RAD Rite Aid Corp

• Revenues of $8.1 Billion for the Third Quarter, Down 0.8 Percent Year-Over-Year
• Third Quarter Net Income of $15.0 Million or $0.01 Per Share, Compared to the Prior Year’s Third Quarter Net Income of $59.5 Million or $0.06 Per Share
• Third Quarter Adjusted Net Income Per Diluted Share of $0.02, Compared to the Prior Year Third Quarter Adjusted Net Income Per Diluted Share of $0.08
• Adjusted EBITDA of $274.1 Million for the Third Quarter, Compared to the Prior Year’s Adjusted EBITDA of $373.2 Million

Rite Aid Corporation (NYSE:RAD) today reported operating results for its third fiscal quarter ended November 26, 2016.

For the third quarter, the company reported revenues of $8.1 billion, net income of $15.0 million, or $0.01 per diluted share, Adjusted net income of $23.3 million, or $0.02 per diluted share and Adjusted EBITDA of $274.1 million, or 3.4 percent of revenues.

“Despite the difficult operating environment created by the extended duration of the merger process with WBA, our third quarter results show solid performance in our front-end business, good cost control and continued strong growth at our pharmacy benefit manager, EnvisionRx,” said Chairman and CEO John Standley. “Reimbursement rates remain our largest challenge and we expect that to continue for the remainder of the fiscal year. Moving forward, we will remain focused on improving the health of our patients through clinical services like immunizations and medication adherence, converting additional stores to our highly successful Wellness format and working as a team to deliver a consistently outstanding experience to our customers.”

Third Quarter Summary

Revenues for the quarter were $8.1 billion compared to revenues of $8.2 billion in the prior year’s third quarter, a decrease of $64.5 million or 0.8 percent. Retail Pharmacy Segment revenues were $6.5 billion and decreased 3.1 percent compared to the prior year period primarily as a result of a decrease in same store sales. Revenues in the company’s Pharmacy Services Segment were $1.6 billion and increased 9.7 percent compared to the prior year period.

Same store sales for the quarter decreased 3.4 percent over the prior year, consisting of a 4.7 percent decrease in pharmacy sales and a 0.4 percent decrease in front-end sales. Pharmacy sales included an approximate 182 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores decreased 2.4 percent over the prior year period. Prescription sales accounted for 68.9 percent of total drugstore sales, and third party prescription revenue was 98.2 percent of pharmacy sales.

Net income was $15.0 million or $0.01 per diluted share compared to last year’s third quarter net income of $59.5 million or $0.06 per diluted share. The decline in operating results is due primarily to a decline in Adjusted EBITDA, partially offset by lower income tax expense.

Adjusted EBITDA (which is reconciled to net income on the attached table) was $274.1 million or 3.4 percent of revenues for the third quarter compared to $373.2 million or 4.6 percent of revenues for the same period last year. The decline in Adjusted EBITDA is due to a decrease of $117.5 million in the Retail Pharmacy Segment, resulting from lower pharmacy gross profit, partially offset by an increase in front end gross profit. Pharmacy gross profit decreased because of lower reimbursement rates and script count. The decline in Retail Pharmacy Segment Adjusted EBITDA was partially offset by an increase of $18.5 million of Pharmacy Services Segment Adjusted EBITDA. This was due to an increase in revenues and strong operating results in the current year.

In the third quarter, the company opened 3 stores, relocated 9 stores, and remodeled 95 stores, bringing the total number of wellness stores chainwide to 2,322. The company also acquired 1 store and closed 7 stores, resulting in a total store count of 4,547 at the end of the third quarter. The company also opened 2 clinics in the third quarter, bringing the total to 92.

Rite Aid Merger with Walgreens Boots Alliance

As announced on Dec. 20, 2016, Walgreens Boots Alliance, Inc. (“WBA”) and Rite Aid have entered into an agreement to sell 865 Rite Aid stores and certain assets related to store operations to Fred’s, Inc. (“Fred’s”) for $950 million in an all-cash transaction. The transaction is subject to Federal Trade Commission (“FTC”) approval of the sale of the stores to Fred’s, FTC approval and completion of the pending acquisition of Rite Aid by WBA and other customary closing conditions.

The agreement was entered into to respond to concerns identified by the FTC in its review of the proposed acquisition of Rite Aid by WBA which was announced in October 2015. While WBA is actively engaged in discussions with the FTC regarding the transaction and is working toward a close of the Rite Aid acquisition in early calendar 2017, there can be no assurance that the requisite regulatory approvals will be obtained, or that the transactions will be completed within the required time period.

