Rite Aid Reports First Quarter Fiscal 2012 Results

"We are pleased with the continued improvement in our results. We increased Adjusted EBITDA as we again grew same store sales and further reduced operating costs"

The company reported revenues of $6.4 billion, a net loss of $63.1 million or $0.07 per diluted share and Adjusted EBITDA of $262.9 million or 4.1 percent of revenues. Results benefited from continued growth in same store sales and a decrease in selling, general and administrative (SG&A) expenses partially offset by a decline in gross margin.

aWe are pleased with the continued improvement in our results. We increased Adjusted EBITDA as we again grew same store sales and further reduced operating costs,a said John Standley, Rite Aid president and CEO. aOur sales initiatives continued to gain traction with the number of members enrolled in our wellness+ customer loyalty program reaching nearly 40 million. Prescriptions filled in comparable stores increased as customers took advantage of our new pharmacy programs.

aWea�re also excited about the new wellness store format we piloted during the quarter,a Standley said. aThese totally revamped stores offer expanded clinical services, hundreds of new products that support health and wellness and our unique on-site Wellness Ambassadors. Even in these early stages, the customer response has been extremely positive.a

First Quarter Summary

Revenues for the 13-week quarter were $6.4 billion, flat to $6.4 billion in last yeara�s first quarter. Revenues were positively impacted by an increase in same store sales, which were offset by store closings.

Same store sales for the quarter increased 0.8 percent over the prior-year period. Front-end same store sales were flat compared to the prior-year period while pharmacy same store sales increased 1.1 percent. Pharmacy sales included an approximate 145 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 0.4 percent over the prior year period. Prescription sales accounted for 68.7 percent of total drugstore sales, and third party prescription revenue was 96.5 percent of pharmacy sales.

Net loss was $63.1 million or $0.07 per diluted share compared to last yeara�s first quarter net loss of $73.7 million or $0.09 per diluted share. Decreases in both SG&A and interest expense contributed to the decrease in net loss. This was partially offset by a decline in front-end margin, which was driven by investments in Rite Aida�s wellness+ customer loyalty program, and a loss on debt modification related to the refinancing of the companya�s $343 million Tranche 3 term loan in March 2011. The Tranche 3 term loan was replaced with a new $343 million Tranche 5 term loan that has an extended maturity and lower interest expense.

Adjusted EBITDA (which is reconciled to net loss on the attached table) was $262.9 million or 4.1 percent of revenues for the first quarter compared to $249.8 million or 3.9 percent of revenues for the like period last year.

In the first quarter, the company relocated 6 stores, remodeled 3 stores and closed 10 stores. Stores in operation at the end of the first quarter totaled 4,704.

Rite Aid Confirms Fiscal 2012 Guidance

Rite Aid confirmed fiscal 2012 guidance with sales expected to be between $25.7 billion and $26.1 billion, same store sales to range from an increase of 0.5 percent to an increase of 2.0 percent over fiscal 2011 and Adjusted EBITDA (which is reconciled to net loss on the attached table) to be between $800 million and $900 million. Net loss is expected to be between $370 million and $560 million or a loss per diluted share of $0.42 to $0.64. Capital expenditures are expected to be approximately $300 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 June 25, 2011. The playback number is 1-800-642-1687 from within the U.S. and Canada or 1-706-645-9291 from outside the U.S. and Canada with the eight-digit reservation number 72882219.

Rite Aid is one of the nationa�s leading drugstore chains with approximately 4,700 stores in 31 states and the District of Columbia. Information about Rite Aid, including corporate background and press releases, is available through Rite Aida�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 aanticipate,a abelieve,a acontinue,a acould,a aestimate,a aexpect,a aintend,a amay,a aplan,a apredict,a aproject,a ashould,a and awilla 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 efforts of private and public third-party payers to reduce prescription drug reimbursements and encourage mail order, the ability to realize anticipated results from capital expenditures and cost reduction initiatives, 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 intentionto 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.


RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)

			May 28, 2011			February 26, 2011
ASSETS
Current assets:
	Cash and cash equivalents		$	230,637		$	91,116
	Accounts receivable, net			962,475			966,457
	Inventories, net of LIFO reserve of $895,013 and $875,012			3,170,491			3,158,145
	Prepaid expenses and other current assets			86,923			195,647
		Total current assets		4,450,526			4,411,365
Property, plant and equipment, net				1,987,948			2,039,383
Other intangibles, net				611,687			646,177
Other assets				454,008			458,925
		Total assets	$	7,504,169		$	7,555,850

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
	Current maturities of long-term debt and lease financing obligations		$	23,656		$	63,045
	Accounts payable			1,354,259			1,307,872
	Accrued salaries, wages and other current liabilities			1,059,188			1,049,406
		Total current liabilities		2,437,103			2,420,323
Long-term debt, less current maturities				6,027,616			6,034,525
Lease financing obligations, less current maturities				119,291			122,295
Other noncurrent liabilities				1,190,396			1,190,074
		Total liabilities		9,774,406			9,767,217

Commitments and contingencies				-			-
Stockholders' deficit:
	Preferred stock - Series G			1			1
	Preferred stock - Series H			164,075			161,650
	Common stock			890,221			890,297
	Additional paid-in capital			4,282,903			4,281,623
	Accumulated deficit			(7,577,885	)		(7,514,796	)
	Accumulated other comprehensive loss			(29,552	)		(30,142	)
		Total stockholders' deficit		(2,270,237	)		(2,211,367	)
		Total liabilities and stockholders' deficit	$	7,504,169		$	7,555,850


RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)


		Thirteen weeks ended			Thirteen weeks ended
		May 28, 2011			May 29, 2010
Revenues		$	6,390,793		$	6,394,336
Costs and expenses:
	Cost of goods sold		4,699,874			4,682,632
	Selling, general and administrative expenses		1,586,236			1,622,934
	Lease termination and impairment charges		17,090			13,457
	Interest expense		130,760			141,619
	Loss on debt modifications and retirements, net		22,434			-
	(Gain) loss on sale of assets, net		(4,792	)		237

			6,451,602			6,460,879

Loss before income taxes			(60,809	)		(66,543	)
Income tax expense			2,273			7,141
	Net loss	$	(63,082	)	$	(73,684	)

Basic and diluted loss per share:

Numerator for loss per share:
	Net loss	$	(63,082	)	$	(73,684	)
	Accretion of redeemable preferred stock		(25	)		(25	)
	Cumulative preferred stock dividends		(2,425	)		(2,285	)
	Loss attributable to common stockholders - basic and diluted	$	(65,532	)	$	(75,994	)



	Basic and diluted weighted average shares		883,915			881,732

	Basic and diluted loss per share	$	(0.07	)	$	(0.09	)


RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL OPERATING AND CASH FLOW INFORMATION
(Dollars in thousands, except per share amounts)
(unaudited)


	Thirteen weeks ended			Thirteen weeks ended
	May 28, 2011			May 29, 2010

SUPPLEMENTAL OPERATING INFORMATION

Revenues	$	6,390,793		$	6,394,336
Cost of goods sold		4,699,874			4,682,632
Gross profit		1,690,919			1,711,704
LIFO charge		20,001			20,528
FIFO gross profit		1,710,920			1,732,232

Gross profit as a percentage of revenues		26.46	%		26.77	%
LIFO charge as a percentage of revenues		0.31	%		0.32	%
FIFO gross profit as a percentage of revenues		26.77	%		27.09	%

Selling, general and administrative expenses		1,586,236			1,622,934
Selling, general and administrative expenses as a percentage of revenues		24.82	%		25.38	%

Cash interest expense		122,192			129,923
Non-cash interest expense		8,568			11,696
Total interest expense		130,760			141,619


Adjusted EBITDA		262,854			249,790
Adjusted EBITDA as a percentage of revenues		4.11	%		3.91	%

Net loss		(63,082	)		(73,684	)
Net loss as a percentage of revenues		-0.99	%		-1.15	%

Total debt		6,170,563			6,269,245
Invested cash		121,603			202,085
Total debt net of invested cash		6,048,960			6,067,160


