Rite Aid Corporation reported operating results for its fiscal third quarter ended November 28, 2015.
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The company reported revenues of $8.2 billion, net income of $59.5 million or $0.06 per diluted share, and Adjusted EBITDA of $373.2 million, or 4.6 percent of revenues.
Revenues for the quarter were $8.2 billion versus revenues of $6.7 billion in the prior year's third quarter, an increase of $1.5 billion or 21.8 percent.
Retail Pharmacy Segment revenues were $6.7 billion and increased 0.8 percent compared to the prior year period primarily as a result of an increase in same store sales. Pharmacy Services Segment revenues were $1.5 billion.
Same store drugstore sales for the Retail Pharmacy Segment increased 0.9 percent over the prior year, consisting of a 0.3 percent increase in front-end sales and a 1.2 percent increase in pharmacy sales. Pharmacy sales included an approximate 252 basis point negative impact from new generic introductions.
The number of prescriptions filled in same stores increased 0.2 percent over the prior year period. Prescription sales accounted for 69.9 percent of total drugstore sales, and third party prescription revenue was 97.9 percent of pharmacy sales.
Net income was $59.5 million or $0.06 per diluted share compared to last year's third quarter net income of $104.8 million or $0.10 per diluted share.
The decline in net income was due to lower income tax expense in the prior year as a result of an adjustment to the company's deferred tax valuation allowance of $45.9 million, an increase in interest and amortization expense related to the company's purchase of EnvisionRx and transaction expenses of $9.8 million related to the company's pending merger with Walgreens Boots Alliance, Inc. (WBA).
These items were partially offset by an increase in Adjusted EBITDA and a prior year loss on debt retirement.
Adjusted EBITDA increased $40.4 million to $373.2 million or 4.6 percent of revenues for the third quarter compared to $332.8 million or 5.0 percent of revenues for the like period last year.
Adjusted EBITDA improved due to $33.9 million of Pharmacy Services Segment Adjusted EBITDA and an increase of $6.5 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 and continued cost control, partially offset by a decrease in pharmacy gross profit.
In the third quarter, the company relocated 5 stores and remodeled 96 stores, bringing the total number of wellness stores chainwide to 1,948. The company also acquired 2 stores and closed 3 stores, resulting in a total store count of 4,560 at the end of the third quarter. The company also opened 5 clinics in the third quarter, bringing the total to 75.
As previously announced on October 27, 2015, Rite Aid and 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 have approved the transaction, which is subject to certain conditions, including, among others, approval by Rite Aid's shareholders, 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.
While Rite Aid remains comfortable with the fiscal 2016 guidance the company provided on September 17, 2015, given the agreement with WBA described above, and as is customary for transactions of this type, Rite Aid does not intend to provide further updates to its guidance for fiscal 2016 or to issue guidance for fiscal 2017.
Rite Aid's guidance did not reflect the pending transaction with WBA. ■