Market Overview

Rite Aid Updates Fiscal 2019 Outlook

Share:

Rite Aid Corporation (NYSE:RAD) today announced that it is updating its
fiscal 2019 outlook, which the company initially provided on April 12,
2018 and included expectations for sales, same store sales, Adjusted
EBITDA, net loss, Adjusted net income per share, and capital
expenditures. As previously disclosed, Rite Aid's outlook is based on a
number of factors, including, but not limited to, the benefits from an
anticipated reimbursement rate environment that is more stable than the
prior year, fees under the Transition Services Agreement (the "TSA")
with Walgreens Boots Alliance, Inc. ("WBA"), generic drug purchasing
efficiencies, and other initiatives to grow sales and drive operational
efficiencies. Rite Aid's fiscal 2019 outlook does not reflect the impact
of the proposed merger with Albertsons Companies, Inc. ("Albertsons").

Based upon recent generic drug bid activity and on anticipated generic
drug market conditions for the balance of the year, generic drug
purchasing efficiencies are expected to be significantly below Rite
Aid's previous experience and will not meet the company's expectations
for the year. The company now expects generic drug purchasing
efficiencies to be approximately $80 million less than when Rite Aid
established its fiscal 2019 outlook. As a result, Rite Aid is updating
its outlook for Adjusted EBITDA, net loss and Adjusted net loss per
diluted share as follows:

  • Adjusted EBITDA is now expected to be in a range between $540 million
    and $590 million, updated from the previously disclosed range of
    between $615 million and $675 million;
  • Net loss is now expected to be in a range between $125 million and
    $170 million, updated from the previously disclosed range of between
    $40 million and $95 million; and
  • Adjusted net loss per diluted share is now expected to be in a range
    of $(0.04) and $(0.00), updated from the previously disclosed Adjusted
    net income per diluted share range of between $0.02 and $0.06.

The company's outlook for sales and same store sales remains unchanged
as sales, prescription count growth and pharmacy reimbursement rates
continue to be in line with expectations. The expectation for capital
expenditures also remains unchanged.

About Rite Aid Corporation

Rite Aid Corporation (NYSE:RAD) is one of the nation's leading
drugstore chains with fiscal 2018 annual revenues of $21.5 billion. The
company also owns EnvisionRxOptions, a multi-faceted healthcare and
pharmacy benefit management (PBM) company supporting a membership base
of more than 22 million members; RediClinic, a convenient care clinic
operator with locations in Delaware, New Jersey, Pennsylvania, Texas and
Washington; and Health Dialog, a leading provider of population health
management solutions including analytics, a multi-channel coaching
platform and shared decision-making tools. Information about Rite Aid,
including corporate background and press releases, is available through
the company's website at www.riteaid.com.

Cautionary Statement Regarding Forward-Looking Statements

Statements contained herein 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 the Company's
outlook for fiscal 2019 for generic drug costs, Adjusted EBITDA, net
loss, Adjusted net loss per diluted share, sales, same store sales,
capital expenditures and strategy, the proposed merger between the
Company and Albertsons (the "Merger") 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, 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, industry,
market, competitive, regulatory and political 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; changes in
legislation or regulations, including healthcare reform; our ability to
achieve the benefits of our efforts to reduce the costs of our generic
and other drugs; risks related to the pending transactions with WBA,
including the possibility that the remaining sales of distribution
centers and related assets may not close, or the business of the Company
may suffer as a result of uncertainty surrounding the pending
transactions; risks related to the expected timing and likelihood of
completion of the proposed Merger, including the risk that the Merger
may not close due to one or more closing conditions to the Merger not
being satisfied or waived, such as the remaining Ohio Department of
Insurance regulatory approval not being obtained, on a timely basis or
otherwise, or that a governmental entity prohibited, delayed or refused
to grant approval for the consummation of the Merger or required certain
conditions, limitations or restrictions in connection with such
approvals, or that the required approval of the merger agreement by the
stockholders of the Company was not obtained; the risk that there may be
a material adverse change of the Company or Albertsons; risks related to
the ability to realize the anticipated benefits of the proposed
transactions with Albertsons, including the risk that the combined
company may be unable to achieve its guidance, its cost-cutting
synergies, its incremental revenue opportunities or it may take longer
or cost more than expected to achieve those synergies and opportunities;
the risk that the market may not value the combined company at a similar
multiple to earnings as that applied to the companies that the Company
and Albertsons believe should be comparable to the combined company;
risks associated with the financing of the proposed transaction; risks
related to diverting management's or employees' attention from ongoing
business operations; the risk that any announcements relating to the
Merger could have adverse effects on the market price of the Company's

common stock, and the risk that the Merger and its announcement could
have an adverse effect on the ability of the Company to retain customers
and retain and hire key personnel and maintain relationships with their
suppliers and customers and on their operating results and businesses
generally; the risk that the Company's stock price may decline
significantly if the Merger or sale of distribution centers and related
assets to WBA is not completed; the occurrence of any event, change or
other circumstances that could give rise to the termination of the
merger agreement (including circumstances requiring the Company to pay
Albertsons a termination fee pursuant to the merger agreement);
significant transaction costs; unknown liabilities; the risk of
litigation and/or regulatory actions related to the proposed
transactions; potential changes to our strategy in the event the
remaining proposed transactions do not close, which may include delaying
or reducing capital or other expenditures, selling assets or other
operations, attempting to restructure or refinance our debt, or seeking
additional capital, and other business effects. 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 and in the
definitive proxy statement/prospectus that was filed with the Securities
and Exchange Commission (the "SEC") on June 25, 2018 in connection with
the Merger, and in other documents that we file or furnish with the SEC,
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. The Company
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, although the Company may update its outlook in
the ordinary course and as facts and circumstances warrant.

