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Rite Aid Corp.$1.20($.01)(.83%)

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 Rite Aid Reports Fiscal 2016 Fourth Quarter and Full Year Results
   Thursday, April 07, 2016 7:00:01 AM ET

--Fourth Quarter Adjusted Net Income Per Diluted Share of $0.07, Compared to the Prior Year of $0.06; Full Year Adjusted Net Income Per Diluted Share of $0.23, Compared to the Prior Year of $0.27

--Fourth Quarter Net Income Per Diluted Share of $0.06, Compared to the Prior Year of $1.79; Full Year Net Income Per Diluted Share of $0.16, Compared to the Prior Year of $2.08

--Prior Year’s Fourth Quarter and Full Year Net Income Benefited from a Deferred Tax Valuation Allowance Adjustment of $1.841 Billion, or Approximately $1.80 Per Diluted Share

--Adjusted EBITDA of $383.0 Million for the Fourth Quarter, Up 11.6 Percent Year-Over-Year and $1,402.3 Million for the Full Year, Up 6.0 Percent Year-Over-Year

Rite Aid Corporation (RAD ) today reported operating results for its fourth quarter and fiscal year ended February 27, 2016.

For the fourth quarter, the company reported revenues of $8.3 billion, net income of $65.6 million, or $0.06 per diluted share, Adjusted net income of $76.1 million, or $0.07 per diluted share and Adjusted EBITDA of $383.0 million, or 4.6 percent of revenues. For the full year, the company reported revenues of $30.7 billion, net income of $165.5 million, or $0.16 per diluted share, Adjusted net income of $241.0 million or $0.23 per diluted share and Adjusted EBITDA of $1,402.3 million, or 4.6 percent of revenues.

"Our positive fourth-quarter results helped us deliver a successful fiscal year that reflects the tremendous progress we’re making to expand our retail healthcare offering," said Rite Aid Chairman and CEO John Standley. "In the fourth quarter, we generated nearly $40 million of growth in Adjusted EBITDA, including an increase in our Retail Pharmacy Segment and strong results from our new Pharmacy Services Segment. This was one of many key highlights of fiscal 2016, which was a transformational year that saw us acquire EnvisionRx, launch the ground-breaking wellness+ with Plenti program, complete our 2,000th Wellness store and exceed $30 billion in revenues for the first time."

"We look forward to building upon this success and to continue delivering a higher level of care in the communities we serve. We thank our dedicated Rite Aid associates for their hard work in executing our strategy and providing an even better retail healthcare experience for our customers. We’re also excited about our opportunity to join forces with Walgreens Boots Alliance to further expand consumer access to health care as part of the first global, pharmacy-led health and wellbeing enterprise."

Fourth Quarter Summary

Revenues for the quarter were $8.3 billion compared to revenues of $6.8 billion in the prior year’s fourth quarter, an increase of $1.4 billion or 20.8 percent. Retail Pharmacy Segment revenues were $6.8 billion and decreased 0.3 percent compared to the prior year period primarily as a result of a decrease in same store sales. Pharmacy Services Segment revenues were $1.5 billion.

Same store sales for the quarter decreased 0.6 percent over the prior year, consisting of a 0.8 percent decrease in pharmacy sales and a 0.4 percent decrease in front-end sales. Pharmacy sales included an approximate 241 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 0.1 percent over the prior year period. Prescription sales accounted for 68.1 percent of total drugstore sales, and third party prescription revenue was 97.9 percent of pharmacy sales.

Adjusted net income (which is reconciled to net income in the attached tables) was $76.1 million or $0.07 per diluted share compared to last year’s fourth quarter adjusted net income of $65.2 million or $0.06 per diluted share.

Adjusted EBITDA (which is reconciled to net income in the attached tables) was $383.0 million or 4.6 percent of revenues for the fourth quarter compared to $343.3 million or 5.0 percent of revenues for the same period last year. Adjusted EBITDA improved due to $34.2 million of Pharmacy Services Segment Adjusted EBITDA and an increase of $5.5 million in Retail Pharmacy Segment Adjusted EBITDA. The increase in Retail Pharmacy Segment Adjusted EBITDA was driven by an increase in front-end gross profit, partially offset by a decrease in pharmacy gross profit and an increase in selling, general and administrative expenses.

In the fourth quarter, the company opened 3 stores, relocated 10 stores, remodeled 89 stores and expanded 1 store, bringing the total number of wellness stores chainwide to 2,042. The company also acquired 2 stores and closed 4 stores, resulting in a total store count of 4,561 at the end of the fourth quarter. The company also opened 3 clinics in the fourth quarter, bringing the total to 78.

Full Year Results

For the fiscal year ended February 27, 2016, Rite Aid had revenues of $30.7 billion compared to revenues of $26.5 billion in the prior year, an increase of $4.2 billion or 15.9 percent. Retail Pharmacy Segment revenues were $26.9 billion and increased 1.3 percent compared to the prior year primarily as a result of an increase in same store sales. Pharmacy Services Segment revenues were $4.1 billion from the date of the acquisition of EnvisionRx, which was June 24, 2015, through the end of the fiscal year.

