Rite Aid Reports Net Income of $71.5 Million and Adjusted EBITDA of $282.3 Million for Third Quarter Fiscal 2014
· Third Quarter Net Income of $71.5 million, Compared to Prior Year's Third Quarter Net Income of $61.9 million< P>
· Third Quarter Net Income of $0.04 per Diluted Share, Compared to Prior Year's Third Quarter Net Income of $0.07 per Diluted Share
o Current Quarter Net Income per Share Negatively Impacted by $0.03 per Share Due to the Redemption of the Company's Series G and H Convertible Preferred Stock< P>
· Third Quarter Adjusted EBITDA of $282.3 Million Compared to Adjusted EBITDA of $295.3 Million in Prior Year's Third Quarter;< P>
o Prior Year's Third Quarter Adjusted EBITDA Includes an $18.1 Million Benefit Related to the Settlement of Interchange Fee Litigation.< P>
· Rite Aid Updates Fiscal 2014 Outlook
CAMP HILL, Pa. (Dec. 19, 2013) - Rite Aid Corporation (NYSE: RAD) today reported operating results for its fiscal third quarter ended Nov. 30, 2013. The company reported revenues of $6.4 billion, net income of $71.5 million or $0.04 per diluted share, and Adjusted EBITDA of $282.3 million, or 4.4 percent of revenues. Prior year's results included an $18.1 million or $0.02 per diluted share benefit from the settlement of interchange fee litigation. Current year earnings per diluted share were negatively impacted by $0.03 per share due to the redemption of the Company's Series G and Series H Convertible Preferred stock on Sept. 30, 2013.
"Our solid third quarter results were driven by the continued success of our key wellness initiatives, specifically the strong start to our flu immunization campaign, and the completion of additional Wellness stores, which now represent nearly a quarter of all Rite Aid stores," said Rite Aid Chairman and CEO John Standley.
"Our team of dedicated Rite Aid associates worked together to execute our strategy and deliver growth in same-store prescription counts, increased same-store sales and net income of more than $71 million," he added. "These results reflect our continued progress in building our unique brand of health, wellness and customer engagement."
Third Quarter Summary< P>
Revenues for the 13-week quarter were $6.4 billion versus revenues of $6.2 billion in the prior year's third quarter. Revenues increased 1.9 percent primarily as a result of an increase in pharmacy same store sales.
Same store sales for the quarter increased 2.3 percent over the prior year's 13-week period, consisting of a 3.5 percent increase in pharmacy sales, partially offset by a 0.2 percent decrease in front end sales. Pharmacy sales included an approximate 88 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 0.7 percent over the prior year period. Prescription sales accounted for 68.6 percent of total drugstore sales, and third party prescription revenue was 97.1 percent of pharmacy sales.
Net income was $71.5 million or $0.04 per diluted share compared to last year's third quarter net income of $61.9 million or $0.07 per diluted share. The improvement in net income resulted primarily from decreases in interest expense and lease termination and impairment charges, partially offset by a higher LIFO charge and an $18.1 million benefit from the settlement of interchange fee litigation in the prior year third quarter. Diluted earnings per share were negatively impacted by $0.03 due to the redemption of the Company's Series G and Series H Convertible Preferred Stock on Sept. 30, 2013, as previously announced.
Adjusted EBITDA (which is reconciled to net income on the attached table) was $282.3 million or 4.4 percent of revenues for the third quarter compared to $295.3 million or 4.7 percent of revenues for the like period last year. Prior year Adjusted EBITDA included an $18.1 million benefit from the settlement of interchange fee litigation. The current quarter's Adjusted EBITDA benefited from an increase in pharmacy gross profit, driven by script count growth, and strong SG&A expense control, offset by a decrease in front-end gross profit.
In the third quarter, the company relocated four stores and remodeled 94 stores, bringing the total number of wellness stores chainwide to 1,117. The company closed nine stores, resulting in a total store count of 4,595 at the end of the third quarter.
Rite Aid Updates Fiscal 2014 Guidance
Rite Aid has updated its fiscal 2014 guidance with sales expected to be between $25.3 billion and $25.425 billion and same store sales to range from an increase of 0.35 percent to 0.85 percent compared to fiscal 2013. Adjusted EBITDA (which is reconciled to net income on the attached table) guidance is now expected to be between $1.250 billion and $1.280 billion and net income is now expected to be between $204.0 million or $0.17 per diluted share and $259.0 million or $0.23 per diluted share. Capital expenditures are expected to be $415.0 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 http://www.riteaid.com/in the conference call section of investor information and http://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. 21, 2013. 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 18263517.
Rite Aid is one of the nation's leading drugstore chains with 4,595 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 http://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 (loss), the most comparable GAAP financial measure. We define Adjusted EBITDA as net income (loss) 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, stock-based compensation expense, debt retirements, sale of assets and investments, revenue deferrals related to our customer loyalty program and other items.
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