• Fourth Quarter Net Income of $1.835 Billion and Net Income per Diluted Share of $1.79, Compared to the Prior Year’s Fourth Quarter Net Income of $55.4 Million and Net Income per Diluted Share of $0.06
• Full Year Net Income of $2.109 Billion and Net Income per Diluted Share of $2.08, Compared to the Prior Year Net Income of $249.4 Million and Net Income per Diluted Share of $0.23
• Current Year Fourth Quarter and Full Year Results Includes an Income Tax Benefit of $1.716 Billion and $1.682 Billion, Respectively, Primarily as a Result of a Reduction of Deferred Tax Asset Valuation Allowance
• Fourth Quarter Adjusted EBITDA of $343.3 Million Compared to Adjusted EBITDA of $356.3 Million in the Prior Year’s Fourth Quarter
• Full Year Adjusted EBITDA of $1,322.8 Million Compared to Adjusted EBITDA of $1,325.0 Million in the Prior Year
• Rite Aid Provides Outlook for Fiscal 2016
CAMP HILL, Pa., 2015-4-9 — /EPR Retail News/ — Rite Aid Corporation (NYSE: RAD) today reported operating results for its fourth quarter and fiscal year ended February 28, 2015.
For the fourth quarter, the company reported revenues of $6.8 billion and net income of $1.835 billion, or $1.79 per diluted share. For the full year, the company reported revenues of $26.5 billion and net income of $2.109 billion, or $2.08 per diluted share. Current year results for both the fourth quarter and the full year were favorably impacted by a reduction of the deferred tax asset valuation allowance and a full year provision of income tax expense at a statutory tax rate, the net effect of which resulted in an income tax benefit of $1.716 billion, or $1.67 per diluted share and $1.682 billion, or $1.65 per diluted share in the fourth quarter and full year, respectively. The company reported Adjusted EBITDA of $343.3 million or 5.0 percent of revenues in the fourth quarter and $1,322.8 million or 5.0 percent of revenues for the full year.
The reduction of the tax valuation allowance represents a non-cash benefit to earnings in fiscal 2015. While the company will record charges for income taxes in future periods, it does not expect to pay significant cash taxes for the foreseeable future.
“In the fourth quarter, our strong growth in same-store sales and prescription count as well as strong cost control helped drive continued profitability,” said Rite Aid Chairman and CEO John Standley.
“These positive results contributed to a successful year in which we took significant steps to further position Rite Aid as a retail healthcare company,” added Standley. “We look forward to building upon our success by leveraging our recent strategic investments to grow our business. We will also continue to implement our initiatives that deliver value to our customers and help us provide greater access to convenient, affordable and high quality healthcare. I thank our dedicated team of nearly 90,000 Rite Aid associates for the great work they did throughout the year to continue our recent momentum.”
Fourth Quarter Summary
Revenues for the quarter were $6.8 billion versus revenues of $6.6 billion in the prior year’s fourth quarter. Revenues increased 3.8 percent primarily as a result of an increase in same store sales.
Same store sales for the quarter increased 4.5 percent over the prior year, consisting of a 5.7 percent increase in pharmacy sales and a 2.0 percent increase in front-end sales. Pharmacy sales included a negative impact of approximately 128 basis points from new generic introductions. The number of prescriptions filled in same stores increased 3.5 percent over the prior year period. Prescription sales accounted for 68.1 percent of total drugstore sales, and third party prescription revenue was 97.5 percent of pharmacy sales.
Net income was $1.835 billion or $1.79 per diluted share compared to last year’s fourth quarter net income of $55.4 million or $0.06 per diluted share. Current year net income included the favorable impact of a reduction of a deferred tax asset valuation allowance of $1.841 billion and income tax expense of $125.3 million compared to last year’s income tax benefit of $6.0 million.
Pre-tax income for the fourth quarter was $119.1 million or $0.12 per diluted share versus $49.4 million or $0.05 per diluted share in the prior year’s fourth quarter. Pre-tax income was favorably impacted by a LIFO credit in the current year of $23.5 million compared to last year’s LIFO charge of $44.1 million.