Same store sales for the year increased 1.3 percent consisting of a 1.8 percent increase in pharmacy sales and a 0.2 percent increase in front end sales. Pharmacy sales included an approximate 221 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 0.5 percent over the prior year period. Prescription sales accounted for 69.1 percent of total drugstore sales, and third party prescription revenue was 97.8 percent of pharmacy sales.

Adjusted net income for fiscal 2016 was $241.0 million or $0.23 per diluted share compared to last year’s adjusted net income of $273.0 million or $0.27 per diluted share. The decline in adjusted net income resulted primarily from increased interest expense incurred in connection with the company’s acquisition of EnvisionRx and higher depreciation expense related to an increase in capital spending, partially offset by an increase in Adjusted EBITDA.

Adjusted EBITDA was $1,402.3 million or 4.6 percent of revenues for the year compared to $1,322.8 million or 5.0 percent of revenues for last year. Adjusted EBITDA improved due to $101.4 million of Pharmacy Services Segment Adjusted EBITDA, partially offset by a decrease of $21.9 million in Retail Pharmacy Segment Adjusted EBITDA. The decrease in Retail Pharmacy Segment Adjusted EBITDA was due to an increase in selling, general and administrative expenses related to our higher level of sales and a decrease in pharmacy gross profit, partially offset by an increase in front-end gross profit.

Operating cash flow for fiscal 2016 was approximately $1.0 billion, due to strong Adjusted EBITDA results and contributions from working capital management. Working capital primarily benefited from a reduction in store level pharmacy inventory. The company used this operating cash flow to fund capital expenditures and to reduce borrowings following the acquisition of EnvisionRx.

For the year, the company relocated 20 stores, acquired 6 stores, remodeled 412 stores, expanded 2 stores, opened 5 stores, and closed 20 stores. The company also opened 23 clinics during the fiscal year.

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 $17.2 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.

Given the agreement with WBA described above, and as is customary for transactions of this type, Rite Aid does not intend to provide earnings guidance for fiscal 2017.

Rite Aid is one of the nation’s leading drugstore chains with 4,561 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 at www.riteaid.com.

Cautionary Statement Regarding Forward Looking Statements

Statements in this release that are not historical and statements regarding the expected timing of the closing of the proposed merger and the ability of the parties to complete such transaction considering the various closing conditions and any assumptions underlying any of the foregoing, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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, our high level of indebtedness and our ability to make interest and principal payments on our debt and satisfy the other covenants contained in our debt agreements, general economic, market and competitive conditions, our ability to improve the operating performance of our stores in accordance with our long term strategy, the impact of private and public third-party payers continued reduction in prescription drug reimbursements and efforts to encourage mail order, our ability to manage expenses and our investments in working capital, outcomes of legal and regulatory matters, changes in legislation or regulations, including healthcare reform, and risks related to the proposed merger. 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, in the definitive proxy statement that we filed with the Securities and Exchange Commission on December 21, 2015 in connection with the proposed merger, and in other documents that we file or furnish with the Securities and Exchange Commission, which you are encouraged to read. 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. Additionally, there can be no assurance that the proposed merger will be completed, or if it is completed, that it will close within the anticipated time period or that the expected benefits of the proposed merger will be realized. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Rite Aid expressly disclaims any current intention 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.

Reconciliation of Non-GAAP Financial Measures

The company separately reports financial results on the basis of Adjusted Net Income, Adjusted Net Income per diluted share, and Adjusted EBITDA, which are non-GAAP financial measures. See the attached tables for a reconciliation of Adjusted Net Income, Adjusted Net Income per diluted share and Adjusted EBITDA to net income, which is a comparable GAAP financial measure. Adjusted Net Income and Adjusted Net Income per diluted share excludes amortization of EnvisionRx intangible assets, acquisition-related costs, loss on debt retirements and LIFO adjustments. Adjusted EBITDA is defined as net income excluding the impact of income taxes (and any corresponding adjustments to tax indemnification asset), interest expense, depreciation and amortization, LIFO adjustments, charges or credits for facility closing and impairment, inventory write-downs related to store closings, debt retirements and other items (including stock-based compensation expense, sale of assets and investments and revenue deferrals related to our customer loyalty program).

 
                                                                                             RITE AID CORPORATION AND SUBSIDIARIES
                                                                                                                                  
                                                                                                  CONSOLIDATED BALANCE SHEETS
                                                                                                    (Dollars in thousands)
                                                                                                          (unaudited)
                                                                                                                                                                          
                                                                                                                 February 27, 2016                                                         February 28, 2015
                                                                                               -----------------------------------------------------                     -----------------------------------------------------
ASSETS
Current assets:
     Cash and cash equivalents                                                                                    $    124,471                                                              $    115,899
     Accounts receivable, net                                                                                        1,601,008                                                                   980,904
     Inventories, net of LIFO reserve of $1,006,396 and $997,528                                                     2,697,104                                                                 2,882,980
     Deferred tax assets                                                                                                     -                                                                    17,823
     Prepaid expenses and other current assets                                                      128,144          224,152  
                                                                                               -------------------- ---------- -------------------- -------------------- -------------------- ---------- --------------------
          Total current assets                                                                                       4,550,727                                                                 4,221,758
Property, plant and equipment, net                                                                                   2,255,398                                                                 2,091,369
Goodwill                                                                                                             1,713,475                                                                    76,124
Other intangibles, net                                                                                               1,004,379                                                                   421,480
Deferred tax assets                                                                                                  1,539,141                                                                 1,766,349
Other assets                                                                                        213,890                             200,345  
                                                                                               -------------------- ---------- --------------------                      -------------------- ---------- --------------------
          Total assets                                                                                            $ 11,277,010                                           $  8,777,425  
                                                                                               ==================== ========== ====================                      ==================== ========== ====================
                                                                                                                                                                          
