Rite Aid Reports Fiscal 2018 Second Quarter Results

Rite Aid Corporation (NYSE: RAD) today reported operating results for its second fiscal quarter ended September 2, 2017.

For the second quarter, the company reported revenues of $7.7 billion, net income of $170.7 million, or $0.16 per diluted share, Adjusted net loss of $15.6 million, or $0.01 per diluted share and Adjusted EBITDA of $213.3 million, or 2.8 percent of revenues.

"While our performance for the quarter reflects a challenging reimbursement rate environment and the effects of an extended merger and asset sale process, securing regulatory clearance for the amended asset sale agreement with Walgreens Boots Alliance gives us a clear path forward to realize the benefits of the transaction and implement our plans to deliver improved results. In addition, we've announced this morning that Kermit Crawford - a proven leader with extensive retail pharmacy experience - is joining Rite Aid as president and chief operating officer to further strengthen our leadership team," said Rite Aid Chairman and CEO John Standley.

"As we work to complete the asset sale, which will reduce our leverage and provide greater financial flexibility to invest in our business, we'll also focus on generating momentum for our business by meeting the health and wellness needs of our customers and patients while delivering an outstanding experience in our stores."

Second Quarter Summary

Revenues for the quarter were $7.7 billion compared to revenues of $8.0 billion in the prior year's second quarter, a decrease of $350.9 million or 4.4 percent. Retail Pharmacy Segment revenues were $6.3 billion and decreased 3.4 percent compared to the prior year period primarily as a result of a decrease in same store sales and reimbursement rates. Revenues in the company's Pharmacy Services Segment were $1.5 billion and decreased 8.7 percent compared to the prior year period, due to an election to participate in fewer Medicare Part D regions.

Same store sales for the quarter decreased 3.4 percent over the prior year, consisting of a 4.6 percent decrease in pharmacy sales and a 0.9 percent decrease in front-end sales. Pharmacy sales included an approximate 189 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, decreased 1.8 percent over the prior year period due in part, to exclusion from certain pharmacy networks that Rite Aid participated in the prior year. Prescription sales accounted for 67.8 percent of total drugstore sales, and third party prescription revenue was 98.3 percent of pharmacy sales.

Net income was $170.7 million or $0.16 per diluted share compared to last year's second quarter net income of $14.8 million or $0.01 per diluted share. The improvement in operating results was due primarily to receipt of the $325.0 million merger termination fee from Walgreens Boots Alliance, Inc. (Nasdaq: WBA) for the termination of the merger agreement, effective June 28, 2017, partially offset by a decline in Adjusted EBITDA and higher income tax expense.

Adjusted net loss was $15.6 million or $0.01 per diluted share compared to last year's second quarter adjusted net income of $36.4 million or $0.03 per diluted share. The decline in Adjusted net income was due to a decline in Adjusted EBITDA, partially offset by a reduction in adjusted income tax expense and depreciation and amortization expense.

Adjusted EBITDA (which is reconciled to net income in the attached tables) was $213.3 million or 2.8 percent of revenues for the second quarter compared to $312.7 million or 3.9 percent of revenues for the same period last year. The decline in Adjusted EBITDA was due to a decrease of $98.6 million in the Retail Pharmacy Segment. The decrease in the Retail Pharmacy Segment EBITDA was primarily driven by a decline in pharmacy gross profit, which was due to a decline in reimbursement rates, which the company was unable to fully offset with generic purchasing efficiencies and lower script counts. The decline in pharmacy gross profit was partially offset by good cost control. Adjusted EBITDA in the Pharmacy Services Segment was flat compared to the prior year.

In the second quarter, the company opened 1 store, relocated 1 store, remodeled 54 stores and expanded 1 store, bringing the total number of wellness stores chainwide to 2,532. The company closed 17 stores, resulting in a total store count of 4,507 at the end of the second quarter.

Rite Aid is one of the nation's leading drugstore chains with 4,507 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.

