Rite Aid Corp (fka RADCQ)

[Theo]

Rite Aid Reports Net Income of $21.5 Million and Adjusted EBITDA of $346.8 Million for Second Quarter Fiscal 2016

CAMP HILL, Pa.--(BUSINESS WIRE)--

Rite Aid Corporation (RAD) today reported operating results for its fiscal second quarter ended August 29, 2015. The company reported revenues of $7.7 billion, net income of $21.5 million or $0.02 per diluted share, and Adjusted EBITDA of $346.8 million, or 4.5 percent of revenues.

“The second quarter was pivotal for Rite Aid as we completed the acquisition of EnvisionRx and worked as a team to accelerate our transformation into a retail healthcare company,” said Rite Aid Chairman and CEO John Standley. “EnvisionRx made positive contributions to our performance as our Pharmacy Services Segment* delivered results that were in line with our expectations. We will continue to focus on key initiatives like wellness+ with Plenti, flu immunizations and Wellness store remodels to drive performance in our retail segment as we also leverage EnvisionRx’s suite of services to create unique and integrated offerings in the healthcare marketplace.”

Second Quarter Summary

Revenues for the quarter were $7.7 billion versus revenues of $6.5 billion in the prior year’s second quarter, an increase of $1.2 billion or 17.5 percent. Retail Pharmacy Segment revenues were $6.6 billion and increased 1.9 percent primarily as a result of an increase in same store sales. Pharmacy Services Segment revenues were $1.1 billion from the date of the acquisition of EnvisionRx, which was June 24, 2015 through the end of the quarter.

*Pharmacy Services Segment consists of results from EnvisionRx

Same store drugstore sales for the Retail Pharmacy Segment increased 2.1 percent over the prior year, consisting of a 0.3 percent increase in front-end sales and a 2.8 percent increase in pharmacy sales. Pharmacy sales included an approximate 223 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 0.2 percent over the prior year period. Prescription sales accounted for 69.3 percent of total drugstore sales, and third party prescription revenue was 97.8 percent of pharmacy sales.

Net income was $21.5 million or $0.02 per diluted share compared to last year’s second quarter net income of $127.8 million or $0.13 per diluted share. The decline in net income resulted primarily from a $33.2 million loss on debt retirement related to the redemption of the company’s 8.00% senior secured notes, higher depreciation and amortization expense related to EnvisionRx and an increase in capital spending, higher interest and transaction costs incurred in connection with the company’s acquisition of EnvisionRx, and the cycling of a prior year benefit of approximately $40 million related to the Company’s transition to its new drug purchasing and delivery arrangement with McKesson.

Adjusted EBITDA (which is reconciled to net income on the attached table) was $346.8 million or 4.5 percent of revenues for the second quarter compared to $364.2 million or 5.6 percent of revenues for the like period last year. After taking into effect the prior year benefit of $40 million related to the Company’s transition to its new drug purchasing and delivery arrangement, Adjusted EBITDA increased by $22.6 million. This increase was due to $33.2 million of Pharmacy Services Segment Adjusted EBITDA, partially offset by a decline in Retail Pharmacy Segment gross margin, which was due to lower pharmacy reimbursement, partially offset by lower drug purchasing costs.

In the second quarter, the company relocated 3 stores and remodeled 119 stores, bringing the total number of wellness stores chainwide to 1,859. The company also opened 2 new stores, acquired 2 stores, and closed 9 stores, resulting in a total store count of 4,561 at the end of the second quarter. The Company also opened 5 clinics in the second quarter, bringing the total to 70.

Rite Aid Updates Fiscal 2016 Guidance

Rite Aid has updated its fiscal 2016 guidance to reflect more recent sales trends and additional expected amortization expense from EnvisionRx. The midpoint of Adjusted EBITDA guidance remains unchanged. Total revenues are expected to be between $30.8 billion and $31.1 billion. Retail drugstore sales are expected to be between $26.7 billion and $27.0 billion and same store sales to range from an increase of 1.5 percent to an increase of 2.5 percent over fiscal 2015. Adjusted EBITDA (which is reconciled to net income on the attached table) guidance is expected to be between $1.360 billion and $1.440 billion and net income is expected to be between $125 million and $195 million or income per diluted share of $0.12 to $0.19. Capital expenditures are expected to be approximately $665 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 Sept. 19, 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 34603858.

Rite Aid is one of the nation’s leading drugstore chains with 4,561 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.