Net loss from continuing operations

(18,495

)

(343,461

)

Net income from discontinued operations, net of tax

-

18,740

Net loss

$

(18,495

)

$

(324,721

)

Basic and diluted loss per share:

Numerator for loss per share:

Net loss from continuing operations attributable to common

stockholders - basic and diluted

$

(18,495

)

$

(343,461

)

Net income from discontinued operations attributable to

common stockholders - basic and diluted

-

18,740

Loss attributable to common stockholders - basic and diluted

$

(18,495

)

$

(324,721

)

Denominator:

Basic and diluted weighted average shares

53,812

53,434

Basic and diluted loss per share

Continuing operations

$

(0.34

)

$

(6.43

)

Discontinued operations

$

-

$

0.35

Net basic and diluted loss per share

$

(0.34

)

$

(6.08

)

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)

Fifty-two weeks ended
February 27, 2021

Fifty-two weeks ended
February 29, 2020

Revenues

$

24,043,240

$

21,928,393

Costs and expenses:

Cost of revenues

19,338,918

17,201,635

Selling, general and administrative expenses

4,657,185

4,587,336

Lease termination and impairment charges

58,403

42,843

Intangible asset impairment charges

29,852

-

Interest expense

201,388

229,657

Gain on debt modifications and retirements, net

(5,274

)

(55,692

)

(Gain) loss on sale of assets, net

(69,300

)

4,226

Gain on Bartell acquisition

(47,705

)

-

24,163,467

22,010,005

Loss from continuing operations before income taxes

(120,227

)

(81,612

)

Income tax (benefit) expense

(20,157

)

387,607

Net loss from continuing operations

(100,070

)

(469,219

)

Net income from discontinued operations, net of tax

9,161

17,045

Net loss

$

(90,909

)

$

(452,174

)

Basic and diluted loss per share:

Numerator for loss per share:

Net loss from continuing operations attributable to common

stockholders - basic and diluted

$

(100,070

)

$

(469,219

)

Net income from discontinued operations attributable to

common stockholders - basic and diluted

9,161

17,045

Loss attributable to common stockholders - basic and diluted

$

(90,909

)

$

(452,174

)

Denominator:

Basic and diluted weighted average shares

53,653

53,228

Basic and diluted loss per share

Continuing operations

$

(1.87

)

$

(8.82

)

Discontinued operations

$

0.18

$

0.32

Net basic and diluted loss per share

$

(1.69

)

$

(8.50

)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

Thirteen weeks ended
February 27, 2021

Thirteen weeks ended
February 29, 2020

OPERATING ACTIVITIES:

Net loss

$

(18,495

)

$

(324,721

)

Net income from discontinued operations, net of tax

-

18,740

Net loss from continuing operations

$

(18,495

)

$

(343,461

)

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

Depreciation and amortization

77,568

79,300

Lease termination and impairment charges

35,669

40,728

LIFO credit

(21,389

)

(72,357

)

(Gain) loss on sale of assets, net

(51,827

)

9,896

Gain on Bartell acquisition

(47,705

)

-

Stock-based compensation expense

4,326

2,489

Changes in deferred taxes

(10,633

)

358,925

Changes in operating assets and liabilities:

Accounts receivable

325,374

387,065

Inventories

196,795

107,798

Accounts payable

(36,832

)

(53,817

)

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

(2,725

)

(8,691

)

Other assets

5,710

4,364

Other liabilities

(96,814

)

(95,057

)

Net cash provided by operating activities of continuing operations

359,022

417,182

INVESTING ACTIVITIES:

Payments for property, plant and equipment

(67,752

)

(42,570

)

Intangible assets acquired

(1,097

)

(9,246

)

Acquisition of business, net of cash acquired

(86,230

)

-

Proceeds from dispositions of assets and investments

2,358

3,687

Proceeds from sale-leaseback transactions

88,880

4,879

Net cash used in investing activities of continuing operations

(63,841

)

(43,250

)

FINANCING ACTIVITIES:

Proceeds from issuance of long-term debt

-

600,000

Net payments to revolver

(141,000

)

(485,000

)

Principal payments on long-term debt

(1,161

)

(601,401

)

Change in zero balance cash accounts

(42,008

)

24,420

Net proceeds from the issuance of common stock

53

-

Payments for taxes related to net share settlement of equity awards

(921

)