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
     Current maturities of long-term debt and lease financing obligations                                         $     26,848                                                              $    100,376
     Accounts payable                                                                                                1,542,797                                                                 1,133,520
     Accrued salaries, wages and other current liabilities                                                           1,427,250                                                                 1,193,419
     Deferred tax liabilities                                                                             -                              57,685  
                                                                                               -------------------- ---------- --------------------                      -------------------- ---------- --------------------
          Total current liabilities                                                                                  2,996,895                                                                 2,485,000
Long-term debt, less current maturities                                                                              6,914,393                                                                 5,397,588
Lease financing obligations, less current maturities                                                                    52,895                                                                    61,152
Other noncurrent liabilities                                                                        731,399                             776,629  
                                                                                               -------------------- ---------- --------------------                      -------------------- ---------- --------------------
          Total liabilities                                                                                         10,695,582                                                                 8,720,369
                                                                                                                                                                          
Commitments and contingencies                                                                                                -                                                                         -
Stockholders’ equity:
     Common stock                                                                                                    1,047,754                                                                   988,558
     Additional paid-in capital                                                                                      4,822,665                                                                 4,521,023
     Accumulated deficit                                                                                            (5,241,210 )                                                              (5,406,675 )
     Accumulated other comprehensive loss                                                           (47,781 )                                              (45,850 )
                                                                                               -------------------- ---------- --------------------                      -------------------- ---------- --------------------
          Total stockholders’ equity                                                                581,428                              57,056  
                                                                                               -------------------- ---------- --------------------                      -------------------- ---------- --------------------
          Total liabilities and stockholders’ equity                                                              $ 11,277,010                                           $  8,777,425  
                                                                                               ==================== ========== ====================                      ==================== ========== ====================
 
                                                                                    RITE AID CORPORATION AND SUBSIDIARIES
                                                                                                                 
                                                                                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                              (Dollars in thousands, except per share amounts)
                                                                                                 (unaudited)
                                                                                                                                                         
                                                                                               Thirteen weeks ended                                                     Thirteen weeks ended
                                                                                                 February 27, 2016                                                        February 28, 2015
                                                                               -------------------------------------------------                        --------------------------------------------------
Revenues                                                                                          $ 8,270,136                                                              $  6,847,929
Costs and expenses:
     Cost of revenues                                                                               6,228,581                                                                 4,892,068
     Selling, general and administrative expenses                                                   1,810,288                                                                 1,718,327
     Lease termination and impairment charges                                                          26,753                                                                    21,284
     Interest expense                                                                                 103,678                                                                    98,442
     Gain on sale of assets, net                                                      (348 )                                               (1,259 )
                                                                               -------------------- --------- --------------------                      -------------------- ---------- --------------------
                                                                                                                                                         
                                                                                 8,168,952                           6,728,862  
                                                                               -------------------- --------- --------------------                      -------------------- ---------- --------------------
                                                                                                                                                         
Income before income taxes                                                                            101,184                                                                   119,067
Income tax expense (benefit)                                                        35,567                          (1,715,965 )
                                                                               -------------------- --------- --------------------                      -------------------- ---------- --------------------
     Net income                                                                                   $    65,617                                           $  1,835,032  
                                                                               ==================== ========= ====================                      ==================== ========== ====================
                                                                                                                                                         
Basic and diluted earnings per share:
                                                                                                                                                         
Numerator for earnings per share:
     Net income                                                                                   $    65,617                                                              $  1,835,032
     Add back - Interest on convertible notes                                            -                               1,364  
                                                                               -------------------- --------- --------------------                      -------------------- ---------- --------------------
     Income attributable to common stockholders - diluted                                         $    65,617                                           $  1,836,396  
                                                                               ==================== ========= ====================                      ==================== ========== ====================
                                                                                                                                                         
                                                                                                                                                         
                                                                                                                                                         
Denominator:
     Basic weighted average shares                                                                  1,041,157                                                                   977,716
     Outstanding options and restricted shares, net                                                    17,357                                                                    22,097
     Convertible notes                                                                   -                              24,792  
                                                                               -------------------- --------- --------------------                      -------------------- ---------- --------------------
                                                                                                                                                         
     Diluted weighted average shares                                             1,058,514                           1,024,605  
                                                                               ==================== ========= ====================                      ==================== ========== ====================
                                                                                                                                                         
     Basic income per share                                                                       $      0.06                                                              $       1.88
     Diluted income per share                                                                     $      0.06                                                              $       1.79
 
                                                                                     RITE AID CORPORATION AND SUBSIDIARIES
                                                                                                                  
                                                                                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                               (Dollars in thousands, except per share amounts)
                                                                                                  (unaudited)
                                                                                                                                                          
