Rite Aid Corporation Reports Fiscal 2023 Third Quarter Results

2022-12-21

财报

PHILADELPHIA--(BUSINESS WIRE)--Rite Aid Corporation (NYSE: RAD) today reported operating results for its third fiscal quarter ended November 26, 2022.

'In addition, we are kicking off a performance acceleration program, which allows us to fast-track initiatives that will improve sales, script volume and operating margins, and free up cash. We look forward to updating you on our progress at year end.'

“Our third quarter beat consensus on top and bottom line, and we’re pleased with our results at Elixir and our accelerated sales growth at retail. However, based on recent trends, we are lowering our full year guidance due to headwinds including pharmacy margin, seasonal markdowns and higher shrink,” said Heyward Donigan, president and chief executive officer. “In addition, we are kicking off a performance acceleration program, which allows us to fast-track initiatives that will improve sales, script volume and operating margins, and free up cash. We look forward to updating you on our progress at year end.”

Consolidated Third Quarter Summary

(dollars in thousands)

Thirteen Week Period Ended

Thirty-nine Week Period Ended

November 26,

2022

November 27,

2021

November 26,

2022

November 27,

2021

Revenues

6,083,346

6,228,880

17,998,997

18,502,865

Net loss

(67,144)

(36,058)

(508,625)

(149,416)

Adjusted EBITDA

121,916

154,793

300,595

399,830

For the third quarter, the Company reported a net loss of $67.1 million, or $1.23 loss per share, Adjusted net loss of $7.9 million, or $0.14 loss per share, and Adjusted EBITDA of $121.9 million, or 2.0 percent of revenues.

Revenues for the quarter were $6.08 billion compared to revenues of $6.23 billion in the prior year’s quarter, largely due to a reduction in revenue from COVID vaccines and testing, store closures and a planned loss of covered lives at Elixir. These items were partially offset by increases in both comparable front-end sales and non-COVID prescriptions.

Third quarter net loss was $67.1 million, or $1.23 per share, compared to last year’s third quarter net loss of $36.1 million, or $0.67 per share. The increase in net loss is due primarily to a decrease in Adjusted EBITDA, an increase in interest expense and an increase in restructuring charges. These items were partially offset by a reduction in facility exit and impairment charges.

Retail Pharmacy Segment

(dollars in thousands)

Thirteen Week Period Ended

Thirty-nine Week Period Ended

November 26,

2022

November 27,

2021

November 26,

2022

November 27,

2021

Revenues

4,412,232

4,432,508

12,989,379

13,061,408

Adjusted EBITDA

81,683

125,931

186,849

290,214

Retail Pharmacy Segment revenues decreased 0.5 percent over the prior year quarter, driven by a reduction in COVID vaccine and testing revenue as well as store closures, partially offset by an increase in both acute and maintenance prescriptions. Same store sales for the third quarter increased 7.5 percent over the prior year period, consisting of a 9.5 percent increase in pharmacy sales and a 2.2 percent increase in front-end sales. Front-end same store sales, excluding tobacco products, increased 2.7 percent. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 4.4 percent over the prior year period. Total same store prescriptions, excluding COVID immunizations, increased 3.6 percent, with same store maintenance prescriptions increasing 2.1 percent and other same store acute prescriptions increasing 8.0 percent. Prescription sales accounted for 72.0 percent of total drugstore sales. Total store count at the end of the third quarter was 2,324.

Retail Pharmacy Segment Adjusted EBITDA was $81.7 million, or 1.9 percent of revenues, for the third quarter compared to last year’s third quarter Adjusted EBITDA of $125.9 million, or 2.8 percent of revenues. The decline in Adjusted EBITDA was due to decreased gross profit, partially offset by a decrease in selling, general and administrative (SG&A) expenses of $81.2 million. Gross profit was negatively impacted by the decline in COVID vaccinations and testing and increased shrink expense, partially offset by the increase in prescriptions filled. SG&A expenses benefited from lower payroll, occupancy, and other operating costs due to store closures and cost control initiatives.