Additional Information and Where to Find It

In connection with the proposed merger involving the Company and
Albertsons, the Company and Albertsons have prepared a registration
statement on Form S-4 that included a proxy statement/prospectus. The
definitive proxy statement/prospectus was filed with the SEC on June 25,
2018. The registration statement has been declared effective by the SEC.
The Company has mailed the definitive proxy statement/prospectus and a
proxy card to each stockholder entitled to vote at the special meeting
relating to the proposed merger. The Company and Albertsons also plan to
file other relevant documents with the SEC regarding the proposed
merger. INVESTORS ARE URGED TO READ THE DEFINITIVE PROXY
STATEMENT/PROSPECTUS, AS WELL AS OTHER DOCUMENTS FILED WITH THE SEC,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. THE COMPANY'S EXISTING
PUBLIC FILINGS WITH THE SEC SHOULD ALSO BE READ, INCLUDING THE RISK
FACTORS CONTAINED THEREIN.

Investors and security holders may obtain copies of the Form S-4,
including the proxy statement/prospectus, as well as other filings
containing information about the Company, free of charge, from the SEC's
website (
www.sec.gov).
Investors and security holders may also obtain the Company's SEC filings
in connection with the transaction, free of charge, from the Company's
website (
www.RiteAid.com)
under the link "Investor Relations" and then under the tab "SEC
Filings," or by directing a request to the Company, Byron Purcell,
Attention: Senior Director, Treasury Services & Investor Relations.
Copies of documents filed with the SEC by Albertsons will be made
available, free of charge, on the SEC's website (
www.sec.gov)
and on Albertsons' website at
www.albertsonscompanies.com.

Non-Solicitation

This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to buy
any securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any
such jurisdiction. No offer of securities shall be made except by means
of a prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.

Reconciliation of Non-GAAP Financial Measures

The Company's fiscal 2019 outlook includes the non-GAAP financial
measures Adjusted EBITDA and adjusted net income (loss) per diluted
share. See the attached tables for a reconciliation of Adjusted EBITDA
to net income (loss), and Adjusted net income (loss) per diluted share
to net income (loss) per diluted share, which are the most directly
comparable GAAP financial measures.
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 impairment,
inventory write-downs related to store closings, debt retirements, the
WBA termination fee, and other items (including stock-based compensation
expense, merger and acquisition-related costs, severance and costs
related to distribution center closures, gain or loss on sale of assets
and revenue deferrals related to our customer loyalty program). Adjusted
net income (loss) per diluted share excludes amortization of EnvisionRx
intangible assets, merger and acquisition-related costs, loss on debt
retirements, LIFO adjustments, goodwill impairment and the WBA
termination fee.

 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE
YEAR ENDING MARCH 2, 2019
(In thousands)
(unaudited)
         
 
Guidance Range
Low High
 
Total Revenues $ 21,700,000 $ 22,100,000
 
Same store sales 0.00 % 1.00 %
 
Gross Capital Expenditures $ 250,000 $ 250,000
 
 
Reconciliation of net loss to adjusted EBITDA:
Net loss $ (170,000 ) $ (125,000 )
Adjustments:
Interest expense 215,000 215,000
Income tax benefit (20,000 ) (15,000 )
Depreciation and amortization 380,000 380,000
LIFO charge 35,000 35,000
Loss on debt retirement 15,000 15,000
Store closing and impairment charges 40,000 40,000
Other   45,000     45,000  
Adjusted EBITDA $ 540,000   $ 590,000  
 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET LOSS GUIDANCE

YEAR ENDING MARCH 2, 2019
(In thousands)
(unaudited)
         
 
 
Guidance Range
Low High
 
Net loss $ (170,000 ) $ (125,000 )
Add back - Income tax benefit   (20,000 )   (15,000 )
Loss before income taxes (190,000 ) (140,000 )
 
Adjustments:
Amortization of EnvisionRx intangible assets 85,000 85,000
LIFO charge 35,000 35,000
Loss on debt retirements   15,000     15,000  
 
Adjusted loss before adjusted income taxes (55,000 ) (5,000 )
 
Adjusted income tax (benefit)   (10,000 )   (1,000 )
Adjusted net loss $ (45,000 ) $ (4,000 )
 
 
Diluted adjusted net loss per share $ (0.04 ) $ (0.00 )

View Comments and Join the Discussion!