                                                                                               Fifty-two weeks ended                                                     Fifty-two weeks ended
                                                                                                 February 27, 2016                                                         February 28, 2015
                                                                               --------------------------------------------------                        --------------------------------------------------
Revenues                                                                                          $ 30,736,657                                                              $ 26,528,377
Costs and expenses:
     Cost of revenues                                                                               22,910,402                                                                18,951,645
     Selling, general and administrative expenses                                                    7,013,346                                                                 6,695,642
     Lease termination and impairment charges                                                           48,423                                                                    41,945
     Interest expense                                                                                  449,574                                                                   397,612
     Loss on debt retirements, net                                                                      33,205                                                                    18,512
     Loss (gain) on sale of assets, net                                               3,303                              (3,799 )
                                                                               -------------------- ---------- --------------------                      -------------------- ---------- --------------------
                                                                                                                                                          
                                                                                 30,458,253                          26,101,557  
                                                                               -------------------- ---------- --------------------                      -------------------- ---------- --------------------
                                                                                                                                                          
Income before income taxes                                                                             278,404                                                                   426,820
Income tax expense (benefit)                                                        112,939                          (1,682,353 )
                                                                               -------------------- ---------- --------------------                      -------------------- ---------- --------------------
     Net income                                                                                   $    165,465                                           $  2,109,173  
                                                                               ==================== ========== ====================                      ==================== ========== ====================
                                                                                                                                                          
Basic and diluted earnings per share:
                                                                                                                                                          
Numerator for earnings per share:
     Net income                                                                                   $    165,465                                                              $  2,109,173
     Add back - Interest on convertible notes                                             -                               5,456  
                                                                               -------------------- ---------- --------------------                      -------------------- ---------- --------------------
     Income attributable to common stockholders - diluted                                         $    165,465                                           $  2,114,629  
                                                                               ==================== ========== ====================                      ==================== ========== ====================
                                                                                                                                                          
                                                                                                                                                          
                                                                                                                                                          
Denominator:
     Basic weighted average shares                                                                   1,024,377                                                                   971,102
     Outstanding options and restricted shares, net                                                     17,985                                                                    21,967
     Convertible notes                                                                    -                              24,792  
                                                                               -------------------- ---------- --------------------                      -------------------- ---------- --------------------
                                                                                                                                                          
     Diluted weighted average shares                                              1,042,362                           1,017,861  
                                                                               ==================== ========== ====================                      ==================== ========== ====================
                                                                                                                                                          
     Basic income per share                                                                       $       0.16                                                              $       2.17
     Diluted income per share                                                                     $       0.16                                                              $       2.08
 
                                                                                            RITE AID CORPORATION AND SUBSIDIARIES
                                                                                                                                 
                                                                                       CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                                                                       (In thousands)
                                                                                                         (unaudited)
                                                                                                                                                                         
                                                                                                                Thirteen weeks ended                                                    Thirteen weeks ended
                                                                                                                  February 27, 2016                                                       February 28, 2015
                                                                                                  -------------------------------------------------                     ----------------------------------------------------
Net income                                                                                                           $ 65,617                                                              $ 1,835,032
Other comprehensive loss:
     Defined benefit pension plans:
          Amortization of prior service cost, net transition obligation and                         (3,723 )                                             (10,495 )
          net actuarial losses included in net periodic pension cost, net of
          $2,875 and $6,042 tax benefit
                                                                                                  -------------------- ------ --------------------                      -------------------- --------- --------------------
     Total other comprehensive loss                                                                 (3,723 )                                             (10,495 )
                                                                                                  -------------------- ------ --------------------                      -------------------- --------- --------------------
Comprehensive income                                                                                                 $ 61,894                                           $ 1,824,537  
                                                                                                  ==================== ====== ====================                      ==================== ========= ====================
 
                                                                                            RITE AID CORPORATION AND SUBSIDIARIES
                                                                                                                                  
                                                                                       CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                                                                       (In thousands)
                                                                                                         (unaudited)
                                                                                                                                                                          
                                                                                                                 Fifty-two weeks ended                                                   Fifty-two weeks ended
                                                                                                                   February 27, 2016                                                       February 28, 2015
                                                                                                  --------------------------------------------------                     ----------------------------------------------------
Net income                                                                                                           $ 165,465                                                              $ 2,109,173
Other comprehensive loss:
     Defined benefit pension plans:
          Amortization of prior service cost, net transition obligation and                          (1,931 )                                              (8,516 )
          net actuarial losses included in net periodic pension cost, net of
          $1,681 and $6,042 tax benefit
                                                                                                  -------------------- ------- --------------------                      -------------------- --------- --------------------
     Total other comprehensive loss                                                                  (1,931 )                                              (8,516 )
                                                                                                  -------------------- ------- --------------------                      -------------------- --------- --------------------
Comprehensive income                                                                                                 $ 163,534                                           $ 2,100,657  
                                                                                                  ==================== ======= ====================                      ==================== ========= ====================
 
                                                                                         RITE AID CORPORATION AND SUBSIDIARIES
                                                                                                                            
                                                                                      SUPPLEMENTAL SEGMENT OPERATING INFORMATION
                                                                                                (Dollars in thousands)
                                                                                                      (unaudited)
                                                                                                                                                                    
                                                                                                          Thirteen weeks ended                                                     Thirteen weeks ended
                                                                                                            February 27, 2016                                                        February 28, 2015
                                                                                          -------------------------------------------------                        -------------------------------------------------
                                                                                                                                                                    