Pharmacy Services Segment

(dollars in thousands)

Thirteen Week Period Ended

Thirty-nine Week Period Ended

November 26,

2022

November 27,

2021

November 26,

2022

November 27,

2021

Revenues

1,726,933

1,858,830

5,180,031

5,629,325

Adjusted EBITDA

40,233

28,862

113,746

109,616

Pharmacy Services Segment revenues were $1.7 billion for the quarter, a decrease of 7.1 percent compared to the prior year quarter. The decrease in revenues was primarily the result of a planned decrease in Elixir Insurance membership and a previously announced client loss due to industry consolidation, partially offset by increased utilization of higher cost drugs.

Pharmacy Services Segment Adjusted EBITDA was $40.2 million, or 2.3 percent of revenues, for the third quarter compared to last year’s third quarter Adjusted EBITDA of $28.9 million, or 1.6 percent of revenues. The current quarter benefitted from increased gross profit resulting from procurement economics, and reductions in SG&A expense, partially offset by the decline in revenues associated with lost clients, as mentioned above.

Outlook for Fiscal 2023

Rite Aid Corporation is narrowing its outlook for Fiscal 2023 revenues and lowering its outlook for net loss and Adjusted EBITDA.

Total revenues are expected to be between $23.7 billion and $24.0 billion in fiscal 2023. Retail Pharmacy Segment revenue is expected to be between $17.4 billion and $17.6 billion and Pharmacy Services Segment revenue is expected to be between $6.3 billion and $6.4 billion (net of any intercompany revenues to the Retail Pharmacy Segment).

Net loss is expected to be between $584 million and $551 million.

Adjusted EBITDA is expected to be between $410 million and $440 million versus prior guidance of between $450 million and $490 million, due to expectations of lower pharmacy margins, cautious consumer demand and the related impact on seasonal markdowns and continued shrink expense. Retail Pharmacy Segment Adjusted EBITDA is expected to be between $265 million and $285 million and Pharmacy Services Segment Adjusted EBITDA is expected to be between $145 million and $155 million.

Adjusted net loss per share is expected to be between $2.18 and $1.78.

Capital expenditures are expected to be approximately $225 million, with a focus on investments in digital capabilities, technology, prescription file purchases and distribution center automation.

We expect to generate positive free cash flow in Fiscal 2023.

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 broadcast via the Internet at https://investors.riteaid.com. The telephone replay will be available beginning at 12:00 p.m. Eastern Time on Wednesday, Dec. 21, 2022 and ending at 11:59 p.m. Eastern Time on Jan. 21, 2023. To access the replay of the call, telephone (800) 770-2030 or (647) 362-9199 and enter the seven-digit reservation number 9029129. The webcast replay of the call will also be available at https://investors.riteaid.com starting at 12 p.m. Eastern Time today. The playback will be available until the company’s next conference call.

About Rite Aid Corporation

Rite Aid Corporation is on the front lines of delivering healthcare services and retail products to Americans 365 days a year. 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 2,300 retail pharmacy locations across 17 states. Through Elixir, we provide pharmacy benefits and services to millions of 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 fiscal 2023, including our expectation to generate positive free cash flow in fiscal 2023; the continued impact of the global coronavirus (COVID-19) pandemic on Rite Aid’s business; 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: risks related to the prolonged impact of the COVID-19 global pandemic and the emerging new variants, including the government responses thereto; the impact of COVID-19 on our workforce, operations, stores, expenses, and supply chain, and the operations or behaviors of our customers, suppliers and business partners; our ability to successfully implement our store closure program and other strategies; the impact of our high level of indebtedness, the ability to refinance such indebtedness on acceptable terms (including the impact of rising interest rates, market volatility, and continuing actions by the United States Federal Reserve) and our ability to satisfy our obligations and the other covenants contained in our debt agreements; outcome of pending or new litigation and government investigations, including related to Opioids, “usual and customary” pricing, government payer programs or other matters; our ability to monetize (and on reasonably available terms) the CMS receivable created in our Part D business; general competitive, economic, industry, market, political (including healthcare reform) and regulatory conditions (including changes to laws or regulations relating to labor or wages), including continued impacts of inflation or other pricing environment factors on our costs, liquidity and our ability to pass on price increases to our customers, including as a result of inflationary and deflationary pressures, a decline in consumer financial position, whether due to inflation or other factors, as well as other factors specific to the markets in which we operate; the impact of private and public third-party payers continued reduction in prescription drug reimbursements, new or disruptive business models or practices, 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; our ability to achieve cost savings and other benefits of our restructuring efforts within our anticipated timeframe, if at all; the outcome of our continuing efforts to monitor and comply with applicable laws, orders, regulations, policies and procedures; and our ability to partner and have relationships with health plans and health systems.

