Business Wire | Sep 24, 2020 07:01AM EDT

Rite Aid Corporation Reports Fiscal 2021 Second Quarter Results

Sep. 24, 2020

CAMP HILL, Pa.--(BUSINESS WIRE)--Sep. 24, 2020--Rite Aid Corporation (NYSE: RAD) today reported operating results for its second fiscal quarter ended August 29, 2020.

For the second quarter, net loss from continuing operations narrowed $65.5 million to $13.2 million, or $0.25 loss per share. Adjusted net income from continuing operations increased $7.2 million to $13.5 million, or $0.25 earnings per share, and Adjusted EBITDA from continuing operations increased $17.4 million to $151.6 million, or 2.5 percent of revenues.

"We are pleased with our second quarter performance as we delivered another quarter of strong results while making solid progress on our bold, new RxEvolution strategy," said Heyward Donigan, president and chief executive officer, Rite Aid. "Our retail pharmacists and associates have always been deeply committed to our communities, and they are doing a great job protecting our customers during a global pandemic. Thanks to them, Rite Aid continues to gain retail market share and increase both same store prescription count and front-end sales."

"And at Elixir, our new leadership team is in place, and we are making progress on modernizing and integrating our many assets. We also officially launched our new Elixir brand and are focused on enhancing our curated solutions, products, clinical and digital capabilities. We grew membership in our Medicare Part D business and benefitted from strong expense control, especially as we continue to integrate Rite Aid and Elixir."

"I am so proud of our 50,000 associates and how they are working together each and every day to deliver operational excellence and help our customers to not just get healthy, but get thriving. Together, we are building a strong foundation for sustainable growth and setting the stage to engage with consumers in ways never before seen in health care. A whole new Rite Aid is coming to life, and I'm excited to continue our journey to become a dominant mid-market PBM, unlock the value of our pharmacists and revitalize our retail and digital experiences."

Consolidated Second Quarter Summary

(dollars in thousands) Thirteen Week Period Ended Twenty-six Week Period Ended

August 29, August 31, August 29, August 31, 2020 2019 2020 2019

Revenues from $ 5,981,970 $ 5,366,264 $ 12,009,346 $ 10,738,853 continuing operations

Net loss from (13,197 ) (78,705 ) (85,899 ) (178,044 )continuing operations

Adjusted EBITDA from continuing operations 151,603 134,190 258,995 244,537

Revenues from continuing operations for the quarter were $5.98 billion compared to revenues from continuing operations of $5.37 billion in the prior year's quarter. The increase in revenues was driven by growth at both the Retail Pharmacy and Pharmacy Services segments.

Net loss from continuing operations was $13.2 million, or $0.25 per share compared to last year's second quarter net loss from continuing operations of $78.7 million, or $1.48 per share. The improvement in net loss is due primarily to an increase in Adjusted EBITDA, decreases in income tax and interest expense, a LIFO credit in the current quarter compared to a LIFO charge in the prior year second quarter, and a gain on debt modification in the current quarter. These benefits were partially offset by an increase in lease termination and impairment charges caused by the wind down of our RediClinic business in the current quarter.

Adjusted EBITDA from continuing operations was $151.6 million or 2.5% of revenues, compared to last year's second quarter Adjusted EBITDA of $134.2 million or 2.5% of revenues. The improvement in Adjusted EBITDA was driven by increased revenues and a reduction in SG&A expenses.

Retail Pharmacy Segment

(dollars in thousands) Thirteen Week Period Ended Twenty-six Week Period Ended

August 29, August 31, August 29, August 31, 2020 2019 2020 2019

Revenues from continuing $ 4,017,912 $ 3,848,104 $ 8,141,183 $ 7,712,912operations

Adjusted EBITDA from continuing operations 122,340 92,673 185,322 176,681

Retail Pharmacy Segment revenues from continuing operations increased 4.4 percent over the prior year quarter. Same store sales from continuing operations for the second quarter increased 3.5 percent over the prior year period, consisting of a 4.6 percent increase in front-end sales and a 2.3 percent increase in pharmacy sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 6.1 percent, driven by increases across a number of categories. The company increased its front-end market share by 130 basis points in dollars and 150 basis points in unit sales1. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 2.6 percent over the prior year period driven by increases in maintenance prescriptions, supported by personalized Medication Therapy Management interventions and home deliveries, partially offset by a reduction in acute prescriptions of 4.9 percent.

Retail Pharmacy Segment Adjusted EBITDA from continuing operations was $122.3 million or 3.0 percent of revenues for the second quarter compared to last year's second quarter Adjusted EBITDA from continuing operations of $92.7 million or 2.4 percent of revenues. The increase of $29.6 million is due to a reduction in SG&A expenses and increased gross profit. SG&A expenses were favorably impacted by changes to modernize our associate paid time off (PTO) plans along with strong expense control. These savings were partially offset by incremental costs associated with the COVID-19 pandemic and the absence of Transition Services Agreement income in the current quarter, as services under that agreement have been completed. Gross profit benefited from increased revenue, partially offset by continued pharmacy reimbursement rate pressures that were not fully offset by generic drug cost reductions.

1 - Source: IRI. Excludes tobacco, cigarettes, greeting cards and online sales. For drug store channel during Rite Aid's second fiscal quarter.

Pharmacy Services Segment

(dollars in thousands) Thirteen Week Period Ended Twenty-six Week Period Ended

August 29, August 31, August 29, August 31, 2020 2019 2020 2019

Revenues from continuing $ 2,038,378 $ 1,579,069 $ 4,015,624 $ 3,145,361operations

Adjusted EBITDA from continuing operations 29,263 41,517 73,673 67,856

Pharmacy Services Segment revenues were $2.0 billion, an increase of 29.1 percent compared to the prior year period. The increase in Pharmacy Services Segment revenues was due primarily to a membership increase of 259,000 in Medicare Part D.

Pharmacy Services Segment Adjusted EBITDA from continuing operations was $29.3 million or 1.4 percent of revenues for the second quarter compared to last year's second quarter Adjusted EBITDA from continuing operations of $41.5 million or 2.6 percent of revenues. The decrease in Adjusted EBITDA of $12.3 million was primarily due to a reduction of $21.0 million in gross profit related to a change in rebate aggregator at our MedTrak subsidiary. The company anticipates that the new rebate aggregator contract will drive improved gross profit for the company and savings for its clients. The unfavorable gross profit reduction was partially offset by increased revenues, improved pharmacy network management and strong expense control.

Outlook for Fiscal 2021

Rite Aid Corporation is issuing revised fiscal 2021 guidance. The company's guidance assumes strong demand for flu immunizations, continued improvement in pharmacy network management at Elixir and savings from our previously announced cost reduction initiatives, offset by continued reimbursement rate pressure and the impact of a less severe cough, cold and flu season on OTC sales and related prescriptions.

Rite Aid Corporation expects revenues to be between $23.5 billion and $24.0 billion in fiscal 2021 with same store sales expected to range from an increase of 3.0 percent to an increase of 4.0 percent over fiscal 2020.

Net loss is expected to be between $190 million and $140 million.

Adjusted EBITDA is expected to be between $475 million and $525 million.

Adjusted net (loss) income per share is expected to be between $(0.67) and $0.09.

Capital expenditures are expected to be approximately $275 million.

Free cash flow is expected to be between $110 million and $160 million.