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 simulcast via the internet and can be accessed at www.riteaid.com in the conference call section of investor information. Slides related to materials discussed on the call will also be available. A playback of the call will be available on both sites starting at 12 p.m. Eastern Time today. A playback of the call will also be available by telephone beginning at 12 p.m. Eastern Time today until 11:59 p.m. Eastern Time on Sept. 30, 2017. The playback number is 1-855-859-2056 from within the U.S. and Canada or 1-404-537-3406 from outside the U.S. and Canada with the eight-digit reservation number 72531385.

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 the expected timing of the closing of the sale of stores and assets to WBA; the ability of the parties to complete the sale and related transactions considering the various closing conditions; the outcome of legal and regulatory matters in connection with the sale of store and assets of Rite Aid to WBA; the expected benefits of the transactions such as improved operations, growth potential, market profile and financial strength; the competitive ability and position of Rite Aid following completion of the proposed transactions; the ability of Rite Aid to implement new business strategies following the completion of the proposed transactions 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, 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 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 business of Rite Aid may suffer as a result of uncertainty surrounding the proposed transactions; risks related to the ability to realize the anticipated benefits of the proposed transactions; risks associated with the financing of the proposed transaction; disruption from the proposed transaction making it more difficult to maintain business and operational relationships; the effect of the pending sale on Rite Aid's business relationships (including, without limitation, customers and suppliers operating results and business generally; risks related to diverting management's or employees' attention from ongoing business operations; the risk that Rite Aid's stock price may decline significantly if the proposed transaction is not completed; significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the proposed transactions; potential changes to our strategy in the event the proposed transactions do not close, which may include delaying or reducing capital or other expenditures, selling assets or other operations, attempting to restructure or refinance our debt, or seeking additional capital, 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, 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. 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 (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 of EnvisionRx intangible assets, merger and acquisition-related costs, loss on debt retirements, LIFO adjustments, and the Walgreens Boots Alliance, Inc. 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, inventory write-downs related to store closings, debt retirements, the Walgreens Boots Alliance, Inc. termination fee, 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)
 
 
 
September 2, 2017 March 4, 2017
ASSETS
Current assets:
Cash and cash equivalents $ 238,978 $ 245,410
Accounts receivable, net 1,843,320 1,771,126
Inventories, net of LIFO reserve of $1,022,282 and $999,776 2,877,427 2,837,211
Prepaid expenses and other current assets   221,644     211,541  
Total current assets 5,181,369 5,065,288
Property, plant and equipment, net 2,188,217 2,251,692
Goodwill 1,715,479 1,715,479
Other intangibles, net 747,288 835,795
Deferred tax assets 1,453,291 1,505,564
Other assets   212,664     219,934  
Total assets $ 11,498,308   $ 11,593,752  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and lease financing obligations $ 22,491 $ 21,335
Accounts payable 1,687,880 1,613,909
Accrued salaries, wages and other current liabilities   1,270,840     1,370,004  
Total current liabilities 2,981,211 3,005,248
Long-term debt, less current maturities 7,082,549 7,263,288
Lease financing obligations, less current maturities 37,890 44,070
Other noncurrent liabilities   663,048     667,076  
Total liabilities 10,764,698 10,979,682
 
Commitments and contingencies - -
Stockholders' equity:
Common stock 1,062,411 1,053,690
Additional paid-in capital 4,841,700 4,839,854
Accumulated deficit (5,129,213 ) (5,237,157 )
Accumulated other comprehensive loss   (41,288 )   (42,317 )
Total stockholders' equity   733,610     614,070  
Total liabilities and stockholders' equity $ 11,498,308   $ 11,593,752  
 
 
RITE AID CORPORATION AND SUBSIDIARIES
   
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
 

Thirteen weeks endedSeptember 2, 2017

Thirteen weeks endedAugust 27, 2016
Revenues $ 7,678,903 $ 8,029,806
Costs and expenses:
Cost of revenues 5,891,900 6,113,063
Selling, general and administrative expenses 1,734,306 1,778,247
Lease termination and impairment charges 3,128 7,233
Interest expense 111,261 105,388
Walgreens Boots Alliance merger termination fee (325,000 ) -
(Gain) loss on sale of assets, net   (14,495 )   174  
 
