Rite Aid — Investor Presentation (January 2018)
44 slides from Rite Aid's investor presentation, Jan 11, 2018
Slide 1: January 10, 2018
January 10, 2018
Slide 2: Forward-looking statements safe harbor
Statements in this presentation 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 the expected timing of the closing of
Slide 3: Cautionary Note Regarding Pro Forma Information
CAUTIONARY NOTE REGARDING PRO FORMA INFORMATION : The following presentation provides certain pro forma information regarding the impact of Rite Aid’s proposed sale of stores and assets to WBA on Rite Aid’s results of operations and capital structure . The pro forma information is for illustrative p
Slide 4: Non-GAAP Financial Measures
Non - GAAP Financial Measures The following presentation includes a non - GAAP financial measure, Adjusted EBITDA . Rite Aid defines Adjusted EBITDA as net income (loss) excluding the impact of income taxes, interest expense, depreciation and amortization, LIFO adjustments, charges or credits for fa
Slide 5: The New Rite Aid
THE NEW RITE AID . | ATT experience & John Standley, Chairman & Chief Executive Officer
Slide 6: New Rite Aid Profile Key Metrics
NEW Rite Aid Profile 6 Key Metrics 2,569 Stores in 19 States as of December 2, 2017 Full - Service Pharmacy Benefit Management Company (EnvisionRx) with over 4 million lives under management Fills over 180 million scripts per year in retail pharmacy Approximately $16.0 billion in Retail Pharmacy Sal
Slide 7: Strong Presence in Key States
Strong Presence in Key States 7 Represents our position in CBSA’s where we have a presence, based on store count. Stores 1 st 2 nd 3 rd California 576 35% 32% 18% Pennsylvania 532 66% 21% 10% Michigan 270 72% 3% 10% Ohio 217 62% 15% 3% New York 322 30% 10% 25% Washington 139 42% 37% 16% Oregon 73 55
Slide 8: Improved Leverage
Improved Leverage 8 ($ in millions) Actual as of December 2, 2017 Pro Forma for Transaction Net Debt 6,720$ 2,933$ Adjusted EBITDA 884$ 632$ Leverage Ratio 7.6 4.6
Slide 9: Pro-Forma Store Metrics
Pro - Forma Store Metrics 9 LTM November 2017 Current Rite Aid Pro Forma Store Count Overview: Store Count 4,404 2,569 Average Square Feet (000s) 13 14 Wellness Remodels 2,505 1,611 (% of Portfolio) 57% 63% Customer World Stores 417 303 (% of Portfolio) 9% 12% Average Per Store ($ in thousands): FE
Slide 10: Kermit Crawford, President & COO
Kermit Crawford, President & COO “yp exserience
Slide 11: Strategic Priorities
Strategic Priorities ▪ Build our Management Team ▪ Redefine & enhance our customer & patient experience ▪ Engage with payor partners to create a sustainable business model ▪ Evaluate our pharmacy purchasing options to ensure we have competitive drug cost ▪ Streamline our operations ▪ Grow our pharma
Slide 12: Build Our Management Team
Build Our Management Team 12 Kermit Crawford President & COO Jocelyn Konrad EVP Pharmacy Derek Griffith EVP Store Operations David Abelman EVP Marketing Bill Jackson SVP Supply Chain Bill Renz SVP Merchandising Bryan Everett COO of Rite Aid Stores
Slide 13: Redefine & Enhance Customer & Patient Experience
Redefine & Enhance Customer & Patient Experience ▪ Immunizations ▪ Wellness Stores ▪ Wellness+ Loyalty Program ▪ Localized Product Assortment ▪ Private Brand ▪ Omni - Channel 13
Slide 14: Fiscal 2018 – Immunization Trends
Fiscal 2018 – Immunization Trends 14 3,235 3,189 3,233 2,920 3,104 1,687 1,832 561 765 804 658 696 374 411 3,796 3,954 4,037 3,578 3,800 2,061 2,243 FY2015 FY2016 FY2017 FY2017 YTD FY2018 YTD New Rite Aid FY2017 YTD New Rite Aid FY2018 YTD Flu shots All Other (1) 53 weeks (in thousands) (1)
Slide 15: Immunization Campaign
Immunization Campaign 15 Immunizations Promote all immunizations and encouraging more patients to think beyond traditional flu shots Workplace Immunization Clinics Work with multiple businesses to bring flu shots and additional vaccines to their location to protect their employees Flu Marketing Focu
Slide 16: Wellness Store Renovations
Wellness Store Renovations ▪ Comp results for Wellness stores continue to exceed the chain average (1) − Front - end sales growth outperformance of 176 bps in Q3 Fiscal 2018 − Script count growth outperformance of 246 bps in Q3 of Fiscal 2018 ▪ Remodeled Stores Since 2012 (2) : 16 (1) Calculation co