Conference Call Broadcast

Rite Aid will hold an analyst call at 8:30 a.m. Eastern Time today with remarks by Rite Aid's management team. The call will be broadcast via the Internet at https://www.riteaid.com/corporate/investor-relations/presentations. The telephone replay will be available beginning at 12 p.m. Eastern Time today and ending at 11:59 p.m. Eastern Time on, Sept. 26, 2020. To access the replay of the call, telephone (800) 585-8367 or (416) 621-4642 and enter the seven-digit reservation number 6691435. The webcast replay of the call will also be available at https://www.riteaid.com/corporate/investor-relations/presentations starting at 12 p.m. Eastern Time today. The playback will be available until the company's next conference call.

About Rite Aid Corporation

Rite Aid Corporation is on the front lines of delivering healthcare services and retail products to more than 1.6 million Americans daily. Our pharmacists are uniquely positioned to engage with customers and improve their health outcomes. We provide an array of whole being health products and services for the entire family through over 2,400 retail pharmacy locations across 18 states. Through Elixir, we provide pharmacy benefits and services to approximately 4 million members nationwide. For more information, www.riteaid.com.

Cautionary Statement Regarding Forward-Looking Statements

Statements in this release that are not historical, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements regarding Rite Aid's outlook and guidance for fiscal 2021, the ability to generate positive free cash flows in fiscal 2021; the continued impact of the recent global coronavirus (COVID-19) pandemic on Rite Aid's business; and any assumptions underlying any of the foregoing. 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: the impact of COVID-19 on our workforce, operations, stores, expenses, and supply chain, and the operations of our customers, suppliers and business partners; our ability to successfully implement our new business strategy (including any delays and adjustments as a result of COVID-19) and improve the operating performance of our stores; our high level of indebtedness and our ability to satisfy our obligations and the other covenants contained in our debt agreements; general competitive, economic, industry, market, political (including healthcare reform) and regulatory conditions, civil unrest (including any resulting store closures, damage, or loss of inventory), as well as other factors specific to the markets in which we operate; 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; our ability to achieve the benefits of our efforts to reduce the costs of our generic and other drugs; our ability to achieve cost savings and other benefits of our organizational restructuring within our anticipated timeframe, if at all; outcomes of legal and regulatory matters; and our ability to partner and have relationships with health plans and health systems.

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 Item 1A (Risk Factors) of our Quarterly Report on Form 10-Q filed on July 2, 2020 and in other documents that we file or furnish with the Securities and Exchange Commission (the "SEC"), which you are encouraged to read. To the extent that COVID-19 adversely affects our business and financial results, it may also have the effect of heightening many of such risk factors.

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. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made.

The degree to which COVID-19 may adversely affect Rite Aid's results and operations, including its ability to achieve its outlook for fiscal 2021 guidance, will depend on numerous evolving factors and future developments, which are highly uncertain, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact (such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns), including the reinstitution of more stringent regulations, and how quickly and to what extent normal economic and operating conditions can resume. As a result, the impact on Rite Aid's financial and operating results cannot be reasonably estimated with specificity at this time, but the impact could be material. 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

Rite Aid separately reports financial results on the basis of Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Adjusted EBITDA which are non-GAAP financial measures. See the attached tables for a reconciliation of Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Adjusted EBITDA to net income (loss), and net income (loss) per diluted share, which are the most directly comparable GAAP financial measures. Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share exclude amortization expense, merger and acquisition-related costs, non-recurring litigation settlement, gains and losses on debt retirements and modifications, LIFO adjustments, goodwill and intangible asset impairment charges, restructuring-related costs and the WBA merger termination fee.

Adjusted EBITDA is defined as net income (loss) excluding the impact of income taxes, interest expense, depreciation and amortization, LIFO adjustments, charges or credits for facility closing and impairment, goodwill and intangible asset impairment charges, inventory write-downs related to store closings, gains or losses on debt retirements and modifications, the WBA merger termination fee, and other items (including stock-based compensation expense, merger and acquisition-related costs, non-recurring litigation settlement, severance, restructuring-related costs and costs related to facility closures and gain or loss on sale of assets). The add back of LIFO (credit) charge when calculating Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share removes the entire impact of LIFO (credits) charges, and effectively reflects Rite Aid's results as if the company was on a FIFO inventory basis.

RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS(Dollars in thousands)(unaudited) August 29, February 29, 2020 2020ASSETSCurrent assets:Cash and cash equivalents $ 92,730 $ 218,180

Accounts receivable, net 1,920,866 1,286,785

Inventories, net of LIFO reserve of $518,824 and 1,937,953 1,921,604 $539,640Prepaid expenses and other current assets 114,148 181,794

Current assets held for sale - 92,278

Total current assets 4,065,697 3,700,641

Property, plant and equipment, net 1,140,658 1,215,838

Operating lease right-of-use assets 2,860,710 2,903,256

Goodwill 1,108,136 1,108,136

Other intangibles, net 305,730 359,491

Deferred tax assets 16,680 16,680

Other assets 122,588 148,327

Total assets $ 9,620,199 $ 9,452,369

LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Current maturities of long-term debt and lease $ 6,902 $ 8,840 financing obligationsAccounts payable 1,448,682 1,484,081

Accrued salaries, wages and other current 637,610 746,318 liabilitiesCurrent portion of operating lease liabilities 487,844 490,161

Current liabilities held for sale - 37,063

Total current liabilities 2,581,038 2,766,463

Long-term debt, less current maturities 3,506,708 3,077,268

Long-term operating lease liabilities 2,657,891 2,710,347

Lease financing obligations, less current 17,935 19,326 maturitiesOther noncurrent liabilities 253,589 204,438

Total liabilities 9,017,161 8,777,842

Commitments and contingencies - -

Stockholders' equity:Common stock 55,224 54,716

Additional paid-in capital 5,893,590 5,890,903

Accumulated deficit (5,298,932 ) (5,222,194 )

Accumulated other comprehensive loss (46,844 ) (48,898 )

Total stockholders' equity 603,038 674,527

Total liabilities and stockholders' equity $ 9,620,199 $ 9,452,369

RITE AID CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in thousands, except per share amounts)(unaudited)Thirteen weeks endedAugust 29, 2020Thirteen weeks endedAugust 31, 2019Revenues$

5,981,970

$

5,366,264

Costs and expenses:Cost of revenues4,821,625

4,221,825

Selling, general and administrative expenses1,116,142

1,135,530

Lease termination and impairment charges11,528

1,471

Interest expense50,007

60,102

Gain on debt modification, net(5,274

)

-

Loss (gain) on sale of assets, net1,092

(1,587

)

5,995,120

5,417,341

Loss from continuing operations before income taxes(13,150

)

(51,077

)

Income tax expense47

27,628

Net loss from continuing operations(13,197

)

(78,705

)

Net loss from discontinued operations, net of tax-

(574

)

Net loss$

(13,197

)

$

(79,279

)

Basic and diluted loss per share:Numerator for loss per share:Net loss from continuing operations attributable to commonstockholders - basic and diluted$

(13,197

)

$

(78,705

)

Net loss from discontinued operations attributable tocommon stockholders - basic and diluted-

(574

)

Loss attributable to common stockholders - basic and diluted$

(13,197

)

$

(79,279

)

Denominator:Basic and diluted weighted average shares53,573

53,041

Basic and diluted loss per shareContinuing operations$

(0.25

)

$

(1.48

)

Discontinued operations$

-

$

(0.01

)

Net basic and diluted loss per share$

(0.25

)