Retail Pharmacy Segment
     Revenues (a)                                                                                            $ 6,826,984                                                              $ 6,847,929
     Cost of revenues (a)                                                                   4,873,484                          4,892,068  
                                                                                          -------------------- --------- --------------------                      -------------------- --------- --------------------
     Gross profit                                                                                              1,953,500                                                                1,955,861
     LIFO credit                                                                               (6,796 )                                             (23,489 )
                                                                                          -------------------- --------- --------------------                      -------------------- --------- --------------------
     FIFO gross profit                                                                                         1,946,704                                                                1,932,372
                                                                                                                                                                    
     Gross profit as a percentage of revenues                                                                      28.61 %                                                                  28.56 %
     LIFO credit as a percentage of revenues                                                                       -0.10 %                                                                  -0.34 %
     FIFO gross profit as a percentage of revenues                                                                 28.51 %                                                                  28.22 %
                                                                                                                                                                    
     Selling, general and administrative expenses                                                              1,737,759                                                                1,718,327
     Selling, general and administrative expenses as a percentage of                                               25.45 %                                                                  25.09 %
     revenues
                                                                                                                                                                    
     Cash interest expense                                                                                        98,081                                                                   86,774
     Non-cash interest expense                                                                  5,342                             11,668  
                                                                                          -------------------- --------- --------------------                      -------------------- --------- --------------------
     Total interest expense                                                                                      103,423                                                                   98,442
                                                                                                                                                                    
     Adjusted EBITDA                                                                                             348,785                                                                  343,295
     Adjusted EBITDA as a percentage of revenues                                                                    5.11 %                                                                   5.01 %
                                                                                                                                                                    
                                                                                                                                                                    
Pharmacy Services Segment
     Revenues (a)                                                                                            $ 1,530,729
     Cost of revenues (a)                                                                   1,442,674  
                                                                                          -------------------- --------- --------------------
     Gross profit                                                                                                 88,055
                                                                                                                                                                    
     Gross profit as a percentage of revenues                                                                       5.75 %
                                                                                                                                                                    
     Adjusted EBITDA                                                                                              34,224
     Adjusted EBITDA as a percentage of revenues                                                                    2.24 %
                                                                                                                                                                    
(a) - Revenues and cost of revenues include $87,577 of inter-segment
activity that is eliminated in consolidation.
 
                                                                                          RITE AID CORPORATION AND SUBSIDIARIES
                                                                                                                             
                                                                                       SUPPLEMENTAL SEGMENT OPERATING INFORMATION
                                                                                                 (Dollars in thousands)
                                                                                                       (unaudited)
                                                                                                                                                                     
                                                                                                          Fifty-two weeks ended                                                     Fifty-two weeks ended
                                                                                                            February 27, 2016                                                         February 28, 2015
                                                                                          --------------------------------------------------                        --------------------------------------------------
                                                                                                                                                                     
Retail Pharmacy Segment
     Revenues (a)                                                                                            $ 26,865,931                                                              $ 26,528,377
     Cost of revenues (a)                                                                   19,270,502                          18,951,645  
                                                                                          -------------------- ---------- --------------------                      -------------------- ---------- --------------------
     Gross profit                                                                                               7,595,429                                                                 7,576,732
     LIFO charge (credit)                                                                       11,163                             (18,857 )
                                                                                          -------------------- ---------- --------------------                      -------------------- ---------- --------------------
     FIFO gross profit                                                                                          7,606,592                                                                 7,557,875
                                                                                                                                                                     
     Gross profit as a percentage of revenues                                                                       28.27 %                                                                   28.56 %
     LIFO charge (credit) as a percentage of revenues                                                                0.04 %                                                                   -0.07 %
     FIFO gross profit as a percentage of revenues                                                                  28.31 %                                                                   28.49 %
                                                                                                                                                                     
     Selling, general and administrative expenses                                                               6,824,698                                                                 6,695,642
     Selling, general and administrative expenses as a percentage of                                                25.40 %                                                                   25.24 %
     revenues
                                                                                                                                                                     
     Cash interest expense                                                                                        412,133                                                                   372,909
     Non-cash interest expense                                                                  37,170                              24,703  
                                                                                          -------------------- ---------- --------------------                      -------------------- ---------- --------------------
     Total interest expense                                                                                       449,303                                                                   397,612
                                                                                                                                                                     
     Adjusted EBITDA                                                                                            1,300,905                                                                 1,322,843
     Adjusted EBITDA as a percentage of revenues                                                                     4.84 %                                                                    4.99 %
                                                                                                                                                                     
                                                                                                                                                                     
Pharmacy Services Segment
     Revenues (a)                                                                                            $  4,103,513
     Cost of revenues (a)                                                                    3,872,687  
                                                                                          -------------------- ---------- --------------------
     Gross profit                                                                                                 230,826
                                                                                                                                                                     
     Gross profit as a percentage of revenues                                                                        5.63 %
                                                                                                                                                                     
     Adjusted EBITDA                                                                                              101,357
     Adjusted EBITDA as a percentage of revenues                                                                     2.47 %
                                                                                                                                                                     
(a) - Revenues and cost of revenues include $232,787 of
inter-segment activity that is eliminated in consolidation.
 