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 (the “SEC”), which you are encouraged to read. To the extent that COVID-19 adversely affects our business and financial results, it may also have the effect of heightening many of such risk factors.

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 rely on these forward-looking statements, which speak only as of the date they are made.

The degree to which COVID-19 may adversely affect Rite Aid’s results and operations, including its ability to achieve its outlook for fiscal 2023 guidance, will depend on numerous evolving factors and future developments, which are highly uncertain, including, but not limited to, federal, state and local governmental policies and initiatives designed to reduce the transmission of COVID-19 and emerging new variants and how quickly and to what extent normal economic and operating conditions can resume. As a result, the impact on Rite Aid’s financial and operating results cannot be reasonably estimated with specificity at this time, but the impact could be material. Rite Aid expressly disclaims any current intention, and assumes no duty, 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.

All references to “Company” and “Rite Aid” as used throughout this release refer to Rite Aid Corporation and its affiliates.

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, Adjusted EBITDA, Adjusted EBITDA Gross Profit and Adjusted EBITDA SG&A, 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 and other contractual settlements, gains or losses on debt modifications and retirements, LIFO adjustments, goodwill and intangible asset impairment charges, restructuring-related costs, the gain or loss on Bartell acquisition, and the change in estimate related to manufacturer rebate receivables. Rite Aid believes Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share serve as appropriate measures to be used in evaluating the performance of its business and help its investors better compare its operating performance over multiple periods.

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 exit and impairment, goodwill and intangible asset impairment charges, inventory write-downs related to store closings, gains or losses on debt modifications and retirements, and other items (including stock-based compensation expense, merger and acquisition-related costs, non-recurring litigation and other contractual settlements, severance, restructuring-related costs, costs related to facility closures, gain or loss on sale of assets, the gain or loss on Bartell acquisition, and the change in estimate related to manufacturer rebate receivables). 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 believes Adjusted EBITDA serves as an appropriate measure in evaluating the performance of its business and helps its investors better compare its operating performance with its competitors.

Adjusted EBITDA Gross Profit includes LIFO adjustments, depreciation and amortization (COGS portion only) and other items. See the attached tables for a reconciliation of Adjusted EBITDA Gross Profit to Revenue, which is the most directly comparable GAAP financial measure. Adjusted EBITDA SG&A excludes depreciation and amortization (SG&A portion only), stock-based compensation expense, merger and acquisition-related costs, non-recurring litigation and other contractual settlements, and other items. See the attached tables for a reconciliation of Adjusted EBITDA SG&A to Revenue, which is the most directly comparable GAAP financial measure. The Company believes Adjusted EBITDA Gross Profit and Adjusted EBITDA SG&A serve as appropriate measures in evaluating the performance of its business and helps its investors better compare its operating performance with its competitors.

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)

November 26, 2022

February 26, 2022

ASSETS

Current assets:

Cash and cash equivalents

103,054

39,721

Accounts receivable, net

1,473,997

1,343,496

Inventories, net of LIFO reserve of $512,540 and $487,173

1,981,335

1,959,389

Prepaid expenses and other current assets

119,836

106,749

Total current assets

3,678,222

3,449,355

Property, plant and equipment, net

939,648

989,167

Operating lease right-of-use assets

2,622,969

2,813,535

Goodwill

626,936

879,136

Other intangibles, net

259,954

291,196

Deferred tax assets

13,938

20,071

Other assets

68,107

86,543

Total assets

8,209,774

8,529,003

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities:

