Rite Aid Corporation (NYSE: RAD) ("Rite Aid" or the "Company") announced that management will outline the Company's corporate strategy and growth plan at its Analyst Day held via webcast today. The Company will provide details on how its strategic initiatives are designed to drive revenue and Adjusted EBITDA growth, as well as reduce the Company's leverage ratio.
"Rite Aid is a business in the midst of a turnaround and it is time for a radical change ? our RxEvolution," said Heyward Donigan, president and chief executive officer, Rite Aid. "This is not business as usual at Rite Aid. We have the unique opportunity to serve a growing customer base and strengthen the power of our iconic brand. We are doubling down on our pharmacy business. We are renewing our commitment to leverage the power of our trusted pharmacists across our retail and pharmacy services business to deliver on the promise of real consumer engagement. Our pharmacists are among the most accessible and trusted health care professionals in America. This means we really can help our customers not just get healthy, but get thriving."
Donigan continued, "We have already made significant progress and have built a strong foundation to deliver on our turnaround. Over the past seven months, we have made key changes to our management team, reduced our leverage ratio and instilled an acute focus on execution and innovation. We are in the process of profoundly changing and modernizing the technology platforms that power our company, with a relentless focus on customer experience and design. We are also executing well on our prescription and clinical services growth. Rite Aid is now better positioned to execute on our key initiatives to grow our revenue, achieve efficiencies across our business, drive Adjusted EBITDA growth and generate cash flow to invest in our business and reduce our debt."
Rite Aid's strategy for evolving the business and revitalizing the brand will focus on innovation in three areas:
Rite Aid believes its RxEvolution will deliver meaningful value with a disciplined approach to investments and a focus on initiatives that will generate the greatest return.
Outlook for Fiscal 2020
The Company is narrowing its Fiscal 2020 outlook for Adjusted EBITDA and Revenues and adjusting its outlook for Capital Expenditures.
Rite Aid Corporation expects revenues to be between $21.9 billion and $21.925 billion in fiscal 2020 with same-store sales expected to range from an increase of 1.0 percent to an increase of 1.1 percent over fiscal 2019.
Adjusted EBITDA is expected to be between $530.0 million and $535.0 million.
Capital expenditures are expected to be approximately $215.0 million.
Outlook for Fiscal 2021
The Company is providing the following outlook for fiscal year 2021:
Revenue is expected to be between $22.5 billion and $22.9 billion.
Net loss is expected to be between $91.0 million and $119.0 million.
Adjusted EBITDA is expected to be between $500.0 million and $540.0 million.
Adjusted net (loss) income per share is expected to be between a loss of $0.22 per share and income of $0.19 per share.
Cash flow from operations is expected to be between $400.0 million and $450.0 million.
Capital Expenditures are expected to be approximately $350.0 million.
Rite Aid also expects to incur restructuring charges of approximately $60.0 million in Fiscal 2021, which will not be included in Adjusted EBITDA. These charges include costs to relaunch the brand and to transition out of certain merchandise lines.
Long-Term Financial Outlook
Based on the Company's strategic initiatives, Rite Aid is providing the following financial targets by fiscal year 2023:
Analyst Day Webcast
The Analyst Day presentation will begin today, March 16, 2020 at 9:00 a.m. ET. The simultaneous, live webcast will be available on the Investor Relations section of Rite Aid's website at: https://www.riteaid.com/corporate/investor-relations/presentations.
About Rite Aid Corporation
Rite Aid Corporation is on the front lines of delivering health care services and retail products to over 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 EnvisionRxOptions, 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 fiscals 2020 and 2021; Rite Aid's competitive position and ability to realize its growth initiatives and operating efficiencies; the implementation and success of our new business strategy and various initiatives and objectives, including (i) improving our PBM business, (ii) redefining the role of our pharmacists, and (iii) updating our retail and digital experience; 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 ability to successfully implement our new business strategy and improve the operating performance of our stores; 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, including disruptions resulting from pandemics or epidemics (such as the coronavirus), as well as 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; outcomes of legal and regulatory matters; our ability to partner and have relationships with health plans and health systems; risks related to the pending sale of the remaining Rite Aid distribution center and related assets to Walgreens Boots Alliance, Inc. ("WBA"), including the possibility that the transaction may not close; and the continued integration of our new senior management team and our ability to realize the benefits from our organizational restructuring.
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 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.
