CAMP HILL, Pa.--(BUSINESS WIRE)--Rite Aid Corporation (NYSE:RAD) today reported operating results for its first fiscal quarter ended May 28, 2016.
For the first quarter, the company reported revenues of $8.2 billion, a net loss of $4.6 million, or $0.00 per diluted share, Adjusted net income of $14.5 million, or $0.01 per diluted share and Adjusted EBITDA of $286.0 million, or 3.5 percent of revenues.
“Our results for the first quarter reflect strong performance in our Pharmacy Services Segment and our front-end business as well as good overall expense control,” said Chairman and CEO John Standley. “Our challenge was pharmacy reimbursement rate pressure, which we were unable to offset largely due to drug purchasing efficiencies that did not meet our expectations. While drug cost reductions will continue to be short of our expectations in the near term, we anticipate improvements over the second half of the fiscal year. As we work to meet this challenge, we remain focused on executing our highly successful sales initiatives like wellness+ with Plenti and the Wellness store program while also making strategic investments for growth and delivering a consistently outstanding customer experience.”
First Quarter Summary
Revenues for the quarter were $8.2 billion compared to revenues of $6.6 billion in the prior year’s first quarter, an increase of $1.5 billion or 23.1 percent. Retail Pharmacy Segment revenues were $6.7 billion and increased 0.4 percent compared to the prior year period primarily as a result of an increase in same store sales. Revenues in the company’s Pharmacy Services Segment, which was acquired on June 24, 2015, were $1.6 billion.
Same store sales for the quarter increased 0.4 percent over the prior year, consisting of a 0.1 percent increase in pharmacy sales and a 1.2 percent increase in front-end sales. Pharmacy sales included an approximate 198 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 0.6 percent over the prior year period. Prescription sales accounted for 68.9 percent of total drugstore sales, and third party prescription revenue was 98.0 percent of pharmacy sales.
Net loss was $4.6 million or $0.00 per diluted share compared to last year’s first quarter net income of $18.8 million or $0.02 per diluted share. The decline in operating results is due primarily to an increase in amortization expense related to EnvisionRx, a higher LIFO charge and a decline in Adjusted net income.
Adjusted net income and Adjusted net income per diluted share (which is reconciled to net (loss) income on the attached table) was $14.5 million or $0.01 per diluted share compared to last year’s first quarter Adjusted net income of $23.7 million or $0.02 per diluted share. The decline in Adjusted net income and Adjusted net income per share is due to a decrease in Adjusted EBITDA, partially offset by lower income tax and interest expense.
Adjusted EBITDA (which is reconciled to net (loss) income on the attached table) was $286.0 million or 3.5 percent of revenues for the first quarter compared to $299.3 million or 4.5 percent of revenues for the same period last year. The decline in Adjusted EBITDA is due to a decrease of $54.4 million in the Retail Pharmacy Segment driven by lower pharmacy margin due to lower reimbursement rates that were not offset by purchasing efficiencies and script count growth. An improvement in front end gross profit offset inflationary increases in selling, general and administrative expenses. The decline in Retail Pharmacy Segment Adjusted EBITDA was partially offset by $41.2 million of Pharmacy Services Segment Adjusted EBITDA.
In the first quarter, the company opened 4 stores, relocated 4 stores, and remodeled 79 stores, bringing the total number of wellness stores chainwide to 2,126. The company also acquired 1 store and closed 6 stores, resulting in a total store count of 4,560 at the end of the first quarter. The company also opened 2 clinics in the first quarter, bringing the total to 80.
As previously announced on October 27, 2015, Rite Aid and Walgreens Boots Alliance, Inc. (“WBA”) entered into a definitive agreement under which WBA will acquire all outstanding shares of Rite Aid for $9.00 per share in cash, for a total enterprise value of approximately $16.6 billion, including acquired net debt. The board of directors of both companies and Rite Aid’s shareholders have approved the transaction, which is subject to certain conditions, including, among others, the receipt of approval under applicable antitrust laws and other customary closing conditions. The transaction is expected to close in the second half of calendar 2016.
Rite Aid is one of the nation’s leading drugstore chains with 4,560 stores in 31 states and the District of Columbia. Information about Rite Aid, including corporate background and press releases, is available through Rite Aid’s website atwww.riteaid.com.