Current maturities of long-term debt and lease financing obligations

6,107

5,544

Accounts payable

1,454,988

1,571,261

Accrued salaries, wages and other current liabilities

799,555

780,632

Current portion of operating lease liabilities

563,490

575,651

Total current liabilities

2,824,140

2,933,088

Long-term debt, less current maturities

3,189,013

2,732,986

Long-term operating lease liabilities

2,427,836

2,597,090

Lease financing obligations, less current maturities

12,970

14,830

Other noncurrent liabilities

159,549

151,976

Total liabilities

8,613,508

8,429,970

Commitments and contingencies

Stockholders' (deficit) equity:

Common stock

56,526

55,752

Additional paid-in capital

5,915,383

5,910,299

Accumulated deficit

(6,360,206

)

(5,851,581

)

Accumulated other comprehensive loss

(15,437

)

(15,437

)

Total stockholders' (deficit) equity

(403,734

)

99,033

Total liabilities and stockholders' (deficit) equity

8,209,774

8,529,003

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)

Thirteen weeks ended

November 26, 2022

Thirteen weeks ended

November 27, 2021

Revenues

6,083,346

6,228,880

Costs and expenses:

Cost of revenues

4,879,594

4,894,497

Selling, general and administrative expenses

1,194,546

1,276,920

Facility exit and impairment charges

22,539

47,455

Interest expense

57,416

47,794

Gain on sale of assets, net

(3,095

)

(5,899

)

Loss on Bartell acquisition

5,346

6,151,000

6,266,113

Loss before income taxes

(67,654

)

(37,233

)

Income tax benefit

(510

)

(1,175

)

Net loss

(67,144

)

(36,058

)

Basic and diluted loss per share:

Numerator for loss per share:

Net loss attributable to common stockholders - basic and diluted

(67,144

)

(36,058

)

Denominator:

Basic and diluted weighted average shares

54,792

54,168

Basic and diluted loss per share

(1.23

)

(0.67

)

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)

Thirty-nine weeks ended

November 26, 2022

Thirty-nine weeks ended

November 27, 2021

Revenues

17,998,997

18,502,865

Costs and expenses:

Cost of revenues

14,444,021

14,637,683

Selling, general and administrative expenses

3,606,028

3,790,035

Facility exit and impairment charges

134,955

67,639

Goodwill and intangible asset impairment charges

252,200

Interest expense

158,068

145,507

(Gain) loss on debt modifications and retirements, net

(41,312

)

3,235

Gain on sale of assets, net

(61,292

)

(79

)

Loss on Bartell acquisition

5,346

18,492,668

18,649,366

Loss before income taxes

(493,671

)

(146,501

)

Income tax expense

14,954

2,915

Net loss

(508,625

)

(149,416

)

Basic and diluted loss per share:

Numerator for loss per share:

Net loss attributable to common stockholders - basic and diluted

(508,625

)

(149,416

)

Denominator:

Basic and diluted weighted average shares

54,567

54,004

Basic and diluted loss per share

(9.32

)

(2.77

)

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

Thirteen weeks ended

November 26, 2022

Thirteen weeks ended

November 27, 2021

OPERATING ACTIVITIES:

Net loss

(67,144

)

(36,058

)

Adjustments to reconcile to net cash provided by (used in) operating activities:

Depreciation and amortization

69,496

72,973

Facility exit and impairment charges

22,539

47,455

LIFO charge

15,246

8,886

Change in allowances for uncollectible accounts receivable

9,082

Gain on sale of assets, net

(3,095

)

(5,899

)

Loss on Bartell acquisition

5,346

Stock-based compensation expense

566

217

Changes in deferred taxes

(1,602

)

Changes in operating assets and liabilities:

Accounts receivable

62,041

(185,224

)

Inventories

29,634

(68,054

)

Accounts payable

(55,762

)

38,112

Operating lease right-of-use assets and operating lease liabilities

(22,838

)

(7,208

)

Other assets

1,935

9,761

Other liabilities

70,909

118,257

Net cash provided by (used in) operating activities

132,609

(3,038

)

INVESTING ACTIVITIES:

Payments for property, plant and equipment

(50,320

)

(39,645

)

Intangible assets acquired

(9,581

)

(9,810

)