$

(1.49

)

RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in thousands, except per share amounts)(unaudited) Thirteen Thirteen weeks ended weeks ended August 29, August 31, 2020 2019Revenues $ 5,981,970 $ 5,366,264

Costs and expenses: Cost of revenues 4,821,625 4,221,825

Selling, general and administrative 1,116,142 1,135,530 expenses Lease termination and impairment 11,528 1,471 charges Interest expense 50,007 60,102

Gain on debt modification, net (5,274 ) -

Loss (gain) on sale of assets, net 1,092 (1,587 )

5,995,120 5,417,341

Loss from continuing operations before income (13,150 ) (51,077 )taxesIncome tax expense 47 27,628

Net loss from continuing operations (13,197 ) (78,705 )

Net loss from discontinued operations, - (574 ) net of tax Net loss $ (13,197 ) $ (79,279 )

Basic and diluted loss per share: Numerator for loss per share: Net loss from continuing operations attributable to common stockholders - basic and diluted $ (13,197 ) $ (78,705 )

Net loss from discontinued operations attributable to common stockholders - basic and diluted - (574 )

Loss attributable to common $ (13,197 ) $ (79,279 ) stockholders - basic and diluted Denominator: Basic and diluted weighted average 53,573 53,041 shares Basic and diluted loss per share Continuing operations $ (0.25 ) $ (1.48 )

Discontinued operations $ - $ (0.01 )

Net basic and diluted loss per share $ (0.25 ) $ (1.49 )

RITE AID CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in thousands, except per share amounts)(unaudited)Twenty-six weeks endedAugust 29, 2020Twenty-six weeks endedAugust 31, 2019Revenues$

12,009,346

$

10,738,853

Costs and expenses:Cost of revenues9,650,682

8,467,691

Selling, general and administrative expenses2,313,289

2,298,182

Lease termination and impairment charges15,281

1,949

Intangible asset impairment charges29,852

-

Interest expense100,554

118,372

Gain on debt modification, net(5,274

)

-

Gain on sale of assets, net(1,168

)

(4,299

)

12,103,216

10,881,895

Loss from continuing operations before income taxes(93,870

)

(143,042

)

Income tax (benefit) expense(7,971

)

35,002

Net loss from continuing operations(85,899

)

(178,044

)

Net income (loss) from discontinued operations, net of tax9,161

(894

)

Net loss$

(76,738

)

$

(178,938

)

Basic and diluted loss per share:Numerator for loss per share:Net loss from continuing operations attributable to commonstockholders - basic and diluted$

(85,899

)

$

(178,044

)

Net income (loss) from discontinued operations attributable tocommon stockholders - basic and diluted9,161

(894

)

Loss attributable to common stockholders - basic and diluted$

(76,738

)

$

(178,938

)

Denominator:Basic and diluted weighted average shares53,528

53,084

Basic and diluted loss per shareContinuing operations$

(1.60

)

$

(3.35

)

Discontinued operations$

0.17

$

(0.02

)

Net basic and diluted loss per share$

(1.43

)

$

(3.37

)

RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in thousands, except per share amounts)(unaudited) Twenty-six Twenty-six weeks ended weeks ended August 29, August 31, 2020 2019Revenues $ 12,009,346 $ 10,738,853

Costs and expenses: Cost of revenues 9,650,682 8,467,691

Selling, general and administrative 2,313,289 2,298,182 expenses Lease termination and impairment 15,281 1,949 charges Intangible asset impairment charges 29,852 -

Interest expense 100,554 118,372

Gain on debt modification, net (5,274 ) -

Gain on sale of assets, net (1,168 ) (4,299 )

12,103,216 10,881,895

Loss from continuing operations before income (93,870 ) (143,042 )taxesIncome tax (benefit) expense (7,971 ) 35,002

Net loss from continuing operations (85,899 ) (178,044 )

Net income (loss) from discontinued 9,161 (894 ) operations, net of tax Net loss $ (76,738 ) $ (178,938 )

Basic and diluted loss per share: Numerator for loss per share: Net loss from continuing operations attributable to common stockholders - basic and diluted $ (85,899 ) $ (178,044 )

Net income (loss) from discontinued operations attributable to common stockholders - basic and 9,161 (894 ) diluted Loss attributable to common $ (76,738 ) $ (178,938 ) stockholders - basic and diluted Denominator: Basic and diluted weighted average 53,528 53,084 shares Basic and diluted loss per share Continuing operations $ (1.60 ) $ (3.35 )

Discontinued operations $ 0.17 $ (0.02 )

Net basic and diluted loss per share $ (1.43 ) $ (3.37 )

RITE AID CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in thousands)(unaudited)Thirteen weeks endedAugust 29, 2020Thirteen weeks endedAugust 31, 2019OPERATING ACTIVITIES:Net loss$

(13,197

)

$

(79,279

)

Net loss from discontinued operations, net of tax-

(574

)

Net loss from continuing operations$

(13,197

)

$

(78,705

)

Adjustments to reconcile to net cash used in operating activities of continuing operations:Depreciation and amortization87,117

83,044

Lease termination and impairment charges11,528

1,471

LIFO (credit) charge(8,750

)

7,504

Loss (gain) on sale of assets, net1,092

(1,587

)

Stock-based compensation expense3,936

4,712

Gain on debt modification, net(5,274

)

-

Changes in deferred taxes-

26,979

Changes in operating assets and liabilities:Accounts receivable(327,919

)

(135,704

)

Inventories(39,174

)

(100,536

)

Accounts payable(11,372

)

(9,730

)

Operating lease right-of-use assets and operating lease liabilities(11,898

)

46,875

Other assets(19,664

)

(67,187

)

Other liabilities(24,747

)

(55,935

)

Net cash used in operating activities of continuing operations(358,322

)

(278,799

)

INVESTING ACTIVITIES:Payments for property, plant and equipment(34,626

)

(43,079

)

Intangible assets acquired(11,857

)

(7,498

)

Proceeds from insured loss12,500

-

Proceeds from dispositions of assets and investments3,155

3,765

Proceeds from sale-leaseback transactions8,461

-

Net cash used in investing activities of continuing operations(22,367

)

(46,812

)

FINANCING ACTIVITIES:Proceeds from issuance of long-term debt849,918

-

Net proceeds from revolver408,000

250,000

Principal payments on long-term debt(1,054,884

)

(1,671

)

Change in zero balance cash accounts(262

)

18,325

Payments for taxes related to net share settlement of equity awards(2,002

)

(791

)

Financing fees paid for early debt redemption(2,399

)

-

Deferred financing costs paid(13,268

)

(129

)

Net cash provided by financing activities of continuing operations185,103

265,734

Cash flows from discontinued operations:Operating activities of discontinued operations-

11,605

Investing activities of discontinued operations-

-

Net cash provided by discontinued operations-

11,605

Decrease in cash and cash equivalents(195,586

)

(48,272

)

Cash and cash equivalents, beginning of period288,316

190,453

Cash and cash equivalents, end of period$

92,730

$

142,181

RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in thousands)(unaudited) Thirteen weeks Thirteen ended weeks ended August 29, August 31, 2020 2019 OPERATING ACTIVITIES:Net loss $ (13,197 ) $ (79,279 )

