Rite Aid Corporation Reports Fiscal 2021 Third Quarter Results

Rhea-AI Summary

Rite Aid Corporation (NYSE: RAD) reported its third fiscal quarter results, ending November 28, 2020, with net income of $4.3 million ($0.08 per share) and adjusted net income of $21.6 million ($0.40 per share). Revenues increased by 12% year-over-year to $6.12 billion, driven by growth in both Retail Pharmacy and Pharmacy Services segments. However, adjusted EBITDA fell to $137.4 million (2.3% of revenues) compared to $158.1 million (2.9% of revenues) in the previous year. The company narrowed its fiscal 2021 guidance, expecting revenues between $23.9 billion and $24.2 billion, with a net loss of $89 million to $114 million.

Positive

• Revenues increased by 12% year-over-year to $6.12 billion.
• Growth in Retail Pharmacy segment revenues by 5.1%.
• Pharmacy Services segment revenues rose by 29.2%, adding 252,000 Medicare Part D members.
• Adjusted net income reached $21.6 million with adjusted EBITDA at $137.4 million.

Negative

• Net income declined to $4.3 million from $52.3 million year-over-year.
• Adjusted EBITDA decreased from $158.1 million to $137.4 million.
• Net loss expected between $89 million and $114 million for fiscal 2021.

Rite Aid Corporation (NYSE: RAD) today reported operating results for its third fiscal quarter ended November 28, 2020.

For the third quarter, the company reported net income from continuing operations of $4.3 million, or $0.08 income per share, Adjusted net income from continuing operations of $21.6 million, or $0.40 income per share, and Adjusted EBITDA from continuing operations of $137.4 million, or 2.3 percent of revenues.

“We are pleased with our third quarter performance as we continue to grow our business and achieve major physical and digital milestones through our RxEvolution strategy,” said Heyward Donigan, president and chief executive officer, Rite Aid. “We officially launched our new brand and logo, made substantial progress in evolving our merchandise mix to an assortment that best supports whole health, refreshed over 700 store exteriors, opened the first three new Store of the Future prototypes and began the integration of our two legacy PBMs. On the digital side, we launched a completely modernized Rite Aid online experience and mobile app and are set to launch our new member portal at Elixir.”

“Our teams are working hard to serve our customers during these challenging times. We have administered over one million COVID-19 tests and will be partnering with the CDC to help administer COVID-19 vaccines in our communities. I am so proud of our 50,000 associates and the strategic progress we’re making in our journey to revolutionize our industry and elevate our role as an indispensable healthcare provider. We are accelerating the key initiatives that support our strategy, and we will continue to deliver the operational excellence needed to achieve strong results as we generate cash flow, reduce debt and improve our leverage ratio.”

Consolidated Third Quarter Summary

(dollars in thousands)	Thirteen Week Period Ended				Thirty-nine Week Period Ended
		November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019
Revenues from continuing operations	$	6,117,038	$	5,462,298	$	18,126,384	$	16,201,151
Net income (loss) from continuing operations		4,324		52,286		(81,575)		(125,758)
Adjusted EBITDA from continuing operations		137,405		158,090		396,400		402,627

Revenues from continuing operations for the quarter were $6.12 billion compared to revenues from continuing operations of $5.46 billion in the prior year’s quarter. The increase in revenues was driven by growth at both the Retail Pharmacy and Pharmacy Services segments.

Net income from continuing operations was $4.3 million, or $0.08 per share, compared to last year’s third quarter net income from continuing operations of $52.3 million, or $0.98 per share. The decline in net income was due primarily to a $55.7 million gain on debt retirements in the prior year and a decrease in Adjusted EBITDA, partially offset by lower restructuring-related costs and a higher gain on sale of assets resulting from the sale-leaseback of the company’s Perryman, MD distribution center.

Adjusted EBITDA from continuing operations was $137.4 million, or 2.3 percent of revenues, compared to last year’s third quarter Adjusted EBITDA of $158.1 million, or 2.9 percent of revenues.