Proceeds from dispositions of assets and investments

10,027

3,145

Proceeds from sale-leaseback transactions

9,908

25,605

Net cash used in investing activities

(39,966

)

(20,705

)

FINANCING ACTIVITIES:

Net (payments to) proceeds from revolver

(36,000

)

50,000

Principal payments on long-term debt

(1,057

)

(1,032

)

Change in zero balance cash accounts

747

(14,243

)

Payments for taxes related to net share settlement of equity awards

(87

)

(131

)

Deferred financing costs paid

(2,126

)

Net cash (used in) provided by financing activities

(36,397

)

32,468

Increase in cash and cash equivalents

56,246

8,725

Cash and cash equivalents, beginning of period

46,808

146,564

Cash and cash equivalents, end of period

103,054

155,289

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

Thirty-nine weeks ended

November 26, 2022

Thirty-nine weeks ended

November 27, 2021

OPERATING ACTIVITIES:

Net loss

(508,625

)

(149,416

)

Adjustments to reconcile to net cash (used in) provided by operating activities:

Depreciation and amortization

208,133

222,691

Facility exit and impairment charges

134,955

67,639

Goodwill and intangible asset impairment charges

252,200

LIFO charge

25,367

900

Change in allowances for uncollectible accounts receivable

7,411

Gain on sale of assets, net

(61,292

)

(79

)

Loss on Bartell acquisition

5,346

Stock-based compensation expense

8,635

8,820

(Gain) loss on debt modifications and retirements, net

(41,312

)

3,235

Changes in deferred taxes

6,133

(1,602

)

Changes in operating assets and liabilities:

Accounts receivable

(149,632

)

(398,079

)

Inventories

(47,771

)

(87,150

)

Accounts payable

(99,105

)

129,436

Operating lease right-of-use assets and operating lease liabilities

(54,551

)

(19,517

)

Other assets

(8,935

)

34,946

Other liabilities

9,537

219,390

Net cash (used in) provided by operating activities

(318,852

)

36,560

INVESTING ACTIVITIES:

Payments for property, plant and equipment

(172,563

)

(145,001

)

Intangible assets acquired

(24,937

)

(24,289

)

Proceeds from insured loss

10,436

Proceeds from dispositions of assets and investments

51,030

7,821

Proceeds from sale-leaseback transactions

55,894

39,790

Net cash used in investing activities

(90,576

)

(111,243

)

FINANCING ACTIVITIES:

Proceeds from issuance of long-term debt

350,000

Net proceeds from revolver

641,000

300,000

Principal payments on long-term debt

(153,068

)

(544,020

)

Change in zero balance cash accounts

(12,184

)

(15,087

)

Financing fees paid for early debt redemption

(881

)

(833

)

Payments for taxes related to net share settlement of equity awards

(2,106

)

(2,352

)

Deferred financing costs paid

(18,638

)

Net cash provided by financing activities

472,761

69,070

Increase (decrease) in cash and cash equivalents

63,333

(5,613

)

Cash and cash equivalents, beginning of period

39,721

160,902

Cash and cash equivalents, end of period

103,054

155,289

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL SEGMENT OPERATING INFORMATION

(Dollars in thousands)

(unaudited)

Thirteen weeks ended

November 26, 2022

Thirteen weeks ended

November 27, 2021

Retail Pharmacy Segment

Revenues (a)

4,412,232

4,432,508

Cost of revenues (a)

3,312,953

3,199,271

Gross profit

1,099,279

1,233,237

LIFO charge

15,246

8,886

FIFO gross profit

1,114,525

1,242,123

Adjusted EBITDA gross profit

1,119,171

1,244,637

Gross profit as a percentage of revenues

24.91

27.82

LIFO charge as a percentage of revenues

0.35

0.20

FIFO gross profit as a percentage of revenues

25.26

28.02

Adjusted EBITDA gross profit as a percentage of revenues

25.37

28.08

Selling, general and administrative expenses

1,118,792

1,185,974

Adjusted EBITDA selling, general and administrative expenses

1,037,488

1,118,706

Selling, general and administrative expenses as a percentage of revenues

25.36

26.76

Adjusted EBITDA selling, general and administrative expenses as a percentage of revenues

