Rite Aid Announces Third Quarter Results (1-2)
Thursday January 10, 8:21 am Eastern Time
Press Release
SOURCE: Rite Aid Corporation
Rite Aid Announces Third Quarter Results
Reduces Loss From Continuing Operations to $112.8 Million or $0.23 Per Share From $241.2 Million or $0.74 Per Share
Reports EBITDA of $77.5 Million; Revises Guidance for Second Half of Fiscal 2002; Provides Preliminary Outlook For Fiscal 2003
CAMP HILL, Pa.--(BUSINESS WIRE)--Jan. 10, 2002-- Rite Aid Corporation (NYSE, PCX:RAD) today announced unaudited financial results for its third quarter, ended December 1, 2001.
Revenues for the 13-week quarter were $3.7 billion, up 5.7 percent from $3.5 billion in the third quarter a year ago.
Same store sales increased 6.9 percent during the third quarter as compared to the year-ago like period, reflecting prescription sales growth of 10.6 percent and a 1.2 percent increase in front-end same store sales. Prescription revenue accounted for 62.5 percent of total drugstore sales, and third-party prescription sales represented 92.2 percent of pharmacy sales.
Third quarter earnings before interest, taxes, depreciation and amortization, LIFO charges, losses from asset disposals, nonrecurring legal and accounting expenses and non-cash expenses (EBITDA) amounted to $77.5 million or 2.1 percent of sales.
This compares to prior year third quarter EBITDA of $105.7 million or 3.0 percent of sales after adjusting the prior year to make it comparable by excluding $20.0 million of nonrecurring income and including $14.5 million of additional rent expense due to the previously announced change in lease classification that became effective on June 27, 2001.
EBITDA was lower than in the prior year due primarily to a decrease in pharmacy gross margin percent, partially offset by reduced selling, general and administrative expenses as a percent of sales.
``This was a difficult quarter, affected by the events of September 11, the recession, an especially competitive drugstore environment and continuing pressure on pharmacy margins,'' said Mary Sammons, Rite Aid president and chief operating officer. ``While we are disappointed with the results and expect continued intense competition, we remain committed to our focus on store execution, training, inventory control and effective advertising and promotions. We believe this is the formula for increasing sales and improving cash flow in the long term.''
Interest expense for the third quarter was $82.5 million versus $146.1 million in the prior year's third quarter due to the benefit of the significant reduction in debt resulting from the company's June 2001 refinancing and lower interest rates. Interest expense was comprised of $74.1 million cash interest on indebtedness and capital lease obligations and non-cash interest of $8.4 million.
Non-cash items in this quarter include a charge of $24.6 million related to store closings and impairment, a charge of $1.7 million related to the company's investment in drugstore.com, a charge of $10.4 million for loss on interest rate swap contracts, $2.0 million of other non-cash charges and non-cash income of $39.4 million resulting from variable plan accounting for stock-based compensation. These items total non-cash income of $0.7 million.
Net loss from continuing operations for the third quarter was $112.8 million or a loss per diluted share of $0.23 compared to a net loss from continuing operations of $241.2 million or a loss per diluted share of $0.74 in the year-ago period.
The net loss from continuing operations would have been $107.3 million or a loss per share of $0.22 without non-cash income of $0.7 million, $0.7 million of losses on asset sales and $5.5 million of non-recurring legal and accounting expenses.
During the quarter, the company sold $250.0 million of 4.75% convertible senior notes due December 2006. Proceeds from the sale were used to reduce debt outstanding under the company's revolving credit facility and will be used for general corporate purposes, including the retirement of the company's 5.25% convertible notes due in September 2002.
During the quarter, the company opened 4 stores, relocated 3 stores and closed 15 stores. Stores in operation at the end of the quarter totaled 3,583.
Revised Guidance for the Second Half of Fiscal 2002
Rite Aid also announced that based on current trends, it is lowering certain elements of its guidance for fiscal 2002.
The company expects sales of approximately $7.7 billion for the second half of fiscal 2002 as compared to previous guidance of $7.7 billion to $8.0 billion. Comparable store sales for the fourth quarter are expected to be up 7.5 percent to 8.0 percent over the prior year.
EBITDA for the second half is expected to be approximately $217.7 million, bringing full year EBITDA to $503.5 million compared to the previous forecast of $265.0 to $315.0 million for the second half and $550.0 million to $600.0 million for the full year.
Working capital is expected to be lower by approximately $50.0 million on a full year basis compared to the previous expectation of approximately $100.0 million lower. The company also revised its free cash flow guidance to $25.0 million from $125.0 million to $175.0 million.
Free cash flow represents the excess of EBITDA and working capital reductions over cash interest expenses, capital expenditures and amounts paid with respect to closed stores.
``While we've experienced a more difficult operating environment than anticipated and our results will be less than forecasted, we have made a lot of progress on our turnaround plan in fiscal 2002,'' said Bob Miller, Rite Aid chairman and chief executive officer. ``With a substantial reduction in debt, a refinancing that gives us time to continue to execute our plan, improving sales and a solid cash position, Rite Aid is a much stronger company today than it was just one year ago.''
Preliminary Outlook for Fiscal 2003
Based on preliminary business plans, Rite Aid said it expects sales of $16.0 billion to $16.5 billion in fiscal 2003, which ends March 1, 2003, with same store sales improving 8.0 percent to 9.0 percent over fiscal 2002. EBITDA for the year is expected to be $530.0 million to $580.0 million.
The company also said it expects to generate $100.0 million to $150.0 million of free cash flow for fiscal 2003.
Rite Aid Corporation is one of the nation's leading drugstore chains with annual revenues of more than $14 billion and approximately 3,600 stores in 29 states and the District of Columbia. Information about Rite Aid, including corporate background and press releases, is available through the company's website at www.riteaid.com.
This press release may contain forward-looking statements, which are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements.
Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include our high level of indebtedness, our ability to make interest and principal payments on our debt and satisfy the other covenants contained in our credit facilities and other debt agreements, our ability to improve the operating performance of our existing stores, and, in particular, our new and relocated stores in accordance with our long term strategy, the outcomes of pending lawsuits and governmental investigations, both civil and criminal, involving our financial reporting and other matters, competitive pricing pressures, continued consolidation of the drugstore industry, third-party prescription reimbursement levels, regulatory changes governing pharmacy practices, general economic conditions and inflation, interest rate movements, access to capital and merchandise supply constraints, and our failure to develop, implement and maintain reliable and adequate internal accounting systems and controls.
Consequently, all of the forward-looking statements made in this press release are qualified by these and other factors, risks and uncertainties. Readers are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission.
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