Retail Pharmacy Segment

(dollars in thousands)	Thirteen Week Period Ended				Thirty-nine Week Period Ended
		November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019
Revenues from continuing operations	$	4,109,592	$	3,909,946	$	12,250,775	$	11,622,858
Adjusted EBITDA from continuing operations		88,557		108,579		273,879		285,260

Retail Pharmacy Segment revenues from continuing operations increased 5.1 percent over the prior year quarter. Same store sales from continuing operations for the third quarter increased 4.3 percent over the prior year period, consisting of a 6.1 percent increase in pharmacy sales and a 0.7 percent decrease in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 0.3 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 and Halloween candy sales. The company increased its retail script share¹, and also increased its front-end market share in both dollars and in unit sales². The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 3.1 percent over the prior year period driven by increases in maintenance prescriptions, supported by personalized Medication Therapy Management interventions and home deliveries. Flu immunizations increased by 28 percent over the prior year period, which offset a 19 percent decline in acute scripts related to cough cold and flu. In total, acute prescriptions decreased by 1.9 percent.

Retail Pharmacy Segment Adjusted EBITDA from continuing operations was $88.6 million, or 2.2 percent of revenues, for the third quarter compared to last year’s third quarter Adjusted EBITDA from continuing operations of $108.6 million or 2.8 percent of revenues. Gross profit dollars increased due to increased revenues, but gross margin rate declined due to reimbursement rate pressure and the impact of the reduction in over-the-counter front-end sales. Selling, general and administrative (SG&A) expenses improved as a percentage of sales, but SG&A dollars increased due to incremental costs associated with the COVID-19 pandemic and the absence of Transition Services Agreement income in the current quarter, as services under that agreement have been completed.

1 – Source: IQVIA RxInsight. Share based on 30-day equivalent scripts in Rite Aid operating area.

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

Pharmacy Services Segment

(dollars in thousands)	Thirteen Week Period Ended				Thirty-nine Week Period Ended
		November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019
Revenues from continuing operations	$	2,084,402	$	1,613,109	$	6,100,026	$	4,758,470
Adjusted EBITDA from continuing operations		48,848		49,511		122,521		117,367

Pharmacy Services Segment revenues were $2.1 billion, an increase of 29.2 percent compared to the prior year period. The increase in revenues was primarily the result of an increase of 252,000 Medicare Part D members.

Pharmacy Services Segment Adjusted EBITDA from continuing operations was $48.8 million, or 2.3 percent of revenues, for the third quarter and was flat to last year’s third quarter Adjusted EBITDA from continuing operations of $49.5 million, or 3.1 percent of revenues. The increase in revenues was offset by a decline in Adjusted EBITDA as a percent of revenues. The Pharmacy Services Segment benefited from reductions in payroll and indirect spend overall, but these benefits were offset by increased drug costs within Medicare Part D and SG&A spend related to an increase in Medicare Part D members. The Company expects Medicare Part D membership to decrease in fiscal 2022, but expects these members to be more profitable.

Outlook for Fiscal 2021

Rite Aid Corporation is narrowing its fiscal 2021 guidance. The company’s key guidance assumptions are as follows:

• Benefits from initiatives to drive retail sales growth, offset by the impact of a less severe cough, cold and flu season on front end over-the-counter sales and related prescriptions;
• A reduction in Medicare Part D membership beginning January 1;
• Strong expense control across both the Retail Pharmacy and Pharmacy Services segments, offset by additional retail operating expenses caused by the recent increase in COVID-19 cases across many of our markets; and
• Continued improvements in pharmacy network management at Elixir.

Rite Aid Corporation expects revenues to be between $23.9 billion and $24.2 billion in fiscal 2021 with same store sales expected to range from an increase of 3.5 percent to an increase of 4.5 percent over fiscal 2020.

Net loss is expected to be between $114 million and $89 million.

Adjusted EBITDA is expected to be between $490 million and $520 million.

Adjusted net income per share is expected to be between $0.45 and $0.85.

Capital expenditures are expected to be approximately $325 million, which includes our previously announced acquisition of Bartell Drugs.

Free cash flow is expected to be between $50 million and $100 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/corporate/investor-relations/presentations. The telephone replay will be available beginning at 12 p.m. Eastern Time on Thursday, Dec. 17, 2020 and ending at 11:59 p.m. Eastern Time on Jan. 16, 2021. To access the replay of the call, telephone (800) 585-8367 or (416) 621-4642 and enter the seven-digit reservation number 3338667. 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 more than 1.6 million Americans daily. 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 18 states. Through Elixir, we provide pharmacy benefits and services to approximately 4 million 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 2021, the ability to generate positive free cash flows in fiscal 2021; the continued 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: the impact of COVID-19 on our workforce, operations, stores, expenses, and supply chain, and the operations of our customers, suppliers and business partners; our ability to successfully implement our RxEvolution strategy; our high level of indebtedness and our ability to satisfy our obligations and the other covenants contained in our debt agreements; general competitive, economic, industry, market, political (including healthcare reform) and regulatory conditions, civil unrest (including any resulting store closures, damage, or loss of inventory), as well as other factors specific to 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; outcomes of legal and regulatory matters; 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 place undue reliance 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 2021 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 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 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.