23.51

25.24

Cash interest expense

54,578

44,853

Non-cash interest expense

2,838

2,941

Total interest expense

57,416

47,794

Adjusted EBITDA

81,683

125,931

Adjusted EBITDA as a percentage of revenues

1.85

2.84

Pharmacy Services Segment

Revenues (a)

1,726,933

1,858,830

Cost of revenues (a)

1,622,460

1,757,684

Gross profit

104,473

101,146

Gross profit as a percentage of revenues

6.05

5.44

Adjusted EBITDA

40,233

28,862

Adjusted EBITDA as a percentage of revenues

2.33

1.55

(a) - Revenues and cost of revenues include $55,819 and $62,458 of inter-segment activity for the thirteen weeks ended November 26, 2022 and November 27, 2021, respectively, that is eliminated in consolidation.

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL SEGMENT OPERATING INFORMATION

(Dollars in thousands)

(unaudited)

Thirty-nine weeks ended

November 26, 2022

Thirty-nine weeks ended

November 27, 2021

Retail Pharmacy Segment

Revenues (a)

12,989,379

13,061,408

Cost of revenues (a)

9,749,707

9,517,875

Gross profit

3,239,672

3,543,533

LIFO charge

25,367

900

FIFO gross profit

3,265,039

3,544,433

Adjusted EBITDA gross profit

3,281,878

3,551,888

Gross profit as a percentage of revenues

24.94

27.13

LIFO charge as a percentage of revenues

0.20

0.01

FIFO gross profit as a percentage of revenues

25.14

27.14

Adjusted EBITDA gross profit as a percentage of revenues

25.27

27.19

Selling, general and administrative expenses

3,336,781

3,505,365

Adjusted EBITDA selling, general and administrative expenses

3,095,029

3,261,674

Selling, general and administrative expenses as a percentage of revenues

25.69

26.84

Adjusted EBITDA selling, general and administrative expenses as a percentage of revenues

23.83

24.97

Cash interest expense

149,441

136,476

Non-cash interest expense

8,627

9,031

Total interest expense

158,068

145,507

Adjusted EBITDA

186,849

290,214

Adjusted EBITDA as a percentage of revenues

1.44

2.22

Pharmacy Services Segment

Revenues (a)

5,180,031

5,629,325

Cost of revenues (a)

4,864,727

5,307,676

Gross profit

315,304

321,649

Gross profit as a percentage of revenues

6.09

5.71

Adjusted EBITDA

113,746

109,616

Adjusted EBITDA as a percentage of revenues

2.20

1.95

(a) - Revenues and cost of revenues include $170,413 and $187,868 of inter-segment activity for the thirty-nine weeks ended November 26, 2022 and November 27, 2021, respectively, that is eliminated in consolidation.

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

(In thousands)

(unaudited)

Thirteen weeks ended

November 26, 2022

Thirteen weeks ended

November 27, 2021

Reconciliation of net loss to adjusted EBITDA:

Net loss

(67,144

)

(36,058

)

Adjustments:

Interest expense

57,416

47,794

Income tax benefit

(510

)

(1,175

)

Depreciation and amortization

69,496

72,973

LIFO charge

15,246

8,886

Facility exit and impairment charges

22,539

47,455

Merger and Acquisition-related costs

3,642

Stock-based compensation expense

566

217

Restructuring-related costs

26,500

9,657

Inventory write-downs related to store closings

3,085

Litigation and other contractual settlements

(2,541

)

2,000

Gain on sale of assets, net

(3,095

)

(5,899

)

Loss on Bartell acquisition

5,346

Other

358

(131

)

Adjusted EBITDA

121,916

154,793

Percent of revenues

2.00

2.49

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

(In thousands)

(unaudited)

Thirty-nine weeks ended

November 26, 2022

Thirty-nine weeks ended

November 27, 2021

Reconciliation of net loss to adjusted EBITDA:

Net loss

(508,625

)

(149,416

)

Adjustments:

Interest expense

158,068

145,507

Income tax expense

14,954

2,915

Depreciation and amortization

208,133

222,691

LIFO charge

25,367

900

Facility exit and impairment charges

134,955

67,639

Goodwill and intangible asset impairment charges

252,200

(Gain) loss on debt modifications and retirements, net

(41,312

)