  7,401,100     8,004,105  
 
Income before income taxes 277,803 25,701
Income tax expense   107,087     10,928  
Net income $ 170,716   $ 14,773  
 
Basic and diluted earnings per share:
 
Numerator for earnings per share:
Income attributable to common stockholders - basic and diluted $ 170,716   $ 14,773  
 
 
 
Denominator:
Basic weighted average shares 1,048,548 1,044,198
Outstanding options and restricted shares, net   18,668     17,251  
 
Diluted weighted average shares   1,067,216     1,061,449  
 
Basic and diluted income per share $ 0.16 $ 0.01
 
 
RITE AID CORPORATION AND SUBSIDIARIES
   
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
 

Twenty-six weeks endedSeptember 2, 2017

Twenty-six weeks endedAugust 27, 2016
Revenues $ 15,460,356 $ 16,213,987
Costs and expenses:
Cost of revenues 11,914,319 12,402,944
Selling, general and administrative expenses 3,495,596 3,571,494
Lease termination and impairment charges 7,214 13,014
Interest expense 221,198 210,501
Walgreens Boots Alliance merger termination fee (325,000 ) -
(Gain) loss on sale of assets, net   (20,216 )   1,230  
 
  15,293,111     16,199,183  
 
Income before income taxes 167,245 14,804
Income tax expense   71,878     4,619  
Net income $ 95,367   $ 10,185  
 
Basic and diluted earnings per share:
 
Numerator for earnings per share:
Income attributable to common stockholders - basic and diluted $ 95,367   $ 10,185  
 
 
 
Denominator:
Basic weighted average shares 1,047,687 1,043,317
Outstanding options and restricted shares, net   22,597     17,210  
 
Diluted weighted average shares   1,070,284     1,060,527  
 
Basic and diluted income per share $ 0.09 $ 0.01
 
 
RITE AID CORPORATION AND SUBSIDIARIES
   
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(unaudited)
 
 
 
Thirteen weeks ended Thirteen weeks ended
September 2, 2017 August 27, 2016
Net income $ 170,716 $ 14,773
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 $342 and $451 tax expense   515   681
Total other comprehensive income   515   681
Comprehensive income $ 171,231 $ 15,454
 
 
RITE AID CORPORATION AND SUBSIDIARIES
   
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(unaudited)
 
 
 
Twenty-six weeks ended Twenty-six weeks ended
September 2, 2017 August 27, 2016
Net income $ 95,367 $ 10,185
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 $684 and $902 tax expense   1,029   1,362
Total other comprehensive income   1,029   1,362
Comprehensive income $ 96,396 $ 11,547
 
 
RITE AID CORPORATION AND SUBSIDIARIES
   
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 
 

Thirteen weeks endedSeptember 2, 2017

Thirteen weeks endedAugust 27, 2016
 
Retail Pharmacy Segment
Revenues (a) $ 6,267,929 $ 6,485,482
Cost of revenues (a)   4,584,188     4,666,133  
Gross profit 1,683,741 1,819,349
LIFO charge   5,632     13,760  
FIFO gross profit 1,689,373 1,833,109
 
Gross profit as a percentage of revenues 26.86 % 28.05 %
LIFO charge as a percentage of revenues 0.09 % 0.21 %
FIFO gross profit as a percentage of revenues 26.95 % 28.26 %
 
Selling, general and administrative expenses 1,658,873 1,708,633
Selling, general and administrative expenses as a percentage of revenues 26.47 % 26.35 %
 
Cash interest expense 105,207 100,105
Non-cash interest expense   5,434     5,273  
Total interest expense 110,641 105,378
 
Adjusted EBITDA 163,995 262,643
Adjusted EBITDA as a percentage of revenues 2.62 % 4.05 %
 
 
Pharmacy Services Segment
Revenues (a) $ 1,492,831 $ 1,634,876
Cost of revenues (a)   1,389,569     1,537,482  
Gross profit 103,262 97,394
 
Gross profit as a percentage of revenues 6.92 % 5.96 %
 
Adjusted EBITDA 49,275 50,010
Adjusted EBITDA as a percentage of revenues 3.30 % 3.06 %
 
(a) - Revenues and cost of revenues include $81,857 and $90,552 of inter-segment activity for the thirteen weeks ended September 2, 2017 and August 27, 2016, respectively, that is eliminated in consolidation.
 