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 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 and gain or loss on sale of assets). The add back of LIFO (credit) charge when calculating Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share removes the entire impact of LIFO (credits) charges, and effectively reflects Rite Aid's results as if the company was on a FIFO inventory basis.

RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
			November 28, 2020				February 29, 2020
ASSETS
Current assets:
	Cash and cash equivalents		$	50,813			$	218,180
	Accounts receivable, net			1,770,691				1,286,785
	Inventories, net of LIFO reserve of $509,337 and $539,640			1,971,250				1,921,604
	Prepaid expenses and other current assets			116,463				181,794
	Current assets held for sale			42,231				92,278
		Total current assets		3,951,448				3,700,641
Property, plant and equipment, net				1,045,682				1,215,838
Operating lease right-of-use assets				2,892,445				2,903,256
Goodwill				1,108,136				1,108,136
Other intangibles, net				291,013				359,491
Deferred tax assets				16,680				16,680
Other assets				123,999				148,327
		Total assets	$	9,429,403			$	9,452,369
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Current maturities of long-term debt and lease financing obligations		$	7,097			$	8,840
	Accounts payable			1,482,521				1,484,081
	Accrued salaries, wages and other current liabilities			676,582				746,318
	Current portion of operating lease liabilities			489,867				490,161
	Current liabilities held for sale			-				37,063
		Total current liabilities		2,656,067				2,766,463
Long-term debt, less current maturities				3,200,577				3,077,268
Long-term operating lease liabilities				2,676,153				2,710,347
Lease financing obligations, less current maturities				17,098				19,326
Other noncurrent liabilities				268,973				204,438
		Total liabilities		8,818,868				8,777,842
Commitments and contingencies				-				-
Stockholders' equity:
	Common stock			55,251				54,716
	Additional paid-in capital			5,895,709				5,890,903
	Accumulated deficit			(5,294,608	)			(5,222,194	)
	Accumulated other comprehensive loss			(45,817	)			(48,898	)
		Total stockholders' equity		610,535				674,527
		Total liabilities and stockholders' equity	$	9,429,403			$	9,452,369

RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
			Thirteen weeks ended November 28, 2020				Thirteen weeks ended November 30, 2019
Revenues			$	6,117,038			$	5,462,298
Costs and expenses:
	Cost of revenues			4,913,939				4,273,323
	Selling, general and administrative expenses			1,156,355				1,134,854
	Lease termination and impairment charges			7,453				166
	Interest expense			50,835				57,856
	Gain on debt retirements, net			-				(55,692	)
	Gain on sale of assets, net			(16,305	)			(1,371	)
				6,112,277				5,409,136
Income from continuing operations before income taxes				4,761				53,162
Income tax expense				437				876
	Net income from continuing operations			4,324				52,286
	Net loss from discontinued operations, net of tax			-				(801	)
	Net income		$	4,324			$	51,485
Basic and diluted income per share:
Numerator for income per share:
	Net income from continuing operations attributable to common
		stockholders - basic and diluted	$	4,324			$	52,286
	Net loss from discontinued operations attributable to
		common stockholders - basic and diluted		-				(801	)
	Income attributable to common stockholders - basic and diluted		$	4,324			$	51,485
Denominator:
	Basic weighted average shares			53,744				53,310
	Outstanding options and restricted shares, net			335				274
	Diluted weighted average shares			54,079				53,584
Basic income per share
	Continuing operations		$	0.08			$	0.98
	Discontinued operations		$	-			$	(0.01	)
	Net basic income per share		$	0.08			$	0.97
Diluted income per share
	Continuing operations		$	0.08			$	0.98
	Discontinued operations		$	-			$	(0.02	)
	Net diluted income per share		$	0.08			$	0.96

RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
			Thirty-nine weeks ended November 28, 2020				Thirty-nine weeks ended November 30, 2019
Revenues			$	18,126,384			$	16,201,151
Costs and expenses:
	Cost of revenues			14,564,621				12,741,014
	Selling, general and administrative expenses			3,469,644				3,433,036
	Lease termination and impairment charges			22,734				2,115
	Intangible asset impairment charges			29,852				-
	Interest expense			151,389				176,228
	Gain on debt modifications and retirements, net			(5,274	)			(55,692	)
	Gain on sale of assets, net			(17,473	)			(5,670	)
				18,215,493				16,291,031
Loss from continuing operations before income taxes				(89,109	)			(89,880	)
Income tax (benefit) expense				(7,534	)			35,878
	Net loss from continuing operations			(81,575	)			(125,758	)
	Net income (loss) from discontinued operations, net of tax			9,161				(1,695	)
	Net loss		$	(72,414	)		$	(127,453	)
Basic and diluted loss per share:
Numerator for loss per share:
	Net loss from continuing operations attributable to common
		stockholders - basic and diluted	$	(81,575	)		$	(125,758	)
	Net income (loss) from discontinued operations attributable to
		common stockholders - basic and diluted		9,161				(1,695	)
	Loss attributable to common stockholders - basic and diluted		$	(72,414	)		$	(127,453	)
Denominator:
	Basic and diluted weighted average shares			53,600				53,159
Basic and diluted loss per share
	Continuing operations		$	(1.52	)		$	(2.37	)
	Discontinued operations		$	0.17			$	(0.03	)
	Net basic and diluted loss per share		$	(1.35	)		$	(2.40	)

RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
											Thirteen weeks ended November 28, 2020				Thirteen weeks ended November 30, 2019
OPERATING ACTIVITIES:
Net income											$	4,324			$	51,485
Net loss from discontinued operations, net of tax												-				(801	)
Net income from continuing operations											$	4,324			$	52,286
Adjustments to reconcile to net cash provided by operating activities of continuing operations:
	Depreciation and amortization											83,336				82,007
	Lease termination and impairment charges											7,453				166
	LIFO credit											(9,487	)			(7,440	)
	Gain on sale of assets, net											(16,305	)			(1,371	)
	Stock-based compensation expense											2,867				3,506
	Gain on debt retirements, net											-				(55,692	)
	Changes in operating assets and liabilities:
		Accounts receivable										128,777				252,767
		Inventories										(24,005	)			19,333
		Accounts payable										(488	)			47,378
		Operating lease right-of-use assets and operating lease liabilities										(6,826	)			(12,179	)
		Other assets										(4,248	)			1,959
		Other liabilities										57,351				40,993
			Net cash provided by operating activities of continuing operations									222,749				423,713
INVESTING ACTIVITIES:
	Payments for property, plant and equipment											(64,304	)			(45,075	)
	Intangible assets acquired											(6,131	)			(17,727	)
	Proceeds from dispositions of assets and investments											3,176				51,548
	Proceeds from sale-leaseback transactions											80,551				-
			Net cash provided by (used in) investing activities of continuing operations									13,292				(11,254	)
FINANCING ACTIVITIES:
	Net payments to revolver											(309,000	)			(115,000	)
	Principal payments on long-term debt											(1,194	)			(101,251	)
	Change in zero balance cash accounts											32,374				(66,461	)
	Payments for taxes related to net share settlement of equity awards											(64	)			(587	)
	Financing fees paid for early debt redemption											-				(518	)
	Deferred financing costs paid											(74	)			-
			Net cash used in financing activities of continuing operations									(277,958	)			(283,817	)
Cash flows from discontinued operations:
	Operating activities of discontinued operations											-				(4,876	)
	Investing activities of discontinued operations											-				23,551
			Net cash provided by discontinued operations									-				18,675
(Decrease) increase in cash and cash equivalents												(41,917	)			147,317
Cash and cash equivalents, beginning of period												92,730				142,181
Cash and cash equivalents, end of period											$	50,813			$	289,498

