UNITED STATES
|
| Date of report (Date of earliest event reported) June 24, 2003 (June 24, 2003) |
| RITE AID CORPORATION |
| (Exact name of registrant as specified in its charter) |
| Delaware | 1-5742 | 23-1614034 |
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
( IRS Employer Identification No.) |
| 30 Hunter Lane, Camp Hill, Pennsylvania | 17011 | ||
| (Address of principal executive offices) | (Zip Code) | ||
| (717) 761-2633 |
| (Registrant's telephone number, including area code) |
| None |
| (Former name or former address, if changed since last report) |
| Item | 7. Financial Statements, Pro Forma Financial Information and Exhibits. |
| (c) Exhibits. |
|
99.1 Registrant’s Press Release, dated June 24, 2003. |
| Item 9. | Regulation FD Disclosure. (Intended to be furnished under “Item 12. Results of Operations and Financial Condition” in accordance with SEC Release No. 33-8216.) |
| On June 24, 2003, we announced our financial position and results of operations as of and for the thirteen week period ended May 31, 2003. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. |
| The announcement includes non-GAAP financial measures “Adjusted Net Income (Loss)” and “Adjusted EBITDA.” |
| Adjusted net income (loss) represents results from operations excluding the impact of debt modifications and retirements, litigation proceeds, litigation expense, expense of the defense against litigation related to prior managements’ business practices and the defense of prior management, sales of assets and investments and non-recurring income tax benefits. |
| Adjusted EBITDA represents net income (loss) from operations excluding the impact of income taxes, interest expense, depreciation and amortization, LIFO adjustments, charges or credits for store closing and impairment, inventory write-downs related to closed stores, stock-based compensation expense, share of loss from equity investments, debt modifications and retirements, litigation proceeds, litigation expense, expense of the defense against litigation related to prior managements’ business practices and the defense of prior management, sales of assets and investments, and non-recurring items. |
| We reference these non-GAAP financial measures frequently in our decision-making because they provide supplemental information that facilitates internal comparisons to historical operating performance of prior periods and external comparisons to competitors’ historical operating performance. In addition, incentive compensation is based on Adjusted EBITDA and we base our forward-looking estimates on Adjusted EBITDA to facilitate quantification of planned business activities and enhance subsequent follow-up with comparisons of actual to planned Adjusted EBITDA. We include these non-GAAP financial measures in our earnings announcement in order to provide transparency to investors and enable investors to compare our operating performance with the operating performance of our competitors. |
| In accordance with interim guidance issued by the Securities and Exchange Commission on March 27, 2003 in Release No. 33-8216, the information in this Current Report on Form 8-K (including the exhibit hereto), which the Company intends to furnish under Item 12, is being furnished under Item 9. |
| The information furnished pursuant to this Current Report on Form 8-K (including the exhibit hereto) shall not be considered “filed” under the Securities Exchange Act of 1934, as amended, nor shall it be incorporated by reference into future filings by the Company under the Securities Act of 1933, as amended or under the Securities Exchange Act of 1934, as amended, unless the Company expressly sets forth in such future filing that such information is to be considered “filed” or incorporated by reference therein. |
SIGNATURES |
| Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. |
| RITE AID CORPORATION |
| Dated: | June 24, 2003 | BY: | /S/ Robert B. Sari | |
| |
| Name: | Robert B. Sari | |
| Title: |
Senior Vice President, General Counsel and Secretary |
EXHIBIT INDEX |
| Exhibit No. | Description |
| 99.1 | Registrant's Press Release dated June 24, 2003. |
| INVESTORS: John Standley 717-214-8857 Kevin Twomey 717-731-6540 or investor@riteaid.com |
MEDIA: Karen Rugen 717-730-7766 |
|
FOR IMMEDIATE RELEASE |
RITE AID ANNOUNCES FIRST QUARTER RESULTS |
REPORTS
NET LOSS OF $38.8 MILLION, INCLUDING $33.4 MILLION CHARGE |
ACHIEVES $175.1 MILLION OF ADJUSTED EBITDA |
Provides Fiscal 2004 Guidance |
Rite Aid To Resume New Store Development Program |
| CAMP HILL, PA, June 24, 2003—Rite Aid Corporation (NYSE, PCX: RAD) today announced financial results for its first quarter, ended May 31, 2003. |