Slide 17: Wellness+ Loyalty Program
Wellness+ Loyalty Program 17 $30.69 $39.23 $47.35 Bronze Silver Gold Wellness+ Penetration (1) Wellness+ Average Customer Basket (1) 79% 21% Front End Sales 57% 43% Prescriptions Members Non - Members $35.43 $37.95 Non-wellness+ wellness+ (1) Based on results for YTD ending December 31, 2017. 20.7 m
Slide 18: Localized Product Assortment
Localized Product Assortment ▪ Being relevant and local will be a key differentiator for the new Rite Aid − Appropriate ethnic assortment to match core demographic − Consumables, beauty, and seasonal ▪ Product assortment that resonates with local community − Consumables and apparel − Expanded DME in
Slide 19: Rite Aid Private Brands
Rite Aid Private Brands ▪ Six key brands with over 4000 items throughout the store and sales over $1B ▪ A strategic point of difference for Rite Aid, offering many exclusive items and great value (price/quality) for our customers ▪ Commitment to quality with all products tested through UL to meet or
Slide 20: Omni-Channel
Omni - Channel ▪ Wellness+ loyalty program has enabled us to personalize communications, enhancing reach, frequency, and relevancy − Over 20M active members − Personalized offers and content in email and direct mail − Mobile app usage continues to grow ▪ Recent enhancements have led to 4.7/5.0 ratin
Slide 21: Pharmacy Business Stabilization
Pharmacy Business Stabilization ▪ Productive engagement with our payor partners ▪ Rates have stabilized quarter over quarter ▪ Better predictability on reimburse - ments and access for the coming year 21
Slide 22: Optimize Pharmacy Purchasing
Optimize Pharmacy Purchasing ▪ WBAD generic purchasing option − Available to us once we transfer 50% of the 1,932 stores to be sold − Option expires May 2019 − Requires brands to be sourced thru ABC − Benefit identified in clean room process ▪ RFP process to achieve lowest possible drug prior to exe
Slide 23: Streamline Our Business
Streamline Our Business ▪ Reduce near term operating costs − Store and field labor efficiency − Advertising: reduce circular costs − Indirect procurement ▪ Estimated long - term reduction of $96 million of administrative costs − Process reengineering at corporate office − Reduction of workload due t
Slide 24: Grow our PBM EnvisionRx Options
Grow our PBM EnvisionRx Options Today, a full - service PBM platform with: ; Comprehensive suite of services offered as a bundle or à la carte ; Patented Point - of - Service (POS) rebate technology ; Laker Software is claims adjudicator for ~20 other PBMs ; Aggregates ~22 million lives across all b
Slide 25: Envision Specialty Pharmacy
Envision Specialty Pharmacy ▪ Injectable, infused, oral, blood, and inhaled biologic products ▪ Limited distribution drug access ▪ Specialty therapy programs to drive adherence and improve patient outcomes ▪ Cost saving programs that focus on waste reduction ▪ Medical specialty programs that address
Slide 26: Medicare Part D Update
Medicare Part D Update 286 191 238 77 180 347 21 31 26 384 402 611 2016 2017 2018 Low Income Subsidy (LIS) Members Non-US Members (Choosers) Group Members (EGWP) 26 (in thousands) Lives covered by EnvisionRx (1) (1) Represents estimated enrollment at the end of calendar 2018
Slide 27: New Rite Aid Financial Update
NEW RITE AID FINANCIAL UPDATE i, Darren Karst, SEVP CFO & CAO ais be soft
Slide 28: WBA Asset Sale Update
WBA Asset Sale Update ▪ Initial store closings completed in November − Major closing conditions satisfied ▪ As of today, 357 of 1,932 stores transferred − $715 million in proceeds received ▪ Sale of all stores is targeted to be completed in the first quarter of Fiscal 2019 28
Slide 29: Pro-Forma Sources & Uses
Pro - Forma Sources & Uses 29 (1) Based on net liability balances as of December 2, 2017. (2) Based on the expected ability as of the date hereof to use the company’s current federal and state tax net operating loss car ryf orwards, and assumes no change in control for purposes of Section 382 under
Slide 30: Improved Leverage & Maturity Profile