 
RITE AID CORPORATION AND SUBSIDIARIES
   
SUPPLEMENTAL SEGMENT OPERATING INFORMATION
(Dollars in thousands)
(unaudited)
 
 

Twenty-six weeks endedSeptember 2, 2017

Twenty-six weeks endedAugust 27, 2016
 
Retail Pharmacy Segment
Revenues (a) $ 12,618,137 $ 13,161,030
Cost of revenues (a)   9,280,334     9,536,314  
Gross profit 3,337,803 3,624,716
LIFO charge   22,506     27,511  
FIFO gross profit 3,360,309 3,652,227
 
Gross profit as a percentage of revenues 26.45 % 27.54 %
LIFO charge as a percentage of revenues 0.18 % 0.21 %
FIFO gross profit as a percentage of revenues 26.63 % 27.75 %
 
Selling, general and administrative expenses 3,341,264 3,432,536
Selling, general and administrative expenses as a percentage of revenues 26.48 % 26.08 %
 
Cash interest expense 209,630 199,787
Non-cash interest expense   10,910     10,702  
Total interest expense 220,540 210,489
 
Adjusted EBITDA 307,960 507,470
Adjusted EBITDA as a percentage of revenues 2.44 % 3.86 %
 
 
Pharmacy Services Segment
Revenues (a) $ 3,006,072 $ 3,237,235
Cost of revenues (a)   2,797,838     3,050,908  
Gross profit 208,234 186,327
 
Gross profit as a percentage of revenues 6.93 % 5.76 %
 
Adjusted EBITDA 97,874 91,185
Adjusted EBITDA as a percentage of revenues 3.26 % 2.82 %
 

(a) -

Revenues and cost of revenues include $163,853 and $184,278 of inter-segment activity for the twenty-six weeks ended September 2, 2017 and August 27, 2016, 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 endedSeptember 2, 2017

Thirteen weeks endedAugust 27, 2016
 
 
Reconciliation of net income to adjusted EBITDA:
Net income $ 170,716 $ 14,773
Adjustments:
Interest expense 111,261 105,388
Income tax expense 107,087 10,928
Depreciation and amortization 132,012 142,051
LIFO charge 5,632 13,760
Lease termination and impairment charges 3,128 7,233
Walgreens Boots Alliance merger termination fee (325,000 ) -
Other   8,434     18,520  
Adjusted EBITDA $ 213,270   $ 312,653  
Percent of revenues 2.78 % 3.89 %
 
 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(In thousands)
(unaudited)
   
 
 

Twenty-six weeks endedSeptember 2, 2017

Twenty-six weeks endedAugust 27, 2016
 
 
Reconciliation of net income to adjusted EBITDA:
Net income $ 95,367 $ 10,185
Adjustments:
Interest expense 221,198 210,501
Income tax expense 71,878 4,619
Depreciation and amortization 274,104 280,839
LIFO charge 22,506 27,511
Lease termination and impairment charges 7,214 13,014
Walgreens Boots Alliance merger termination fee (325,000 ) -
Other   38,567     51,986  
Adjusted EBITDA $ 405,834   $ 598,655  
Percent of revenues 2.62 % 3.69 %
 
 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET (LOSS) INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
   
 

Thirteen weeks endedSeptember 2, 2017

Thirteen weeks endedAugust 27, 2016
 
Net income $ 170,716 $ 14,773
Add back - Income tax expense   107,087     10,928  
Income before income taxes 277,803 25,701
 
Adjustments:
Amortization of EnvisionRx intangible assets 19,560 20,853
LIFO charge 5,632 13,760
Merger and Acquisition-related costs 13,883 1,402
Walgreens Boots Alliance merger termination fee   (325,000 )   -  
 