| Revenues for the 13-week first quarter increased 3.1 percent to $4.0 billion versus revenues of $3.9 billion in the prior year first quarter. Same store sales increased 4.3 percent during the first quarter as compared to the year-ago like period, consisting of a 5.7 percent pharmacy same store sales increase and a 1.8 percent increase in front-end same store sales. Prescription sales accounted for 64.5 percent of total sales, and third party prescription sales represented 93.1 percent of pharmacy sales. |
| Net loss for the quarter was $38.8 million or a loss of $.08 per common share, including a $33.4 million charge resulting from the early retirement of debt and $6.0 million of costs incurred to defend prior management and the business practices of prior management, which combined to impact net loss for the quarter this year by $.08 per common share. After adjusting for these items, net income would have been $0.6 million and earnings per share would have been zero. Net income for last year’s first quarter was $2.6 million and a loss of $.01 per common share. The prior year quarter had an income tax benefit of $44.0 million, litigation settlement charges of $20.0 million, gains on asset sales of $16.9 million and $6.7 million of costs to defend prior management and the business practices of prior management, all of which combined to impact net income favorably by $.07 per common share. |
| Adjusted EBITDA, which is reconciled to the net loss on the attached table, amounted to $175.1 million or 4.3 percent of revenues compared to $158.3 million or 4.0 percent of revenues last year. |
| — MORE — |
|
Rite Aid First Quarter Release – page 2 |
| During the quarter, the company announced that Mary Sammons, currently Rite Aid’s president and chief operating officer, will become president and chief executive officer following the company’s annual stockholder meeting on June 25. Bob Miller, currently Rite Aid chairman and CEO, will retain the position of chairman. |
| Other significant events during the quarter include the previously announced completion of a comprehensive refinancing including a new $1.85 billion senior secured credit facility, which consists of a $1.15 billion term loan and a $700 million revolving credit facility that will mature in April 2008, the issuance of $360 million of 8.125 percent senior secured notes due 2010 and the issuance of $150 million of 9.25 percent senior notes due 2013. The proceeds of the new facility and the bond issuances were used to repay the company’s existing $968.6 million senior secured credit facility due March 2005, to repay its $107 million synthetic lease due March 2005, to replace the company’s existing $407.5 million revolving credit facility, to repurchase $193.0 million of bonds with maturities primarily in 2005 and 2007 and for general corporate purposes. |
| “The first quarter was another good quarter for Rite Aid on two fronts. We continued to improve our operating performance by achieving $175.1 million of adjusted EBITDA, an 11 per cent increase over the first quarter of last year, as we delivered on our strategy of increasing sales, improving margins and containing costs,” Sammons said. “We also completed a major refinancing nearly two years ahead of schedule that will have a significant impact on the future of Rite Aid by giving us greater operating flexibility because it extends the maturity of a significant portion of our debt by three years and provides additional capital to retire debt and to invest in our business.” |
| In the first quarter, the company remodeled 41 stores, relocated one store and closed eight stores. Stores in operation at the end of the quarter totaled 3,396. |
| Certain reclassifications have been made to prior years’ amounts on the attached tables to conform to the current year classifications. |
|
Guidance for Fiscal 2004 |
| Based on current trends, Rite Aid said it expects sales of $16.5 billion to $16.7 billion in fiscal 2004 which ends February 28, 2004, with same store sales improving 5.5 percent to 6.5 percent over fiscal 2003. Net loss for the fifty-two weeks ending February 28, 2004 is expected to be between zero and $63.0 million. The company reaffirmed that it expects adjusted EBITDA, as reconciled on the attached table, to be between $675.0 million and $725.0 million. |
| Capital expenditures are expected to be between $170.0 million to $190.0 million in fiscal 2004. |
|
Rite Aid To Resume New Store Development Program |