                                                                                  RITE AID CORPORATION AND SUBSIDIARIES
                                                                                        SUPPLEMENTAL INFORMATION
                                                                             RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
                                                                                             (In thousands)
                                                                                               (unaudited)
                                                                                                            
                                                                                           Thirteen weeks ended                                                    Thirteen weeks ended
                                                                                             February 27, 2016                                                       February 28, 2015
                                                                            -----------------------------------------------                        --------------------------------------------------
                                                                                                                                                    
Reconciliation of net income to adjusted EBITDA:
         Net income                                                                            $  65,617                                                              $  1,835,032
         Adjustments:
              Interest expense                                                                   103,678                                                                    98,442
              Income tax expense                                                                  61,925                                                                   125,339
              Income tax valuation allowance reduction                                           (26,358 )                                                              (1,841,304 )
              Depreciation and amortization                                                      135,430                                                                   107,425
              LIFO credit                                                                         (6,796 )                                                                 (23,489 )
              Lease termination and impairment charges                                            26,753                                                                    21,284
              Other                                                            22,760                              20,566  
                                                                            -------------------- ------- --------------------                      -------------------- ---------- --------------------
                    Adjusted EBITDA                                                            $ 383,009                                           $    343,295  
                                                                            ==================== ======= ====================                      ==================== ========== ====================
                    Percent of revenues                                                             4.63 %                                                                    5.01 %
 
                                                                                   RITE AID CORPORATION AND SUBSIDIARIES
                                                                                         SUPPLEMENTAL INFORMATION
                                                                              RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
                                                                                              (In thousands)
                                                                                                (unaudited)
                                                                                                               
                                                                                             Fifty-two weeks ended                                                    Fifty-two weeks ended
                                                                                               February 27, 2016                                                        February 28, 2015
                                                                             -------------------------------------------------                        --------------------------------------------------
                                                                                                                                                       
Reconciliation of net income to adjusted EBITDA:
          Net income                                                                            $   165,465                                                              $  2,109,173
          Adjustments:
               Interest expense                                                                     449,574                                                                   397,612
               Income tax expense                                                                   139,297                                                                   158,951
               Income tax valuation allowance reduction                                             (26,358 )                                                              (1,841,304 )
               Depreciation and amortization                                                        509,212                                                                   416,628
               LIFO charge (credit)                                                                  11,163                                                                   (18,857 )
               Lease termination and impairment charges                                              48,423                                                                    41,945
               Loss on debt retirements, net                                                         33,205                                                                    18,512
               Other                                                              72,281                              40,183  
                                                                             -------------------- --------- --------------------                      -------------------- ---------- --------------------
                    Adjusted EBITDA                                                             $ 1,402,262                                           $  1,322,843  
                                                                             ==================== ========= ====================                      ==================== ========== ====================
                    Percent of revenues                                                                4.56 %                                                                    4.99 %
 
                                                                                  RITE AID CORPORATION AND SUBSIDIARIES
                                                                                        SUPPLEMENTAL INFORMATION
                                                                                           ADJUSTED NET INCOME
                                                                            (Dollars in thousands, except per share amounts)
                                                                                               (unaudited)
                                                                                                            
                                                                                           Thirteen weeks ended                                                    Thirteen weeks ended
                                                                                             February 27, 2016                                                       February 28, 2015
                                                                            -----------------------------------------------                        --------------------------------------------------
                                                                                                                                                    
Net income                                                                                     $  65,617                                                              $  1,835,032
     Add back - Income tax expense (benefit)                                   35,567                          (1,715,965 )
                                                                            -------------------- ------- --------------------                      -------------------- ---------- --------------------
               Income before income taxes                                                        101,184                                                                   119,067
                                                                                                                                                    
     Adjustments:
          Amortization of EnvisionRx intangible assets                                            17,310                                                                         -
          LIFO credit                                                                             (6,796 )                                                                 (23,489 )
          Acquisition-related costs                                             5,686                               8,309  
                                                                            -------------------- ------- --------------------                      -------------------- ---------- --------------------
                                                                                                                                                    
               Adjusted income before income taxes                                               117,384                                                                   103,887
                                                                                                                                                    
               Adjusted income tax expense (a)                                 41,319                              38,646  
                                                                            -------------------- ------- --------------------                      -------------------- ---------- --------------------
               Adjusted net income                                                             $  76,065                                           $     65,241  
                                                                            ==================== ======= ====================                      ==================== ========== ====================
                                                                                                                                                    
               Adjusted net income per diluted share                                           $    0.07                                                              $       0.06
     
(a)                      The fiscal year 2015 annual effective tax rate, adjusted for the
                         income tax valuation reduction of $1.841 billion, is used for the
                         thirteen weeks ended February 28, 2015.
 