Adjusted (loss) income before income taxes (8,122 ) 61,716
 
Adjusted income tax expense (a)   7,480     25,335  
Adjusted net (loss) income $ (15,602 ) $ 36,381  
 
Adjusted net (loss) income per diluted share:
 
Numerator for adjusted net (loss) income per diluted share:
Adjusted net (loss) income $ (15,602 ) $ 36,381  
 
 
 
Denominator:
Basic weighted average shares 1,048,548 1,044,198
Outstanding options and restricted shares, net   -     17,251  
 
Diluted weighted average shares   1,048,548     1,061,449  
 
Net income per diluted share $ 0.16 $ 0.01
 
Adjusted net (loss) income per diluted share $ (0.01 ) $ 0.03
 

(a)

The fiscal year 2018 and 2017 annual effective tax rates, adjusted to exclude amortization of EnvisionRx intangible assets, LIFO charges, Merger and Acquisition-related costs and the Walgreens Boots Alliance merger termination fee from book income, are used for the thirteen weeks ended September 2, 2017 and August 27, 2016, respectively.
 
 
RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
ADJUSTED NET (LOSS) INCOME
(Dollars in thousands, except per share amounts)
(unaudited)
   
 

Twenty-six weeks endedSeptember 2, 2017

Twenty-six weeks endedAugust 27, 2016
 
Net income $ 95,367 $ 10,185
Add back - Income tax expense   71,878     4,619  
Income before income taxes 167,245 14,804
 
Adjustments:
Amortization of EnvisionRx intangible assets 40,276 41,168
LIFO charge 22,506 27,511
Merger and Acquisition-related costs 21,121 4,158
Walgreens Boots Alliance merger termination fee   (325,000 )   -  
 
Adjusted (loss) income before income taxes (73,852 ) 87,641
 
Adjusted income tax (benefit) expense (a)   (11,346 )   34,468  
Adjusted net (loss) income $ (62,506 ) $ 53,173  
 
Adjusted net (loss) income per diluted share:
 
Numerator for adjusted net (loss) income per diluted share:
Adjusted net (loss) income $ (62,506 ) $ 53,173  
 
 
 
Denominator:
Basic weighted average shares 1,047,687 1,043,317
Outstanding options and restricted shares, net   -     17,210  
 
Diluted weighted average shares   1,047,687     1,060,527  
 
Net income per diluted share $ 0.09 $ 0.01
 
Adjusted net (loss) income per diluted share $ (0.06 ) $ 0.05
 

(a)

The fiscal year 2018 and 2017 annual effective tax rates, adjusted to exclude amortization of EnvisionRx intangible assets, LIFO charges, Merger and Acquisition-related costs and the Walgreens Boots Alliance merger termination fee from book income, are used for the twenty-six weeks ended September 2, 2017 and August 27, 2016, respectively.
 
 
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
 
 

Thirteen weeks endedSeptember 2, 2017

Thirteen weeks endedAugust 27, 2016 (a)
 
 
OPERATING ACTIVITIES:
Net income $ 170,716 $ 14,773
Adjustments to reconcile to net cash provided by (used in) operating activities:
Depreciation and amortization 132,012 142,051
Lease termination and impairment charges 3,128 7,233
LIFO charge 5,632 13,760
(Gain) loss on sale of assets, net (14,495 ) 174
Stock-based compensation expense 6,324 12,552
Changes in deferred taxes 103,010 7,747
Excess tax benefit on stock options and restricted stock - (2,365 )
Changes in operating assets and liabilities:
Accounts receivable (60,025 ) (152,725 )
Inventories (93,886 ) (216,911 )
Accounts payable 58,180 34,693
Other assets and liabilities, net   (105,499 )   (1,943 )
Net cash provided by (used in) operating activities 205,097 (140,961 )
INVESTING ACTIVITIES:
Payments for property, plant and equipment (59,723 ) (119,641 )
Intangible assets acquired (4,839 ) (12,488 )
Proceeds from dispositions of assets and investments 8,768 3,745
Proceeds from insured loss   1,490     -  
Net cash used in investing activities (54,304 ) (128,384 )
FINANCING ACTIVITIES:
Net (payments to) proceeds from revolver (100,000 ) 270,000
Principal payments on long-term debt (3,829 ) (5,509 )
Change in zero balance cash accounts (18,579 ) (1,728 )
Net proceeds from the issuance of common stock 68 1,587
Excess tax benefit on stock options and restricted stock - 2,365
Payments for taxes related to net share settlement of equity awards   (3,924 )   (6,117 )
Net cash (used in) provided by financing activities   (126,264 )   260,598  
Increase (decrease) in cash and cash equivalents 24,529 (8,747 )
Cash and cash equivalents, beginning of period   214,449     144,840  
Cash and cash equivalents, end of period $ 238,978   $ 136,093  
 