Rite Aid is one of the nation’s leading drugstore chains with 4,547 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 with WBA 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. Such statements include, but are not limited to, statements regarding the expected timing of the closing of the merger with WBA and sale of stores and assets to Fred's, as well as the ability of the parties to complete the transactions considering the various closing conditions. 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, industry, market, competitive, regulatory and political 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; our ability to achieve the benefits of our efforts to reduce the costs of our generic and other drugs; risks related to the proposed transactions, including the possibility that the transactions may not close, including because one or more closing conditions to the transactions, including certain regulatory approvals, may not be satisfied or waived, on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transactions, or may require conditions, limitations or restrictions in connection with such approvals; the risk that there may be a material adverse change of Rite Aid or the stores proposed to be sold to Fred's, or the business of Rite Aid or the stores proposed to be sold to Fred's may suffer as a result of uncertainty surrounding the transactions; risks related to the ability to realize the anticipated benefits of the proposed transactions, risks associated with the financing of the proposed transactions; disruption from the proposed transactions making it more difficult to maintain business and operational relationships; significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the proposed transactions; and other business effects. 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 requisite regulatory approvals for the proposed merger and proposed sale of stores and assets to Fred's will be obtained, or that the proposed transactions will be completed within the required time period or that the expected benefits of the proposed transactions 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, and net income per diluted share, which are the most directly comparable GAAP financial measures. Adjusted Net Income and Adjusted Net Income per diluted share exclude amortization of EnvisionRx intangible assets, merger and acquisition-related costs, loss on debt retirements and LIFO adjustments. Adjusted EBITDA is defined as net income excluding the impact of income taxes, 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, merger and acquisition-related costs, severance and costs related to distribution center closures, gain or loss on sale of assets and revenue deferrals related to our customer loyalty program).

  RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (unaudited)         November 26, 2016 February 27, 2016 ASSETS Current assets: Cash and cash equivalents $ 220,028 $ 124,471 Accounts receivable, net 1,707,648 1,601,008 Inventories, net of LIFO reserve of $1,047,657 and $1,006,396 2,947,358 2,697,104 Prepaid expenses and other current assets   142,134     128,144   Total current assets 5,017,168 4,550,727 Property, plant and equipment, net 2,291,459 2,255,398 Goodwill 1,715,479 1,713,475 Other intangibles, net 885,220 1,004,379 Deferred tax assets 1,534,437 1,539,141 Other assets   215,163     213,890   Total assets $ 11,658,926   $ 11,277,010     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ 22,681 $ 26,848 Accounts payable 1,792,574 1,542,797 Accrued salaries, wages and other current liabilities   1,256,283     1,427,250   Total current liabilities 3,071,538 2,996,895 Long-term debt, less current maturities 7,208,286 6,914,393 Lease financing obligations, less current maturities 43,943 52,895 Other noncurrent liabilities   689,032     731,399   Total liabilities 11,012,799 10,695,582   Commitments and contingencies - - Stockholders' equity: Common stock 1,052,268 1,047,754 Additional paid-in capital 4,855,612 4,822,665 Accumulated deficit (5,216,015 ) (5,241,210 ) Accumulated other comprehensive loss   (45,738 )   (47,781 ) Total stockholders' equity   646,127     581,428   Total liabilities and stockholders' equity $ 11,658,926   $ 11,277,010       RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (unaudited)         Thirteen weeks ended   Thirteen weeks ended November 26, 2016 November 28, 2015 Revenues $ 8,089,726 $ 8,154,184 Costs and expenses: Cost of revenues 6,194,866 6,151,305 Selling, general and administrative expenses 1,773,862 1,777,647 Lease termination and impairment charges 7,265 7,011 Interest expense 106,309 106,879 Loss on sale of assets, net   501     3,331     8,082,803     8,046,173   Income before income taxes 6,923 108,011 Income tax (benefit) expense   (8,087 )   48,468 Net income $ 15,010   $ 59,543   Basic and diluted earnings per share:   Numerator for earnings per share: Income attributable to common stockholders - basic and diluted $ 15,010   $ 59,543       Denominator: Basic weighted average shares 1,045,028 1,039,867 Outstanding options and restricted shares, net   15,735     17,411   Diluted weighted average shares   1,060,763     1,057,278   Basic and diluted income per share $ 0.01 $ 0.06     RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (unaudited)         Thirty-nine weeks ended   Thirty-nine weeks ended November 26, 2016 November 28, 2015 Revenues $ 24,303,712 $ 22,466,521 Costs and expenses: Cost of revenues 18,597,809 16,681,822 Selling, general and administrative expenses 5,345,356 5,203,058 Lease termination and impairment charges 20,279 21,670 Interest expense 316,810 345,895 Loss on debt retirements, net - 33,205 Loss on sale of assets, net   1,731     3,651     24,281,985     22,289,301   Income before income taxes 21,727 177,220 Income tax (benefit) expense   (3,468 )   77,372 Net income $ 25,195   $ 99,848   Basic and diluted earnings per share:   Numerator for earnings per share: Income attributable to common stockholders - basic and diluted $ 25,195   $ 99,848       Denominator: Basic weighted average shares 1,043,887 1,018,783 Outstanding options and restricted shares, net   17,117     18,765   Diluted weighted average shares   1,061,004     1,037,548   Basic and diluted income per share $ 0.02 $ 0.10     RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (unaudited)         Thirteen weeks ended   Thirteen weeks ended November 26, 2016 November 28, 2015 Net income $ 15,010 $ 59,543 Other comprehensive income: Defined benefit pension plans: Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost, net of $451 and $398 tax expense   681   597 Total other comprehensive income   681   597 Comprehensive income $ 15,691 $ 60,140     RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (unaudited)         Thirty-nine weeks ended   Thirty-nine weeks ended November 26, 2016 November 28, 2015 Net income $ 25,195 $ 99,848 Other comprehensive income: Defined benefit pension plans: Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost, net of $1,353 and $1,194 tax expense   2,043   1,792 Total other comprehensive income   2,043   1,792 Comprehensive income $ 27,238 $ 101,640     RITE AID CORPORATION AND SUBSIDIARIES   SUPPLEMENTAL SEGMENT OPERATING INFORMATION (Dollars in thousands) (unaudited)       Thirteen weeks ended   Thirteen weeks ended November 26, 2016 November 28, 2015   Retail Pharmacy Segment Revenues (a) $ 6,535,274 $ 6,744,143 Cost of revenues (a)   4,743,471     4,822,257   Gross profit 1,791,803 1,921,886 LIFO charge   13,750     5,986   FIFO gross profit 1,805,553 1,927,872   Gross profit as a percentage of revenues 27.42 % 28.50 % LIFO charge as a percentage of revenues 0.21 % 0.09 % FIFO gross profit as a percentage of revenues 27.63 % 28.59 %   Selling, general and administrative expenses 1,700,625 1,708,445 Selling, general and administrative expenses as a percentage of revenues 26.02 % 25.33 %   Cash interest expense 101,015 101,494 Non-cash interest expense   5,271     5,375   Total interest expense 106,286 106,869   Adjusted EBITDA 221,716 339,255 Adjusted EBITDA as a percentage of revenues 3.39 % 5.03 %     Pharmacy Services Segment Revenues (a) $ 1,645,835 $ 1,500,895 Cost of revenues (a)   1,542,778     1,419,902   Gross profit 103,057 80,993   Gross profit as a percentage of revenues 6.26 % 5.40 %   Adjusted EBITDA 52,431 33,911 Adjusted EBITDA as a percentage of revenues 3.19 % 2.26 %  

(a) -

 

Revenues and cost of revenues include $91,383 and $90,854 of inter-segment activity for the thirteen weeks ended November 26, 2016 and November 28, 2015, respectively, that is eliminated in consolidation.

    RITE AID CORPORATION AND SUBSIDIARIES     SUPPLEMENTAL SEGMENT OPERATING INFORMATION (Dollars in thousands) (unaudited)    

Thirty-nine weeks endedNovember 26, 2016

Thirty-nine weeks endedNovember 28, 2015

  Retail Pharmacy Segment Revenues (a) $ 19,696,304 $ 20,038,947 Cost of revenues (a)   14,279,785     14,397,018   Gross profit 5,416,519 5,641,929 LIFO charge   41,261     17,959   FIFO gross profit 5,457,780 5,659,888   Gross profit as a percentage of revenues 27.50 % 28.15 % LIFO charge as a percentage of revenues 0.21 % 0.09 % FIFO gross profit as a percentage of revenues 27.71 % 28.24 %   Selling, general and administrative expenses 5,133,161 5,086,939 Selling, general and administrative expenses as a percentage of revenues 26.06 % 25.39 %   Cash interest expense 300,802 314,052 Non-cash interest expense   15,973     31,828   Total interest expense 316,775 345,880   Adjusted EBITDA 729,186 952,120 Adjusted EBITDA as a percentage of revenues 3.70 % 4.75 %     Pharmacy Services Segment Revenues (a) $ 4,883,070 $ 2,572,784 Cost of revenues (a)   4,593,686     2,430,014   Gross profit 289,384 142,770   Gross profit as a percentage of revenues 5.93 % 5.55 %   Adjusted EBITDA 143,616 67,133 Adjusted EBITDA as a percentage of revenues 2.94 % 2.61 %  

(a) -

Revenues and cost of revenues include $275,662 and $145,210 of inter-segment activity for the thirty-nine weeks ended November 26, 2016 and November 28, 2015, respectively, that is eliminated in consolidation.

    RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (In thousands) (unaudited)        

Thirteen weeks endedNovember 26, 2016

Thirteen weeks endedNovember 28, 2015

    Reconciliation of net income to adjusted EBITDA: Net income $ 15,010 $ 59,543 Adjustments: Interest expense 106,309 106,879 Income tax (benefit) expense (8,087 ) 48,468 Depreciation and amortization 143,245 136,434 LIFO charge 13,750 5,986 Lease termination and impairment charges 7,265 7,011 Other   (3,345 )   8,845   Adjusted EBITDA $ 274,147   $ 373,166   Percent of revenues 3.39 % 4.58 %     RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (In thousands) (unaudited)        

Thirty-nine weeks endedNovember 26, 2016

Thirty-nine weeks endedNovember 28, 2015

    Reconciliation of net income to adjusted EBITDA: Net income $ 25,195 $ 99,848 Adjustments: Interest expense 316,810 345,895 Income tax (benefit) expense (3,468 ) 77,372 Depreciation and amortization 424,084 373,782 LIFO charge 41,261 17,959 Lease termination and impairment charges 20,279 21,670 Loss on debt retirements, net - 33,205 Other   48,641     49,522   Adjusted EBITDA $ 872,802   $ 1,019,253   Percent of revenues 3.59 % 4.54 %     RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION ADJUSTED NET INCOME (Dollars in thousands, except per share amounts) (unaudited)      

Thirteen weeks endedNovember 26, 2016

Thirteen weeks endedNovember 28, 2015

  Net income $ 15,010 $ 59,543 Add back - Income tax (benefit) expense   (8,087 )   48,468 Income before income taxes 6,923 108,011   Adjustments: Amortization of EnvisionRx intangible assets 21,049 21,177 LIFO charge 13,750 5,986 Merger and Acquisition-related costs   1,964     10,078   Adjusted income before income taxes 43,686 145,252   Adjusted income tax expense (a)   20,401     58,101 Adjusted net income $ 23,285   $ 87,151   Adjusted net income per diluted share:   Numerator for adjusted net income per diluted share: Adjusted net income $ 23,285   $ 87,151       Denominator: Basic weighted average shares 1,045,028 1,039,867 Outstanding options and restricted shares, net   15,735     17,411   Diluted weighted average shares   1,060,763     1,057,278   Net income per diluted share $ 0.01 $ 0.06   Adjusted net income per diluted share $ 0.02 $ 0.08   (a)  

The fiscal year 2017 and 2016 annual effective tax rates, adjusted to exclude amortization of EnvisionRx intangible assets, LIFO charges and Merger and Acquisition-related costs from projected book income, are used for the thirteen weeks ended November 26, 2016 and November 28, 2015, respectively.

    RITE AID CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION ADJUSTED NET INCOME (Dollars in thousands, except per share amounts) (unaudited)       Thirty-nine weeks ended Thirty-nine weeks ended November 26, 2016 November 28, 2015   Net income $ 25,195 $ 99,848 Add back - Income tax (benefit) expense   (3,468 )   77,372 Income before income taxes 21,727 177,220   Adjustments: Amortization of EnvisionRx intangible assets 62,217 38,217 LIFO charge 41,261 17,959 Loss on debt retirements, net - 33,205 Merger and Acquisition-related costs   6,122     21,796   Adjusted income before income taxes 131,327 288,397   Adjusted income tax expense (a)   61,330     115,359 Adjusted net income $ 69,997   $ 173,038   Adjusted net income per diluted share:   Numerator for adjusted net income per diluted share: Adjusted net income $ 69,997   $ 173,038       Denominator: Basic weighted average shares 1,043,887 1,018,783 Outstanding options and restricted shares, net   17,117     18,765   Diluted weighted average shares   1,061,004     1,037,548   Net income per diluted share $ 0.02 $ 0.10   Adjusted net income per diluted share $ 0.07 $ 0.17  

(a)

 

The fiscal year 2017 and 2016 annual effective tax rates, adjusted to exclude amortization of EnvisionRx intangible assets, LIFO charges and Merger and Acquisition-related costs from projected book income, are used for the thirty-nine weeks ended November 26, 2016 and November 28, 2015, respectively.