RITE AID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
											Thirty-nine weeks ended November 28, 2020				Thirty-nine weeks ended November 30, 2019
OPERATING ACTIVITIES:
Net loss											$	(72,414	)		$	(127,453	)
Net income (loss) from discontinued operations, net of tax												9,161				(1,695	)
Net loss from continuing operations											$	(81,575	)		$	(125,758	)
Adjustments to reconcile to net cash (used in) provided by operating activities of continuing operations:
	Depreciation and amortization											249,556				248,977
	Lease termination and impairment charges											22,734				2,115
	Intangible asset impairment charges											29,852				-
	LIFO (credit) charge											(30,303	)			7,553
	Gain on sale of assets, net											(17,473	)			(5,670	)
	Stock-based compensation expense											8,677				13,598
	Gain on debt modifications and retirements, net											(5,274	)			(55,692	)
	Changes in deferred taxes											-				26,979
	Changes in operating assets and liabilities:
		Accounts receivable										(507,778	)			99,498
		Inventories										(19,532	)			(92,657	)
		Accounts payable										1,460				(38,245	)
		Operating lease right-of-use assets and operating lease liabilities										(25,319	)			22,803
		Other assets										75,265				(42,715	)
		Other liabilities										45,867				32,889
			Net cash (used in) provided by operating activities of continuing operations									(253,843	)			93,675
INVESTING ACTIVITIES:
	Payments for property, plant and equipment											(127,389	)			(129,135	)
	Intangible assets acquired											(28,703	)			(33,435	)
	Proceeds from insured loss											12,500				-
	Proceeds from dispositions of assets and investments											9,086				55,971
	Proceeds from sale-leaseback transactions											89,012				-
			Net cash used in investing activities of continuing operations									(45,494	)			(106,599	)
FINANCING ACTIVITIES:
	Proceeds from issuance of long-term debt											849,918				-
	Net proceeds from revolver											341,000				260,000
	Principal payments on long-term debt											(1,057,376	)			(104,702	)
	Change in zero balance cash accounts											5,545				(11,749	)
	Payments for taxes related to net share settlement of equity awards											(2,165	)			(1,573	)
	Financing fees paid for early debt redemption											(2,399	)			(518	)
	Deferred financing costs paid											(14,674	)			(315	)
			Net cash provided by financing activities of continuing operations									119,849				141,143
Cash flows from discontinued operations:
	Operating activities of discontinued operations											(82,189	)			(7,148	)
	Investing activities of discontinued operations											94,310				24,074
			Net cash provided by discontinued operations									12,121				16,926
(Decrease) increase in cash and cash equivalents												(167,367	)			145,145
Cash and cash equivalents, beginning of period												218,180				144,353
Cash and cash equivalents, end of period											$	50,813			$	289,498

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
				Thirteen weeks ended November 28, 2020				Thirteen weeks ended November 30, 2019
Retail Pharmacy Segment
	Revenues from continuing operations (a)			$	4,109,592			$	3,909,946
	Cost of revenues from continuing operations (a)				3,029,884				2,839,094
	Gross profit from continuing operations				1,079,708				1,070,852
	LIFO credit from continuing operations				(9,487	)			(7,440	)
	FIFO gross profit from continuing operations				1,070,221				1,063,412
	Adjusted EBITDA gross profit from continuing operations				1,072,547				1,065,523
	Gross profit as a percentage of revenues - continuing operations				26.27	%			27.39	%
	LIFO credit as a percentage of revenues - continuing operations				-0.23	%			-0.19	%
	FIFO gross profit as a percentage of revenues - continuing operations				26.04	%			27.20	%
	Adjusted EBITDA gross profit as a percentage of revenues - continuing operations				26.10	%			27.25	%
	Selling, general and administrative expenses from continuing operations				1,067,027				1,044,236
	Adjusted EBITDA selling, general and administrative expenses from continuing operations				983,990				956,944
	Selling, general and administrative expenses as a percentage of
		revenues - continuing operations			25.96	%			26.71	%
	Adjusted EBITDA selling, general and administrative expenses as a percentage of
		revenues - continuing operations			23.94	%			24.47	%
	Cash interest expense				47,500				54,068
	Non-cash interest expense				3,335				3,788
	Total interest expense				50,835				57,856
	Interest expense - continuing operations				50,835				57,856
	Interest expense - discontinued operations				-				-
	Adjusted EBITDA - continuing operations				88,557				108,579
	Adjusted EBITDA as a percentage of revenues - continuing operations				2.15	%			2.78	%
Pharmacy Services Segment
	Revenues (a)			$	2,084,402			$	1,613,109
	Cost of revenues (a)				1,961,011				1,494,986
	Gross profit				123,391				118,123
	Gross profit as a percentage of revenues				5.92	%			7.32	%
	Adjusted EBITDA				48,848				49,511
	Adjusted EBITDA as a percentage of revenues				2.34	%			3.07	%

(a) -

Revenues and cost of revenues include $76,956 and $60,757 of inter-segment activity for the thirteen weeks ended November 28, 2020 and November 30, 2019, respectively, that is eliminated in consolidation.