$880 $1,620 $295 $128 $1,800 $0 $1,500 $3,000 $4,500 $6,000 2017 2018 2019 2020 2021 2022 2023 . . . . . . 2027 2028 Improved Leverage & Maturity Profile 30 Note: Maturities reflect calendar year. Amounts reflect face value and are not net of unamortized debt issuance costs. *Assumes a $2.5 billion
Slide 31: FY18-Q3: Income Statement Summary
FY18 - Q3: Income Statement Summary 31 (1) Includes revenues, income and EBITDA from discontinued operations. TOTAL COMPANY (1) Revenue 7,739.9$ 8,122.1$ Net Income 81.0$ 15.0$ Net Income Per Diluted Share 0.08$ 0.01$ Adjusted EBITDA 214.2$ 2.77% 274.1$ 3.37% 13 Weeks Ended December 2, 2017 13 Weeks
Slide 32: FY18-Q3: Continuing Operations
FY18 - Q3: Continuing Operations 32 Revenue 5,353.2$ 5,669.1$ Net (loss) Income (18.2)$ 23.6$ Adjusted Net Income 1.6$ 26.8$ Net (loss) Income Per Diluted Share (0.02)$ 0.02$ Adjusted Net Income per Diluted Share 0.00$ 0.03$ Adjusted EBITDA 129.2$ 2.41% 191.3$ 3.38% 13 Weeks Ended December 2, 2017 1
Slide 33: FY18-Q3: Continuing Operations Pro Forma Adjusted EBITDA
FY18 - Q3: Continuing Operations Pro Forma Adjusted EBITDA ▪ Pro Forma Adjusted EBITDA of $153 million, including $24 million in TSA fees that would have been received if the divested stores were managed from the beginning of the period 33 13 Weeks Ended December 2, 2017 13 Weeks Ended November 26,
Slide 34: FY18-Q3: Continuing Operations Segment Summary
Retail Pharmacy Segment Pharmacy Services Segment Total Revenue (1) 3,959.0$ 1,445.1$ 5,353.2$ Adjusted EBITDA Gross Profit 1,086.1$ 98.8$ 1,184.9$ Adjusted EBITDA SG&A 997.2$ 58.5$ 1,055.7$ Adjusted EBITDA 88.9$ 40.3$ 129.2$ 13 Weeks Ended December 2, 2017 FY18 - Q3: Continuing Operations Segment S
Slide 35: Wy exverience
Wy exverience
Slide 36: Appendix
APPENDIX experience
Slide 37: Reconciliation of Net (Loss) Income to Adjusted EBITDA
FY18 - Q3: Reconciliation of Net (Loss) Income to Adjusted EBITDA 37 ($ in thousands) 13 Weeks Ended December 2, 2017 13 Weeks Ended November 26, 2016 Net (Loss) Income - Continuing Operations (18,182)$ 23,610$ Adjustments: Interest expense 50,308 50,304 Income tax benefit (16,061) (4,682) Depreciat
Slide 38: Reconciliation of Net (Loss) Income to Adj. Net Income
FY18 - Q3: Reconciliation of Net (Loss) Income to Adj. Net Income 38 ($ in thousands, except per share amounts) 13 Weeks Ended December 2, 2017 13 Weeks Ended November 26, 2016 Net (Loss) Income $ (18,182) $ 23,610 Add back - Income tax benefit (16,061) (4,682) (Loss) Income before income taxes (34,
Slide 39: Reconciliation of Adjusted EBITDA Gross Profit, Retail Pharmacy
Reconciliation of Adjusted EBITDA Gross Profit RETAIL PHARMACY SEGMENT 39 ($ in thousands) 13 Weeks Ended December 2, 2017 13 Weeks Ended November 26, 2016 Revenues 3,959,002$ 4,082,278$ Gross Profit 1,087,888 1,141,794 Addback: LIFO charge 6,784 8,373 Customer loyalty card program revenue deferral
Slide 40: Reconciliation of Adjusted EBITDA SG&A, Retail Pharmacy
Reconciliation of Adjusted EBITDA SG&A RETAIL PHARMACY SEGMENT 40 13 Weeks Ended December 2, 2017 13 Weeks Ended November 26, 2016 Total Revenues 3,959,002$ 4,082,278$ Selling, general and administrative expenses 1,086,857 1,095,409 Less: Depreciation and amortization (SG&A portion only) 72,128 76,7
Slide 41: Leverage Ratio
Leverage Ratio 41 Pro Forma December 2, 2017 March 4, 2017 December 2, 2017 Gross Debt w/o Debt Issuance Costs 6,889,647$ 7,402,477$ 3,103,167$ Less: cash and cash equivalents 169,800 245,410 169,800 Net Debt 6,719,847$ 7,157,067$ 2,933,367$ Adjusted EBITDA Retail Pharmacy Segment 701,492 948,906 44
Slide 42: Asset Sale Pro-Forma Information – Key Assumptions
Asset Sale Pro - Forma Information – Key Assumptions ▪ LTM December 2017 data presented on a 52 - week basis instead of on a 53 - week basis ▪ Net proceeds of $4.025 billion used to pay down debt (refer to "Sources and Uses" slide) ▪ Corporate administration costs are assumed to be reduced by $96 mi
Slide 43: Pro-Forma Reconciliation of Net Income to Adj. EBITDA
Pro - Forma Financial Information Reconciliation of Net Income to Adj. EBITDA 43 (1) Includes adjustments to reflect results on a 52 week basis and account for the sale of the divested stores including the gain re cognized on store sales through December 2, 2017. (2) Includes the WBA merger terminat
Slide 44: Wy exverience
Wy exverience