 
SUPPLEMENTAL CASH FLOW INFORMATION
 
Payments for property, plant and equipment $ 59,723 $ 119,641
Intangible assets acquired   4,839     12,488  
Total cash capital expenditures 64,562 132,129
Equipment received for noncash consideration - 114
Equipment financed under capital leases   4,758     1,307  
Gross capital expenditures $ 69,320   $ 133,550  
 

(a) During the thirteen weeks ended June 3, 2017, the Company adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which resulted in a retrospective reclassification of $6.1 million for payments for taxes related to net share settlement of equity awards from operating activities to financing activities which decreased net cash used in operating activities and decreased cash provided by financing activities for the thirteen weeks ended August 27, 2016.
 
 
RITE AID CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
 
 

Twenty-six weeks endedSeptember 2, 2017

Twenty-six weeks endedAugust 27, 2016 (a)
 
 
OPERATING ACTIVITIES:
Net income $ 95,367 $ 10,185
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 274,104 280,839
Lease termination and impairment charges 7,214 13,014
LIFO charge 22,506 27,511
(Gain) loss on sale of assets, net (20,216 ) 1,230
Stock-based compensation expense 15,362 23,696
Changes in deferred taxes 64,850 1,998
Excess tax benefit on stock options and restricted stock - (3,248 )
Changes in operating assets and liabilities:
Accounts receivable (73,782 ) (227,255 )
Inventories (62,714 ) (157,471 )
Accounts payable 62,552 150,339
Other assets and liabilities, net   (87,412 )   (101,799 )
Net cash provided by operating activities 297,831 19,039
INVESTING ACTIVITIES:
Payments for property, plant and equipment (120,461 ) (225,718 )
Intangible assets acquired (13,073 ) (28,869 )
Proceeds from dispositions of assets and investments 17,407 6,833
Proceeds from insured loss   3,627     -  
Net cash used in investing activities (112,500 ) (247,754 )
FINANCING ACTIVITIES:
Net (payments to) proceeds from revolver (190,000 ) 250,000
Principal payments on long-term debt (8,096 ) (11,230 )
Change in zero balance cash accounts 10,189 534
Net proceeds from the issuance of common stock 215 3,958
Excess tax benefit on stock options and restricted stock - 3,248
Payments for taxes related to net share settlement of equity awards   (4,071 )   (6,173 )
Net cash (used in) provided by financing activities   (191,763 )   240,337  
(Decrease) increase in cash and cash equivalents (6,432 ) 11,622
Cash and cash equivalents, beginning of period   245,410     124,471  
Cash and cash equivalents, end of period $ 238,978   $ 136,093  
 
 
SUPPLEMENTAL CASH FLOW INFORMATION
 
Payments for property, plant and equipment $ 120,461 $ 225,718
Intangible assets acquired   13,073     28,869  
Total cash capital expenditures 133,534 254,587
Equipment received for noncash consideration 1,295 746
Equipment financed under capital leases   8,615     2,860  
Gross capital expenditures $ 143,444   $ 258,193  

(a) During the thirteen weeks ended June 3, 2017, the Company adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which resulted in a retrospective reclassification of $6.2 million for payments for taxes related to net share settlement of equity awards from operating activities to financing activities which increased net cash provided by operating activities and decreased cash provided by financing activities for the twenty-six weeks ended August 27, 2016.

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