Adjusted EBITDA (which is reconciled to net income on the attached table) was $343.3 million or 5.0 percent of revenues for the fourth quarter compared to $356.3 million or 5.4 percent of revenues for the same period last year. Adjusted EBITDA in last year’s fourth quarter was favorably impacted by a $28 million reimbursement rate adjustment related to Medi-Cal.
In the fourth quarter, the company relocated 3 stores, remodeled 115 stores and expanded 2 stores, bringing the total number of wellness stores chainwide to 1,634. The company also opened 1 store, acquired 2 stores and closed 5 stores, resulting in a total store count of 4,570 at the end of the fourth quarter.
Full Year Results
For the fiscal year ended February 28, 2015, Rite Aid had revenues of $26.5 billion compared to $25.5 billion for the prior year. Revenues increased 3.9 percent primarily as a result of an increase in same store sales.
Same store sales for the year increased 4.3 percent consisting of a 5.8 percent increase in pharmacy sales and a 1.2 percent increase in front end sales. Pharmacy sales included a negative impact of approximately175 basis points from new generic introductions. The number of prescriptions filled in same stores increased 3.5 percent over the prior year period. Prescription sales accounted for 68.8 percent of total drugstore sales, and third party prescription revenue was 97.5 percent of pharmacy sales.
Net income for fiscal 2015 was $2.109 billion or $2.08 per diluted share compared to last year’s net income of $249.4 million or $0.23 per diluted share. Current year results were favorably impacted by the reduction of a deferred tax asset valuation allowance of $1.841 billion, partially offset by income tax expense of $159.0 million compared to $0.8 million in the prior year.
Pre-tax income was $426.8 million or $0.42 per diluted share in fiscal 2015 compared to $250.2 million or $0.23 per diluted share in fiscal 2014. Current year results were favorably impacted by a LIFO credit of $18.9 million in the current year compared to a LIFO charge of $104.1 million in the prior year, a loss on debt retirement of $18.5 million compared to $62.4 million in the prior year, and lower interest expense.
Adjusted EBITDA was $1,322.8 million or 5.0 percent of revenues for the year compared to $1,325.0 million or 5.2 percent of revenues for last year.
For the year, the company relocated 14 stores, acquired 9 stores, remodeled 440 stores, expanded 5 stores, opened two stores, and closed 28 stores.
Outlook for Fiscal 2016
The company’s outlook for fiscal 2016 is based on the anticipated benefits of its wellness remodels, a full year of benefits from the pharmacy sourcing arrangement with McKesson and other initiatives to grow sales and drive operational efficiencies. The company’s outlook also considers planned wage and benefit increases, the introduction of certain new generics and a reimbursement rate environment that is expected to continue to be challenging. The outlook does not consider the impact of the EnvisionRx acquisition due to the uncertainty as to when the transaction will close. The company’s outlook also reflects an increase in income tax expense compared to fiscal 2015, which included an income tax benefit from the reduction of the deferred tax asset valuation allowance. The company expects cash tax payments to remain in a range of $10 million to $20 million for fiscal 2016 as it will continue to be able to utilize its tax net operating loss carryforward.
Rite Aid said it expects sales to be between $26.9 billion and $27.4 billion in fiscal 2016 with same store sales expected to range from an increase of 2.5 percent to an increase of 4.5 percent over fiscal 2015.
Adjusted EBITDA (which is reconciled to net income on the attached table) is expected to be between $1.250 billion and $1.350 billion.
Net income for fiscal 2016 is expected to be between $190 million and $275 million or income per diluted share of $0.19 to $0.27. This guidance is net of estimated income tax expense of between $130 million and $180 million, or $0.13 to $0.18 per diluted share, respectively.
Capital expenditures are expected to be approximately $650 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 Apr. 10, 2015. 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 11217760.
Rite Aid is one of the nation’s leading drugstore chains with 4,570 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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