(348

)

Deferred financing costs paid

(55

)

(5,466

)

Net cash used in financing activities of continuing operations

(185,092

)

(467,795

)

Cash flows from discontinued operations:

Operating activities of discontinued operations

-

(16,688

)

Investing activities of discontinued operations

-

39,233

Net cash provided by discontinued operations

-

22,545

Increase (decrease) in cash and cash equivalents

110,089

(71,318

)

Cash and cash equivalents, beginning of period

50,813

289,498

Cash and cash equivalents, end of period

$

160,902

$

218,180

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

Fifty-two weeks ended
February 27, 2021

Fifty-two weeks ended
February 29, 2020

OPERATING ACTIVITIES:

Net loss

$

(90,909

)

$

(452,174

)

Net income from discontinued operations, net of tax

9,161

17,045

Net loss from continuing operations

$

(100,070

)

$

(469,219

)

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

Depreciation and amortization

327,124

328,277

Lease termination and impairment charges

58,403

42,843

Intangible asset impairment charges

29,852

-

LIFO credit

(51,692

)

(64,804

)

(Gain) loss on sale of assets, net

(69,300

)

4,226

Gain on Bartell acquisition

(47,705

)

-

Stock-based compensation expense

13,003

16,087

Gain on debt modifications and retirements, net

(5,274

)

(55,692

)

Changes in deferred taxes

(10,633

)

385,904

Changes in operating assets and liabilities:

Accounts receivable

(182,404

)

486,563

Inventories

177,263

15,141

Accounts payable

(35,372

)

(92,062

)

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

(28,044

)

14,112

Other assets

80,975

(38,351

)

Other liabilities

(50,947

)

(62,168

)

Net cash provided by operating activities of continuing operations

105,179

510,857

INVESTING ACTIVITIES:

Payments for property, plant and equipment

(195,141

)

(171,705

)

Intangible assets acquired

(29,800

)

(42,681

)

Acquisition of business, net of cash acquired

(86,230

)

-

Proceeds from insured loss

12,500

-

Proceeds from dispositions of assets and investments

11,444

59,658

Proceeds from sale-leaseback transactions

177,892

4,879

Net cash used in investing activities of continuing operations

(109,335

)

(149,849

)

FINANCING ACTIVITIES:

Proceeds from issuance of long-term debt

849,918

600,000

Net proceeds from (payments to) revolver

200,000

(225,000

)

Principal payments on long-term debt

(1,058,537

)

(706,103

)

Change in zero balance cash accounts

(36,463

)

12,671

Net proceeds from the issuance of common stock

53

-

Payments for taxes related to net share settlement of equity awards

(3,086

)

(1,921

)

Financing fees paid for early debt redemption

(2,399

)

(518

)

Deferred financing costs paid

(14,729

)

(5,781

)

Net cash used in financing activities of continuing operations

(65,243

)

(326,652

)

Cash flows from discontinued operations:

Operating activities of discontinued operations

(82,189

)

(23,836

)

Investing activities of discontinued operations

94,310

63,307

Net cash provided by discontinued operations

12,121

39,471

(Decrease) increase in cash and cash equivalents

(57,278

)

73,827

Cash and cash equivalents, beginning of period

218,180

144,353

Cash and cash equivalents, end of period

$

160,902

$

218,180

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL SEGMENT OPERATING INFORMATION

(Dollars in thousands)

(unaudited)

Thirteen weeks ended
February 27, 2021

Thirteen weeks ended
February 29, 2020

Retail Pharmacy Segment

Revenues from continuing operations (a)

$

4,114,485

$

3,993,328

Cost of revenues from continuing operations (a)

3,081,851

2,852,283

Gross profit from continuing operations

1,032,634

1,141,045

LIFO credit from continuing operations

(21,389

)

(72,357

)

FIFO gross profit from continuing operations

1,011,245

1,068,688

Adjusted EBITDA gross profit from continuing operations

1,009,004

1,070,890

Gross profit as a percentage of revenues - continuing operations

25.10

%

28.57

%

LIFO credit as a percentage of revenues - continuing operations

-0.52

%

-1.81

%

FIFO gross profit as a percentage of revenues - continuing operations

24.58

%

26.76

%

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

24.52

%

26.82

%

Selling, general and administrative expenses from continuing operations

1,093,074

1,060,472

Adjusted EBITDA selling, general and administrative expenses from continuing operations