Net loss from discontinued - (574 )operations, net of taxNet loss from continuing $ (13,197 ) $ (78,705 )operationsAdjustments to reconcile to net cash used inoperating activities of continuing operations: Depreciation and 87,117 83,044 amortization Lease termination and 11,528 1,471 impairment charges LIFO (credit) (8,750 ) 7,504 charge Loss (gain) on sale of 1,092 (1,587 ) assets, net Stock-based 3,936 4,712 compensation expense Gain on debt (5,274 ) - modification, net Changes in deferred - 26,979 taxes Changes in operating assets and liabilities: Accounts receivable (327,919 ) (135,704 )

Inventories (39,174 ) (100,536 )

Accounts payable (11,372 ) (9,730 )

Operating lease right-of-use assets (11,898 ) 46,875 and operating lease liabilities Other assets (19,664 ) (67,187 )

Other liabilities (24,747 ) (55,935 )

Net cash used in operating activities of (358,322 ) (278,799 ) continuing operationsINVESTING ACTIVITIES: Payments for property, plant (34,626 ) (43,079 ) and equipment Intangible assets (11,857 ) (7,498 ) acquired Proceeds from insured 12,500 - loss Proceeds from dispositions of 3,155 3,765 assets and investments Proceeds from sale-leaseback 8,461 - transactions Net cash used in investing activities of (22,367 ) (46,812 ) continuing operationsFINANCING ACTIVITIES: Proceeds from issuance of 849,918 - long-term debt Net proceeds from 408,000 250,000 revolver Principal payments on (1,054,884 ) (1,671 ) long-term debt Change in zero balance cash (262 ) 18,325 accounts Payments for taxes related to net (2,002 ) (791 ) share settlement of equity awards Financing fees paid for early (2,399 ) - debt redemption Deferred financing (13,268 ) (129 ) costs paid Net cash provided by financing activities 185,103 265,734 of continuing operationsCash flows from discontinuedoperations: Operating activities of - 11,605 discontinued operations Investing activities of - - discontinued operations Net cash provided by discontinued - 11,605 operationsDecrease in cash and cash (195,586 ) (48,272 )equivalentsCash and cash equivalents, 288,316 190,453 beginning of periodCash and cash equivalents, $ 92,730 $ 142,181 end of periodRITE AID CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in thousands)(unaudited)Twenty-six weeks endedAugust 29, 2020Twenty-six weeks endedAugust 31, 2019OPERATING ACTIVITIES:Net loss$

(76,738

)

$

(178,938

)

Net income (loss) from discontinued operations, net of tax9,161

(894

)

Net loss from continuing operations$

(85,899

)

$

(178,044

)

Adjustments to reconcile to net cash used in operating activities of continuing operations:Depreciation and amortization166,220

166,970

Lease termination and impairment charges15,281

1,949

Intangible asset impairment charges29,852

-

LIFO (credit) charge(20,816

)

14,993

Gain on sale of assets, net(1,168

)

(4,299

)

Stock-based compensation expense5,810

10,092

Gain on debt modification, net(5,274

)

-

Changes in deferred taxes-

26,979

Changes in operating assets and liabilities:Accounts receivable(636,555

)

(153,269

)

Inventories4,473

(111,990

)

Accounts payable1,948

(85,623

)

Operating lease right-of-use assets and operating lease liabilities(18,493

)

34,982

Other assets79,513

(44,674

)

Other liabilities(11,484

)

(8,104

)

Net cash used in operating activities of continuing operations(476,592

)

(330,038

)

INVESTING ACTIVITIES:Payments for property, plant and equipment(63,085

)

(84,060

)

Intangible assets acquired(22,572

)

(15,708

)

Proceeds from insured loss12,500

-

Proceeds from dispositions of assets and investments5,910

4,423

Proceeds from sale-leaseback transactions8,461

-

Net cash used in investing activities of continuing operations(58,786

)

(95,345

)

FINANCING ACTIVITIES:Proceeds from issuance of long-term debt849,918

-

Net proceeds from revolver650,000

375,000

Principal payments on long-term debt(1,056,182

)

(3,451

)

Change in zero balance cash accounts(26,829

)

54,712

Payments for taxes related to net share settlement of equity awards(2,101

)

(986

)

Financing fees paid for early debt redemption(2,399

)

-

Deferred financing costs paid(14,600

)

(315

)

Net cash provided by financing activities of continuing operations397,807

424,960

Cash flows from discontinued operations:Operating activities of discontinued operations(82,189

)

(2,272

)

Investing activities of discontinued operations94,310

523

Net cash provided by (used in) discontinued operations12,121

(1,749

)

Decrease in cash and cash equivalents(125,450

)

(2,172

)

Cash and cash equivalents, beginning of period218,180

144,353

Cash and cash equivalents, end of period$

92,730

$

142,181

RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in thousands)(unaudited) Twenty-six Twenty-six weeks ended weeks ended August 29, August 31, 2020 2019 OPERATING ACTIVITIES:Net loss $ (76,738 ) $ (178,938 )

Net income (loss) from discontinued 9,161 (894 )operations, net of taxNet loss from continuing $ (85,899 ) $ (178,044 )operationsAdjustments to reconcile to net cash used inoperating activities of continuing operations: Depreciation and 166,220 166,970 amortization Lease termination and 15,281 1,949 impairment charges Intangible asset 29,852 - impairment charges LIFO (credit) (20,816 ) 14,993 charge Gain on sale of assets, (1,168 ) (4,299 ) net Stock-based 5,810 10,092 compensation expense Gain on debt (5,274 ) - modification, net Changes in deferred - 26,979 taxes Changes in operating assets and liabilities: Accounts receivable (636,555 ) (153,269 )

Inventories 4,473 (111,990 )

Accounts payable 1,948 (85,623 )

Operating lease right-of-use assets (18,493 ) 34,982 and operating lease liabilities Other assets 79,513 (44,674 )

Other liabilities (11,484 ) (8,104 )

Net cash used in operating activities of (476,592 ) (330,038 ) continuing operationsINVESTING ACTIVITIES: Payments for property, plant (63,085 ) (84,060 ) and equipment Intangible assets (22,572 ) (15,708 ) acquired Proceeds from insured 12,500 - loss Proceeds from dispositions of 5,910 4,423 assets and investments Proceeds from sale-leaseback 8,461 - transactions Net cash used in investing activities of (58,786 ) (95,345 ) continuing operationsFINANCING ACTIVITIES: Proceeds from issuance of 849,918 - long-term debt Net proceeds from 650,000 375,000 revolver Principal payments on (1,056,182 ) (3,451 ) long-term debt Change in zero balance cash (26,829 ) 54,712 accounts Payments for taxes related to net (2,101 ) (986 ) share settlement of equity awards Financing fees paid for early (2,399 ) - debt redemption Deferred financing (14,600 ) (315 ) costs paid Net cash provided by financing activities 397,807 424,960 of continuing operationsCash flows from discontinuedoperations: Operating activities of (82,189 ) (2,272 ) discontinued operations Investing activities of 94,310 523 discontinued operations Net cash provided by (used in) 12,121 (1,749 ) discontinued operationsDecrease in cash and cash (125,450 ) (2,172 )equivalentsCash and cash equivalents, 218,180 144,353 beginning of periodCash and cash equivalents, $ 92,730 $ 142,181 end of periodRITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL SEGMENT OPERATING INFORMATION(Dollars in thousands)(unaudited)Thirteen weeks endedAugust 29, 2020Thirteen weeks endedAugust 31, 2019Retail Pharmacy SegmentRevenues from continuing operations (a)$