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
				Thirty-nine weeks ended November 28, 2020				Thirty-nine weeks ended November 30, 2019
Retail Pharmacy Segment
	Revenues from continuing operations (a)			$	12,250,775			$	11,622,858
	Cost of revenues from continuing operations (a)				9,027,618				8,489,067
	Gross profit from continuing operations				3,223,157				3,133,791
	LIFO (credit) charge from continuing operations				(30,303	)			7,553
	FIFO gross profit from continuing operations				3,192,854				3,141,344
	Adjusted EBITDA gross profit from continuing operations				3,227,196				3,151,043
	Gross profit as a percentage of revenues - continuing operations				26.31	%			26.96	%
	LIFO (credit) charge as a percentage of revenues - continuing operations				-0.25	%			0.06	%
	FIFO gross profit as a percentage of revenues - continuing operations				26.06	%			27.03	%
	Adjusted EBITDA gross profit as a percentage of revenues - continuing operations				26.34	%			27.11	%
	Selling, general and administrative expenses from continuing operations				3,206,078				3,160,379
	Adjusted EBITDA selling, general and administrative expenses from continuing operations				2,953,317				2,865,783
	Selling, general and administrative expenses as a percentage of
		revenues - continuing operations			26.17	%			27.19	%
	Adjusted EBITDA selling, general and administrative expenses as a percentage of
		revenues - continuing operations			24.11	%			24.66	%
	Cash interest expense				141,635				164,982
	Non-cash interest expense				9,754				11,246
	Total interest expense				151,389				176,228
	Interest expense - continuing operations				151,389				176,228
	Interest expense - discontinued operations				-				-
	Adjusted EBITDA - continuing operations				273,879				285,260
	Adjusted EBITDA as a percentage of revenues - continuing operations				2.24	%			2.45	%
Pharmacy Services Segment
	Revenues (a)			$	6,100,026			$	4,758,470
	Cost of revenues (a)				5,761,420				4,432,124
	Gross profit				338,606				326,346
	Gross profit as a percentage of revenues				5.55	%			6.86	%
	Adjusted EBITDA				122,521				117,367
	Adjusted EBITDA as a percentage of revenues				2.01	%			2.47	%

(a) -

Revenues and cost of revenues include $224,417 and $180,177 of inter-segment activity for the thirty-nine weeks ended November 28, 2020 and November 30, 2019, respectively, that is eliminated in consolidation.

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(In thousands)
(unaudited)
						Thirteen weeks ended November 28, 2020				Thirteen weeks ended November 30, 2019
Reconciliation of net income to adjusted EBITDA:
		Net income - continuing operations				$	4,324			$	52,286
		Adjustments:
			Interest expense				50,835				57,856
			Income tax expense				437				876
			Depreciation and amortization				83,336				82,007
			LIFO credit				(9,487	)			(7,440	)
			Lease termination and impairment charges				7,453				166
			Gain on debt retirements, net				-				(55,692	)
			Merger and Acquisition-related costs				1,136				-
			Stock-based compensation expense				2,867				3,506
			Restructuring-related costs				12,175				25,275
			Inventory write-downs related to store closings				704				93
			Gain on sale of assets, net				(16,305	)			(1,371	)
			Other				(70	)			528
					Adjusted EBITDA - continuing operations	$	137,405			$	158,090
					Percent of revenues - continuing operations		2.25	%			2.89	%

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(In thousands)
(unaudited)
						Thirty-nine weeks ended November 28, 2020				Thirty-nine weeks ended November 30, 2019
Reconciliation of net loss to adjusted EBITDA:
		Net loss - continuing operations				$	(81,575	)		$	(125,758	)
		Adjustments:
			Interest expense				151,389				176,228
			Income tax (benefit) expense				(7,534	)			35,878
			Depreciation and amortization				249,556				248,977
			LIFO (credit) charge				(30,303	)			7,553
			Lease termination and impairment charges				22,734				2,115
			Intangible asset impairment charges				29,852				-
			Gain on debt modifications and retirements, net				(5,274	)			(55,692	)
			Merger and Acquisition-related costs				1,136				3,599
			Stock-based compensation expense				8,677				13,598
			Restructuring-related costs				71,096				93,770
			Inventory write-downs related to store closings				2,596				4,083
			Gain on sale of assets, net				(17,473	)			(5,670	)
			Other				1,523				3,946
					Adjusted EBITDA - continuing operations	$	396,400			$	402,627
					Percent of revenues - continuing operations		2.19	%			2.49	%

