EX-99 2 fyo7.txt EXHIBIT 99.1 - PRESS RELEASE Exhibit 99.1 INVESTORS: MEDIA: Kevin Twomey Karen Rugen 717-731-6540 717-730-7766 or investor@riteaid.com FOR IMMEDIATE RELEASE RITE AID ANNOUNCES FIRST QUARTER RESULTS REPORTS FIRST QUARTER NET INCOME OF $.01 PER DILUTED SHARE COMPARED TO NET INCOME OF $.05 PER DILUTED SHARE IN PRIOR YEAR REPORTS FIRST QUARTER ADJUSTED EBITDA OF $180.4 MILLION COMPARED TO ADJUSTED EBITDA OF $203.6 MILLION IN PRIOR YEAR Raises Fiscal 2007 Sales Guidance; Confirms Fiscal 2007 Net Income, Adjusted EBITDA, Cap Ex Guidance CAMP HILL, PA, June 22, 2006--Rite Aid Corporation (NYSE, PCX: RAD) today announced financial results for its first quarter ended June 3, 2006. Revenues for the 13-week first quarter were $4.34 billion versus revenues of $4.22 billion in the prior year first quarter. Revenues increased 2.7 percent. Same store sales increased 3.6 percent during the first quarter as compared to the year-ago like period, consisting of a 4.4 percent pharmacy same store sales increase and a 2.1 percent increase in front-end same store sales. Prescription sales accounted for 64.3 percent of total sales, and third party prescription sales represented 95.2 percent of pharmacy sales. Net income for the first quarter decreased to $10.9 million or $.01 per diluted share compared to last year's first quarter net income of $33.4 million or $.05 per diluted share. The decrease was primarily due to a $23.3 million decrease in adjusted EBITDA (which is reconciled to net income on the attached table) and no litigation settlement income in the current quarter compared to $5.9 million litigation settlement income in the prior year quarter. These negative factors were partially offset by $9.2 million lower income tax expense. - MORE - FY'07 Q1 Press Release - page 2 Adjusted EBITDA amounted to $180.4 million or 4.2 percent of revenues for the first quarter compared to $203.6 million or 4.8 percent of revenues for the like period last year. The $23.2 million decrease is primarily the result of an increase in selling, general and administrative expenses, due in large part to an increase in occupancy costs resulting from the opening of new and relocated stores. "We are pleased with our sales trends this quarter, especially the continued increase in prescription sales. This shows that the initiatives we've put in place to grow our pharmacy business are working," said Mary Sammons, Rite Aid president and CEO. "The negative impact to adjusted EBITDA from our new store development program was expected and included in our fiscal 2007 guidance, and we remain on track with plans to open 125 additional new and relocated stores this fiscal year. Growing the store base is critical to our long-term success and as the new stores gain momentum, we expect they will be significant contributors to revenue and same-store sales growth." In the first quarter, the company opened 3 stores, relocated 4 stores, acquired 2 stores, closed 7 stores and remodeled 13 stores. Stores in operation at the end of the quarter totaled 3,321. Company Raises Fiscal 2007 Sales Guidance; Confirms Fiscal 2007 Net Income, Adjusted EBITDA, Cap Ex Guidance As the result of current sales trends, Rite Aid raised its fiscal 2007 sales guidance to between $17.40 billion and $17.65 billion, with same store sales expected to improve 2 percent to 4 percent over fiscal 2006. This compares to previous fiscal 2007 sales guidance of between $17.35 billion and $17.60 billion, with same store sales improving 1.75 percent to 3.25 percent over fiscal 2006. The company confirmed fiscal 2007 guidance for net income, adjusted EBITDA and capital expenditures. Net income (loss) for fiscal 2007 is expected to be between a net loss of $5 million and net income of $40 million or a loss per diluted share of $.07 to net income per diluted share of $.02. Adjusted EBITDA (which is reconciled to net income on the attached table) is expected to be between $650 million and $725 million. Capital expenditures, excluding proceeds from sale and leaseback transactions, are expected to be between $450 million and $500 million. Proceeds from sale and leaseback transaction are expected to be between $50 million and $100 million. 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 24. 