4,017,912

$

3,848,104

Cost of revenues from continuing operations (a)2,955,999

2,815,660

Gross profit from continuing operations1,061,913

1,032,444

LIFO (credit) charge from continuing operations(8,750

)

7,504

FIFO gross profit from continuing operations1,053,163

1,039,948

Adjusted EBITDA gross profit from continuing operations1,056,222

1,045,257

Gross profit as a percentage of revenues - continuing operations26.43

%

26.83

%

LIFO (credit) charge as a percentage of revenues - continuing operations-0.22

%

0.20

%

FIFO gross profit as a percentage of revenues - continuing operations26.21

%

27.02

%

Adjusted EBITDA gross profit as a percentage of revenues - continuing operations26.29

%

27.16

%

Selling, general and administrative expenses from continuing operations1,030,075

1,044,818

Adjusted EBITDA selling, general and administrative expenses from continuing operations933,882

952,584

Selling, general and administrative expenses as a percentage ofrevenues - continuing operations25.64

%

27.15

%

Adjusted EBITDA selling, general and administrative expenses as a percentage ofrevenues - continuing operations23.24

%

24.75

%

Cash interest expense46,767

56,304

Non-cash interest expense3,240

3,798

Total interest expense50,007

60,102

Interest expense - continuing operations50,007

60,102

Interest expense - discontinued operations-

-

Adjusted EBITDA - continuing operations122,340

92,673

Adjusted EBITDA as a percentage of revenues - continuing operations3.04

%

2.41

%

Pharmacy Services SegmentRevenues (a)$

2,038,378

$

1,579,069

Cost of revenues (a)1,939,946

1,467,074

Gross profit98,432

111,995

Gross profit as a percentage of revenues4.83

%

7.09

%

Adjusted EBITDA29,263

41,517

Adjusted EBITDA as a percentage of revenues1.44

%

2.63

%

RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL SEGMENT OPERATING INFORMATION(Dollars in thousands)(unaudited) Thirteen Thirteen weeks ended weeks ended August 29, August 31, 2020 2019 Retail Pharmacy Segment Revenues from continuing operations (a) $ 4,017,912 $ 3,848,104

Cost of revenues from continuing operations (a) 2,955,999 2,815,660

Gross profit from continuing operations 1,061,913 1,032,444

LIFO (credit) charge from continuing operations (8,750 ) 7,504

FIFO gross profit from continuing operations 1,053,163 1,039,948

Adjusted EBITDA gross profit from continuing 1,056,222 1,045,257 operations Gross profit as a percentage of revenues - 26.43 % 26.83 % continuing operations LIFO (credit) charge as a percentage of revenues - -0.22 % 0.20 % continuing operations FIFO gross profit as a percentage of revenues - 26.21 % 27.02 % continuing operations Adjusted EBITDA gross profit as a percentage of 26.29 % 27.16 % revenues - continuing operations Selling, general and administrative expenses from 1,030,075 1,044,818 continuing operations Adjusted EBITDA selling, general and 933,882 952,584 administrative expenses from continuing operations Selling, general and administrative expenses as a percentage of revenues - continuing operations 25.64 % 27.15 %

Adjusted EBITDA selling, general and administrative expenses as a percentage of revenues - continuing operations 23.24 % 24.75 %

Cash interest expense 46,767 56,304

Non-cash interest expense 3,240 3,798

Total interest expense 50,007 60,102

Interest expense - continuing operations 50,007 60,102

Interest expense - discontinued operations - -

Adjusted EBITDA - continuing operations 122,340 92,673

Adjusted EBITDA as a percentage of revenues - 3.04 % 2.41 % continuing operations Pharmacy Services Segment Revenues (a) $ 2,038,378 $ 1,579,069

Cost of revenues (a) 1,939,946 1,467,074

Gross profit 98,432 111,995

Gross profit as a percentage of revenues 4.83 % 7.09 %

Adjusted EBITDA 29,263 41,517

Adjusted EBITDA as a percentage of revenues 1.44 % 2.63 %

(a) -

Revenues and cost of revenues include $74,320 and $60,909 of inter-segment activity for the thirteen weeks ended August 29, 2020 and August 31, 2019, respectively, that is eliminated in consolidation.(a) Revenues and cost of revenues include $74,320 and $60,909 of- inter-segment activity for the thirteen weeks ended August 29, 2020 and August 31, 2019, respectively, that is eliminated in consolidation.RITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL SEGMENT OPERATING INFORMATION(Dollars in thousands)(unaudited)Twenty-six weeks endedAugust 29, 2020Twenty-six weeks endedAugust 31, 2019Retail Pharmacy SegmentRevenues from continuing operations (a)$

8,141,183

$

7,712,912

Cost of revenues from continuing operations (a)5,997,734

5,649,973

Gross profit from continuing operations2,143,449

2,062,939

LIFO (credit) charge from continuing operations(20,816

)

14,993

FIFO gross profit from continuing operations2,122,633

2,077,932

Adjusted EBITDA gross profit from continuing operations2,154,649

2,085,520

Gross profit as a percentage of revenues - continuing operations26.33

%

26.75

%

LIFO (credit) charge as a percentage of revenues - continuing operations-0.26

%

0.19

%

FIFO gross profit as a percentage of revenues - continuing operations26.07

%

26.94

%

Adjusted EBITDA gross profit as a percentage of revenues - continuing operations26.47

%

27.04

%

Selling, general and administrative expenses from continuing operations2,139,051

2,116,143

Adjusted EBITDA selling, general and administrative expenses from continuing operations1,969,327

1,908,839

Selling, general and administrative expenses as a percentage ofrevenues - continuing operations26.27

%

27.44

%

Adjusted EBITDA selling, general and administrative expenses as a percentage ofrevenues - continuing operations24.19

%

24.75

%

Cash interest expense94,135

110,914

Non-cash interest expense6,419

7,458

Total interest expense100,554

118,372

Interest expense - continuing operations100,554

118,372

Interest expense - discontinued operations-

-

Adjusted EBITDA - continuing operations185,322

176,681

Adjusted EBITDA as a percentage of revenues - continuing operations2.28

%

2.29

%

Pharmacy Services SegmentRevenues (a)$

4,015,624

$

3,145,361

Cost of revenues (a)3,800,409

2,937,138

Gross profit215,215

208,223

Gross profit as a percentage of revenues5.36

%

6.62

%

Adjusted EBITDA73,673

67,856

Adjusted EBITDA as a percentage of revenues1.83

%

2.16

%

RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL SEGMENT OPERATING INFORMATION(Dollars in thousands)(unaudited) Twenty-six Twenty-six weeks ended weeks ended August 29, August 31, 2020 2019 Retail Pharmacy Segment Revenues from continuing operations (a) $ 8,141,183 $ 7,712,912

Cost of revenues from continuing operations (a) 5,997,734 5,649,973

Gross profit from continuing operations 2,143,449 2,062,939

LIFO (credit) charge from continuing operations (20,816 ) 14,993

FIFO gross profit from continuing operations 2,122,633 2,077,932

Adjusted EBITDA gross profit from continuing 2,154,649 2,085,520 operations Gross profit as a percentage of revenues - 26.33 % 26.75 % continuing operations LIFO (credit) charge as a percentage of revenues - -0.26 % 0.19 % continuing operations FIFO gross profit as a percentage of revenues - 26.07 % 26.94 % continuing operations Adjusted EBITDA gross profit as a percentage of 26.47 % 27.04 % revenues - continuing operations Selling, general and administrative expenses from 2,139,051 2,116,143 continuing operations Adjusted EBITDA selling, general and 1,969,327 1,908,839 administrative expenses from continuing operations Selling, general and administrative expenses as a percentage of revenues - continuing operations 26.27 % 27.44 %