SUPPLEMENTAL CASH FLOW INFORMATION

Payments for property, plant and equipment		48,755			35,212
Intangible assets acquired		8,072			5,377
Total cash capital expenditures		56,827			40,589
Equipment received for noncash consideration		-			2,028
Equipment financed under capital leases		1,562			-
Gross capital expenditures	$	58,389		$	42,617


RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(In thousands)



				Thirteen weeks ended			Thirteen weeks ended
				May 28, 2011			May 29, 2010


Reconciliation of net loss to adjusted EBITDA:
	Net loss			$	(63,082	)	$	(73,684	)
	Adjustments:
		Interest expense			130,760			141,619
		Income tax expense			2,273			7,141
		Depreciation and amortization			117,090			127,500
		LIFO charges			20,001			20,528
		Lease termination and impairment charges			17,090			13,457
		Stock-based compensation expense			3,571			5,485
		(Gain) loss on sale of assets, net			(4,792	)		237
		Loss on debt modifications and retirements, net			22,434			-
		Closed facility liquidation expense			2,647			2,422
		Severance costs			(49	)		10
		Customer loyalty card programs revenue deferral (a)			21,866			5,037
		Other			(6,955	)		38
			Adjusted EBITDA	$	262,854		$	249,790
			Percent of revenues		4.11	%		3.91	%



	Notes:

		(a)	Relates to deferral of revenues for our customer loyalty programs.


RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)


	Thirteen weeks ended			Thirteen weeks ended
	May 28, 2011			May 29, 2010


OPERATING ACTIVITIES:
Net loss	$	(63,082	)	$	(73,684	)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization		117,090			127,500
Lease termination and impairment charges		17,090			13,457
LIFO charges		20,001			20,528
(Gain) loss on sale of assets, net		(4,792	)		237
Stock-based compensation expense		3,571			5,485
Loss on debt modifications and retirements, net		22,434			-
Changes in operating assets and liabilities:
Accounts receivable		1,018			(57,153	)
Inventories		(32,486	)		42,119
Accounts payable		174,597			271,173
Other assets and liabilities, net		129,893			169,905
Net cash provided by operating activities		385,334			519,567
INVESTING ACTIVITIES:
Payments for property, plant and equipment		(48,755	)		(35,212	)
Intangible assets acquired		(8,072	)		(5,377	)
Proceeds from dispositions of assets and investments		8,423			4,030
Net cash used in investing activities		(48,404	)		(36,559	)
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		341,285			-
Net repayments to revolver		(28,000	)		(80,000	)
Principal payments on long-term debt		(385,865	)		(25,804	)
Change in zero balance cash accounts		(122,097	)		(153,009	)
Net proceeds from the issuance of common stock		57			93
Deferred financing costs paid		(2,789	)		-
Net cash used in financing activities		(197,409	)		(258,720	)
Increase in cash and cash equivalents		139,521			224,288
Cash and cash equivalents, beginning of period		91,116			103,594
Cash and cash equivalents, end of period	$	230,637		$	327,882


RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE
YEAR ENDING MARCH 3, 2012
(In thousands, except per share amounts)


	Guidance Range
	Low			High

Sales	$	25,700,000		$	26,100,000

Same store sales		0.50	%		2.00	%

Gross capital expenditures	$	300,000		$	300,000

Reconciliation of net loss to adjusted EBITDA:
Net loss	$	(560,000	)	$	(370,000	)
Adjustments:
Interest expense		545,000			535,000
Income tax benefit		(10,000	)		(15,000	)
Depreciation and amortization		460,000			450,000
LIFO charge		80,000			60,000
Store closing and impairment charges		180,000			160,000
Stock-based compensation expense		17,000			14,000
Customer loyalty card programs revenue deferral (a)		45,000			35,000
Loss on debt modification		22,000			22,000
Other		21,000			9,000
Adjusted EBITDA	$	800,000		$	900,000


Diluted loss per share	$	(0.64	)	$	(0.42	)

(a) Relates to deferral of revenues for our customer loyalty programs.

Contributing Sources

Market Wire

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Rite Aid Reports First Quarter Fiscal 2012 Results