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 and losses on debt retirements, LIFO adjustments, goodwill and intangible asset impairment charges, restructuring-related costs and the WBA merger termination fee. The current calculations of Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share reflect a modification made in the second quarter of fiscal 2019 to add back all amortization expenses rather than the amortization of EnvisionRx intangible assets only. 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 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 current calculation of Adjusted EBITDA reflects a modification made in the second quarter of fiscal 2019 to eliminate the add back of revenue deferrals related to our customer loyalty program and to present amounts previously included within other as separate reconciling items. We further note that 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 | ||||||||||||||
SUPPLEMENTAL INFORMATION |
||||||||||||||
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE |
||||||||||||||
YEAR ENDING FEBRUARY 29, 2020 |
||||||||||||||
(In thousands) |
||||||||||||||
(unaudited) |
||||||||||||||
Guidance Range |
||||||||||||||
Low |
|
High |
||||||||||||
Total Revenues | $ |
21,900,000 |
|
$ |
21,925,000 |
|
||||||||
Same store sales |
|
1.00 |
% |
|
1.10 |
% |
||||||||
Gross Capital Expenditures | $ |
215,000 |
|
$ |
215,000 |
|
||||||||
Reconciliation of net loss to adjusted EBITDA: | ||||||||||||||
Net loss | $ |
(189,000 |
) |
$ |
(184,000 |
) |
||||||||
Adjustments: | ||||||||||||||
Interest expense |
|
235,000 |
|
|
235,000 |
|
||||||||
Income tax expense |
|
40,000 |
|
|
40,000 |
|
||||||||
Depreciation and amortization |
|
330,000 |
|
|
330,000 |
|
||||||||
LIFO charge |
|
10,000 |
|
|
10,000 |
|
||||||||
Lease termination and impairment charges |
|
35,000 |
|
|
35,000 |
|
||||||||
Gain on debt retirements, net |
|
(56,000 |
) |
|
(56,000 |
) |
||||||||
Restructuring-related costs |
|
100,000 |
|
|
100,000 |
|
||||||||
Other |
|
25,000 |
|
|
25,000 |
|
||||||||
Adjusted EBITDA | $ |
530,000 |
|
$ |
535,000 |
|
||||||||
Guidance for Total Revenues, Same store sales, Gross Capital Expenditures and Adjusted EBITDA has been updated. Guidance for Net Loss is neither being confirmed or updated, as the Company is still in the year end closing process. Some of the reconciling items between Net Loss and Adjusted EBITDA, including those related to income tax expense and LIFO charge, could differ from the previously issued guidance shown in this table, and such differences could be material. Net loss is shown above for illustrative purposes only and in order to show how the Company is calculating its updated Adjusted EBITDA guidance. You should not place undue reliance on the Net Loss guidance above.
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 | $ |
22,500,000 |
|
$ |
22,900,000 |
|
||||||||
PBM Revenues | $ |
6,750,000 |
|
$ |
6,850,000 |
|
||||||||
Same store sales |
|
1.50 |
% |
|
2.50 |
% |
||||||||
Gross Capital Expenditures | $ |
350,000 |
|
$ |
350,000 |
|
||||||||
Reconciliation of net loss to adjusted EBITDA: | ||||||||||||||
Net loss | $ |
(119,000 |
) |
$ |
(91,000 |
) |
||||||||
Adjustments: | ||||||||||||||
Interest expense |
|
215,000 |
|
|
215,000 |
|
||||||||
Income tax expense |
|
3,000 |
|
|
15,000 |
|
||||||||
Depreciation and amortization |
|
317,000 |
|
|
317,000 |
|
||||||||
LIFO credit |
|
(35,000 |
) |
|
(35,000 |
) |
||||||||
Lease termination and impairment charges |
|
41,000 |
|
|
41,000 |
|
||||||||
Restructuring-related costs |
|
60,000 |
|
|
60,000 |
|
||||||||
Other |
|
18,000 |
|
|
18,000 |
|
||||||||
Adjusted EBITDA | $ |
500,000 |
|
$ |
540,000 |
|
||||||||
RITE AID CORPORATION AND SUBSIDIARIES |
|||||||||||
SUPPLEMENTAL INFORMATION |
|||||||||||
RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET (LOSS) INCOME GUIDANCE |
|||||||||||
YEAR ENDING FEBRUARY 27, 2021 |
|||||||||||
(In thousands) |
|||||||||||
(unaudited) |
|||||||||||
Guidance Range |
|||||||||||
Low |
|
High |
|||||||||
Net loss | $ |
(119,000 |
) |
$ |
(91,000 |
) |
|||||
Add back - income tax expense |
|
3,000 |
|
|
15,000 |
|
|||||
Loss before income taxes |
|
(116,000 |
) |
|
(76,000 |
) |
|||||
Adjustments: | |||||||||||
Amortization expense |
|
64,000 |
|
|
64,000 |
|
|||||
LIFO credit |
|
(35,000 |
) |
|
(35,000 |
) |
|||||
Restructuring-related costs |
|
60,000 |
|
|
60,000 |
|
|||||
Adjusted (loss) income before adjusted income taxes |
|
(27,000 |
) |
|
13,000 |
|
|||||
Adjusted income tax (benefit) expense |
|
(15,000 |
) |
|
3,000 |
|
|||||
Adjusted net (loss) income | $ |
(12,000 |
) |
$ |
10,000 |
|
|||||
Diluted adjusted net (loss) income per share | $ |
(0.22 |
) |
$ |
0.19 |
|
|||||
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 | $ |
500,000 |
|
$ |
540,000 |
|
||||
Cash interest expense |
|
(210,000 |
) |
|
(210,000 |
) |
||||
Restructuring-related costs |
|
(60,000 |
) |
|
(60,000 |
) |
||||
Closed store rent |
|
(30,000 |
) |
|
(30,000 |
) |
||||
Working capital benefit |
|
200,000 |
|
|
210,000 |
|
||||
Cash flow from operations |
|
400,000 |
|
|
450,000 |
|
||||
Gross capital expenditures |
|
(350,000 |
) |
|
(350,000 |
) |
||||
Free cash flow | $ |
50,000 |
|
$ |
100,000 |
|
||||
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