Tuesday July 11 9:01 PM ET
Rite Aid Releases Earns Restatement
By HOPE YEN, Associated Press Writer
HARRISBURG, Pa. (AP) - Rite Aid Corp. (NYSE:RAD - news) reported
far wider losses for the fiscal first-quarter and all of last year and restated its
financial results for 1997 and 1998 to reflect a $1.6 billion loss greater than
originally reported.
Rite Aid released the figures after the close of markets Tuesday, but investors
reacted quickly. Shares had been down 7.6 percent to $7.625 at the end of
regular trading Tuesday, but they fell an additional 55 percent to $3.392 in
after-hours trading on the New York Stock Exchange.
The restated figures give investors and analysts their first real look at the
troubled company's financial status since Rite Aid announced last fall it could
no longer provide reliable profit forecasts due to accounting difficulties.
The nation's third-largest drugstore chain said its loss from the quarter ended May 27 came in at $238 million,
or 92 cents a share, compared with a net loss of $44 million, or 17 cents, for the restated first quarter of the
previous fiscal year.
Revenues for the first quarter of this year rose to $3.8 billion from a restated $3.6 billion in the same period last
year.
Chief executive Robert Miller attributed the problems to the old management's expansion program, which he
said was ``overly aggressive,'' and said those problems should not continue under his management.
Miller said the next step for the company will be getting down to the basics to attract more customers.
``Now it's Retail 101 - treat employees right, have a good advertising program, be in stock,'' Miller said
Tuesday night. ``We expect to see good improvements in the third and fourth quarter.''
For 1999, Rite Aid restated its net loss of $1.1 billion, or $4.45 per diluted share, versus a restated net loss of
$422 million, or $1.64 per share, for 1998.
Net income for 1998 was reduced by about $566.2 million, while the net income for fiscal 1997 was reduced
by about $492.1 million.
``I'm cautiously optimistic'' about Rite Aid's financial status, said Eric Bosshard, an analyst with Midwest
Research. ``I guess my take is that the earnings restatement was twice as large as I expected. On the other side
of the coin, I was pretty impressed with the progress that management made and the initiatives they had for
turning the business around.''
In a conference call with analysts Tuesday, the company said it had met with vendors, sold off outdated
merchandise and boosted marketing to become more competitive. That has resulted in improvements in
same-store sales this year on both the East Coast and the West Coast, said Mary Sammons, president and
chief operating officer.
Rite Aid, with more than 4,000 store locations in 30 states, has been rocked with difficulty after financial woes
and accounting troubles sent the company's stock tumbling by more than 80 percent, or $10 billion, in a year.
Former top executive Martin L. Grass was ousted Oct. 18, the day the company announced it was switching
auditing firms. That came after company auditors at KPMG resigned, saying they had no confidence in the
company's management.
Since then, the U.S. Securities and Exchange Commission began conducting its own review of Rite Aid, and
the U.S. Attorney's office in Harrisburg reportedly was investigating the company for criminal fraud in
connection with its past accounting practices.
A new team installed in December and led by Miller pledged stricter financial controls as part of its turnaround
strategy. It recently secured a new financing pact, including $1 billion in secured credit, to give it breathing room
to repay debt and pay expenses.
``We have a tremendous team and we have great people in the stores, modern stores and modern systems,''
Miller said. ``We have a big opportunity going forward.'' |