1,002,987

985,715

Selling, general and administrative expenses as a percentage of

revenues - continuing operations

26.57

%

26.56

%

Adjusted EBITDA selling, general and administrative expenses as a percentage of

revenues - continuing operations

24.38

%

24.68

%

Cash interest expense

46,671

49,607

Non-cash interest expense

3,328

3,822

Total interest expense

49,999

53,429

Interest expense - continuing operations

49,999

53,429

Interest expense - discontinued operations

-

-

Adjusted EBITDA - continuing operations

6,017

85,175

Adjusted EBITDA as a percentage of revenues - continuing operations

0.15

%

2.13

%

Pharmacy Services Segment

Revenues (a)

$

1,870,111

$

1,801,090

Cost of revenues (a)

1,760,186

1,675,514

Gross profit

109,925

125,576

Gross profit as a percentage of revenues

5.88

%

6.97

%

Adjusted EBITDA

35,248

50,409

Adjusted EBITDA as a percentage of revenues

1.88

%

2.80

%

(a) -

Revenues and cost of revenues include $67,740 and $67,176 of inter-segment activity for the thirteen weeks ended

February 27, 2021 and February 29, 2020, respectively, that is eliminated in consolidation.

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL SEGMENT OPERATING INFORMATION

(Dollars in thousands)

(unaudited)

Fifty-two weeks ended
February 27, 2021

Fifty-two weeks ended
February 29, 2020

Retail Pharmacy Segment

Revenues from continuing operations (a)

$

16,365,260

$

15,616,186

Cost of revenues from continuing operations (a)

12,109,469

11,341,350

Gross profit from continuing operations

4,255,791

4,274,836

LIFO credit from continuing operations

(51,692

)

(64,804

)

FIFO gross profit from continuing operations

4,204,099

4,210,032

Adjusted EBITDA gross profit from continuing operations

4,236,200

4,221,933

Gross profit as a percentage of revenues - continuing operations

26.01

%

27.37

%

LIFO credit as a percentage of revenues - continuing operations

-0.32

%

-0.41

%

FIFO gross profit as a percentage of revenues - continuing operations

25.69

%

26.96

%

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

25.89

%

27.04

%

Selling, general and administrative expenses from continuing operations

4,299,152

4,220,851

Adjusted EBITDA selling, general and administrative expenses from continuing operations

3,956,304

3,851,498

Selling, general and administrative expenses as a percentage of

revenues - continuing operations

26.27

%

27.03

%

Adjusted EBITDA selling, general and administrative expenses as a percentage of

revenues - continuing operations

24.18

%

24.66

%

Cash interest expense

188,306

214,589

Non-cash interest expense

13,082

15,068

Total interest expense

201,388

229,657

Interest expense - continuing operations

201,388

229,657

Interest expense - discontinued operations

-

-

Adjusted EBITDA - continuing operations

279,896

370,435

Adjusted EBITDA as a percentage of revenues - continuing operations

1.71

%

2.37

%

Pharmacy Services Segment

Revenues (a)

$

7,970,137

$

6,559,560

Cost of revenues (a)

7,521,606

6,107,638

Gross profit

448,531

451,922

Gross profit as a percentage of revenues

5.63

%

6.89

%

Adjusted EBITDA

157,769

167,776

Adjusted EBITDA as a percentage of revenues

1.98

%

2.56

%

(a) -

Revenues and cost of revenues include $292,157 and $247,353 of inter-segment activity for the fifty-two weeks ended

February 27, 2021 and February 29, 2020, respectively, that is eliminated in consolidation.