                                                                                  RITE AID CORPORATION AND SUBSIDIARIES
                                                                                        SUPPLEMENTAL INFORMATION
                                                                                           ADJUSTED NET INCOME
                                                                            (Dollars in thousands, except per share amounts)
                                                                                               (unaudited)
                                                                                                            
                                                                                           Fifty-two weeks ended                                                   Fifty-two weeks ended
                                                                                             February 27, 2016                                                       February 28, 2015
                                                                            -----------------------------------------------                        --------------------------------------------------
                                                                                                                                                    
Net income                                                                                     $ 165,465                                                              $  2,109,173
     Add back - Income tax expense (benefit)                                  112,939                          (1,682,353 )
                                                                            -------------------- ------- --------------------                      -------------------- ---------- --------------------
               Income before income taxes                                                        278,404                                                                   426,820
                                                                                                                                                    
     Adjustments:
          Amortization of EnvisionRx intangible assets                                            55,527                                                                         -
          LIFO charge (credit)                                                                    11,163                                                                   (18,857 )
          Loss on debt retirements, net                                                           33,205                                                                    18,512
          Acquisition-related costs                                            27,482                               8,309  
                                                                            -------------------- ------- --------------------                      -------------------- ---------- --------------------
                                                                                                                                                    
               Adjusted income before income taxes                                               405,781                                                                   434,784
                                                                                                                                                    
               Adjusted income tax expense (a)                                164,747                             161,740  
                                                                            -------------------- ------- --------------------                      -------------------- ---------- --------------------
               Adjusted net income                                                             $ 241,034                                           $    273,044  
                                                                            ==================== ======= ====================                      ==================== ========== ====================
                                                                                                                                                    
               Adjusted net income per diluted share                                           $    0.23                                                              $       0.27
     
(a)                      The estimated annualized effective tax rate used for the fifty-two
                         weeks ended February 28, 2015 is adjusted for the income tax
                         valuation allowance reduction of $1.841 billion.
 
                                                                                      RITE AID CORPORATION AND SUBSIDIARIES
                                                                                                                    
                                                                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                             (Dollars in thousands)
                                                                                                   (unaudited)
                                                                                                                                                            
                                                                                                  Thirteen weeks ended                                                     Thirteen weeks ended
                                                                                                    February 27, 2016                                                        February 28, 2015
                                                                                   ------------------------------------------------                        --------------------------------------------------
                                                                                                                                                            
OPERATING ACTIVITIES:
Net income                                                                                            $   65,617                                                              $  1,835,032
Adjustments to reconcile to net cash provided by operating
activities:
     Depreciation and amortization                                                                       135,430                                                                   107,425
     Lease termination and impairment charges                                                             26,753                                                                    21,284
     LIFO credit                                                                                          (6,796 )                                                                 (23,489 )
     Gain on sale of assets, net                                                                            (348 )                                                                  (1,259 )
     Stock-based compensation expense                                                                     11,419                                                                     6,458
     Changes in deferred taxes                                                                            28,793                                                                (1,726,487 )
     Excess tax benefit on stock options and restricted stock                                             (1,448 )                                                                 (13,916 )
     Changes in operating assets and liabilities:
          Accounts receivable                                                                            (24,239 )                                                                  15,591
          Inventories                                                                                    181,619                                                                   138,023
          Accounts payable                                                                              (110,817 )                                                                (124,905 )
          Other assets and liabilities, net                                            21,882                             (58,757 )
                                                                                   -------------------- -------- --------------------                      -------------------- ---------- --------------------
               Net cash provided by operating activities                                                 327,865                                                                   175,000
INVESTING ACTIVITIES:
     Payments for property, plant and equipment                                                         (127,009 )                                                                (101,890 )
     Intangible assets acquired                                                                          (31,036 )                                                                 (32,949 )
     Proceeds from sale-leaseback transactions                                                            36,732                                                                         -
     Proceeds from dispositions of assets and investments                               1,085                               4,935  
                                                                                   -------------------- -------- --------------------                      -------------------- ---------- --------------------
               Net cash used in investing activities                                                    (120,228 )                                                                (129,904 )
FINANCING ACTIVITIES:
     Net (payments to) proceeds from revolver                                                           (280,000 )                                                                 945,000
     Principal payments on long-term debt                                                                 (5,750 )                                                              (1,151,897 )
     Change in zero balance cash accounts                                                                (27,867 )                                                                  41,015
     Net proceeds from the issuance of common stock                                                        2,751                                                                     8,594
     Excess tax benefit on stock options and restricted stock                                              1,448                                                                    13,916
     Deferred financing costs paid                                                          -                             (18,779 )
                                                                                   -------------------- -------- --------------------                      -------------------- ---------- --------------------
               Net cash used in financing activities                                 (309,418 )                                             (162,151 )
                                                                                   -------------------- -------- --------------------                      -------------------- ---------- --------------------
Decrease in cash and cash equivalents                                                                   (101,781 )                                                                (117,055 )
Cash and cash equivalents, beginning of period                                        226,252                             232,954  
                                                                                   -------------------- -------- --------------------                      -------------------- ---------- --------------------
Cash and cash equivalents, end of period                                                              $  124,471                                           $    115,899  
                                                                                   ==================== ======== ====================                      ==================== ========== ====================
                                                                                                                                                            
                                                                                                                                                            
SUPPLEMENTAL CASH FLOW INFORMATION
                                                                                                                                                            
     Payments for property, plant and equipment                                                       $  127,009                                                              $    101,890
     Intangible assets acquired                                                        31,036                              32,949  
                                                                                   -------------------- -------- --------------------                      -------------------- ---------- --------------------
     Total cash capital expenditures                                                                     158,045                                                                   134,839
     Equipment received for noncash consideration                                                          1,000                                                                         -
     Equipment financed under capital leases                                            6,115                               1,408  
                                                                                   -------------------- -------- --------------------                      -------------------- ---------- --------------------
     Gross capital expenditures                                                                       $  165,160                                           $    136,247  
                                                                                   ==================== ======== ====================                      ==================== ========== ====================
                                                                    