Adjusted EBITDA selling, general and administrative expenses as a percentage of revenues - continuing operations 24.19 % 24.75 %

Cash interest expense 94,135 110,914

Non-cash interest expense 6,419 7,458

Total interest expense 100,554 118,372

Interest expense - continuing operations 100,554 118,372

Interest expense - discontinued operations - -

Adjusted EBITDA - continuing operations 185,322 176,681

Adjusted EBITDA as a percentage of revenues - 2.28 % 2.29 % continuing operations Pharmacy Services Segment Revenues (a) $ 4,015,624 $ 3,145,361

Cost of revenues (a) 3,800,409 2,937,138

Gross profit 215,215 208,223

Gross profit as a percentage of revenues 5.36 % 6.62 %

Adjusted EBITDA 73,673 67,856

Adjusted EBITDA as a percentage of revenues 1.83 % 2.16 %

(a) -

Revenues and cost of revenues include $147,461 and $119,420 of inter-segment activity for the twenty-six weeks ended August 29, 2020 and August 31, 2019, respectively, that is eliminated in consolidation.(a) Revenues and cost of revenues include $147,461 and $119,420 of- inter-segment activity for the twenty-six weeks ended August 29, 2020 and August 31, 2019, respectively, that is eliminated in consolidation.RITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF NET LOSS TO ADJUSTED EBITDA(In thousands)(unaudited)Thirteen weeks endedAugust 29, 2020Thirteen weeks endedAugust 31, 2019Reconciliation of net loss to adjusted EBITDA:Net loss - continuing operations$

(13,197

)

$

(78,705

)

Adjustments:Interest expense50,007

60,102

Income tax expense47

27,628

Depreciation and amortization87,117

83,044

LIFO (credit) charge(8,750

)

7,504

Lease termination and impairment charges11,528

1,471

Gain on debt modification, net(5,274

)

-

Merger and Acquisition-related costs-

514

Stock-based compensation expense3,936

4,712

Restructuring-related costs23,186

25,145

Inventory write-downs related to store closings1,058

3,149

Loss (gain) on sale of assets, net1,092

(1,587

)

Other853

1,213

Adjusted EBITDA - continuing operations$

151,603

$

134,190

Percent of revenues - continuing operations2.53

%

2.50

%

RITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF NET LOSS TO ADJUSTED EBITDA(In thousands)(unaudited) Thirteen weeks Thirteen weeks ended ended August 29, August 31, 2020 2019 Reconciliation of net loss to adjusted EBITDA: Net loss - continuing operations $ (13,197 ) $ (78,705 )

Adjustments: Interest expense 50,007 60,102

Income tax expense 47 27,628

Depreciation and amortization 87,117 83,044

LIFO (credit) charge (8,750 ) 7,504

Lease termination and impairment charges 11,528 1,471

Gain on debt modification, net (5,274 ) -

Merger and Acquisition-related costs - 514

Stock-based compensation expense 3,936 4,712

Restructuring-related costs 23,186 25,145

Inventory write-downs related to store 1,058 3,149 closings Loss (gain) on sale of assets, net 1,092 (1,587 )

Other 853 1,213

Adjusted EBITDA - continuing $ 151,603 $ 134,190 operations Percent of revenues - 2.53 % 2.50 % continuing operationsRITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF NET LOSS TO ADJUSTED EBITDA(In thousands)(unaudited)Twenty-six weeks endedAugust 29, 2020Twenty-six weeks endedAugust 31, 2019Reconciliation of net loss to adjusted EBITDA:Net loss - continuing operations$

(85,899

)

$

(178,044

)

Adjustments:Interest expense100,554

118,372

Income tax (benefit) expense(7,971

)

35,002

Depreciation and amortization166,220

166,970

LIFO (credit) charge(20,816

)

14,993

Lease termination and impairment charges15,281

1,949

Intangible asset impairment charges29,852

-

Gain on debt modification, net(5,274

)

-

Merger and Acquisition-related costs-

3,599

Stock-based compensation expense5,810

10,092

Restructuring-related costs58,921

68,495

Inventory write-downs related to store closings1,892

3,990

Gain on sale of assets, net(1,168

)

(4,299

)

Other1,593

3,418

Adjusted EBITDA - continuing operations$

258,995

$

244,537

Percent of revenues - continuing operations2.16

%

2.28

%

RITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF NET LOSS TO ADJUSTED EBITDA(In thousands)(unaudited) Twenty-six Twenty-six weeks ended weeks ended August 29, 2020 August 31, 2019 Reconciliation of net loss to adjusted EBITDA: Net loss - continuing operations $ (85,899 ) $ (178,044 )

Adjustments: Interest expense 100,554 118,372

Income tax (benefit) expense (7,971 ) 35,002

Depreciation and amortization 166,220 166,970

LIFO (credit) charge (20,816 ) 14,993

Lease termination and impairment charges 15,281 1,949

Intangible asset impairment charges 29,852 -

Gain on debt modification, net (5,274 ) -

Merger and Acquisition-related costs - 3,599

Stock-based compensation expense 5,810 10,092

Restructuring-related costs 58,921 68,495

Inventory write-downs related to store 1,892 3,990 closings Gain on sale of assets, net (1,168 ) (4,299 )

Other 1,593 3,418

Adjusted EBITDA - continuing $ 258,995 $ 244,537 operations Percent of revenues - 2.16 % 2.28 % continuing operationsRITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONADJUSTED NET INCOME(Dollars in thousands, except per share amounts)(unaudited)Thirteen weeks endedAugust 29, 2020Thirteen weeks endedAugust 31, 2019Net loss from continuing operations$

(13,197

)

$

(78,705

)

Add back - Income tax expense47

27,628

Loss before income taxes - continuing operations(13,150

)

(51,077

)

Adjustments:Amortization expense22,695

26,596

LIFO (credit) charge(8,750

)

7,504

Gain on debt modification, net(5,274

)

-

Merger and Acquisition-related costs-

514

Restructuring-related costs23,186

25,145

Adjusted income before income taxes - continuing operations18,707

8,682

Adjusted income tax expense (a)5,171

2,394

Adjusted net income from continuing operations$

13,536

$

6,288

Adjusted net income per diluted share - continuing operations:Numerator for adjusted net income per diluted share:Adjusted net income from continuing operations$

13,536

$

6,288

Denominator:Basic weighted average shares53,573

53,041

Outstanding options and restricted shares, net842

651

Diluted weighted average shares54,415

53,692

Net loss from continuing operations per dilutedshare - continuing operations$

(0.25

)

$

(1.48

)

Adjusted net income per diluted share - continuing operations$

0.25

$

0.12

RITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONADJUSTED NET INCOME(Dollars in thousands, except per share amounts)(unaudited) Thirteen Thirteen weeks ended weeks ended August 29, August 31, 2020 2019 Net loss from continuing operations $ (13,197 ) $ (78,705 )

Add back - Income tax expense 47 27,628

Loss before income taxes - continuing (13,150 ) (51,077 ) operations Adjustments: Amortization expense 22,695 26,596