3,235

Merger and Acquisition-related costs

12,119

Stock-based compensation expense

8,635

8,820

Restructuring-related costs

61,951

25,173

Inventory write-downs related to store closings

12,134

1,356

Litigation and other contractual settlements

35,823

50,212

Gain on sale of assets, net

(61,292

)

(79

)

Loss on Bartell acquisition

5,346

Other

(396

)

3,412

Adjusted EBITDA

300,595

399,830

Percent of revenues

1.67

2.16

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

ADJUSTED NET (LOSS) INCOME

(Dollars in thousands, except per share amounts)

(unaudited)

Thirteen weeks ended

November 26, 2022

Thirteen weeks ended

November 27, 2021

Net loss

(67,144

)

(36,058

)

Add back - Income tax benefit

(510

)

(1,175

)

Loss before income taxes

(67,654

)

(37,233

)

Adjustments:

Amortization expense

17,622

18,780

LIFO charge

15,246

8,886

Merger and Acquisition-related costs

3,642

Restructuring-related costs

26,500

9,657

Litigation and other contractual settlements

(2,541

)

2,000

Loss on Bartell acquisition

5,346

Adjusted (loss) income before income taxes

(10,827

)

11,078

Adjusted income tax (benefit) expense (a)

(2,897

)

2,914

Adjusted net (loss) income

(7,930

)

8,164

Adjusted net (loss) income per diluted share:

Numerator for adjusted net (loss) income per diluted share:

Adjusted net (loss) income

(7,930

)

8,164

Denominator:

Basic weighted average shares

54,792

54,168

Outstanding options and restricted shares, net

541

Diluted weighted average shares

54,792

54,709

Net loss per diluted share

(1.23

)

(0.67

)

Adjusted net (loss) income per diluted share

(0.14

)

0.15

(a) The fiscal year 2023 and 2022 annual effective tax rates, calculated using a federal rate plus a net state rate that excluded the impact of state NOL's, state credits and valuation allowance, was used for the thirteen weeks ended November 26, 2022 and November 27, 2021, respectively.

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

ADJUSTED NET (LOSS) INCOME

(Dollars in thousands, except per share amounts)

(unaudited)

Thirty-nine weeks ended

November 26, 2022

Thirty-nine weeks ended

November 27, 2021

Net loss

(508,625

)

(149,416

)

Add back - Income tax expense

14,954

2,915

Loss before income taxes

(493,671

)

(146,501

)

Adjustments:

Amortization expense

56,668

59,193

LIFO charge

25,367

900

Goodwill and intangible asset impairment charges

252,200

(Gain) loss on debt modifications and retirements, net

(41,312

)

3,235

Merger and Acquisition-related costs

12,119

Restructuring-related costs

61,951

25,173

Litigation and other contractual settlements

35,823

50,212

Loss on Bartell acquisition

5,346

Adjusted (loss) income before income taxes

(102,974

)

9,677

Adjusted income tax (benefit) expense (a)

(27,556

)

2,545

Adjusted net (loss) income

(75,418

)

7,132

Adjusted net (loss) income per diluted share:

Numerator for adjusted net (loss) income per diluted share:

Adjusted net (loss) income

(75,418

)

7,132

Denominator:

Basic weighted average shares

54,567

54,004

Outstanding options and restricted shares, net

998

Diluted weighted average shares

54,567

55,002

Net loss per diluted share

(9.32

)

(2.77

)

Adjusted net (loss) income per diluted share

(1.38

)

0.13

(a) The fiscal year 2023 and 2022 annual effective tax rates, calculated using a federal rate plus a net state rate that excluded the impact of state NOL's, state credits and valuation allowance, was used for the thirty-nine weeks ended November 26, 2022 and November 27, 2021, respectively.