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 1531724. Rite Aid Corporation is one of the nation's leading drugstore chains with annual revenues of $17.3 billion and approximately 3,320 stores in 27 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. - MORE - FY'07 Q1 Press Release - page 3 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 senior secured credit facility and other debt agreements, our ability to improve the operating performance of our existing stores in accordance with our long term strategy, our ability to hire and retain pharmacists and other store personnel, the efforts of private and public third-party payors to reduce prescription drug reimbursements and encourage mail order, competitive pricing pressures, continued consolidation of the drugstore industry, changes in state or federal legislation or regulations, the outcome of lawsuits and governmental investigations, general economic conditions and inflation, interest rate movements and access to capital. 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". See the 8-K furnished to the Securities and Exchange Commission on June 22, 2006 for definition, purpose and reconciliation of non-GAAP financial measures referred to herein to most comparable GAAP financial measures. ### RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (unaudited)
June 3, 2006 March 4, 2006 ------------------- ------------------ ASSETS Current assets: Cash and cash equivalents $ 111,092 $ 76,067 Accounts receivable, net 386,701 354,949 Inventories, net 2,292,568 2,341,410 Prepaid expenses and other current assets 98,382 112,386 ------------------- ------------------ Total current assets 2,888,743 2,884,812 Property, plant and equipment, net 1,676,960 1,717,022 Goodwill 656,037 656,037 Other intangibles, net 193,945 193,228 Deferred tax assets 1,385,700 1,392,889 Other assets 144,805 144,383 ------------------- ------------------ Total assets $ 6,946,190 $ 6,988,371 =================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of convertible notes, long-term debt and lease financing obligations $ 585,923 $ 584,196 Accounts payable 841,934 862,192 Accrued salaries, wages and other current liabilities 699,328 696,936 ------------------- ------------------ Total current liabilities: 2,127,185 2,143,324 Long-term debt, less current maturities 2,274,663 2,298,706 Lease financing obligations, less current maturities 178,442 168,544 Other noncurrent liabilities 747,059 770,876 ------------------- ------------------ Total liabilities 5,327,349 5,381,450 Commitments and contingencies - - Stockholders' equity: Preferred stock - Series E 120,000 120,000 Preferred stock - Series G 123,328 121,207 Preferred stock - Series H 121,821 120,020 Preferred stock - Series I 116,074 116,074 Common stock 528,954 527,667 Additional paid-in capital 3,110,753 3,114,997 Accumulated deficit (2,478,068) (2,489,023) Accumulated other comprehensive loss (24,021) (24,021) ------------------- ------------------ Total stockholders' equity 1,618,841 1,606,921 ------------------- ------------------ Total liabilities and stockholders' equity $ 6,946,190 $ 6,988,371 =================== ==================
RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (unaudited)
Thirteen Weeks ended Thirteen Weeks ended June 3, 2006 May 28, 2005 -------------------- -------------------- Revenues $ 4,337,086 $ 4,221,436 Costs and expenses: Costs of goods sold 3,153,086 3,041,980 Selling, general and administrative expenses 1,085,597 1,046,276 Store closing and impairment charges 12,588 15,532 Interest expense 69,334 70,851 Loss (gain) on sale of assets and investments, net 791 (538) -------------------- -------------------- 4,321,396 4,174,101 -------------------- -------------------- Income before income taxes 15,690 47,335 Income tax expense 4,735 13,911 -------------------- -------------------- Net income $ 10,955 $ 33,424 ==================== ==================== Basic and diluted income per share: Numerator for income per share: Net income $ 10,955 $ 33,424 Accretion of redeemable preferred stock (25) (26) Cumulative preferred stock dividends (7,767) (8,149) -------------------- -------------------- Income attributable to common stockholders - basic and diluted $ 3,163 $ 25,249 ==================== ==================== Denominator: Basic weighted average shares 522,594 520,752 Outstanding options 10,714 8,932 -------------------- -------------------- Diluted weighted average shares 533,308 529,684 ==================== ==================== Basic income per share $ 0.01 $ 0.05 Diluted income per share $ 0.01 $ 0.05
RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (In thousands)
Thirteen Weeks ended Thirteen Weeks ended June 3, 2006 May 28, 2005 -------------------- -------------------- Reconciliation of net income to adjusted EBITDA: Net income $ 10,955 $ 33,424 Adjustments: Interest expense 69,334 70,851 Recurring income tax expense 4,735 21,759 Income tax benefit from favorable tax settlement - (7,848) Depreciation and amortization 66,132 60,330 LIFO charges (a) 8,946 7,612 Store closing and impairment charges 12,588 15,532 Stock-based compensation expense 3,310 4,890 Loss (gain) on sale of assets and investments, net 791 (538) Litigation settlements, net (b) - (5,907) Legal and accounting expenses (c) 101 1,114 Closed store liquidation expense (d) 2,424 1,646 Other 1,072 749 ------------------ ------------------ Adjusted EBITDA $ 180,388 $ 203,614 ================== ================== Percent of revenues 4.16% 4.82%
Notes: (a) Represents non-cash charges to value our inventories under the last-in first-out ("LIFO") method. (b) Represents net impact of non-recurring litigation. (c) 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. (d) Represents costs to liquidate inventory at stores that are in the process of closing. RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited)
Thirteen Weeks ended Thirteen Weeks ended June 3, 2006 May 28, 2005 -------------------- --------------------- OPERATING ACTIVITIES: Net income $ 10,955 $ 33,424 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 66,132 60,330 Store closing and impairment charges 12,588 15,532 LIFO charges 8,946 7,612 Loss (gain) on sale of assets and investments, net 791 (538) Stock-based compensation expense 3,310 4,890 Changes in deferred taxes 7,189 17,010 Changes in operating assets and liabilities: Net proceeds from accounts receivable securitization 15,000 - Accounts receivable (46,751) 22,318 Inventories 39,896 (22,947) Prepaid expenses and other current assets 14,005 (2,221) Other assets 1,015 1,371 Income taxes receivable/payable (3,604) 3,020 Accounts payable (6,481) 34,592 Other liabilities (1,190) (1,553) -------------------- --------------------- Net cash provided by operating activities 121,801 172,840 INVESTING ACTIVITIES: Expenditures for property, plant and equipment (70,513) (41,795) Intangible assets acquired (11,619) (7,922) Proceeds from sale-leaseback transactions 19,677 18,784 Proceeds from dispositions of assets and investments 435 8,787 -------------------- --------------------- Net cash used in investing activities (62,020) (22,146) FINANCING ACTIVITIES: Net payments to revolver (24,000) - Principal payments on bank credit facilities - (1,125) Proceeds from financing secured by owned property 8,841 5,352 Principal payments on long-term debt (2,495) (172,955) Change in zero balance cash accounts (4,699) (9,219) Excess tax deduction on stock options 65 - Net proceeds from the issuance of common stock 1,377 1,885 Payments for preferred stock dividends (3,845) (2,212) Deferred financing costs paid - (204) -------------------- --------------------- Net cash used in financing activities (24,756) (178,478) Increase (decrease) in cash and cash equivalents 35,025 (27,784) Cash and cash equivalents, beginning of period 76,067 162,821 -------------------- --------------------- Cash and cash equivalents, end of period $ 111,092 $ 135,037 ==================== =====================
RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF NET (LOSS) INCOME GUIDANCE TO ADJUSTED EBITDA GUIDANCE (In thousands)
Guidance Range --------------------------------- Low High ------------- ---------------- Year Ending Year Ending March 3, 2007 March 3, 2007 ------------- ---------------- Reconciliation of net (loss) income to adjusted EBITDA: Net (loss) income $ (5,000) $ 40,000 Adjustments: Interest expense 280,000 280,000 Income tax (benefit) expense, net (5,000) 15,000 Depreciation and amortization 275,000 275,000 LIFO charge 30,000 35,000 Store closing, liquidation, and impairment charges 50,000 55,000 Stock-based compensation expense 25,000 25,000 ------------- ---------------- Adjusted EBITDA $650,000 $ 725,000 ============= ================ Diluted (loss) income per share $ (0.07) $ 0.02