Immunology

Rite Aid Corporation (NYSE:RAD) today reported operating results for its fourth quarter and fiscal year ended March 1, 2014.

For the fourth quarter, the company reported revenues of $6.6 billion, net income of $55.4 million or $0.06 per diluted share, and Adjusted EBITDA of $356.3 million, or 5.4 percent of revenues.

For the full year, the company reported revenues of $25.5 billion, net income of $249.4 million or $0.23 per diluted share, and Adjusted EBITDA of $1,325.0 million, or 5.2 percent of revenues.

"Thanks to the strong teamwork of our dedicated Rite Aid associates, we delivered strong fourth-quarter and fiscal 2014 results, including new company records for fourth-quarter and full-year Adjusted EBITDA," said Rite Aid Chairman and CEO John Standley. "These accomplishments reflect the significant progress we're making in executing key initiatives and delivering on our promise to actively work with our customers to keep them well."

"Our recent acquisitions of Health Dialog and RediClinic, our expanded partnership with McKesson and our continued commitment to investing in our store base have positioned us to transition our strategy from turnaround to growth as we more aggressively pursue opportunities to become a growing retail healthcare company."

Fourth Quarter Summary

Revenues for the quarter were $6.6 billion versus revenues of $6.5 billion in the prior year's fourth quarter. Revenues increased 2.2 percent primarily as a result of an increase in pharmacy same store sales.

Same store sales for the quarter increased 2.1 percent over the prior year, consisting of a 3.5 percent increase in pharmacy sales, partially offset by a 0.7 percent decrease in front end sales. Pharmacy sales included an approximate 123 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores decreased 1.8 percent over the prior year period, with 1.3 percent of this decrease being driven by a decrease in flu-related prescriptions and flu shots. Prescription sales accounted for 67.5 percent of total drugstore sales, and third party prescription revenue was 97.1 percent of pharmacy sales.

Net income was $55.4 million or $0.06 per diluted share compared to last year's fourth quarter net income of $123.1 million or $0.13 per diluted share. Current year net income included a LIFO charge of $44.1 million due to pharmacy inflation while prior year net income included a LIFO credit of $175.4 million resulting from significant generic deflation. The increase in LIFO expense was partially offset by an increase in Adjusted EBITDA, no loss on debt retirement in the current year compared to a $122.7 million loss on debt retirement in the prior year and decreases in interest expense and lease termination and impairment charges. Excluding the LIFO charge, current year net income was $99.5 million or $.10 per diluted share. Excluding the LIFO credit and loss on debt retirement, prior year net income was $70.4 million or $.07 per diluted share.

Adjusted EBITDA (which is reconciled to net income on the attached table) was $356.3 million or 5.4 percent of revenues for the fourth quarter compared to $340.3 million or 5.3 percent of revenues for the like period last year. Adjusted EBITDA improved due to an increase in pharmacy gross profit, driven by improvements in pharmacy revenues and purchasing efficiencies, offset partially by an increase in selling general and administrative expenses.

In the fourth quarter, the company relocated 2 stores, remodeled 94 stores and expanded 3 stores, bringing the total number of wellness stores chainwide to 1,215. The company also closed 8 stores, resulting in a total store count of 4,587 at the end of the fourth quarter.

Full Year Results

For the fiscal year ended March 1, 2014, Rite Aid had revenues of $25.5 billion compared to $25.4 billion for the prior year. Revenues increased 0.5 percent primarily as a result of an increase in same store sales.

Same store sales for the year increased 0.7 percent consisting of a 1.2 percent increase in pharmacy sales, partially offset by a 0.2 percent decrease in front end sales. Pharmacy sales included an approximate 232 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores decreased 0.3 percent over the prior year period. Prescription sales accounted for 67.9 percent of total drugstore sales, and third party prescription revenue was 97.0 percent of pharmacy sales.