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

(In thousands)

(unaudited)

Thirteen weeks ended
February 27, 2021

Thirteen weeks ended
February 29, 2020

Reconciliation of net loss to adjusted EBITDA:

Net loss - continuing operations

$

(18,495

)

$

(343,461

)

Adjustments:

Interest expense

49,999

53,429

Income tax (benefit) expense

(12,623

)

351,729

Depreciation and amortization

77,568

79,300

LIFO credit

(21,389

)

(72,357

)

Lease termination and impairment charges

35,669

40,728

Merger and Acquisition-related costs

9,413

-

Stock-based compensation expense

4,326

2,489

Restructuring-related costs

13,456

11,872

Inventory write-downs related to store closings

1,113

569

(Gain) loss on sale of assets, net

(51,827

)

9,896

Gain on Bartell acquisition

(47,705

)

-

Other

1,760

1,390

Adjusted EBITDA - continuing operations

$

41,265

$

135,584

Percent of revenues - continuing operations

0.70

%

2.37

%

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

(In thousands)

(unaudited)

Fifty-two weeks ended
February 27, 2021

Fifty-two weeks ended
February 29, 2020

Reconciliation of net loss to adjusted EBITDA:

Net loss - continuing operations

$

(100,070

)

$

(469,219

)

Adjustments:

Interest expense

201,388

229,657

Income tax (benefit) expense

(20,157

)

387,607

Depreciation and amortization

327,124

328,277

LIFO credit

(51,692

)

(64,804

)

Lease termination and impairment charges

58,403

42,843

Intangible asset impairment charges

29,852

-

Gain on debt modifications and retirements, net

(5,274

)

(55,692

)

Merger and Acquisition-related costs

10,549

3,599

Stock-based compensation expense

13,003

16,087

Restructuring-related costs

84,552

105,642

Inventory write-downs related to store closings

3,709

4,652

(Gain) loss on sale of assets, net

(69,300

)

4,226

Gain on Bartell acquisition

(47,705

)

-

Other

3,283

5,336

Adjusted EBITDA - continuing operations

$

437,665

$

538,211

Percent of revenues - continuing operations

1.82

%

2.45

%

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

ADJUSTED NET LOSS

(Dollars in thousands, except per share amounts)

(unaudited)

Thirteen weeks ended
February 27, 2021

Thirteen weeks ended
February 29, 2020

Net loss from continuing operations

$

(18,495

)

$

(343,461

)

Add back - Income tax (benefit) expense

(12,623

)

351,729

(Loss) income before income taxes - continuing operations

(31,118

)

8,268

Adjustments:

Amortization expense

20,669

24,765

LIFO credit

(21,389

)

(72,357

)

Merger and Acquisition-related costs

9,413

-

Restructuring-related costs

13,456

11,872

Gain on Bartell acquisition

(47,705

)

-

Adjusted loss before income taxes - continuing operations

(56,674

)

(27,452

)

Adjusted income tax benefit (a)

(14,905

)

(7,588

)

Adjusted net loss from continuing operations

$

(41,769

)

$

(19,864

)

Adjusted net loss per diluted share - continuing operations:

Numerator for adjusted net loss per diluted share:

Adjusted net loss from continuing operations

$

(41,769

)

$

(19,864

)

Denominator:

Basic and diluted weighted average shares

53,812

53,434

Net loss from continuing operations per diluted

share - continuing operations

$

(0.34

)

$

(6.43

)

Adjusted net loss per diluted share - continuing operations

$

(0.78

)

$

(0.37

)

(a) The fiscal year 2021 and 2020 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 February 27, 2021 and

February 29, 2020, respectively.

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

ADJUSTED NET (LOSS) INCOME

(Dollars in thousands, except per share amounts)

(unaudited)

Fifty-two weeks ended
February 27, 2021

Fifty-two weeks ended
February 29, 2020

Net loss from continuing operations

$

(100,070

)

$

(469,219

)

Add back - Income tax (benefit) expense

(20,157

)

387,607

Loss before income taxes - continuing operations

(120,227

)

(81,612

)

Adjustments:

Amortization expense

89,020

103,941

LIFO credit

(51,692

)

(64,804

)

Intangible asset impairment charges

29,852

-

Gain on debt modifications and retirements, net

(5,274

)

(55,692

)

Merger and Acquisition-related costs

10,549

3,599

Restructuring-related costs

84,552

105,642

Gain on Bartell acquisition

(47,705

)

-

Adjusted (loss) income before income taxes - continuing operations

(10,925

)

11,074

Adjusted income tax (benefit) expense (a)

(2,873

)

3,061

Adjusted net (loss) income from continuing operations

$

(8,052

)

$

8,013

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

$

(8,052

)

$

8,013

Denominator:

Basic weighted average shares

53,653

53,228

Outstanding options and restricted shares, net

-

778

Diluted weighted average shares

53,653

54,006

Net loss from continuing operations per diluted

share - continuing operations

$

(1.87

)

$

(8.82

)

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

$

(0.15

)

$

0.15

(a) The fiscal year 2021 and 2020 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 February 27, 2021 and

February 29, 2020, respectively.