    RITE AID CORPORATION AND SUBSIDIARIES     CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited)       Thirteen weeks ended Thirteen weeks ended November 26, 2016 November 28, 2015     OPERATING ACTIVITIES: Net income $ 15,010 $ 59,543 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 143,245 136,434 Lease termination and impairment charges 7,265 7,011 LIFO charge 13,750 5,986 Loss on sale of assets, net 501 3,331 Stock-based compensation expense 13,070 10,328 Changes in deferred taxes 4,167 44,079 Excess tax benefit on stock options and restricted stock (561 ) (567 ) Changes in operating assets and liabilities: Accounts receivable 116,387 307,779 Inventories (134,103 ) 24,808 Accounts payable 74,939 57,721 Other assets and liabilities, net   (101,083 )   (328,488 ) Net cash provided by operating activities 152,587 327,965 INVESTING ACTIVITIES: Payments for property, plant and equipment (108,070 ) (142,655 ) Intangible assets acquired (19,936 ) (54,150 ) Acquisition of businesses, net of cash acquired - 1,194 Proceeds from dispositions of assets and investments   3,384     2,616   Net cash used in investing activities (124,622 ) (192,995 ) FINANCING ACTIVITIES: Net proceeds from (payments to) revolver 30,000 (73,000 ) Principal payments on long-term debt (5,196 ) (5,750 ) Change in zero balance cash accounts 30,151 16,298 Net proceeds from the issuance of common stock 454 520 Excess tax benefit on stock options and restricted stock   561     567   Net cash provided by (used in) financing activities   55,970     (61,365 ) Increase in cash and cash equivalents 83,935 73,605 Cash and cash equivalents, beginning of period   136,093     152,647   Cash and cash equivalents, end of period $ 220,028   $ 226,252       SUPPLEMENTAL CASH FLOW INFORMATION   Payments for property, plant and equipment $ 108,070 $ 142,655 Intangible assets acquired   19,936     54,150   Total cash capital expenditures 128,006 196,805 Equipment received for noncash consideration - - Equipment financed under capital leases   1,021     2,228   Gross capital expenditures $ 129,027   $ 199,033       RITE AID CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited)       Thirty-nine weeks ended Thirty-nine weeks ended November 26, 2016 November 28, 2015     OPERATING ACTIVITIES: Net income $ 25,195 $ 99,848 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 424,084 373,782 Lease termination and impairment charges 20,279 21,670 LIFO charge 41,261 17,959 Loss on sale of assets, net 1,731 3,651 Stock-based compensation expense 36,766 26,529 Loss on debt retirements, net - 33,205 Changes in deferred taxes 6,165 50,696 Excess tax benefit on stock options and restricted stock (3,809 ) (21,436 ) Changes in operating assets and liabilities: Accounts receivable (110,868 ) 315,898 Inventories (291,574 ) 339 Accounts payable 225,278 89,630 Other assets and liabilities, net   (209,055 )   (342,234 ) Net cash provided by operating activities 165,453 669,537 INVESTING ACTIVITIES: Payments for property, plant and equipment (333,788 ) (414,338 ) Intangible assets acquired (48,805 ) (97,612 ) Acquisition of businesses, net of cash acquired - (1,778,377 ) Proceeds from dispositions of assets and investments   10,217     8,697   Net cash used in investing activities (372,376 ) (2,281,630 ) FINANCING ACTIVITIES: Proceeds from issuance of long-term debt - 1,800,000 Net proceeds from revolver 280,000 655,000 Principal payments on long-term debt (16,426 ) (666,967 ) Change in zero balance cash accounts 30,685 (35,011 ) Net proceeds from the issuance of common stock 4,412 8,625 Financing fees paid for early debt redemption - (26,003 ) Excess tax benefit on stock options and restricted stock 3,809 21,436 Deferred financing costs paid   -     (34,634 ) Net cash provided by financing activities   302,480     1,722,446   Increase in cash and cash equivalents 95,557 110,353 Cash and cash equivalents, beginning of period   124,471     115,899   Cash and cash equivalents, end of period $ 220,028   $ 226,252       SUPPLEMENTAL CASH FLOW INFORMATION   Payments for property, plant and equipment $ 333,788 $ 414,338 Intangible assets acquired   48,805     97,612   Total cash capital expenditures 382,593 511,950 Equipment received for noncash consideration 746 2,011 Equipment financed under capital leases   3,881     3,499   Gross capital expenditures $ 387,220   $ 517,460    

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Rite Aid CorporationINVESTORS:Matt Schroeder, 717-214-8867investor@riteaid.comorMEDIA:Susan Henderson, 717-730-7766