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
					Thirteen weeks ended November 28, 2020				Thirteen weeks ended November 30, 2019
Net income from continuing operations					$	4,324			$	52,286
	Add back - Income tax expense					437				876
			Income before income taxes - continuing operations			4,761				53,162
	Adjustments:
		Amortization expense				21,236				24,920
		LIFO credit				(9,487	)			(7,440	)
		Gain on debt retirements, net				-				(55,692	)
		Merger and Acquisition-related costs				1,136				-
		Restructuring-related costs				12,175				25,275
			Adjusted income before income taxes - continuing operations			29,821				40,225
			Adjusted income tax expense (a)			8,243				11,090
			Adjusted net income from continuing operations		$	21,578			$	29,135
	Adjusted net income per diluted share - continuing operations:
	Numerator for adjusted net income per diluted share:
		Adjusted net income from continuing operations			$	21,578			$	29,135
	Denominator:
		Basic weighted average shares				53,744				53,310
		Outstanding options and restricted shares, net				335				274
		Diluted weighted average shares				54,079				53,584
			Net income from continuing operations per diluted
				share - continuing operations	$	0.08			$	0.98
			Adjusted net income per diluted share - continuing operations		$	0.40			$	0.54

(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 November 28, 2020 and November 30, 2019, respectively.

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
					Thirty-nine weeks ended November 28, 2020				Thirty-nine weeks ended November 30, 2019
Net loss from continuing operations					$	(81,575	)		$	(125,758	)
	Add back - Income tax (benefit) expense					(7,534	)			35,878
			Loss before income taxes - continuing operations			(89,109	)			(89,880	)
	Adjustments:
		Amortization expense				68,351				79,176
		LIFO (credit) charge				(30,303	)			7,553
		Intangible asset impairment charges				29,852				-
		Gain on debt modifications and retirements, net				(5,274	)			(55,692	)
		Merger and Acquisition-related costs				1,136				3,599
		Restructuring-related costs				71,096				93,770
			Adjusted income before income taxes - continuing operations			45,749				38,526
			Adjusted income tax expense (a)			12,645				10,622
			Adjusted net income from continuing operations		$	33,104			$	27,904
	Adjusted net income per diluted share - continuing operations:
	Numerator for adjusted net income per diluted share:
		Adjusted net income from continuing operations			$	33,104			$	27,904
	Denominator:
		Basic weighted average shares				53,600				53,159
		Outstanding options and restricted shares, net				754				775
		Diluted weighted average shares				54,354				53,934
			Net loss from continuing operations per diluted
				share - continuing operations	$	(1.52	)		$	(2.37	)
			Adjusted net income per diluted share - continuing operations		$	0.61			$	0.52

(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 thirty-nine weeks ended November 28, 2020 and November 30, 2019, 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 November 28, 2020				Thirteen weeks ended November 30, 2019
Reconciliation of adjusted EBITDA gross profit:
		Revenues					$	4,109,592			$	3,909,946
		Gross Profit						1,079,708				1,070,852
		Addback:
			LIFO credit					(9,487	)			(7,440	)
			Depreciation and amortization (cost of goods sold portion only)					1,945				2,070
			Other					381				41
					Adjusted EBITDA gross profit - continuing operations		$	1,072,547			$	1,065,523
					Percent of revenues - continuing operations			26.10	%			27.25	%
Reconciliation of adjusted EBITDA selling, general and administrative expenses:
		Revenues					$	4,109,592			$	3,909,946
		Selling, general and administrative expenses						1,067,027				1,044,236
		Less:
			Depreciation and amortization (SG&A portion only)					67,641				65,267
			Stock-based compensation expense					2,429				2,976
			Merger and Acquisition-related costs					1,136				-
			Restructuring-related costs					11,605				18,415
			Other					226				634
					Adjusted EBITDA selling, general and administrative
						expenses - continuing operations	$	983,990			$	956,944
					Percent of revenues - continuing operations			23.94	%			24.47	%
						Adjusted EBITDA - continuing operations	$	88,557			$	108,579