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND RECONCILIATION OF ADJUSTED EBITDA SELLING,

GENERAL AND ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT

(In thousands)

(unaudited)

Thirteen weeks ended
February 27, 2021

Thirteen weeks ended
February 29, 2020

Reconciliation of adjusted EBITDA gross profit:

Revenues

$

4,114,485

$

3,993,328

Gross Profit

1,032,634

1,141,045

Addback:

LIFO credit

(21,389

)

(72,357

)

Depreciation and amortization (cost of goods sold portion only)

1,915

1,758

Restructuring-related costs - SKU optimization charges

(4,824

)

-

Other

668

444

Adjusted EBITDA gross profit - continuing operations

$

1,009,004

$

1,070,890

Percent of revenues - continuing operations

24.52

%

26.82

%

Reconciliation of adjusted EBITDA selling, general and administrative expenses:

Revenues

$

4,114,485

$

3,993,328

Selling, general and administrative expenses

1,093,074

1,060,472

Less:

Depreciation and amortization (SG&A portion only)

61,861

62,109

Stock-based compensation expense

3,809

2,191

Merger and Acquisition-related costs

9,413

-

Restructuring-related costs

12,641

8,887

Other

2,363

1,570

Adjusted EBITDA selling, general and administrative

expenses - continuing operations

$

1,002,987

$

985,715

Percent of revenues - continuing operations

24.38

%

24.68

%

Adjusted EBITDA - continuing operations

$

6,017

$

85,175

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND RECONCILIATION OF ADJUSTED EBITDA SELLING,

GENERAL AND ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT

(In thousands)

(unaudited)

Fifty-two weeks ended
February 27, 2021

Fifty-two weeks ended
February 29, 2020

Reconciliation of adjusted EBITDA gross profit:

Revenues

$

16,365,260

$

15,616,186

Gross Profit

4,255,791

4,274,836

Addback:

LIFO credit

(51,692

)

(64,804

)

Depreciation and amortization (cost of goods sold portion only)

8,690

8,296

Restructuring-related costs - SKU optimization charges

20,939

-

Other

2,472

3,605

Adjusted EBITDA gross profit - continuing operations

$

4,236,200

$

4,221,933

Percent of revenues - continuing operations

25.89

%

27.04

%

Reconciliation of adjusted EBITDA selling, general and administrative expenses:

Revenues

$

16,365,260

$

15,616,186

Selling, general and administrative expenses

4,299,152

4,220,851

Less:

Depreciation and amortization (SG&A portion only)

261,295

257,390

Stock-based compensation expense

11,594

14,864

Merger and Acquisition-related costs

10,549

2,828

Restructuring-related costs

54,633

87,738

Other

4,777

6,533

Adjusted EBITDA selling, general and administrative

expenses - continuing operations

$

3,956,304

$

3,851,498

Percent of revenues - continuing operations

24.18

%

24.66

%

Adjusted EBITDA - continuing operations

$

279,896

$

370,435

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET (LOSS) INCOME GUIDANCE TO ADJUSTED EBITDA GUIDANCE

QUARTER ENDING MAY 29, 2021

(In thousands)

(unaudited)

Guidance Range

Low

High

Total Revenues

$

6,100,000

$

6,300,000

Same store sales

-9.00

%

-7.00

%

Reconciliation of net (loss) income to adjusted EBITDA:

Net (loss) income

$

(10,000

)

$

10,000

Adjustments:

Interest expense

46,000

46,000

Income tax expense

3,000

4,000

Depreciation and amortization

78,000

78,000

LIFO credit

(12,000

)

(12,000

)

Lease termination and impairment charges

1,000

1,000

Merger and Acquisition-related costs

3,000

3,000

Restructuring-related costs

3,000

7,000

Other

3,000

3,000

Adjusted EBITDA

$

115,000

$

140,000

View source version on businesswire.com: https://www.businesswire.com/news/home/20210415005496/en/

Contacts

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

MEDIA:
Christopher Savarese
(717) 975-5718
Christopher.Savarese@riteaid.com