LIFO (credit) charge (8,750 ) 7,504

Gain on debt modification, net (5,274 ) -

Merger and Acquisition-related costs - 514

Restructuring-related costs 23,186 25,145

Adjusted income before income taxes - 18,707 8,682 continuing operations Adjusted income tax expense (a) 5,171 2,394

Adjusted net income from continuing $ 13,536 $ 6,288 operations Adjusted net income per diluted share - continuing operations: Numerator for adjusted net income per diluted share: Adjusted net income from continuing operations $ 13,536 $ 6,288

Denominator: Basic weighted average shares 53,573 53,041

Outstanding options and restricted shares, net 842 651

Diluted weighted average shares 54,415 53,692

Net loss from continuing operations per diluted share - continuing operations $ (0.25 ) $ (1.48 )

Adjusted net income per diluted share - $ 0.25 $ 0.12 continuing operations(a)

The fiscal year 2021 and 2020 annual effective tax rates, calculated using a federal rate plus a net state rate that excluded the impact of state NOL's, state credits and valuation allowance, was used for the thirteen weeks ended August 29, 2020 and August 31, 2019, respectively. The fiscal year 2021 and 2020 annual effective tax rates, calculated(a) using a federal rate plus a net state rate that excluded the impact of state NOL's, state credits and valuation allowance, was used for the thirteen weeks ended August 29, 2020 and August 31, 2019, respectively.RITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONADJUSTED NET INCOME (LOSS)(Dollars in thousands, except per share amounts)(unaudited)Twenty-six weeks endedAugust 29, 2020Twenty-six weeks endedAugust 31, 2019Net loss from continuing operations$

(85,899

)

$

(178,044

)

Add back - Income tax (benefit) expense(7,971

)

35,002

Loss before income taxes - continuing operations(93,870

)

(143,042

)

Adjustments:Amortization expense47,115

54,256

LIFO (credit) charge(20,816

)

14,993

Intangible asset impairment charges29,852

-

Gain on debt modification, net(5,274

)

-

Merger and Acquisition-related costs-

3,599

Restructuring-related costs58,921

68,495

Adjusted income (loss) before income taxes - continuing operations15,928

(1,699

)

Adjusted income tax expense (benefit) (a)4,402

(468

)

Adjusted net income (loss) from continuing operations$

11,526

$

(1,231

)

Adjusted net income (loss) per diluted share - continuing operations:Numerator for adjusted net income (loss) per diluted share:Adjusted net income (loss) from continuing operations$

11,526

$

(1,231

)

Denominator:Basic weighted average shares53,528

53,084

Outstanding options and restricted shares, net775

-

Diluted weighted average shares54,303

53,084

Net loss from continuing operations per dilutedshare - continuing operations$

(1.60

)

$

(3.35

)

Adjusted net income (loss) per diluted share - continuing operations$

0.21

$

(0.02

)

RITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONADJUSTED NET INCOME (LOSS)(Dollars in thousands, except per share amounts)(unaudited) Twenty-six Twenty-six weeks ended weeks ended August 29, August 31, 2020 2019 Net loss from continuing operations $ (85,899 ) $ (178,044 )

Add back - Income tax (benefit) expense (7,971 ) 35,002

Loss before income taxes - continuing (93,870 ) (143,042 ) operations Adjustments: Amortization expense 47,115 54,256

LIFO (credit) charge (20,816 ) 14,993

Intangible asset impairment charges 29,852 -

Gain on debt modification, net (5,274 ) -

Merger and Acquisition-related costs - 3,599

Restructuring-related costs 58,921 68,495

Adjusted income (loss) before income 15,928 (1,699 ) taxes - continuing operations Adjusted income tax expense (benefit) 4,402 (468 ) (a) Adjusted net income (loss) from $ 11,526 $ (1,231 ) continuing operations Adjusted net income (loss) per diluted share - continuing operations: Numerator for adjusted net income (loss) per diluted share: Adjusted net income (loss) from continuing $ 11,526 $ (1,231 ) operations Denominator: Basic weighted average shares 53,528 53,084

Outstanding options and restricted shares, net 775 -

Diluted weighted average shares 54,303 53,084

Net loss from continuing operations per diluted share - continuing operations $ (1.60 ) $ (3.35 )

Adjusted net income (loss) per diluted $ 0.21 $ (0.02 ) share - continuing operations(a)

The fiscal year 2021 and 2020 annual effective tax rates, calculated using a federal rate plus a net state rate that excluded the impact of state NOL's, state credits and valuation allowance, was used for the twenty-six weeks ended August 29, 2020 and August 31, 2019, respectively. The fiscal year 2021 and 2020 annual effective tax rates, calculated(a) using a federal rate plus a net state rate that excluded the impact of state NOL's, state credits and valuation allowance, was used for the twenty-six weeks ended August 29, 2020 and August 31, 2019, respectively.RITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND RECONCILIATION OF ADJUSTED EBITDA SELLING,GENERAL AND ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT(In thousands)(unaudited)Thirteen weeks endedAugust 29, 2020Thirteen weeks endedAugust 31, 2019Reconciliation of adjusted EBITDA gross profit:Revenues$

4,017,912

$

3,848,104

Gross Profit1,061,913

1,032,444

Addback:LIFO (credit) charge(8,750

)

7,504

Depreciation and amortization (cost of goods sold portion only)2,167

2,205

Other892

3,104

Adjusted EBITDA gross profit - continuing operations$

1,056,222

$

1,045,257

Percent of revenues - continuing operations26.29

%

27.16

%

Reconciliation of adjusted EBITDA selling, general and administrative expenses:Revenues$

4,017,912

$

3,848,104

Selling, general and administrative expenses1,030,075

1,044,818

Less:Depreciation and amortization (SG&A portion only)70,884

64,975

Stock-based compensation expense3,631

4,432

Merger and Acquisition-related costs-

514

Restructuring-related costs20,441

21,055

Other1,237

1,258

Adjusted EBITDA selling, general and administrativeexpenses - continuing operations$

933,882

$

952,584

Percent of revenues - continuing operations23.24

%

24.75

%

Adjusted EBITDA - continuing operations$

122,340

$

92,673

RITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND RECONCILIATION OF ADJUSTEDEBITDA SELLING,GENERAL AND ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT(In thousands)(unaudited) Thirteen Thirteen weeks ended weeks ended August 29, August 31, 2020 2019 Reconciliation ofadjusted EBITDA grossprofit: Revenues $ 4,017,912 $ 3,848,104

Gross Profit 1,061,913 1,032,444

Addback: LIFO (8,750 ) 7,504 (credit) charge Depreciation and amortization (cost of 2,167 2,205 goods sold portion only) Other 892 3,104

Adjusted EBITDA gross profit $ 1,056,222 $ 1,045,257 - continuing operations Percent of revenues - 26.29 % 27.16 % continuing operations Reconciliation of adjusted EBITDA selling, generaland administrative expenses: Revenues $ 4,017,912 $ 3,848,104

Selling, general and administrative expenses 1,030,075 1,044,818

Less: Depreciation and amortization (SG&A 70,884 64,975 portion only) Stock-based compensation expense 3,631 4,432

