• Third Quarter Net Income of $104.8 Million and Net Income per Diluted Share of $0.10, Compared to Prior Year’s Third Quarter Net Income of $71.5 Million and Net Income per Diluted Share of $0.04
• Third Quarter Adjusted EBITDA of $332.8 Million Compared to Adjusted EBITDA of $282.3 Million in Prior Third Quarter
• Rite Aid Raises Fiscal 2015 Outlook
CAMP HILL, Pa., 2014-12-18 — /EPR Retail News/ — Rite Aid Corporation (NYSE: RAD) today reported operating results for its fiscal third quarter ended November 29, 2014. The company reported revenues of $6.7 billion, net income of $104.8 million or $0.10 per diluted share, and Adjusted EBITDA of $332.8 million, or 5.0 percent of revenues.
“We are pleased with our results for the third quarter, said Rite Aid Chairman and CEO John Standley. “Our focus on expanding our health and wellness offering and delivering a higher level of care to the communities we serve drove our strong same-store sales, prescription count and gross profit. Based upon our strong third-quarter results, we have raised our guidance for the year.”
Third Quarter Summary
Revenues for the quarter were $6.7 billion versus revenues of $6.4 billion in the prior year’s third quarter. Revenues increased 5.3 percent primarily as a result of an increase in same store sales.
Same store sales for the quarter increased 5.4 percent over the prior year, consisting of a 1.6 percent increase in front-end sales and a 7.2 percent increase in pharmacy sales. Pharmacy sales included an approximate 228 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 4.5 percent over the prior year period. Prescription sales accounted for 69.8 percent of total drugstore sales, and third party prescription revenue was 97.6 percent of pharmacy sales.
Net income was $104.8 million or $0.10 per diluted share compared to last year’s third quarter net income of $71.5 million or $0.04 per diluted share. The improvement in net income resulted primarily from an increase in Adjusted EBITDA and a lower LIFO charge, partially offset by a higher loss on debt retirement related to the redemption of the company’s 10.25% senior secured notes.
Adjusted EBITDA (which is reconciled to net income on the attached table) was $332.8 million or 5.0 percent of revenues for the third quarter compared to $282.3 million or 4.4 percent of revenues for the like period last year. Adjusted EBITDA improved due to an increase in front-end and pharmacy gross profit, partially offset by an increase in selling, general and administrative expenses related to our higher level of sales. The improved pharmacy gross profit was driven by the increase in pharmacy prescription revenues and a reduction in generic drug costs, driven by the company’s transition to its new drug purchasing and delivery arrangement with McKesson, partially offset by lower reimbursement rates.
In the third quarter, the company relocated 3 stores, remodeled 103 stores and expanded 1 store, bringing the total number of wellness stores chainwide to 1,529. The company also acquired 6 stores and closed 6 stores, resulting in a total store count of 4,572 at the end of the third quarter.
Rite Aid Raises Fiscal 2015 Guidance
Based upon third quarter results, the company is raising its guidance. Adjusted EBITDA (which is reconciled to net income on the attached table) is expected to be between $1.275 billion and $1.305 billion. Net income is expected to be between $315.0 million and $370.0 million and income per diluted share between $0.31 and $0.37. Sales are expected to be between $26.25 billion and $26.4 billion and same store sales to range from an increase of 3.75 percent to an increase of 4.25 percent over Fiscal 2014. Capital expenditures are expected to be approximately $525 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 simulcast via the internet and can be accessed through the websites www.riteaid.com in the conference call section of investor information and www.StreetEvents.com. Slides related to materials discussed on the call will be available on both sites. A playback of the call will be available on both sites starting at 12 p.m. Eastern Time today. A playback of the call will also be available by telephone beginning at 12 p.m. Eastern Time today until 11:59 p.m. Eastern Time on Dec. 20, 2014. The playback number is 1-855-859-2056 from within the U.S. and Canada or 1-404-537-3406 from outside the U.S. and Canada with the eight-digit reservation number 38826492.
Rite Aid is one of the nation’s leading drugstore chains with 4,572 stores in 31 states and the District of Columbia. Information about Rite Aid, including corporate background and press releases, is available through Rite Aid’s website at www.riteaid.com.
Statements, including guidance, 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. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” and “will” and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including, but not limited to, our high level of indebtedness and our ability to make interest and principal payments on our debt and satisfy the other covenants contained in our debt agreements, general economic, market and competitive conditions, our ability to improve the operating performance of our stores in accordance with our long term strategy, the impact of private and public third-party payers continued reduction in prescription drug reimbursements and efforts to encourage mail order, our ability to manage expenses and our investments in working capital, outcomes of legal and regulatory matters and changes in legislation or regulations, including healthcare reform. These and other risks, assumptions and uncertainties are 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, which you are encouraged to read. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Rite Aid expressly disclaims any current intention to update publicly any forward-looking statement after the distribution of this release, whether as a result of new information, future events, changes in assumptions or otherwise.
See the attached table for a reconciliation of a non-GAAP financial measure, Adjusted EBITDA to net income, the most comparable GAAP financial measure. We define Adjusted EBITDA as net income excluding the impact of income taxes (and any corresponding adjustments to tax indemnification asset), interest expense, depreciation and amortization, LIFO adjustments, charges or credits for facility closing and impairment, inventory write-downs related to store closings, debt retirements and other items (including stock-based compensation expense, sale of assets and investments and revenue deferrals related to our customer loyalty program).
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