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND RECONCILIATION OF ADJUSTED EBITDA SELLING,

GENERAL AND ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT

(In thousands)

(unaudited)

Thirteen weeks ended

November 26, 2022

Thirteen weeks ended

November 27, 2021

Reconciliation of adjusted EBITDA gross profit:

Revenues

4,412,232

4,432,508

Gross Profit

1,099,279

1,233,237

Addback:

LIFO charge

15,246

8,886

Depreciation and amortization (cost of goods sold portion only)

2,158

2,489

Other

2,488

Adjusted EBITDA gross profit

1,119,171

1,244,637

Percent of revenues

25.37

28.08

Reconciliation of adjusted EBITDA selling, general and administrative expenses:

Revenues

4,412,232

4,432,508

Selling, general and administrative expenses

1,118,792

1,185,974

Less:

Depreciation and amortization (SG&A portion only)

56,542

58,087

Stock-based compensation expense

456

(174

)

Merger and Acquisition-related costs

3,642

Restructuring-related costs

19,876

3,746

Litigation and other contractual settlements

3,475

2,000

Other

955

(33

)

Adjusted EBITDA selling, general and administrative expenses

1,037,488

1,118,706

Percent of revenues

23.51

25.24

Adjusted EBITDA

81,683

125,931

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND RECONCILIATION OF ADJUSTED EBITDA SELLING,

GENERAL AND ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT

(In thousands)

(unaudited)

Thirty-nine weeks ended

November 26, 2022

Thirty-nine weeks ended

November 27, 2021

Reconciliation of adjusted EBITDA gross profit:

Revenues

12,989,379

13,061,408

Gross Profit

3,239,672

3,543,533

Addback:

LIFO charge

25,367

900

Depreciation and amortization (cost of goods sold portion only)

7,126

6,536

Other

9,713

919

Adjusted EBITDA gross profit

3,281,878

3,551,888

Percent of revenues

25.27

27.19

Reconciliation of adjusted EBITDA selling, general and administrative expenses:

Revenues

12,989,379

13,061,408

Selling, general and administrative expenses

3,336,781

3,505,365

Less:

Depreciation and amortization (SG&A portion only)

164,361

176,936

Stock-based compensation expense

8,054

8,292

Merger and Acquisition-related costs

12,119

Restructuring-related costs

45,689

7,951

Litigation and other contractual settlements

21,597

34,448

Other

2,051

3,945

Adjusted EBITDA selling, general and administrative expenses

3,095,029

3,261,674

Percent of revenues

23.83

24.97

Adjusted EBITDA

186,849

290,214

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCE

YEAR ENDING MARCH 4, 2023

(In thousands)

(unaudited)

Guidance Range

Low

High

Total Revenues

23,700,000

24,000,000

Pharmacy Services Segment Revenues

6,300,000

6,400,000

Gross Capital Expenditures

225,000

Reconciliation of net loss to adjusted EBITDA:

Net loss

(584,000

)

(551,000

)

Adjustments:

Interest expense

220,000

Income tax benefit

(7,000

)

(10,000

)

Depreciation and amortization

280,000

LIFO charge

35,000

Facility exit and impairment charges

182,000

Goodwill and intangible asset impairment charges

252,000

Gain on debt modifications and retirements, net

(41,000

)

(41,000

)

Restructuring-related costs

72,000

Litigation and other contractual settlements

36,000

Gain on sale of assets, net

(60,000

)

(60,000

)

Other

25,000

Adjusted EBITDA

410,000

440,000

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET LOSS GUIDANCE

YEAR ENDING MARCH 4, 2023

(In thousands)

(unaudited)

Guidance Range

Low

High

Net loss

(584,000

)

(551,000

)

Add back - income tax benefit

(7,000

)

(10,000

)

Loss before income taxes

(591,000

)

(561,000

)

Adjustments:

Amortization expense

75,000

LIFO charge

35,000

Goodwill and intangible asset impairment charges

252,000

Gain on debt modifications and retirements, net

(41,000

)

(41,000

)

Restructuring-related costs

72,000

Litigation and other contractual settlements

36,000

Adjusted loss before adjusted income taxes

(162,000

)

(132,000

)

Adjusted income tax benefit

(43,000

)

(35,000

)

Adjusted net loss

(119,000

)

(97,000

)

Diluted adjusted net loss per share

(2.18

)

(1.78

)