Merger and Acquisition-related costs - 514

Restructuring-related costs 20,441 21,055

Other 1,237 1,258

Adjusted EBITDA selling, general and administrative expenses - continuing $ 933,882 $ 952,584 operations Percent of revenues - 23.24 % 24.75 % continuing operations Adjusted EBITDA - $ 122,340 $ 92,673 continuing operationsRITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND RECONCILIATION OF ADJUSTED EBITDA SELLING,GENERAL AND ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT(In thousands)(unaudited)Twenty-six weeks endedAugust 29, 2020Twenty-six weeks endedAugust 31, 2019Reconciliation of adjusted EBITDA gross profit:Revenues$

8,141,183

$

7,712,912

Gross Profit2,143,449

2,062,939

Addback:LIFO (credit) charge(20,816

)

14,993

Depreciation and amortization (cost of goods sold portion only)4,830

4,468

Restructuring-related costs - SKU optimization charges25,763

-

Other1,423

3,120

Adjusted EBITDA gross profit - continuing operations$

2,154,649

$

2,085,520

Percent of revenues - continuing operations26.47

%

27.04

%

Reconciliation of adjusted EBITDA selling, general and administrative expenses:Revenues$

8,141,183

$

7,712,912

Selling, general and administrative expenses2,139,051

2,116,143

Less:Depreciation and amortization (SG&A portion only)131,793

130,014

Stock-based compensation expense5,356

9,697

Merger and Acquisition-related costs-

2,828

Restructuring-related costs30,387

60,436

Other2,188

4,329

Adjusted EBITDA selling, general and administrativeexpenses - continuing operations$

1,969,327

$

1,908,839

Percent of revenues - continuing operations24.19

%

24.75

%

Adjusted EBITDA - continuing operations$

185,322

$

176,681

RITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF ADJUSTED EBITDA GROSS PROFIT AND RECONCILIATION OF ADJUSTEDEBITDA SELLING,GENERAL AND ADMINISTRATIVE EXPENSES- RETAIL PHARMACY SEGMENT(In thousands)(unaudited) Twenty-six Twenty-six weeks ended weeks ended August 29, August 31, 2020 2019 Reconciliation ofadjusted EBITDA grossprofit: Revenues $ 8,141,183 $ 7,712,912

Gross Profit 2,143,449 2,062,939

Addback: LIFO (20,816 ) 14,993 (credit) charge Depreciation and amortization (cost of 4,830 4,468 goods sold portion only) Restructuring-related costs - SKU 25,763 - optimization charges Other 1,423 3,120

Adjusted EBITDA gross profit $ 2,154,649 $ 2,085,520 - continuing operations Percent of revenues - 26.47 % 27.04 % continuing operations Reconciliation of adjusted EBITDA selling, generaland administrative expenses: Revenues $ 8,141,183 $ 7,712,912

Selling, general and administrative expenses 2,139,051 2,116,143

Less: Depreciation and amortization (SG&A 131,793 130,014 portion only) Stock-based compensation expense 5,356 9,697

Merger and Acquisition-related costs - 2,828

Restructuring-related costs 30,387 60,436

Other 2,188 4,329

Adjusted EBITDA selling, general and administrative expenses - continuing $ 1,969,327 $ 1,908,839 operations Percent of revenues - 24.19 % 24.75 % continuing operations Adjusted EBITDA - $ 185,322 $ 176,681 continuing operationsRITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCEYEAR ENDING FEBRUARY 27, 2021(In thousands)(unaudited)Guidance RangeLowHighTotal Revenues$

23,500,000

$

24,000,000

PBM Revenues$

7,550,000

$

7,650,000

Same store sales3.00

%

4.00

%

Gross Capital Expenditures$

275,000

$

275,000

Reconciliation of net loss to adjusted EBITDA:Net loss$

(190,000

)

$

(140,000

)

Adjustments:Interest expense202,000

202,000

Income tax benefit(12,000

)

(7,000

)

Depreciation and amortization338,000

338,000

LIFO credit(38,000

)

(38,000

)

Lease termination and impairment charges53,000

53,000

Intangible asset impairment charges30,000

30,000

Gain on debt modification, net(5,300

)

(5,300

)

Restructuring-related costs75,000

75,000

Other22,300

17,300

Adjusted EBITDA$

475,000

$

525,000

RITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED EBITDA GUIDANCEYEAR ENDING FEBRUARY 27, 2021(In thousands)(unaudited) Guidance Range Low High Total Revenues $ 23,500,000 $ 24,000,000

PBM Revenues $ 7,550,000 $ 7,650,000

Same store sales 3.00 % 4.00 %

Gross Capital Expenditures $ 275,000 $ 275,000

Reconciliation of net loss to adjustedEBITDA: Net loss $ (190,000 ) $ (140,000 )

Adjustments: Interest expense 202,000 202,000

Income tax benefit (12,000 ) (7,000 )

Depreciation and amortization 338,000 338,000

LIFO credit (38,000 ) (38,000 )

Lease termination and impairment charges 53,000 53,000

Intangible asset impairment charges 30,000 30,000

Gain on debt modification, net (5,300 ) (5,300 )

Restructuring-related costs 75,000 75,000

Other 22,300 17,300

Adjusted $ 475,000 $ 525,000 EBITDARITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET (LOSS) INCOME GUIDANCEYEAR ENDING FEBRUARY 27, 2021(In thousands)(unaudited)Guidance RangeLowHighNet loss$

(190,000

)

$

(140,000

)

Add back - income tax benefit(12,000

)

(7,000

)

Loss before income taxes(202,000

)

(147,000

)

Adjustments:Amortization expense92,000

92,000

LIFO credit(38,000

)

(38,000

)

Intangible asset impairment charges30,000

30,000

Gain on debt modification, net(5,300

)

(5,300

)

Restructuring-related costs75,000

75,000

Adjusted (loss) income before adjusted income taxes(48,300

)

6,700

Adjusted income tax (benefit) expense(12,000

)

2,000

Adjusted net (loss) income$

(36,300

)

$

4,700

Diluted adjusted net (loss) income per share$

(0.67

)

$

0.09

RITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF NET LOSS GUIDANCE TO ADJUSTED NET (LOSS) INCOME GUIDANCEYEAR ENDING FEBRUARY 27, 2021(In thousands)(unaudited) Guidance Range Low High Net $ (190,000 ) $ (140,000 )loss Add back - income tax benefit (12,000 ) (7,000 )

Loss before income taxes (202,000 ) (147,000 )

Adjustments: Amortization expense 92,000 92,000

LIFO credit (38,000 ) (38,000 )

Intangible asset impairment charges 30,000 30,000

Gain on debt modification, net (5,300 ) (5,300 )

Restructuring-related costs 75,000 75,000

Adjusted (loss) income (48,300 ) 6,700 before adjusted income taxes Adjusted income tax (12,000 ) 2,000 (benefit) expense Adjusted net (loss) income $ (36,300 ) $ 4,700

Diluted adjusted net (loss) $ (0.67 ) $ 0.09 income per shareRITE AID CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF ADJUSTED EBITDA GUIDANCE TO FREE CASH FLOWGUIDANCEYEAR ENDING FEBRUARY 27, 2021(In thousands)(unaudited)Guidance RangeLowHighAdjusted EBITDA$

475,000

$

525,000

Cash interest expense(189,000

)

(189,000

)

Restructuring-related costs(75,000

)

(75,000

)

Closed store rent(26,000

)

(26,000

)

Working capital benefit200,000

200,000

Cash flow from operations385,000

435,000

Gross capital expenditures(275,000

)

(275,000

)

Free cash flow$

110,000

$

160,000

View source version on businesswire.com: https://www.businesswire.com/news/home/20200924005410/en/

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