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)
							Thirty-nine weeks ended November 28, 2020				Thirty-nine weeks ended November 30, 2019
Reconciliation of adjusted EBITDA gross profit:
		Revenues					$	12,250,775			$	11,622,858
		Gross Profit						3,223,157				3,133,791
		Addback:
			LIFO (credit) charge					(30,303	)			7,553
			Depreciation and amortization (cost of goods sold portion only)					6,775				6,538
			Restructuring-related costs - SKU optimization charges					25,763				-
			Other					1,804				3,161
					Adjusted EBITDA gross profit - continuing operations		$	3,227,196			$	3,151,043
					Percent of revenues - continuing operations			26.34	%			27.11	%
Reconciliation of adjusted EBITDA selling, general and administrative expenses:
		Revenues					$	12,250,775			$	11,622,858
		Selling, general and administrative expenses						3,206,078				3,160,379
		Less:
			Depreciation and amortization (SG&A portion only)					199,434				195,281
			Stock-based compensation expense					7,785				12,673
			Merger and Acquisition-related costs					1,136				2,828
			Restructuring-related costs					41,992				78,851
			Other					2,414				4,963
					Adjusted EBITDA selling, general and administrative
						expenses - continuing operations	$	2,953,317			$	2,865,783
					Percent of revenues - continuing operations			24.11	%			24.66	%
						Adjusted EBITDA - continuing operations	$	273,879			$	285,260

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE
YEAR ENDING FEBRUARY 27, 2021
(In thousands)
(unaudited)
							Guidance Range
							Low				High
Total Revenues							$	23,900,000			$	24,200,000
PBM Revenues							$	7,850,000			$	7,950,000
Same store sales								3.50	%			4.50	%
Gross Capital Expenditures							$	325,000			$	325,000
Reconciliation of net loss to adjusted EBITDA:
		Net loss					$	(113,800	)		$	(88,800	)
		Adjustments:
			Interest expense					202,000				202,000
			Income tax benefit					(12,000	)			(7,000	)
			Depreciation and amortization					332,000				332,000
			LIFO credit					(39,000	)			(39,000	)
			Lease termination and impairment charges					57,000				57,000
			Intangible asset impairment charges					30,000				30,000
			Gain on debt modifications and retirements, net					(5,300	)			(5,300	)
			Merger and Acquisition-related costs					1,200				1,200
			Restructuring-related costs					80,000				80,000
			Gain on sale of assets, net					(60,100	)			(60,100	)
			Other					18,000				18,000
					Adjusted EBITDA		$	490,000			$	520,000

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET INCOME GUIDANCE
YEAR ENDING FEBRUARY 27, 2021
(In thousands)
(unaudited)
					Guidance Range
					Low				High
Net loss					$	(113,800	)		$	(88,800	)
	Add back - income tax benefit					(12,000	)			(7,000	)
			Loss before income taxes			(125,800	)			(95,800	)
	Adjustments:
		Amortization expense				92,000				92,000
		LIFO credit				(39,000	)			(39,000	)
		Intangible asset impairment charges				30,000				30,000
		Gain on debt modifications and retirements, net				(5,300	)			(5,300	)
		Merger and Acquisition-related costs				1,200				1,200
		Restructuring-related costs				80,000				80,000
			Adjusted income before adjusted income taxes			33,100				63,100
			Adjusted income tax expense			9,000				17,000
			Adjusted net income		$	24,100			$	46,100
			Diluted adjusted net income per share		$	0.45			$	0.85

RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF ADJUSTED EBITDA GUIDANCE TO FREE CASH FLOW
GUIDANCE
YEAR ENDING FEBRUARY 27, 2021
(In thousands)
(unaudited)
				Guidance Range
				Low				High
Adjusted EBITDA				$	490,000			$	520,000
Cash interest expense					(190,000	)			(190,000	)
Restructuring-related costs					(80,000	)			(80,000	)
Closed store rent					(25,000	)			(25,000	)
Working capital benefit					180,000				200,000
	Cash flow from operations				375,000				425,000
Gross capital expenditures					(325,000	)			(325,000	)
	Free cash flow			$	50,000			$	100,000

 

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FAQ

What were Rite Aid's third quarter earnings for 2020?

Rite Aid reported net income of $4.3 million and adjusted net income of $21.6 million for the third quarter of fiscal 2021.

How did Rite Aid's revenues change in the third quarter?

Rite Aid's revenues increased by 12% year-over-year, reaching $6.12 billion.

What is Rite Aid's adjusted EBITDA for the third quarter of 2020?

Rite Aid's adjusted EBITDA for the third quarter was $137.4 million, or 2.3% of revenues.

What is Rite Aid's fiscal 2021 outlook?

Rite Aid expects revenues between $23.9 billion and $24.2 billion, with a net loss between $89 million and $114 million.