| The company also announced that Rite Aid is resuming a new store development program with the goal to open 75 new stores by the end of fiscal 2005, which ends in February 2005, and an additional 100 new stores in fiscal 2006, which ends March 2006. |
| “With our substantially improved results, and the refinancing we just completed, Rite Aid is now in a position to start working on new store development again,” Sammons said. “These new stores will be located in our strongest existing markets and in many cases will replace existing stores, which we believe will deliver a much bigger and quicker payback than entering new markets.” |
| -MORE- |
|
Rite Aid First Quarter Release – page 3 |
|
Conference Call Broadcast |
| Rite Aid will hold an analyst call at 10:30 a.m. Eastern Time today with remarks by Rite Aid’s management team. The call will be simulcast via the internet and can be accessed through the websites www.riteaid.com in the conference call section of investor information and www.StreetEvents.com. A playback of the call will be available on both sites starting at 2 p.m. Eastern Time today. A playback of the call will also be available by telephone for 48 hours beginning at 2 p.m. Eastern Time today until 2 p.m. Eastern Time on June 26. The playback number is 1-800-642-1687 from within the U.S. and Canada or 1-706-645-9291 from outside the U.S. and Canada with the seven-digit reservation number 1228602. |
| Rite Aid Corporation is one of the nation’s leading drugstore chains with annual revenues of nearly $16 billion and approximately 3,400 stores in 28 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 facility and other debt agreements, our ability to improve the operating performance of our existing stores in accordance with our management’s long term strategy, our ability to hire and retain pharmacists and other store personnel, the outcomes of pending lawsuits and governmental investigations, competitive pricing pressures, continued consolidation of the drugstore industry, the efforts of third party payors to reduce prescription drug costs, changes in state or federal legislation or regulations, the success of planned advertising and merchandising strategies, general economic conditions and inflation, interest rate movements, access to capital and our relationship with our suppliers. 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. Forward-looking statements can be identified through the use of words such as “may”, “will”, “intend”, “plan”, “project”, “expect”, “anticipate”, “could”, “should”, “would”, “believe”, “estimate”, “contemplate”, and “possible”. |
###
| RITE AID CORPORATION AND SUBSIDIARIES |
| CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) |
| May 31, 2003 | March 1, 2003 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 342,742 | $ | 365,321 | ||||
| Accounts receivable, net | 628,348 | 575,518 | ||||||
| Inventories, net | 2,226,611 | 2,195,030 | ||||||
| Prepaid expenses and other current assets | 98,851 | 108,018 | ||||||
| Total current assets | 3,296,552 | 3,243,887 | ||||||
| PROPERTY, PLANT AND EQUIPMENT, NET | 1,932,726 | 1,868,579 | ||||||
| GOODWILL | 684,535 | 684,535 | ||||||
| OTHER INTANGIBLES, NET | 195,190 | 199,768 | ||||||
| OTHER ASSETS | 130,097 | 136,746 | ||||||
| Total Assets | $ | 6,239,100 | $ | 6,133,515 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Short-term debt and current maturities of convertible notes, | ||||||||
| long-term debt and lease financing obligations | $ | 70,911 | $ | 103,715 | ||||
| Accounts payable | 837,445 | 755,284 | ||||||
| Accrued salaries, wages and other current liabilities | 684,434 | 707,999 | ||||||
| Total current liabilities | 1,592,790 | 1,566,998 | ||||||
| CONVERTIBLE NOTES | 244,875 | 244,500 | ||||||
| LONG-TERM DEBT, LESS CURRENT MATURITIES | 3,465,797 | 3,345,365 | ||||||
| LEASE FINANCING OBLIGATIONS, LESS CURRENT MATURITIES | 167,121 | 169,048 | ||||||
| OTHER NONCURRENT LIABILITIES | 889,464 | 900,270 | ||||||
| Total liabilities | 6,360,047 | 6,226,181 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| REDEEMABLE PREFERRED STOCK | 19,689 | 19,663 | ||||||
| STOCKHOLDERS' DEFICIT: | ||||||||
| PREFERRED STOCK | 393,705 | 393,705 | ||||||
| COMMON STOCK | 515,372 | 515,115 | ||||||
| ADDITIONAL PAID-IN CAPITAL | 3,135,246 | 3,119,619 | ||||||
| ACCUMULATED DEFICIT | (4,156,941 | ) | (4,118,119 | ) | ||||
| DEFERRED COMPENSATION | -- | 5,369 | ||||||
| ACCUMULATED OTHER COMPREHENSIVE LOSS | (28,018 | ) | (28,018 | ) | ||||
| Total stockholders' deficit | (140,636 | ) | (112,329 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 6,239,100 | $ | 6,133,515 | ||||
| RITE AID CORPORATION AND SUBSIDIARIES |
| CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) |
| Thirteen Weeks Ended May 31, 2003 |
Thirteen Weeks Ended June 1, 2002 | |||||||
| REVENUES | $ | 4,046,168 | $ | 3,923,731 | ||||
| COSTS AND EXPENSES: | ||||||||
| Cost of goods sold, including occupancy costs | 3,068,175 | 2,993,778 | ||||||
| Selling, general and administrative expenses | 889,733 | 899,143 | ||||||
| Stock-based compensation | 9,835 | 8,094 | ||||||
| Store closing and impairment charges (credits) | 6,366 | (4,117 | ) | |||||
| Interest expense | 78,958 | 84,631 | ||||||
| Interest rate swap contracts | -- | 264 | ||||||
| Loss (gain) on debt modifications and retirements, net | 33,427 | (270 | ) | |||||
| Gain on sale of assets and investments, net | (1,504 | ) | (16,865 | ) | ||||
| 4,084,990 | 3,964,658 | |||||||
| Loss before income taxes | (38,822 | ) | (40,927 | ) | ||||
| INCOME TAX BENEFIT | -- | 43,511 | ||||||
| Net (loss) income | $ | (38,822 | ) | $ | 2,584 | |||
| Basic and diluted earnings (loss) per share | ||||||||
| Net (loss) income | $ | (38,822 | ) | $ | 2,584 | |||
| Accretion of redeemable preferred stock | (26 | ) | (25 | ) | ||||
| Cumulative preferred stock dividends | -- | (7,230 | ) | |||||
| Loss applicable to common stockholders | $ | (38,848 | ) | $ | (4,671 | ) | ||
| Loss per share | $ | (0.08 | ) | $ | (0.01 | ) | ||
| Weighted average shares outstanding | 515,198 | 515,119 | ||||||
| RITE
AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA (In thousands) |
| Thirteen Weeks Ended May 31, 2003 |
Thirteen Weeks Ended June 1, 2002 | |||||||
| RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA: | ||||||||
| Net income (loss) | $ | (38,822 | ) | $ | 2,584 | |||
| Adjustments: | ||||||||
| LIFO charge (a) | 15,030 | 17,250 | ||||||
| Store closing and impairment charges (credits) | 6,366 | (4,117 | ) | |||||
| Closed store liquidation expense (b) | 983 | 7,693 | ||||||
| Stock-based compensation expense | 9,835 | 8,094 | ||||||
| Loss (gain) on debt modifications and retirements, net (c) | 33,427 | (270 | ) | |||||
| Litigation settlements, net (d) | (750 | ) | 20,000 | |||||
| Gain on sale of assets and investments | (1,504 | ) | (16,865 | ) | ||||
| Legal and accounting expenses (e) | 5,988 | 6,672 | ||||||
| Non-recurring income tax benefit | -- | (44,011 | ) | |||||
| Interest expense | 78,958 | 84,631 | ||||||
| Interest rate swap contracts | -- | 264 | ||||||
| Recurring income tax expense | -- | 500 | ||||||
| Depreciation and amortization | 65,575 | 75,019 | ||||||
| Other | 20 | 875 | ||||||
| Adjusted EBITDA | $ | 175,106 | $ | 158,319 | ||||
| Percent to revenues | 4.33 | % | 4.03 | % | ||||
| NOTES: |
| (a) | Represents non-cash charges to value our inventories under the last-in first-out ("LIFO") method. |
| (b) | Represents costs to liquidate inventory at stores that are in the process of closing. |
| (c) | Represents loss (gain) related to debt modifications and retirements, net. |
| (d) | Represents net impact of non-recurring litigation. |
| (e) | Charges consist primarily of fees paid for legal services related to defending against litigation related to prior management's business practices, and to defend prior management. |
| RITE
AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF NET INCOME (LOSS) GUIDANCE TO ADJUSTED EBITDA GUIDANCE (In thousands) |
| Guidance Range | |||||||||||
| Actual | Low | High | |||||||||
| Year Ended March 1, 2003 |
Year Ending February 28, 2004 |
Year Ending February 28, 2004 | |||||||||
| RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA | |||||||||||
| Net loss | $ | (112,076 | ) | $ | (63,000 | ) | $ | -- | |||
| Adjustments: | |||||||||||
| LIFO charge | 32,248 | 60,000 | 60,000 | ||||||||
| Store closing, liquidation, and impairment charges | 153,292 | 40,000 | 40,000 | ||||||||
| Stock-based compensation expense | 4,806 | 31,000 | 29,000 | ||||||||
| (Gain) loss on debt and lease conversions and modifications | (13,628 | ) | 33,427 | 33,427 | |||||||
| Legal and accounting expenses | 20,681 | 15,000 | 15,000 | ||||||||
| Elimination of severance liabilities for former executives | (27,700 | ) | -- | -- | |||||||
| Income tax benefit, net | (41,940 | ) | (22,000 | ) | (22,000 | ) | |||||
| Interest expense | 330,298 | 322,000 | 317,000 | ||||||||
| Depreciation and amortization | 285,334 | 260,000 | 255,000 | ||||||||
| Litigation settlements, gain on sale of assets and investments, and other | (8,388 | ) | (1,427 | ) | (2,427 | ) | |||||
| Adjusted EBITDA | $ | 622,927 | $ | 675,000 | $ | 725,000 | |||||
| Percent to revenues | 3.94 | % | 4.04 | % | 4.34 | % | |||||