                                                                                         RITE AID CORPORATION AND SUBSIDIARIES
                                                                                                                                              
                                                                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                (Dollars in thousands)
                                                                                                      (unaudited)
                                                                                                                                                                   
                                                                                                        Fifty-two weeks ended                                                     Fifty-two weeks ended
                                                                                                          February 27, 2016                                                         February 28, 2015
                                                                                        --------------------------------------------------                        --------------------------------------------------
                                                                                                                                                                   
OPERATING ACTIVITIES:
Net income                                                                                                 $    165,465                                                              $  2,109,173
Adjustments to reconcile to net cash provided by operating
activities:
     Depreciation and amortization                                                                              509,212                                                                   416,628
     Lease termination and impairment charges                                                                    48,423                                                                    41,945
     LIFO charge (credit)                                                                                        11,163                                                                   (18,857 )
     Loss (gain) on sale of assets, net                                                                           3,303                                                                    (3,799 )
     Stock-based compensation expense                                                                            37,948                                                                    23,390
     Loss on debt retirements, net                                                                               33,205                                                                    18,512
     Changes in deferred taxes                                                                                   79,488                                                                (1,726,487 )
     Excess tax benefit on stock options and restricted stock                                                   (22,884 )                                                                 (41,563 )
     Changes in operating assets and liabilities:
                                                                                                                291,659                                                                   (25,902 )
          Accounts receivable
          Inventories                                                                                           181,958                                                                   129,985
          Accounts payable                                                                                      (21,187 )                                                                (169,952 )
          Other assets and liabilities, net                                                 (320,351 )                                             (104,114 )
                                                                                        -------------------- ---------- --------------------                      -------------------- ---------- --------------------
               Net cash provided by operating activities                                                        997,402                                                                   648,959
INVESTING ACTIVITIES:
     Payments for property, plant and equipment                                                                (541,347 )                                                                (426,828 )
     Intangible assets acquired                                                                                (128,648 )                                                                (112,558 )
     Acquisition of businesses, net of cash acquired                                                         (1,778,377 )                                                                 (69,793 )
     Proceeds from sale-leaseback transactions                                                                   36,732                                                                         -
     Proceeds from dispositions of assets and investments                                      9,782                              15,494  
                                                                                        -------------------- ---------- --------------------                      -------------------- ---------- --------------------
               Net cash used in investing activities                                                         (2,401,858 )                                                                (593,685 )
FINANCING ACTIVITIES:
     Proceeds from issuance of long-term debt                                                                 1,800,000                                                                 1,152,293
     Net proceeds from revolver                                                                                 375,000                                                                 1,325,000
     Principal payments on long-term debt                                                                      (672,717 )                                                              (2,595,709 )
     Change in zero balance cash accounts                                                                       (62,878 )                                                                   1,081
     Net proceeds from the issuance of common stock                                                              11,376                                                                    24,117
     Financing fees paid for early debt redemption                                                              (26,003 )                                                                 (13,841 )
     Excess tax benefit on stock options and restricted stock                                                    22,884                                                                    41,563
     Deferred financing costs paid                                                           (34,634 )                                              (20,285 )
                                                                                        -------------------- ---------- --------------------                      -------------------- ---------- --------------------
               Net cash provided by (used in) financing activities                         1,413,028                             (85,781 )
                                                                                        -------------------- ---------- --------------------                      -------------------- ---------- --------------------
Increase (decrease) in cash and cash equivalents                                                                  8,572                                                                   (30,507 )
Cash and cash equivalents, beginning of period                                               115,899                             146,406  
                                                                                        -------------------- ---------- --------------------                      -------------------- ---------- --------------------
Cash and cash equivalents, end of period                                                                   $    124,471                                           $    115,899  
                                                                                        ==================== ========== ====================                      ==================== ========== ====================
                                                                                                                                                                   
                                                                                                                                                                   
SUPPLEMENTAL CASH FLOW INFORMATION
                                                                                                                                                                   
     Payments for property, plant and equipment                                                            $    541,347                                                              $    426,828
     Intangible assets acquired                                                              128,648                             112,558  
                                                                                        -------------------- ---------- --------------------                      -------------------- ---------- --------------------
     Total cash capital expenditures                                                                            669,995                                                                   539,386
     Equipment received for noncash consideration                                                                 3,011                                                                     1,600
     Equipment financed under capital leases                                                   9,614                               6,157  
                                                                                        -------------------- ---------- --------------------                      -------------------- ---------- --------------------
     Gross capital expenditures                                                                            $    682,620                                           $    547,143  
                                                                                        ==================== ========== ====================                      ==================== ========== ====================

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20160407005640r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20160407005640/en/

SOURCE: Rite Aid Corporation

Rite Aid Corporation 
INVESTORS: 
Matt Schroeder, 717-214-8867 
investor@riteaid.com 
or 
MEDIA: 
Susan Henderson, 717-730-7766


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